III. which the wifdom of both nations has thought CHA P. proper to difcourage, and that which it has favoured the moft. But the very fame circumftances which would have rendered an open and free commerce be tween the two countries fo advantageous to both, have occafioned the principal obftructions to that commerce. Being neighbours, they are neceffarily enemies, and the wealth and power of each becomes, upon that account, more formidable to the other; and what would increase the advantage of national friendship, ferves only to inflame the violence of national animofity. They are both rich and induftrious nations; and the merchants and manufacturers of each, dread the competition of the skill and activity of those of the other. Mercantile jealoufy is excited, and both inflames, and is itfelf inflamed, by the violence of national animofity: And the traders of both countries have announced, with all the paffionate confidence of interefted falfehood, the certain ruin of each, in confequence of that unfavourable balance of trade, which, they pretend, would be the infallible effect of an unreftrained commerce with the other. There is no commercial country in Europe of which the approaching ruin has not frequently been foretold by the pretended doctors of this fyftem, from an unfavourable balance of trade. After all the anxiety, however, which they have excited about this, after all the vain attempts of almost all trading nations to turn that balance in their own favour and against their neighbours, BOOK it does not appear that any one nation in Europe IV. has been in any refpect impoverished by this caufe. Every town and country, on the contrary, in proportion as they have opened their ports to all nations, instead of being ruined by this free trade, as the principles of the commercial fyftem would lead us to expect, have been enriched by it. Though there are in Europe, indeed, a few towns which in fome refpects deferve the name of free ports, there is no country which does fo. Holland, perhaps, approaches the nearest to this character of any, though ftill very remote from it; and Holland, it is acknow ledged, not only derives its whole wealth, but a great part of its neceffary fubfiftence, from foreign trade.. There is another balance, indeed, which has already been explained, very different from thei balance of trade, and which, according as it hap pens to be either favourable or unfavourable, neceffarily occafions the profperity or decay of every nation. This is the balance of the annual produce and confumption. If the exchangeable value of the annual produce, it has already been obferved, exceeds that of the annual confumption, the capital of the fociety muft annually increase in proportion to this excefs. The fo ciety in this cafe lives within its revenue, and what is annually faved out of its revenue, is naturally added to its capital, and employed fo as to increase ftill further the annual produce. If the exchangeable value of the annual produce, on the contrary, fall fhort of the annual: III. confumption, the capital of the fociety muft CHAP. annually decay in proportion to this deficiency. The expence of the fociety in this cafe exceeds its revenue, and neceffarily encroaches upon its capital. Its capital, therefore, must neceffarily decay, and, together with it, the exchangeable value of the annual produce of its industry, This balance of produce and confumption is entirely different from, what is called, the ba lance of trade. It might take place in a nation which had no foreign trade, but which was entirely feparated from all the world. It may take place in the whole globe of the earth, of which the wealth, population, and improvement, may be either gradually increafing or gradually decaying. The balance of produce and confumption may be conftantly in favour of a nation, though what is called the balance of trade be generally against it. A nation may import to a greater value than it exports for half a century, perhaps, together; the gold and filver which comes into it during all this time may be all immediately fent out of it; its circulating coin may gradually decay, different forts of paper money being fubftituted in its place, and even the debts too which it contracts in the principal nations with whom it deals, may be gradually increafing; and yet its real wealth, the exchangeable value of the annual produce of its lands and labour, may, during the fame period, have been increasing in a much greater proportion. The ftate of our North American colonies, and of the trade IV. BOOK which they carried on with Great Britain, before the commencement of the present disturbances *, may ferve as a proof that this is by no means an impoffible fuppofition. С НАР. CHAP. IV. Of Drawbacks. ERCHANTS and manufactures are not contented with the monopoly of the home market, but defire likewife the most extenfive foreign fale for their goods. Their country has no jurisdiction in foreign nations, and therefore can feldom procure them any monopoly there. They are generally obliged, therefore, to content themselves with petitioning for certain encouragements to exportation. Of thefe encouragements what are called Drawbacks feem to be the most reasonable. To allow the merchant to draw back upon exportation, either the whole or a part of whatever excife or inland duty is impofed upon domestic in duftry, can never occafion the exportation of a greater quantity of goods than what would have been exported had no duty been impofed. Such encouragements do not tend to turn towards any particular employment a greater fhare of the capital of the country, than what would go to that employment of its own accord, but only to hinder the duty from driving away any part of * This paragraph was written in the year 1775 that IV. that share to other employments. They tend CHA P. not to overturn that balance which naturally establishes itself among all the various employments of the society; but to hinder it from being overturned by the duty. They tend not to deftroy, but to preserve, what it is in most cases advantageous to preferve, the natural divifion and diftribution of labour in the fociety. The fame thing may be faid of the drawbacks upon the re-exportation of foreign goods imported; which in Great Britain generally amount to by much the largest part of the duty upon importation. By the fecond of the rules annexed to the act of parliament, which impofed; what is now called, the old fubfidy, every merchant, whether English or alien, was allowed to draw back half that duty upon exportation; the English merchant, provided the exportation took place within twelve months; the alien, provided it took place within nine months. Wines, currants, and wrought filks were the only goods which did not fall within this rule, having other and more advantageous allowances. The duties imposed by this act of parliament were, at that time, the only duties upon the importation of foreign goods. The term within which this, and all other drawbacks, could be claimed, was afterwards (by 7 Geo. I. chap. 21. fect. 10.) extended to three years. The duties which have been impofed fince the old fubfidy, are, the greater part of them, wholly drawn back upon exportation. This general rule, however, is liable to a great number of |