Foreign Trade
In any act of trade, a participant seems to gain more than he gives - otherwise he would keep his own good rather than trade it for something less valuable. It is interesting that both parties think they have "won" in that they value what they got more than what they gave - and both indeed have, and in general do not consider their win to be at the loss of the other party (they ware quite indifferent to the effect of a trade on the other).
In foreign trade, however, this notion is lost: nations are not concerned with their own gain, but jealous of the gains of others: it is not sufficient to have profited by trade, but there is an unhealthy desire to ensure that the other party profited less, or even suffered a loss.
When national concerns arise, a state feels advantaged when it perceives itself the winner in a trade - that its imports inhabitants to consumer more of the land and labor of its neighbor that it must offer in return, or when it amasses money from the difference in the value of imports and exports, or gains more of what it deems to be most valuable in any regard.
There is an extended example of the trade of French wine for Belgian lace, which is summarized thus:
- The demand in France for Belgian lace provides money to pay the Belgians who grow flax and manufacture lace - their wages, their materials, and the rent of land.
- The demand in Belgium for French wine likewise pays the French who grow grapes and make wine - similarly, their wages, their materials, and their rent.
- If the demands are equal, than roughly the same amount of currency will flow from one country to the other, through various hands.
- Essentially, it is as if the goods were traded by barter, though some part of the price is spent to pay others who transport goods and money.
- And chiefly, this trade occurs because Belgians can weave lace better (in terms of cost and quality) then the French and the French can produce wine better than the Belgians. Were it not so, each party would produce the goods at home.
Inequities may rise by various causes.
- If there is an abundance of land or labor in one of the nations, it will produce goods more cheaply for paying lower prices
- If there is greater productivity in one nation, whether by the fertility of the land or the skill of the labor, it will produce goods more cheaply
- If there is a greater abundance of credit, hence lower interest rates, in one nation the producers will get capital more cheaply
To the degree to which a nation is able to produce a good more cheaply, it is able to better profit from trade with another nation. Some would claim that such a nation is taking advantage by giving less land, labor, or capital embodied in the goods it trades that that which was invested in the goods it receives - but this is in the judgment of a disinterested third party.
That is to say that the French believed the price they paid for lace to be fair and the Belgians likewise consider the price they paid for wine to be fair. Were it no so, trade would not have taken place. It is only when one considers the production costs of a trading partner, rather than the use-value of their goods, that they become covetous of the other's profits.
When any article is exported, it brings greater wealth into the state by virtue of goods or specie received in return. It enables otherwise idle workers to support themselves by selling to consumers abroad and develops the product capabilities of the nation.
Imports, however, may be problematic because they do nothing to increase the productive capabilities of the nation. If they are articles of luxury this is not a grave concern, but a state that imports food lets its fields grow fallow while its population swells - and will find itself in shortage and famine if the supply of foreign food is interrupted.
The state that trades its wares for specie is at an advantage - the goods it provides are consumed and wear out over time whereas gold and silver is permanent until spent. But a state, like any man, can become miserly and deny its citizens pleasure to amass specie if it exports goods that could have been enjoyed domestically.
Too great an increase on money will over time cause money to be plentiful and increase the cost of land and labor in the state. This increase will also cause the price of finished goods to rise, such that they will eventually become too expensive for foreign markets to import.
Nations should not seek to increase their populations, but instead should seek to leverage trade to provide its citizens with ease and comfort, but this also cannot be done infinitely. Wealth causes a state to plunge into luxury and wastefulness, and states that rise by trade invariably sink afterward.
Specific mention is made of the rise of England through trade, and the gradual decline that occurs as those wealthy from trade send their silver to Asia to purchase silks, spices, tea, and other items of luxury, while meanwhile British goods are too expensive for natives of India and China to import.
It is also noted that the Dutch, who produce little at home, amass great wealth by being facilitators of trade - buying goods cheaply in the east and selling them to markets in England and France at considerable profit, which the Dutch retain in money. In this regard the Dutch have considerable advantage given their timber and rivers, as well as their technology: one windmill can saw more men than eighty men, enabling them to build ships quickly and cheaply.
With this in mind, it is noted that it is more advantageous for the nations of Europe to maintain their own fleets of merchant ships rather than encourage India and China to develop shipping of their own. Were this to occur, Europe would lose the profit of trade.
Another benefit of a large merchant fleet is that it develops for the state a sizable navy, and the trade for which merchant ships are used finances it. No prince could develop such a large number of vessels and sailors without bankrupting his treasury.