(3.iv.8) Suppose the following case: That 10 yards of broad cloth purchase 15 yards of linenin England; and 20 yards in Germany. In exchanging 10 yards of English broad cloth for theequivalent of German linen, a saving, to the amount of 5 yards of linen, is the result of thebargain; and it is evident that the advantage will be shared upon the following principles. InEngland linen will fall, in relation to cloth., from the knowledge that 10 yards of cloth willpurchase more than 15 yards of linen in Germany; and in Germany linen will rise as comparedwith cloth, from a knowledge that 20 yards of linen, if sent to England, will purchase more than10 yards of cloth. It is the inevitable effect of such an interchange to bring the relative value ofthe two commodities to a level in the two countries; that is, to make the purchasing power oflinen in respect to cloth, and of cloth in respect to linen, the same in both; bating the differencein the cost of carriage, each country paying the cost of the carriage of the commodity which itimports, and the value of that article being so much higher in the country which imports than inthat which exports it.
(3.iv.9) To produce exchange, therefore, there must be two countries, and two commodities.
(3.iv.10) When both countries can produce both commodities, it is not greater absolute, butgreater relative, facility, that induces one of them to confine itself to the production of one of thecommodities, and to import the other.
(3.iv.11) When a country can either import a commodity, or produce it at home, it comparesthe cost of producing at home with the cost of procuring from abroad; if the latter cost is less thanthe first, it imports.
(3.iv.12) The cost at which a country can import from abroad depends, not upon the cost atwhich the foreign country produces the commodity, but upon what the commodity costs which itsends in exchange, compared with the cost which it must be at to produce the commodity inquestion, if it did not import it.
(3.iv.13) If a quarter of corn is produced in England with 50 days' labour, it may be equallyher interest to import corn from Poland, whether it requires, in Poland, 50 days' labour, or 60, or 40,or any other number. Her only consideration is, whether the commodity with which she canimport a quarter costs her less than 50 days' labour.
(3.iv.14) Thus, if labour in Poland produce corn and cloth, in the ratio of eight yards to onequarter; but, in England, in the ratio of ten yards to one quarter, exchange will take place.
(3.iv.15) The practical conclusion may be commodiously an correctly stated thus:
(3.iv.16) Whenever the purchasing power of any commodity with respect to another is less,in one of two countries, than it is in the other, it is the interest of those countries to exchange thesecommodities with one another.
(3.iv.17) Unless the difference of purchasing power, which renders it the interest of nationsto barter commodities with one another, be sufficiently great to cover the expense of carriage, andsomething more, no advantage is obtained.
Section V. The Commodities Imported are the Cause of theBenefits Derived from a Foreign Trade (3.v.1) From what is stated in the preceding chapter, one general, or rather universal,proposition may be deduced. The benefit which is derived from exchanging one commodity for another,arises, in all cases, from the commodity received not from the commodity given. When onecountry exchanges, in other words, when one country traffics with another, the whole of itsadvantage consists in the commodities imported. It benefits by the importation, and by nothingelse.
(3.v.2) This seems to be so very nearly a self-evident proposition, as to be hardly capable ofbeing rendered more clear by illustration; and yet it is so little in harmony with current andvulgar opinions, that it may not be easy by any illustration, to gain it admission into certainminds.
(3.v.3) When a man possesses a certain commodity, he cannot benefit himself by giving itaway.
It seems to be implied, therefore, in the very fact of his parting with it for another commodity,that he is benefited by what he receives. His own commodity be might have kept, if it had beenvalued by him more than that for which he exchanges it. The fact of his choosing to have theother commodity rather than his own, is a proof that the other is to him more valuable than hisown.
(3.v.4) The corresponding facts are evidence equally conclusive in the case of nations. Whenone nation exchanges a part of its commodities for a part of the commodities of another nation, thenation can gain nothing by parting with its commodities; all the gain must consist in what itreceives. If it be said that the gain consists in receiving money, it will presently appear, from thedoctrine of money, that a nation derives no advantage, but the contrary, from possessing morethan its due proportion of the precious metals.
(3.v.5) In importing commodities which the country itself is competent to produce, as in thecase, supposed above, of trade with Poland, we saw that England would import her corn fromPoland, if she thus obtained, with the produce of so many days' labour in cloth, as much corn asit would have required a greater number or days' labour to produce in England. If it had sohappened, that she could procure in Poland with the cloth, only as much corn as she couldproduce with the same quantity of labour at home, she would have had no advantage in thetransaction. Her advantage would arise, not from what she should export, but wholly from whatshe should import.
