all the commodities exported, with the designation of their destination, and of those imported, with the designation of the place of their origin, ought to afford every information that can possibly be desired concerning the nature and effects of foreign trade in a given country. But it ought to have been remem

bered, that such registers state only the material quantity of the goods exported and imported, and that their declared value is never conformable to their true value. It was, however, supposed, that truth might be approximated within a certain distance: but experience has shewn, that such valuations differ about seventy per cent. from the true value; and hence it is evident, that any calculation on such grounds is impossible. But the same has happened on this subject which generally takes place in such. cases. The impossibility of ascertaining by the balance of trade the rate of profit derived from foreign commerce, has led to the belief that such balances of trade are good for nothing. This inference appears as unreasonable as the hopes which had been conceived. Although the balance of trade cannot give the exact results of the circulation of the produce of every country, it may be of service to judge of its acceleration or obstruction, to lead an attentive and enlightened observer to discover the causes of either, and to suggest the means which may prevent its impediments and increase its beneficial effects. I therefore think the balance of exports and imports of great importance; it may afford much valuable information concerning the progressive, stationary, or retrograde state of national wealth.

The subject of exchanges is involved in still more inaccuracy, obscurity, and fallacy, than the balance

of trade.

Adam Smith has so clearly discussed this matter, that I cannot do better than quote what he states on the subject.

"When," says he, "the exchange between two places, such as London and Paris, is at par, it is said to be a sign that the debts due from London to Paris are compensated by those due from Paris to London. On the contrary, when a premium is paid at London for a bill upon Paris, it is said to be a sign that the debts due from London to Paris are not compensated by those due from Paris to London; but that a balance in money must be sent out from the latter place, for the risk, trouble, and expence of exporting which, the premium is both demanded and given.

"But several causes destroy this consequence.

"1. We cannot always judge of the value of the current money of different countries by the standard of their respective mints. In some it is less worn, clipt, and otherwise degenerated from that standard. But the value of the current coin of every country, compared with that of any other country, is in proportion not to the quantity of pure silver which it ought to contain, but to that which it actually does contain.

"2. In some countries, the expence of coinage is defrayed by the government; in others, it is defrayed by the private people, who carry their bullion to the mint; and the government even derives some revenue

from the coinage. The money of the country which defrays the expence of coinage is therefore more valuable than that of the country which does not defray that expence, because the workmanship adds to the value; consequently the premium for a bill may be merely sufficient to compensate the expence of the coinage.

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"3. In some places, as at Amsterdam, Hamburgh, Venice, &c. foreign bills of exchange are paid in what they call bank-money; while in others, as at London, Lisbon, Antwerp, Leghorn, &c. they are paid in the common currency of the country. What is called bank-money, is always of more value than the same nominal sum of common currency: therefore the premium paid by London and Lisbon for bills upon Hamburgh and Amsterdam may merely compensate the difference in the value of the currency in which the bills are to be paid.

4. The ordinary state of debt and credit between any two places is not always entirely regulated by the ordinary course of their dealings with one another; but is often influenced by that of the dealings of either with many other places. If it is usual, for example, for the merchants of England to pay for the goods which they buy of Hamburgh, Dantzic, Riga, &c. by bills upon Holland, the ordinary state of debt and credit between England and Holland will not be regulated entirely by the ordinary course of the dealings of those two countries with one another."*

* Wealth of Nations, vol. ii. pages 221, 222, 223, 224, 227.

In whatever light, therefore, the rate of exchanges may be viewed, it is evident that it gives but fallacious indications of the state of foreign commerce.

There is, then, at present no certain way of acquiring any positive information in that respect; all is conjecture, and of course uncertain. Perhaps it is even useless to attempt it, since it is undoubted that foreign commerce is constantly advantageous to all countries, and the question between them is only about the greater or less advantages they derive from it. But if the exact statement of its imports and exports be almost indifferent to a nation, it is not so with regard to its home trade, which comprizes the annual produce of its labour and the consumption of that produce. "If the exchangeable value of the annual produce exceed that of the annual consumption, the capital of the society increases in proportion to this excess. The society, in this case, lives within its income, and what is annually saved out of its income, is naturally added to its capital and employed so as to increase still further the annual produce. If the exchangeable value of the annual produce, on the contrary, fall short of the annual consumption, the capital of the society must annually decay in proportion to this deficiency. The expence of the society in this case exceeds its income, and necessarily encroaches upon its capital. Its capital, therefore, must necessarily decay, and, together with it, the exchangeable value of the annual produce of its industry.

"This balance of produce and consumption is entirely different from what is called the balance `of

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trade*, or balance of imports and exports. When the former is advantageous, the latter is always favourable; and when the balance of produce and consumption is unfavourable, it is not in the power of a beneficial balance of trade to check or ward off its pernicious influence."

Adam Smith advances in this respect an assertion which it is proper to investigate, in order to ascertain the nature and difference of the two balances.

He thinks that the balance of produce and consumption may be constantly in favour of a nation, though what is called the balance of trade be generally against it. "A nation," he says, may import to a greater value than it exports for half a century, perhaps, together; the gold and silver which comes into it during all this time may be all immediately sent out of it; its circulating coin may gradually decay, different sorts of paper-money being substituted in its place, and even the debts which it contracts in the principal nations with whom it deals may be gradually increasing; and yet its real wealth, the exchangeable value of the annual produce of its lands and labour, may, during the same period, have been increasing in a much greater proportion. The state of the North-American colonies and of the trade which they carried on with Great Britain before the American war, may serve as a proof that this is by no means an impossible supposition."

This seems a strange phenomenon. How is it to

* Wealth of Nations, vol. ii. page 260.

+ Ibidem, page 261.