Chapter 2c: Retaliatory Restraints

23There are two cases when it will be advantageous to lay some burden on foreign industry to encourage domestic industry.

  1. 24 When an industry is needed for national defence.
  2. When a tax is imposed by foreign countries on certain products of the home country.

Case 1: National Defence

For example, Great Britain's defence depends very much on its sailors and shipping.

  1. 25 All ships, of which the owners and 3/4 of the mariners are not British, are prohibited from:
    1. trading to the British settlements and plantations
    2. being employed in the coasting trade of Great Britain
    • The penalty is the forfeiture of the ship and its cargo.
  • 26 The most bulky commodities can only be imported into Great Britain in:
    1. the above-mentioned ships
    2. ships of the country:
    1. where those goods are produced
    2. whose owners, masters, and 3/4 of the mariners are of that country
  • 27 The most bulky commodities are prohibited from being imported, even in British ships, from any country where they were not produced.
    1. The penalty is the forfeiture of the ship and its cargo.
  • 28 Salt fish of all kinds, whale-fins, whale-bone, oil, and blubber, not caught by British vessels nor cured on them, are subjected to double aliens duty when imported into Great Britain.
  • By this regulation, a very heavy burden was laid on their supply to Great Britain.
  • 29 When the act of navigation was made, England and Holland were not at war.
  • War soon broke out in the Dutch wars during the government of the Protector and of Charles II.
  • Some of the regulations of this act possibly proceeded from national animosity.
  • At that time, the most deliberate wisdom would have recommended the reduction of Holland's naval power.
  • Holland was the only naval power which could endanger England's security.
  • 30 The act of navigation is not favourable to foreign commerce or that opulence arising from it.
  • But it will most likely buy cheap when there is perfect freedom of trade.
  • The act of navigation lays no burden on foreign ships that come to export British products.
  • The ancient aliens duty used to be paid on all exported and imported goods.
  • It was removed from most of the articles of exportation through subsequent acts.
  • But if foreigners are hindered from coming to sell by bans or high duties, they cannot always afford to come to buy.
  • By reducing the number of sellers, we reduce the number of buyers.
  • But since defence is more important than opulence, the act of navigation is, perhaps, the wisest of all commercial English regulations.

  • Case 2: When a tax is imposed by foreign countries on certain products of the home country.

    In this case, it is reasonable that an equal tax should be imposed by the home country on the like produce of those foreign countries.

  • It would:
  • In Great Britain, it is usual to lay a much heavier duty on foreign imports of the same kind when any such tax is laid on the produce of domestic industry.
  • 32 According to some, this second limitation should be extended beyond those foreign commodities which compete with our own.

  • Such taxes are really equivalent to a tax on domestic commodities.
  • To put domestic industry on the same footing with foreign industry, it is necessary to lay some duty on every foreign commodity equal to this price enhancement of the home commodities which competes with it.
  • 33 Whether taxes on basic necessities, such as soap, salt, leather, candles, etc., raise the price of labour and all other commodities, I shall consider later in Book 5, Chapter 2.

    1. 34 It can always be precisely known how the price of a domestic commodity could be raised by such a direct tax.
    1. 35Taxes on basic necessities have the same effect on the people as poor soil and bad climate.
  • It would be more advantageous for the people to:
  • It is most absurd to make amends to the people by laying a new tax on them and make them pay dearer for other commodities when they:
  • 36 When taxes on necessities rise to a certain height, they are a curse equal to the earth's barrenness and the inclemency of the heavens.
  • Only the strongest bodies can live and be healthy under an unwholesome regimen.
  • Holland has the most taxes in Europe.
  • 37 There are two other cases when it may be deliberated:

    Retaliatory Commerical Policies

    38 It may be deliberated how proper it is to continue the free importation of certain foreign goods, when a foreign nation restrains their importation of some of our manufactures by high duties or prohibitions. 39 There may be good policy in retaliations of this kind, when there is a chance that they will repeal the high duties or prohibitions by other countries.
    Words: 1877
    Next: Chapter 4, Part 2d: Restoring Free Trade