Simplified Wealth of Nations by Adam Smith, Book 4, Chapter 3a: Extraordinary Restraints on Disadvantageous Balance of Trade

Chapter 3a: Extraordinary Restraints on Importation from Countries Where the Balance is supposed to be Disadvantageous

Unreasonableness of the Balance of Trade

1 The second expedient of the commercial system to increase the amount of gold and silver is to lay extraordinary restraints on imports from countries where the balance of trade is disadvantageous.
  1. 2 It does not follow that a balance of free trade in favour of France would be disadvantageous to England.
  1. 3 Most of those French goods might be re-exported to other countries to be sold at a profit.
  1. 4 There is no certain criteria to determine:
    • which side the balance between any two countries lies, or
    • which side exports the greatest value
5 It is said when the exchange between London and Paris is at par, it is a sign that the debts due from London to Paris are compensated by the debts due from Paris to London. 6 The ordinary exchange shows the ordinary state of debt and credit between two places. 7 In this way, the ordinary exchange is not a proof that the ordinary state of debt and credit is in favour of the country which has the ordinary exchange in its favour. 8 When you exchange English money, with the English mint standard of pure silver, for a bill for French money with equal ounces of pure silver according to the French mint, the exchange is said to be at par between England and France.
  1. 9 But we cannot always judge of the value of the money of different countries by the standard of their respective mints.
  1. 10 In some countries, the cost of coinage is defrayed by the government.
  1. 11 In some places such as Amsterdam, Hamburgh, Venice, etc., foreign bills of exchange are paid in bank money.

Words: 2061
Next: Chapter 3b: Digression: Bank Deposits