are manufacturing to the greatest disadvantage can make average profits; otherwise there will be a call for higher duties. This is one of the practical difficulties of protection. The higher the duties imposed the greater will be the rush into the protected branch of industry; and none will be satisfied until they make the business profitable, however imperfectly conducted. Hence there will be a constant call for increased duties. Witness the history of protection in the United States, a tariff in 1816, a higher one in 1820, higher yet in 1824, still higher in 1828, with continued changes from that time to this.

CHAPTER X.

THE DOCTRINE

OF INTERNATIONAL EX

'CHANGES: THE LIMITS OF FREE TRADE

AND THE PROTECTIVE SYSTEM.*

BY PROF. FRANCIS BOWEN,

Alford Professor of Natural Religion, Moral Philosophy, and Civil Polity in Harvard University.

T has now been shown that prices are determined by the

tension of the market, or an increase of the demand, can be obtained only by submitting to a fall of prices, so as to bring the article within the reach of a greater number of consumers. In any market only a certain quantity of goods at a given price can be consumed; if more goods are forced upon the market than it naturally requires, the price must fall, and then the consumption may be very much increased.

It has also been proved that we really purchase commodi. ties with commodities; that we pay for our whole imports with our whole exports; that if, in our traffic with any one country, our imports much exceed our exports, then we pay the balance, not in money, but by transferring to that country the debt due to us from another country with which our trade is such that our exports exceed our imports. It is only the balance of the immensely long "account-current" of our trade with all foreign countries whatsoever which is struck in money; and this cash balance cannot be more than an insignificant fraction of either side of the account.

* American Political Economy, 1870 Edition.

The advocates for free trade have always insisted that we must buy merchandise of England, not only to induce, but even to enable England to buy merchandise of us; that we must buy of any country in order to sell to her, and must buy as much as we sell. But it is not so. It is not necessary that we should take enough of English manufactured goods to pay us for all the cotton, tobacco, and wheat which we sell to England. England is able, though of course she is not very willing, to pay us the balance in tea from China, coffee from Brazil, hemp from Russia, or whatever other article, from whatever other country, we see fit to require. We can compel her to pay us in whatever commodities we may select; for the articles which we sell to England, cotton, tobacco, and wheat, are of prime necessity to her, and most of them she cannot obtain elsewhere. As our exports must pay for our imports, the only point to be considered is, how we can dispose of the exports to most advantage, or obtain for them the largest return of the imports.

The cost to us of our domestic products is, the labor that is expended upon their production. But the cost to us of foreign products is, not the labor which has been expended upon their production, but the labor which we must expend upon the articles that are given in exchange for those products.

"The advantage of an interchange of commodities between nations," says Mr. Mill, "consists simply and solely in this, -that it enables each to obtain, with a given amount of labor and capital, a greater quantity of all commodities taken together. This it accomplishes by enabling each, with a quantity of one commodity which has cost it so much labor and capital, to purchase a quantity of another commodity, which, if produced at home, would have required labor and capital to a greater amount. To render the importation of an article more advantageous than its production, it is not

necessary that the foreign country should be able to produce it with less labor and capital than ourselves. We may even have a positive advantage in its production; but if we are so far favored by circumstances as to have a still greater positive advantage in the production of some other article. which is in demand in the foreign country, we may be able to obtain a greater return to our labor and capital by employ ing none of it in producing the article in which our advantage is least, but devoting it all to the production of that in which our advantage is greatest, and giving this to the foreign country in exchange for the other. It is not a difference in the absolute cost of production, which determines the interchange, but a difference in the comparative cost."

The inhabitants of Barbadoes, for instance, favored by their tropical climate and fertile soil, can raise provisions cheaper than we can in the United States. And yet Barbadoes buys nearly all her provisions from this country. Why is this so? Because, though Barbadoes has the advantage over us in the ability to raise provisions cheaply, she has a still greater advantage over us in her power to produce sugar and molasses. If she has an advantage of one-quarter in raising provisions, she has an advantage of one-half in regard to products exclusively tropical; and it is better for her to employ all her labor and capital in that branch of production in which her advantage is greatest. She can thus, by trading with us, obtain our breadstuffs and meat at a smaller expense of labor and capital than they cost ourselves. If, for instance, a barrel of flour cost ten days' labor in the United States, and only eight days' labor in Barbadoes, the people of Barbadoes can still profitably buy the flour from this country, if they can pay for it with sugar which cost them only six days' labor; and the people of this country can profitably sell them the flour, or buy from them the sugar, provided the sugar, if raised in the United States,

would cost eleven days' labor. This is a striking example to show the benefit of foreign trade to both the countries which are parties to it. The United States receive sugar, which would have cost them eleven days' labor, by paying for it with flour which costs them but ten days. Barbadoes receives flour, which would have cost her eight days' labor, by paying for it with sugar which costs her but six days., If Barbadoes produced both commodities with greater facility, but greater in precisely the same degree, there would be no motive for interchange.

Now let us apply these principles to the trade between England and the United States. To simplify the matter, we will take but one article, flour, as representing all the commodities that America sells to England; and but one article, cloth, as representing all the goods which England sells to America. Suppose, on account of the respective advantages possessed by the two countries, that the produc tion of one barrel of flour in England costs as much labor and capital as would suffice for the manufacture of ten yards of cloth; while in America, one barrel of flour can be produced for three-fifths of its cost in England,—that is, for as much labor and capital as would, in England, manufacture only six yards of cloth.

Now, if a system of free trade between the two countries be established, the two commodities will be exchanged for each other at the same rate both in England and America. The price will be equalized between the two countries; but at what point will it be equalized? Shall the English price be established in America, or shall the American price be established in England? Or shall a price intermediate between the two be established ? Either of these three suppositions is possible. The Englishman can afford to give ten yards, for it will cost him that amount of labor and capital to produce the flour in his own country, or for himself. On the other hand, the American can afford to sell