Trade having subsisted long in the nation we are now to keep in our eye, I shall suppose that, through length of time, her neighbours have learned to supply one article of their own and other peoples wants cheaper than she can do. What is to be done? No body will buy from her, when they can be supplied from another quarter at a less price. I say, what is to be done? For if there be no check put upon trade, and if the statesman do not interpose with the greatest care, it is certain, that merchants will import the produce, and even the manufactures of rival nations; the inhabitants will buy them preferably to their own; the wealth of the nation will be exported; and her industrious manufacturers will be brought to starve. We may therefore look upon this, as a problem in trade, to be resolved by the principles already established.
First, then, it must be inquired, if, in the branch in which she is undersold, her rivals enjoy a natural advantage above her, which no superior industry, frugality, or address on her side, can counterbalance? If this be the case, there are three different courses to be pursued, according to circumstances.
1mo. To renounce that branch of commerce entirely, and to take the commodities wanted from foreigners, as they can furnish them cheaper.
2do. To prohibit the importation of such commodities altogether.
3tio. To impose a duty upon importation, in order to raise the price of them so high as to make them dearer than the same kind of commodity produced at home.
The first course may be taken, if, upon examining how the hands employed in a manufacture may be disposed of, it be found, that they may easily be thrown into another branch of industry, in which the nation’s natural advantages are as superior to her rivals, as their’s are superior to her’s in the branch she intends to abandon; and providing her neighbours will agree to open their ports to the free importation of the commodities in question. For though there may be little profit in a trade by exchange, I still think it adviseable to continue correspondence, and to avoid every occasion of cutting off commerce with other nations. A laborious, oeconomical, and sagacious nation, such as I suppose our traders to be, will be able to profit of many circumstances, which would infallibly turn to the disadvantage of others less expert in commerce, with whom she trades; and in expectation of favourable revolutions, she ought not rashly, nor because of small inconveniencies, to renounce trading with them; especially if luxury should appear there to be on the growing hand.
But suppose the rival nation will not consent to receive the manufactures which the traders may produce with great natural advantages, what course then is the best to be taken?
I think she ought to encourage the branch in which she is rivalled, for her own consumption, though she must give over exporting it; and, in this case, it must be examined, whether that trade with foreigners should be prohibited altogether, (which is the second course mentioned above) or whether it be more adviseable to prefer the last scheme, viz. to allow the commodities to be imported, with a duty which may raise their price to so just a height as neither to suffer them to be sold so cheap as to discourage the domestic fabrication, nor dear enough to raise the profits of manufactures above a reasonable standard, in case of an augmentation of demand.
The second course must be taken, when the natural advantages of the foreign nations are so great, as to oblige the statesman to raise duties to such a height as to give encouragement to smuggling.
The third course seems the best, when the advantages of the rivals are more inconsiderable; in which case, the traders, may, in time, and by the progress of luxury among their neighbours, or from other revolutions, which happen frequently in trading nations, regain their former advantages.