country which does so. Holland, perhaps, 
approaches the nearest to this character of any, 
though still very remote from it; and Holland
it is acknowledged, not only derives its 
whole wealth, but a great part of its necessary 
subsistence, from foreign trade
There is another balance, indeed, which has 
already been explained, very different from 
the balance of trade, and which, according as 
it happens to be either favourable or unfavourable
necessarily occasions the prosperity 
or decay of every nation. This is the balance 
of the annual produce and consumption. If 
the exchangeable value of the annual produce
it has already been observed, exceeds that of 
the annual consumption, the capital of the society 
must annually increase in proportion to 
this excess. The society in this case lives within 
its revenue; and what is annually saved 
out of its revenue, 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 expense 
of the society, in this case, exceeds its revenue
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 trade. It might take place in a 
nation which had no foreign trade, but which 
was entirely separated from all the world. 
It may take place in the whole globe of the 
earth, of which the wealth, population, and 
improvement, may be either gradually increasing 
or gradually decaying. 
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 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, too, 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 our 
North American colonies, and of the trade 
which they carried on with Great Britain, before 
the commencement of the present disturbances,[38] 
may serve as a proof that this is 
by no means an impossible supposition
Merchants and manufacturers are not contented 
with the monopoly of the home market
but desire likewise the most extensive foreign 
sale for their goods. Their country has no 
jurisdiction in foreign nations, and therefore 
can seldom procure them any monopoly there. 
They are generally obliged, therefore, to content 
themselves with petitioning for certain 
encouragements to exportation
Of these encouragements, what are called 
drawbacks seem to be the most reasonable. 
To allow the merchant to draw back upon exportation
either the whole, or a part of whatever 
excise or inland duty is imposed upon 
domestic industry, can never occasion the exportation 
of a greater quantity of goods than 
what would have been exported had no duty 
been imposed. Such encouragements do not 
tend to turn towards any particular employment 
a greater share of the capital of the 
country, than what would go to that employment 
of its own accord, but only to hinder 
the duty from driving away any part of that 
share to other employments. They tend not 
to overturn that balance which naturally establishes 
itself among all the various employments 
of the society, but to hinder it from being 
overturned by the duty. They tend not 
to destroy, but to preserve, what it is in most 
cases advantageous to preserve, the natural 
division and distribution of labour in the society
The same thing may be said of the drawbacks 
upon the re-exportation of foreign goods 
imported, which, in Great Britain, generally 
amount to by much the largest part of the 
duty upon importation. By the second of the 
rules, annexed to the act of parliament, which 
imposed what is now called the old subsidy
every merchant, whether English or alien, 
was allowed to draw back half that duty upon 
exportation; the English merchant, provided 
the exportation took place within twelve 
months; the alien, provided it took place 
within nine months. Wines, currants, and 
wrought silks, were the only goods which did 
not fall within this rule, having other and 
more advantageous allowances. The duties 
imposed by this act of parliament were, at 
that time, the only duties upon the importation 
of foreign goods. The term within which 
this, and all other drawbacks could be claimed, 
was afterwards (by 7 Geo. I. chap. 21. 
sect. 10.) extended to three years. 
The duties which have been imposed since 
the old subsidy, are, the greater part of them, 
wholly drawn back upon exportation. This 
general rule, however, is liable to a great 
number of exceptions; and the doctrine of