Home Trade, Foreign Trade, Carrying Trade Icon

January 1, 2020

24 Wholesale trade is the buying and selling by wholesale.

It may be reduced to three kinds=

  1. The home-trade

This is the purchase of local produce in one part of a country to sell in another part of the same country. It includes the inland and the coasting trade.

  1. The foreign trade of consumption

This is the purchase of foreign goods for home-consumption.

  1. The carrying trade

This is the carrying of the surplus produce of one country to another. It is the transacting of the commerce of foreign countries.

The Home Trade

25 The home trade generally replaces two distinct capitals [that of the buyer and that of the seller] employed in agriculture or manufactures. It enables the buyers and sellers to continue that employment.

The value of commodities sent out from the merchant’s shop generally returns an equal value of other commodities. When both commodities are domestic produce, it replaces two distinct capitals which support productive labour. It enables them to continue that support.

A trader’s capital sends Scotch manufactures to London and brings back English corn and manufactures to Edinburgh. His capital replaces distinct Scottish and English capitals employed in agriculture or manufactures.

The Foreign Trade of Consumption

26 The capital employed in buying foreign goods for home-consumption in exchange for domestic produce, also replaces two distinct capitals. But only one of them is employed in supporting domestic industry.

A trader’s capital sends British goods to Portugal and brings back Portuguese goods to Great Britain. His capital replaces only one British capital and only one Portuguese capital.

The foreign trade of consumption will only give half the encouragement to national industry as the home trade, even if its returns were as quick as the home-trade.

27 But the returns of the foreign trade of consumption are very seldom as quick as those of the home-trade. The returns of the home-trade come in before the end of the year. It comes three or four times in the year.

The returns of the foreign trade of consumption seldom come in before the end of the year. It sometimes comes after two or three years. A capital employed in the home-trade can make 12 operations.

It can be sent out and return 12 times, before that of the foreign trade of consumption has made one. If the capitals are equal, the home trade will give 24 times more encouragement to the country’s industry than the foreign trade.

28 The foreign goods for home-consumption may sometimes be bought with other foreign goods. Those other foreign goods must be bought immediately with domestic produce because foreign goods can only be bought with domestic goods, except during war and conquest.

The effects of a round-about foreign trade are the same as a direct foreign trade. Except that the final returns will likely be more distant because they must depend on the returns of two or three other foreign trades.

Assuming=

  • British manufactures are used to buy Virginia tobacco
  • Virginia tobacco is used to buy the flax & hemp of Latvia [Riga].

The merchant must wait for the returns of Virginia tobacco and the flax & hemp of Latvia before he can re-purchase British manufactures.

Assuming=

  • British manufactures are used to buy Jamaican sugar & rum instead,
  • Jamaican sugar & rum are used to buy Virginia tobacco, and
  • Virginia tobacco are used to buy the flax & hemp of Latvia.

The merchant must wait for the returns of the goods from Jamaica, Virginia, and Latvia.

If those three foreign trades were done by three merchants, each merchant will receive the returns of his own capital more quickly if=

  • the first imports goods
  • the second buys the goods imported by the first
  • the third buys those goods imported by the second, to export them again.

But the final returns of the trade will be just as slow as ever.

It makes no difference to the country whether the capital employed in a round-about trade belong to one or three merchants. It may make a difference to the particular merchants. In both cases, three times more capital must be employed to exchange British manufactures for flax & hemp than necessary had the manufactures and the flax & hemp been directly exchanged for one another.

Such round-about foreign trade of consumption will generally give less encouragement to country’s productive labour than the direct trade of the same kind.

29 Whatever foreign goods are used to buy other foreign goods for home-consumption, brings no essential difference in=

  • the nature of the trade or
  • the encouragement it can give to the productive labour of the country it is carried on.

For example, if foreign goods are bought in Britain with Brazilian gold, this gold, like the tobacco of Virginia must have been bought with=

  • British produce or
  • another foreign commodity which was bought with British produce.

As far as the nation’s productive labour is concerned, the foreign trade done with gold and silver has all the advantages and inconveniences of any round-about foreign trade.

It will replace with the same speed the capital immediately employed in supporting that productive labour. It even has one advantage over other round-about foreign trades.

The transportation of those metals is less expensive than almost any other foreign goods, due to their small bulk and great value. Their freight is much less. Their insurance is not greater. No goods, besides, are less liable to suffer by the carriage.

By using gold and silver coins for trade=

  • an equal amount of foreign goods can be bought with fewer domestic produce, than with any other foreign goods
  • the country’s demand can be supplied more completely and at a smaller cost than in any foreign commodity.

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