the rate of interchange has so adjusted itself that the cloth and the linen will exactly pay for one another; and, when once this point is attained, values will remain without further alteration.”
§ 4. The conclusion states in the Equation of International Demand.
“It may be considered, therefore, as established, that when two countries trade together in two commodities, the exchange value of these commodities relatively to each other will adjust itself to the inclinations and circumstances of the consumers on both sides, in such manner that the quantities [pg 399] required by each country, of the articles which it imports from its neighbor, shall be exactly sufficient to pay for one another. As the inclinations and circumstances of consumers can not be reduced to any rule, so neither can the proportions in which the two commodities will be interchanged. We know that the limits within which the variation is confined are the ratio between their costs of production in the one country and the ratio between their costs of production in the other. Ten yards of cloth can not exchange for more than twenty yards of linen, nor for less than fifteen. But they may exchange for any intermediate number. The ratios, therefore, in which the advantage of the trade may be divided between the two nations are various. The circumstances on which the proportionate share of each country more remotely depends admit only of a very general indication.”
If, therefore, it be asked what country draws to itself the greatest share of the advantage of any trade it carries on, the answer is, the country for whose productions there is in other countries the greatest demand, and a demand the most susceptible of increase from additional cheapness. In so far as the productions of any country possess this property, the country obtains all foreign commodities at less cost. It gets its imports cheaper, the greater the intensity of the demand in foreign countries for its exports. It also gets its imports cheaper, the less the extent and intensity of its