another, the exports and imports which are equal in money price would, if money were not used, precisely exchange for one another.277
§ 2. The preceding Theorem further illustrated.
Let us proceed to [examine] to what extent the benefit of an improvement in the production of an exportable article is participated in by the countries importing it.
The improvement may either consist in the cheapening of some article which was already a staple production of the country, or in the establishment of some new branch of industry, or of some process rendering an article exportable which had not till then been exported at all. It will be convenient to begin with the case of a new export, as being somewhat the simpler of the two.
The first effect is that the article falls in price, and a demand arises for it abroad. This new exportation disturbs the balance, turns the exchanges, money flows into the country (which we shall suppose to be the United States), and continues to flow until prices rise. This higher range of prices will somewhat check the demand in foreign countries for the new article of export; and will diminish the demand which existed abroad for the other things which the United States was in the habit of exporting. The exports will thus be diminished; while at the same time the American public, [pg 424] having more money, will have a greater power of purchasing foreign commodities. If they make use of this increased power of purchase, there will be an increase of imports; and by this, and the check to exportation, the equilibrium of imports and exports will be restored. The result to foreign countries will be, that they have to pay dearer than before for their other imports, and obtain the new commodity cheaper than before, but not so much cheaper as the United States herself does. I say this, being well aware that the article would be actually at the very same price (cost of carriage excepted) in the United States and