Chapter 29 Chapter VI Commercial Treaties

If country A signs a treaty with country B, prohibiting or restricting the import of a certain commodity from other foreign countries by imposing heavy taxes, and only allowing the import of this commodity in country B, and exempting it from taxes, then the merchants and manufacturers of country B, It is certain that greater benefits can be obtained from such a treaty.For the merchants and manufacturers of country B enjoy a monopoly in country A; country A becomes a wider and more profitable market for their commodities.Broader means that under the circumstance that goods imported from other countries have to pay heavy taxes, the quantity of goods from country B entering the market of country A is much larger than that without the treaty; more favorable means that merchants of country B enjoy a kind of monopolies, and are therefore often able to sell their goods at a higher price than they would in free competition.

Though this treaty is advantageous to the merchants and manufacturers of country B, it is disadvantageous to the merchants and manufacturers of country A.Because granting a foreign country the monopoly of a certain product in the country means that the people of the country often need to pay a higher price than in the case of free competition to buy the desired foreign product.Since when two goods are exchanged, the high price of one commodity will affect the low price of the other commodity, or the relationship between the two is one after another; therefore, if the price of a foreign commodity is high, then the exchange rate The prices of domestic produce are necessarily low.That is to say, such a treaty reduces the exchange value of its own annual produce.However, this reduction is not an absolute loss, but only a reduction in available benefits.The price at which goods are sold in the country, though lower than when there were no treaties of commerce, will always be greater than the cost.It is by no means, therefore, impossible, as with some goods, that the absence of a bounty would not be able to compensate the capital invested in bringing the goods to market and provide a profit.Otherwise, this trade cannot continue.Therefore, in the case of a treaty, conducting trade is also beneficial to the beneficiary country, but the degree of benefit is not as great as in the case of free competition.

There are, however, some treaties of commerce, concluded on different principles, but also in favor of the benefactor.For example, when one country grants to another a monopoly of a certain commodity in its own country, it is hoped that, in the whole trade between the two countries, it will annually sell more than it annually buys, so that the annual difference in gold and silver Do yourself a favor. The Anglo-Portuguese Commercial Treaty in 1703 was based on this principle and was highly praised by people.Here are three translations of the treaty: Article 1. The King of Portugal, in the name of himself and his successors, agrees, subject to the conditions laid down in the following article, to permit forever the exportation of English woolens and other woolen goods to Portugal, except where prohibited by law.

Article 2 The king of England, in the name of himself and his heirs, always permits the import of Portuguese wine into England at any time, whether England and France are at war or not, and regardless of whether the wine is imported in a barrel of 105 gallons. Barrels, fifty-two-and-a-half-gallon barrels, or otherwise, shall not, directly or indirectly, impose on Portuguese wines, whether by customs or otherwise, more duties than the same quantity of French wines, and Portuguese wines shall be exempted from duties by one-third.Should this relief of the duties mentioned above be in any way injurious in the future, the King of Portugal may prohibit the importation of English cloth and other articles of wool.

Article 3 Regarding the treaty, the plenipotentiaries of the two countries are responsible for obtaining the ratification of their respective kings and exchanging ratification documents with each other within two months. The treaty stipulates: "It is the duty of the King of Portugal to allow the import of British woolen fabrics under the same conditions as when the importation of British woolen fabrics was previously prohibited (without raising the previous tax amount)." Better import conditions for woolen fabrics from other countries (France or Holland).As far as the King of England is concerned, he is obliged to import Portuguese wines under better conditions than French wines (which are most competitive with Portuguese wines), that is, to pay one-third less customs duties than French wines.It can be seen from this that the content of the treaty is clearly in favor of Portugal and not in favor of Britain.

However, the treaty is considered a masterpiece of British commercial policy.The gold that Portugal obtains from Brazil every year, even if it is circulated in the domestic market in the form of coins or used to make utensils, there is still a lot of surplus.In Portugal, these surpluses could not find a profitable market, so even when exports were prohibited, they were shipped out in exchange for goods that were more in demand in the domestic market.Among them, Portugal exports most of its gold to the UK every year to directly exchange for British goods, or indirectly exchange for goods from other European countries through the UK.According to Barrett, the cycle ships from Lisbon brought gold to England on an average of more than 50,000 pounds a week.If this is the case, then the total amount of gold shipped to England every year will be more than 2.6 million pounds, which is almost greater than the amount provided by Brazil every year.

A few years ago, English merchants lost favor with the King of Portugal because some of the favors granted by the King of Portugal, without treaty guarantees, were violated or withdrawn.Of course, these favors may have been obtained by solicitation, but the Portuguese received correspondingly significant favors and protection from the English king.From this point of view, even those who were most appreciative of the Portuguese trade would find it less favorable than it might have imagined.They believe that most or all of the gold imported each year is actually for the benefit of other European countries, not for the benefit of Britain; the fruit and wine exported by Portugal to the UK every year is basically equal to the value of the goods exported by the UK to Portugal.Even if the imported gold (a larger sum than Barrett imagined) was all for the benefit of Great Britain, it would still not justify the fact that imported gold was more valuable than other trades in which the value of the exported product was equal to the value of the imported product. favorable.

A very insignificant part of these imported golds are used for making vessels or coining coins; the rest is necessarily exported to foreign countries, where it is exchanged for some articles of consumption.Although we could buy gold from Portugal from England, and buy these consumer goods with gold, it is obviously much more advantageous to directly exchange these consumer goods abroad.It can therefore be said that the direct foreign trade in consumer goods is more advantageous than the indirect foreign trade in consumer goods; and that the cost of direct trade is much smaller in transporting goods of a certain value from foreign countries to the domestic market.It would obviously be to her advantage if her domestic industry produced only a small part of the goods for the Portuguese market, and a great part of those for other markets, that England should be able to obtain as much of the consumption goods as she wanted.Thus it cost England much less to acquire the gold and consumer goods it needed than it now does.In this way, the capital saved by Britain can be used in other aspects to produce more products and promote the development of more industries.

Of course, even if Britain does not trade with Portugal, it is very easy for it to obtain all the gold it needs every year for utensils, coins or foreign trade.Gold is like any commodity, and there are places where people can always get gold for what they pay.Moreover, Portugal’s annual surplus of gold still needs to be exported. Even if the UK does not buy it, other countries will buy it, and these countries will sell some of their gold at a certain price like the current UK.Although we have always bought gold directly from Portugal and indirectly from every other country (except Spain), the difference is so small that the government never notices.

Some people say that the gold in the UK is basically imported from Portugal, and the trade between the UK and other countries is either not good for the UK or not of much benefit to the UK.What needs to be reminded here is that the more gold imported from a country, the less gold will be imported from other countries.The effective demand for gold in any country is as quantitative as the effective demand for other commodities.If England imports nine-tenths of this quantity from one country, only one-tenth remains from other countries.Moreover, if England imports gold from certain countries every year more than Britain needs in terms of utensils and coins, the gold exports of England to other countries will inevitably increase.It can be said that the most meaningless trade policy at present is to achieve a trade surplus.For if such a surplus is advantageous to England in her trade with one country, it must be disadvantageous in her trade with many others.

The idea that English trade could not exist without Portuguese trade is ludicrous.At the end of the last war between France and Spain, France and Spain, without any excuse (insulted or provoked), demanded that the King of Portugal expel all British ships in his port and welcome French or Spanish troops into the port for defense British.If the King of Portugal accepts the conditions put forward by his brother-in-law, the King of Spain, then for the United Kingdom, it will actually get rid of a big burden, because supporting an ally with extremely weak defense is actually a bigger burden than losing Portuguese trade. .Because in war, even if Britain tried its best, it might not be able to effectively defend this weak ally.Of course, the loss of British trade with Portugal would bring certain difficulties to the merchants who were engaged in such trade at that time, causing them to be unable to find other equally beneficial investment methods within one to two years.I am afraid that this is also the disadvantage that England may suffer from this commercial policy. The country imports large quantities of gold and silver every year, not so much for the manufacture of vessels or coinage, as for foreign trade.The medium of gold and silver is more advantageous for the indirect foreign commerce of consumer goods than is the medium of other commodities.Gold and silver, being more common in commerce than other commodities, are more readily exchanged by men for them; and, being small in size and of high value, they cost less to transport than almost any other, The loss is also relatively small.No other medium can exchange goods abroad in the way of buying, selling, etc. as conveniently as gold and silver.The chief, if not the greatest, but considerable, advantage of the Portuguese trade to England was the facilitation of the foreign trade of all indirect consumer goods. Through reasonable inference, we can clearly know that a country only needs to import a small amount of gold and silver every year to meet the needs of making utensils and minting coins.Even if Britain does not conduct direct trade with Portugal, it is not difficult to obtain this small amount of gold and silver. In England, although the goldsmithing industry was considerable, most of the new vessels sold each year were made by melting down old vessels.Therefore, only a very small amount of gold and silver needs to be imported every year to meet the needs of making utensils.The same goes for coinage.During the ten years before the reformation of the gold coin, the greater part of the annual minting of more than 800,000 pounds was used to increase the currency in circulation in the country.In countries where the government pays for the coinage, the standard value of the gold and silver contained in the coinage cannot be greater than the value of an equal quantity of metal.This is because, if the value of the metal contained in the coin is greater than the value of the same amount of metal, the masses of the people will all go to the mint to demand coins.Of course, the coin in circulation in any country will be somewhat below its standard weight, through wear or otherwise.Before the reform of British gold coins, this situation was relatively common. Generally speaking, gold coins were often more than 2% below the standard weight; silver coins were often more than 8% below the standard weight.Therefore, forty-four and a half guineas (or a pound of gold in the case of standard weight) cannot be exchanged for more than a pound of gold, which is not enough for the forty-four and a half guineas of standard weight, and can only be exchanged if some more are made up. A pound of gold.Therefore, the market circulation price of gold bullion is inconsistent with the price of coins of the same weight minted by the mint.For example, forty-six pounds fourteen shillings and sixpence, sometimes about forty-seven fourteen shillings, and sometimes about forty-eight pounds.Even forty-four and a half guineas, fresh from the mint, when the coinage was below the standard weight, after it had flowed into the merchant's coffers and mixed with other money, could buy commodities in the market, In fact, it is similar to the goods that can be purchased with other ordinary currencies.It would be worth less than forty-six pounds, fourteen shillings and sixpence, like any other currency. However, the effect of pouring new coins into the furnace is to equalize their unmelted weight with essentially no appreciable loss.That is to say, one pound of standard gold can be produced, that is, gold coins or silver coins of forty-seven pounds, fourteen shillings or even forty-eight pounds can be exchanged.It was evident that it was profitable to melt the new coinage, and, because of its speed, the government could not prevent it.Thus, the work of the Mint is like the fabric of Pannalope, which is woven during the day and unraveled at night.It can be said that the work of the mint is only to replenish the amount of coins that have been melted, but not to increase the amount of coins. If private individuals take their gold and silver to the mint and pay for the coinage themselves, the processing costs can increase both the value of the coinage and the value of the metal.The minted metal is therefore more valuable than the unminted metal.We know that everywhere it is the prerogative of the government to mint coins.If the seigniorage was too high, the value of the tax was added to the bullion.When the amount of taxation is much higher than the labor and cost required for casting, domestic and foreign private coin minters will inject a large number of counterfeit coins into the market to make up for the huge value difference between gold and silver bars and gold and silver coins, and finally lead to official currency value decreased. But in France, where the seigniorage is eight per cent, there have never been great disturbances.We know that it is very risky to mint coins privately.The French private minters, and their agents abroad, simply did not think it necessary to risk so much for a profit of six or seven per cent.In France seigniorage makes the coin more valuable than it should be in proportion to its pure gold content.For example, in January 1726, the decree of France fixed the coinage of twenty-four carats of pure gold at seven hundred and forty livres ninety-one and elevenths of a denier, about one mark (eight ounces) of Paris. ).After deducting the error of coinage, the French gold coin only contains 21.75 carats of pure gold and 2.25 carats of alloy, which is equivalent to the value of one mark standard gold, which is about six hundred and seventy-one livres ten Denieux.After the implementation of seigniorage, the standard gold of the French mark can be coined with thirty gold louis (each is twenty-four livres), a total of seven hundred and twenty livres.From the foregoing it will be seen that the value added by the seigniorage to the standard gold of the mark is the difference of seven hundred and twenty livres minus six hundred and seventy-one livres ten denies, or forty-eight livres, nineteen sous and two. Denieux. In fact, the difference obtained from the amount of pure gold and silver that should be contained in the currency in circulation minus the amount of pure gold and silver that it actually contains is the profit of melting new coins.In most cases this profit is reduced or lost entirely by seigniorage.When the above difference is less than the seigniorage, there is not only no profit but also a loss in melting the new coin; when the above difference is equal to the seigniorage, there is neither profit nor loss in the melting of the coin; Much smaller compared to tax time.If, before the gold coins were re-minted, the tax on coinage was 5 per cent, there would be a loss of 3 per cent in melting the gold coins; if the seigniorage was 2 per cent, there would be no profit and no loss in melting the gold coins; If it is one percent, then melting gold coins can make a profit, but the profit is only one percent, not two percent.In some places, where money is counted by number rather than weight, seigniorage would be the best means of preventing the melting and exporting of coinage.For, those who melt or export coin privately, in order to obtain the greatest profit, use mostly the best and heaviest coin. As early as Charles II, laws were enacted to encourage coinage through tax exemptions.But the law was short-lived, and after several extensions, it was finally amended to become permanent in 1769.The government made the law permanent, perhaps at the behest of a big bank like the Bank of England.The Bank of England often carried its own bullion to the Mint to mint coins to replenish the coffers.Because it believes that it is obviously more beneficial for the government to bear the cost of minting than to bear the cost of minting itself.Suppose, before the reformation of the gold coin, the custom of counting gold by weight, as it is likely to be done for inconvenience, or by count, the great banks would find that they had miscalculated their stake. Before the reformation of gold coins, there was no seigniorage, and the gold coins in circulation in England were two per cent below the standard weight, and their value was also two per cent below that which should contain the standard amount of gold.The great banks, therefore, at this time buying bullion for minting, will be worth two per cent less than the price paid when minted.If a seigniorage of 2 per cent is payable, then the gold coins in circulation, when they are 2 per cent below the standard weight, are still worth as much as they should contain the standard quantity of gold.In this case, the value of the mint offsets the value of the reduction in its weight.Although the bank pays two per cent seigniorage, it loses only two per cent, as before.This is because, when the seigniorage is five per cent, and the gold coins in circulation are two per cent below the standard weight, the bank can make a three per cent profit on the bullion price, minus the per cent it has to pay After five seigniorages, the loss was exactly two per cent.When the seigniorage is one percent, and the gold coins in circulation are less than two percent of the standard weight, the bank loses one percent in the price of the bullion, less the one percent seigniorage it has to pay , and the final loss was exactly two percent.When the seigniorage is neither high nor low, and the coin contains a standard weight (as it was before the reformation), then the Bank of England will neither gain nor lose as if there had been no seigniorage.They gained in bullion prices but lost in seigniorage. Thus, when a commodity is moderately taxed (which, of course, does not encourage smuggling), the transporter of that commodity may not really be considered a true taxpayer, since he recovers the tax paid in the price of the commodity.The final purchaser of commodities, the consumer, is the bearer of this tax.But in general, with money there is no buyer or consumer of last resort, because with money everyone is a merchant.We buy currency in order to resell it.Therefore, when the seigniorage is moderate, all are required to pay taxes, and each will recover the amount he has paid in the increase in the value of the seigniorage. In any case, therefore, whether the seigniorage is moderate or not, it does not increase or decrease the expenses of the bank, or any other private person, who carries bullion to the mint.So long as the currency in circulation contains a standard weight, the coinage costs no one, whether there is a seigniorage or not; The difference in the amount of pure gold contained is equal.In this way, when the casting fee is paid by the government, the government not only has to bear a certain amount of expenses, but also cannot obtain due income.Even with such generosity from the government, the banks or any private individuals are not getting any benefit from it. Moreover, the trustees of the bank will not agree to pay seigniorage because they believe that "the payment of seigniorage will cause them no loss or benefit."In the present case, if the value of gold and silver continued to be calculated by weight, they would gain no advantage; but if the custom of weight calculation were abolished, and the quality of gold coins returned to what they were before the reformation, the effect of seigniorage would be Banks will gain or save a large income.Currently, the Bank of England is the only bank that sends large quantities of gold and silver bullion to the mint, so it bears the cost of minting the coins.If the object of the coinage were merely to replace the inevitable loss and wear and tear of the coin, it would generally not exceed fifty thousand pounds, and at the most not more than one hundred thousand pounds.But if the coinage is lower than the standard weight, the annual coinage must additionally replenish the huge shortfall caused by continual melting and exportation.Therefore, during the ten or twelve years before the gold coin was reformed, the annual mint in England averaged more than 850,000 pounds.And the bank loses 2.5 per cent, or more than 21,250 pounds, in gold bullion every year for minting more than 850,000 pounds of gold coins.In the circumstances at the time, a mintage duty of four or five per cent might have been effective in preventing the export and melting of mint.At this time, the bank's loss may be less than one-tenth of the above-mentioned amount. The annual appropriations of Parliament to the mint do not exceed fourteen thousand pounds, but in general the real expenses of the government (such as the wages of the mint clerks) amount to only half this amount.It will be thought that it is not very much a matter of concern to the government to save such a small amount of money, or to obtain something like it; but to a large corporation like the Bank of Eight thousand pounds or twenty thousand pounds is a matter of great concern. Some of the above descriptions may be more appropriate to discuss in the first few chapters.For example, it can be placed in the chapters on the origin and utility of money, and the difference between real and nominal prices of commodities.I put it in this chapter because the law that rewards minting has its origins in mercantile bias.Money production incentives are considered one of the rich country policies of mercantilism.Mercantilism believes that money constitutes the wealth of all countries, and rewarding currency production is most in line with the spirit of mercantilism.