requires so diminished a quantity of
cloth, that its total money value is exactly the same as before, the
balance of trade will be undisturbed; England will gain the duty,
Germany will lose it, and nothing more. If, again, the imposition of the
duty occasions such a falling off in the demand, that Germany requires a
less pecuniary value than before, our exports will no longer pay for our
imports, money must pass from England into Germany, and Germany's share
of the advantage of the trade will be increased. By the change in the
distribution of money, cloth will fall in England; and therefore it
will, of course, fall in Germany. Thus Germany will not pay the whole of
the tax. From the same cause, linen will rise in Germany, and
consequently in England. When this alteration of prices has so adjusted
the demand, that the cloth and the linen again pay for one another, the
result is, that Germany has paid only a part of the tax, and the
remainder of what has been received into our treasury has come
indirectly out of the pockets of our own consumers of linen, who pay a
higher price for that imported commodity, in consequence of the tax on
our exports, which at the same time they, in consequence of the efflux
of money and consequent fall of prices, have smaller money incomes
wherewith to pay for the linen at that advanced price.

It is not an impossible supposition that, by taxing our exports, we
might not only gain nothing from the foreigner, the tax being paid out
of our own pockets, but might even compel our own people to pay a second
tax to the foreigner. Suppose, as before, that the demand of Germany for
cloth falls off so much on the imposition of the duty, that she requires
a smaller money value than before, but that the case is so different
with linen in England, that when the price rises the demand either does
not fall off at all, or so little that the money value required is
greater than before. The first effect of laying on the duty is, as
before, that the cloth exported will no longer pay for the linen
imported. Money will, therefore, flow out of England into Germany. One
effect is to raise the price of linen in Germany, and, consequently, in
England. But this, by the supposition, instead of stopping the efflux of
money, only makes it greater, because the higher the price, the greater
the money value of the linen consumed. The balance, therefore, can only
be restored by the other effect, which is going on at the same