The Wealth of Nations

The Wealth of Nations

by

Adam Smith

Balance of Trade Term Analysis

A country’s balance of trade is the difference between its imports and exports. A favorable (or positive) balance of trade means that the country exports more than it imports, while an unfavorable (or negative) balance of trade means that it imports more than it exports.
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Balance of Trade Term Timeline in The Wealth of Nations

The timeline below shows where the term Balance of Trade appears in The Wealth of Nations. The colored dots and icons indicate which themes are associated with that appearance.
Book 4, Chapter 1
Labor, Markets, and Growth Theme Icon
Institutions and Good Governance Theme Icon
Mercantilism and Free Trade Theme Icon
Money and Banking Theme Icon
When European countries started prohibiting gold and silver exports, merchants protested. They focused on the balance of trade , arguing that a nation can obtain more gold and silver by exporting more than... (full context)
Institutions and Good Governance Theme Icon
Mercantilism and Free Trade Theme Icon
...the measure of wealth, and it tries to build a nation’s wealth by modifying the balance of trade . It uses six kinds of policies, two to restrict imports and four to grow... (full context)
Book 4, Chapter 3
Institutions and Good Governance Theme Icon
Mercantilism and Free Trade Theme Icon
...system wrongly encourages nations to restrict imports from countries with which they have a negative balance of trade . For instance, Britain puts extraordinarily high duties on imports from France, which has done... (full context)
Institutions and Good Governance Theme Icon
Mercantilism and Free Trade Theme Icon
There are three issues with this policy. First, it mistakenly sees an unfavorable balance of trade with one country as unfavorable overall. But in reality, by importing certain goods from France,... (full context)
Institutions and Good Governance Theme Icon
Mercantilism and Free Trade Theme Icon
Money and Banking Theme Icon
Third, it’s impossible to precisely measure the balance of trade . Customs records are based on inaccurate valuations, and even if England pays more bills... (full context)
Labor, Markets, and Growth Theme Icon
Institutions and Good Governance Theme Icon
Mercantilism and Free Trade Theme Icon
Money and Banking Theme Icon
...Of the Unreasonableness of those extraordinary Restraints upon other Principles.” It’s absurd to view the balance of trade as a measure of whether trade is beneficial or harmful to society. If two countries... (full context)
Labor, Markets, and Growth Theme Icon
Institutions and Good Governance Theme Icon
Mercantilism and Free Trade Theme Icon
...be far more efficient than trade with Asia or the Americas. In conclusion, an unfavorable balance of trade has never impoverished a country. Rather, the balance of production and consumption determines whether a... (full context)
Book 4, Chapter 6
Institutions and Good Governance Theme Icon
Mercantilism and Free Trade Theme Icon
Money and Banking Theme Icon
...more cheaply. But some countries have established such treaties primarily in order to shape the balance of trade and secure more gold and silver. For instance, Britain and Portugal’s 1703 treaty secures Britain’s... (full context)
Institutions and Good Governance Theme Icon
Mercantilism and Free Trade Theme Icon
Money and Banking Theme Icon
...of going through the trouble of first selling them for Portuguese gold. This would favor balance of trade with those other countries. When France and Spain invaded Portugal in 1762, they tried to... (full context)
Book 4, Chapter 8
Labor, Markets, and Growth Theme Icon
Institutions and Good Governance Theme Icon
Mercantilism and Free Trade Theme Icon
The mercantile system’s stated goal is to improve the balance of trade by increasing exports and reducing imports. But to a significant extent, Britain’s attempts to help... (full context)
Book 5, Chapter 2
Institutions and Good Governance Theme Icon
Mercantilism and Free Trade Theme Icon
...encourage merchants to overstate exports and understate imports, which politicians appreciate because it makes Britain’s balance of trade look more favorable than it really is. The import duties are also extremely complicated and... (full context)