An exclusive trade monopoly is a system in which a dependent territory is only allowed to trade with the country that rules it. This was typical of European colonies in the Americas, which were only allowed to trade with the countries that settled them. Such rules tend to bring capital into the colonial trade by artificially limiting competition, thus raising prices and profit margins. But they also limit the colonies’ total production and divert capital from other, more fruitful domestic investments. This is why Smith considers them counterproductive in almost all cases.
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Exclusive Trade Monopoly Term Timeline in The Wealth of Nations
The timeline below shows where the term Exclusive Trade Monopoly appears in The Wealth of Nations. The colored dots and icons indicate which themes are associated with that appearance.
Book 4, Chapter 4
...for re-exportation in the first place. But when there is already a trade monopoly—like Britain’s exclusive rights to trade with its American colonies—drawbacks do not increase trade, and only cost the customs house in...
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Book 4, Chapter 7
...English colonies can trade with England on better terms than other countries’ colonies. When individual companies exclusively control the trade (like in Holland, Denmark, Portugal, and France in the past), they limit supply to increase...
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...countries grows due to those countries’ trade with America. But European countries who establish an exclusive trade with their American colonies benefit less, as these colonies would produce more goods for cheaper...
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...the colonies can provide revenue and soldiers (although, in practice, they actually haven’t). And the exclusive trade helps colonizing countries receive particular commodities that they couldn’t access otherwise (like tobacco and sugar...
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England’s exclusive trade with its colonies led other foreign powers to withdraw their capital from them, which caused...
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...back and forth faster, and the same capital can yield profits more frequently. But Britain’s exclusive trade with its colonies has supported a distant, roundabout trade while harming the direct, nearby trade...
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...British goods. And Britain’s trade with its colonies has been beneficial overall, even if the exclusive nature of that trade was harmful. Still, it would be far better in a “natural and free state.” The...
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By increasing merchants’ profits, the exclusive trade also reduces wages, discourages land improvement, reduces land rents, and raises interest rates in Europe....
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Yet exclusive trade systems between European countries and their colonies often hurt the mother country’s economy and benefit...
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...over its trade to a particular company. As explained above, the first kind of monopoly, exclusive trade , causes capital to flood into commerce. The second kind, the company-based monopoly, affects rich...
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Book 4, Chapter 8
...of competitive goods and putting bounties on exportation to the treaty with Portugal and the exclusive trade policies with the colonies, really just support merchants and manufacturers at consumers’ expense.
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Book 5, Chapter 1
Some companies have exclusive trade privileges, while others have lost theirs—like the Royal African Company, which failed as a result....
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...a new branch of trade, but foolish when granted in perpetuity). Fifty-five joint-stock companies with exclusive trade privileges have failed, too. Joint-stock companies without these privileges can only succeed in banking, insurance,...
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