ts lot, _minus_ the cost of bringing from the other country the
commodity which it imports. This solution is rendered plausible by the
circumstance just now mentioned, that the price of the commodity will be
higher in the country which imports it, than in the country which
exports it, by the amount of the cost of carriage. If linen is sold in
England at a higher price than in Germany, by a per-centage equal to the
cost of carriage of the linen, it appears obvious that England pays for
the carriage of the linen, and Germany, by parity of reason, for that of
the cloth.

But if we apply to these questions the principles already explained, we
shall see that this is not by any means a universal law: the fact may
correspond with it, or it may not.

For suppose that the prices have adjusted themselves, no matter how, and
that the imports and exports balance one another, each commodity, of
course, being dearer by the cost of carriage, in the country which
imports than in that which exports it: and suppose now that the cost of
carriage, both of the one and of the other, were suddenly and
miraculously annihilated, and that the commodities could pass from
country to country without expense. If each country bore its own cost of
carriage before, each country will save its own cost of carriage now.
Cloth, in Germany, will in that case fall exactly to what it is in
England; linen in England, to what it is in Germany.

Now this fall of price, supposing it to happen, will probably affect the
demand on both sides; and it will either affect it alike in both
countries, or it will affect it unequally. It will affect it alike, if
the fall of price does not affect the demand at all, or if it affects it
equally in both countries. If either of these results should take place,
the cloth and the linen would continue to balance each other as before:
no money would pass from one country to the other; prices in both would
continue at the point to which they had fallen, and each country would
exactly save the cost of carriage on the commodity which it imports from
the other.

But the result might be, that the fall of price might not have an effect
exactly equal, on the demand in the two countries. Suppose, for
instance, that the fall of cloth in Germany owing to the saving of the
cost of carriage, did not increase the demand for cloth in Germany; but
that the fall of linen in England from a like cause, did increase the
demand for linen in England