tances which affect the trade of a
country by operating immediately upon the exports.

Let us revert to our old example, and to our old figures. Suppose that
the trade between England and Germany in cloth and linen is established,
and that the rate of interchange is 10 yards of cloth for 17 of linen.
Now suppose that there arises in another country, in Flanders, for
example, a linen manufacture; and that the same causes, the working of
which in England and Germany has made 10 yards exchange for 17, would in
England and Flanders, putting Germany out of the question, have made the
rate of interchange 10 for 18. It is evident that Germany also must give
18 yards of linen for 10 of cloth, and so carry on the trade with a
diminished share of the advantage, or lose it altogether. If the play of
demand in England and Flanders had made the rate of interchange not 10
for 18 but 10 for 21, (10 to 20 being in Germany the comparative cost of
production,) it is evident that Germany could not have maintained the
competition, and would have lost, not part of her share of the
advantage, but all advantage, and the trade itself.

It would be no answer to say, that Germany could probably still have
found the means of importing cloth from England, by exporting something
else. If she had purchased cloth with anything else, she would have
purchased it dearer: as is proved by the fact, that having free choice,
she found it most advantageous to purchase it with linen. When she could
get 10 yards of cloth for 17 of linen, that was the mode in which she
could get it with least labour. Being pressed by competition, she gave
successively 17, 18, 18; but rather than give 19 yards of linen, she
perhaps would prefer to give, as costing her rather less labour, 10
yards of silk, (which we will suppose to be the quantity which in
England will purchase 10 yards of cloth.) It is obvious that, although
Germany has found the means of supplying herself with cloth, by
exporting a different article from that in which she was undersold, yet
the advantage of the trade between her and England is now shared in a
proportion much less favourable to Germany.

There is no difficulty in showing that the same series of consequences
takes place in exactly the same manner through the agency of money. The
trade in cloth and linen between England and Germany being supposed to
exist as before, Flanders produces linen at a lower price than that at
which Germany has hitherto