te on the relative value of cloth in the two countries, that it
would cease to be profitable to export it. If the improvement in making
wine were of a very important description, it might become profitable
for the two countries to exchange employments; for England to make all
the wine, and Portugal all the cloth, consumed by them: but this could
be effected only by a new distribution of the precious metals, which
should raise the price of cloth in England, and lower it in Portugal.
The relative price of wine would fall in England in consequence of the
real advantage from the improvement of its manufacture; that is to say,
its natural price would fall: the relative price of cloth would rise
there from the accumulation of money.

Thus, suppose before the improvement in making wine in England, the
price of wine here were 50_l._ per pipe, and the price of a certain
quantity of cloth were 45_l._, whilst in Portugal the price of the same
quantity of wine was 45_l._, and that of the same quantity of cloth
50_l._; wine would be exported from Portugal with a profit of 5_l._, and
cloth from England with a profit of the same amount.

Suppose that, after the improvement, wine falls to 45_l._ in England,
the cloth continuing at the same price. Every transaction in commerce is
an independent transaction. Whilst a merchant can buy cloth in England
for 45_l._, and sell it with the usual profit in Portugal, he will
continue to export it from England. His business is simply to purchase
English cloth, and to pay for it by a bill of exchange, which he
purchases with Portuguese money. It is to him of no importance what
becomes of this money; he has discharged his debt by the remittance of
the bill. His transaction is undoubtedly regulated by the terms on which
he can obtain this bill, but they are known to him at the time; and the
causes which may influence the market price of bills, or the rate of
exchange, is no consideration of his.

If the markets be favourable for the exportation of wine from Portugal
to England, the exporter of the wine will be a seller of a bill, which
will be purchased either by the importer of the cloth, or by the person
who sold him his bill; and thus without the necessity of money passing
from either country, the exporters in each country will be paid for
their goods. Without having any direct transaction with each other, the
money paid in Portugal by the importer of cloth will be paid to the
Portuguese exporte