domestic producers in the country to which it exports. Even on the most
selfish principles, therefore, the benefit of such a tax is always
extremely precarious.

5. We have had an example of a tax on exports, that is, on foreigners,
falling in part on ourselves. We shall, therefore, not be surprised if
we find a tax on imports, that is, on ourselves, partly falling upon
foreigners.

Instead of taxing the cloth which we export, suppose that we tax the
linen which we import. The duty which we are now supposing must not be
what is termed a protecting duty, that is, a duty sufficiently high to
induce us to produce the article at home. If it had this effect, it
would destroy entirely the trade both in cloth and in linen, and both
countries would lose the whole of the advantage which they previously
gained by exchanging those commodities with one another. We suppose a
duty which might diminish the consumption of the article, but which
would not prevent us from continuing to import, as before, whatever
linen we did consume.

The equilibrium of trade would be disturbed if the imposition of the tax
diminished in the slightest degree the quantity of linen consumed. For,
as the tax is levied at our own custom-house, the German exporter only
receives the same price as formerly, though the English consumer pays a
higher one. If, therefore, there be any diminution of the quantity
bought, although a larger sum of money may be actually laid out in the
article, a smaller one will be due from England to Germany: this sum
will no longer be an equivalent for the sum due from Germany to England
for cloth, the balance therefore must be paid in money. Prices will fall
in Germany, and rise in England; linen will fall in the German market;