This course of policy, called the mercantile system, involved more than one error. It was a mistake to suppose that there was any peculiar advantage in receiving the precious metals, or peculiar disadvantage in paying them away, when the free course of trade required it; any extraordinary value which they might chance to have beyond merchandize justly determining in each case the expediency or inexpediency of exporting them.

It is also a mistake to assume that the excess of the exports over the imports always indicated the profits of a trade. It was, for example, formerly not unusual for an adventurer in some Atlantic city to take out to the Pacific such articles as were suited to the trade with the natives on that coast, to the amount of a few thousand dollars. These articles were in due time exchanged with the Indians for furs, which, being then transported to China, were there converted into a cargo of teas and other Chinese goods, worth, when brought to the United States, one or two hundred thousand dollars. Thus a trade was established by which the goods exported had brought a return of perhaps an hundred times their cost, and which was, consequently, as gainful as, by the prevalent doctrine of the balance of trade, it would have been pronounced injurious. In like manner a ship is fitted for a whaling voyage, and takes out nothing but provisions for the crew, with her fishing tackle, and in a year, or two, returns with a cargo of oil and spermaceti, worth perhaps an hundred thousand dollars.

These, however, are anomalous cases, and tend to make us overrate the errors of the rule for ascertaining the balance of trade. If, indeed, all imported merchandise was paid for by the exports in the same branch of business, as in the two cases mentioned, then the reverse of the old rule would be correct, and a trade would be profitable in proportion as the value of the imports exceeded that of the exports. But such is not the fact; and the excess of imports may indicate not the profits to the importer, but the amount of debt contracted by him.

In a series of years, indeed, the whole amount of imports and of exports are of equal value, with the exception of a small excess in the value of imports; inasmuch as nations, like individuals, in their exchanges, commonly receive more value than they part with. But occasionally there is a great difference of value between the two. Now, the exports of a country may commonly be regarded as so much sold to foreign nations, and the imports as so much bought from them. But, if a country buys more than it sells, this is prima facie evidence that it is living too fast. It so far lessens the national wealth, and contracts a debt which it may not be able to discharge without inconvenience, and even embarrassment.

Such is often the condition of the United States in its commerce with Great Britain, which constitutes three-fourths of their trade with the world. In every flush of prosperity they increase their imports of foreign merchandise, and are but too apt to continue their extra consumption when their extra means have ceased. The abundant capital of Great Britain enables our merchants to obtain credit whenever they ask it, and the debt thus contracted lays the foundation for future embarrassment. These facts seem to present a yet stronger ground for a tolerably high impost than does the encouragement of domestic industry, as it would tend to check unwarranted expense of living; and so far as it failed in introducing frugality, it would draw from the improvident class some compensation to the public, and strengthen the nation in its ability to encounter the difficulties of debt.

There are many fabrics extensively consumed, particularly those of iron, wool, cotton, and leather, which are partly manufactured at home and partly obtained from abroad by the exchanges of commerce; and this diversity of origin, differently affecting different interests, has given rise to a question of public policy which has warmly agitated the community; and the controversy has been the more serious and threatening from the fact that the principal parties were separated by geographical lines - the Northern States, which take the lead in manufactures, being in favor of protecting and encouraging that branch of industry by taxing its foreign rivals; while the Southern States, which are mere consumers of manufactured articles, were in favor of free trade, by which they could buy their merchandise in the cheapest market, whether it was foreign or domestic.

Though I do not hope to reconcile a discordance of views founded on a diversity of private interests, I shall endeavor to state with fairness the principal arguments by the parties severally supporting their respective tenets.

The friends of manufactures, which they too exclusively regard as domestic industry, maintain that it is our true policy to manufacture for ourselves those articles of which our country at once produces the raw materials and possesses the requisite labor and capital; and although, by the greater cheapness of human labor in some foreign countries, where the laborer is obliged to put up with the bare necessaries of life, together with the greater cheapness of capital in such countries, they may be able to undersell our manufacturers, that we are bound, by taxing the foreign articles, to protect the industry of our own citizens from the rivalship of foreign paupers, who are as much below them in the modes of subsistence as in their political condition; and farther, that the higher price which may be paid for the domestic manufacture is but temporary; since the competition among the domestic manufacturers when the home market has been secured to them, together with the gradual increase of skill and of capital, will make the domestic fabrics cheaper and cheaper, until they will eventually be able to support themselves without public protection against foreign competitors. The success of the manufactures of cotton are relied on to prove the soundness of this policy; and it is urged that a similar course pursued towards the manufactures of iron, wool, leather, and some other articles, would be attended with similar results; and lastly, that even if the domestic manufacture should not always become cheaper than it could be purchased abroad, the difference would be more than compensated by securing a supply, from domestic sources, of all articles essential to the comfort of our citizens, rather than to be dependent on the good-will, the peace, and the varying productiveness of other nations.

Their opponents, on the other hand, insist that the manufactures purchased by the exchanges of commerce are as much the product of domestic industry as if they were fabricated at home; since they have been obtained only by being given in exchange for commodities which are the product of our own land and labor; and that it is one of the highest boasts of political freedom that every citizen should have an unrestricted right to buy where he can obtain the cheapest and best articles, or those which he thinks the cheapest and best; and to compel him, by a tax on the cheaper foreign article, to buy a dearer one made at home, is to take money out of his pocket to put it into the pocket of another, and is therefore an act of tyranny and injustice; that, although the protected manufacture may, perchance, in time become cheaper, this result is problematical, since many articles, after a protection of forty or fifty years, cannot even then dispense with it; and that the loss is present and certain, while the benefit is future and contingent: that if other countries can make cloth, cutlery, or railroad iron cheaper than we, whether they owe their advantage to their pauper labor, their greater skill, or more abundant capital, we should be wise to profit by this cheapness, as we are when we import our pine-apples rather than raise them in hothouses, and bring our tea from the farthest extremity of the globe rather than raise it at home, as Mr. Junius Smith has shown that we might do.

That, inasmuch as the sagacity of self-interest will commonly induce individuals to employ their capital and industry in the most profitable modes, the policy which induces many to abandon their previous pursuits to engage in manufacturing may be presumed to divert labor and capital to a business less suited to the circumstances of the country, and is so far a source of national loss.

That, from the great distance of foreign manufacturers from our country, the cost of transporting their fabrics hither - comprehending freight, insurance, commissions, and interest of money - is a standing bounty and encouragement to domestic manufacturers, which are likely to prompt the establishment of all those that are adapted to the circumstances of the country; and when they are further stimulated by an impost, rash and improvident enterprises, ruinous to the undertakers and injurious to the nation, are often the consequence.

That, while it is a wise policy for a country to secure a domestic supply of everything essential to the national defence, all further interference by the government is injurious. That a dependence on foreign countries for any commodities it may require has advanced the cause of civilization in the world, and been of more benefit than disadvantage to its separate communities.

Amidst this discrepancy of views, I think it will be admitted by the advocate of free trade that where the country possessing the raw materials, skill, and capital required for a manufacture, is so far ripe for it that a temporary encouragement will enable it to overcome the early difficulties which attend on every new business, and finally to support itself, such encouragement may be justified, and the country be more than compensated by the new manufacture for the previous cost of protection.

But, on the other hand, without this result, the advocate for protective restrictions must admit that they not only take money from one class of men to give to another, but also take a further sum, which is given to no one, and is, in fact, so much value annihilated. Thus, suppose that a ton of bar-iron could be imported and sold, free of duty, for $60, and that iron of a similar quality could not be made here and sold for less than $75 a ton, and that the profit to the iron-master is $10 a ton. Now, let us suppose that, to secure the home market to the domestic producer, an impost of $20 the ton is laid on this iron. The purchaser, then, of a ton, in giving $75, gives $15 more than the foreign iron would cost; of which $10 is merely transferred from him to the iron-master, but $5 is received by no one, and is as thoroughly destroyed as if it had been sunk in the ocean.