The “Balance of Trade”

Of all the arguments which gained adherents to the tariff policy at the time of the last General Election and immediately following it, the "balance of trade" argument was the most potent—and the most fallacious. Under the Gold Standard, any surplus of imports which was not of a purely temporary character was met by a movement of gold. The country which had imported more than it had exported thus paid for its surplus imports partly in gold and partly by allowing its exports to be sold at a slightly lower price. With the departure from the Gold Standard and the assurance that any temporary unbalance in the trade would speedily be rectified by natural processes, the plea for tariffs for the purpose of "correcting" the trade balance lost strength. The effect of the departure from the Gold Standard in producing equilibrium between the imports and the exports was to some extent, then, neutralized by the new tariffs.