Segar. — The Balance of Trade. 183 



cannot continue beyond what is required by and determined by 

 the necessities of the country. A demand for foreign products, 

 then, is ultimately a demand for an equal value of home products, 

 and this is what is chiefly in view, as a rule, when it is said that 

 exports have to pay for imports. 



It is often lamented that we in New Zealand import this from 

 America, that from Germany, and something else from England. 

 But it should be understood that if we imported nothing we 

 should export only about as much as would be needed to pay 

 interest on our debt ; and if we took no canned fruit, no soap, no 

 leather, and so on, we should export less mutton, less wool, and 

 less butter. The fact that our people prefer to produce butter 

 and mutton shows that we could only exchange to our own dis- 

 advantage a portion of those industries for the others we pine 

 after. By protection we can undoubtedly foster the smaller 

 industries which do not already completely supply our wants, 

 but it is at a greater loss to the great staple exporting industries 

 and to the nation at large. 



There is not, of course, intended any suggestion in what we 

 have said that the balance of trade must remain constant ; in 

 fact, we have seen that it fluctuates rapidly within short periods. 

 But these changes have now been proved, both statistically and 

 theoretically, to be due in only a very minor degree and only 

 temporarily to foreign goods displacing home-made goods, or the 

 reverse. The balance of trade depends on the many elements 

 we enumerated in the early part of this paper, and any but the 

 more temporary fluctuations are mainly due to operations in the 

 loan market and great movements of capital. When a nation 

 borrows or lends abroad, a change in the balance of trade repre- 

 sents the transaction, and so also when any of the factors of 

 international indebtedness are changed. But the ordinary trans- 

 actions of trade do not affect these. If a merchant in Auckland 

 orders a large supply of cotton goods or hardware, the Govern- 

 ment does not as a consequence issue a new loan. And so an 

 increase in importations brought about and to be paid for in the 

 ordinary way of business must call forth an equal increase in the 

 exports of goods. The effect of a single transaction may not be 

 very visible, as a single drop of rain may not appear to raise 

 the level of a large lake, but nevertheless the level is raised al- 

 ways to an extent proportional to the amount of rain that falls. 

 The effect of the single transaction is there : it only wants the 

 assistance of some others to be patent to all. 



Import Duties. 



We have seen that a restriction, in the form of duties, on 

 imports must, after a time, equally restrict exports. Similarly. 



