The Wealth of Nations Book 4 Chapter 6 - The Hidden Cost of Trade Treaties

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In this video, we examine the economic impact of treaties of commerce, using the 1703 Methuen Treaty between Britain and Portugal as a case study. While such treaties aim to boost exports and secure trade advantages, they often create market distortions, benefiting certain merchants while harming consumers and industries. The Methuen Treaty gave Portugal’s wine producers an advantage in Britain, but at the cost of trade efficiency. We also explore how Britain’s reliance on Portuguese gold was overstated, as gold is just another commodity that can be acquired elsewhere. Additionally, we break down the role of seigniorage—government fees for minting coins—and how Britain’s policy of free coinage contributed to gold coin shortages and economic inefficiencies. The key takeaway: trade agreements that favor one country over others often do more harm than good, and policies focused on money supply rather than productive industry are based on outdated mercantilist thinking.

00:00 - Introduction to Treaties of Commerce
00:11 - Impact of Trade Treaties
00:58 - The Methuen Treaty
01:40 - Gold and Trade Efficiency
03:01 - Britain’s Coinage System
03:44 - Seigniorage and Coinage Policy
06:34 - Conclusion and Broader Economic Implications
07:01 - Get the book

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