Trade Deals and Hidden Costs — The Wealth of Nations

Smith looks at commercial treaties that give one foreign country special trade rights. The favoured nation's merchants gain a monopoly in the treaty partner's market and often sell at higher prices. The partner nation must buy protected foreign goods dearer and sell its own exports cheaper, so its annual wealth may shrink even if the trade still earns some profit.

When two goods are exchanged, cheapening one side means dearing the other. Treaties praised as friendship pacts often grant foreign sellers a protected corner of the home market while home producers face a monopoly abroad. The public hears about mutual gain; the ledger shows one nation's exchangeable produce sold at a discount.