Multilateralism and/or Bilateralism: the Settlement of British Trade Balances with ‘The North’, c. 1700
During I949-5I, Mr Charles Wilson and the late Professor Heckscher in a number of articles in this journal exchanged views on the relative importance of the mechanisms through which trade balances were normally settled in 'the period commonly described as "mercantilist"'. 1 The discussion or controversy centred on two questions: (a) to what extent were coin and bullion shipments rather than bills of exchange used to settle international accounts; and (b) were trade balances ordinarily settled bilaterally or multilaterally. The general drift of the argument associated bilateral settlement with specie shipments and multilateral settlement with the exchange mechanism. Abstractly, of course, this association is not necessary. The bilateral use of the exchange mechanism, however convenient to individual merchants, could not of course redress a trade imbalance between two nations; but specie transfers might be multilateral. Country A having an unfavourable trade balance with country B, a merchant in A, with debts to pay in B and unwilling to take the characteristic loss by the exchange, orders his correspondent in C to ship specie to B, reimbursing that correspondent either by specie shipment from A, by exchange, or by goods in trade. Though such multilateral specie shipments can be conceived of abstractly (and actually occurred, as will be shown below), it was convenient for Mr Wilson to associate specie shipments with bilateral settlements inasmuch as he used, in his original article, the actual necessity for bilateral specie settlements as a justification or explanation of the advocacy by many mercantilist publicists and policy makers of the necessity of individually balanced trades (as distinct from the liberal satisfaction with an overall national balance of trade). Mr Wilson and Professor Heckscher based their argument in very great part on contemporary controversial literature with supporting references to modern scholarship and contemporary statistics and estimates. Evidence was used from the sixteenth to the eighteenth centuries, suggesting that the normal modes of settlement had remained essentially the same for at least several centuries. Since there has never been any question in modern scholarship about the heavy use of coin and bullion in European trade with the East Indies, argument centred on the degree to which such shipments were used in settling English trade mbalances with Scandinavia and the Baltic a classic area of deficit