Trade benefits of the Colonies

• Definition: When a country like Britain (England) used its colonies to form a

favorable balance of trade by exporting more than it imported.

Mercantilism

England France

Textiles$ 300

Lumber$ 500

Gold$ 200

Before Mercantilism

•England Exports textiles•England Imports Lumber

Does the money England receives from France for its Export of Textiles equal the cost of the Lumber they import from France? _______________What does England have to give to France to purchase lumber? ___________What is the result of the imbalance in trade cause in England? _______________

NO$200.00

Debt

England France

Textiles$ 300

Gold$ 300

Lumber

After Mercantilism

England imports lumber from its colonies

Britain (England) can use the colonies to get the lumber they used to have to get from FranceEngland no longer needs French LumberFrance still needs to import textiles from England. France now has to pay Britain to get the textiles it needsEngland sells manufactured goods to the colonists.

England exports manufactured goods to the

colonies

England still exports textiles to France

France now has to pay for

textiles from England.

Other Notes• Goal of Mercantilism: Create a favorable balance of

trade. Colonies helped countries achieve this goal. – Example 1 England had a trade deficit. Why?

» Imports cost more than exports = debt– Example 2 England created a favorable balance of trade. How?

» England used its colonies to get the goods it once imported, but it still exported its textiles and sells manufactured good to the colonies.

» Exports exceeded the cost of imports = profit

• Colonies are only allowed to import manufactured goods from the mother country.

• Colonies are only allowed to export natural resources to the mother country.

• England achieves a favorable balance of trade by exporting more than it imports

• Definition: A hands off policy the British had towards its colonies which let the colonies develop on their own without strict governmental control.– Colonies learn to govern themselves – The colonies also smuggle goods in from other

countries because of salutary neglect.• This will lead to problems later as England tries to

regain governmental control of the colonies and stop and/or tax previously smuggled goods.

Salutary Neglect