That country like Spain， had possessed from time immemorial fineflocks of sheep.Strabo tells us that a fine breed of sheep hadbeen introduced into Portugal from Asia， the cost of which amountedto one talent per head.When the Count of Ereceira became ministerin 1681， he conceived the design of establishing clothmanufactories， and of thus working up the native raw material inorder to supply the mother country and the colonies withhome-manufactured goods.With that view cloth workers were invitedfrom England， and so speedily did the native cloth manufactoriesflourish in consequence of the protection secured to them， thatthree years later (in 1684) it became practicable to prohibit theimportation of foreign cloths.From that period Portugal suppliedherself and her colonies with native goods manufactured ofhome-grown raw material， and prospered exceedingly in so doing fora period of nineteen years， as attested by the evidence of Englishwriters themselves.(5*)It is true that even in those days the English gave proof ofthat ability which at subsequent times they have managed to bringto perfection.In order to evade the tariff restrictions ofPortugal， they manufactured woollen fabrics， which slightlydiffered from cloth though serving the same purpose， and importedthese into Portugal under the designation of woollen serges andwoollen druggets.This trick of trade was， however， soon detectedand rendered innocuous by a decree prohibiting the importation ofsuch goods.(6*) The success of these measures is all the moreremarkable because the country， not a very great while before， hadbeen drained of a large amount of capital， which had found its wayabroad owing to the expulsion of the Jews， and was sufferingespecially from all the evils of bigotry， of bad government， and ofa feudal aristocracy， which ground down popular liberties andagriculture.(7*)In the year 1703， after the death of Count Ereceira， however，the famous British ambassador Paul Methuen succeeded in persuadingthe Portuguese Government that Portugal would be immenselybenefited if England were to permit the importation of Portuguesewines at a duty one-third less than the duty levied upon wines ofother countries， in consideration of Portugal admitting Englishcloths at the same rate of import duty (viz.twenty-three percent.) which had been charged upon such goods prior to the year1684.It seems as though on the part of the King the hope of anincrease in his customs revenue， and on the part of the nobilitythe hope of an increased income from rents， supplied the chiefmotives for the conclusion of that commercial treaty in which theQueen of England (Anne) styles the King of Portugal 'her oldestfriend and ally' -- on much the same principle as the Roman Senatewas formerly wont to apply such designations to those rulers whohad the misfortune to be brought into closer relations with thatassembly.
Directly after the conclusion of this treaty， Portugal wasdeluged with English manufactures， and the first result of thisinundation was the sudden and complete ruin of the Portuguesemanufactories -- a result which had its perfect counterparts in thesubsequent so-called Eden treaty with France and in the abrogationof the Continental system in Germany.
According to Anderson's testimony， the English， even in thosedays， had become such adepts in the art of understating the valueof their goods in their custom-house bills of entry， that in effectthey paid no more than half the duty chargeable on them by thetariff.(8*)'After the repeal of the prohibition，' says 'The BritishMerchant，' 'we managed to carry away so much of their silvercurrency that there remained but very little for their necessaryoccasions； thereupon we attacked their gold.'(9*) This trade theEnglish continued down to very recent times.They exported all theprecious metals which the Portuguese had obtained from theircolonies， and sent a large portion of them to the East Indies andto China， where， as we saw in Chapter IV， they exchanged them forgoods which they disposed of on the continent of Europe against rawmaterials.The yearly exports of England to Portugal exceed theimports from that country by the amount of one million sterling.
This favourable balance of trade lowered the rate of exchange tothe extent of fifteen per cent to the disadvantage of Portugal.
'The balance of trade is more favourable to us in our dealings withPortugal than it is with any other country，' says the author of'The British Merchant' in his dedication to Sir Paul Methuen， theson of the famous minister， 'and our imports of specie from thatcountry have risen to the sum of one and a half millions sterling，whereas formerly they amounted only to 300，000 l.'(10*)All the merchants and political economists， as well as all thestatesmen of England， have ever since eulogised this treaty as themasterpiece of English commercial policy.Anderson himself， who hada clear insight enough into all matters affecting Englishcommercial policy and who in his way always treats of them withgreat candour call's it 'an extremely fair and advantageoustreaty；' nor could he forbear the na飗e exclamation， 'May it endurefor ever and ever！'(11*)For Adam Smith alone it was reserved to set up a theorydirectly opposed to this unanimous verdict， and to maintain thatthe Methuen Treaty had in no respect proved a special boon toBritish commerce.Now， if anything will suffice to show the blindreverence with which public opinion has accepted the (partly veryparadoxical) views of this celebrated man， surely it is the factthat the particular opinion above mentioned has hitherto been leftunrefuted.