Last night I received a Balikabayan Box from my folks in the US. In it is a bottle of Dow's 10-Year-Old Tawny Port, courtesy of my sister (thanks!). True port wine comes from the Douro Valley region in Portugal and is actually a mixture of old and new vintages, so 10 years is the average of the vintage mix.
Although port comes from Portugal, most of the popular and established port brands have English names: Croft, Dow, Graham, Sandeman, Taylor, Warre. This is because England and Portugal have been traditional trading partners since the 1300's, a partnership reinforced during the Franco-English wars (starting from the 17th century) when England banned trade from France. (France and Spain, on the other hand, became close partners; even their monarchs eventully came from one family-- the Borbon/Bourbon dynasty.) So when French wine was banned from English stores, English traders turned to Portugal for substitutes. These traders eventually established port houses to make production of port wine more efficient and facilitate its trade-- multinational companies in today's terms. These English port brands are the names of those port houses.
David Ricardo, the father of modern trade theory, wrote On the Principles of Political Economy and Taxation in 1817 within this context of vibrant trade between England and Portugal. Though he never used the term comparative advantage in his text, he illustrated this truly nontrivial concept in his classic example:
"If Portugal had no commercial connexion with other countries, instead of employing a great part of her capital and industry in the production of wines, with which she purchases for her own use the cloth and hardware of other countries, she would be obliged to devote a part of that capital to the manufacture of those commodities, which she would thus obtain probably inferior in quality as well as quantity.
"The quantity of wine which she shall give in exchange for the cloth of England, is not determined by the respective quantities of labour devoted to the production of each, as it would be, if both commodities were manufactured in England, or both in Portugal.
"England may be so circumstanced, that to produce the cloth may require the labour of 100 men for one year; and if she attempted to make the wine, it might require the labour of 120 men for the same time. England would therefore find it her interest to import wine, and to purchase it by the exportation of cloth.
"To produce the wine in Portugal, might require only the labour of 80 men for one year, and to produce the cloth in the same country, might require the labour of 90 men for the same time. It would therefore be advantageous for her to export wine in exchange for cloth. This exchange might even take place, notwithstanding that the commodity imported by Portugal could be produced there with less labour than in England. Though she could make the cloth with the labour of 90 men, she would import it from a country where it required the labour of 100 men to produce it, because it would be advantageous to her rather to employ her capital in the production of wine, for which she would obtain more cloth from England, than she could produce by diverting a portion of her capital from the cultivation of vines to the manufacture of cloth.
"Thus England would give the produce of the labour of 100 men, for the produce of the labour of 80. Such an exchange could not take place between the individuals of the same country. The labour of 100 Englishmen cannot be given for that of 80 Englishmen, but the produce of the labour of 100 Englishmen may be given for the produce of the labour of 80 Portuguese, 60 Russians, or 120 East Indians. The difference in this respect, between a single country and many, is easily accounted for, by considering the difficulty with which capital moves from one country to another, to seek a more profitable employment, and the activity with which it invariably passes from one province to another in the same country."
Thus giving port wine a permanent place in economic theory.
Although port comes from Portugal, most of the popular and established port brands have English names: Croft, Dow, Graham, Sandeman, Taylor, Warre. This is because England and Portugal have been traditional trading partners since the 1300's, a partnership reinforced during the Franco-English wars (starting from the 17th century) when England banned trade from France. (France and Spain, on the other hand, became close partners; even their monarchs eventully came from one family-- the Borbon/Bourbon dynasty.) So when French wine was banned from English stores, English traders turned to Portugal for substitutes. These traders eventually established port houses to make production of port wine more efficient and facilitate its trade-- multinational companies in today's terms. These English port brands are the names of those port houses.
David Ricardo, the father of modern trade theory, wrote On the Principles of Political Economy and Taxation in 1817 within this context of vibrant trade between England and Portugal. Though he never used the term comparative advantage in his text, he illustrated this truly nontrivial concept in his classic example:
"If Portugal had no commercial connexion with other countries, instead of employing a great part of her capital and industry in the production of wines, with which she purchases for her own use the cloth and hardware of other countries, she would be obliged to devote a part of that capital to the manufacture of those commodities, which she would thus obtain probably inferior in quality as well as quantity.
"The quantity of wine which she shall give in exchange for the cloth of England, is not determined by the respective quantities of labour devoted to the production of each, as it would be, if both commodities were manufactured in England, or both in Portugal.
"England may be so circumstanced, that to produce the cloth may require the labour of 100 men for one year; and if she attempted to make the wine, it might require the labour of 120 men for the same time. England would therefore find it her interest to import wine, and to purchase it by the exportation of cloth.
"To produce the wine in Portugal, might require only the labour of 80 men for one year, and to produce the cloth in the same country, might require the labour of 90 men for the same time. It would therefore be advantageous for her to export wine in exchange for cloth. This exchange might even take place, notwithstanding that the commodity imported by Portugal could be produced there with less labour than in England. Though she could make the cloth with the labour of 90 men, she would import it from a country where it required the labour of 100 men to produce it, because it would be advantageous to her rather to employ her capital in the production of wine, for which she would obtain more cloth from England, than she could produce by diverting a portion of her capital from the cultivation of vines to the manufacture of cloth.
"Thus England would give the produce of the labour of 100 men, for the produce of the labour of 80. Such an exchange could not take place between the individuals of the same country. The labour of 100 Englishmen cannot be given for that of 80 Englishmen, but the produce of the labour of 100 Englishmen may be given for the produce of the labour of 80 Portuguese, 60 Russians, or 120 East Indians. The difference in this respect, between a single country and many, is easily accounted for, by considering the difficulty with which capital moves from one country to another, to seek a more profitable employment, and the activity with which it invariably passes from one province to another in the same country."
Thus giving port wine a permanent place in economic theory.
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