Smith is saying, the costs of maintaining colonies in order to maintain a preferential trade arrangement exceeded the benefits – thus his statement that the project is unfit for a nation of shopkeepers. But the cost to the shopkeepers is a small fraction of the cost to Britain – they pay only their pro rata share – whereas the shopkeepers get the lion's share of the benefits. If the shopkeepers had to bear the whole cost of the arrangement, the benefits would not be worth it. Thus his analogy to the sucker deal that someone hypothetically offers a shopkeeper: buy me a house and I'll promise to buy all my goods from you from now on. The shopkeeper would quickly reject such a deal. But if the shopkeeper can find others to pay for the house and he pays only a fraction, the deal might be in the shopkeeper's interest. Using the asymmetric distribution of costs and benefits to explain why governments take actions that are not in the general interest – whether the special interest benefited be farmers, seniors, or Northrop Grumman – has become part of the tool kit of the modern economist, due to the "public choice" revolution started by James Buchanan and Gordon Tullock. But notice that Smith had the idea two centuries earlier. 

Adam Smith's Economic Case Against Imperialism. By David Henderson, The Wartime Economist/Antiwar.com November 28, 2005 http://antiwar.com/henderson/?articleid=8159 Good stuff from David Henderson, over at Antiwar.com.  Drop in OIL and the Petro-Dollar, and the you've got it right, and you begin to get the picture that the US would be a lot better off spending the treasure we are wasting occupying the Mideast, developing alternative energy sources and energy independence.   The Neo-Con theory that the US must product our Client States from the threat of Islamic Fundamentalism, our dominance over the supply of Oil, and the continued status of the US Dollar as the World's Reserve Currency is a House of Cards, destined to bankrupcy and ruin for the American working folk.