OVERSEAS TRADE AFTER 1890 87 
must be ventured. One difficulty in any discussion upon inter- 
national trade lies in the common usage of the words ‘favour- 
able’ and ‘adverse’ in connexion with the balance of trade. To 
the extent that these words connote a theory of trade which 
postulates the advantage of a credit balance in international 
trade we can discern the influence of mercantilist tradition. 
The commercial application of the doctrine that, in trade as in 
charity, it is more blessed to give than to receive, had, of course, 
it greatest significance in the effect of trade upon the movement 
of gold; and belief in the advantage of a national system of 
trade organized in such a way that it promotes an influx of gold 
is still lively. For many reasons, but chiefly because they con- 
centrate attention upon the mere physical volume of incoming 
and outgoing commodities, such theories of trade must be dis- 
regarded. Movements of goods in international trade are merely 
the outward and visible signs of the operation of factors hidden 
deeply and often inextricably in the fabric of national finance 
and industry ; and it is rather upon the operation of the factors 
causing the movement of goods between countries that we must 
focus attention. 
The first approach to ‘the complex problem of world trade 
by way of the relatively simple problem of the exclusive trade 
between two countries’ was made by Ricardo; and Marshall 
took this a stage further by emphasizing the individual trans- 
actions of which the fabric of international trade is built, and 
by stressing the specialized function of the merchant in selecting 
those goods for international exchange which offer the best 
chance of profit.! The merchant’s work consisted in establishing 
an equilibrium in trade by exchanging what the population of 
a country produced for what they wanted. International trade 
was thus recognized as pure barter; and, from the merchant’s 
point of view, all he wants to know is ‘whether the prices for the 
things which he has to sell, i.e. the country’s exports, are high 
relatively to the things which he looks to bring back. If they 
are he does not care so long as there is no appreciable change in 
relative price-levels between the completion of his sales and the 
settling of his terms of purchase.’ From this arose the concept 
of the barter terms of international trade ; although Mill’s Theory 
of International Demand recognized that the ratio at which 
1 Qee Marshall, Money, Credit, and Commerce, Chap. VIL,