viii

CONTENTS

demand for remittances. Exchange rates and their movements reflect
‘he fluctuations of international indebtedness. In general the range
of movement is small. If the price of gold be fixed in each of two
countries, the rate of exchange between them cannot pass certain limits.
The par of exchange. Cost of procuring gold not absolutely fixed, and
hence gold points, or specie points, not rigidly fixed. Effect of
premium on gold. When one currency is silver, or one or both paper,
no fixed par or approximately fixed limits of fluctuation. Effect of
bullion imports or exports on prices. Distribution of precious metals
throughout the world, Gresham’s law that bad coin drives out good.
Application to bimetallic systems. Influence of uniformity of coinage
ratio in different countries,
The influence of the time element in exchange. Finance bills.
The rate of interest on short loans involved. Difference in price of long
and short bills corresponds to rate of interest, The discount rate as a
regulator of the exchanges. Balance of trade affected, and loans from
abroad stimulated, Market-rate can be induced to follow bank-rate.
Exchange -rates express the relation of prices in the countries
concerned. Falling exchange stimulates exports. Arbitrage of exchange
 keeps the different rates in close correspondence. English
‘mports mostly drawn against and her exports remitted for . 225-243

PAGES

CHAPTER XVI

FREE TRADE AND PROTECTION

AUTHORITIES
FAWCETT ., ‘Free Trade and Protection.”
BASTABLE . ‘The Commerce of Nations” and ¢¢ Theory of International
 Trade.”
HapLEY . . ‘ Economics,” Chapter XIII.

[ndustrial development, if unhampered, follows the lines of greatest prospective
 profitableness. Protection ensures the devotion of productive
powers to special ends, Free trade an equal field for all. Methods
of protection. Guarantee of interest on capital. Present sacrifice to
ensure future gain, whose amount needs scrutiny. Bonus, subsidy or
tax-exemption. Conflict of private and public interests risked.
Bounties on production : should not be permanently needed. Import
and export duties. Prices in general neither unchanged nor changed
to the full extent of the tax. Hence burden divided between producer
and consumer. Conditions of incidence on one side only. Bounties
similarly examined. Division of expenses of transport in foreign trade.
Cheap freights have lightened the burden of all tariffs. Prices raised
by protective duties may be ultimately reduced as a final result. Infant
industries. Tests of applicability of protection to them. Obstacles to