VARYING ADVANTAGES 
Te 
y 
89 
Observe that the effectiveness of labor in the United States is 
greater thruout than its effectiveness in Germany. The same 
amount of labor produces in the United States more of wheat than 
in Germany, more of linen, more of cloth. But the superiority is 
greatest in wheat; it is less in linen; it is least in cloth. What 
sort of trade will emerge ? 
Consider first the possibilities of barter; and begin by consider- 
ing these possibilities separately for the three pairs of commodities ; 
namely, wheat as against cloth, wheat as against linen, and cloth as 
against linen. 
(1) Suppose the situation were wheat against cloth. 
In the U. S. 10 days’ labor produce 20 wheat 
’ U.S. 10.” 48 ” 20 cloth 
” Germany 10 H ” 10 wheat 
” Germany 10 ” »” 18 cloth | 
Domestic TErRMs oF TRADE 
10 wheat = 10 cloth 
10 wheat = 18 cloth 
The United States and Germany would both gain at any barter 
terms of trade intermediate between 10 and 18 of German cloth for 
10 of American wheat ; the gain to the United States being greatest 
if nearly 18 of cloth were got for 10 of wheat, and that to Germany 
greatest if but little more than 10 of cloth were given for 10 of 
wheat. 
(2) Suppose the situation were simply wheat against linen. 
Domestic TErMs oF TRADE 
In the U. S. 10 days’ labor produce 20 wheat ud : 
13 9) U. S. 10 1 » » 20 linen 10 wheat =-10 linen 
” Germany 10 ” P ” 10 wheat oe : 
Germany 10 » ’ ’ 15 linen { 10 wheat = 15 linen 
The United States and Germany would both gain at any barter 
terms of trade intermediate between 10 and 15 of German linen 
for 10 of American wheat. The nearer the terms were to 15 linen 
for 10 of wheat, the more the United States would gain; the 
nearer to 10 of linen for 10 of wheat, the more Germany would gain. 
(3) Suppose finally that the situation were cloth against linen. 
Domestic TERMs oF TRADE 
10 cloth = 10 linen 
15 linen = 18 cloth 
1.e. 10 linen = 12 cloth