02
INTERNATION AL TRADE
demand ; both wheat and linen then move from the United States
to Germany.
III. Lastly, take an intermediate case — the intermediate case.
Suppose the barter terms of trade to be 10 of wheat for 12 of cloth
(less than 15 of cloth as in our first case, and more than 11 of cloth
as in the second). Within Germany 12 of cloth are produced with
the same labor as 10 of linen. The United States, sending 10 of
wheat to Germany, and getting 12 of cloth in exchange, might
indeed get also 10 of German linen in exchange. But 10 of linen
are produced in the United States with the same labor as 10 of
wheat; there is no gain to the United States. Germany might
send 12 of cloth to the United States and would then receive
in exchange 10 of linen. But 10 of linen and 12 of cloth are both
produced in Germany with the same amount of labor (62 days);
and there would be no gain to Germany. Neither country would
find it worth while to send linen to the other. The only gainful
exchange is that of German cloth for American wheat. The case
is, in a sense, the mid-way or balancing one, that in which one
commodity (linen) remains where it is, while the others move to
and fro.
This train of consequences from the play of varying demand is
dependent on the total demand in each country for the products of
the other. To speak more accurately, it is dependent on the state
of demand among the inhabitants of the two countries for each and
every one of the commodities which they might exchange. The
Americans may care for cloth and linen so much, and for wheat so
little, that they will offer wheat for the other two commodities on
terms that make it worth while for the Germans to send both cloth
and linen to the United States. Or, at the other extreme, the
Americans may care for cloth and linen so little, and for their own
wheat so much, that they will indeed take cloth in exchange for
some wheat, but will take no linen; nay, may prefer to send some
linen of their own make in exchange for cloth.
These possible relations may now be expressed in terms of prices
and money incomes. Let it be remembered, in considering the
