112 
INTERNATIONAL TRADE 
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her imports in money value. The balance of trade is “unfavor- 
able” to Germany ; her imports of goods exceed in money value her 
exports. These expressions “favorable” and “unfavorable” bal- 
ance, with their implication that a country secures a gain in the one 
case and suffers a loss in the other, are so commonly used in the 
ordinary talk about international trade that it is difficult to keep 
away from them entirely. They rest on the obvious fact that if 
there be no other than merchandise transactions, an excess of ex- 
ports over imports will cause a flow of specie into a country; and 
they rest further on the persistent mercantilist notion that there is 
something advantageous or “favorable” to a country in a relation 
of exports to imports which, #f it stood by itself, would cause specie 
to flow in. The qualifying tf has become of more and more impor- 
tance in modern times, and consequently the mercantilist terminol- 
ogy, misleading in any case, has lost its significance even as a 
description of the forces on which depends the movement of specie. 
Non-merchandise transactions have become so large, and affect so 
steadily the trade of each and every country, that the relations of 
imports and exports in themselves give a very uncertain clue to 
that which in reality determines the specie flow. It is the balance 
of international payments which determines this flow. In our 
supposed case the balance of payments is precisely settled; the 
balance of trade, even tho it be called “favorable” to the United 
States and “unfavorable” to Germany, leads to no movement of 
specie either way. 
In the important sense, the situation has become less favorable 
to the United States; and this in two ways. Not only do the 
people of the United States part with a considerable volume of 
tangible goods (wheat) in order to make the required payment to 
Germany, but in order to carry out the transaction and at the 
same time pay for the linen which they continue to buy, they have 
to barter their wheat for linen on less advantageous terms. 
Consider the figures. Before the tribute became payable, the 
United States sent 10 millions of wheat to Germany, and got in 
exchange 12} millions of linen; for each ten of wheat 12% of linen 
were got. When the new equilibrium is attained and the annual