TRIBUTE AS EXAMPLE 
113 
payment of the tribute is effected, the United States sends 10+ mil- 
lions of wheat and gets but 9.4 millions of linen. She sends more 
wheat and gets less linen; she exchanges 10% of wheat for 9.4 of 
linen, 7.e. 10 of wheat for 9.2 of linen. The barter terms of trade 
are much less favorable to the United States, much more favorable 
to Germany. 
These figures, however, call for further consideration. The 
wheat sent from the United States is to be regarded as making two 
payments: one to meet the obligatory remittance, the other for 
the German linen. The two may be separated in this fashion : 
1,250,000 wheat at $0.80 for remittance = $1,000,000 
9,000,000 wheat at $0.80 for linen = $7.200.000 
The wheat that serves to pay for the linen amounts to 9,000,000 
bushels. It is this quantity — less than the total sent — which 
can be said with accuracy to be exchanged for the 9,400,000 linen. 
The barter terms of trade, so considered, are 9 of wheat for 9.4 of 
linen, i.e. 10 wheat for 10.4 linen. This is not so unfavorable to 
the United States as the relation just mentioned — 10 for 9.2. 
But it remains much less favorable than the ratio of 10 to 12% 
which prevailed at the outset. To repeat, the people of the United 
States suffer loss in two ways. They send wheat to pay the 
tribute; and, in order to get the linen they want, they must give 
more wheat for each unit of linen which they continue to buy. 
There are thus two ways of looking at the barter terms of trade. 
One may be indicated by the phrase “gross barter terms of trade” ; 
the other by “net barter terms of trade.” The first regards the 
whole volume of goods, both imports and exports. The second 
regards those goods only which pay for goods; it demarcates any 
movement of goods which serves for other payments. (I neglect 
services, for reasons presently to be explained.) 
The gross barter terms in the present illustration are 10 wheat 
for 9.2 of linen; the net barter terms are 10 wheat for 10.4 linen. 
For some purposes the first is the important one, for other pur- 
poses the second. As regards the limiting figures — the range 
within which trade is possible — the net terms are alone important,