134

INTERNATIONAL TRADE

ABF
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whatever further items there may be — the additional sum due to
Great Britain will be provided in the same way as in other cases of
unsettled balance of payments. The theoretical solution is
familiar. If payment had balanced before this item was present —
if we suppose this to appear as a new item — specie flows to
Great Britain; a double set of price changes sets in, upward in
Great Britain, downward in the United States; imports and exports
 are modified ; finally Great Britain has an excess of merchandise
 imports, the United States an excess of merchandise exports.
And this series of changes brings the familiar consequences for the
barter terms of trade; they become less favorable to the United
States, more so to Great Britain. The people of the United
States get their imported goods on less favorable terms than before ;
those of Great Britain get theirs on more favorable terms.
Shipping charges and shipping earnings thus have a place in international
 trade precisely like that of tourist expenditures. They
take their place in the balance of payments, and they affect the
net barter terms of trade — these only, not the gross terms.
The Americans (say) pay the freight charges to the British, and
get the freight service; they get their quid pro quo at once. They
pay others for doing the work of carriage, rather than do it themselves;
 and the reason why they make the payment, in the last
analysis, is that the others can do the work of carriage cheaply,
while they themselves can apply their labor more effectively in
other ways. It is quite superfluous to explain, to those who follow
the general reasoning of the theory of international trade, that
there is no net loss to the Americans from their payment of shipping
charges. The case is similar to that of tourist expenditures and
dissimilar to some of the other transactions considered in the preceding
 pages, in that there is an immediate service, for which payment
 is made at once. At once, that is, in the sense in which it
can be said that the entire balance of international payments is
settled at once; it is a balance settled very promptly, within a
few months or a year. Of the temporary extensions and adjustments
 of “unfunded” balances more will be said elsewhere; they
cause no modification of the general principles here under con-