GREAT BRITAIN, II

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her gross barter terms of trade, but has nothing to do with the
net barter terms. The same is true, mutatis mutandis, of fresh
loans and investments. These also affect the gross barter terms,
but not the net barter terms. Of course they affect the gross
terms the other way. The export of capital means that goods are
sent out, but are not expected or stipulated to be paid for in the
current year. For the time being the goods go out from Great
Britain, but neither merchandise nor money comes in as payment.
Eventually, of course, income will be paid ; and it will come in
the form of imported goods. Some annual payment may begin the
very next year, and presumably a return flow will set in (unless the
investment happens to be a complete failure) within a very few
years. Inthe end, even the principal may be repaid; and then the
payment made to Great Britain will be heavy and her merchandise
imports will be very greatly swelled. But all these transactions,
with their trend first one way and then the other, have a direct
effect, year by year, on the gross terms of trade only. They are
thus different from such transactions as are involved in shipping
services; these being part of the immediate volume of British
products which goes out from year to year and is paid each year
in the form of inflowing imports.
It follows further that in any strict calculations of the net
barter terms, and of changes in those terms, regard should be had
not only to the volume of shipping services, but also to their
prices — to the rates of freight. The index of export prices which
has been used in constructing the chart and the tables does not
include shipping, nor such minor items as banking and insurance
service. Therein it obviously fails to be inclusive. Doubtless the
materials exist from which shipping rates could be computed, and
the index of export prices thus made more accurate. I have not
endeavored to modify in this way the price indices, but have taken
them as they appear in the British sources — figures, that is,
derived from the prices of merchandise alone. Tt is possible that
corrected indices would show a different trend, but not probable.
I feel reasonably confident that no differences would appear such
as to invalidate the general conclusions here drawn. The point