A8 
INTERNATIONAL TRADE 
NT 3 
only so far as the situation thus engendered is peculiar to that 
country. If the groups are in the same relative positions in the 
exchanging countries as regards wages — if the hierarchy, so to 
speak, is arranged on the same plan in each — trade takes place 
exactly as if it were governed by the strict and simple principle 
of comparative costs. If the rate of wages in a given occupation 
is particularly low in one country, this circumstance will affect 
international trade exactly as would a high effectiveness of labor 
in that country. But if in other countries also the same occupa- 
tion has a particularly low rate of wages, international trade will 
not be affected. The coeflicient to be allowed for will be the 
same all around, and no special influence on trade between the 
countries will be felt. Trade will develop as it would if prices 
within each country were governed by labor costs alone. 
For further illustration, let us turn to a variant of the previous 
case. Starting with a situation in which, so far as labor costs go, 
exchange cannot be expected to arise, introduce the complication 
of non-competing groups and observe how under the changed 
conditions exchange becomes possible and advantageous. 
In the U. S. 10 days’ labor 
3 ) U. S. 10 2» » 
” Germany 10 7” ie 
»” Germany 10 ” 
Wages TorAL PRODUCE DowmesrIC 
PER Day WAGES SuppLy PRICE 
$2.00 $20 30 wheat $0.662 
$2.00 $20 20 linen $1.00 
$1.00 $10 15 wheat $0.662 
$1.00 $10 10 linen $1.00 
The case, it will be seen, is one of equal differences in cost. The 
effectiveness of labor in the United States is twice as great thruout 
as in Germany. Money wages in the United States are adjusted 
to this relation and are twice as high. Wheat is at the same price 
in the United States as in Germany ; linen also at the same price 
in the two countries. Wages in each country are uniform — that 
is, are the same in wheat-growing as in linen-making. There are no 
non-competing groups. Prices are in accord with the respective 
quantities of labor. Germans and Americans go their way regard- 
less of each others’ doings. 
Suppose now that German linen wages are not $1.00 but $0.75. 
The linen workers are in a low-lying non-competing group; their