106 
INTERNATIONAL TRADE 
ay 
bE 
England to both. The price of wheat thruout the trading area 
would be $1.00, the price of cloth $0.73. The terms of trade in 
physical units would be the ratio of those figures, that is 10 of 
wheat for 13.7 of cloth — more than 13 of cloth for 10 of wheat. 
And Germany would no longer be an exporter of cloth to the United 
States, but an exporter of wheat to England.! 
(3) Readjust finally in such way that the money wages and the 
supply prices correspond to barter terms of 10 wheat for 13 cloth. 
We still keep wages and prices in the United States at the original 
figures, confining the shifts to the other countries. 
In the U. S. 10 days’ labor 
2) )) vu. S. 10 3) 
” England 10° °°’ : 
i’ England 10%” 2 
” ‘Germany 10 7” 2 
» Germany 10 7” 2 
WAGES 
ER DAY 
$2.00 
$2.00 
@l.15 
51.15 
$1.00 
$1.00 
ToTAL 
WAGES 
220 
220 
11 5p 
© 50 
< 2 ) 
$10 
PropUuCE 
20 wheat 
20 cloth 
10 wheat 
15 cloth 
i0 wheat 
13 cloth 
DomEesTIC 
SUPPLY PRICE 
$1.00 
$1.00 
$1.15 
$0.77 
$1.00 
$0.77 
Under these conditions England and the United States exchange 
wheat and cloth; since the supply price of wheat in the United 
States ($1.00) is lower than that of wheat in England ($1.15); while 
the supply price of cloth in England (80.77) is lower than that of 
cloth in the United States ($1.00). English cloth will be sold in 
the United States and England at $0.77, and American wheat will 
be sold in both at $1.00. The barter terms of trade will be 10 
wheat for 13 of cloth (the ratio in physical units of the price rela- 
tions $0.77 and $1.00). 
Germany, however, can find no advantage from participation in 
trade on these terms. If indeed Germany and the United States 
alone were confronted with each other, trade would arise between 
them. Tho wheat is at the same price in both ($1.00), cloth is at 
$0.77 in Germany and at $1.00 in the United States ; cloth would 
114 will be observed that in Case 2 the wages relations of the countries are 
different from what they were in Case 1. In that earlier case, wages in England 
were $1.40, in Germany $1.21; that is, in the ratio of 15 to 13, which is the ratio 
of the effectiveness of labor in the two countries for the article exported (15 cloth 
for 10 days’ labor in England, 13 cloth in Germany). In Case 2 wages in the 
United States are $2.00, in Germany $1.00, that being again the ratio of the effective- 
ness of labor in the exported article (20 wheat for 10 days’ labor in the United 
States, 10 wheat in Germany).