[02 
INTERN ATIONAL TRADE 
will take twice as much of cloth at the same price as either of 
them would take alone; and the barter terms of trade will become 
more favorable to England. 
Turn now to a case of a different kind, and one more complicated. 
[t is exemplified by the following figures : 
Domestic TERMS OF TRADE 
In the U. S. 10 days’ labor produce 20 wheat | 
102 2” ” 20 cloth (10 wheat = 10 cloth 
In England 10 ” i 10 wheat | - 
10 ” 2) 2} 15 cloth (10 wheat = 15 cloth 
In Germany 10 ” 22 ” © 10 wheat | ky 
10 a ’) 7) 13 cloth 7 10 wheat = 13 cloth 
Here each of the countries has a situation as regards the relative 
costs of the two articles which is different from that of either of the 
others. The United States has a comparative advantage over both 
England and Germany in wheat, and might exchange wheat for 
cloth with either or with both. England has a comparative 
advantage in cloth not only as against the United States but as 
against Germany also; and she might send cloth to either in 
exchange for wheat. Germany might send cloth to the United 
States in exchange for wheat; but she might also send wheat to 
England in exchange for cloth. The limits within which the barter 
terms of trade thruout the trading area could establish themselves 
are 10 cloth for 10 wheat at the lowest, 15 cloth for 10 wheat at the 
highest. At any rate between these limits (¢.e. wheat exchanging 
at the rates of 11, 12, 13, 14 for cloth) there will be trade. But 
which of these several possibilities will emerge ? 
The situation is essentially the same as that considered in the first 
part of this chapter ; indeed, is no more than a variant. The answer 
again is that the outcome depends on the state of demand be- 
tween the countries. As before, there are three possible cases. 
(1) Suppose the barter terms of trade to be unfavorable to the 
United States — such as would exist if the demand of the United 
States for cloth were great, the demand of England and Germany 
for wheat small. Suppose it to be 10 wheat for 11 cloth. Both 
Germany and England would then send cloth to the United States,