04 
INTERNATIONAL TRADE 
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Consider now the barter terms of trade which obtain under these 
circumstances. In both countries wheat sells for $1.00 and cloth 
for $0.66%, these being the “world prices.” In terms of commod- 
ities, 10 of wheat exchange for 15 of cloth. The five days’ 
labor which in the United States produce 10 of wheat would yield, 
if applied to cloth, 10 of cloth also; the United States, getting 
15 of cloth for her 10 of wheat, gains 5 of cloth. Germany, on the 
other hand, gains 3 of cloth. With 10 days’ labor she could pro- 
duce 18 of cloth or 10 of wheat; with only 15 of cloth she gets 10 of 
wheat. 
Linen sells for $0.80 in both countries; with wheat at $1.00 
the terms of trade are 12% of linen for 10 of wheat. The 
United States gets 12% of linen for 10 of wheat, the product of 
5 days’ labor, whereas that labor would produce at home only 
10 of linen. The gain is 2; of linen for the United States. 
And Germany gains the same: the difference between 15 of 
linen and 121%. 
(2) Next, assume barter terms of trade between the two countries 
which are more favorable to Germany ; the evidence of the more 
favorable terms being higher money wages in that country. Sup- 
pose German wages to be not at a figure somewhat low ($1.20), 
but much higher, say $1.60. Wages in the United States we 
assume to remain at $2.00. Then we have : 
In the U. S. 
» )) U. S 
)) » i. S. 
”’ Germany 1 
”’ Germany 10 
” Germany 10 
10 devs’ lahor 
BD) 
7) 
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J) 
)) 
9 
7) 
1» 
WAGES 
PER DAY 
$2.00 
$2.00 
$2.00 
$1.60 
$1.60 
$1.60 
ToTAL 
WAGES 
$20 
$20 
$20 
$16 
$16 
$16 
PRODUCE 
20 wheat 
20 linen 
>) cloth 
10 wheat 
15 linen 
18 cloth 
DowMmesTic 
SuppLy PRICE 
$1.00 
$1.00 
$1.00 
$1.60 
$1.062 
$0.89 
Both wheat and linen are now cheaper in the United States than 
in Germany. The difference, of course, is greater for wheat, whose 
domestic supply price in Germany is $1.60, whereas it can be got 
from the United States for $1.00. Linen can be produced in Ger- 
many at a money cost of $1.06%; but it is obtainable from the 
United States at a slichtly lower figure — $1.00. Cloth still moves