TWO COUNTRIES COMPETING IN A THIRD 103 
and the United States would send wheat to both in exchange. 
England would gain more from the operation than Germany; she 
would gain the difference between 15 and 11. Ten days’ labor in 
England yields 10 of wheat and 15 of cloth; if England gets 10 
wheat for 11 of cloth, she gains the difference between 15 and 11. 
Ten days’ labor in Germany yields 10 of wheat and 13 of cloth; if 
Germany gets 10 of wheat for 11 of cloth, she gains the difference 
between 13 and 11. The United States would gain the difference 
between 10 and 11. 
(2) Next suppose that the terms of trade become distinctly 
favorable to the United States, — that she gets for 10 wheat as 
much as 14 cloth. Then England would send cloth to the United 
States and the United States wheat to England. But at these 
terms England and Germany would also exchange. Germany 
would gain by sending 10 wheat to England and getting 14 cloth in 
exchange. Since the given labor (10 days) would produce in Ger- 
many only 13 cloth, England would gain similarly; with 10 days’ 
labor she could produce at home 10 wheat or 15 cloth; if she gets 
10 wheat for less than 15 cloth, she gives her labor more advan- 
tageously to producing cloth only. At the rate of 14 cloth for 
10 wheat, then, both the United States and Germany would send 
wheat to England, and England would send cloth to both ; nor 
would any cloth be made either in Germany or the United States. 
No trade would take place between the United States and Ger- 
many, notwithstanding the fact that trade between them would 
develop if England were out of the way and they were confronted 
merely with each other. 
(3) Suppose now the intermediate stage, that at which the terms 
of trade are exactly 10 wheat for 13 linen. England then will send 
cloth to the United States and the United States will send wheat in 
exchange. But for Germany the situation would be one of indif- 
ference. If she were to send 13 cloth to the United States she 
would secure (at the rate established between England and the 
United States) 10 of wheat, or precisely the same amount of wheat 
as she could produce at home with the labor given to producing the 
13 of cloth. The trade would be between the United States and