CHAPTER 13

INTERNATIONAL TRADE

REFERENCES.

_Bastable, C. E._, The theory of international trade. 1897.

_Brown, H. G._, International trade and exchange. 1914.

_Clare, G._, The A B C of the foreign exchanges. 1895.

_Escher, Franklin_, The elements of foreign exchange. 2d ed., 1911.

_Goschen, Viscount_, The theory of the foreign exchanges. 1898.

_Johnson, E. R._, Probable changes in the foreign trade of the United States resulting from the European war. A. E. Rev., 6 (no. 1, supp.): 17-25. 1916. Round table discussion of above, 26-49.

_Johnson, E. R._, _Van Metre, T. W._, _Huebner, G. G._, and _Hanchett, D. S._, History of domestic and foreign commerce of the United States. 1915.

*_Source Book_, 337-346.

_Willis, H. P._, Transportation and competition in South American markets. A. E. Rev., 2: 814-833. 1912.

QUESTIONS.

1. Is it bad policy to let the people of a suburban village spend money in the city for things that could be produced at home?

2. Is it bad policy for California to buy New England manufactures?

3. Give examples of the industrial advantages of America as compared with Europe.

4. Is the alleged superior efficiency of the American workman over the competing workman of Europe connected in any way with the principle of proportionality?

5. Community A has lands that can produce wheat at a cost of 60 cents per bushel, corn at 40 cents per bushel and potatoes at 40 cents per bushel. Community B can produce wheat at 70 cents per bushel, corn at 45 cents per bushel and potatoes at 42 cents per bushel. Supposing that each community can raise just enough of these foodstuffs for its own use, will there be any incentive for them to exchange these products?

6. "A man is of all sorts of luggage the most difficult to be transported." What is the bearing of this fact upon the theory of international trade?

7. Can a country have a persisting excess of merchandise exports over merchandise imports? If so, under what conditions?

8. If foreign exchange suddenly rose several cents, while imports and exports remained the same, to what causes might it be due?

9. If as the result of a year's foreign trade nation A obtains from other nations $10,000,000 in gold coin in settlement of the balance of international indebtedness, to what extent does that sum measure the gain of nation A from international trade? Reasons.

10. The statistics of exports and imports of the United States for the year 1908-1909 show an excess of exports over imports of $351,000,000 in merchandise; $12,000,000 in silver and $48,000,000 in gold. Explain clearly how the United States could have had an excess of exports of merchandise, silver and gold in the same year.

11. If demand exchange on London were selling at $4.835 in New York, would that indicate anything as to the relative values of our imports and exports? Would gold be shipped under these conditions and if so in which direction? Explain.

12. Explain clearly the condition of commerce under which demand sterling bills of exchange will sell at $4.875 in the New York exchange market.

13. If the merchandise imports from England to the United States equalled the exports from the United States to England, what would be the state of exchange on London? Would there be any greater advantage to either of the countries engaged in trade?

14. What effect on exchange has the holding of American bonds abroad?

15. If large shipments of wheat are made to England, will bills of exchange on London be higher or lower in New York?

16. When in New York a sight draft on London for £5000 sells for $24,150, in which direction are gold remittances likely to be moving? Give reasons.

17. If England sells $10,000,000 worth of our securities to Americans, what is the effect on exchange rates?

18. Show what, in a gold-producing country, would be the relations and interaction of new gold supply, prices, relative amounts of imports and exports, and rate of exchange. (Sumner.)

19. A nation with _n_ dollars in circulation has to pay a war indemnity of _n_ dollars to another country having the same circulation. How much money will each then have, and what will be the effect on prices, foreign trade, rate of exchange? (Davenport.)

20. Suppose an increase in the volume of our currency, due to a new issue of silver, what would be the effect upon international trade? Would this effect be lasting? Would your answer depend at all upon the condition of our currency at the time the increase occurred?

21. If through the improvement of our banking and currency system a much larger percentage of the business of the country comes to be done through the use of credits (rather than money) as the medium of exchange, what will be the effect on (a) the quantity of money in circulation, (b) the general level of prices, (c) the composition of the country's media of exchange, (d) the international movement of gold, (e) the interests of debtors and creditors, respectively?

22. Each one of two countries, A and B, can, by the application of a given amount of labor to its material resources, produce any one or all of the commodities M, N, O, P, Q, R and S, as exhibited in the following table:

_Commodity._ _Country A._ _Country B._ =M= 50 tons 60 tons =N= 1000 yards 1100 yards =O= .25 bales 20 bales =P= 900 bushels 800 bushels =Q= 600 ounces 650 ounces =R= 5000 gallons 5000 gallons =S= 2500 pounds 2000 pounds

(a) In the absence of restrictive legislation is each country likely to produce all of these commodities for itself? Why or why not?

(b) If conditions are such as to lead to the territorial division of labor, which commodities are most likely to be produced in each country?

(c) About which of these commodities is there the least certainty on this point? Why?