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?