foreign trade intermediaries; and VI and VII, the distributing trade in the importing country.

The traders are of two classes, those who assume title to a commodity, buying and selling it at a profit, and those who sell only their services. The latter factors owe their existence to their co-operative efforts and to the benefits they confer. Only when they cease to be worth what they cost will they be eliminated. Direct importing and co-operative methods may reduce their number somewhat, but in the meantime their presence is felt in the increased cost of the commodity.

Fixing the Price

It is evident that the selling price abroad must reflect the greatly increased cost of distribution. Selling cost has been estimated as averaging from 20 to 35 per cent more abroad than at home when the same method is followed. Even under the general merchandising plan the increased selling cost is still much higher. In fixing the retail export price the exporter must know his own costs and must allow himself a fair profit.

Generally his price will be higher than his European competitor's, but that need not necessarily exclude him from the market. A high price will always connote a superior article in the mind of the consumer. A slight difference in cost is not such an important element to the man who has also to consider the difference in transportation charges, the quality of the product and possibly export duties as well. There are other ways of offsetting price differences and, as will be pointed out in Chapter XXXII, cost is not always the determining factor in effecting a sale.

Comparative Costs

Individuals find it most profitable to confine themselves to their particular functions and to have someone else do the

less productive work. The exporter may himself be an expert packer, but he will make more money if he spends all his time in directing his business and leaves the work of packing to a moderately paid subordinate. So it is with nations. If in Spain it costs ten times as much to produce a barrel of flour as a yard of cloth, while in America it costs but six times as much, it is to the advantage of the Spaniard to confine himself to making cloth and to purchase his flour from America. So long as the comparative costs of producing goods vary among the different nations of the world, so long will there be international trade. This is the principle commonly referred to as the law of comparative costs.

As stated by Bastable in his "Theory of International Trade": "John Stuart Mill's conclusion, in his first and soundest exposition of his theory, is that the ratio of exchange in the case of commodities which are subject to international trade depends on the comparative intensity of the demand on each side, always of course operating within the limits set by comparative costs. . . . This Mill calls the first elementary principle of international values."

The benefits of international trade come from the advantage which the nation derives in producing commodities in excess of its own needs which it can exchange for those of other nations unable or unwilling to produce like commodities. It may be to the advantage of a nation to purchase from another nation commodities which it could manufacture itself, if, as may well happen, it can purchase imports with exports more cheaply than it can manufacture them.

The climate and resources of a country determine whether or not it is advantageous for it to obtain the needed products of another country by exchanging its own products for those of the other country instead of producing them itself.

The apparent handicaps of nature and industry may, however, be reduced if the country will develop to the utmost,

through organized and intelligent effort, such advantages as it may possess. This course calls for a highly developed economic organization worked out along the lines of production, transportation, merchandising, and banking. The country attempting such industrial expansion must produce her products at the lowest possible cost through the co-operation of her capital, labor, and men of science; she must have every facility for transportation on both land and sea; she must know how to sell her goods abroad; and her foreign trade must be adequately financed by an organized system of international banking.

Such a nation will be able to meet the competition of foreign trade under the best conditions. So equipped, the restrictions imposed by comparative costs become fewer and fewer, and it may ultimately come to pass that she may defy nature itself.

Dumping

There is a class of international distribution known as "dumping," which is the selling of surplus goods in foreign markets for such purposes as stabilization, or to decrease the home supply and thus maintain high domestic prices.

In such cases the goods are usually offered for sale abroad at lower prices than they bring at home. When this practice becomes general it furnishes additional propaganda against a protective tariff, in that the existence of such a tariff enables the foreigner to buy under more favorable conditions than can the native of the country. Dumping is frequently detrimental to the producers of the importing country. On the other hand it sometimes stimulates them to improvements and adaptions that more than offset the differences in price. To avoid dumping certain British colonies have required the filing of nondumping certificates on the part of the exporter as a part of the export procedure.

Distribution and Credit

One may judge the credit of a country by the character of its imports, for they are the surest indication of its financial stability. If, during the borrowing period, the country imports luxuries only, it may indicate an unhealthy condition. But if it imports things necessary for the upbuilding of its industries. and the development of its resources, its credit standing is improved.

Thus, if the borrowing country imports chiefly iron, steel, rails, and mining machinery, it is manifestly developing its resources; whereas if it imports largely champagne, spices, and silks, this might show that instead of developing, it is wasting its resources and is squandering borrowed money. Since nations are composed of individuals, it is justifiable to judge the character and conduct of a nation by the tendencies of a majority of its people.

Distribution and Prices

Foreign trade is a most potent force in regulating overproduction. Hence it is likewise a great aid in keeping prices level. The overseas markets, by absorbing the surplus, keep distribution active and prevent a storage of goods in the warehouses at home that sooner or later must depress prices.

It is the natural function not only of the international trader but of every intermediary between the producer and the consumer so to gauge the extent of demand and supply that the equilibrium between production and consumption is preserved. So long as the channels of distribution are kept open and the markets, domestic and foreign, absorb production, so long will prices remain firm to the benefit of all concerned.

Maximum and Minimum Efforts in Distribution

Results are usually proportionate to the efforts made to obtain them, and of two efforts in the same direction the one