France . . . lo 15 20

Switzerland ... 8 20 15

Italy .... 15 30 60

It will be seen that Italy produces all the articles at the
highest cost, and hence wiU find it advantageous to cultivate
grain and draw its supply of iron from France and of wine
from Switzerland, because in this way it obtains the goods
more cheaply than it could produce them at home. Further-
more, France and Switzerland could make no unreasonable
demands as to price because they would be hindered by their
mutual competition. The division of the advantage gained

1569-14 B-



130 ECONOMIC PROTECTIONISM

among the exchanging countries would depend upon the
intensity of the demand.
Beside this argument is to be placed a second one, namely,
that with due allowance for the other elements in the inter-
national balance of payments, the exports of a country must
pay for its imports, and hence that an increase of imports
must lead to an increase of exports. Eventually the equali-
zation is brought about through the effect on the value of
money, for with a continuing debit-balance, money would
flow abroad, and as a result the value of money in the
country would increase in relation to the value of goods, and
the consequence of this, again, would be an increase in the
exportation of commodities.
