Sec. 1.  Political and trade boundaries.  Sec. 2.  Benefits of international trade.  Sec. 3.  Choice of the more advantageous occupations.  Sec. 4.  Persistence of differences between nations.  Sec. 5.  Doctrine of comparative advantages.  Sec. 6.  Equation of international exchange.  Sec.7.  Balance of merchandise movements.  Sec. 8.  Cancellation of foreign indebtedness.  Sec. 9.  Par of exchange.  Sec. 10.  International monetary balance and price-levels.

Sec. 1. #Political and trade boundaries.# By international trade is meant, in general, trade between persons resident in different countries; comparatively rare is the case in which one of the two parties to a trade is a whole nation acting through its government as a unit (e.g., in the purchase of munitions of war in neutral countries).  Outside of a communistic group such as the family, trade is a necessary accompaniment of division of labor.  As territorial division of labor began between neighboring tribes,[1] international trade was the earliest kind of regular interchange of goods.  Indeed the very word “market” meant originally the boundary between tribes.  Thus, from primitive times when wandering savages gave bits of flint or copper in return for salt or fish, individuals have sought to adjust their goods to their desires through trade with men of other political groups.  With the progress of the world in the means of communication and transportation, international trade has widened in extent and grown in volume.

Economic relations never have been coextensive with political relations.  The economic groupings of men connected by a network of trades never have and never will correspond very nearly with political groupings of men bound together by common citizenship in particular states.  Indeed it is not uncommon for many of the residents in two adjoining states to trade far more with each other than they do with their own fellow citizens.  Lawmakers and rulers from the beginnings of formal governments have constantly tried to hinder this kind of trade.  They have done this chiefly because of their belief that they could strengthen their states in political and economic ways, and could favor some of their citizens, by confining economic relations within political boundaries—­if not exclusively, more closely than when trade was left to take its natural course, guided by individual motives.  The regulation of international trade, therefore, has always constituted an economic problem of great importance in the field of political action.

Sec. 2. #Benefits of international trade#.  Now, bearing in mind that international trade is carried on by individual traders in any two countries, we may ask what motive impels men to trade across the political boundaries of a state.  The simple answer is that each trader has something to give and desires to get something in return.  Each is seeking to get something that has to him a greater value than