the thing he gives, and believes he can do this in trade with a foreigner better than by trading at home.  In any trade, both parties gain, or think they are gaining.[2] In international trade there is the same chance for mistake as in domestic trade, but no more.  In a single transaction in either domestic or foreign trade one party may be cheated, but the continuance of trade relations is dependent upon continued benefits.  The once generally accepted maxim that the gain of one in trade is the loss of another is now generally rejected, but often still it is assumed to be true of international trade.  The starting point for the consideration of this subject is in this proposition:  Foreign trade is carried on by individuals, for individual gain, with the same motives and for the same benefits as are found in other trade.

The advantages of international trade are indeed but those of division of labor in general, in the particular case where it happens to cross political boundaries.  The great territorial divisions of industry are determined first and mainly by natural differences of climate, soil, and material resources.  Thus trade arises easily between North and South, between warm and frigid climates, between new countries and old, between regions sparsely and regions densely populated.[3]

Territorial divisions of industry are determined secondly by social and economic differences such as those with respect to accumulation of wealth, amount of loanable capital, invention, organization and intelligence of the workers, and the grade of civilization.

Foreign trade normally imparts increased efficiency to the productive forces of each country.  In most cases it is apparent that labor is more effective and gets a larger product when it is applied in those ways for which the country is best fitted and for which it offers the best and most bountiful materials; and that, further, when special branches of industry have developed at one place, they make possible the advantages of large production and of high specialization.

Certain erroneous explanations of the advantages of foreign trade may be dismissed with brief mention.  It is said to give vent for surplus production and to give a wider market to what would otherwise go to waste.  This involves the same fallacy as the “lump of labor notion,” the destruction of machinery, and the praise of waste and luxury.[4] If it were true that sale to backward nations were now necessary to give an outlet for products which would otherwise rot in the warehouses, a time would come at length when the world would have an enormous surplus unless neighboring planets could be successively annexed.  Again it is said that the great purpose of foreign trade is to keep exports in excess of imports so that the money of the country may constantly increase in amount.  The ideal of such theorists is an impossible condition where the country would constantly sell and never buy.[5] In the narrow commercial view of the subject the sole object of foreign trade is to afford a profit to the merchants, regardless of the welfare of the mass of the citizens.