differences in degree of industrial development, and which, because of the progress of civilization the world over, is far less common today than it was centuries ago; we refer to frontier trade. By this we mean trade between two groups which are widely different in culture, such as, for example, a group of savages and a commercial group. Frontier trade is, in reality, trade between uncivilized and civilized peoples, typified by the trade of the European trading-companies with the Indians and Eskimos. If an Eskimo accepts a cheap pocketknife in exchange for a Polar bear's skin, he does so because he is entirely unaware of the relative values of the two articles in the world's market. It is the lack of knowledge of the natives which makes frontier trading so profitable. When they become sophisticated and keep in touch with the market, the trade with them is no longer of the frontier type.

Trade due to racial differences. Historically, racial differences have played an important part in commerce and should be listed here among the fundamental causes giving rise to exchange. With the widening of knowledge, the breaking down of racial prejudice, and the progress of industrial imitation there is a strong tendency for racial differences, as affecting commerce, to even themselves up and disappear. Nevertheless, such differences still exist, with the result that peoples such as the Chinese, Japanese, Indians, Turks, and others have produced and still continue to produce for export numerous types of manufactures upon which have been left an impress no less distinctive than the peculiarities, from our viewpoint, of such peoples in stature and features. Not only do racial differences influence the amount of goods produced, - homemade goods are more slowly made than machine-made articles, but they tend to multiply the varieties of products to be transported the world over to satisfy man's needs. Racial differences, as affecting commerce, are by no means limited to peoples of the Far and Near East; the French, English, Germans, and others each leave their distinctive

impress upon their manufactures which has gained them reputation in certain particulars. For example, French skill and taste in artistic productions are known the world over and influence the demand for their manufactures, and, consequently, the commerce therein.

It

Race character in trade. Why some nations are more successful traders than others is a difficult question to answer. is clear, however, that nations differ greatly in this particular; some peoples seem to develop an instinct for trade, while others figure slightly in any except local exchange. The Phoenicians, as compared with the Romans, were great traders, and, in modern times, the English outclass the French. If one should undertake to explain these differences on the basis of racial characteristics alone, he would at once be challenged. Some point to the physical environment as the fundamental cause, affirming that racial characteristics themselves are, in large part, a product of the environment. In modern times life has become so complicated that the solution of questions such as the one here proposed can scarcely be demonstrated on one ground alone, especially in the light of present-day prejudices.

Doctrine of comparative costs. Before concluding our discussion of the principles of trade, reference should be made to the doctrine of comparative costs in its application to foreign trade. In all stages of industrial development those things which are desired but which are not produced within the country in question must be obtained abroad, and it is the function of international commerce to effect the redistribution of the earth's commercial products. A detailed study of the character of the articles moved in foreign trade would show that the countries of the world, especially the more advanced nations, import vast quantities of foods and raw materials which are adapted to their own soil and climate. And the study also would show that countries pay out annually millions of dollars for manufactured good that could be produced within

their own borders. A full and satisfactory explanation of these facts, especially under the complicated conditions of modern production and distribution, would require the consideration of a variety of factors whose influences are difficult to trace. The most basic explanation, however, is embodied in the economic doctrine of comparative costs. Nations differ greatly in many ways which give them comparative advantages or disadvantages in production. Among these differences are favorable or unfavorable geographical environment, personal aptitudes, differences in culture, in skill, in knowledge of the arts, and in mechanical training.

These comparative advantages and disadvantages are reflected in the course of trade. If it be granted that a certain country has comparative advantages in the production of X, its labor can be applied effectively in the production of this commodity so that its cost of production and its domestic price will be low. Hence, in accordance with the principle that a country tends to export those commodities whose domestic prices are low, X will be exported. If, on the other hand, the same country has comparative disadvantages in the production of Y, its labor would be applied ineffectively if directed to the production of Y, and its cost of production and its domestic price would be high. Consequently, the country in question would import Y, assuming, of course, that some other country with comparative advantages were engaged in producing Y. There are many modifications of the economic doctrine of comparative costs which cannot be entered into at this point; merely the essence of the principle has been stated. It may be observed that the doctrine of comparative costs applies in the explanation not only of foreign trade but, in a country as large and diversified as the United States, of the interregional domestic trade. Cotton can be grown in Kansas and wheat in the lower Mississippi River bottoms, but labor cannot be effectively applied in either case. Accordingly, comparative advantages are recognized, and the Kansas

wheat-growers exchange their wheat for Mississippi cotton to the advantage of all concerned.

Trade mutually beneficial. Time was when trade was looked upon as benefiting only one party in the transaction (p.270), but the modern world recognizes that trade is mutually beneficial. Each country is interested, therefore, in the maintenance of a healthy economic life in all other countries as well as at home. Whatever is injurious to the industrial life of one country affects all others eventually, provided the injury is of large enough proportions. Cholera, plague, earthquakes, wars, and other similar misfortunes spend their greatest energies and show their most evil effects in the unfortunate countries that are stricken, but their baneful effects reach all countries with which commercial relations, directly or indirectly, exist. Mutual interest in the welfare of two countries, the one for the other, obtains whether or not direct trade is maintained between them. Countries A and B may purchase nothing directly from each other, but A may buy freely from C, which is dependent upon B's raw products for its manufactures. A's business with C stimulates the latter's trade with B, even though no direct commercial intercourse exists between A and B. A shortage of crops and raw material for manufacture in B is bound to affect A adversely, because C's business with B will be diminished.

Summary. The foregoing discussion embraces the fundamental principles underlying exchange. Under conditions in which society is less complicated than we find it today in Western civilization, that is, where trade is reduced to its lowest terms, the operation of these principles can the more clearly be discerned. Nevertheless, they are still the controlling factors in the modern commercial world, with its complicated organization and attempted manipulation on the part of man. We pass on now to a consideration of the industry and foreign commerce of the United States in the light of the principles already indicated.

CHAPTER II

NATURAL RESOURCES OF THE UNITED STATES

The starting point. In undertaking a comprehensive outline of the foreign commerce of the United States, it would seem desirable to follow a broader method of approach than through statistics alone, a method in which statistics will be less in the foreground and in which human activities and interests play the prominent part. A study of foreign commerce, whether approached by the statistical method or otherwise, is a study of the movement of commercial commodities hither and thither between the nations to satisfy human wants. But a study of such commodities, though interesting from many standpoints, is not basic in a survey of American foreign commerce. The commodities of commerce are the tangible results of man's efforts in reacting against his physical environment in getting a living. Such reaction gives rise, as we have seen, to specialized occupations or industries, such as agriculture, manufacturing, mining, and the like. Hence the industries of the country are the real basis of American commerce; they bring forth the things to be exchanged within the country in domestic trade and are, in large part, the purchasing power, when sent abroad, for the goods to be imported. But, in the final analysis, a country's industrial life is a product of its resources as developed, wisely or otherwise, by its population. Consequently, the starting point in a study of American foreign commerce, once the general principles underlying exchanges have been established, is the natural resources of the country.' To these, attention now will be given.

1 Were the present volume devoted primarily to a study of the domestic trade of the United States rather than its foreign trade, a similar method of approach would have been followed. The domestic and foreign trade of a country like