7. Modification of comparative costs.—The simple statement of this law, as it was made by the earlier writers, must be supplemented by an explanation of the meaning of advantageous production. The ad vantages of climate and resources must be developed by a real economic organization so that the nation can meet the sharp conflict of world-wide competition in international trade.
The factors in such success are (1) efficiency in production, (2) knowledge of merchandising, (3) satisfactory transportation facilities by land and sea, (4) and an adequate banking system. The progress made by Germany in foreign trade during the past quarter of a century indicates that the disadvantages of resources may be overcome by organization. This land, with an inferior grade of iron, and lacking native sources for the materials of many of her prod ucts, has bieen able to produce cheaply thru the aid of her scientific men and a careful organization of ber labor and capital. With this start her merchants have studied the best system of merchandising, and the bankers have followed the traders in all parts of the world with the financial assistance necessary to the trading of coMmodities. In the course of a few
years a great international trade has been built up, based upon the principles of a new national sufficiency that stands in odd contrast to the exchange of com modities on the basis of the advantages established by nature.
8. lvternational trade and foreign exchange.—The movement of merchandise from one country to an other, on which the balance of trade is commonly figured, constitutes only one element in international coMmercial relations. The tendency on the part of economists to over-emphasize merchandise movements has obscured relations involving the interchange of capital which have long played an important role in the trade relations of Great Britain, France and Germany with other countries, and which in the lzst three years have become increasingly important to the United States. These matters are dealt with in detail in the Modern Business Text on "Foreign Trade and Shipping." These manifold international relations in part com mercial, in part financial, give rise to payments be tween nations in settlement of balances. How such payments are effected is discussed in the Modern Busi ness Text on "Domestic and Foreign Exchange."