Page:Principles of Political Economy Vol 2.djvu/261

Rh its commodities in exchange; and in proportion as the competition of other countries compels it to offer its commodities on cheaper terms, on pain of riot selling them at all, the imports which it obtains by its foreign trade are procured at greater cost.

These points have been adequately, though incidentally, illustrated in some of the preceding chapters. But the great space which the topic has filled, and continues to fill, in economical speculations, and in the practical anxieties both of politicians and of dealers and manufacturers, makes it desirable, before quitting the subject of international exchange, to subjoin a few observations on the things which do, and on those which do not, enable countries to undersell one another. One country can only undersell another in a given market, to the extent of entirely expelling her from it, on two conditions. In the first place, she must have a greater advantage than the second country in the production of the article exported by both; meaning by a greater advantage (as has been already so fully explained) not absolutely, but in comparison with other commodities; and in the second place, such must be her relation with the customer country in respect to the demand for each other's products, and such the consequent state of international values, as to give away to the customer country more than the whole advantage possessed by the rival country; otherwise the rival will still be able to hold her ground in the market.

Let us revert to the imaginary hypothesis of a trade between England and Germany in cloth and linen: England being capable of producing 10 yards of cloth at the same cost with 15 yards of linen, Germany at the same cost with 20, and the two commodities being exchanged between the two countries (cost of carriage apart) at some intermediate rate, say 10 for 17. Germany could not be permanently undersold in the English market, and expelled from it, unless by a country which offered not merely more than 17, but more than 20 yards of linen for 10 of cloth. Short of