This function is performed for them by the bill brokers, who will take all the risk, and charge the traders little more for their services than the expense of sending the gold itself, plus their commission. The effect of it, in brief, will be this, that the Belgian traders will have to pay, say, £101 for every £100 worth of goods which they buy from the English traders, so long as the exchange stands at that ratio, while the English traders, on the contrary, will only have to pay £99, say, for every £100 worth of goods they buy from Belgium; and the question we now have to answer is what effect this 'turn of the exchanges,' as it is called, will have on the trade between England and Belgium. Obviously, that English dealers if they wish to buy an article that is valued at, say, £100 both in England and in Belgium, will give their order for it to the Belgian manufacturer, inasmuch as by taking advantage of this turn of the exchanges they will only have to pay £99 for it. But should the turn of the exchanges between England and Belgium be reversed the following month, say, then the Belgian dealers in turn will give their orders to the English manufacturer, inasmuch as they will get the article in England for £99 instead of the £100 which they would have to pay for it at home.

Clearly then, in all those competitive articles or products which stand at nearly the same natural level of price in both countries, and where the turn of the exchanges alone can give to either the small advantage it has over the other, a trade between the two countries might indeed go on backwards and forwards for ever, as rival businesses might do where one has the advantage of the incoming and the other of the outgoing tide. But two other things are also equally clear; the first is, that it is only when the instruments of production of the two nations, in the case of any particular commodity, are nearly equal in power, that the one can get this differential advantage over the other through the turn of the exchanges; the second is, that this differential advantage at most can never be more than the trifling difference of the bill-brokers' commission, and the risk and expense of sending the gold itself, over and above the expense of sending a bill of exchange. This latter, the orthodox Economists and Free Traders themselves admit, but they have ignored or forgotten the former, and left it out of their calculation; and hence their argument has no more validity than it would have in the case of a race between two horses.

If the horses were so nearly equal in their powers of running that a small hurdle placed before one would give the victory to the other, they might go on running indefinitely without the one beating the other from the field. But if. on the contrary, one was so superior to the other in its racing powers that it could be handicapped with the hurdle, and still beat the other, the racing matches between them would come to an end. It is the same with International Trade. If one nation is nearly equal to another in its powers of production of any given commodity, the small hurdle of the foreign exchanges may suffice to keep trade going on indefinitely between them in that commodity, but if the one is so superior to the other that it can take the hurdle and still beat the other in cheapness, trade between them in that commodity must cease; and if, (as Mr. Pigou's hypothesis assumes), the one is superior to the other in the production of all commodities, all trade between them must cease, just as the trade of the world with Greenland is practically non-extant; and no hocus-pocus, either of the passage of gold between one and the other, or of the turn of the exchanges between them, raising prices in the one and depressing them in the other, will avail to stave off - beyond the pass or two required to test their relative strengths, or to sell off the bankrupt stocks, - the inevitable end.

With all complementary products, on the contrary, - as distinct from competitive, - it is quite different as we have seen; for with them international trade can be depended on to continue backwards and forwards (as long as any of the complementary product is left) for an indefinite time, - as is seen, for example, in the trade in furs with the Hudson's Bay Company. And there can be no doubt, I think, that it is to the fact that the orthodox Economists have not separated out these complementary products from the competitive ones before they started on their quixotic enterprise of demonstrating to us what stupendous effects on international trade the passage of gold and the turn of the Foreign Exchanges will have, that their fallacies on this important problem are due.

From the above considerations it will, I think, now be evident that the stronghold on which the orthodox economist-have been most accustomed to rely in their defence of Free Trade, - and in proof of their doctrine that as it would increase the wealth of the world as a whole it must necessarily benefit each particular nation in it, - is the weakest of reeds on which to stake the issue of a problem so momentous for any nation as that of Free Trade or Protection. And yet so great is still the prestige of this old stock-in-trade fallacy of the effect of the passage of gold and the turn of the Foreign Exchanges in keeping International Trade, when once started, going on forever, (for it would be fatal to admit that trade could come to an end through any one nation being vanquished by a rival nation because it kept its ports open, inasmuch as that would be a standing proof that what was for the benefit of the world as a whole was not necessarily for the benefit of each nation in it); - so great is the prestige of this doctrine, that it has unduly biased the judgment even of Mr. Hobson - one of the most wary, far-sighted, and free from illusions, of all those who have made Political Economy a specialty - in the direction of Free Trade.