A GENERAL THEORY OF THE SYSTEM OF MULTILATERAL TRADE.

This article presents information on the system of multilateral trade. If the chart of the network of world trade is analysed, the trade pattern is found to be empirical. It was discovered that the countries in the system could be arranged in the order of the direction of their balances of trade, so that each country had an import balance from practically all countries that preceded it in the list and an export balance to practically all countries that succeeded it. Countries have been grouped into a limited number of categories to give a synoptical view of the network. This system was not a haphazard, unstable pattern shifting in form from year to year. The great significance lies in the stability of the system. This structure of world trade was built on a solid foundation, some major principles of which will now be dealt with in a theoretical approach. The simple case of three countries which have an unequal relative supply of the three main factors of production, labour, land and capital, demonstrates the fundamental basis of a trade system.