Defence of the Barriers to Invisible Trade
The effects of constraints on invisible trade can only be considered by comparison with a theoretical world in which there is complete freedom of trade in invisibles. Under such an assumption, each country would produce those services in which it had a comparative advantage over the rest of the world, meaning that the total output of shipping, banking and insurance services in the world as a whole would be produced at the least possible cost. Given the world prices of providing invisible services, the United Kingdom would be induced to supply a certain amount of those services which it found profitable to provide at those particular prices. The ratio of invisible to visible trade for Britain would be at an optimal level reflecting in turn British cost advantage over the rest of the world in the production of services by comparison with the production of visible goods. Such a statistic would not only show the comparative advantage over other countries in the provision of invisible services. It would also mean that the real income of Britain was at a higher level than it would be for any other proportion of invisible to visible trade.
KeywordsMonetary Policy Foreign Bank International Monetary System Monetary Policy Action Domestic Ownership
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