Abstract
This chapter discusses international transactions. The legislative frame in which international economic relations had been conducted in the few decades preceding the gold standard, full freedom of international payments on both current and capital account, customs duties as the only restrictions on trade, was, under the economic stresses of the First World War and its aftermath, abandoned by most countries in various respects and for varying periods. This was combined with a theoretical argument that tending to the ideological saw in the freedom of international trade and investment the symbol of free enterprise in general. Under free trade, each country is likely to specialize in supplying those goods in the production of which the factors of production are used in the same proportion as they are present in its economy. Owing to its simplicity and logical clarity, as well as to its association with the ideals of internationalism and freedom, this theory has great intellectual and emotional appeal.
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