The purpose of this study is to introduce the element of time into the analysis of optinial taxation of international capital movements. As with Irving Fisher, in his Theory of Interest, the . . supply and demand we have to deal with are . .. the supply and demand of future income, and we shall interpret a rate of interest as . . that sort of price which links one point of time with another point of time in the markets of the world (pp. 32-33). The analysis stresses the formal identity between capital theory, involving exchange over time, and trade theory, involving exchange at the same point of time and argues that, as a consequence, the theory of the optimum tax on capital movements may be regarded as a branch of optimal tariff theory. The correspondence between trade theory and capital theory has appeared in many guises throughout the past century, and was recognized at least as early as 1907 by Fisher. His classic graphical apparatus anticipates much of the later opportunity cost approach to international trade, as well as the more recent work in general equilibrium encompassing both theories.1 In this latter work, time is broken up into a (finite) number of successive time periods, and the same physical item available at different time periods and locations is treated as a different commodity. Future production and consumption possibilities are assumed to be perfectly known today and economic agents acting as price takers engage in markets in which prices for delivery in future periods are quoted, and, under certainty, will correctly reflect future scarcity values. As an immediate consequence of this approach, optimum tariff theory is no less applicable when trade over time is included with trade at a given point in time. Prices quoted in the present reflect marginal rates of substitution not only between present commodities, but also between future commodities, and between present and future commodities. A country then stands to gain by taxing exchange over time in the same manner as it may in taxing exchange at the same point in time. Indeed, it has the same purpose-to influence the terms of trade. That the terms of trade over time are called interest rates, or that a lender is treated as an exporter and a borrower as an importer of present income makes little difference. The resulting optimum taxes on trade are simply those taxes which equate the marginal rates of transformation through trade at the same point in time, and over time, with the marginal rates of transformation in domestic production and consumption. This is a somewhat different approach to the problem of optimal taxation of capital movements than that recently pursued by Murray Kemp and Ronald Jones. The major difference is the explicit role played in our analysis by the element of time-of waiting -which allows for pure borrowing or lending, in addition to the financing of imported capital goods by current exports. In a later section we will relate the two approaches.