Adam Smith-Free Trade

In the earlier days of recorded history, nations traded to obtain more goods, especially those they couldn't produce themselves, which seems like a logical enough motive. But by the 17th century, this motive for trade gradually eroded. The desire for goods was replaced by the desire to accumulate gold instead. This seemingly irrational motive for international trade, which came to be called mercantilism, colors some nations' international economic policy to this day. Mercantilism flourished during …

…Free trade creates income for the community by reallocating jobs and capital from lower productivity to higher productivity sectors of the economy. The gains from trade are the gains from a more efficient allocation of the nations productive resources. The point of all this is that countries gain from specializing and trading: productivity is increased, incomes are higher because more is sold, costs are lower, and consumption is higher. Therefore, everybody gains from free trade.