The potential gains from specialisation and trade have been known to economists since the eighteenth century. If countries specialise in the production of goods and services in which they have a comparative advantage, then trade can be mutually beneficial to trading partners. A free trade system would be one in which there were no barriers to trade between countries, which would encourage specialisation. Such a system has never been in effect, however, as governments have tended to intervene to restrict trade for various reasons, and market failure has also occurred through the existence of imperfect competition in world markets.
Nonetheless, the process of globalisation in recent years has led to freer trade between countries, and to a dramatic boost in volumes of trade, economic growth and employment.
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