6.1.2—Specialisation and free trade

Specialisation means concentrating resources on a narrower range of products; international specialisation follows comparative advantage. Free trade allows countries to exchange output without protective barriers.

Specialisation can raise productivity through learning and scale, widen consumer choice and let each country consume beyond its own production possibility frontier. Gains depend on transport, reliable institutions, terms of trade and the ability of workers and firms to adjust.

A country specialising in a product with low opportunity cost can export it and import a product it gives up relatively more of, provided the trading price lies between the two opportunity costs.

Free trade gains are not proof that every worker or region gains immediately; the aggregate benefit can coexist with concentrated adjustment costs.