As the Nations in the world become closer and closer nowadays, the international trade seems to be another way for them to communicate with each other. Obviously everyone knows that some international trade is beneficial, while nations generally gain from international trade, however it is quite possible that international trade may hurt particular groups within nations. The reason that international trade produces this increase in world output is that is allows each country to specialize in producing the good in which it has a comparative advantage. A country has a comparative advantage in producing a good if the opportunity cost of producing that good in terms of other goods is lower in that country than it is in other countries.i.e labour cost is cheap in China, so China has a comparative advantage in labour output. According to classical economists, comparative advantage was based on the difference in the productivity of labour among nations, but they provide no explanation for such a difference in productivity, except for possible differences in climate. …
