To return to our example of France and Spain

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The increased production achieved by each nation allows for the start of international trade which benefits each country.

The key word, therefore, is specialization . According to this theory, if each country specializes in a sector and verticalizes its production, it can draw great advantages from international trade and all this benefits the global economy.

Comparative advantage
Another British economist, David Ricardo, however, has developed another theory that conflicts with Smith's because it starts from a different assumption: not all countries can have an absolute advantage over others.

it is not a given that for a specific product France has a better, faster and higher quality production than Spain. The two countries could even be at the same level in terms of production. How can we establish the germany email list absolute advantage in these cases and therefore the product on which to specialize to favor the national and international economy?

In this case, then, does foreign trade become harmful? According to Ricardo, no.

According to his theory of comparative advantage, in fact, if a State produces a product at lower costs than any other commodity produced by that State, specialization is always advantageous. In short, it is always convenient to specialize in a production sector if the latter involves a lower use of time and investment than other sectors.

Let's take a practical example with our two countries. Let's assume that France uses less resources and energy in the production of cloth than in any other goods it produces. And that Spain, for its part, has a large production of wheat that involves less expense than all the other goods it produces. It is clear that if the two countries specialize in the production of cloth and wheat respectively, they can gain economic advantages both nationally and internationally, by marketing the goods produced abroad.