The EBF site is dead. If you click through you will be taken to the Internet Archive site to find an archived copy.
The economic case for free trade is that it produces mutual gains for countries. These gains arise from the workings of the principle of comparative advantage. Comparative advantage results from different countries having different opportunity costs of producing one traded good in terms of another; for example, the cost of a gallon of wine in terms of yards of cloth. The ratios of wine to cloth differ among countries due to inherent differences (in this case, differences in climate and soil). These different relative cost ratios are the reason why it pays to specialise and to trade.
In order for resources to be allocated within each country in keeping with comparative advantage, factors of production must be relatively immobile internationally. Otherwise, factors of production would be allocated according to absolute advantage and would move abroad to where their productivity is higher.
The operation of absolute advantage is what we see today. Labour is most productive where capital is most abundant, and capital is most productive where labour is most abundant. Thus, we observe developing world labour moving across borders physically and electronically to first-world countries where capital is abundant, and we observe first-world capital and technology moving to countries where labour is abundant and inexpensive.
Comparative advantage has now disappeared from the picture. Today, factors of production are more mobile internationally than are traded goods.
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