The heart of the theory is that free trade allows each country to specialize in its most
competitive products. More wealth is created by trade because limited ‘factors of
production’ are used more efficiently and all participants are better off than they would
be without trade.6 This has important implications for trade. The appearance of
new competitors in the international market does not put existing traders out of
business. Provided there are relative differences in efficiency it leads to more trade
and greater wealth, though it does raise difficult questions about the redistribution
of economic resources and how the gains from trade are distributed between the
participating countries.