How is trade profitable for both countries involved? Surely one loses out in the end.

Question

How is trade profitable for both countries involved? Surely one loses out in the end.

In: Economics

Answer 1

This is a short video that explains this from a basic theoretical standpoint (Ricardian model) this is probably the foundation of macroeconomic studies

[https://www.youtube.com/watch?v=tPcBIlSj0zg](https://www.youtube.com/watch?v=tPcBIlSj0zg)

The general statement is that trade is “beneficial” to both economies because “profitable” might have a different meaning. In this sense “beneficial” means that, after trade, both countries can consume more goods than they otherwise would if no trade occurred.

But it should be pointed out that “beneficial” is defined in terms of the ENTIRE economy. But there is definitely no guarantee that EVERY MEMBER of the economy benefits or benefits in the same way with trade. I.e. there will be individual winners and losers within a country when trade occurs.