Angles from where you can study gain from the international trade are:
(i) Whole world,
(ii) Country,
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(iii) Citizens.
(i) Gains from Trade for the World:
There is no doubt that trade will increase global production. Country, which can produce the products more efficiently will not only produce for its consumption, but will also export it. Country which can’t produce a product efficiently will import it by exchanging it with products which it can produce efficiently. In this way global production [and thus global welfare] may increase.
(ii) Gains from trade for a country:
If a country does not enter international trade, then its social welfare function can reach upto the point where it is tangent to production possibility curve. If it enters international trade, then although it produces at same point on production possibility curve, but it will consumers at point where social welfare will be higher than in case of an autarky.
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Although, world as a whole will undoubtedly benefit from trade, how much does each country benefit depends on relative power of the countries. A developed and powerful country which has monopoly over technology of producing goods can corner all the gains for itself at the cost of poor and underdeveloped countries.
Usually, products produced by developed countries are highly elastic while products produced by underdeveloped countries are inelastic. Hence terms of trade adversely affect underdeveloped countries. Price fluctuations of agricultural products, which are exported by underdeveloped countries, vary widely.
Price fluctuation of industrial goods exported by developed countries remains stable. Hence international trade increases instability in the economy of underdeveloped countries. Benefit of trade is also cornered by developed countries because terms of trade move in their favour.
(iii) Gains of trade for a Citizen:
In case of India where labour is abundant, it can export labour intensive products. This will increase the demand for labour and hence income of labourers will increase. In India labour class is poor; hence international trade will lead to more equality in income distribution. One can generalise the above argument by stating that free trade will increase the income of abundant factor of production. If abundant factor of production is owned by poorer section of the society (which is usually the case), then income equality will increase after international trade.