According to Steven Suranovic (2003) in International Trade Theory and Policy Lecture Notes (online), a country is said to have an absolute advantage in producing a good if a worker in that country can produce more of the good than a worker in the same industry in a different country. International trade is beneficial even when one country has an absolute advantage in producing almost everything because the gains from trade depend on the concept of comparative advantage. Every nation's unique combination of scarce natural resources, labor and capital determines what goods and services its people can produce most efficiently. Through trade, countries exchange goods they produce most efficiently for goods other countries produce most efficiently. The total output of the world economy and the standard of living in each country will be higher if workers produce more of those items in which their country has a comparative advantage.
In general, absolute advantage determines the overall level of wages in each country, and comparative advantage determines trade patterns. Both countries' living standards will increase from trading according to comparative advantage because the resulting world pattern of production is more efficient than if each country produces only for its own market. If the theory of comparative advantage is correct, every community benefits from globalization to the extent that prices for goods are lower and standards of living are higher. Also, globalization involves economic and cultural integration, therefore globalization implies and involves broader acceptance of diversity (Suranovic, 2003).
Former Assistant Treasury Secretary Paul Roberts writes in Business Week (2004) that the premise of free trade is that the international division of labor follows the principle of comparative advantage. The United States is likely to have an absolute advantage in all stages of the production process, because American worke...