Gains from trade shows the net benefit derived by the economic agents from Voluntary trading with each other. It leads to various gains for the participating countries which are as follows:
1) Increase in World production:
More production will take places because of international division of labour, division of labour is on basis of specialisation. For example, if the there are two country x and y. As we can clearly see that the country X has comparative advantage in producing wine whereas Country Y has Comparative advantage in producing cloth.
Before trade
| Country | Wine | Cloth | ||
| Hours | Output | Hours | Output | |
| x | 170 | 170/80=2.1 wine | – | – |
| y | – | – | 220 | 220/100= 2.2 cloth |
| Total | 2.1 Wine | 2.2 Cloth |
It can be clearly observed that after the trade the total output increased from 2 wine to 2.1 and similarly from 2 cloth to 2.2 cloth. The increase in quantity reflects the gain from trade.
2) Cost benefit:
This gain is incurred by the home country if the cost of producing the goods is higher than the cost of importing. If this is the case country will import those goods instead of incurring higher cost on production.
3) Establishes Co-operation and better relationship:
As the international trade takes places, it establishes a better relationship between the trading countries. The trading country is interdependent for some or other resources as no country is self-sufficient in itself ,so this ensures better cooperation among the trading partners.
4) Benefit to customer :
Due to international trade ,the customer get the quality goods at lowest price because the each country produces only those commodities in which it has specialisation .
5) Accessibility :
The goods produced by a country is easily accessible to all those countries who participate in international trade . Easily accessible of any good from any market increases consumer satisfaction.