Explain how international trade acts as an "engine of growth"

Introduction
Professor Adam Smith was the proponent of the notion of free trade. The most important
objective of international trade is to take the advantage of differences in factor endowments,
larger markets and the availability of modern technologies; and thereby making gains from pure
arbitrage, economies of scale and more sophisticated product differentiation. According to Adam
Smith, trade acts as an engine of growth. It is said that an economy is experiencing growth when
its total real output or gross domestic product (GDP) increases. Since economic growth affects
both production and consumption, therefore it also has an impact on international trade.
International trade has also motivated innovation. International trade theory explains the pattern
of international trade and shows how the trading nations gains from trade. According to Adam
Smith both the trading nations will gain from trade. The basic idea of international trade is based
on the concept of comparative advantage. A country enjoys a comparative advantage in the
production of a commodity if the opportunity cost of producing that good is lower than another
country.
International Trade as a stimulus for economic growth
International trade, today, acts as a stimulus for the economic growth of a nation. There are
several linkages, due to which the nations are interconnected today. The major linkages are:
i. Good transportation facilities
ii. Globalization and liberalization in the 90s
iii. Easy access to global economy
iv. Defined exchange rate system
v. Advancement of technology – access to internet, etc.
It is often argued that the developed countries generally benefit from international trade rather
than the developing nations.
Many economists are against the notion of free trade. They argued that there must be certain
restrictions. Trade barriers refer to the situation of imposing artificial restrictions on trade of
goods and services between two countries. Many economists opposed the theory of “free trade”
proposed by Adam Smith. They were of the opinion that some restrictions must be imposed on
trade for the sake of the country. Trade restrictions are generally designed to protect the interest
of the domestic country. But later on, it was observed that the objectives of protection were...