Free Trade and specialisation Two countries producing 2 commodities Assume Portugal Absolutely more efficient at producing both wine and cloth Relatively more efficient at producing wine than cloth More of both wine and cloth produced if England specialises in cloth Portugal specialises in wine Countries trade surpluses and increase consumption of both goods in both countriesFree Trade and Specialisation • Two countries producing 2 commodities • Assume Portugal – Absolutely more efficient at producing both wine and cloth – Relatively more efficient at producing wine than cloth • More of both wine and cloth produced if – England specialises in cloth – Portugal specialises in wine • Countries trade surpluses and increase consumption of both goods in both countries