How Trade Promotes Growth

Trade helps an economy grow in several ways:

It encourages economies to specialise and produce in areas where they have a relative cost advantage over other economies. Over time, this helps economies to employ more of their human, physical and capital resources in sectors where they get the highest returns in open international markets, boosting productivity and the returns to workers and investors.
Trade expands the markets local producers can access, allowing them to produce at the most efficient scale to keep down costs. Even in populous developing economies, low incomes often make producers' potential local market small, so trading with the world is vital.
Trade diffuses new technologies and ideas, increasing local workers' and managers' productivity. Technology transfers through trade and investment are even more valuable for developing economies, which employ less advanced technologies and typically have less capacity to develop new technologies themselves.
Removing tariffs on imports gives consumers access to cheaper products, increasing their purchasing power and living standards, and gives producers access to cheaper inputs, reducing their production costs and boosting their competitiveness.

2007