The movements of goods from producers to consumers. The classic explanation for trade is expressed in terms of comparative advantage. Greenaway and Torstensson (1997) TU. Inst. Econ. Res. W. Paper 144 support comparative advantage models, observing that an abundant human capital endowment, as well as a large domestic market, increases the quality of OECD countries’ manufacturing exports, with human capital increasingly important over time. Forslid and Wooton (2003) Rev. Int. Econ. 11 find that lowering trade costs leads initially to increased concentration and then to dispersion of production. When a pattern of comparative advantage exists, integration may lead to international specialization of production. ‘This may be good news for peripheral countries, which may be able to retain industry despite the attraction of the core.’

Baier and Bergstrand (2005, Atlanta W. Paper 2005–3) answer the question ‘do free trade agreements increase members’ international trade?’ with a yes! Bernard et al. (2007) CEP Discuss. Paper 795 urge that the number of products firms trade as well as the number of countries with which they trade are central to understanding the role of distance in dampening aggregate trade flows. See Hummels and Hillberry (2005) NBER W. Paper 11339 on the impact of distance on trade.