[balance_factor]

The example Ricardo gave for comparative advantage was Portuguese wine for English cloth.

More than two centuries later, Joan Robinson reexamined comparative advantage using Ricardo's original example. How had such trade affected the two economies - Portugal staying a more agricultural society, whereas in England, textiles served as one of the backbones for the country's industrialization. The analysis Robinson came up with should be obvious - both countries did not benefit by the trade of cloth for wine, it had been much more to England's advantage, and Portugal would have been better off staving off free trade and building up its textile and industrial base. The original example given for the benefits of comparative advantage for all parties turned out to itself be a fallacy.

[UncleEntity]

> British worsteds, bays and serges being exported to Portugal – the ‘cloth’ from ‘England’ in Ricardo’s famous example – simply could not be paid for alone by the wine exports travelling in the other direction. Brazil, a Portuguese colony at the time, was responsible for a massive 40 per cent of the world’s new gold reserves in the eighteenth century (DeWitt 2002: 4). It was this that was used to settle the trade deficit resulting from the inadequacies of the wine trade.[0]

Simply put, the flaw in their argument is they treat Brazilian bullion not as a trade good but as some magical thing. Portugal was able to consume more English goods than their wine industry could supply because they were also able to dig gold out of the ground and use it to "settle the trade deficit".

Portugal chose to consume foreign goods instead of investing in domestic production and this is somehow England's fault?

[0]http://www.tandfonline.com/doi/pdf/10.1080/13563467.2016.121...

[kinghajj]

> Portugal chose to consume foreign goods instead of investing in domestic production and this is somehow England's fault?

Huh? It's Portugal's fault, they could have imposed a tax on imported cloth to change the domestic economic calculus to favor creation of a local textile industry.

[UncleEntity]

That's not the argument they're making, they're saying that trade itself is responsible for Portugal's "misfortune".