It’s not always beneficial.
Economists do not model reality. Instead, they take real world situations and interpret them by creating a version that is conventionalised in accordance with their theories and notions of markets. [Which is an abstract notion, as they typically have little knowledge of marketing practices.]
They then manipulate this interpreted model to arrive at conclusions they are wont to recommend as the sorts of actions the real world might well benefit from taking.
However, their contrived model is often well askew of the reality they pretend it is of, so what economists are really doing is arguing by analogy. An instance of this arguing by analogy is the belief most economists hold concerning the benefits of so-called ‘free trade’, trade with no import tariffs.
They are certainly not referencing some model of two trading entities where one’s labour costs are a small fraction of the other’s. ..That may be current reality, but it is not what economists learnt about trade benefitting both trading entities — for implicit there are labour costs that are never so divergent. Nor would one entity have a seemingly unlimited pool of cheap under~employed labour.
Set up a free trade model having the above features, and the entity with unlimited cheap labour will be producing nearly all the goods. The importing entity has the benefit of these goods at prices well below what its domestic producers can offer. So they quit producing, and it runs a huge trade imbalance in actual goods with the other entity.
Yet, money flows between them must be in balance, which typically means the exporting entity purchases government bonds of the importing entity, perhaps also shares and bonds of companies there.
Whatever else it may buy in the way of actual goods, the goods trade will be decidedly imbalanced, and the financial trade must make the difference. Pardon me if this makes the importer look like a big loser. ..Care to guess which entity would be China were this to reflect a real world scenario?
Conventional Barter Model
When the Economics student first learns the supposed benefits of free trade, it is a variant of Ricardo’s simple model of barter that they are taught. It is two hundred years’ old. It has two trading entities and two goods, each with different labour costs in each entity. Even when one entity has lower labour costs for both goods (usually expressed in units of labour) ..if it is at full employment, then it can have more of both for itself if it imports the good costing it more labour and switches that labour to production of the other good. Note that it must switch labour.
So, according to this model, if it is at full employment — a not uncommon assumption of economists (though here usually not mentioned to students) — only then might it benefit from trade with that other entity. ..Otherwise, in this model it would usually be better off employing more of its own workers, taking them off state support, and not trading at all.
Of course, in Ricardo’s day [the early 1800s in England] state support for the unemployed did not really exist, nor really did ‘full employment’ since most people were still working in agriculture in a traditional manner. So he didn’t have the complication of trying to create a ‘full employment’ scenario.
Remember, this is a model of barter, which was clever of Ricardo as it avoids financial considerations entirely. [Ricardo was a financier, and successful at it.]
And Today’s Reality
Moving beyond pure barter, a populous country with much under~employed poorly~paid labour likely won’t have the consumer purchasing power to buy the increased output, or purchase many imports either. ..Its best hope may be to produce cheaply and export much. But then the inter~entity financial flow from trade is imbalanced and flowing from the importer to the exporting entity. To balance it, gov’t bonds of the importer are purchased by the exporting entity.
The importer gets cheap goods, while disemploying workers displaced by these imports; ..which creates competition for what factory employment remains, and tends to lower wage rates. This increases the income disparity between those who work for wages and those who profit from trade, and such disparity grows with time.
If it is really perverse, the importing entity will repay the gov’t debt by taxing workers moreso than the wealthy. And since the wealthy typically control politics indirectly and do not give a flying whats~it for the workers, there will be a strong tendency to be so perverse.
Oddly enough, the fledgling student economist typically does not learn about this model nor anything like it. Since their training leaves them oblivious to the obvious, it would be fair to call such ill~prepared graduates miseducated. _ indoctrinated, like a religionist, into the ‘cult of free trade’.
NOTES__
Maynard Keynes circa 1922 called free trade “an inflexible dogma to which no exception is admitted” and spoke in support of the Liberal Party who were pro free trade in the British election of 1923, while the Conservative Party favoured a tariff to protect British jobs. …But by 1931 he had switched and supported a general revenue tariff in order to increase employment. [The Collected Writings of John Maynard Keynes vol 17 p 145; and vol 9 p 238.]
He usually favoured flexibility: “When circumstances change, I change my position — What do you do?” is said to be one of his famous quips.