Final answer:
The statement is true; Adam Smith's principle of comparative advantage allows countries to benefit from international trade without possessing absolute advantage. It encourages specialization to achieve mutual benefits, even for countries with no absolute edge in producing certain goods.
Step-by-step explanation:
The statement that Adam Smith explained how countries can benefit from international trade even if they lack any absolute advantage over their trade partners is true. The concept Adam Smith described is known as comparative advantage. Even if a country has an absolute advantage in all products, there can still be gains from trade if countries specialize according to their comparative advantages. High-income countries may have advantages in education, technology, and productivity, but they too benefit from focusing on areas where their efficiency is greatest relative to other countries. This principle not only suggests that trade is beneficial but also supports the notion of free international trade. Consequently, under the principle of comparative advantage, even countries with no absolute advantage can engage in trade that is mutually beneficial.
For instance, while high-income countries can produce everything more efficiently, low-income countries can still benefit from trade by focusing on goods for which they have the least comparative disadvantage. This approach allows them to trade for goods and services that would be relatively more costly for them to produce. Therefore, trade can lead to improved welfare for both trading partners since it allows each country to take advantage of economies of scale and specialization. This is supported by the rapid economic growth of countries like Japan, South Korea, China, and India, which have integrated deeply into the global trade system.
In essence, trade based on comparative advantage facilitates access to a wider variety of goods and services, promotes efficiency, and drives down prices, benefiting consumers and economies as a whole. Notably, smaller economies, often constrained in their capacity for internal trade, can particularly benefit from the global market, thereby gaining access to goods, services, and technologies that may not be producible domestically.