ABSTRACT
Taking advantage of recent developments in factor-content and duality theory, we derive a necessary and sufficient condition for trade gains which is both novel and global in scope: trade is gainful if and only if any loss of productivity as a consequence of trade is more than offset by the improvement in the factoral terms of trade. Moreover, it is shown that trade gains do not imply changes in product prices, that changes in factor prices can alone suffice for gain, and that this is so even when trade exacerbates the distortion associated with externalities. Indeed trade may be less gainful when it brings about a change in product prices than when prices are unchanged.
