In Ricardo's hypothetical world with zero unemployment, free trade allows each company to allocate its labor to the things it does best. So in this world, at least from our perspective, the United States would use its workers where the returns on their efforts are greatest. The rest of the world would supply the goods and services that have unacceptable returns for American workers. Everyone in every country would be employed at the most rewarding work available for his or her relative skills, so everyone should be happy. In the real world, there is unemployment, and free trade has some highly unpleasant consequences.
Countries attempt to increase employment by selling products below cost in other countries.
Authoritarian states may turn to slave labor, and other countries may sacrifice health and environment to boost employment. Trade is not conducted on a level playing field because countries that do not dump, use slave labor or allow pollutants must charge more for their goods. But the consumers in the countries that play fair look at the price tags, not the country of origin, and skew their purchases to subsidized foreign products. Inevitably, the countries that play fair will lose out. Unemployment will rise, pressure to relax environmental laws will grow, and financial well-being and civility will decline.