In the production of goods it is cheaper to produce a large quantity of a given good than it is to produce small quantities. Economies of scale cannot be achieved unless the market available for the product is large enough so that all the product can be sold. Large countries such as the United States may have large enough markets to support economies of scale, but smaller countries such as Canada cannot develop a large enough market unless they are able to export the surplus production to other countries. Free trade allows world production to be maximized because of the effects of specialization and economies of scale. This makes it possible for every household to consume more goods then it could without free trade.
Agriculture is an example of the effects of economies of scale.
Agriculture in Canada and particularly in Saskatchewan was able to increase its productivity significantly by varying all factors of production. In recent years this phenomenon has occurred in other parts of the world with the result that the production of food has outstripped the demand for food. Free Trade A nation which uses economic advantage as the criterion to determine what kinds of economic production to engage in finds that it may have to limit itself to the production of a small number of commodities. Most nations have not been prepared to allow the free market to be the only determinant of what types of economic activity their society can engage in. Often these considerations are seen to be worth a reduction in living standards in the short run in order to achieve a better economic position in the long run. .