These dynamic gains are of two sorts. First, free trade might increase a country's stock of resources as increased supplies of labor and capital from abroad become available for use within the country. Second, free trade might also increase the efficiency with which a country utilizes its resources. These dynamic gains will shift a country's PPF curve outward. That is, it can create economic growth.
Economic growth means a nation is able to produce more of everything.
According to Porter's theory of national competitive advantage one of the important components to a nation's competitive advantage is factor endowments. Thus, government investments in basic and higher education, by improving the general skill and knowledge level of the population and by stimulating advanced research at higher educational institutions, can upgrade a nation's advanced factors. Beyond Porter's theory, the new trade theory makes an even stronger argument for why a proactive government might increase a nation's competitive advantage. New trade theorists argue that a source of comparative advantage for a country might stem from first-mover advantages . If an industry has relatively large economies of scale associated with it, then the firm that expands first and realizes lower per unit costs of production will be more price-competitive than smaller, less efficient firms.