In their view, the purpose of foreign trade was the enrichment of the nation, and this could be accomplished by a trade policy encouraging exports, which bring in gold, and discouraging imports, which send out gold. Displaying the characteristic hubris of interventionists, the mercantilists presumed to know what kinds of trade were good or bad and proposed to regulate people accordingly. Theirs was the theory Adam Smith set out to refute in The Wealth of Nations. Irwin notes, however, that three-quarters of a century before Smith's great work, Henry Martyn penned a masterful tract entitled Considerations upon the East India Trade that brilliantly anticipated the Scottish professor's main arguments. Irwin does an excellent job of presenting Smith's case for free trade.
Trade is beneficial because it permits people to specialize in what they do best.
Driven by self-interest, specialization will maximize production, and producers will then trade their output for the more valued outputs of other specialists. Smith saw no reason to limit the gains from specialization and trade by confining them within the artificial boundaries of nations. The larger the market, the greater the benefits. Smith's cogent argument routed the mercantilists. To this day, the great majority of economists accept his conclusions about trade.