&gt; <i>Wouldn&#x27;t the world be flush with Portugal&#x27;s product in both industries rather than only in wine?</i><p>In short, yes. But that&#x27;s merely an extreme case, not an counterexample to the principle.<p>Starting with the no-trade situation, Portugal producing 1M units of cloth and 1M units of wine, England producing only 10 units each. Note that &quot;the world&quot; is already flush with Portuguese products.<p>If they start trading and want to keep the same total production of cloth, then England would produce only cloth (20 and odd units), and Portugal would produce a little less cloth (1M - England&#x27;s production) and bit more wine.