1 Ricardo's theory of foreign trade, which he developed in Chapter VII of the Principles, is a classic theory of comparative cost. The chapter forms, in conjunction with later ones (XIX, XXII, XXV and XXVIII), the part of the book in which he advocates free trade. It is closely connected with his theory of growth and elucidates, as will be seen later, that diminishing returns due to the limited availability of land can be avoided by abandoning domestic agriculture and importing agricultural products from countries and colonies where land is abundant and agriculture is not subject to diminishing returns. In this way, the price of food is kept low and, therefore, wages are low, so that the rate of profit is maintained at a high level; therefore the accumulation of capital continues at a high speed. Thus, according to the principle of free trade, Ricardo's theory of an international division of labour appeared to guarantee Great Britain's position as the Workshop of the World.

Ricardo's theory has a well-established position in the history of economic theory. Nevertheless, it has been pointed out that his argument is ambiguous and confusing, and, at a number of crucial points, it seems entirely mistaken. For example, he stated: