The key logical fallacy in the case for free trade

The key fallacy in the argument is the belief that machinery can be switched from one industry to another without loss. They can’t. Machines are specific to each industry, a simple reality that mainstream economists have ignored for two centuries.

When you take this into account, machinery is in effect destroyed in the less competitive industries when trade is deregulated, and whether trade enhances output and welfare in the long run depends more on investment and economies of scale than on specialisation.