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It normally arises from an abundance of a particular factor resource, e.g. France is good at wine because of its abundance in productive land and climate.
For example, the production possibilities of 2 countries are as follows:
Country Wheat Cloth
A 2 1
B 4 8
Assume, pre-trade exchange ratio of wheat for cloth are
Country A: 2 wheat for 1 cloth
Country B: 1 wheat for 2 cloth
Country A gains by exporting wheat and importing cloth. Country B gains by exporting cloth and importing wheat. Thus both countries have gained from trade. Gains of trade between the 2 countries need not be equal as it depends on the relative prices of wheat and cloth after trade takes place...
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