This is logical, but like all logical arguments comparative advantage is based on premises. The key premise is that while capital (and other factors) moves freely between industries within a nation, it does not move between nations. If capital could move abroad it would have no reason to be content with a mere comparative advantage at home, but would seek absolute advantage—the absolutely lowest cost of production anywhere in the world. Why not? With free trade the product could be
sold anywhere in the world, including the nation the capital just left.
While there are certainly global gains from trade under absolute advantage there is no guarantee of mutual benefit. Some countries could lose. Now comes the problem. The IMF preaches free trade based on comparative advantage, and has done so for a long time. More recently the IMF has started preaching the gospel of globalization, which, in addition to free trade, means free capital mobility internationally—exactly what comparative advantage forbids! When confronted with this
contradiction the IMF waves its hands, suggests that you might be a xenophobe, and changes the subject.
The IMF-WB-WTO contradict themselves in service to the interests of transnational corporations. International capital mobility, coupled with free trade, allows corporations to escape from national regulation in the public interest, playing one nation off against another. Since there is no global government they are in effect uncontrolled. The nearest thing we have to a global government (IMF-WB-WTO) has shown no interest in regulating transnational capital for the common good. Their goal is to help these corporations grow, because growth is presumed good for all—end of story. If the IMF wanted to limit international capital mobility to keep the world safe for comparative advantage, there are several things they could do. They could promote minimum residence times for foreign
investment to limit capital flight and speculation; they could propose a small tax on all foreign exchange transactions (Tobin tax); and most of all they could revive Keynes’ proposal for an international multilateral clearing union that would directly penalize persistent imbalances in
current account (both deficit and surplus), and thereby indirectly promote balance in the compensating capital account, reducing international capital movements.