Economic Basis of Free Trade

My friend Martin explained to me the basic economic principle behind the idea of Free Trade Agreements. I'm not especially strong on the concept yet, but I'll try to explain. The reason the principle is important is because for any discussion on the pros and cons of free trade between nations or even regions, if one doesn't understand the principle driving the idea than one is missing the basis of discussion. There are many advantages and disadvantages to Free Trade, but the following principle is what drives it at the core.

Say you have two states, Florida and Washington. In this example, each state only produces two products: apples and oranges. Now, each state has different proportions in which they can produce goods: say Florida can use its resources to produce 10 oranges and 0 apples, or 6 apples and 0 oranges, or some ratio in between like 5 oranges and 3 apples. Now, say Washington has the opposite situation, where it's better at producing apples so it could produce 10 apples, or 6 oranges, or some balance in between like 5 apples and 3 oranges. Now, if they were to set up free trade between the two states, each could optimize their own production keeping in mind that they could barter for other items. So Washington could make 10 apples, Florida would make 10 oranges, and they could swap so both end up with 5 apples and 5 oranges. The best they could get in isolation would be 8 fruits in mixed variety or 10 of only one fruit, whereas in free trade they could get 10 fruit with variety. So the result of free trade is that both sides get a greater abundance of everything.

What is interesting is that this principle, in a completely free market, will work to the benefit of both sides regardless of the proportions. If Florida could produce 100 times the volume of Washington, both sides would still benefit by trading. This is because in a pure free trade barter, the sides will only trade if it is beneficial to both sides to do so. If they decide not to trade at all then the situation will be no worse than if they were in complete trade isolation, and at best there will be an increased abundance for both parties. So theoretically, Free Trade is always good.

In reality this is not necessarily the case. There are tons of ways in which this ideal model breaks down in favor of one country over another. But it is still important to understand the thinking behind free trade before jumping to the criticisms of it. In understanding the basic principle, both its flaws and benefits in a real world situation will make more contextual sense.