Comparative advantage states that two countries can gain from trade if they have a comparative cost advantage in the production of certain commodities. This is essential to the theory of free trade, which allows companies with comparative advantage to produce and export given commodities to the countries of competitors, competing on equal footing with them. The advantage can be in terms of cheap manufacturing and production cost, superior quality or both. These result in availability of better quality products at a cheaper price to consumers. Thus, economies as a whole win as they are free to exploit their comparative advantage.
Free trade zones create dependencies among the nations, a state in which economies are unable to survive without each other. Free trade of goods and services among nations gives rise to sharing of technology, import and export of services and medicines, thus raising the citizens' standard of living. This creates high level of dependencies among the nations for availing the benefits of such advantages that are not available in their countries. Additionally, trade contributes to the gross domestic product of the nations, making them dependent on each other for revenue generation.
A free trade zone established by a country or a cartel generally offers location-specific advantages such as cheap labor, environmental conditions and better access to outside markets. Such advantages are available to the foreign players, thus helping them start a manufacturing unit in the free trade zone, exploiting the location advantages of local labor conditions, removing cost competition and exporting products. Sometimes free trade zones do not allow all domestic producers to enter the market; rather, they attract foreign participation to raise the competition and remove inefficiencies present in unhealthy domestic units.
Free trade zones often are established for regional economic cooperation and development. The countries agree to slash tariffs and duties for goods and services traded for economic development of the nations. This reduces inequalities among the nations and provides a better standard of living for their people.