Modern international trade is based on the principle of?

Modern international trade is based on the principle of comparative advantage. This principle states that countries should specialize in producing the goods and services they are relatively more efficient at producing, and then trade with other countries to obtain the goods and services they are relatively less efficient at producing. This allows for a more efficient allocation of resources and leads to increased economic growth and higher standards of living for all countries involved in trade. The idea is that even if one country is more efficient at producing all goods, it still benefits from specializing in the goods it is relatively more efficient at producing and trading for the goods it is relatively less efficient at producing. Terms of trade refer to the relative price of exports to imports, while balance of trade refers to the difference between a country's exports and imports. Both of these concepts are related to international trade, but comparative advantage is the underlying principle that guides modern international trade.