Since David Ricardo first developed the theory of comparative advantage, showing that nations gain from specializing in the goods that they produce at relatively lower cost, most students of economics have learned that all countries can gain from trade. Yet, many countries are reluctant to move too far or too fast toward free trade. Their reasoning is not inconsistent with Ricardo's theory. Trade and specialization lead to changes in a country's industry's structure and, in turn, to changes in the wages and rents of factors used in production. Therefore, although trade confers broad benefits on a country, it can also create winners and losers. Protecting, compensating, or managing the social and economic transition of those who lose has led many countries to qualify or delay their commitment to global free trade.

Since the early 1990s, CGE models have been widely used to analyze trade policy issues including unilateral trade liberalization, multilateral tariff reforms through the World Trade Organization (WTO), and preferential trade agreements such as the North American Free Trade Agreement (NAFTA) and the European Union's expansion. The contributions made by CGE models rest on their ability to identify which industries will grow or could contract with freer trade, to describe whether labor or capital will gain or could lose from trade reforms, and, perhaps most important, to measure welfare effects, which summarize the overall effects of changing trade policies on an economy's well-being.