Adam Smith appears to have been dealing with a world in which, say, one country might be best and most efficient at making wines, while another might be best and most efficient at making woolens.  There was an implicit presumption that everybody in both countries was going to keep on buying wines and woolens, and the only real issue was the price or quality of what they bought.   This isn’t a bad assumption, when there are only two countries involved, each of which is better at producing something than the other.

But there are times when the assumption appears to unravel, and open trade is not as uniformly beneficial to both partners.

A good example is when one trading partner is advanced and industrialized, and the other is not.  In such circumstances, the non-industrialized country may not be sufficiently efficient to make anything at all that the industrialized country cares to buy.  When this occurs, the economy of the industrialized country simply overwhelms the economy of the non-industrialized one.   The more efficient outside businesses systematically eliminate less-efficient indigenous businesses, until the less-efficient country has virtually no indigenous economy left.

At this point, its employment base is also destroyed, which means that it doesn’t provide much of a market for goods—no matter how efficiently they may have been made.  This runs counter to the best interests of all parties involved, even the businesses of the exporting country.