The neoclassical trade theory is based on the assumption that specialization and trade lead to a more efficient employment of resources consequently resulting in increased levels of welfare for the nations involved. In order to illustrate this, I have selected, East-African country, Kenya, which has an abundance in the labour production factor and is to some degree, specialized in the production of tea. On average a total of approximately 345,817 metric tonnes are produced annually of which 325,533 metric tonnes are exported abroad. Using neoclassical trade models I will demonstrate the gains acquired from specialization and trade. Why should two regions specialise in the production of their respective goods/services? A country should specialise in the production of a good or service when it has a comparative advantage. That is, countries with a lower opportunity cost at producing a certain good should efficiently allocate their resources at producing only that good whereby, following domestic consumption, the country can trade and benefit from it. In the case of two countries producing two different goods, the comparative advantage of a good will be the one who with a lower opportunity cost of good B whilst producing 1 unit of good A; this is known as the Comparative Advantage Theory , which was created by Gottfried Habelar, whereby reformulating the Riccardian Theory. To understand the concept of comparative advantage and the benefits of trade as a whole, let us take the previous example of Kenya, that produces tea; and the rest of the world which produces petroleum, which consists of 15% of all of Kenyas imports. The table below shows an approximation of the yearly production of the two goods, tea and petroleum. It is assumed that Kenya produces 500 BBL annually as there were no records of the actual amount produced, even though Kenya has just discovered oil in the last two years. Opportunity Cost (Kenya) = 345,000 tea : 500 BBL = 1 unit of tea : 0.00144 units of petroleum.?This means that Kenyas OC for producing 1 unit of tea is giving up 0.00144 units of petroleum?Opportunity Cost (ROW) = 2.7million tea : 32billion