Yeah! a question for the economics major!
First, it must be explained that each economy produces with a constrained resource set. You only have a certain amount of labor, capital, land, and other resources, the productivity of which is determined by the institutions and technology of the economy. For simplicity sake, most economists describe it as a two good model, but the idea can certainly be extended into much higher order variable sets once the basic model is understood. So, then you have the choice between producing goods A and goods B (lets say, wheat and cars. yes, arbitrary, but for illustration). Then, given your set of resources, you have a boundary curve, called the production possibilities frontier. this curve looks kind of like an inverted parabola, centered above the origin. thus, for every increase in production in good A, you have a corresponding decrease in the production of good B. This relationship has decreasing returns, meaning that a change in 1 unit will be less when good A is at 500 then when good A is at 100. the practical reason for this is that resources and technology are not equally efficient in both sectors (example, you can't use a tractor to make cars, unless you first melt down the metal, resmelt it, etc). All this implies that you cannot consume beyond your production possibilities frontier, unless it shifts due to changes in resources or technology. the economy will then produce wherever demand meets this curve, due to the magic of supply and demand (well, not magic. math, but it will take too long to explain all of their properties here). thus, the economy produces at that point, which lies on the production possibilites frontier.
however, if the economy opens its markets, then it can produce more of whatever it is more efficient at, and trade with another country the difference. it works out so that countries are able to not only trade to make up the difference in production, but to consume past the constraints of their production possibilites frontier (if not, then it would close itself back off from trade). thus, they are able to consume more than they otherwise would be able to if they did not have trade. that is the theory behind trade (well, Ricardian theory. there are many others, but this is the first one taught in most international trade classes).
given the above model, anything that stops or hinders free trade hurts the consumers of an economy, because it reduces the amount of goods it is able to consume. on a whole, it is generally accepted that free trade makes consumers better off. however, it does not always help producers of the inefficient industry, who have to compete with better or more cheaply made goods from abroad. it is up to the governemnt to decide whose benefit they feel is more important, but the gains from trade tend to be greater than the losses of trade. that is only discussing trade in goods. trade in labor and capital is a little more complicated. but people tend to focus on trade in goods when discussing free trade.
using Canada and the US as an example, we can focus on two goods, say icewine and rice. The United States can grow rice using much less resources than Canada can, while Canada has a comparitive advantage in producing ice wine (made from wine grown in colder climates by letting the grapes freeze on the vine). thus, rather than have each state try to produce both of the goods for themselves, the US would focus on rice growing, while Canada would focus on growing grapes for icewine, and the two would trade to their mutual benefit.
I say US and Canada above, but actually, it is individual producers within the states who make such decisions, based upon market prices, cost of production, etc. rather delicate supply and demand works in the background.
