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The aim of this paper is to re-appraise the significance of the "real" as distinct from the "monetary" aspect of Smith's international trade theory. It will be argued that Smith's theory of foreign trade is so closely interwoven with his theory of domestic economic development that the two have to be considered together. This means that Smith's trade theory should not be treated simply as a static cross-section analysis of the existing pattern of trade based on the allocation of the given resources with the given productivity; rather it should be considered as an attempt to study the longer-run mutual interaction between foreign trade and domestic economic development, essentially involving an increase in the total volume of the resources and a rise in their productivity. [ABSTRACT FROM AUTHOR]