This is a main idea question. An active reading of the passage reveals the following major points:
(1) Economists have long recognized a persistent and unfounded belief among the population which has come to be known as the anti-foreign bias.
(2) No less an authority than Adam Smith, one of the fathers of the modern free market system, spoke glowingly of foreign trade in his influential treatise Wealth of Nations.
(3) Even more startling, a basic economic theorem, the Law of Comparative Advantage, states that mutually beneficial trade is possible even if one nation is less productive than the other.
With these key points, the author shows that foreign trade can be a mutually beneficial exchange despite the belief of the population. The passage is not arguing for an increase in trade, so choice A is out.
The historical context— Adam Smith—refutes the belief of the population, so eliminate choice B.
Choice D is too narrow. The reason the author illustrates the economic principle is to show the fallacy of the belief.
Choice E is also too narrow because it only focuses on Adam Smith.