Suppose, in the England/cloth/Portugal/wine example, that England "decides" to make only cloth and Portugal "decides" to make only wine. (I put the word in quotes because it isn't up to countries to make such decisions.) Then we have the potential of a lot of unemployed English winemakers and a lot of unemployed Portuguese clothmakers. Over time the employment market will adjust, with the people concerned finding other jobs or leaving the job market.
The speed of business and markets has been increasing for some time now, probably more than the speed of individual adjustment. This increases the likelihood that individuals will be left in the lurch as markets adjust. Furthermore, if markets adjust quickly enough, it's conceivable that a slow-moving individual could be caught out-of-step multiple times before he finds a niche or gives up.
Yes. And unemployment is truly miserable.
On the other hand, if we subsidize our current crop of buggy-whip manufacturers to keep them in business, that's worse.
Capitalism is based, in part, on "creative destruction." If you're one of the destroyed, you won't like it, in the short run, but if you can adapt, in the long run you're better off. Regardless, you can't stop this. It is the powerful engine that makes our economic system run.