Trade involves the transfer of goods and services from one person or entity to another, often in exchange for money. Economists refer to a
system
A system is a group of Interaction, interacting or interrelated elements that act according to a set of rules to form a unified whole. A system, surrounded and influenced by its environment (systems), environment, is described by its boundaries, ...
or network that allows trade as a
market
Market is a term used to describe concepts such as:
* Market (economics), system in which parties engage in transactions according to supply and demand
* Market economy
*Marketplace, a physical marketplace or public market
Geography
*Märket, a ...
.
An early form of trade, barter, saw the direct exchange of goods and services for other goods and services, i.e. trading things without the use of money. Modern traders generally negotiate through a medium of exchange, such as money. As a result, buying can be separated from selling, or
earning
Earning can refer to:
* Labour (economics)
*Earnings of a company
*Merit
Merit may refer to:
Religion
* Merit (Christianity)
* Merit (Buddhism)
* Punya (Hinduism)
* Imputed righteousness in Reformed Christianity
Companies and brands
* Merit ...
multilateral trade
Bilateral trade or clearing trade is trade exclusively between two states, particularly, barter trade based on bilateral deals between governments, and without using hard currency for payment. Bilateral trade agreements often aim to keep trade def ...
.
In one modern view, trade exists due to specialization and the
division of labour
The division of labour is the separation of the tasks in any economic system or organisation so that participants may specialise (specialisation). Individuals, organizations, and nations are endowed with, or acquire specialised capabilities, and ...
, a predominant form of
economic activity
Economics () is the social science that studies the Production (economics), production, distribution (economics), distribution, and Consumption (economics), consumption of goods and services.
Economics focuses on the behaviour and intera ...
in which individuals and groups concentrate on a small aspect of production, but use their output in trades for other products and needs. Trade exists between regions because different regions may have a
comparative advantage
In an economic model, agents have a comparative advantage over others in producing a particular good if they can produce that good at a lower relative opportunity cost or autarky price, i.e. at a lower relative marginal cost prior to trade. Comp ...
(perceived or real) in the production of some trade-able
commodity
In economics, a commodity is an economic good, usually a resource, that has full or substantial fungibility: that is, the market treats instances of the good as equivalent or nearly so with no regard to who produced them.
The price of a comm ...
—including production of natural resources scarce or limited elsewhere. For example: different regions' sizes may encourage
mass production
Mass production, also known as flow production or continuous production, is the production of substantial amounts of standardized products in a constant flow, including and especially on assembly lines. Together with job production and batch ...
. In such circumstances, trade at market prices between locations can benefit both locations. Different types of traders may specialize in trading different kinds of goods; for example, the spice trade and
grain trade
The grain trade refers to the local and international trade in cereals and other food grains such as wheat, barley, maize, and rice. Grain is an important trade item because it is easily stored and transported with limited spoilage, unlike other ...
have both historically been important in the development of a global, international economy.
Retail
Retail is the sale of goods and services to consumers, in contrast to wholesaling, which is sale to business or institutional customers. A retailer purchases goods in large quantities from manufacturers, directly or through a wholesaler, and t ...
merchandise
Merchandising is any practice which contributes to the sale of products to a retail consumer. At a retail in-store level, merchandising refers to displaying products that are for sale in a creative way that entices customers to purchase more i ...
from a very fixed location (such as a
department store
A department store is a retail establishment offering a wide range of consumer goods in different areas of the store, each area ("department") specializing in a product category. In modern major cities, the department store made a dramatic app ...
,
boutique
A boutique () is a small shop that deals in fashionable clothing or accessories. The word is French for "shop", which derives ultimately from the Ancient Greek ἀποθήκη (''apothēkē'') "storehouse".
The term ''boutique'' and also ''d ...
or
kiosk
Historically, a kiosk () was a small garden pavilion open on some or all sides common in Iran, Persia, the Indian subcontinent, and in the Ottoman Empire from the 13th century onward. Today, several examples of this type of kiosk still exist ...
),
online
In computer technology and telecommunications, online indicates a state of connectivity and offline indicates a disconnected state. In modern terminology, this usually refers to an Internet connection, but (especially when expressed "on line" or ...
or by
mail
The mail or post is a system for physically transporting postcards, letter (message), letters, and parcel (package), parcels. A postal service can be private or public, though many governments place restrictions on private systems. Since the mid ...
, in small or individual lots for direct consumption or use by the purchaser.
Wholesale
Wholesaling or distributing is the sale of goods or merchandise to retailers; to industrial, commercial, institutional or other professional business users; or to other wholesalers (wholesale businesses) and related subordinated services. In ...
trade is traffic in goods that are sold as merchandise to
retailer
Retail is the sale of goods and services to consumers, in contrast to wholesaling, which is sale to business or institutional customers. A retailer purchases goods in large quantities from manufacturers, directly or through a wholesaler, and t ...
s, or to industrial, commercial, institutional, or other professional
business
Business is the practice of making one's living or making money by producing or Trade, buying and selling Product (business), products (such as goods and Service (economics), services). It is also "any activity or enterprise entered into for pr ...
users, or to other wholesalers and related subordinated services.
Historically, openness to
free trade
Free trade is a trade policy that does not restrict imports or exports. It can also be understood as the free market idea applied to international trade. In government, free trade is predominantly advocated by political parties that hold econo ...
substantially increased in some areas from 1815 to the outbreak of World War I in 1914. Trade openness increased again during the 1920s but collapsed (in particular in Europe and North America) during the
Great Depression
The Great Depression (19291939) was an economic shock that impacted most countries across the world. It was a period of economic depression that became evident after a major fall in stock prices in the United States. The economic contagio ...
of the 1930s. Trade openness increased substantially again from the 1950s onwards (albeit with a slowdown during the oil crisis of the 1970s). Economists and
economic historians
Economic history is the academic learning of economies or economic events of the past. Research is conducted using a combination of historical methods, statistical methods and the application of economic theory to historical situations and inst ...
contend that current levels of trade openness are the highest they have ever been.
Etymology
''Trade'' is from
Middle English
Middle English (abbreviated to ME) is a form of the English language that was spoken after the Norman conquest of 1066, until the late 15th century. The English language underwent distinct variations and developments following the Old English p ...
''trade'' ("path, course of conduct"), introduced into English by Hanseatic merchants, from
Middle Low German
Middle Low German or Middle Saxon (autonym: ''Sassisch'', i.e. " Saxon", Standard High German: ', Modern Dutch: ') is a developmental stage of Low German. It developed from the Old Saxon language in the Middle Ages and has been documented i ...
''trade'' ("track, course"), from
Old Saxon
Old Saxon, also known as Old Low German, was a Germanic language and the earliest recorded form of Low German (spoken nowadays in Northern Germany, the northeastern Netherlands, southern Denmark, the Americas and parts of Eastern Europe). It i ...
''trada'' ("spoor, track"), from
Proto-Germanic
Proto-Germanic (abbreviated PGmc; also called Common Germanic) is the reconstructed proto-language of the Germanic branch of the Indo-European languages.
Proto-Germanic eventually developed from pre-Proto-Germanic into three Germanic branc ...
''*tradō'' ("track, way"), and cognate with
Old English
Old English (, ), or Anglo-Saxon, is the earliest recorded form of the English language, spoken in England and southern and eastern Scotland in the early Middle Ages. It was brought to Great Britain by Anglo-Saxon settlement of Britain, Anglo ...
''tredan'' ("to tread").
''
Commerce
Commerce is the large-scale organized system of activities, functions, procedures and institutions directly and indirectly related to the exchange (buying and selling) of goods and services among two or more parties within local, regional, nation ...
'' is derived from the
Latin
Latin (, or , ) is a classical language belonging to the Italic branch of the Indo-European languages. Latin was originally a dialect spoken in the lower Tiber area (then known as Latium) around present-day Rome, but through the power of the ...
''commercium'', from ''cum'' "together" and ''merx'', "merchandise."
History
Prehistory
Trade originated from
human communication
Human communication, or anthroposemiotics, is a field of study dedicated to understanding how humans Communication, communicate. Humans ability to communicate with one another would not be possible without an understanding of what we are refere ...
in
prehistoric
Prehistory, also known as pre-literary history, is the period of human history between the use of the first stone tools by hominins 3.3 million years ago and the beginning of recorded history with the invention of writing systems. The use of ...
times. Trading was the main facility of prehistoric people, who exchanged goods and services from each other in a gift economy before the innovation of modern-day currency. Peter Watson dates the history of long-distance commerce from years ago.Watson (2005), Introduction.
In the Mediterranean region, the earliest contact between cultures involved members of the species ''Homo sapiens'', principally using the Danube river, at a time beginning 35,000–30,000 BP.
Some trace the origins of commerce to the very start of transactions in
prehistoric
Prehistory, also known as pre-literary history, is the period of human history between the use of the first stone tools by hominins 3.3 million years ago and the beginning of recorded history with the invention of writing systems. The use of ...
times. Apart from traditional
self-sufficiency
Self-sustainability and self-sufficiency are overlapping states of being in which a person or organization needs little or no help from, or interaction with, others. Self-sufficiency entails the self being enough (to fulfill needs), and a self-s ...
, trading became a principal facility of prehistoric people, who bartered what they had for goods and services from each other.
Ancient history
Trade is believed to have taken place throughout much of recorded human history. There is evidence of the exchange of
obsidian
Obsidian () is a naturally occurring volcanic glass formed when lava extrusive rock, extruded from a volcano cools rapidly with minimal crystal growth. It is an igneous rock.
Obsidian is produced from felsic lava, rich in the lighter elements s ...
and
flint
Flint, occasionally flintstone, is a sedimentary cryptocrystalline form of the mineral quartz, categorized as the variety of chert that occurs in chalk or marly limestone. Flint was widely used historically to make stone tools and start fir ...
during the
Stone Age
The Stone Age was a broad prehistoric period during which stone was widely used to make tools with an edge, a point, or a percussion surface. The period lasted for roughly 3.4 million years, and ended between 4,000 BC and 2,000 BC, with t ...
. Trade in obsidian is believed to have taken place in
New Guinea
New Guinea (; Hiri Motu
Hiri Motu, also known as Police Motu, Pidgin Motu, or just Hiri, is a language of Papua New Guinea, which is spoken in surrounding areas of Port Moresby (Capital of Papua New Guinea).
It is a simplified version of ...
from 17,000 BCE.
Robert Carr Bosanquet
Robert Carr Bosanquet (1871–1935) was a British archaeologist, operating in the Aegean and Britain and teaching at the University of Liverpool from 1906 to 1920 as the first holder of the Chair of Classical Archaeology there.
Life and work
Bo ...
investigated trade in the Stone Age by excavations in 1901. Trade is believed to have first begun in south west Asia.
Archaeological evidence of obsidian use provides data on how this material was increasingly the preferred choice rather than
chert
Chert () is a hard, fine-grained sedimentary rock composed of microcrystalline or cryptocrystalline quartz, the mineral form of silicon dioxide (SiO2). Chert is characteristically of biological origin, but may also occur inorganically as a prec ...
from the late Mesolithic to Neolithic, requiring exchange as deposits of obsidian are rare in the Mediterranean region.
Obsidian is thought to have provided the material to make cutting utensils or tools, although since other more easily obtainable materials were available, use was found exclusive to the higher status of the tribe using "the rich man's flint". Interestingly, Obsidian has held its value relative to flint.
Early traders traded Obsidian at distances of 900 kilometres within the Mediterranean region.
Trade in the Mediterranean during the Neolithic of Europe was greatest in this material. Networks were in existence at around 12,000 BCE Anatolia was the source primarily for trade with the Levant, Iran and Egypt according to Zarins study of 1990.
Melos
Milos or Melos (; el, label=Modern Greek, Μήλος, Mílos, ; grc, Μῆλος, Mêlos) is a volcanic Greek island in the Aegean Sea, just north of the Sea of Crete. Milos is the southwesternmost island in the Cyclades group.
The ''Venus d ...
and
Lipari
Lipari (; scn, Lìpari) is the largest of the Aeolian Islands in the Tyrrhenian Sea off the northern coast of Sicily, southern Italy; it is also the name of the island's main town and ''comune'', which is administratively part of the Metropolit ...
sources produced among the most widespread trading in the Mediterranean region as known to archaeology.
The Sari-i-Sang mine in the mountains of Afghanistan was the largest source for trade of
lapis lazuli
Lapis lazuli (; ), or lapis for short, is a deep-blue metamorphic rock used as a semi-precious stone that has been prized since antiquity for its intense color.
As early as the 7th millennium BC, lapis lazuli was mined in the Sar-i Sang mines, ...
. The material was most largely traded during the
Kassite period
The Kassites () were people of the ancient Near East, who controlled Babylonia after the fall of the Old Babylonian Empire c. 1531 BC and until c. 1155 BC (short chronology).
They gained control of Babylonia after the Hittite sack of Babylon ...
of Babylonia beginning 1595 BCE.
Later trade
Mediterranean and Near East
Ebla
Ebla ( Sumerian: ''eb₂-la'', ar, إبلا, modern: , Tell Mardikh) was one of the earliest kingdoms in Syria. Its remains constitute a tell located about southwest of Aleppo near the village of Mardikh. Ebla was an important center t ...
was a prominent trading center during the third millennia BCE, with a network reaching into Anatolia and north Mesopotamia.
Materials used for creating
jewelry
Jewellery ( UK) or jewelry (U.S.) consists of decorative items worn for personal adornment, such as brooches, rings, necklaces, earrings, pendants, bracelets, and cufflinks. Jewellery may be attached to the body or the clothes. From a western ...
were traded with Egypt since 3000 BCE. Long-range trade routes first appeared in the 3rd millennium BCE, when
Sumer
Sumer () is the earliest known civilization in the historical region of southern Mesopotamia (south-central Iraq), emerging during the Chalcolithic and early Bronze Ages between the sixth and fifth millennium BC. It is one of the cradles of c ...
ians in
Mesopotamia
Mesopotamia ''Mesopotamíā''; ar, بِلَاد ٱلرَّافِدَيْن or ; syc, ܐܪܡ ܢܗܪ̈ܝܢ, or , ) is a historical region of Western Asia situated within the Tigris–Euphrates river system, in the northern part of the F ...
Indus Valley
The Indus ( ) is a transboundary river of Asia and a trans-Himalayan river of South and Central Asia. The river rises in mountain springs northeast of Mount Kailash in Western Tibet, flows northwest through the disputed region of Kashmir, ...
. The
Phoenicians
Phoenicia () was an ancient Semitic-speaking peoples, ancient thalassocracy, thalassocratic civilization originating in the Levant region of the eastern Mediterranean, primarily located in modern Lebanon. The territory of the Phoenician city-st ...
were noted sea traders, traveling across the
Mediterranean Sea
The Mediterranean Sea is a sea connected to the Atlantic Ocean, surrounded by the Mediterranean Basin and almost completely enclosed by land: on the north by Western and Southern Europe and Anatolia, on the south by North Africa, and on the ea ...
tin
Tin is a chemical element with the symbol Sn (from la, stannum) and atomic number 50. Tin is a silvery-coloured metal.
Tin is soft enough to be cut with little force and a bar of tin can be bent by hand with little effort. When bent, t ...
to manufacture
bronze
Bronze is an alloy consisting primarily of copper, commonly with about 12–12.5% tin and often with the addition of other metals (including aluminium, manganese, nickel, or zinc) and sometimes non-metals, such as phosphorus, or metalloids such ...
. For this purpose they established trade colonies the Greeks called emporia. Along the coast of the Mediterranean, researchers have found a positive relationship between how well-connected a coastal location was and the local prevalence of archaeological sites from the Iron Age. This suggests that a location's trade potential was an important determinant of human settlements.
From the beginning of Greek
civilization
A civilization (or civilisation) is any complex society characterized by the development of a state, social stratification, urbanization, and symbolic systems of communication beyond natural spoken language (namely, a writing system).
Ci ...
until the fall of the
Roman Empire
The Roman Empire ( la, Imperium Romanum ; grc-gre, Βασιλεία τῶν Ῥωμαίων, Basileía tôn Rhōmaíōn) was the post-Republican period of ancient Rome. As a polity, it included large territorial holdings around the Mediterr ...
in the 5th century, a financially lucrative trade brought valuable
spice
A spice is a seed, fruit, root, bark, or other plant substance primarily used for flavoring or coloring food. Spices are distinguished from herbs, which are the leaves, flowers, or stems of plants used for flavoring or as a garnish. Spices a ...
to Europe from the far east, including India and China. Roman commerce allowed its empire to flourish and endure. The latter Roman Republic and the
Pax Romana
The Pax Romana (Latin for 'Roman peace') is a roughly 200-year-long timespan of Roman history which is periodization, identified as a period and as a golden age (metaphor), golden age of increased as well as sustained Imperial cult of ancient Rome ...
of the Roman empire produced a stable and secure transportation network that enabled the shipment of trade goods without fear of significant
piracy
Piracy is an act of robbery or criminal violence by ship or boat-borne attackers upon another ship or a coastal area, typically with the goal of stealing cargo and other valuable goods. Those who conduct acts of piracy are called pirates, v ...
, as Rome had become the sole effective sea power in the
Mediterranean
The Mediterranean Sea is a sea connected to the Atlantic Ocean, surrounded by the Mediterranean Basin and almost completely enclosed by land: on the north by Western and Southern Europe and Anatolia, on the south by North Africa, and on the e ...
with the conquest of Egypt and the near east.
In ancient Greece
Hermes
Hermes (; grc-gre, Ἑρμῆς) is an Olympian deity in ancient Greek religion and mythology. Hermes is considered the herald of the gods. He is also considered the protector of human heralds, travellers, thieves, merchants, and orato ...
was the god of trade (commerce) and weights and measures. In ancient Rome, '' Mercurius'' was the god of merchants, whose festival was celebrated by traders on the 25th day of the fifth month. The concept of free trade was an antithesis to the will and economic direction of the sovereigns of the ancient Greek states. Free trade between states was stifled by the need for strict internal controls (via taxation) to maintain security within the treasury of the sovereign, which nevertheless enabled the maintenance of a ''
The emergence of exchange networks in the Pre-Columbian societies of and near to Mexico are known to have occurred within recent years before and after 1500 BCE.
Trade networks reached north to Oasisamerica. There is evidence of established maritime trade with the cultures of northwestern South America and the Caribbean.
Middle Ages
During the
Middle Ages
In the history of Europe, the Middle Ages or medieval period lasted approximately from the late 5th to the late 15th centuries, similar to the post-classical period of global history. It began with the fall of the Western Roman Empire a ...
, commerce developed in Europe by trading luxury goods at trade fairs. Wealth became converted into movable wealth or
capital
Capital may refer to:
Common uses
* Capital city, a municipality of primary status
** List of national capital cities
* Capital letter, an upper-case letter Economics and social sciences
* Capital (economics), the durable produced goods used f ...
. Banking systems developed where money on account was transferred across national boundaries. Hand to hand markets became a feature of town life and were regulated by town authorities.
Western Europe established a complex and expansive trade network with cargo ships being the main carrier of goods; Cogs and Hulks are two examples of such cargo ships. Many ports would develop their own extensive trade networks. The English port city of
Bristol
Bristol () is a city, ceremonial county and unitary authority in England. Situated on the River Avon, it is bordered by the ceremonial counties of Gloucestershire to the north and Somerset to the south. Bristol is the most populous city in ...
traded with peoples from what is modern day Iceland, all along the western coast of France, and down to what is now Spain.
During the Middle Ages, Central Asia was the economic center of the world.Beckwith (2011), p. xxiv. The Sogdians dominated the east–west trade route known as the
Silk Road
The Silk Road () was a network of Eurasian trade routes active from the second century BCE until the mid-15th century. Spanning over 6,400 kilometers (4,000 miles), it played a central role in facilitating economic, cultural, political, and reli ...
after the 4th century CE up to the 8th century CE, with
Suyab
Suyab ( fa, سوی آب; Middle Chinese: /suʌiH jiᴇp̚/), also known as ''Ordukent'' (modern-day ''Ak-Beshim''), was an ancient Silk Road city located some 50 km east from Bishkek, and 8 km west southwest from Tokmok, in the Chu ri ...
and Talas ranking among their main centers in the north. They were the main
caravan
Caravan or caravans may refer to:
Transport and travel
*Caravan (travellers), a group of travellers journeying together
**Caravanserai, a place where a caravan could stop
*Camel train, a convoy using camels as pack animals
*Convoy, a group of veh ...
merchants of Central Asia.
From the Middle Ages, the maritime republics, in particular
Venice
Venice ( ; it, Venezia ; vec, Venesia or ) is a city in northeastern Italy and the capital of the Veneto Regions of Italy, region. It is built on a group of 118 small islands that are separated by canals and linked by over 400 ...
,
Pisa
Pisa ( , or ) is a city and ''comune'' in Tuscany, central Italy, straddling the Arno just before it empties into the Ligurian Sea. It is the capital city of the Province of Pisa. Although Pisa is known worldwide for its leaning tower, the cit ...
and
Genoa
Genoa ( ; it, Genova ; lij, Zêna ). is the capital of the Italian region of Liguria and the List of cities in Italy, sixth-largest city in Italy. In 2015, 594,733 people lived within the city's administrative limits. As of the 2011 Italian ce ...
, played a key role in trade along the Mediterranean. From the 11th to the late 15th centuries, the
Venetian Republic
The Republic of Venice ( vec, Repùblega de Venèsia) or Venetian Republic ( vec, Repùblega Vèneta, links=no), traditionally known as La Serenissima ( en, Most Serene Republic of Venice, italics=yes; vec, Serenìsima Repùblega de Venèsia, ...
and the
Republic of Genoa
The Republic of Genoa ( lij, Repúbrica de Zêna ; it, Repubblica di Genova; la, Res Publica Ianuensis) was a medieval and early modern maritime republic from the 11th century to 1797 in Liguria on the northwestern Italian coast. During the Lat ...
were major trade centers. They dominated trade in the Mediterranean and the Black Sea, having the monopoly between Europe and the Near East for centuries.
From the 8th to the 11th century, the
Viking
Vikings ; non, víkingr is the modern name given to seafaring people originally from Scandinavia (present-day Denmark, Norway and Sweden),
who from the late 8th to the late 11th centuries raided, pirated, traded and se ...
s and Varangians traded as they sailed from and to Scandinavia. Vikings sailed to Western Europe, while Varangians to Russia. The
Hanseatic League
The Hanseatic League (; gml, Hanse, , ; german: label=Modern German, Deutsche Hanse) was a medieval commercial and defensive confederation of merchant guilds and market towns in Central and Northern Europe. Growing from a few North German to ...
was an alliance of trading cities that maintained a trade
monopoly
A monopoly (from Greek language, Greek el, μόνος, mónos, single, alone, label=none and el, πωλεῖν, pōleîn, to sell, label=none), as described by Irving Fisher, is a market with the "absence of competition", creating a situati ...
over most of
Northern Europe
The northern region of Europe has several definitions. A restrictive definition may describe Northern Europe as being roughly north of the southern coast of the Baltic Sea, which is about 54th parallel north, 54°N, or may be based on other g ...
and the
Baltic
Baltic may refer to:
Peoples and languages
* Baltic languages, a subfamily of Indo-European languages, including Lithuanian, Latvian and extinct Old Prussian
*Balts (or Baltic peoples), ethnic groups speaking the Baltic languages and/or originati ...
, between the 13th and 17th centuries.
The Age of Sail and the Industrial Revolution
Portuguese explorer
Vasco da Gama
Vasco da Gama, 1st Count of Vidigueira (; ; c. 1460s – 24 December 1524), was a Portuguese explorer and the first European to reach India by sea.
His initial voyage to India by way of Cape of Good Hope (1497–1499) was the first to link E ...
pioneered the European spice trade in 1498 when he reached
Calicut
Kozhikode (), also known in English as Calicut, is a city along the Malabar Coast in the state of Kerala in India. It has a corporation limit population of 609,224 and a metropolitan population of more than 2 million, making it the second la ...
after sailing around the
Cape of Good Hope
The Cape of Good Hope ( af, Kaap die Goeie Hoop ) ;''Kaap'' in isolation: pt, Cabo da Boa Esperança is a rocky headland on the Atlantic coast of the Cape Peninsula in South Africa.
A common misconception is that the Cape of Good Hope is t ...
at the southern tip of the African continent. Prior to this, the flow of spice into Europe from India was controlled by Islamic powers, especially Egypt. The spice trade was of major economic importance and helped spur the
Age of Discovery
The Age of Discovery (or the Age of Exploration), also known as the early modern period, was a period largely overlapping with the Age of Sail, approximately from the 15th century to the 17th century in European history, during which seafarin ...
in Europe. Spices brought to Europe from the Eastern world were some of the most valuable commodities for their weight, sometimes rivaling
gold
Gold is a chemical element with the symbol Au (from la, aurum) and atomic number 79. This makes it one of the higher atomic number elements that occur naturally. It is a bright, slightly orange-yellow, dense, soft, malleable, and ductile met ...
.
From 1070 onward, kingdoms in West
Africa
Africa is the world's second-largest and second-most populous continent, after Asia in both cases. At about 30.3 million km2 (11.7 million square miles) including adjacent islands, it covers 6% of Earth's total surface area ...
Muslim
Muslims ( ar, المسلمون, , ) are people who adhere to Islam, a monotheistic religion belonging to the Abrahamic tradition. They consider the Quran, the foundational religious text of Islam, to be the verbatim word of the God of Abrah ...
traders on the Trans-Saharan trading network. Beginning in the 16th century, European merchants would purchase gold, spices, cloth, timber and
slaves
Slavery and enslavement are both the state and the condition of being a slave—someone forbidden to quit one's service for an enslaver, and who is treated by the enslaver as property. Slavery typically involves slaves being made to perf ...
from West African states as part of the
triangular trade
Triangular trade or triangle trade is trade between three ports or regions. Triangular trade usually evolves when a region has export commodities that are not required in the region from which its major imports come. It has been used to offset t ...
iron
Iron () is a chemical element with symbol Fe (from la, ferrum) and atomic number 26. It is a metal that belongs to the first transition series and group 8 of the periodic table. It is, by mass, the most common element on Earth, right in f ...
, or
cowrie shells
Cowrie or cowry () is the common name for a group of small to large sea snails, marine gastropod mollusks in the family Cypraeidae, the cowries.
The term ''porcelain'' derives from the old Italian term for the cowrie shell (''porcellana'') du ...
which were used locally as currency.
Founded in 1352, the
Bengal Sultanate
The Sultanate of Bengal ( Middle Bengali: শাহী বাঙ্গালা ''Shahī Baṅgala'', Classical Persian: ''Saltanat-e-Bangālah'') was an empire based in Bengal for much of the 14th, 15th and 16th centuries. It was the dominan ...
was a major
trading nation
A trading nation (also known as a trade-dependent economy, or an export-oriented economy) is a country where international trade makes up a large percentage of its economy.
Smaller nations (by population) tend to be more trade-dependent than larg ...
in the world and often referred to by Europeans as the wealthiest country with which to trade.
In the 16th and 17th centuries, the Portuguese gained an economic advantage in the
Kingdom of Kongo
The Kingdom of Kongo ( kg, Kongo dya Ntotila or ''Wene wa Kongo;'' pt, Reino do Congo) was a kingdom located in central Africa in present-day northern Angola, the western portion of the Democratic Republic of the Congo, and the Republic of the ...
due to different philosophies of trade. Whereas Portuguese traders concentrated on the accumulation of capital, in Kongo spiritual meaning was attached to many objects of trade. According to economic historian
Toby Green
Toby Green is a British historian who is a Professor of Precolonial and Lusophone African History and Culture at King's College London. He obtained his Doctor of Philosophy in African studies at the University of Birmingham. He is Chair of the Fo ...
, in Kongo "giving more than receiving was a symbol of spiritual and political power and privilege."
In the 16th century, the
Seventeen Provinces
The Seventeen Provinces were the Imperial states of the Habsburg Netherlands in the 16th century. They roughly covered the Low Countries, i.e., what is now the Netherlands, Belgium, Luxembourg, and most of the French departments of Nord (Fre ...
were the center of free trade, imposing no
exchange control
Foreign exchange controls are various forms of controls imposed by a government on the purchase/sale of foreign currencies by residents, on the purchase/sale of local currency by nonresidents, or the transfers of any currency across national bor ...
s, and advocating the free movement of goods. Trade in the
East Indies
The East Indies (or simply the Indies), is a term used in historical narratives of the Age of Discovery. The Indies refers to various lands in the East or the Eastern hemisphere, particularly the islands and mainlands found in and around t ...
was dominated by Portugal in the 16th century, the
Dutch Republic
The United Provinces of the Netherlands, also known as the (Seven) United Provinces, officially as the Republic of the Seven United Netherlands (Dutch: ''Republiek der Zeven Verenigde Nederlanden''), and commonly referred to in historiography ...
in the 17th century, and the British in the 18th century. The
Spanish Empire
The Spanish Empire ( es, link=no, Imperio español), also known as the Hispanic Monarchy ( es, link=no, Monarquía Hispánica) or the Catholic Monarchy ( es, link=no, Monarquía Católica) was a colonial empire governed by Spain and its prede ...
developed regular trade links across both the Atlantic and the Pacific Oceans.
In 1776,
Adam Smith
Adam Smith (baptized 1723 – 17 July 1790) was a Scottish economist and philosopher who was a pioneer in the thinking of political economy and key figure during the Scottish Enlightenment. Seen by some as "The Father of Economics"——— ...
published the paper ''
An Inquiry into the Nature and Causes of the Wealth of Nations
''An Inquiry into the Nature and Causes of the Wealth of Nations'', generally referred to by its shortened title ''The Wealth of Nations'', is the ''Masterpiece, magnum opus'' of the Scottish people, Scottish economist and moral philosopher Ada ...
''. It criticized
Mercantilism
Mercantilism is an economic policy that is designed to maximize the exports and minimize the imports for an economy. It promotes imperialism, colonialism, tariffs and subsidies on traded goods to achieve that goal. The policy aims to reduce a ...
, and argued that
economic
An economy is an area of the Production (economics), production, Distribution (economics), distribution and trade, as well as Consumption (economics), consumption of Goods (economics), goods and Service (economics), services. In general, it is ...
specialization could benefit nations just as much as firms. Since the
division of labour
The division of labour is the separation of the tasks in any economic system or organisation so that participants may specialise (specialisation). Individuals, organizations, and nations are endowed with, or acquire specialised capabilities, and ...
was restricted by the size of the market, he said that countries having access to larger markets would be able to divide labour more efficiently and thereby become more
productive
Productivity is the efficiency of production of goods or services expressed by some measure. Measurements of productivity are often expressed as a ratio of an aggregate output to a single input or an aggregate input used in a production process ...
. Smith said that he considered all rationalizations of
import
An import is the receiving country in an export from the sending country. Importation and exportation are the defining financial transactions of international trade.
In international trade, the importation and exportation of goods are limited ...
and
export
An export in international trade is a good produced in one country that is sold into another country or a service provided in one country for a national or resident of another country. The seller of such goods or the service provider is an ...
controls "dupery", which hurt the trading nation as a whole for the benefit of specific industries.
In 1799, the
Dutch East India Company
The United East India Company ( nl, Verenigde Oostindische Compagnie, the VOC) was a chartered company established on the 20th March 1602 by the States General of the Netherlands amalgamating existing companies into the first joint-stock ...
, formerly the world's largest company, became bankrupt, partly due to the rise of competitive free trade.
19th century
In 1817,
David Ricardo
David Ricardo (18 April 1772 – 11 September 1823) was a British Political economy, political economist. He was one of the most influential of the Classical economics, classical economists along with Thomas Robert Malthus, Thomas Malthus, Ad ...
,
James Mill
James Mill (born James Milne; 6 April 1773 – 23 June 1836) was a Scottish historian, economist, political theorist, and philosopher. He is counted among the founders of the Ricardian school of economics. He also wrote ''The History of British ...
and Robert Torrens showed that free trade would benefit the industrially weak as well as the strong, in the famous theory of
comparative advantage
In an economic model, agents have a comparative advantage over others in producing a particular good if they can produce that good at a lower relative opportunity cost or autarky price, i.e. at a lower relative marginal cost prior to trade. Comp ...
. In
Principles of Political Economy and Taxation
'' the Principles of Political Economy and Taxation'' (19 April 1817) is a book by David Ricardo on economics. The book concludes that land rent grows as population increases. It also presents the theory of comparative advantage, the theory that ...
Ricardo advanced the doctrine still considered the most counterintuitive in
economics
Economics () is the social science that studies the Production (economics), production, distribution (economics), distribution, and Consumption (economics), consumption of goods and services.
Economics focuses on the behaviour and intera ...
:
: ''When an inefficient producer sends the merchandise it produces best to a country able to produce it more efficiently, both countries benefit.''
The ascendancy of free trade was primarily based on national advantage in the mid 19th century. That is, the calculation made was whether it was in any particular country's self-interest to open its borders to imports.
John Stuart Mill
John Stuart Mill (20 May 1806 – 7 May 1873) was an English philosopher, political economist, Member of Parliament (MP) and civil servant. One of the most influential thinkers in the history of classical liberalism, he contributed widely to ...
proved that a country with monopoly
pricing power
In economics, market power refers to the ability of a firm to influence the price at which it sells a product or service by manipulating either the supply or demand of the product or service to increase economic profit. In other words, market powe ...
on the international market could manipulate the terms of trade through maintaining
tariff
A tariff is a tax imposed by the government of a country or by a supranational union on imports or exports of goods. Besides being a source of revenue for the government, import duties can also be a form of regulation of foreign trade and poli ...
s, and that the response to this might be
reciprocity
Reciprocity may refer to:
Law and trade
* Reciprocity (Canadian politics), free trade with the United States of America
** Reciprocal trade agreement, entered into in order to reduce (or eliminate) tariffs, quotas and other trade restrictions on ...
in trade policy. Ricardo and others had suggested this earlier. This was taken as evidence against the universal doctrine of free trade, as it was believed that more of the economic surplus of trade would accrue to a country following ''reciprocal'', rather than completely free, trade policies. This was followed within a few years by the
infant industry
In economics, an infant industry is a new industry, which in its early stages experiences relative difficulty or is absolutely incapable in competing with established competitors abroad.
Governments are sometimes urged to support the development ...
scenario developed by Mill promoting the theory that the government had the duty to protect young industries, although only for a time necessary for them to develop full capacity. This became the policy in many countries attempting to industrialize and out-compete English exporters.
Milton Friedman
Milton Friedman (; July 31, 1912 – November 16, 2006) was an American economist and statistician who received the 1976 Nobel Memorial Prize in Economic Sciences for his research on consumption analysis, monetary history and theory and the ...
later continued this vein of thought, showing that in a few circumstances tariffs might be beneficial to the host country; but never for the world at large.
20th century
The
Great Depression
The Great Depression (19291939) was an economic shock that impacted most countries across the world. It was a period of economic depression that became evident after a major fall in stock prices in the United States. The economic contagio ...
was a major economic recession that ran from 1929 to the late 1930s. During this period, there was a great drop in trade and other economic indicators.
The lack of free trade was considered by many as a principal cause of the depression causing stagnation and inflation. Only during
World War II
World War II or the Second World War, often abbreviated as WWII or WW2, was a world war that lasted from 1939 to 1945. It involved the vast majority of the world's countries—including all of the great powers—forming two opposin ...
did the recession end in the United States. Also during the war, in 1944, 44 countries signed the Bretton Woods Agreement, intended to prevent national trade barriers, to avoid depressions. It set up rules and institutions to regulate the international political economy: the International Monetary Fund and the International Bank for Reconstruction and Development (later divided into the World Bank $ Bank for International Settlements). These organizations became operational in 1946 after enough countries ratified the agreement. In 1947, 23 countries agreed to the
General Agreement on Tariffs and Trade
The General Agreement on Tariffs and Trade (GATT) is a legal agreement between many countries, whose overall purpose was to promote international trade by reducing or eliminating trade barriers such as tariffs or quotas. According to its pre ...
to promote free trade.
The
European Union
The European Union (EU) is a supranational political and economic union of member states that are located primarily in Europe. The union has a total area of and an estimated total population of about 447million. The EU has often been des ...
became the world's largest exporter of manufactured goods and services, the biggest export market for around 80 countries.
21st century
Today, trade is merely a subset within a complex system of companies which try to maximize their profits by offering products and services to the
market
Market is a term used to describe concepts such as:
* Market (economics), system in which parties engage in transactions according to supply and demand
* Market economy
*Marketplace, a physical marketplace or public market
Geography
*Märket, a ...
(which consists both of individuals and other companies) at the lowest production cost. A system of
international trade
International trade is the exchange of capital, goods, and services across international borders or territories because there is a need or want of goods or services. (see: World economy)
In most countries, such trade represents a significant ...
has helped to develop the world economy but, in combination with bilateral or multilateral agreements to lower
tariff
A tariff is a tax imposed by the government of a country or by a supranational union on imports or exports of goods. Besides being a source of revenue for the government, import duties can also be a form of regulation of foreign trade and poli ...
s or to achieve
free trade
Free trade is a trade policy that does not restrict imports or exports. It can also be understood as the free market idea applied to international trade. In government, free trade is predominantly advocated by political parties that hold econo ...
Free trade is a policy by which a government does not discriminate against imports or exports by applying tariffs or subsidies. This policy is also known as laissez-faire policy. This kind of policy does not necessarily imply because a country will then abandon all control and taxation of imports and exports.
Free trade advanced further in the late 20th century and early 2000s:
* 1992
European Union
The European Union (EU) is a supranational political and economic union of member states that are located primarily in Europe. The union has a total area of and an estimated total population of about 447million. The EU has often been des ...
lifted barriers to internal trade in
goods
In economics, goods are items that satisfy human wants
and provide utility, for example, to a consumer making a purchase of a satisfying product. A common distinction is made between goods which are transferable, and services, which are not tran ...
and
labour
Labour or labor may refer to:
* Childbirth, the delivery of a baby
* Labour (human activity), or work
** Manual labour, physical work
** Wage labour, a socioeconomic relationship between a worker and an employer
** Organized labour and the labour ...
.
* January 1, 1994 the
North American Free Trade Agreement
The North American Free Trade Agreement (NAFTA ; es, Tratado de Libre Comercio de América del Norte, TLCAN; french: Accord de libre-échange nord-américain, ALÉNA) was an agreement signed by Canada, Mexico, and the United States that crea ...
(NAFTA) took effect.
* 1994 The GATT Marrakech Agreement specified formation of the WTO.
* January 1, 1995 World Trade Organization was created to facilitate
free trade
Free trade is a trade policy that does not restrict imports or exports. It can also be understood as the free market idea applied to international trade. In government, free trade is predominantly advocated by political parties that hold econo ...
, by mandating mutual most favored nation trading status between all signatories.
* EC was transformed into the European Union, which accomplished the Economic and Monetary Union (EMU) in 2002, through introducing the Euro, and creating this way a real single market between 13 member states as of January 1, 2007.
* 2005, the Central American Free Trade Agreement was signed; It includes the United States and the Dominican Republic.
Perspectives
Protectionism
Protectionism is the policy of restraining and discouraging trade between states and contrasts with the policy of free trade. This policy often takes the form of
tariff
A tariff is a tax imposed by the government of a country or by a supranational union on imports or exports of goods. Besides being a source of revenue for the government, import duties can also be a form of regulation of foreign trade and poli ...
s and restrictive Import quota, quotas. Protectionist policies were particularly prevalent in the 1930s, between the
Great Depression
The Great Depression (19291939) was an economic shock that impacted most countries across the world. It was a period of economic depression that became evident after a major fall in stock prices in the United States. The economic contagio ...
and the onset of World War II.
Religion
Islamic teachings encourage trading (and condemn usury or interest).
Judeao-Christian teachings do not prohibit trade. They do prohibit fraud and dishonest measures. Historically they forbade charging interest on loans.
Development of money
The first instances of money were objects with intrinsic value. This is called commodity money and includes any commonly available commodity that has intrinsic value; historical examples include pigs, rare seashells, whale's teeth, and (often) cattle. In medieval Iraq, bread was used as an early form of money. In the Aztec Empire, under the rule of Moctezuma II, Montezuma cocoa beans became legitimate currency.
Currency was introduced as standardised money to facilitate a wider exchange of goods and services. This first stage of currency, where metals were used to represent stored value, and symbols to represent commodities, formed the basis of trade in the Fertile Crescent for over 1500 years.
Numismatists have examples of coins from the earliest large-scale societies, although these were initially unmarked lumps of precious metal.Gold was an especially common form of early money, as described in #Davies2002, Davies (2002).
Trends
Doha rounds
The Doha round of World Trade Organization negotiations aimed to lower trade barrier, barriers to trade around the world, with a focus on making fair trade, trade fairer for developing countries. Talks have been hung over a divide between the rich developed countries, represented by the G20, and the major developing countries. Agricultural subsidies are the most significant issue upon which agreement has been the hardest to negotiate. By contrast, there was much agreement on trade facilitation and capacity building. The Doha round began in Doha, Qatar, and negotiations were continued in: Cancún, Mexico; Geneva, Switzerland; and Paris, France, and Hong Kong.
China
Beginning around 1978, the government of the People's Republic of China (PRC) began an experiment in economic reforms in China, economic reform. In contrast to the previous USSR, Soviet-style centrally planned economy, the new measures progressively relaxed restrictions on farming, agricultural distribution and, several years later, urban enterprises and labor. The more market-oriented approach reduced inefficiencies and stimulated private investment, particularly by farmers, which led to increased productivity and output. One feature was the establishment of four (later five) Special Economic Zones located along the South-east coast.
The reforms proved spectacularly successful in terms of increased output, variety, quality, price and demand. In real terms, the economy doubled in size between 1978 and 1986, doubled again by 1994, and again by 2003. On a real per capita basis, doubling from the 1978 base took place in 1987, 1996 and 2006. By 2008, the economy was 16.7 times the size it was in 1978, and 12.1 times its previous per capita levels. International trade progressed even more rapidly, doubling on average every 4.5 years. Total two-way trade in January 1998 exceeded that for all of 1978; in the first quarter of 2009, trade exceeded the full-year 1998 level. In 2008, China's two-way trade totaled US$2.56 trillion.
In 1991 China joined the Asia-Pacific Economic Cooperation group, a trade-promotion forum. In 2001, it also joined the World Trade Organization.
International trade
International trade is the exchange of goods and services across national borders. In most countries, it represents a significant part of Gross Domestic Product, GDP. While international trade has been present throughout much of history (see Silk Road, Amber Road), its economic, social, and political importance have increased in recent centuries, mainly because of Industrialization, advanced transportation, globalization, multinational corporations, and outsourcing.
Empirical evidence for the success of trade can be seen in the contrast between countries such as South Korea, which adopted a policy of export-oriented industrialization, and India, which historically had a more closed policy. South Korea has done much better by economic criteria than India over the past fifty years, though its success also has to do with effective state institutions.
Trade sanctions
Trade sanctions against a specific country are sometimes imposed, in order to punish that country for some action. An embargo, a severe form of externally imposed isolation, is a blockade of all trade by one country on another. For example, the United States has had an United States embargo against Cuba, embargo against Cuba for over 40 years. Embargoes are usually on a temporary basis. For example, Armenia put a temporary embargo on Turkish products and bans any imports from Turkey on December 31, 2020. The situation is prompted by food security concerns given Turkey's hostile attitude towards Armenia.
Fair trade
The "fair trade" movement, also known as the "trade justice" movement, promotes the use of Manual labour, labour, environmental movement, environmental and Social issues, social standards for the production of Commodity, commodities, particularly those exported from the Third World, Third and Second Worlds to the First World. Such ideas have also sparked a debate on whether trade itself should be codified as a human right.
Importing firms voluntarily adhere to fair trade standards or governments may enforce them through a combination of employment law, employment and commercial law. Proposed and practiced fair trade policies vary widely, ranging from the common prohibition of
goods
In economics, goods are items that satisfy human wants
and provide utility, for example, to a consumer making a purchase of a satisfying product. A common distinction is made between goods which are transferable, and services, which are not tran ...
made using slave labour to minimum price support schemes such as those for coffee in the 1980s. Non-governmental organizations also play a role in promoting fair trade standards by serving as independent monitors of compliance with labeling requirements. As such, it is a form of Protectionism.
* Agritrade Resource material on trade by ACP countries World Bank's World Integrated Trade Solution provides summary trade statistics and custom query features World Bank's Preferential Trade Agreement Database
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Trade,
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