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Trade involves the transfer of goods 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, is described by its boundaries, structure and purpo ...

system
or network that allows trade as a
market Market may refer to: *Market (economics) *Market economy *Marketplace, a physical marketplace or public market Geography *Märket, an island shared by Finland and Sweden Art, entertainment, and media Films *Market (1965 film), ''Market'' (1965 ...
. An early form of trade, the
Gift economy A gift economy or gift culture is a mode of exchange where valuables are not sold, but rather given without an explicit agreement for immediate or future rewards. Social norms and customs govern giving a gift in a gift culture, gifts are not giv ...
, saw the exchange of goods and services without an explicit agreement for immediate or future rewards. A gift economy involves 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 (disambiguation), Merit {{disambig


Mesoamerica

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 Oasisamerica is a term that was coined by Paul Kirchhoff (who also coined that of Mesoamerica) and published in a 1954 article, and is used by some scholars, primarily Mexican anthropologists, for the broad cultural area defining pre-Columbian ...

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 history of Europe concerns itself with the discovery and collection, the study, organization and presentation and the interpretation of past events and affairs of the people of Europe since the beginning of ...
, commerce developed in Europe by trading luxury goods at trade fairs. Wealth became converted into movable wealth or
capital Capital most commonly refers to: * Capital letter Letter case (or just case) is the distinction between the letters that are in larger uppercase or capitals (or more formally ''majuscule'') and smaller lowercase (or more formally ''minusc ...
. 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 workhorse for the movement of goods, Cogs and Hulk (ship type), Hulks are two examples of such cargo ships. Many ports would develop their own extensive trade networks. The English port city of Bristol 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.#Beckwith2011, Beckwith (2011), p. xxiv. The Sogdiana, Sogdians dominated the east–west trade route known as the
Silk Road The Silk Road () was and is a network of trade route A trade route is a logistical network identified as a series of pathways and stoppages used for the commercial transport of cargo. The term can also be used to refer to trade over bodies of ...

Silk Road
after the 4th century CE up to the 8th century CE, with Suyab and Taraz, Talas ranking among their main centers in the north. They were the main caravan (travelers), caravan merchants of Central Asia. From the Middle Ages, the maritime republics, in particular Republic of Venice, Venice, Republic of Pisa, Pisa and Republic of Genoa, Genoa, played a key role in trade along the Mediterranean. From the 11th to the late 15th centuries, the Venetian Republic and the Republic of Genoa 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 Vikings and Varangians traded as they sailed from and to Scandinavia. Vikings sailed to Western Europe, while Varangians to Russia. The Hanseatic League was an alliance of trading cities that maintained a trade monopoly over most of Northern Europe and the Baltic region, Baltic, between the 13th and 17th centuries.


The Age of Sail and the Industrial Revolution

Portuguese explorer Vasco da Gama pioneered the European spice trade in 1498 when he reached History of Kozhikode, Calicut after sailing around the Cape of Good Hope 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 in Europe. Spices brought to Europe from the Eastern world were some of the most valuable commodities for their weight, sometimes rivaling gold. From 1070 onward, kingdoms in West Africa became Economic history of Africa, significant members of global trade. This came initially through the movement of gold and other resources sent out by Muslim traders on the Trans-Saharan trade, Trans-Saharan trading network. Beginning in the 16th century, European merchants would purchase gold, spices, cloth, timber and Atlantic slave trade, slaves from West African states as part of the triangular trade. This was often in exchange for cloth, iron, or cowrie shells which were used locally as currency. Founded in 1352, the Bengal Sultanate was a major trading nation in the world and often referred to by Europeans as the wealthiest country to trade with. In the 16th and 17th centuries, the Portuguese gained an economic advantage in the Kingdom of Kongo 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, in Kongo "giving more than receiving was a symbol of spiritual and political power and privilege." In the 16th century, the Seventeen Provinces were the center of free trade, imposing no exchange controls, and advocating the free movement of goods. Trade in the East Indies was dominated by Portugal in the 16th century, the Dutch Republic in the 17th century, and the United Kingdom, British in the 18th century. The Spanish Empire developed regular trade links across both the Atlantic and the Pacific Oceans. In 1776, Adam Smith published the paper ''An Inquiry into the Nature and Causes of the Wealth of Nations''. It criticized Mercantilism, and argued that economic specialization could benefit nations just as much as firms. Since the division of labour 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. Smith said that he considered all rationalizations of International trade, import and export controls "dupery", which hurt the trading nation as a whole for the benefit of specific industries. In 1799, the Dutch East India Company, formerly the world's largest company, became bankrupt, partly due to the rise of competitive free trade.


19th century

In 1817, David Ricardo, James Mill and Robert Torrens (economist), 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, agent (economics), agents have a comparative advantage over others in producing a particular Goods (economics), good if they can produce that good at a lower relative opportunity cost or autarky price, i.e. at a lower relative ...

comparative advantage
. In Principles of Political Economy and Taxation Ricardo advanced the doctrine still considered the most counterintuitive in economics: : ''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 proved that a country with monopoly pricing power on the international market could manipulate the terms of trade through maintaining tariffs, and that the response to this might be Reciprocity (international relations), reciprocity 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 scenario developed by Mill promoting the theory that the government had the duty to protectionism, 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 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 was a severe worldwide that took place mostly during the 1930s, beginning . The timing of the Great Depression varied around the world; in most countries, it started in 1929 and lasted until the late 1930s. It was the l ...
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 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 to promote free trade. The European Union 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 Corporation, companies which try to maximize their profits by offering Product (business), products and Service (economics), services to the Market (economics), market (which consists both of individuals and other companies) at the lowest production cost. A system of international trade has helped to develop the world economy but, in combination with bilateral or multilateral agreements to lower tariffs or to achieve
free trade Free trade is a trade policy A commercial policy (also referred to as a trade policy or international trade policy) is a government's policy governing international trade International trade is the exchange of capital, goods, and service ...
, has sometimes harmed Third World, third-world markets for local products.


Free trade

Free trade advanced further in the late 20th century and early 2000s: * 1992 European Union lifted barriers to internal trade in good (economics), goods and labour (economics), labour. * January 1, 1994 the North American Free Trade Agreement (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 A commercial policy (also referred to as a trade policy or international trade policy) is a government's policy governing international trade International trade is the exchange of capital, goods, and service ...
, 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 tariffs and restrictive Import quota, quotas. Protectionist policies were particularly prevalent in the 1930s, between the
Great Depression The Great Depression was a severe worldwide that took place mostly during the 1930s, beginning . The timing of the Great Depression varied around the world; in most countries, it started in 1929 and lasted until the late 1930s. It was the l ...
and the onset of World War II.


Religion

Islamic teachings encourage trading (and condemn usury or interest). Judeao-Christian teachings not have a problem with trade, prohibit fraud and dishonest measures, and historically also forbade the charging of 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 good (economics), goods 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.


Notes


Bibliography

* * * * * (Covers sea-trading over the whole world from ancient times.) * Rössner, Philipp
''Economy / Trade''EGO - European History Online
Mainz
Institute of European History
2017, retrieved: March 8, 2021
pdf
. *


External links

*
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 {{Authority control Trade, Society az:Kommersiya