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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 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 purpose and express ...
or network that allows trade as a market. An early form of trade,
barter In trade, barter (derived from ''baretor'') is a system of exchange in which participants in a transaction directly exchange goods or services for other goods or services without using a medium of exchange, such as money. Economists disti ...
, 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 Earnings are the net benefits of a corporation's operation. Earnings is also the amount on which corporate tax is due. For an analysis of specific aspects of corporate operations several mor ...
. The invention of money (and letter of credit,
paper money A banknote—also called a bill (North American English), paper money, or simply a note—is a type of negotiable promissory note, made by a bank or other licensed authority, payable to the bearer on demand. Banknotes were originally issued ...
, and non-physical money) greatly simplified and promoted trade. Trade between two traders is called
bilateral 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 ...
, while trade involving more than two traders is called
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, an ...
, a predominant form of economic activity 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. C ...
(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 co ...
—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 ba ...
. In such circumstances, trade at
market price A price is the (usually not negative) quantity of payment or compensation given by one party to another in return for goods or services. In some situations, the price of production has a different name. If the product is a "good" in the ...
s 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 Service (economics), services to consumers, in contrast to wholesaling, which is sale to business or institutional customers. A retailer purchases goods in large quantities from manufacturing, manufacturers, dire ...
trade consists of the sale of goods or
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 ...
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 appe ...
,
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 ''de ...
or
kiosk Historically, a kiosk () was a small garden pavilion open on some or all sides common in Persia, the Indian subcontinent, and in the Ottoman Empire from the 13th century onward. Today, several examples of this type of kiosk still exist in a ...
),
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 by
mail The mail or post is a system for physically transporting postcards, letters, and parcels. A postal service can be private or public, though many governments place restrictions on private systems. Since the mid-19th century, national postal sys ...
, 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. I ...
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 ...
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 buying and selling products (such as goods and services). It is also "any activity or enterprise entered into for profit." Having a business name does not separ ...
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 econ ...
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 in ...
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 Englis ...
''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). 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 br ...
''*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 settlers in the mid-5th ...
''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, natio ...
'' is derived from the
Latin Latin (, or , ) is a classical language belonging to the Italic languages, 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 ...
''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 communicate. Humans ability to communicate with one another would not be possible without an understanding of what we are referencing or thin ...
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 us ...
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 us ...
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
barter In trade, barter (derived from ''baretor'') is a system of exchange in which participants in a transaction directly exchange goods or services for other goods or services without using a medium of exchange, such as money. Economists disti ...
ed 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 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 such as silicon ...
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 ...
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 ...
. Trade in obsidian is believed to have taken place in
New Guinea New Guinea (; Hiri Motu: ''Niu Gini''; id, Papua, or , historically ) is the world's second-largest island with an area of . Located in Oceania in the southwestern Pacific Ocean, the island is separated from Australia by the wide Torres ...
from 17,000 BCE. Robert Carr Bosanquet 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 ...
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 ...
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 Metropol ...
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 mine ...
. The material was most largely traded during the Kassite period 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 w ...
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 ...
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 ...
traded with the Harappan civilization of the
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 thalassocratic civilization originating in the Levant region of the eastern Mediterranean, primarily located in modern Lebanon. The territory of the Phoenician city-states extended and shrank throughout their his ...
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 ...
, and as far north as Britain for sources of tin 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 suc ...
. 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). ...
until the fall of the
Roman Empire The Roman Empire ( la, Imperium Romanum ; grc-gre, Βασιλεία τῶν Ῥωμαίων, Basileía tôn Rhōmaíōn) was the post-Roman Republic, Republican period of ancient Rome. As a polity, it included large territorial holdings aro ...
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 identified as a period and as a golden age of increased as well as sustained Roman imperialism, relative peace and order, prosperous stabilit ...
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 ...
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 orat ...
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 '' modicum'' of civility within the structures of functional community life. The fall of the Roman empire and the succeeding Dark Ages brought instability to
Western Europe Western Europe is the western region of Europe. The region's countries and territories vary depending on context. The concept of "the West" appeared in Europe in juxtaposition to "the East" and originally applied to the ancient Mediterranean ...
and a near-collapse of the trade network in the western world. Trade, however, continued to flourish among the kingdoms of Africa, the Middle East, India, China, and Southeast Asia. Some trade did occur in the west. For instance, Radhanites were a medieval guild or group (the precise meaning of the word is lost to history) of
Jew Jews ( he, יְהוּדִים, , ) or Jewish people are an ethnoreligious group and nation originating from the Israelites Israelite origins and kingdom: "The first act in the long drama of Jewish history is the age of the Israelites""T ...
ish merchants who traded between the
Christians Christians () are people who follow or adhere to Christianity, a monotheistic Abrahamic religion based on the life and teachings of Jesus Christ. The words ''Christ'' and ''Christian'' derive from the Koine Greek title ''Christós'' (Χρ� ...
in Europe and the
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 ...
s of the Near East.


Indo-Pacific

The first true maritime trade network in the Indian Ocean was by the
Austronesian peoples The Austronesian peoples, sometimes referred to as Austronesian-speaking peoples, are a large group of peoples in Taiwan, Maritime Southeast Asia, Micronesia, coastal New Guinea, Island Melanesia, Polynesia, and Madagascar that speak Au ...
of
Island Southeast Asia Maritime Southeast Asia comprises the countries of Brunei, Indonesia, Malaysia, the Philippines, Singapore, and East Timor. Maritime Southeast Asia is sometimes also referred to as Island Southeast Asia, Insular Southeast Asia or Oceanic Sout ...
. Initiated by the animist indigenous peoples of
Taiwan Taiwan, officially the Republic of China (ROC), is a country in East Asia, at the junction of the East and South China Seas in the northwestern Pacific Ocean, with the People's Republic of China (PRC) to the northwest, Japan to the no ...
and the
Philippines The Philippines (; fil, Pilipinas, links=no), officially the Republic of the Philippines ( fil, Republika ng Pilipinas, links=no), * bik, Republika kan Filipinas * ceb, Republika sa Pilipinas * cbk, República de Filipinas * hil, Republ ...
, the Maritime Jade Road was an extensive trading network connecting multiple areas in Southeast and East Asia. Its primary products were made of jade mined from Taiwan by animist
Taiwanese indigenous peoples Taiwanese indigenous peoples (formerly Taiwanese aborigines), also known as Formosan people, Austronesian Taiwanese, Yuanzhumin or Gaoshan people, are the Indigenous peoples of Oceania, indigenous peoples of Taiwan, with the nationally recogni ...
and processed mostly in the Philippines by animist indigenous Filipinos, especially in
Batanes Batanes, officially the Province of Batanes ( ivv, Provinsiya nu Batanes; Ilocano: ''Probinsia ti Batanes''; fil, Lalawigan ng Batanes, ), is an archipelagic province in the Philippines, administratively part of the Cagayan Valley region. It i ...
,
Luzon Luzon (; ) is the largest and most populous island in the Philippines. Located in the northern portion of the Philippines archipelago, it is the economic and political center of the nation, being home to the country's capital city, Manila, as ...
, and
Palawan Palawan (), officially the Province of Palawan ( cyo, Probinsya i'ang Palawan; tl, Lalawigan ng Palawan), is an archipelagic province of the Philippines that is located in the region of Mimaropa. It is the largest province in the country in t ...
. Some were also processed in
Vietnam Vietnam or Viet Nam ( vi, Việt Nam, ), officially the Socialist Republic of Vietnam,., group="n" is a country in Southeast Asia, at the eastern edge of mainland Southeast Asia, with an area of and population of 96 million, making ...
, while the peoples of
Malaysia Malaysia ( ; ) is a country in Southeast Asia. The federal constitutional monarchy consists of thirteen states and three federal territories, separated by the South China Sea into two regions: Peninsular Malaysia and Borneo's East Mal ...
,
Brunei Brunei ( , ), formally Brunei Darussalam ( ms, Negara Brunei Darussalam, Jawi: , ), is a country located on the north coast of the island of Borneo in Southeast Asia. Apart from its South China Sea coast, it is completely surrounded by th ...
,
Singapore Singapore (), officially the Republic of Singapore, is a sovereign island country and city-state in maritime Southeast Asia. It lies about one degree of latitude () north of the equator, off the southern tip of the Malay Peninsula, bor ...
,
Thailand Thailand ( ), historically known as Siam () and officially the Kingdom of Thailand, is a country in Southeast Asia, located at the centre of the Indochinese Peninsula, spanning , with a population of almost 70 million. The country is b ...
,
Indonesia Indonesia, officially the Republic of Indonesia, is a country in Southeast Asia and Oceania between the Indian and Pacific oceans. It consists of over 17,000 islands, including Sumatra, Java, Sulawesi, and parts of Borneo and New Gui ...
, and
Cambodia Cambodia (; also Kampuchea ; km, កម្ពុជា, UNGEGN: ), officially the Kingdom of Cambodia, is a country located in the southern portion of the Indochinese Peninsula in Southeast Asia, spanning an area of , bordered by Thailand ...
also participated in the massive animist-led trading network. Participants in the network at the time had a majority animist population. The maritime road is one of the most extensive sea-based trade networks of a single geological material in the prehistoric world. It was in existence for at least 3,000 years, where its peak production was from 2000 BCE to 500 CE, older than 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 rel ...
in mainland Eurasia and the later Maritime Silk Road. The Maritime Jade Road began to wane during its final centuries from 500 CE until 1000 CE. The entire period of the network was a golden age for the diverse animist societies of the region. Sea-faring Southeast Asians also established trade routes with
Southern India South India, also known as Dakshina Bharata or Peninsular India, consists of the peninsular southern part of India. It encompasses the Indian states of Andhra Pradesh, Karnataka, Kerala, Tamil Nadu, and Telangana, as well as the union territ ...
and
Sri Lanka Sri Lanka (, ; si, ශ්‍රී ලංකා, Śrī Laṅkā, translit-std=ISO (); ta, இலங்கை, Ilaṅkai, translit-std=ISO ()), formerly known as Ceylon and officially the Democratic Socialist Republic of Sri Lanka, is an ...
as early as 1500 BC, ushering an exchange of material culture (like
catamaran A Formula 16 beachable catamaran Powered catamaran passenger ferry at Salem, Massachusetts, United States A catamaran () (informally, a "cat") is a multi-hulled watercraft featuring two parallel hulls of equal size. It is a geometry-sta ...
s, outrigger boats, sewn-plank boats, and paan) and cultigens (like
coconut The coconut tree (''Cocos nucifera'') is a member of the palm tree family (Arecaceae) and the only living species of the genus ''Cocos''. The term "coconut" (or the archaic "cocoanut") can refer to the whole coconut palm, the seed, or the f ...
s,
sandalwood Sandalwood is a class of woods from trees in the genus '' Santalum''. The woods are heavy, yellow, and fine-grained, and, unlike many other aromatic woods, they retain their fragrance for decades. Sandalwood oil is extracted from the woods for ...
,
banana A banana is an elongated, edible fruit – botanically a berry – produced by several kinds of large herbaceous flowering plants in the genus ''Musa''. In some countries, bananas used for cooking may be called "plantains", disting ...
s, and
sugarcane Sugarcane or sugar cane is a species of (often hybrid) tall, perennial grass (in the genus '' Saccharum'', tribe Andropogoneae) that is used for sugar production. The plants are 2–6 m (6–20 ft) tall with stout, jointed, fibrous stalk ...
); as well as connecting the material cultures of India and China.
Indonesians Indonesians ( Indonesian: ''orang Indonesia'') are citizens or people originally from Indonesia, regardless of their ethnic or religious background. There are more than 1,300 ethnicities in Indonesia, making it a multicultural archipelagic co ...
, in particular were trading in spices (mainly
cinnamon Cinnamon is a spice obtained from the inner bark of several tree species from the genus '' Cinnamomum''. Cinnamon is used mainly as an aromatic condiment and flavouring additive in a wide variety of cuisines, sweet and savoury dishes, breakf ...
and cassia) with
East Africa East Africa, Eastern Africa, or East of Africa, is the eastern subregion of the African continent. In the United Nations Statistics Division scheme of geographic regions, 10-11-(16*) territories make up Eastern Africa: Due to the historica ...
using
catamaran A Formula 16 beachable catamaran Powered catamaran passenger ferry at Salem, Massachusetts, United States A catamaran () (informally, a "cat") is a multi-hulled watercraft featuring two parallel hulls of equal size. It is a geometry-sta ...
and outrigger boats and sailing with the help of the
Westerlies The westerlies, anti-trades, or prevailing westerlies, are prevailing winds from the west toward the east in the middle latitudes between 30 and 60 degrees latitude. They originate from the high-pressure areas in the horse latitudes and tren ...
in the Indian Ocean. This trade network expanded to reach as far as Africa and the
Arabian Peninsula The Arabian Peninsula, (; ar, شِبْهُ الْجَزِيرَةِ الْعَرَبِيَّة, , "Arabian Peninsula" or , , "Island of the Arabs") or Arabia, is a peninsula of Western Asia, situated northeast of Africa on the Arabian Plat ...
, resulting in the Austronesian colonization of
Madagascar Madagascar (; mg, Madagasikara, ), officially the Republic of Madagascar ( mg, Repoblikan'i Madagasikara, links=no, ; french: République de Madagascar), is an island country in the Indian Ocean, approximately off the coast of East Afric ...
by the first half of the first millennium AD. It continued up to historic times, later becoming the Maritime Silk Road.


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. 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 ...
, 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 fo ...
. 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 status in the United Kingdom, city, Ceremonial counties of England, ceremonial county and unitary authority in England. Situated on the River Avon, Bristol, River Avon, it is bordered by the ceremonial counties of Glouces ...
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 rel ...
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 r ...
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 The maritime republics ( it, repubbliche marinare), also called merchant republics ( it, repubbliche mercantili), were Thalassocracy, thalassocratic city-states of the Mediterranean Basin during the Middle Ages. Being a significant presence in I ...
, 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 ci ...
and
Genoa Genoa ( ; it, Genova ; lij, Zêna ). is the capital of the Italian region of Liguria and the sixth-largest city in Italy. In 2015, 594,733 people lived within the city's administrative limits. As of the 2011 Italian census, the Province of ...
, 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 La ...
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 54°N, or may be based on other geographical factors ...
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 originatin ...
, 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 ...
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 ...
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 ...
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 seafa ...
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 ...
. 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 ...
became significant members of global trade. This came initially through the movement of gold and other resources sent out by
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 ...
. This was often in exchange for
cloth Textile is an umbrella term that includes various fiber-based materials, including fibers, yarns, filaments, threads, different fabric types, etc. At first, the word "textiles" only referred to woven fabrics. However, weaving is not the ...
,
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 ...
, 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'') ...
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 domina ...
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 ...
, 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 (F ...
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 ...
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 historiograph ...
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 '' magnum opus'' of the Scottish economist and moral philosopher Adam Smith. First published in ...
''. 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 ...
, and argued that
economic An economy is an area of the production, distribution and trade, as well as consumption of goods and services. In general, it is defined as a social domain that emphasize the practices, discourses, and material expressions associated with th ...
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, an ...
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 proces ...
. 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 a ...
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 Bankruptcy is a legal process through which people or other entities who cannot repay debts to creditors may seek relief from some or all of their debts. In most jurisdictions, bankruptcy is imposed by a court order, often initiated by the debtor ...
, 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 economist. He was one of the most influential of the classical economists along with Thomas Malthus, Adam Smith and James Mill. Ricardo was also a politician, and a ...
,
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 Briti ...
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. C ...
. 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 tha ...
Ricardo advanced the doctrine still considered the most counterintuitive in
economics Economics () is the social science that studies the production, distribution, and consumption of goods and services. Economics focuses on the behaviour and interactions of economic agents and how economies work. Microeconomics anal ...
: : ''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 on the international market could manipulate the
terms of trade The terms of trade (TOT) is the relative price of exports in terms of imports and is defined as the ratio of export prices to import prices. It can be interpreted as the amount of import goods an economy can purchase per unit of export goods. An i ...
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 p ...
s, and that the response to this might be 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 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 World War II by country, vast majority of the world's countries—including all of the great power ...
did the recession end in the United States. Also during the war, in 1944, 44 countries signed the
Bretton Woods Agreement The Bretton Woods system of monetary management established the rules for commercial and financial relations among the United States, Canada, Western European countries, Australia, and Japan after the 1944 Bretton Woods Agreement. The Bretto ...
, 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 pr ...
to promote free trade. The
European Union The European Union (EU) is a supranational union, supranational political union, political and economic union of Member state of the European Union, member states that are located primarily in Europe, Europe. The union has a total area of ...
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 (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 significa ...
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 p ...
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 econ ...
, has sometimes harmed third-world markets for local products.


Free trade

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 union, supranational political union, political and economic union of Member state of the European Union, member states that are located primarily in Europe, Europe. The union has a total area of ...
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 ...
and 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 The Marrakesh Agreement, manifested by the Marrakesh Declaration, was an agreement signed in Marrakesh, Morocco, by 123 nations on 15 April 1994, marking the culmination of the 8-year-long Uruguay Round and establishing the World Trade Organiz ...
specified formation of the WTO. * January 1, 1995
World Trade Organization The World Trade Organization (WTO) is an intergovernmental organization that regulates and facilitates international trade. With effective cooperation in the United Nations System, governments use the organization to establish, revise, and ...
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 econ ...
, 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 Central is an adjective usually referring to being in the center of some place or (mathematical) object. Central may also refer to: Directions and generalised locations * Central Africa, a region in the centre of Africa continent, also known as ...
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 p ...
s and restrictive
quotas Quota may refer to: Economics * Import quota, a trade restriction on the quantity of goods imported into a country * Market Sharing Quota, an economic system used in Canadian agriculture * Milk quota, a quota on milk production in Europe * Indi ...
. 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 Usury () is the practice of making unethical or immoral monetary loans that unfairly enrich the lender. The term may be used in a moral sense—condemning taking advantage of others' misfortunes—or in a legal sense, where an interest rate is c ...
or
interest In finance and economics, interest is payment from a borrower or deposit-taking financial institution to a lender or depositor of an amount above repayment of the principal sum (that is, the amount borrowed), at a particular rate. It is distin ...
).
Judeao-Christian The term Judeo-Christian is used to group Christianity and Judaism together, either in reference to Christianity's derivation from Judaism, Christianity's borrowing of Jewish Scripture to constitute the "Old Testament" of the Christian Bible, or ...
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 Commodity money is money whose value comes from a commodity of which it is made. Commodity money consists of objects having value or use in themselves (intrinsic value) as well as their value in buying goods. This is in contrast to representa ...
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 The Aztec Empire or the Triple Alliance ( nci, Ēxcān Tlahtōlōyān, �jéːʃkaːn̥ t͡ɬaʔtoːˈlóːjaːn̥ was an alliance of three Nahua city-states: , , and . These three city-states ruled that area in and around the Valley of Mexi ...
, under the rule of Montezuma cocoa beans became legitimate currency.
Currency A currency, "in circulation", from la, currens, -entis, literally meaning "running" or "traversing" is a standardization of money in any form, in use or circulation as a medium of exchange, for example banknotes and coins. A more general ...
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 Precious metals are rare, naturally occurring metallic chemical elements of high economic value. Chemically, the precious metals tend to be less reactive than most elements (see noble metal). They are usually ductile and have a high lu ...
.Gold was an especially common form of early money, as described in Davies (2002).


Trends


Doha rounds

The Doha round of World Trade Organization negotiations aimed to lower
barriers to trade Trade barriers are government-induced restrictions on international trade. According to the theory of comparative advantage, trade barriers are detrimental to the world economy and decrease overall economic efficiency. Most trade barriers work o ...
around the world, with a focus on making trade fairer for
developing countries A developing country is a sovereign state with a lesser developed industrial base and a lower Human Development Index (HDI) relative to other countries. However, this definition is not universally agreed upon. There is also no clear agreem ...
. Talks have been hung over a divide between the rich
developed countries A developed country (or industrialized country, high-income country, more economically developed country (MEDC), advanced country) is a sovereign state that has a high quality of life, developed economy and advanced technological infrastruct ...
, represented by the G20, and the major developing countries.
Agricultural subsidies An agricultural subsidy (also called an agricultural incentive) is a government incentive paid to agribusinesses, agricultural organizations and farms to supplement their income, manage the supply of agricultural commodities, and influence the ...
are the most significant issue upon which agreement has been the hardest to negotiate. By contrast, there was much agreement on
trade facilitation Trade facilitation looks at how procedures and controls governing the movement of goods across national borders can be improved to reduce associated cost burdens and maximise efficiency while safeguarding legitimate regulatory objectives. Bus ...
and capacity building. The Doha round began in
Doha Doha ( ar, الدوحة, ad-Dawḥa or ''ad-Dōḥa'') is the capital city and main financial hub of Qatar. Located on the Persian Gulf coast in the east of the country, north of Al Wakrah and south of Al Khor (city), Al Khor, it is home to m ...
, Qatar, and negotiations were continued in:
Cancún Cancún ( ), often Cancun in English (without the accent; or ) is a city in southeast Mexico on the northeast coast of the Yucatán Peninsula in the Mexican state of Quintana Roo. It is a significant tourist destination in Mexico and the seat ...
, Mexico;
Geneva Geneva ( ; french: Genève ) frp, Genèva ; german: link=no, Genf ; it, Ginevra ; rm, Genevra is the second-most populous city in Switzerland (after Zürich) and the most populous city of Romandy, the French-speaking part of Switzerland. Situa ...
, Switzerland; and
Paris Paris () is the capital and most populous city of France, with an estimated population of 2,165,423 residents in 2019 in an area of more than 105 km² (41 sq mi), making it the 30th most densely populated city in the world in 2020. Si ...
, France, and Hong Kong.


China

Beginning around 1978, the government of the
People's Republic of China China, officially the People's Republic of China (PRC), is a country in East Asia. It is the world's List of countries and dependencies by population, most populous country, with a Population of China, population exceeding 1.4 billion, slig ...
(PRC) began an experiment in economic reform. In contrast to the previous
Soviet The Soviet Union,. officially the Union of Soviet Socialist Republics. (USSR),. was a List of former transcontinental countries#Since 1700, transcontinental country that spanned much of Eurasia from 1922 to 1991. A flagship communist state, ...
-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 Zone A special economic zone (SEZ) is an area in which the business and trade laws are different from the rest of the country. SEZs are located within a country's national borders, and their aims include increasing trade balance, employment, increas ...
s located along the South-east coast. The reforms proved spectacularly successful in terms of increased output, variety, quality,
price A price is the (usually not negative) quantity of payment or compensation given by one party to another in return for goods or services. In some situations, the price of production has a different name. If the product is a "good" in the ...
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 The Asia-Pacific Economic Cooperation (APEC ) is an inter-governmental forum for 21 member economy, economies in the Pacific Rim that promotes free trade throughout the Asia-Pacific region.
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 GDP. While international trade has been present throughout much of history (see Silk Road,
Amber Road The Amber Road was an ancient trade route for the transfer of amber from coastal areas of the North Sea and the Baltic Sea to the Mediterranean Sea. Prehistoric trade routes between Northern and Southern Europe were defined by the amber trade. ...
), its economic, social, and political importance have increased in recent centuries, mainly because of
Industrialization Industrialisation ( alternatively spelled industrialization) is the period of social and economic change that transforms a human group from an agrarian society into an industrial society. This involves an extensive re-organisation of an econo ...
, advanced transportation,
globalization Globalization, or globalisation (Commonwealth English; see spelling differences), is the process of interaction and integration among people, companies, and governments worldwide. The term ''globalization'' first appeared in the early 20t ...
,
multinational corporation A multinational company (MNC), also referred to as a multinational enterprise (MNE), a transnational enterprise (TNE), a transnational corporation (TNC), an international corporation or a stateless corporation with subtle but contrasting senses, i ...
s, and
outsourcing Outsourcing is an agreement in which one company hires another company to be responsible for a planned or existing activity which otherwise is or could be carried out internally, i.e. in-house, and sometimes involves transferring employees and ...
. Empirical evidence for the success of trade can be seen in the contrast between countries such as
South Korea South Korea, officially the Republic of Korea (ROK), is a country in East Asia, constituting the southern part of the Korea, Korean Peninsula and sharing a Korean Demilitarized Zone, land border with North Korea. Its western border is formed ...
, 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 Economic sanctions are commercial and financial penalties applied by one or more countries against a targeted self-governing state, group, or individual. Economic sanctions are not necessarily imposed because of economic circumstances—they ma ...
against a specific country are sometimes imposed, in order to punish that country for some action. An
embargo Economic sanctions are commercial and financial penalties applied by one or more countries against a targeted self-governing state, group, or individual. Economic sanctions are not necessarily imposed because of economic circumstances—they m ...
, 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
embargo Economic sanctions are commercial and financial penalties applied by one or more countries against a targeted self-governing state, group, or individual. Economic sanctions are not necessarily imposed because of economic circumstances—they m ...
against
Cuba Cuba ( , ), officially the Republic of Cuba ( es, República de Cuba, links=no ), is an island country comprising the island of Cuba, as well as Isla de la Juventud and several minor archipelagos. Cuba is located where the northern Caribb ...
for over 40 years. Embargoes are usually on a temporary basis. For example,
Armenia Armenia (), , group=pron officially the Republic of Armenia,, is a landlocked country in the Armenian Highlands of Western Asia.The UNbr>classification of world regions places Armenia in Western Asia; the CIA World Factbook , , and ''O ...
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 Fair trade is an arrangement designed to help producers in developing countries achieve sustainable and equitable trade relationships. The fair trade movement combines the payment of higher prices to exporters with improved social and envir ...
" movement, also known as the "trade justice" movement, promotes the use of labour,
environmental A biophysical environment is a biotic and abiotic surrounding of an organism or population, and consequently includes the factors that have an influence in their survival, development, and evolution. A biophysical environment can vary in scal ...
and
social Social organisms, including human(s), live collectively in interacting populations. This interaction is considered social whether they are aware of it or not, and whether the exchange is voluntary or not. Etymology The word "social" derives from ...
standards for the production of
commodities 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 co ...
, particularly those exported from the
Third Third or 3rd may refer to: Numbers * 3rd, the ordinal form of the cardinal number 3 * , a fraction of one third * 1⁄60 of a ''second'', or 1⁄3600 of a ''minute'' Places * 3rd Street (disambiguation) * Third Avenue (disambiguation) * Hi ...
and Second Worlds to the
First World The concept of First World originated during the Cold War and comprised countries that were under the influence of the United States and the rest of NATO and opposed the Soviet Union and/or communism during the Cold War. Since the collapse of ...
. Such ideas have also sparked a debate on whether trade itself should be codified as a
human right Human rights are moral principles or normsJames Nickel, with assistance from Thomas Pogge, M.B.E. Smith, and Leif Wenar, 13 December 2013, Stanford Encyclopedia of PhilosophyHuman Rights Retrieved 14 August 2014 for certain standards of hum ...
. Importing firms voluntarily adhere to fair trade standards or governments may enforce them through a combination of
employment Employment is a relationship between two parties regulating the provision of paid labour services. Usually based on a contract, one party, the employer, which might be a corporation, a not-for-profit organization, a co-operative, or any o ...
and
commercial law Commercial law, also known as mercantile law or trade law, is the body of law that applies to the rights, relations, and conduct of persons and business engaged in commerce, merchandising, trade, and sales. It is often considered to be a branc ...
. 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 ...
made using
slave labour 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 per ...
to minimum
price support In economics, a price support may be either a subsidy, a production quota, or a price control, each with the intended effect of keeping the market price of a good higher than the competitive equilibrium level. In the case of a price control, a ...
schemes such as those for coffee in the 1980s.
Non-governmental organization A non-governmental organization (NGO) or non-governmental organisation (see spelling differences) is an organization that generally is formed independent from government. They are typically nonprofit entities, and many of them are active in ...
s 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 {{unreferenced, date=February 2012 The World Integrated Trade Solution (WITS) is a trade software provided by the World Bank for users to query several international trade databases. WITS allows the user to query trade statistics (export, import, ...
provides summary trade statistics and custom query features
World Bank's
Preferential Trade Agreement Database {{Authority control Society az:Kommersiya