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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 expres ...
or network that allows trade as a market. An early form of trade, barter, saw the direct exchange of goods and services for other goods and services, i.e. trading things without the use of money. Modern traders generally negotiate through a medium of exchange, such as money. As a result, buying can be separated from selling, or earning. The invention of money (and letter of credit, paper money, and non-physical money) greatly simplified and promoted trade. Trade between two traders is called bilateral trade, while trade involving more than two traders is called multilateral trade. In one modern view, trade exists due to specialization and the division of labour, 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 (perceived or real) in the production of some trade-able commodity—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 prices between locations can benefit both locations. Different types of traders may specialize in trading different kinds of goods; for example, the spice trade and
grain trade The grain trade refers to the local and international trade in cereals and other food grains such as wheat, barley, maize, and rice. Grain is an important trade item because it is easily stored and transported with limited spoilage, unlike ...
have both historically been important in the development of a global, international economy.
Retail Retail is the sale of goods and services to consumers, in contrast to wholesaling, which is sale to business or institutional customers. A retailer purchases goods in large quantities from manufacturers, directly or through a wholesaler, a ...
trade consists of the sale of goods or merchandise 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 appea ...
, boutique or kiosk),
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 sy ...
, 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 retailers, or to industrial, commercial, institutional, or other professional business 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 ...
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 United Stat ...
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 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 English is a West Germanic language of the Indo-European language family, with its earliest forms spoken by the inhabitants of early medieval England. It is named ...
''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 In the hist ...
''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 The Americas, which are ...
''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 English is a West Germanic language of the Indo-European language family, with its earliest forms spoken by the inhabitants of early medieval ...
''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 in prehistoric 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 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- ...
, trading became a principal facility of prehistoric people, who bartered what they had for goods and services from each other.


Ancient history

Trade is believed to have taken place throughout much of recorded human history. There is evidence of the exchange of
obsidian Obsidian () is a naturally occurring volcanic glass formed when lava 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 s ...
and
flint Flint, occasionally flintstone, is a sedimentary cryptocrystalline form of the mineral quartz, categorized as the variety of chert that occurs in chalk or marly limestone Limestone ( calcium carbonate ) is a type of carbonate se ...
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 Oceania (, , ) is a region, geographical region that includes Australasia, Melanesia, M ...
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 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 '' V ...
and Lipari 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. The material was most largely traded during the Kassite period of Babylonia beginning 1595 BCE.


Later trade


Mediterranean and Near East

Ebla was a prominent trading center during the third millennia BCE, with a network reaching into Anatolia and north Mesopotamia. Materials used for creating jewelry 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 Age, early Bronze Ages between the sixth and fifth millennium BC. It is one 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 th ...
traded with the Harappan civilization of the Indus Valley. The Phoenicians 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 In biogeography, the Mediterranean Basin (; also known as the Mediterranean Region or sometimes Mediterranea) is the region of lands ...
, and as far north as Britain for sources of
tin Tin is a chemical element A chemical element is a species of atoms that have a given number of protons in their nuclei, including the pure substance consisting only of that species. Unlike chemical compounds, chemical elements cann ...
to manufacture
bronze Bronze is an alloy consisting primarily of copper Copper is a chemical element with the Symbol (chemistry), symbol Cu (from la, cuprum) and atomic number 29. It is a soft, malleable, and ductility, ductile metal with very high thermal c ...
. 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 Social stratification refers to a society's categorization of its people into groups based on socioeconomic fact ...
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 A seed is an embryonic plant Plants are predominantly photosynthetic eukaryote Eukaryotes () are organisms whose cells have a nucleus. All animals, plants, fungi, and many unicellular organisms, are Eu ...
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 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 prese ...
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 The Atlantic Ocean is the second-largest of the world's five oceans, with an area of about . It covers approximately 20% of Earth's surface and about 29% of its water surf ...
with the conquest of Egypt and the near east. In ancient Greece
Hermes Hermes (; grc-gre, Ἑρμῆς) is an Olympian deity A deity or god is a supernatural being who is considered divine or sacred. The ''Oxford Dictionary of English'' defines deity as a god or goddess, or anything revered as divi ...
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 Europe is a large peninsula conventionally considered a continent in its own right because of its great physical size and the weight of its history and traditions. Europe is also considered ...
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 A nation is a community of people formed on the basis of a combination of shared features such as language, history, ethnicity, culture an ...
ish merchants who traded between the
Christians Christians () are people who follow or adhere to Christianity Christianity is an Abrahamic monotheistic religion Religion is usually defined as a social- cultural system of designated behaviors and practices, morals, beliefs, ...
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 Ab ...
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 Taiwan, officially the Republic of China (ROC), is a country in East Asia, at the junction of the East and Sou ...
of Island Southeast Asia. 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 China, officially the People's R ...
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 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 The Philippines (; fil, Pilipinas, links=no), of ...
, Luzon, and Palawan. 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 Southeast Asia, also spelled South East Asia and South-East Asia, and also known as Southeastern Asia, S ...
, while the peoples of
Malaysia Malaysia ( ; ) is a country in Southeast Asia Southeast Asia, also spelled South East Asia and South-East Asia, and also known as Southeastern Asia, South-eastern Asia or SEA, is the geographical south-eastern region of Asia ...
,
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 Southeast Asia, also spelled South East Asia and South-East Asia, ...
,
Singapore Singapore (), officially the Republic of Singapore, is a sovereign island country A country is a distinct part of the world, such as a state, nation A nation is a community of people formed on the basis of a combination of ...
,
Thailand Thailand ( ), historically known as Siam () and officially the Kingdom of Thailand, is a country in Southeast Asia Southeast Asia, also spelled South East Asia and South-East Asia, and also known as Southeastern Asia, South-eastern ...
,
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 Gu ...
, 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 Southeast Asia, also spelled South Ea ...
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 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 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 catamarans, outrigger boats, sewn-plank boats, and
paan Betel nut chewing, also called betel quid chewing or areca nut chewing, is a practice in which areca nut ''Areca'' is a genus Genus ( plural genera ) is a taxonomic rank used in the biological classification of living and fossil ...
) and cultigens (like
coconut The coconut tree (''Cocos nucifera'') is a member of the palm tree family ( Arecaceae) and the only living species In biology Biology is the scientific study of life. It is a natural science with a broad scope but has sev ...
s, sandalwood, bananas, and sugarcane); as well as connecting the material cultures of India and China. Indonesians, 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, brea ...
and cassia) with East Africa using catamaran and outrigger boats and sailing with the help of the Westerlies 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 Plate. ...
, 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 The Indian Ocean is the third-largest o ...
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 Oasisamerica is a term that was coined by Paul Kirchhoff (who also coined " Mesoamerica") and published in a 1954 article, and is used by some scholars, primarily Mexican anthropologists, for the broad cultural area defining pre-Columbian ...
. 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. 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 A city is a human settlement of notable size.Goodall, B. (1987) ''The Penguin Dictionary of Human Geography''. London: Penguin.Kuper, A. and Kuper, J., eds (1996) ''The Social Science Encyclopedia''. 2nd edition. Lon ...
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 after the 4th century CE up to the 8th century CE, with Suyab and Talas ranking among their main centers in the north. They were the main caravan merchants of Central Asia. From the Middle Ages, the maritime republics, in particular Venice,
Pisa Pisa ( , or ) is a city and ''comune The (; plural: ) is a local administrative division of Italy, roughly equivalent to a township or municipality. It is the third-level administrative division of Italy, after regions ('' regioni'' ...
and
Genoa Genoa ( ; it, Genova ; lij, Zêna ). is the capital of the Italian region of Liguria Liguria (; lij, Ligûria ; french: Ligurie) is a Regions of Italy, region of north-western Italy; its Capital city, capital is Genoa. Its territory is cro ...
, 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 Liguria (; lij, Ligûria ; french: Ligurie) i ...
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 ) , song = ( en, "King Christian stood by the lofty mast") , song_type = National and royal anthem , image ...
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=German language, Modern German, Deutsche Hanse) was a Middle Ages, medieval commercial and defensive confederation of merchant guilds and market towns in Central Europe, Central and Norther ...
was an alliance of trading cities that maintained a trade monopoly over most of
Northern Europe The northern region of Europe Europe is a large peninsula conventionally considered a continent in its own right because of its great physical size and the weight of its history and traditions. Europe is also considered a Continent#Su ...
and the 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 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 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 seaf ...
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 (chemistry), 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 Brightness, bright, slightly orange-yellow, dense, s ...
. From 1070 onward, kingdoms in West
Africa Africa is the world's second-largest and second-most populous continent, after Asia Asia (, ) is one of the world's most notable geographical regions, which is either considered a continent in its own right or a subcontinent of ...
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 Ab ...
traders on the Trans-Saharan trading network. Beginning in the 16th century, European merchants would purchase gold, spices, cloth, timber and slaves from West African states as part of the triangular trade. This was often in exchange for cloth,
iron Iron () is a chemical element A chemical element is a species of atoms that have a given number of protons in their nuclei, including the pure substance consisting only of that species. Unlike chemical compounds, chemical elements ca ...
, or cowrie shells 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 domin ...
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 lar ...
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 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 The United Provinces of the Netherlands, also known as the (Seven) United Provinces, officially as the Republic of the Seven United Netherlands ( Dutch: ''Republiek der Zeven Verenigde Nederlanden''), and commonly referred to in historiography ...
in the 17th century, and the British in the 18th century. The
Spanish Empire The Spanish Empire ( es, link=no, Imperio español), also known as the Hispanic Monarchy ( es, link=no, Monarquía Hispánica) or the Catholic Monarchy ( es, link=no, Monarquía Católica) was a colonial empire governed by Spain and its prede ...
developed regular trade links across both the Atlantic and the Pacific Oceans. In 1776, Adam Smith published the paper '' An Inquiry into the Nature and Causes of the Wealth of Nations''. It criticized Mercantilism, 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 ...
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 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 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 deb ...
, partly due to the rise of competitive free trade.


19th century

In 1817, David Ricardo, James Mill 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 Principles of Political Economy and Taxation 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 ana ...
: : ''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 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 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 United Stat ...
was a major economic recession that ran from 1929 to the late 1930s. During this period, there was a great drop in trade and other economic indicators. The lack of free trade was considered by many as a principal cause of the depression causing stagnation and inflation. Only during
World War II World War II or the Second World War, often abbreviated as WWII or WW2, was a world war that lasted from 1939 to 1945. It involved the vast majority of the world's countries—including all of the great powers—forming two opposi ...
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 The European Union (EU) is a supranational political and economic union of member states that are located primarily in Europe Europe is a large peninsula conventionally considered a continent in its own right because of its gre ...
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 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 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 ...
, 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 political and economic union of member states that are located primarily in Europe Europe is a large peninsula conventionally considered a continent in its own right because of its gre ...
lifted barriers to internal trade in goods and 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 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, an ...
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 ...
, 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
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 * ...
. 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 United Stat ...
and the onset of World War II.


Religion

Islamic teachings encourage trading (and condemn usury or interest). Judeao-Christian teachings do not prohibit trade. They do prohibit fraud and dishonest measures. Historically they forbade charging interest on loans.


Development of money

The first instances of money were objects with intrinsic value. This is called commodity money and includes any commonly available commodity that has intrinsic value; historical examples include pigs, rare seashells, whale's teeth, and (often) cattle. In medieval Iraq, bread was used as an early form of money. In the Aztec Empire, under the rule of 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.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 around the world, with a focus on making 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 Geneva ( ; french: Genève ) frp, Genèva ; german: link=no, Genf ; it, Ginevra ; rm, Genevra is the second-most populous city in Switzerland ). Swiss law does not designate a ''capital'' as such, but the federal parliament and government ...
, Switzerland; and
Paris Paris () is the Capital city, capital and List of communes in France with over 20,000 inhabitants, 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), ma ...
, 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 most populous country, with a population exceeding 1.4 billion, slightly ahead of India. China spans the equivalent of five time zones ...
(PRC) began an experiment in economic reform. In contrast to the previous 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 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 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 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 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 eco ...
, 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 2 ...
,
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 Korean Peninsula and sharing a land border with North Korea. Its western border is formed by the Yellow Sea, while its ...
, 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 embargo 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 archipelago An archipelago ( ), sometimes called ...
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 Western Asia, West Asia, or Southwest Asia, is the westernmost subregion of the larger geographical region ...
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 labour, environmental and social standards for the production of commodities, particularly those exported from the 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 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 A ...
and commercial law. Proposed and practiced fair trade policies vary widely, ranging from the common prohibition of 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 Society az:Kommersiya