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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 or network that allows trade as a market.
Traders generally negotiate through a medium of credit or exchange, such as money. Though some economists characterize barter (i.e. trading things without the use of money) as an early form of trade, money was invented before written history began. Consequently, any story of how money first developed is mostly based on conjecture and logical inference. Letters of credit, paper money, and digital currency have greatly simplified and promoted trade as buying can be separated from selling, or Earnings. 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 labor, a predominant form of economic activity in which individuals and groups concentrate on a small aspect of production, but use their output in trade 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 goodsincluding the production of scarce or limited natural resources elsewhere. For example, different regions' sizes may encourage mass production. In such circumstances, trading at market price 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 have both historically been important in the development of a global, international economy. Retail trade consists of the sales of goods or merchandise from a very fixed locationCompare peddling and other types of retail trade: (such as a department store, boutique, or kiosk), online or by mail, in small or individual lots for direct consumption or use by the purchaser. Wholesale trade is the traffic in goods that are sold as merchandise to , industrial, commercial, institutional, or other professional business users, or to other wholesalers and related subordinated services.
Historically, openness to free trade substantially increased in some areas from 1815 until 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 of the 1930s. Trade openness increased substantially again from the 1950s onward (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.
Commerce is derived from the Latin commercium, from cum "together" and merx, "merchandise."
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 Before Present.Compare: National Maritime Historical Society. Sea History, Issues 13–25. , published by National Maritime Historical Society 1979. Retrieved 2012-06-26.
There is evidence of the exchange of obsidian and flint during the Stone Age. Trade in obsidian is believed to have taken place in New Guinea from 17,000 BCE.
Robert Carr Bosanquet investigated trade in the Stone Age by excavations in 1901.Donald A. Mackenzie. – published 1917. – . Retrieved 2012-06-09. The first clear archaeological evidence of trade in manufactured goods is found in south west Asia.P. Singh. Neolithic cultures of western Asia, , Seminar Press, 20 August 1974.
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.P. Goldberg, V. T. Holliday, C. Reid Ferring. Earth Sciences and Archaeology. . Springer, 2001, . Retrieved 2012-06-28.S. L. Dyson, R. J. Rowland. Archaeology And History In Sardinia From The Stone Age To The Middle Ages: Shepherds, Sailors, & Conquerors. . University of Pennsylvania – Museum of Archaeology, 2007, . Retrieved 2012-06-28.
Obsidian provided the material to make cutting utensils or tools, although since other more easily obtainable materials were available, use was exclusive to the higher status of the tribe using "the rich man's flint". 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..Douglas Harper. etymology online. . Retrieved 2012-06-09. 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.T. A. H. Wilkinson. Early Dynastic Egypt: Strategies, Society and Security. .(secondary) [8]. + + [9]. + [10]. + [11]. . Melos and Lipari sources produced among the most widespread trading in the Mediterranean region as known to archaeology..
The Sar-i Sang mine in the mountains of Afghanistan was the largest source for trade of lapis lazuli.Toby A. H. Wilkinson. Early Dynastic Egypt: Strategies, Society and Security. Routledge, 8 August 2001. Retrieved 2012-07-03. The material was most largely traded during the Kassites of Babylonia beginning 1595 BCE. Routledge 2007. Retrieved 2012-07-03. .S. Bertman. Handbook To Life In Ancient Mesopotamia Oxford University Press, 2005. Retrieved 2012-07-03. .
Adam Smith traces the origins of commerce to the very start of transactions in prehistoric times. Apart from traditional self-sufficiency, trading became a principal cognitive skill for prehistoric people, who what they had for goods and services from each other. Anthropologists have found no evidence of barter systems that did not exist alongside systems of credit.
Ebla was a prominent trading-center during the third millennium BCE, with a network reaching into Anatolia and north Mesopotamia...Bamber Gascoigne et al. HistoryWorld.net.
Materials used for making jewelry were traded with Egypt from 3000 BCE. Long-range first appeared in the 3rd millennium BCE, when in Mesopotamia traded with the Harappan civilization of the Indus River. The Phoenicians were noted maritime traders, traveling across the Mediterranean Sea and as far north as Britain for sources of tin to manufacture bronze. For this purpose they established trading colony which the Greeks called emporia. Along the coasts 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.Jan David Bakker, Stephan Maurer, Jörn-Steffen Pischke and Ferdinand Rauch. 2021. "" Review of Economics and Statistics, 103 (4): 652–665.
The complaint tablet to Ea-nāṣir, dated 1750 BCE, documents the tribulations of a copper merchant at the time.
From the beginning of Greek civilization until the fall of the Roman Empire in the 5th century CE, a financially lucrative trade brought valuable spice to Europe from the far east, including India and China. Roman commerce allowed its empire to flourish and endure, notable by importing grain to Italy from Sicily and from Egypt. The latter Roman Republic and the Pax Romana of the Roman empire produced a stable and secure transportation-network that enabled the shipment of trade goods without fear of significant piracy, as Rome had become the sole effective sea-power in the Mediterranean with the conquest of Egypt and the near east.Pax Romana let average villagers throughout the Empire conduct day-to-day affairs without fear of armed attack.
In ancient Greece Hermes was the god of tradeP. D. Curtin. Cross-Cultural Trade in World History. . Cambridge University Press, 1984. . Retrieved 2012-06-25.N. O. Brown. Hermes the Thief: The Evolution of a Myth. . SteinerBooks, 1990. . Retrieved 2012-06-25. (commerce) and weights and measures.D. Sacks, O. Murray. A Dictionary of the Ancient Greek World. . Oxford University Press, 1997. . Retrieved 2012-06-26. In ancient Rome, Mercurius was the god of merchants, whose festival was celebrated by traders on the 25th day of the fifth month.Alexander S. Murray. Manual of Mythology. . Wildside Press LLC, 2008. . Retrieved 2012-06-25.John R. Rice. Filled With the Spirit. . Sword of the Lord Publishers, 2000. . Retrieved 2012-06-25. 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 of civility within the structures of functional community life.Johannes Hasebroek. Trade and Politics in Ancient Greece. . Biblo & Tannen Publishers, 1933. Retrieved 2012-07-04. .Cambridge dictionaries online.
The fall of the Roman empire and the succeeding Dark Ages brought instability to Western Europe 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, were a medieval guild or group (the precise meaning of the word is lost to history) of merchants who traded between the Christians in Europe and the of the Near East.
Sea-faring Southeast Asians also established trade routes with Southern India and Sri Lanka as early as 1500 BC, ushering an exchange of material culture (like , , sewn-plank boats, and paan) and (like , sandalwood, , and sugarcane); as well as connecting the material cultures of India and China. Indonesians, in particular were trading in spices (mainly cinnamon and Cassia bark) with East Africa using catamaran and 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, resulting in the Austronesian colonization of Madagascar by the first half of the first millennium AD. It continued up to historic times, later becoming the Maritime Silk Road. (1981). 9780890961070, Texas A&M University Press. ISBN 9780890961070
Trade networks reached north to Oasisamerica. There is evidence of established maritime trade with the cultures of northwestern South America and the Caribbean.
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 traded with peoples from Iceland, all along the western coast of France, and south to present-day Spain. for goods within late-medieval Europe]]
During the Middle Ages, Central Asia was the economic center of the world.Beckwith (2011), p. xxiv. The Sogdiana dominated the east–west trade-route known as the Silk Road from after the 4th century CE until the 8th century CE, with Suyab and Taraz ranking among their main centers in the north. Sogdians functioned as the main caravan merchants of Central Asia.
From the Middle Ages, the maritime republics, in particular Venice, Pisa and Genoa, played a key role in trade in the Mediterranean. From the 11th to the late-15th centuries, the Venetian Republic and the Republic of Genoa were major trade-centers. They dominated trade in the Mediterranean and the Black Sea, maintaining a trading monopoly between Europe and the Near East for centuries.
From the 8th to the 11th centuries, the and Varangians traded as they sailed from and to Scandinavia. Vikings sailed to Western Europe, while Varangians travelled to Kyivan Rus' and to the Black and Caspian Seas. The Hanseatic League, an alliance of trading cities, maintained a trade monopoly over most of Northern Europe and the Baltic region between the 13th and 17th centuries.
From 1070 onward, kingdoms in West Africa became significant members of global trade. This came initially through the movement of gold and other resources sent out by Muslims 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, or cowrie shells which were used locally as currency.
Founded in 1352, the Bengal Sultanate was a major trading nation in the world and often referred to by Europeans as the wealthiest country 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 , and advocating the free movement of goods. Trade in the East Indies was dominated by Portugal in the 16th century, the Dutch Republic in the 17th century, and the United Kingdom in the 18th century. The Spanish Empire developed regular trade links across both the Atlantic and the Pacific Oceans.
In 1776, Adam Smith published the paper An Inquiry into the Nature and Causes of the Wealth of Nations. It criticized Mercantilism, and argued that economic specialization could benefit nations just as much as firms. Since the division of labour was restricted by the size of the market, he said that countries having access to larger markets would be able to divide labour more efficiently and thereby become more productive. Smith said that he considered all rationalizations of import and export controls "dupery", which hurt the trading nation as a whole for the benefit of specific industries.
In 1799, the Dutch East India Company, formerly the world's largest company, became bankrupt, partly due to the rise of competitive free trade.
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 , 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 protectionism 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.
The lack of free trade was considered by many as a principal cause of the depression causing stagnation and inflation.(secondary) BBC – history. . Only during World War II did the recession end in the United States. Also during the war, in 1944, 44 countries signed the Bretton Woods Agreement, intended to prevent national trade barriers, to avoid depressions. It set up rules and institutions to regulate the international political economy: the International Monetary Fund and the International Bank for Reconstruction and Development (later divided into the World Bank $ Bank for International Settlements). These organizations became operational in 1946 after enough countries ratified the agreement. In 1947, 23 countries agreed to the General Agreement on Tariffs and Trade to promote free trade.(secondary) M. Smith. V. Gollancz, 1996. . .
The European Union became the world's largest exporter of manufactured goods and services, the biggest export market for around 80 countries.
Free trade advanced further in the late 20th century and early 2000s:
Judeao-Christian teachings do not prohibit trade. They do prohibit fraud and dishonest measures. Historically they forbade charging interest on loans. ..
Currency was introduced as standardised money to facilitate a wider exchange of goods and services. This first stage of currency, where metals were used to represent stored value, and symbols to represent commodities, formed the basis of trade in the Fertile Crescent for over 1500 years.
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).
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.
Empirical evidence for the success of trade can be seen in the contrast between countries such as South Korea, which adopted a policy of export-oriented industrialization, and India, which historically had a more closed policy. South Korea has done much better by economic criteria than India over the past fifty years, though its success also has to do with effective state institutions.
Importing firms voluntarily adhere to fair trade standards or governments may enforce them through a combination of employment law 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.
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