
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 open system (systems theory), environment, is described by its boundaries, str ...
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
non-physical money have greatly simplified and promoted trade as buying can be separated from selling, or
earning. 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
Comparative advantage in an economic model is the advantage over others in producing a particular Goods (economics), good. A good can be produced at a lower relative opportunity cost or autarky price, i.e. at a lower relative marginal cost prior t ...
(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
Retail is the sale of goods and services to consumers, in contrast to wholesaling, which is the sale to business or institutional customers. A retailer purchases goods in large quantities from manufacturers, directly or through a wholes ...
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 under one roof, each area ("department") specializing in a product category. In modern major cities, the department store mad ...
,
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 as "on lin ...
or by
mail
The mail or post is a system for physically transporting postcards, letter (message), letters, and parcel (package), parcels. A postal service can be private or public, though many governments place restrictions on private systems. Since the mid ...
, in small or individual lots for direct
consumption or use by the purchaser.
Wholesale trade is the traffic in goods that are sold as merchandise to
retailers, industrial, commercial, institutional, or other professional
business
Business is the practice of making one's living or making money by producing or Trade, buying and selling Product (business), products (such as goods and Service (economics), services). It is also "any activity or enterprise entered into for ...
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
The Great Depression was a severe global economic downturn from 1929 to 1939. The period was characterized by high rates of unemployment and poverty, drastic reductions in industrial production and international trade, and widespread bank and ...
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.
Etymology
''Trade'' is from
Middle English
Middle English (abbreviated to ME) is a form of the English language that was spoken after the Norman Conquest of 1066, until the late 15th century. The English language underwent distinct variations and developments following the Old English pe ...
''trade'' ("path, course of conduct"), introduced into English by Hanseatic merchants, from
Middle Low German ''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 Eur ...
''trada'' ("spoor, track"), from
Proto-Germanic
Proto-Germanic (abbreviated PGmc; also called Common Germanic) is the linguistic reconstruction, reconstructed proto-language of the Germanic languages, Germanic branch of the Indo-European languages.
Proto-Germanic eventually developed from ...
''*tradō'' ("track, way"), and cognate with
Old English
Old English ( or , or ), 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 developed from the languages brought to Great Britain by Anglo-S ...
''tredan'' ("to tread").
''
Commerce
Commerce is the organized Complex system, system of activities, functions, procedures and institutions that directly or indirectly contribute to the smooth, unhindered large-scale exchange (distribution through Financial transaction, transactiona ...
'' 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 spoken by the Latins (Italic tribe), Latins in Latium (now known as Lazio), the lower Tiber area aroun ...
''commercium'', from ''cum'' "together" and ''merx'', "merchandise."
History
Prehistory
Trade originated from
human communication in
prehistoric times. Prehistoric peoples exchanged goods and services with each other in a
gift economy before the innovation of modern-day currency.
Peter Watson dates the
history of long-distance commerce to 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.

There is evidence of the exchange of
obsidian and
flint during the
Stone Age
The Stone Age was a broad prehistory, prehistoric period during which Rock (geology), stone was widely used to make stone tools with an edge, a point, or a percussion surface. The period lasted for roughly 3.4 million years and ended b ...
. Trade in obsidian is believed to have taken place in
New Guinea
New Guinea (; Hiri Motu: ''Niu Gini''; , fossilized , also known as Papua or historically ) is the List of islands by area, world's second-largest island, with an area of . Located in Melanesia in the southwestern Pacific Ocean, the island is ...
from 17,000 BCE.
Robert Carr Bosanquet investigated trade in the Stone Age by excavations in 1901. The first clear archaeological evidence of trade in manufactured goods is found 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 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.
[.] 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 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.
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
faculty for prehistoric people, who
bartered 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.
Ancient History
Mediterranean and Near East
The earliest evidence of writing is deeply bound up in trade, as
a system of clay tokens used for accounting – found in Upper Euphrates valley in Syria dated to the 10th millennium BCE – is one of the earliest versions of writing.
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, located in the historical region of southern Mesopotamia (now south-central Iraq), emerging during the Chalcolithic and Early Bronze Age, early Bronze Ages between the sixth and fifth millennium BC. ...
ians in
Mesopotamia
Mesopotamia is a historical region of West Asia situated within the Tigris–Euphrates river system, in the northern part of the Fertile Crescent. Today, Mesopotamia is known as present-day Iraq and forms the eastern geographic boundary of ...
traded with the
Harappan civilization of the
Indus Valley. The
Phoenicians were noted sea traders, traveling across the
Mediterranean Sea, and as far north as
Britain for sources of
tin to manufacture
bronze. 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.
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
A civilization (also spelled civilisation in British English) is any complex society characterized by the development of state (polity), the state, social stratification, urban area, urbanization, and symbolic systems of communication beyon ...
until the fall of the
Roman Empire
The Roman Empire ruled the Mediterranean and much of Europe, Western Asia and North Africa. The Roman people, Romans conquered most of this during the Roman Republic, Republic, and it was ruled by emperors following Octavian's assumption of ...
in the 5th century, 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. 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.
In ancient Greece
Hermes 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 extent varies depending on context.
The concept of "the West" appeared in Europe in juxtaposition to "the East" and originally applied to the Western half of 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
Jewish merchants who traded between the
Christians in Europe and the
Muslim
Muslims () are people who adhere to Islam, a Monotheism, monotheistic religion belonging to the Abrahamic religions, Abrahamic tradition. They consider the Quran, the foundational religious text of Islam, to be the verbatim word of the God ...
s of the Near East.
Indo-Pacific

The first true maritime trade network in the Indian Ocean was by the
Austronesian peoples of
Island Southeast Asia.
Initiated by the indigenous peoples of
Taiwan
Taiwan, officially the Republic of China (ROC), is a country in East Asia. The main geography of Taiwan, island of Taiwan, also known as ''Formosa'', lies between the East China Sea, East and South China Seas in the northwestern Pacific Ocea ...
and the
Philippines
The Philippines, officially the Republic of the Philippines, is an Archipelagic state, archipelagic country in Southeast Asia. Located in the western Pacific Ocean, it consists of List of islands of the Philippines, 7,641 islands, with a tot ...
, 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
Taiwanese indigenous peoples and processed mostly in the Philippines by indigenous Filipinos, especially in
Batanes,
Luzon
Luzon ( , ) is the largest and most populous List of islands in the Philippines, island in the Philippines. Located in the northern portion of the List of islands of the Philippines, Philippine archipelago, it is the economic and political ce ...
, and
Palawan. Some were also processed in
Vietnam
Vietnam, officially the Socialist Republic of Vietnam (SRV), is a country at the eastern edge of mainland Southeast Asia, with an area of about and a population of over 100 million, making it the world's List of countries and depende ...
, while the peoples of
Malaysia
Malaysia is a country in Southeast Asia. Featuring the Tanjung Piai, southernmost point of continental Eurasia, it is a federation, federal constitutional monarchy consisting of States and federal territories of Malaysia, 13 states and thre ...
,
Brunei,
Singapore,
Thailand
Thailand, officially the Kingdom of Thailand and historically known as Siam (the official name until 1939), is a country in Southeast Asia on the Mainland Southeast Asia, Indochinese Peninsula. With a population of almost 66 million, it spa ...
,
Indonesia
Indonesia, officially the Republic of Indonesia, is a country in Southeast Asia and Oceania, between the Indian Ocean, Indian and Pacific Ocean, Pacific oceans. Comprising over List of islands of Indonesia, 17,000 islands, including Sumatra, ...
, and
Cambodia also participated in the massive trading network. 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 societies of the region.
Sea-faring Southeast Asians also established trade routes with
Southern India and
Sri Lanka
Sri Lanka, officially the Democratic Socialist Republic of Sri Lanka, also known historically as Ceylon, is an island country in South Asia. It lies in the Indian Ocean, southwest of the Bay of Bengal, separated from the Indian subcontinent, ...
as early as 1500 BC, ushering an exchange of material culture (like
catamarans,
outrigger boats, sewn-plank boats, and paan) and
cultigens (like
coconut
The coconut tree (''Cocos nucifera'') is a member of the palm tree family (biology), 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, ...
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. Sanda ...
,
bananas, and
sugarcane
Sugarcane or sugar cane is a species of tall, Perennial plant, perennial grass (in the genus ''Saccharum'', tribe Andropogoneae) that is used for sugar Sugar industry, production. The plants are 2–6 m (6–20 ft) tall with stout, jointed, fib ...
); as well as connecting the material cultures of India and China.
Indonesians, in particular were trading in spices (mainly
cinnamon 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 (, , or , , ) or Arabia, is a peninsula in West Asia, situated north-east of Africa on the Arabian plate. At , comparable in size to India, the Arabian Peninsula is the largest peninsula in the world.
Geographically, the ...
, resulting in the Austronesian colonization of
Madagascar
Madagascar, officially the Republic of Madagascar, is an island country that includes the island of Madagascar and numerous smaller peripheral islands. Lying off the southeastern coast of Africa, it is the world's List of islands by area, f ...
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 5th to the late 15th centuries, similarly to the post-classical period of global history. It began with the fall of the Western Roman Empire and ...
, 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 status in the United Kingdom, cathedral city, unitary authority area and ceremonial county in South West England, the most populous city in the region. Built around the River Avon, Bristol, River Avon, it is bordered by t ...
traded with peoples from Iceland, all along the western coast of France, and south to present-day 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 from after the 4th century CE until the 8th century CE, with
Suyab and
Talas 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
Venice ( ; ; , formerly ) is a city in northeastern Italy and the capital of the Veneto Regions of Italy, region. It is built on a group of 118 islands that are separated by expanses of open water and by canals; portions of the city are li ...
,
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
Vikings 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 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 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; it has chemical symbol Au (from Latin ) and atomic number 79. In its pure form, it is a brightness, bright, slightly orange-yellow, dense, soft, malleable, and ductile metal. Chemically, gold is a transition metal ...
.
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
Muslim
Muslims () are people who adhere to Islam, a Monotheism, monotheistic religion belonging to the Abrahamic religions, Abrahamic tradition. They consider the Quran, the foundational religious text of Islam, to be the verbatim word of the God ...
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
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, commonly referred to in historiography as the Dutch Republic, was a confederation that existed from 1579 until the Batavian Revolution in 1795. It was a predecessor state of the present-day Netherlands ...
in the 17th century, and the
British in the 18th century. The
Spanish Empire developed regular trade links across both the Atlantic and the Pacific Oceans.
In 1776,
Adam Smith published the paper ''
An Inquiry into the Nature and Causes of the Wealth of Nations''. It criticized
Mercantilism, and argued that
economic specialization could benefit nations just as much as firms. Since the
division of labour was restricted by the size of the market, he said that countries having access to larger markets would be able to divide labour more efficiently and thereby become more
productive. Smith said that he considered all rationalizations of
import and
export controls "dupery", which hurt the trading nation as a whole for the benefit of specific industries.
In 1799, the
Dutch East India Company, formerly the world's largest company, became
bankrupt, partly due to the rise of competitive free trade.
19th century
In 1817,
David Ricardo,
James Mill and
Robert Torrens showed that free trade would benefit the industrially weak as well as the strong, in the famous theory of
comparative advantage
Comparative advantage in an economic model is the advantage over others in producing a particular Goods (economics), good. A good can be produced at a lower relative opportunity cost or autarky price, i.e. at a lower relative marginal cost prior t ...
. In
Principles of Political Economy and Taxation Ricardo advanced the doctrine still considered the most counterintuitive in
economics
Economics () is a behavioral science that studies the Production (economics), production, distribution (economics), distribution, and Consumption (economics), consumption of goods and services.
Economics focuses on the behaviour and interac ...
:
: ''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 was a severe global economic downturn from 1929 to 1939. The period was characterized by high rates of unemployment and poverty, drastic reductions in industrial production and international trade, and widespread bank and ...
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 (1 September 1939 – 2 September 1945) was a World war, global conflict between two coalitions: the Allies of World War II, Allies and the Axis powers. World War II by country, Nearly all of the wo ...
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 union, supranational political union, political and economic union of Member state of the European Union, member states that are Geography of the European Union, located primarily in Europe. The u ...
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, 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 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 Geography of the European Union, located primarily in Europe. The u ...
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 was created to facilitate
free trade, 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. Protectionist policies were particularly prevalent in the 1930s, between the
Great Depression
The Great Depression was a severe global economic downturn from 1929 to 1939. The period was characterized by high rates of unemployment and poverty, drastic reductions in industrial production and international trade, and widespread bank and ...
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 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 definition is that a currency is a ''system of money'' in common use within a specific envi ...
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.
Numismatist
A numismatist is a specialist, researcher, and/or well-informed collector of numismatics, numismatics/coins ("of coins"; from Late Latin , genitive of ). Numismatists can include collectors, specialist dealers, and scholar-researchers who use coi ...
s 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 Value (economics), economic value. Precious metals, particularly the noble metals, are more corrosion resistant and less reactivity (chemistry), chemically reac ...
.
[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 more fair 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.
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. With population of China, a population exceeding 1.4 billion, it is the list of countries by population (United Nations), second-most populous country after ...
(PRC) began an experiment in
economic reform. In contrast to the previous
Soviet
The Union of Soviet Socialist Republics. (USSR), commonly known as the Soviet Union, was a List of former transcontinental countries#Since 1700, transcontinental country that spanned much of Eurasia from 1922 until Dissolution of the Soviet ...
-style
centrally planned economy, the new measures progressively relaxed restrictions on farming, agricultural distribution and, several years later, urban enterprises and labor. The more market-oriented approach reduced inefficiencies and stimulated private investment, particularly by farmers, which led to increased productivity and output. One feature was the establishment of four (later five)
Special Economic Zones located along the South-east coast.
The reforms proved spectacularly successful in terms of increased output, variety, quality,
price and
demand. In real terms, the economy doubled in size between 1978 and 1986, doubled again by 1994, and again by 2003. On a real per capita basis, doubling from the 1978 base took place in 1987, 1996 and 2006. By 2008, the economy was 16.7 times the size it was in 1978, and 12.1 times its previous per capita levels. International trade progressed even more rapidly, doubling on average every 4.5 years. Total two-way trade in January 1998 exceeded that for all of 1978; in the first quarter of 2009, trade exceeded the full-year 1998 level. In 2008, China's two-way trade totaled US$2.56 trillion.
In 1991 China joined the
Asia-Pacific Economic Cooperation group, a trade-promotion forum. In 2001, it also joined the World Trade Organization.
International trade
International trade is the exchange of goods and services across national borders. In most countries, it represents a significant part of
GDP. While international trade has been present throughout much of history (see Silk Road,
Amber Road), its economic, social, and political importance have increased in recent centuries, mainly because of
Industrialization, advanced
transportation,
globalization,
multinational corporations, and
outsourcing.
Empirical evidence for the success of trade can be seen in the contrast between countries such as
South Korea, which adopted a policy of
export-oriented industrialization, and India, which historically had a more closed policy. South Korea has done much better by economic criteria than India over the past fifty years, though its success also has to do with effective state institutions.
Trade sanctions
Trade sanctions against a specific country are sometimes imposed, in order to punish that country for some action. An
embargo, a severe form of externally imposed isolation, is a blockade of all trade by one country on another. For example, the United States has had an
embargo against
Cuba
Cuba, officially the Republic of Cuba, is an island country, comprising the island of Cuba (largest island), Isla de la Juventud, and List of islands of Cuba, 4,195 islands, islets and cays surrounding the main island. It is located where the ...
for over 60 years. Embargoes are usually on a temporary basis. For example,
Armenia
Armenia, officially the Republic of Armenia, is a landlocked country in the Armenian Highlands of West Asia. It is a part of the Caucasus region and is bordered by Turkey to the west, Georgia (country), Georgia to the north and Azerbaijan to ...
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 goods, 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 party (law), parties Regulation, regulating the provision of paid Labour (human activity), labour services. Usually based on a employment contract, contract, one party, the employer, which might be a cor ...
and
commercial law
Commercial law (or business law), which is also known by other names such as mercantile law or trade law depending on jurisdiction; is the body of law that applies to the rights, relations, and conduct of Legal person, persons and organizations ...
. 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 organization
A non-governmental organization (NGO) is an independent, typically nonprofit organization that operates outside government control, though it may get a significant percentage of its funding from government or corporate sources. NGOs often focus ...
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.
See also
*
Commerce
Commerce is the organized Complex system, system of activities, functions, procedures and institutions that directly or indirectly contribute to the smooth, unhindered large-scale exchange (distribution through Financial transaction, transactiona ...
*
Business
Business is the practice of making one's living or making money by producing or Trade, buying and selling Product (business), products (such as goods and Service (economics), services). It is also "any activity or enterprise entered into for ...
*
Economics
Economics () is a behavioral science that studies the Production (economics), production, distribution (economics), distribution, and Consumption (economics), consumption of goods and services.
Economics focuses on the behaviour and interac ...
Notes
Bibliography
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*
*
*
* (Covers sea-trading over the whole world from ancient times),
* Rössner, Philipp
''Economy / Trade''EGO – European History Online Mainz, Germany
Institute of European History 2017, retrieved: March 8, 2021
pdf.
*
External links
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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'sPreferential Trade Agreement Database
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