Trade involves the transfer of goods and services from one person or entity to another, often in exchange for money. Economists refer to asystem or network that allows trade as amarket.
Traders generally negotiate through a medium of credit or exchange, such as money. Though some economists characterizebarter (i.e. trading things without the use of money[1]) 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 ofcredit,paper money, andnon-physical money have greatly simplified and promoted trade asbuying can be separated fromselling, orearning. Trade between two traders is calledbilateral trade, while trade involving more than two traders is calledmultilateral trade.
In one modern view, trade exists due to specialization and thedivision of labor, a predominant form ofeconomic activity in which individuals and groups concentrate on a small aspect of production, but use their output in trade for other products and needs.[2] Trade exists between regions because different regions may have acomparative advantage (perceived or real) in the production of some trade-able goods – including the production of scarce or limited natural resources elsewhere. For example, different regions' sizes may encouragemass production. In such circumstances, trading atmarket price between locations can benefit both locations. Different types of traders may specialize in trading different kinds of goods; for example, thespice trade andgrain trade have both historically been important in the development of a global, international economy.
A busy market in Mile 12, Lagos, Nigeria
Retail trade consists of thesale of goods ormerchandise from a very fixed location[3] (such as adepartment store,boutique, orkiosk),online or bymail, in small or individual lots for directconsumption or use by the purchaser.[4]Wholesale trade is the traffic in goods that are sold as merchandise toretailers, industrial, commercial, institutional, or other professionalbusiness users, or to other wholesalers and related subordinated services.
Historically, openness tofree 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 theGreat Depression of the 1930s. Trade openness increased substantially again from the 1950s onward (albeit with a slowdown during theoil crisis of the 1970s). Economists andeconomic historians contend that current levels of trade openness are the highest they have ever been.[5][6][7]
In the Mediterranean region, the earliest contact between cultures involved members of the speciesHomo sapiens, principally using the Danube river, at a time beginning 35,000–30,000BP.[10][11][12][13][need quotation to verify]
There is evidence of the exchange ofobsidian andflint during theStone Age. Trade in obsidian is believed to have taken place inNew Guinea from 17,000 BCE.[15][16]
The earliest use of obsidian in the Near East dates to the Lower and Middle paleolithic.[17]
Robert Carr Bosanquet investigated trade in the Stone Age by excavations in 1901.[18][19] The first clear archaeological evidence of trade in manufactured goods is found in south west Asia.[20][21]
Archaeological evidence of obsidian use provides data on how this material was increasingly the preferred choice rather thanchert from the late Mesolithic to Neolithic, requiring exchange as deposits of obsidian are rare in the Mediterranean region.[22][23][24]
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".[25] Obsidian has held its value relative to flint.
Early traders traded Obsidian at distances of 900 kilometres within the Mediterranean region.[26]
Trade in the Mediterranean during the Neolithic of Europe was greatest in this material.[22][27] Networks were in existence at around 12,000 BCE[28] Anatolia was the source primarily for trade with the Levant, Iran and Egypt according to Zarins study of 1990.[29][30][31]Melos andLipari sources produced among the most widespread trading in the Mediterranean region as known to archaeology.[32]
Adam Smith traces the origins of commerce to the very start oftransactions inprehistoric times. Apart from traditionalself-sufficiency, trading became a principalfaculty for prehistoric people, whobartered 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.
The earliest evidence of writing is deeply bound up in trade, asa 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.[32][37][38][39]
A map of theSilk Road trade route between Europe and Asia
Materials used for creatingjewelry were traded with Egypt since 3000 BCE. Long-range trade routes first appeared in the 3rd millennium BCE, whenSumerians inMesopotamia traded with theHarappan civilization of theIndus Valley.[40] ThePhoenicians were noted sea traders, traveling across theMediterranean Sea, and as far north asBritain for sources oftin to manufacturebronze. For this purpose they established trade colonies the Greeks calledemporia.[41] 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.[42]
From the beginning of Greekcivilization until the fall of theRoman Empire in the 5th century, a financially lucrative trade brought valuablespice to Europe from the far east, including India and China.Roman commerce allowed its empire to flourish and endure. The latter Roman Republic and thePax Romana of the Roman empire produced a stable and secure transportation network that enabled the shipment of trade goods without fear of significantpiracy, as Rome had become the sole effective sea power in theMediterranean with the conquest of Egypt and the near east.[43]
In ancient GreeceHermes was the god of trade[44][45] (commerce) and weights and measures.[46] In ancient Rome,Mercurius was the god of merchants, whose festival was celebrated by traders on the 25th day of the fifth month.[47][48] 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 amodicum of civility within the structures of functional community life.[49][50]
The fall of the Roman empire and the succeedingDark Ages brought instability toWestern 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,Radhanites were a medieval guild or group (the precise meaning of the word is lost to history) ofJewish merchants who traded between theChristians in Europe and theMuslims of the Near East.[51]
The first true maritime trade network in the Indian Ocean was by theAustronesian peoples ofIsland Southeast Asia.[52] Initiated by the indigenous peoples ofTaiwan and thePhilippines, theMaritime 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 byTaiwanese indigenous peoples and processed mostly in the Philippines by indigenous Filipinos, especially inBatanes,Luzon, andPalawan. Some were also processed inVietnam, while the peoples ofMalaysia,Brunei,Singapore,Thailand,Indonesia, andCambodia 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 theSilk Road in mainland Eurasia and the laterMaritime 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.[53][54][55][56]
Tajadero oraxe money used as currency inMesoamerica. It had a fixed worth of 8,000cacao seeds, which were also used as currency.[61]
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.[62]
Trade networks reached north toOasisamerica. There is evidence of established maritime trade with the cultures of northwestern South America and the Caribbean.
During theMiddle Ages, commerce developed in Europe by trading luxury goods at trade fairs. Wealth became converted into movable wealth orcapital. 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 andHulks are two examples of such cargo ships.[63] Many ports would develop their own extensive trade networks. The English port city ofBristol traded with peoples from what is modern day Iceland, all along the western coast of France, and down to what is now Spain.[64]
During the Middle Ages, Central Asia was the economic center of the world.[65] TheSogdians dominated the east–west trade route known as theSilk Road after the 4th century CE up to the 8th century CE, withSuyab andTalas ranking among their main centers in the north. They were the maincaravan merchants of Central Asia.
From the Middle Ages, themaritime republics, in particularVenice,Pisa andGenoa, played a key role in trade along the Mediterranean. From the 11th to the late 15th centuries, theVenetian Republic and theRepublic of Genoa were major trade centers. They dominated trade in the Mediterranean and the Black Sea, having the monopoly between Europe and the Near East for centuries.[66][67]
From the 8th to the 11th century, theVikings andVarangians traded as they sailed from and to Scandinavia. Vikings sailed to Western Europe, while Varangians toKyivan Rus'. TheHanseatic League was an alliance of trading cities that maintained a trademonopoly over most ofNorthern Europe and theBaltic, between the 13th and 17th centuries.
Portuguese explorerVasco da Gama pioneered the Europeanspice trade in 1498 when he reachedCalicut after sailing around theCape 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 theAge of Discovery in Europe. Spices brought to Europe from the Eastern world were some of the most valuable commodities for their weight, sometimes rivalinggold.
Founded in 1352, theBengal Sultanate was a majortrading nation in the world and often referred to by Europeans as the wealthiest country with which to trade.[69]
In the 16th and 17th centuries, the Portuguese gained an economic advantage in theKingdom of Kongo due to different philosophies of trade.[68] Whereas Portuguese traders concentrated on the accumulation of capital, in Kongo spiritual meaning was attached to many objects of trade. According to economic historianToby Green, in Kongo "giving more than receiving was a symbol of spiritual and political power and privilege."[68]
In the 16th century, theSeventeen Provinces were the center of free trade, imposing noexchange controls, and advocating the free movement of goods. Trade in theEast Indies was dominated by Portugal in the 16th century, theDutch Republic in the 17th century, and theBritish in the 18th century. TheSpanish Empire developed regular trade links across both the Atlantic and the Pacific Oceans.
In 1776,Adam Smith published the paperAn Inquiry into the Nature and Causes of the Wealth of Nations. It criticizedMercantilism, and argued thateconomic specialization could benefit nations just as much as firms. Since thedivision 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 moreproductive. Smith said that he considered all rationalizations ofimport andexport controls "dupery", which hurt the trading nation as a whole for the benefit of specific industries.
In 1799, theDutch East India Company, formerly the world's largest company, becamebankrupt, partly due to the rise of competitive free trade.
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 monopolypricing power on the international market could manipulate theterms of trade through maintainingtariffs, and that the response to this might bereciprocity 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 theeconomic surplus of trade would accrue to a country followingreciprocal, rather than completely free, trade policies. This was followed within a few years by theinfant industry scenario developed by Mill promoting the theory that the government had the duty toprotect young industries, although only for a time necessary for them to develop full capacity. This became the policy in many countries attempting toindustrialize 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.[70]
TheGreat Depression 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.[71] Only duringWorld War II did the recession end in the United States. Also during the war, in 1944, 44 countries signed theBretton Woods Agreement, intended to prevent national trade barriers, to avoid depressions. It set up rules and institutions to regulate theinternational political economy: theInternational 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 theGeneral Agreement on Tariffs and Trade to promote free trade.[72]
TheEuropean Union became the world's largest exporter of manufactured goods and services, the biggest export market for around 80 countries.[73]
Today, trade is merely a subset within a complex system ofcompanies which try to maximize their profits by offeringproducts andservices to themarket (which consists both of individuals and other companies) at the lowestproduction cost. A system ofinternational trade has helped to develop the world economy but, in combination with bilateral or multilateral agreements to lowertariffs or to achievefree trade, has sometimes harmedthird-world markets for local products.
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.[74]
Free trade advanced further in the late 20th century and early 2000s:
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.
Intérêts des nations de l'Europe, dévélopés relativement au commerce (1766)2005, theCentral American Free Trade Agreement was signed; It includes the United States and the Dominican Republic.
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 oftariffs and restrictivequotas. Protectionist policies were particularly prevalent in the 1930s, between theGreat Depression and the onset of World War II.
Judeao-Christian teachings do not prohibit trade. They do prohibit fraud and dishonest measures. Historically they forbade charging interest on loans.[77][78]
The first instances of money were objects with intrinsic value. This is calledcommodity 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 theAztec Empire, under the rule ofMontezuma cocoa beans became legitimate currency.[79]
Currency was introduced as standardised money to facilitate a wider exchange of goods and services. This first stage of currency, where metals were used to represent stored value, and symbols to represent commodities, formed the basis of trade in the Fertile Crescent for over 1500 years.
Numismatists have examples of coins from the earliest large-scale societies, although these were initially unmarked lumps ofprecious metal.[80]
The Doha round of World Trade Organization negotiations aimed to lowerbarriers to trade around the world, with a focus on makingtrade more fair fordeveloping countries. Talks have been hung over a divide between the richdeveloped countries, represented by theG20, 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 ontrade facilitation and capacity building. The Doha round began inDoha, Qatar,[81] and negotiations were continued in:Cancún, Mexico;Geneva, Switzerland; andParis, France, and Hong Kong.[citation needed]
Beginning around 1978, the government of thePeople's Republic of China (PRC) began an experiment ineconomic reform. In contrast to the previousSoviet-stylecentrally 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.[82]
The reforms proved spectacularly successful in terms of increased output, variety, quality,price anddemand. 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.[83]
Empirical evidence for the success of trade can be seen in the contrast between countries such asSouth Korea, which adopted a policy ofexport-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.[86]
Trade sanctions against a specific country are sometimes imposed, in order to punish that country for some action. Anembargo, 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 anembargo againstCuba for over 60 years.[87] Embargoes are usually on a temporary basis. For example,Armenia put a temporary embargo on Turkish products and bans any imports from Turkey on December 31, 2020. The situation is prompted by food security concerns given Turkey's hostile attitude towards Armenia.[88]
The "fair trade" movement, also known as the "trade justice" movement, promotes the use oflabour,environmental andsocial standards for the production of goods, particularly those exported from theThird andSecond Worlds to theFirst World. Such ideas have also sparked a debate on whether trade itself should be codified as ahuman right.[89]
Importing firms voluntarily adhere to fair trade standards or governments may enforce them through a combination ofemployment andcommercial law. Proposed and practiced fair trade policies vary widely, ranging from the common prohibition ofgoods made usingslave labour to minimumprice 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.[90][91] As such, it is a form of Protectionism.
^Samuelson, P. (1939). "The Gains from International Trade".The Canadian Journal of Economics and Political Science.5 (2):195–205.doi:10.2307/137133.JSTOR137133.
^Comparepeddling and other types of retail trade:Hoffman, K. Douglas, ed. (2005).Marketing principles and best practices (3 ed.). Thomson/South-Western. p. 407.ISBN978-0-324-22519-8.Archived from the original on 22 October 2022. Retrieved3 May 2018.Five types of nonstore retailing will be discussed: street peddling, direct selling, mail-order, automatic-merchandising machine operators, and electronic shopping.
^Abulafia, D.; Rackham, O.; Suano, M. (2011) [2008],The Mediterranean in History, Getty Publications,ISBN978-1-60606-057-5,archived from the original on 11 May 2021, retrieved7 September 2019,[...] the Danube played an extremely important role in connecting East and West before the Mediterranean became the main link between these regions. This period runs for about 25,000 years, from 35,000/30,000 to around 10,000/8,000 before the present.
^Compare:Barbier, Edward (2015). "The Origins of Economic Wealth".Nature and Wealth: Overcoming Environmental Scarcity and Inequality. Springer.ISBN978-1137403391.Archived from the original on 5 February 2021. Retrieved7 September 2019.Even before domestication of plants and animals occurred, long-distance trading networks were prominent among some hunter-gathering societies, such as the Natufians and other sedentary populations who inhabited the Eastern Mediterranean around 12,000–10,000 BC.
^Smith, Richard L. (2008).Premodern Trade in World History. Themes in World History. Routledge. p. 19.ISBN978-1134095803.Archived from the original on 22 May 2020. Retrieved7 September 2019.[...] modern observers have sometimes referred to obsidian as 'rich man's flint.'
^Williams-Thorpe, O. (1995). "Obsidian in the Mediterranean and the Near East: A Provenancing Success Story".Archaeometry.37 (2):217–48.doi:10.1111/j.1475-4754.1995.tb00740.x.
^McIntosh, Jane R. (2008).The ancient Indus valley: new perspectives. ABC-CLIO's understanding ancient civilizations. Santa Barbara, California: ABC-CLIO. pp. 190–191.ISBN978-1-57607-907-2.
^Dikov, Ivan (12 July 2015)."Bulgarian Archaeologists To Start Excavations of Ancient Greek Emporium in Thracians' the Odrysian Kingdom".Archaeology in Bulgaria. Archived fromthe original on 12 July 2015. Retrieved28 October 2010.An emporium (in Latin; "emporion" in Greek) was a settlement reserved as a trading post, usually for the Ancient Greeks, on the territory of another ancient nation, in this case, the Ancient Thracian Odrysian Kingdom (5th century BC – 1st century AD), the most powerful Thracian state.
^Tsang, Cheng-hwa (2000), "Recent advances in the Iron Age archaeology of Taiwan", Bulletin of the Indo-Pacific Prehistory Association, 20: 153–158,doi:10.7152/bippa.v20i0.11751.
^Turton, M. (2021). Notes from central Taiwan: Our brother to the south. Taiwan's relations with the Philippines date back millennia, so it's a mystery that it's not the jewel in the crown of the New Southbound Policy. Taiwan Times.
^Everington, K. (2017). Birthplace of Austronesians is Taiwan, capital was Taitung: Scholar. Taiwan News.
^Bellwood, P., H. Hung, H., Lizuka, Y. (2011). "Taiwan Jade in the Philippines: 3,000 Years of Trade and Long-distance Interaction". Semantic Scholar.
^Doran, Edwin Jr. (1974)."Outrigger Ages".The Journal of the Polynesian Society.83 (2):130–140.Archived from the original on 8 June 2019. Retrieved14 July 2019.
^Mahdi, Waruno (1999). "The Dispersal of Austronesian boat forms in the Indian Ocean". In Blench, Roger; Spriggs, Matthew (eds.).Archaeology and Language III: Artefacts languages, and texts. One World Archaeology. Vol. 34. Routledge. pp. 144–179.ISBN0415100542.
^Doran, Edwin B. (1981).Wangka: Austronesian Canoe Origins. Texas A&M University Press.ISBN978-0890961070.
^abcdefGreen, Toby (2019).A Fistful of Shells: West Africa from the Rise of the Slave Trade to the Age of Revolution. Chicago, Illinois: University of Chicago Press.ISBN978-0226644578.OCLC1051687994.
^Nanda, J. N. (2005).Bengal: the unique state. Concept Publishing Company. p. 10.ISBN978-81-8069-149-2.Bengal [...] was rich in the production and export of grain, salt, fruit, liquors and wines, precious metals and ornaments besides the output of its handlooms in silk and cotton. Europe referred to Bengal as the richest country to trade with.
^Nomani & Rahnema (1994), p. ?. "I want nine out of ten people from my Ummah (nation) as traders" and "Trader, who did trading in truth, and sold the right quantity and quality of goods, he will stand along with Prophets and Martyrs, on Judgment day".
^Quran4:29: "O believers! Do not devour one another’s wealth illegally, but rather trade by mutual consent." Quran2:275: "But Allah has permitted trading and forbidden interest."
^Davenport, Eileen; Low, Will (1 January 2012). "The labour behind the (Fair Trade) label".Critical Perspectives on International Business.8 (4):329–348.doi:10.1108/17422041211274200.ISSN1742-2043.
Beckwith, Christopher I (2011) [2009].Empires of the Silk Road: A History of Central Eurasia from the Bronze Age to the Present. Princeton: University Press.ISBN978-0-691-15034-5.
Nomani, Farhad; Rahnema, Ali (1994).Islamic Economic Systems. New Jersey: Zed Books.ISBN978-1-85649-058-0.
Paine, Lincoln (2013).The Sea and Civilisation: a Maritime History of the World. Atlantic. (Covers sea-trading over the whole world from ancient times),
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