Trade is the voluntary exchange of goods In macroeconomics and accounting, a good is contrasted with a service. In this sense, a good is defined as a physical product, capable of being delivered to a purchaser and involves the transfer of ownership from seller to customer, say an apple, as opposed to an (intangible) service, say a haircut. A more general term that preserves the, services A service is the non-ownership equivalent of a good. Service provision has been defined as an economic activity that does not result in ownership and is claimed to be a process that creates benefits by facilitating either a change in customers, a change in their physical possessions, or a change in their intangible assets, or both. Trade is also called commerce Commerce is a division of trade or production which deals with the exchange of goods and services from producer to final consumer. It comprises the trading of something of economic value such as goods, services, information, or money between two or more entities. Commerce functions as the central mechanism which drives capitalism and certain other or transaction A transaction is an agreement, communication, or movement carried out between separate entities or objects, often involving the exchange of items of value, such as information, goods, services, and money. A mechanism that allows trade is called a market A market is any one of a variety of different systems, institutions, procedures, social relations and infrastructures whereby persons trade, and goods and services are exchanged, forming part of the economy. It is an arrangement that allows buyers and sellers to exchange things. Markets vary in size, range, geographic scale, location, types and. The original form of trade was barter Bartering is a medium in which goods or services are directly exchanged for other goods and/or services without a common unit of exchange . It can be bilateral or multilateral, and usually exists parallel to monetary systems in most developed countries, though to a very limited extent. Barter usually replaces money as the method of exchange in, the direct exchange of goods and services. Later one side of the barter were the metals, precious metals (poles, coins), bill, paper money. Modern traders instead generally negotiate through a medium of exchange, such as money Money is anything that is generally accepted as payment for goods and services and repayment of debts. The main functions of money are distinguished as: a medium of exchange, a unit of account, a store of value, and occasionally, a standard of deferred payment. Money is an abstraction, idea or concept, token instances of which are the physical. As a result, buying can be separated from selling, or earning. The invention of money (and later credit, paper money and non-physical money) greatly simplified and promoted trade. Trade between two traders is called bilateral trade, while trade between more than two traders is called multilateral trade.

Trade exists for man due to specialization and division of labor, most people concentrate on a small aspect of production, trading for other products. Trade exists between regions because different regions have a comparative advantage In economics, the law of comparative advantage refers to the ability of a party to produce a particular good or service at a lower opportunity cost than another party. It is the ability to produce a product most efficiently given all the other products that could be produced. It can be contrasted with absolute advantage which refers to the ability in the production of some tradable commodity, or because different regions' size allows for the benefits of mass production Mass production is the production of large amounts of standardized products, including and especially on assembly lines. The concepts of mass production are applied to various kinds of products, from fluids and particulates handled in bulk (such as food, fuel, chemicals, and mined minerals) to discrete solid parts (such as fasteners) to assemblies. As such, trade at market prices Market price is the economic price for which a good or service is offered in the marketplace. It is of interest mainly in the study of microeconomics. Market value and market price are equal only under conditions of market efficiency, equilibrium, and rational expectations between locations benefits both locations.

Trading can also refer to the action performed by traders In finance, a trader is someone who buys and sells financial instruments such as stocks, bonds and derivatives. A broker who simply fills buy or sell orders is not a trader, as they are merely executing instructions given to them and other market agents in the financial markets In economics, a financial market is a mechanism that allows people to easily buy and sell financial securities (such as stocks and bonds), commodities (such as precious metals or agricultural goods), and other fungible items of value at low transaction costs and at prices that reflect the efficient-market hypothesis.

Contents

History of trade

Part of a series Categories: Economic history | Ancient roads and tracks | Commercial item transport and distribution | Trade | Routes | International road networks on Trade routes A trade route is a logistical network identified as a series of pathways and stoppages used for the commercial transport of cargo. Allowing goods to reach distant markets, a single trade route contains long distance arteries which may further be connected to several smaller networks of commercial and non commercial transportation
Amber Road The Amber Road was an ancient trade route for the transfer of amber. As one of the waterways and ancient highways, for centuries the road led from Europe to Asia and back, and from northern Europe to the Mediterranean Sea · Hærvejen Hærvejen is the name given to an ancient trackway in Denmark and Schleswig-Holstein. The route passes from Viborg over Flensburg to Hamburg, the territory of which it entered at Ochsenzoll ("ox-toll", "toll" in the meaning of "customs") and where it connected with other roads. It has been known by several other names . Incense Route The Incense trade route or the Incense Road of Antiquity comprised a network of major ancient trading routes linking the Mediterranean world with Eastern sources of incense , stretching from Mediterranean ports across the Levant and Egypt through Arabia to India. The incense trade flourished from South Arabia to the Mediterranean between roughly
Kamboja-Dvaravati Route The Kamboja-Dvaravati Route was an ancient land trade route that was an important branch of the Silk Road. The route dates from the Indus Valley Civilization period in the 3rd millennium BCE, and was a major trading pathway through to the 1st millennium CE. It connected the Kamboja Kingdom in today's Afghanistan and Tajikstan to Dvaraka and other . King's Highway The King’s Highway was a trade route of vital importance to the ancient Middle East. It began in Egypt, and stretched across the Sinai Peninsula to Aqaba. From there it turned northward, leading to Damascus and the Euphrates River
Roman-India routes Roman trade with India through the overland caravan routes via Anatolia and Persia, though at a relative trickle comparative to later times, antedated the southern trade route via the Red Sea and Monsoons which started around the beginning of the Common Era following the reign of Augustus and his conquest of Egypt. Having extended the Empire's . Royal Road The Persian Royal Road was an ancient highway reorganized and rebuilt by the Persian king Darius I of the Achaemenid Empire in the 5th century BC. Darius built the road to facilitate rapid communication throughout his very large empire from Susa to Sardis: "centralized rule is the victim of time and distance". Robin Lane Fox has remarked
Silk Road The Silk Road is an extensive interconnected network of trade routes across the Asian continent connecting East, South, and Western Asia with the Mediterranean world, as well as North and Northeast Africa and Europe. In recent years, the Silk Road is again being used for the maritime and overland routes · Spice Route The spice trade is a commercial activity of ancient origin which involves the merchandising of spices, incense, herbs, drugs and opium. Civilizations of Asia were involved in spice trade from the ancient times, and the Greco-Roman world soon followed by trading along the Incense route and the Roman-India routes. The Roman-Indian routes were . Tea route The Ancient Tea Route was a network of mule caravan paths winding through the mountains of Yunnan Province in Southwest China. It is also referred to as the Southern Silk Road. From around a thousand years ago, the Ancient Tea Route was a trade link from Yunnan, one of the first tea-producing regions: to India via Burma; to Tibet; and to central
Varangians to the Greeks The trade route from the Varangians to the Greeks was a trade route that connected Scandinavia, Kievan Rus' and the Byzantine Empire. The route allowed traders along the route to establish a direct prosperous trade with Byzantium, and prompted some of them to settle in the territories of present-day Belarus, Russia and Ukraine · Via Maris Via Maris is the modern name for an ancient trade route, dating from the early Bronze Age, linking Egypt with the northern empires of Syria, Anatolia and Mesopotamia — modern day Iran, Iraq, Turkey and Syria
Triangular trade Triangular trade, or Triangle trade, is a historical term indicating trade among three ports or regions. The trade evolved where a region had an export commodity that was required in the region from which its major imports came. Triangular trade thus provided a mechanism for rectifying trade imbalances .Volga trade route In the Middle Ages, the Volga trade route connected Northern Europe and Northwestern Russia with the Caspian Sea, via the Volga River. The Rus used this route to trade with Muslim countries on the southern shores of the Caspian Sea, sometimes penetrating as far as Baghdad. The route functioned concurrently with the Dnieper trade route, better
Trans-Saharan trade Trans-Saharan trade is trade across the Sahara between Mediterranean countries and sub-Saharan Africa. While existing from prehistoric times, the peak of such trade extended from the eighth century until the late sixteenth century . Salt Route The Old Salt Route was a medieval trade route in northern Germany, one of the ancient network of salt roads which were used primarily for the transport of salt and other staples. In Germany it was referred to as Alte Salzstraße
Hanseatic League The Hanseatic League was an alliance of trading cities and their guilds that established and maintained a trade monopoly along the coast of Northern Europe, from the Baltic to the North Sea and inland, during the Late Middle Ages and early modern period (c.13th–17th centuries). The Hanseatic cities had their own law system and furnished their . Grand Trunk Road The Grand Trunk Road is one of South Asia's oldest and longest major roads. For several centuries, it has linked the eastern and western regions of the Indian subcontinent, running from Bengal, across north India, into Peshawar in Pakistan

Trade originated with the start of communication The history of communication dates back to the earliest signs of life. Communication can range from very subtle processes of exchange, to full conversations and mass communication. Human communication was revolutionized with speech about 200,000 years ago. Symbols were developed about 30,000 years ago, and writing about 7,000. On a much shorter in prehistoric Prehistory is a term used to describe the period before recorded history. Paul Tournal originally coined the term Pré-historique in describing the finds he had made in the caves of southern France.[citation needed] It came into use in French in the 1830s to describe the time before writing, and the word "prehistoric" was introduced into times. Trading was the main facility of prehistoric people, who bartered goods and services from each other before the innovation of the modern day currency. Peter Watson Peter Watson is an intellectual historian and author from London. He was educated at the University of Durham, University of London, and University of Rome. He was the deputy editor of New Society, and was on the "Insight" team of The Sunday Times for four years. He was also the New York correspondent of The Times, and has written for dates the history of long-distance commerce In the era before the rise of the nation state, the term 'international' trade cannot be literally applied, but simply means trade over long distances; the sort of movement in goods which would represent international trade in the modern world from circa Circa means "in approximately" (it literally means "around"), referring to a date. It is widely used in genealogy and historical writing, when the dates of events are approximately known 150,000 years ago.[1]

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 as an extrusive igneous rock. It is produced when felsic lava extruded from a volcano cools without crystal growth. Obsidian is commonly found within the margins of rhyolitic lava flows known as obsidian flows, where the chemical composition induces a high viscosity and polymerization degree and flint Flint is a hard, sedimentary cryptocrystalline form of the mineral quartz, categorized as a variety of chert. It occurs chiefly as nodules and masses in sedimentary rocks, such as chalks and limestones. Inside the nodule, flint is usually dark grey, black, green, white, or brown in color, and often has a glassy or waxy appearance. A thin layer on during the stone age The Stone Age is a broad prehistoric time period during which humans widely used stone for toolmaking. Materials used for creating jewelry Jewellery or jewelry (see American and British English spelling differences) is an item of personal adornment, such as a necklace, ring, brooch or bracelet, that is worn by a person. It may be made from gemstones or precious metals, but may be from any other material, and may be appreciated because of geometric or other patterns, or meaningful were traded with Egypt Egypt (pronounced /ˈiːdʒɪpt/ ; Arabic: مصر‎ Miṣr, pronounced [misˤɾ] ( listen); Egyptian Arabic: Maṣr [ˈmɑsˤɾ]; Coptic: Ⲭⲏⲙⲓ, kīmi; Egyptian: Kemet), officially the Arab Republic of Egypt, is a country mainly in North Africa, with the Sinai Peninsula forming a land bridge in Western Asia. Covering an area of about 1,010, since 3000 BC. Long-range trade routes first appeared in the 3rd millennium BC It represents a period of time in which imperialism, or the desire to conquer, grew to prominence, in the city states of the Middle East, but also throughout Eurasia, with Indo-European expansion to Anatolia, Europe and Central Asia. The civilization of Ancient Egypt rises to a peak with the Old Kingdom. World population is estimated to have, when Sumerians Sumer (sometimes spelled "Sumar") was a civilization and historical region in southern Iraq (Mesopotamia). It is the earliest known civilization in the world and is known as the Cradle of Civilization. The Sumerian civilization spanned over three-thousand years and began with the first settlement of Eridu in the Ubaid period (mid 6th in Mesopotamia Mesopotamia "land between the rivers" is a name for the Tigris–Euphrates region in the eastern Mediterranean, largely corresponding to Iraq, as well as northeastern Syria, some parts of southeastern Turkey, and some parts of the Khūzestān Province of southwestern Iran traded with the Harappan civilization The Indus Valley Civilization was a Bronze Age civilization (mature period 2600–1900 BCE) which centred mostly in the western part of the Indian Subcontinent or South Asia and flourished around the Indus river basin. Primarily centered along the Indus and the Punjab region, the civilization extended into the Ghaggar-Hakra River valley and the of the Indus Valley The Indus River is the longest river in Pakistan and the twenty-first largest river in the world in terms of annual flow. It is often considered the life-line of Pakistan. The Europeans used the name "India" for the entire Asian Subcontinent based on Indos, the Greek appellation of this river. The Phoenicians Phoenicia what is now modern day Lebanon, was an ancient civilization centered in the north of ancient Canaan, with its heartland along the coastal regions of modern day Lebanon, extending to parts of Israel, Syria and Palestine. Phoenician civilization was an enterprising maritime trading culture that spread across the Mediterranean during the were noted sea traders, traveling across the Mediterranean Sea The Mediterranean Sea is a sea connected to the Atlantic Ocean surrounded by the Mediterranean region and almost completely enclosed by land: on the north by Anatolia and Europe, on the south by Africa, and on the east by the Levant. The sea is technically a part of the Atlantic Ocean, although it is usually identified as a completely separate, and as far north as Britain Prehistoric Britain is the period between the arrival of the first humans in Great Britain and the start of recorded British history. The period prior to occupation by the genus Homo is part of the Geology of the British Isles. The history of Britain is conventionally reckoned to begin in AD 43 with the Roman invasion of Britain, though some for sources of tin to manufacture bronze. For this purpose they established trade colonies the Greeks called emporia. From the beginning of Greek civilization until the fall of the Roman empire in the 5th century, a financially lucrative trade brought valuable spice to Europe from the far east, including China. Roman commerce allowed its empire to flourish and endure. The Roman empire produced a stable and secure transportation network that enabled the shipment of trade goods without fear of significant piracy.

The fall of the Roman empire, and the succeeding Dark Ages brought instability to Western Europe and a near collapse of the trade network. Nevertheless some trade did occur. 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 Muslims of the Near East.

The Sogdians dominated the East-West trade route known as the Silk Road after the 4th century AD up to the 8th century AD, with Suyab and Talas ranking among their main centeres in the north. They were the main caravan merchants of Central Asia.

From the 8th to the 11th century, the Vikings and Varangians traded as they sailed from and to Scandinavia. Vikings sailed to Western Europe, while Varangians to Russia. The Hanseatic League was an alliance of trading cities that maintained a trade monopoly over most of Northern Europe and the Baltic, between the 13th and 17th centuries.

Vasco da Gama restarted the European Spice trade in 1498. Prior to his sailing around Africa, the flow of spice into Europe was controlled by Islamic powers, especially Egypt. The spice trade was of major economic importance and helped spur the Age of Exploration. Spices brought to Europe from distant lands were some of the most valuable commodities for their weight, sometimes rivaling gold.

In the 16th century, Holland was the centre 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 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 criticised Mercantilism, and argued that economic specialisation 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 rationalisations of import and export controls "dupery", which hurt the trading nation at the expense 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.

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:

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 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 industrialise 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.[2]

The Great 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. Only during the World War II the recession ended 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 and Bank for International Settlements). These organisations 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.

Free trade advanced further in the late 20th century and early 2000s:

Development of money

Main article: History 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 Mexico under Montezuma cocoa beans were money. [1]

Roman denarius

Currency was introduced as a 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.[3]

Ancient Sparta minted coins from iron to discourage its citizens from engaging in foreign trade.

The system of commodity money in many instances evolved into a system of representative money.

Current trends

Doha rounds

Main article: Doha round

The Doha round of World Trade Organization negotiations aims 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, and the major developing countries (represented by the G20). Agricultural subsidies are the most significant issue upon which agreement has been hardest to negotiate. By contrast, there was much agreement on trade facilitation and capacity building.

The Doha round began in Doha, Qatar, and negotiations have subsequently continued in: Cancún, Mexico; Geneva, Switzerland; and Paris, France and Hong Kong.

China

Beginning around 1978, the government of the People's Republic of China (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, that 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 the PRC joined the Asia-Pacific Economic Cooperation group, a trade-promotion forum. In 2001, it also joined the World Trade Organization. See also: Economy of the People's Republic of China

International trade

Main article: International trade
International Trade Series
International trade
History of international trade
Political views
Fair trade
Trade justice
Free trade
Protectionism
Economic integration
Preferential trading area
Free trade area
Customs union
Single market
Economic and monetary union
Complete economic integration
Other
Trade pact
Trade bloc
Trade creation
Trade diversion

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. In fact, it is probably the increasing prevalence of international trade that is usually meant by the term "globalization".

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 (although it has begun to open its economy, as of 2005). 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 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 for over 40 years.

Although there are usually few trade restrictions within countries, international trade is usually regulated by governmental quotas and restrictions, and often taxed by tariffs. Tariffs are usually on imports, but sometimes countries may impose export tariffs or subsidies. All of these are called trade barriers. If a government removes all trade barriers, a condition of free trade exists. A government that implements a protectionist policy establishes trade barriers.

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.[4]

Standards may be voluntarily adhered to by importing firms, or enforced by governments through a combination of employment and commercial law. Proposed and practiced fair trade policies vary widely, ranging from the commonly adhered to 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 fair trade labeling requirements.

Organization of trade

Patterns of organizing and administering trade include:

International organizations

Free trade areas

Notes

  1. ^ Watson, Peter (2005). Ideas : A History of Thought and Invention from Fire to Freud. HarperCollins. ISBN 0-06-621064-X. Introduction.
  2. ^ Price theory Milton Friedman
  3. ^ Gold was an especially common form of early money, as described in Origins of Money and of Banking Davies, Glyn (2002). Ideas : A history of money from ancient times to the present day. University of Wales Press. ISBN 0-7083-1717-0.
  4. ^ "Should trade be considered a human right?". COPLA. 09 December 2008. http://www.cop-la.net/en/node/523.
  5. ^ Correspondent. "India clears regional free trade". BBC News (BBC). http://news.bbc.co.uk/1/hi/world/south_asia/4566818.stm. Retrieved 2009-06-11.

References

External links

Look up trade in Wiktionary, the free dictionary.

Categories: International trade | Trade routes | Trade

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