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Information about Trade

This article is about economic exchange. For other uses, see Trade (disambiguation).


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A fruit stand at a market.


Trade is the voluntary exchange of goods, services, or both. Trade is also called commerce. A mechanism that allows trade is called a market. The original form of trade was barter, the direct exchange of goods and services. Modern traders instead generally negotiate through a medium of exchange, such as money. As a result, buying can be separated from selling, or earning. The invention of money (and 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 many reasons. Due to specialisation 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 the production of some tradable commodity, or because different regions' size allows for the benefits of mass production. As such, trade at market prices between locations benefits both locations.

Trading can also refer to the action performed by traders and other market agents in the financial markets.

History of trade

Main articles: History of trade and Trade route
Trade originated with the start of communication in prehistoric times. Trading was the main facility of prehistoric people, who bartered goods and services from each other when there was no such thing as the modern day currency. Peter Watson dates the history of long-distance commerce from circa 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 and flint during the stone age. Materials used for creating jewelry were traded with Egypt since 3000 BC. Long-range trade routes first appeared in the 3rd millennium BC, when Sumerians in Mesopotamia traded with the Harappan civilization of the Indus Valley. The Phoenicians were noted sea traders, travelling 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. 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 their empire to flourish and endure. Their widespread 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.

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The tales of Marco Polo's travels to the far east sparked an interest in the spice trade.
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.

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 might 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 anticipated New Trade Theory by 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.

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 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:
  • 1992 European Union lifted barriers to internal trade in goods and labour.
  • January 11994 NAFTA took effect
  • 1994 The GATT Marrakech Agreement specified formation of the WTO.
  • January 11995 World Trade Organization was created to facilitate free trade, by mandating mutual most favoured nation trading status between all signatories.
  • EC was transformed into the European Union, which accomplished the Economic and Monnetary 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.

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]

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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.[2]

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. In this system, the material that constitutes the money itself had very little intrinsic value, but none the less such money achieves significant market value through scarcity or controlled supply.

See also

Saran Seker

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. Previously the Communist nation had employed the Soviet-style centrally planned economy, with limited results. They would now utilise a more market-oriented economy, particularly in the so-called Special Economic Zones located in the Guangdong, Fujian, and Hainan. This reform has been spectacularly successful. By 2004, the GDP of the nation has quadrupled since 1978 and foreign trade exceeded $1 trillion US. As of 2005, China had become the 3rd largest exporter behind Germany and the United States. This occurred in spite of the backlash from the shootings following Tiananmen Square protests of 1989. The PRC maintains a $29 billion trade surplus, and is rapidly becoming a leader in industrial manufacturing.

In 1991 the PRC joined the Asia-Pacific Economic Cooperation group, a free-trade organisation. More recently, in 2001 they also joined the World Trade Organization.

See also: Economy of the People's Republic of China

International trade

Main article: International trade
Trade Series
 •  • [ e]
International trade
History of international trade
Free trade
Protectionism
Trade pact
Trade bloc
Preferential trading area
Free trade area
Customs union
Trade creation
Trade diversion
Monetary union
Common market
Economic and monetary union


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 Industrialisation, advanced transportation, globalisation, multinational corporations, and outsourcing. In fact, it is probably the increasing prevalence of international trade that is usually meant by the term "globalisation".

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 industrialisation, 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.

Leading IMPORTERS in world trade
in merchandise, data from WTO, 2005
RankCountryValue
bn US$		Share %annual %
change
1 United States1,732.416.114
2 Germany773.87.28
3 China660.06.118
4 Japan514.94.813
5 United Kingdom510.24.78
6 France497.94.66
7 Italy379.83.57
8 Netherlands359.13.312
9 Canada319.73.015
10 Belgium318.73.012


Leading EXPORTERS in world trade
in merchandise, data from WTO, 2005
RankCountryValue
bn US$		Share %annual %
change
1 Germany969.99.37
2 United States904.48.710
3 China762.07.328
4 Japan594.95.75
5 France460.24.42
6 Netherlands402.43.913
7 United Kingdom382.83.710
8 Italy367.23.54
9 Canada359.43.414
10 Belgium334.33.29


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 fairtrade labelling requirements.

Organization of trade

Patterns of organizing and administering trade include:

International organizations

Free trade areas

United Nations umbrella

Types of trade

Support for trade

See also

 •  • [ e]
International trade
Definitions
Organizations and policies
Schools of thought
Related issues

Notes

1. ^ Watson, Peter (2005). Ideas : A History of Thought and Invention from Fire to Freud. HarperCollins. ISBN 0-06-621064-X.  Introduction.
2. ^ 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. 

References

External links

Trade may also refer to:
  • Trade (financial instrument), buying, holding, selling, and short-selling of financial instruments
  • Trade (profession), a particular occupation or profession requiring a particular skill or craft; see also, trade fair or trade school

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A good or commodity in economics is any object or service that increases utility, directly or indirectly, not to be confused with good in a moral or ethical sense (see Utilitarianism and consequentialist ethical theory).
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Service can refer to:
  • Public services, services carried out with the aim of providing a public good
  • A penetrant, as defined by a building code
  • Service (Systems Architecture), the provision of a discrete business or technology function within a systems environment; i.

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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.
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market is a social arrangement that allows buyers and sellers to discover information and carry out a voluntary exchange of goods or services. It is one of the two key institutions that organize trade, along with the right to own property.
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Barter is a type of trade that doesn't use any medium of exchange, in which goods or services are exchanged for other goods and/or services. It can be bilateral or multilateral as trade.

Barter and money are different means of balancing an economic exchange.
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Money is any token or other object that functions as a medium of exchange that is socially and legally accepted in payment for goods and services and in settlement of debts.
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labour (or labor) is a measure of the work done by human beings. It is conventionally contrasted with such other factors of production as land and capital. There are theories which have created a concept called human capital (referring to the skills that workers possess, not
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In economics, David Ricardo is credited for the principle of comparative advantage to explain how it can be beneficial for two parties (countries, regions, individuals and so on) to trade if one has a lower relative cost of producing some good.
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For the American band of the 1970s and 1980s, see .
Mass production (also called flow production, repetitive flow production, or series production) is the production of large amounts of standardized products on production lines.
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Market price is an economic concept with commonplace familiarity; it is the price that a good or service is offered at, or will fetch, in the marketplace; it is of interest mainly in the study of microeconomics.
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In finance, a trader is someone who buys and sells financial instruments such as stocks, bonds and derivatives. Traders are professionals, casual investors or speculators in financial instruments traded in the stock markets, derivatives markets and commodity markets, comprising the
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In economics, a financial market is a mechanism that allows people to easily buy and sell (trade) 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
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history of international trade chronicles notable events that have affected the trade between various countries.

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
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Trade routes are logistical networks identified as a series of pathways and stoppages used for the commercial transport of cargo.[1] Connecting public markets to the producers of finished products, a single trade route contains long distance arteries which may further be
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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.
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Prehistory (Latin, præ = before Greek, ιστορία = history) is a term often used to describe the period before written history. Paul Tournal originally coined the term Pré-historique
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Peter Watson (b. 1943) is an intellectual historian and author from London, England. He was educated at the University of Durham, University of London, and University of Rome.
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history of international trade chronicles notable events that have affected the trade between various countries.

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
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Circa (often abbreviated c., ca., ca or cca. and sometimes italicized to show it is Latin) literally means "about" or "around". It is widely used in genealogy and historical writing, when the dates of events are approximately known.
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Obsidian is a type of naturally-occurring glass formed as an extrusive igneous rock. It is produced when felsic lava erupted from a volcano cools rapidly through the glass transition temperature and freezes without sufficient time for crystal growth.
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Flint (or flintstone) is a hard, sedimentary cryptocrystalline silicate form of the mineral quartz, categorized as a variety of chalcedony and broadly part of the mineral group known as silicas.
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The Stone Age is part of the history of the world that encompasses the first widespread use of technology in human evolution and the spread of humanity from the savannas of East Africa to the rest of the world.
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Jewellery (also spelled jewelry, see spelling differences) is a personal ornament, such as a necklace, ring, or bracelet, made from jewels, precious metals or other substance.
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Gumhūriyyat Miṣr al-ʿArabiyyah
Arab Republic of Egypt


Flag Coat of arms
Anthem
Bilady, Bilady, Bilady
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and
30th century
←← ↔ →→


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4th millennium BC - 3rd millennium BC - 2nd millennium BC The 3rd millennium BC spans the Early to Middle Bronze Age. 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
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Ancient Mesopotamia

Euphrates Tigris
Cities / Empires
Sumer: Uruk ' Ur ' Eridu
Kish ' Lagash ' Nippur
Akkadian Empire: Akkad
Babylon ' Isin ' Susa
Assyria: Assur Nineveh
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Mesopotamia was a cradle of civilization geographically located between the Tigris and Euphrates rivers, largely corresponding to modern-day Iraq. Sumer in southern Mesopotamia is commonly regarded as the world's earliest civilization.
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The Indus Valley Civilization (c. 3000–1500 BCE, flourished 2600–1900 BCE), abbreviated IVC, was an ancient civilization that flourished in the Indus and Ghaggar-Hakra river valleys primarily in what is now Pakistan and western India, extending westward into
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