Trade

• 1. Introduction

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  Trade is the transfer of goods and services from one person or entity to another, often in exchange for money. A clay tablet dated to 1750 BCE records a copper merchant's complaints, addressed to a man named Ea-nasir. That single grievance, scratched into clay nearly four thousand years ago, points to something far older than writing itself. Recent research finds early humans built trade networks for obsidian fifteen thousand years ago, and for ostrich egg shell beads fifty thousand years ago. So why did people who could mostly feed themselves bother to swap goods at all? Why did a glassy black stone travel nine hundred kilometres across the Mediterranean? And how did a practice rooted in prehistoric gift-giving grow into a system that today moves trillions of dollars across national borders? The answers run from Stone Age tool-makers to a Scottish economist who called import controls dupery.

• 2. Why Trade Exists

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  Specialization and the division of labor sit at the heart of trade in one modern view. Individuals and groups concentrate on a small aspect of production, then exchange their output for the other things they need. Different regions trade because each may hold a comparative advantage, real or perceived, in producing certain goods. A region's size can encourage mass production, and trading at market price between locations can benefit both sides. The spice trade and the grain trade have both historically shaped the development of a global, international economy. Trade also splits along scale. Retail trade is the sale of merchandise from a fixed location, online, or by mail, in small lots for direct use by the buyer. Wholesale trade moves goods sold to retailers, industrial and commercial users, or to other wholesalers. Trade between two traders is bilateral; trade among more than two is multilateral. The vocabulary itself carries history. The word trade entered English through Hanseatic merchants, from Middle Low German trade, meaning track or course.

• 3. Stone And Glass

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  Obsidian was the rich man's flint. Early traders carried it at distances of nine hundred kilometres within the Mediterranean region, even though easier materials were available, making it a marker of a tribe's higher status. Trade in obsidian is believed to have taken place in New Guinea from 17,000 BCE, and the earliest use of the stone in the Near East dates to the Lower and Middle paleolithic. Robert Carr Bosanquet investigated Stone Age trade through excavations in 1901. The first clear archaeological evidence of trade in manufactured goods turns up in south west Asia. Networks for obsidian existed around 12,000 BCE, and according to Zarins' study of 1990, Anatolia was the source primarily for trade with the Levant, Iran, and Egypt. The Melos and Lipari sources produced among the most widespread trading known to archaeology. Other materials had their own routes. The Sar-i Sang mine in the mountains of Afghanistan was the largest source of lapis lazuli, traded most heavily during the Kassite period of Babylonia, which began in 1595 BCE. Anthropologists have found no barter systems that existed without systems of credit alongside them.

• 4. Empires And Routes

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  A system of clay tokens used for accounting, found in the Upper Euphrates valley in Syria and dated to the 10th millennium BCE, ranks among the earliest surviving versions of writing. Ebla was a prominent trading center during the third millennium BCE, with a network reaching into Anatolia and north Mesopotamia. Long-range trade routes first appeared in the 3rd millennium BCE, when Sumerians in Mesopotamia traded with the Harappan civilization of the Indus Valley. The Phoenicians sailed across the Mediterranean Sea and as far north as Britain in search of tin to make bronze, establishing trading colonies the Greeks called emporia. From the start of Greek civilization until the fall of the Roman Empire in the 5th century CE, a lucrative trade carried valuable spice to Europe from India and China. The Pax Romana gave the empire a stable, secure transport network, free of significant piracy, after Rome conquered Egypt and the near east to become the Mediterranean's sole effective sea-power. Rome imported grain to Italy from Sicily and Egypt. In ancient Greece, Hermes was the god of trade and of weights and measures. In ancient Rome, Mercurius was the god of merchants, his festival celebrated on the 25th day of the fifth month. When the Roman empire fell, the Dark Ages nearly collapsed the western trade network, yet trade flourished among the kingdoms of Africa, the Middle East, India, China, and Southeast Asia.

• 5. Roads Of Jade And Spice

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  The Maritime Jade Road was one of the most extensive sea-based trade networks built around a single geological material in the prehistoric world. The Austronesian peoples of Island Southeast Asia created the first true maritime trade network in the Indian Ocean, initiated by the indigenous peoples of Taiwan and the Philippines. Jade mined in Taiwan was processed mostly in the Philippines, especially in Batanes, Luzon, and Palawan, with peoples from Vietnam, Malaysia, Brunei, Singapore, Thailand, Indonesia, and Cambodia also taking part. The network lasted at least 3,000 years, peaking from 2000 BCE to 500 CE, older than the Silk Road and the later Maritime Silk Road. Sea-faring Southeast Asians reached Southern India and Sri Lanka as early as 1500 BC, exchanging catamarans, outrigger boats, sewn-plank boats, and paan, along with cultigens like coconuts, sandalwood, bananas, and sugarcane. Indonesians traded spices, mainly cinnamon and cassia, with East Africa, sailing with the help of the Westerlies, a route that led to the Austronesian colonization of Madagascar by the first half of the first millennium AD. Inland, the Sogdians dominated the east-west Silk Road from after the 4th century CE until the 8th century CE, with Suyab and Talas among their main northern centers.

• 6. Merchant Republics And Leagues

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  Cogs and hulks carried cargo across the expansive trade network Western Europe built during the Middle Ages, when commerce grew through luxury goods sold at trade fairs. Wealth turned into movable capital, banking systems moved money on account across national boundaries, and hand-to-hand markets became a feature of town life under town authorities. The English port city of Bristol traded with Iceland, all along the western coast of France, and south to present-day Spain. The Venetian Republic and the Republic of Genoa were major trade centers from the 11th to the late-15th centuries, holding a trading monopoly between Europe and the Near East and dominating the Mediterranean and the Black Sea. From the 8th to the 11th centuries, 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, held a trade monopoly over most of Northern Europe and the Baltic between the 13th and 17th centuries. Radhanites, a medieval guild of Jewish merchants, traded between the Christians of Europe and the Muslims of the Near East, their exact name now lost to history.

• 7. Sails, Gold, And Spice

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  Portuguese explorer Vasco da Gama reached Calicut in 1498, sailing around the Cape of Good Hope at the southern tip of Africa to pioneer the European spice trade. Before then, Islamic powers, especially Egypt, controlled the flow of spice into Europe from India. Spices ranked among the most valuable commodities for their weight, sometimes rivaling gold, and the trade helped spur the Age of Discovery. From 1070 onward, West African kingdoms became significant in global trade, first through gold moved by Muslim traders on the Trans-Saharan network. Beginning in the 16th century, European merchants bought gold, spices, cloth, timber, and slaves from West African states in the triangular trade, often in exchange for cloth, iron, or cowrie shells used locally as currency. Founded in 1352, the Bengal Sultanate was a major trading nation, often called by Europeans the wealthiest country with which to trade. In the Kingdom of Kongo, economic historian Toby Green notes, giving more than receiving was a symbol of spiritual and political power and privilege, a philosophy that contrasted with Portuguese capital accumulation. Trade in the East Indies was dominated by Portugal in the 16th century, the Dutch Republic in the 17th, and the British in the 18th. In 1799 the Dutch East India Company, formerly the world's largest company, went bankrupt, partly due to the rise of competitive free trade.

• 8. The Argument Over Free Trade

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  Adam Smith published An Inquiry into the Nature and Causes of the Wealth of Nations in 1776, criticizing Mercantilism and arguing that economic specialization could benefit nations as much as firms. Because the division of labour was restricted by the size of the market, countries with access to larger markets could divide labour more efficiently and grow more productive. Smith considered all rationalizations of import and export controls dupery, harmful to the trading nation as a whole. In 1817, David Ricardo, James Mill, and Robert Torrens advanced the theory of comparative advantage. Ricardo's doctrine, still called the most counterintuitive in economics, held that when an inefficient producer sends what it makes best to a country able to produce it more efficiently, both countries benefit. John Stuart Mill then proved that a country with monopoly pricing power could manipulate the terms of trade through tariffs, inviting reciprocity, and he developed the infant industry argument that governments had a duty to protect young industries for a time. Milton Friedman later showed that tariffs might benefit a host country in a few circumstances, but never the world at large. Protectionism, the policy of restraining trade through tariffs and quotas, was particularly prevalent in the 1930s, between the Great Depression and the onset of World War II.