International Trade: A Brief Historical Tale

Trade is believed to have taken place throughout much of recorded human history. Trade formed between regions because different regions have a comparative advantage in the production of some commodities, or because the size of some regions allows for mass production. As such, trade between different locations benefits both locations. Before the formation of "Nation states", International Trade would have better described just trade over long distances; the sort of movement in goods which would represent international trade in today's modern world. Trade (also called commerce) is voluntary exchange of goods, services, or both. A market is a mechanism that allows trade. The original trade form was bartering, the direct exchange of goods and services. Modern -Day traders now generally negotiate through exchange, such as money. The invention of money greatly simplified and promoted trade. Trade between two trading partners is called bilateral trade, while trade between more than two trading partners is called multilateral trade.

Once International Trade began to become popular, however, it would be regulated by treaties drawn up between two nations spelling out rules and expectations. Mercantilism was the popular approach used by nations when it came to International Trade. Mercantilism is an economic theory that proposes that the the wealth of a nation depends on it's supply of capital or durable produced goods (often measured in gold bullion - see picture to the left), so the more capital available the richer the nation, and that the global volume of trade never changes. Mercantilism speculates that the government can increase capital with a positive balance of trade (exports minus imports) and increase the positive balance of trade with other nations by encouraging exports and discouraging imports, especially through use of tariffs. The economic policy based on these ideas is sometimes referred to as the "Mercantile System"(France was one of the nations that wholly embraced Mercantilism - see the picture of 1638 France at the height of Mercantilism).

For centuries, most nations had high tariffs and lots of restrictions based on the Mercantile System. In the 19th Century, the idea of Free Trade began to become popular, especially in Britain. Free Trade is an idealized economic theory in which trade of goods and services flows between nations unrestricted by governments. Since that time, the idea of Free Trade has remained considerably popular even up until the Present Day and several treaties have been drawn up in an attempt to create a globally regulated trade structure.

* www.Wikipedia.org