TRADE

The geographical position of the Middle East has made the region part of far-flung trade networks, as both market and supplier, since antiquity.

The Middle East is the cradle of civilization, the place where agriculture and urban life are thought to have originated. The region was economically vibrant and a center of trade in early antiquity, and it connected far-flung markets across the Eastern Hemisphere during Roman times. The collapse of the Roman Empire fragmented governing institutions in northwestern Europe, dividing its markets from the rest of the world. The rise of Islam during the seventh century c.e. and its subsequent diffusion spread Arabic and a common legal system (shariʿa) across the southern Mediterranean and as far east as what now is Indonesia. Trade was rein-vigorated and, following the Mongol conquest and consolidation in east and west Asia, overland trade between the Middle East and China along the Silk Road also thrived.

Trade before the Modern Period

Before the modern period, the Middle East exported mainly high-quality manufactured products to Europe and Africa, with which it generally enjoyed a trade surplus. Raw materials and manufactured products went to Asia but, like others trading with this region, Middle Eastern merchants often ran deficits with their east Asian partners.

The area around the Indian Ocean was a main market and supplier of goods to the Middle East. Pepper and spices came from the East Indies and were re-exported as well as consumed locally. Teak for ship construction and other tropical woods were imported from India; porcelain and silk came from China. After silkworms were smuggled out of China during the sixth century c.e., the Middle East also became a producer and exporter of silk cloth. Arab and Iranian shipping dominated the Indian Ocean as far as the Straits of Malacca, where Chinese junks took over, sailing to Guangzhou (Canton) and other Chinese ports to sell carpets, linens, cotton and wool fabrics, metalwork, iron ore, pearls, and ivory.

Overland trade with the Baltic region went via the Volga and other Russian rivers. Along these routes, Middle Eastern traders exchanged manufactured goods for furs, wax, amber, and slaves. The ancient sea trade with East Africa expanded greatly with the spread of Islam and with the establishment of branches of family trading concerns by Arabs and Iranians down the East African coast. Middle Eastern traders exchanged cloth, glassware, weapons, and trinkets for Africa's wood, ivory, palm oil, and gold. Slaves were sent from Africa to the Middle East in large numbers, most remaining in the countries bordering the Red Sea and Persian Gulf, but some going as far as India and China. The trans-Sahara trade blossomed following the introduction of caravans between Egypt, North African ports, and tropical Africa, exchanging African gold, ivory, pepper, and slaves for salt, weapons, copper, textiles, glass-ware, and trinkets.

Trade with Europe eventually would come to dominate Middle Eastern exchange relations, but Europe's lagging development following the sack of Rome confined most European exports to the Middle East to raw materials such as wood, iron, furs, and slaves. In exchange, Europeans received the high-quality manufactures for which the Middle East had long been famous: glassware, metal goods, and fabrics. As corruption eroded Egypt's competitive position during the fourteenth century, manufactures brought by Venetian traders began to displace local products. During the first half of the sixteenth century, Portugal invaded and took control of the Indian Ocean trade, constructing fortifications in ports like Bahrain and charging protection rents to merchants for allowing their goods to pass. The Dutch then displaced the Portuguese from much of their empire, and Portuguese interference with
local shipping waned. Shipbuilding thrived in the Persian Gulf during the eighteenth century, and merchant families grew rich from pearling and long-distance trade. Gulf-based merchants carried a wide variety of goods—including live horses—east to South Asia and west to the African coast. Their predominance in their own region was challenged and gradually eroded during the nineteenth century. In mid-century, competition from British steam-powered ships began taking business from Arab shippers who relied on wind-powered dhows and boums. Near the end of the century, the British navy established protectorates over the smaller emi-rates near the mouth of the Gulf and soon dominated that sea.

During the nineteenth century, the terms of trade between the Middle East and Europe gradually shifted as Europeans penetrated Middle Eastern markets and pressed governments for changes favoring imports over articles produced locally. High value-added products (i.e., manufactured or processed goods rather than raw materials) increasingly came from Europe rather than being produced at home. For example, Morocco had been famous for its refined sugar, but its Middle Eastern markets were overtaken by sugar from southern Europe and by sugar from the New World that had been refined in Europe. A similar displacement occurred later with respect to coffee. Manufactured goods were similarly displaced as fine silk and woolen fabrics, high-quality paper, and glass, which formerly had gone from the Middle East to Europe, began to flow from Europe to the Middle East. New European products, such as clocks, spectacles, and weapons, entered Middle Eastern markets without local competition. Although yarn exports to Europe continued until the end of the eighteenth century, it was clear by the time of the industrial revolution that the Middle East was becoming a peripheral actor in world trade, exporting mostly primary products and importing mostly manufactured and processed goods from the industrializing European core.

Shifting trade patterns accelerated during the nineteenth-century era of globalization, which ended with World War I. Total world trade rose from some $1.7 billion in 1800 to $42 billion in 1913. During this period, the share of world trade going to the Middle East was halved, falling from about 3 percent in 1800 to 1.5 percent in 1913. The slope of the upsurge in trade reflected European investment in steamships and railroads, and what economists like John Gallagher and Ronald Robinson called "the imperialism of free trade": in the name of open markets, Britain forced weaker trading partners to abolish monopolies and local trade regulations and to adopt low uniform tariffs on imports. Referred to as capitulations, these institutional changes ensured that the market effects of competition from an industrializing Europe on artisan production in the Middle East (and elsewhere) would not be moderated by the state. This virtually guaranteed that the region would be incorporated into the global trading system as a dependent exporter of raw materials: tobacco, dried fruits, and cotton from Turkey; silk and opium from Iran; wheat, barley, and dates from Syria and Iraq; silk from Lebanon; oranges from Palestine; and coffee beans from Yemen.

Foreign investment and loans were key elements changing the terms of trade and fostering trade dependency. Egyptian overinvestment in cotton production during the U.S. Civil War displaced local food production and, when cotton prices collapsed, increased Egypt's foreign debt. The protection of foreign creditors served as a justification for imposing on the Egyptian government a joint British-French commission in 1876. Britain used this
opportunity to take control of the Suez Canal and, in 1882, of Egypt itself. Trade deficits combined with heavy foreign borrowing caused the Ottoman Empire to declare bankruptcy in 1875 and, six years later, led to the establishment of the Ottoman Debt Commission. This essentially parallel ministry of finance represented the interests of the Ottoman Empire's creditors, and imposed an early version of conditionality (i.e., the surrender of control over fiscal policy to an agent of foreign creditors) to ensure that they would be repaid.

The Modern Period

The discovery of oil in Iran at the turn of the twentieth century confirmed the position of the Middle East as a supplier of raw materials, defining its position in world trade for the next century. Competition between France and Britain for control of Iraqi oil influenced the way the defeated Ottoman Empire was divided into mandates governed by these two victors after World War I. During the interwar period, oil was found in Bahrain, Kuwait, and Saudi Arabia, while the Iraqi oil industry became the balance wheel regulating the development of production capacity in the region via the Red Line Agreement of 1928. During World War II, trade volume declined regionally and globally owing to blockades, dangers to shipping, and shut-in oil production. Afterward, the production and sale of petroleum came to dominate interregional trade. Starting in 1960, the Organization of Petroleum

Exporting Countries (OPEC) struggled to reverse the unfavorable terms of trade that had beset its Middle Eastern members since the nineteenth century by halting and then reversing the incipient decline in real oil prices that threatened to erode oil-exporter income.

Oil exports altered economic positions intra-regionally. Until 1948, Egypt and Turkey accounted for the majority of Middle Eastern trade. After that, the oil-producing countries captured an enormous proportion of total regional trade, especially exports. Attempts to foster intraregional trade through common markets and regional organizations such as the Gulf Cooperation Council mostly foundered on the shoals of economies deformed by dependent development—that is, development strategies emphasizing oil and gas production rather than goods and services aimed primarily at domestic and regional markets. Local industrial development also was affected by what is sometimes called "Dutch disease" (because the same situation affected Holland during the heyday of its exploitation of the riches of the East Indies), oil export–induced monetary inflation that decreased the competitiveness of local goods as compared to imports. Dutch disease makes domestic production uncompetitive, even at home, further discouraging economic diversification.

The Arab League trade boycott, imposed against Israel after its creation in 1948 and still in effect in a number of Arab countries, was another factor retarding the development of local industries in Arab countries; it also deprived Israeli farms and factories of a nearby market for their products and increased Israel's already massive dependence on foreign assistance. Together, these outcomes increased the power of government over civil society, both in Israel and in the Arab states, by diminishing the capacity of domestic business interests to exercise checks on the state. The boycott also aggravated a conflict that all the region's governments used to their advantage to discourage if not repress domestic dissent.

Middle Eastern trade oscillates in response to political crises and wars, many connected to the Arab–Israeli conflict. In general, crises tend to depress Middle Eastern oil exports, either through oil embargoes or as a result of war-induced oil price increases. For example, the global position of Arab oil exporters was gravely damaged by consumer efforts to find other sources of hydrocarbon imports following the 1973 Arab-Israel war and the Arab oil embargo, which enabled OPEC to raise crude oil prices to what then were unheard-of levels. Ten years later, the volume of oil exports from OPEC countries was half what it had been in 1973. (Oil income did not fall in proportion because of further oil price increases during that period.) Other conflicts, such as the revolution in Iran and the subsequent U.S. trade sanctions against it, and the three Gulf Wars in which Iraq was a major belligerent (1980–1988; 1990–1991; and 2003), also affected regional trade. The first Gulf War, between Iran and Iraq, was fought in part with oil exports. Iraqi exports were occasionally halted by Iranian attacks but Iraq continued to receive oil income from Saudi and Kuwaiti sales of oil from the former Neutral Zone. Meanwhile, Iran suffered under U.S. trade sanctions, which depressed its export income.

As regards the balance of trade overall, oil-exporting-country revenues usually have exceeded the cost of imported goods and services. Non-oil exporters, such as Egypt, Israel, Syria, Jordan, Yemen, and Turkey, ran trade deficits, some incurred to pay for oil imports. The deficits were covered by foreign aid and loans, leading to large foreign debts. These macro-level effects mask significant changes in non-oil-exporting economies. For most, the composition of exports has changed. Traditional raw-material exports like cotton and grain have declined owing to greater processing and consumption at home. A growing export trade in manufactured goods, such as high-tech equipment and finished textiles, is bringing new trade income to Israel, Turkey, Egypt, Syria, and Lebanon. On the import side, rising incomes from oil exports have trickled down to non-oil-exporting neighbors via labor migration and, prior to the collapse in oil prices in 1986, through intraregional foreign aid. This allowed imports of foodstuffs, durable consumer goods, industrial and transport machinery, and raw materials to rise.

The most disturbing component of Middle Eastern trade is armaments. Higher oil prices in the 1970s were offset by the aggressive marketing of weapons to Middle Eastern Muslim countries. The motives of arms buyers were diverse. Some, such as Iran, Iraq, and Saudi Arabia, sought arms from external patrons as a way to assert their political and religious authority in the region. Others felt themselves to be at a disadvantage as compared to their neighbors, especially Israel, with its virtually First World military industries and its ability to acquire weapons and advanced military technologies, mostly free, from the United States. The overall decline in the world economy following the 1973 Arab-Israeli war made trade-surplus oil exporters attractive targets of marketing efforts by arms exporters from throughout the world. Britain, France, China, and Russia joined the United States in building arms export markets in the Middle East. Beginning in the 1980s, when U.S. policy shifted toward greater marketization of supporting strategic industries by encouraging them to market weapons abroad, then expanding during the 1990s, following the collapse of the Soviet Union, even materials for so-called weapons of mass destruction became widely available for import into the Middle East and elsewhere.

see also gulf cooperation council; organization of petroleum exporting countries (opec); red line agreement.

Bibliography

Gallagher, John, and Robinson, Ronald. "The Imperialism of Free Trade." Economic History Review, 2d series, no. 6 (1953): 1–15.

Issawi, Charles. An Economic History of the Middle East and North Africa. New York: Columbia University Press, 1982.

Nitzan, Jonathan, and Bichler, Shimshon. The Global Political Economy of Israel. Sterling, VA; London: Pluto Press, 2002.

Schwartz, Herman M. States Versus Markets: The Emergence of a Global Economy. 2d edition. New York and Basingstoke, U.K.: Palgrave, 2000.

charles issawi
updated by mary ann tÉtreault

Trade

THE PATTERN OF TRADE

GAINS FROM TRADE

BIBLIOGRAPHY

Trade is the exchange of goods between locations. For example, bananas from Honduras exchange for automobiles from the United States. International trade between locations in different nations receives far more attention than does domestic trade because nations discriminate against foreigners with international policies that are contested. For example, in 2005, the U.S. Congress ratified a Central American Free Trade Agreement in a hotly contested vote.

Trade also means the exchange of services of factors of production such as labor and capital. For example, Bangalore call centers provide telemarketing labor to U.S. marketers, while U.S. computer engineers maintain hardware and software in Bangalore. Trade in services is quantitatively important, but the distinction between trade in services and trade in goods is often not important. For many purposes, the distinction between international and intranational trade is similarly irrelevant. This essay uses the term trade to mean international trade in goods, but much of its content also applies to intranational trade in goods and services. The distinction is crucial when international trade policy—discrimination against foreigners—is important. (Domestic trade is affected by domestic policy, but seldom controversially.)

The key questions are: What explains the pattern of trade? Is liberal trade policy a good thing? The householder’s answer to the first question is that nations import goods that are unavailable domestically or are cheaper than potential domestic substitutes and export goods that are unavailable or more expensive abroad. There are gains from this exchange, to answer the second question—voluntary transactions must be beneficial or they would not be made, once familiarity acquaints participants with exchange.

Economic analysis embeds the householder’s insight in an equilibrium system. Crucially, householders take prices as given in their decisions. When all households together react to a new market opportunity, they will necessarily have an impact on prices. International trade theory provides an answer to what makes a nation’s goods cheaper or more expensive in a world where the act of trade changes prices. It also provides an analysis of the gains from trade in complex, many-household production economies. Since all prices normally will change, some households will gain (for example, owners of property or specific skills in the expanding export sector of the economy) while others will lose (for example, owners of property or specific skills in the contracting import sector). Trade theory shows that the gains to the gainers must ordinarily be larger than the losses to the losers.

The answers convince the vast majority of economists about the desirability of trade, provided some compensation for losers from trade is made. But the explanation of how international trade affects the overall well-being of society is also subtle and sometimes misunderstood by a portion of the general population that tends to oppose liberal trade. Opposition to trade liberalization may also arise from well-informed opponents, including lobbies representing workers and firms that might be harmed by liberalization, as well as persons sympathetic to those workers and firms who are skeptical that fair compensation will be provided.

THE PATTERN OF TRADE

Imports are goods and services purchased by domestic households and firms from firms located in foreign countries. Exports are goods and services sold to foreign households and firms by domestic firms. Imports must be paid for by exports, so the market for a nation’s imports is linked to the market for its exports. The price of imports cannot be isolated from the price of exports. Moreover, exports increase the demand for factors such as labor used to produce them, while imports reduce demand for factors used to produce import substitutes. Thus factor markets at home and abroad are linked through the mechanism of trade. (If exports pay for imports every year, trade is balanced. This simplification does no real harm to the analysis. Unbalanced trade has international borrowing or lending as a counterpart, and in this setting exports must pay for imports over time, in present discounted value terms.)

The balanced trade requirement implies that the relative price of exports, the terms of trade, is equal to the volume of imports divided by the volume of exports. Thus trade determines relative prices and, conversely, relative prices determine trade. The cause of trade must be sought in relative price differences between countries. Indeed, with frictionless trade (that is, international trade without tariffs, quotas, or other barriers to trade), these must be the price differences that would prevail in the absence of trade (autarky).

Compare the relative price (of, for example, wine in terms of cheese) at home to the same relative price abroad in a prior equilibrium with no trade (autarky) or restricted trade. The country with the lower relative price of wine is said to have a comparative advantage in wine, while the other country has, symmetrically, a comparative advantage in cheese. Trade theory predicts that countries will export the good in which they have the comparative advantage. Krugman and Obstfeld (2005) cite a recent study showing that Japan’s opening to trade in the 1850s reveals data consistent with the prediction.

Comparative-advantage differences between nations are explained in trade theory by differences between countries in either technology or factor supplies. Both are realistic—Canada exports grain because its large endowment of agricultural land makes land relatively cheap, but its better technology also provides an edge relative to land-abundant Ukraine. Notice that the mechanism run by relative price differences implies that economy-wide forces (exchange-rate manipulations, environmental or labor standards) that tend to cause uniform (over goods) national differences in costs will tend to cancel out and have no effect on trade patterns.

Absolute, or “competitive,” advantage should be distinguished carefully from comparative advantage, as the former is the source of much fallacious reasoning. For example, suppose there are two countries considering whether they should trade with each other. Prior to the opening of trade, a naïve observer would compare the domestic prices or production costs in the two countries good by good and predict that the country with the lower cost, having an absolute or “competitive” advantage, will export the good. But economic theory establishes that this method fails whenever one country could undersell the other for all goods, since the importer could not pay for the imports by exporting. Instead, prices of goods and factors must change so that in the trade equilibrium each country is competitive in its export industry, in which it has a comparative advantage. In equilibrium, prices must clear markets for all goods and factors in the world economy, and exports must pay for imports.

Differences between countries can arise endogenously from their economic interaction, in contrast to the differences which are given prior to trade in the preceding account of comparative advantage. Differences which arise as a result of trade lead to theories of trade that do not necessarily imply comparative advantage—difference in relative prices in the absence of trade. One theory is based on economies of scale, whereby the wider markets brought by trade will confer a cost advantage on one of the countries. Another theory is based on monopolistic competition, whereby the wider markets brought by trade increase product variety as buyers seek the special characteristics of foreign brands.

GAINS FROM TRADE

There are gains from trade in all these models. Each nation can act through trade policy to take more, leading to destructive trade wars with mutual losses. International institutions such as the World Trade Organization (WTO) act to restrain the destructive tendencies of unilateral action.

Within national economies, some members of a nation must lose from trade. For example, factors of production used intensively in export sectors of the economy tend to gain disproportionately when trade expands, while factors used intensively in import competing sectors tend to lose disproportionately. This gives insight into the widespread political resistance to trade that occasionally erupts into protectionism. National institutions act to redistribute some of the gains (U.S. Trade Adjustment Assistance) or provide temporary relief from losses due to trade (antidumping, escape-clause protection). In equilibrium the gains must outweigh the losses; there are gains from trade on average. On the way to equilibrium, it is theoretically possible that losses may temporarily exceed gains, justifying temporary relief measures. Extensive investigation of U.S. cases suggests that losses from trade are small and of short duration and are swamped by the gains from trade.

Most professional economists support liberal trade because there must be gains on average. The average is a “typical” household. Suppose that in autarky equilibrium, the home (domestic) typical householder is willing to swap 2 units of cheese for 1 unit of wine. That is, he would be indifferent to moving his consumption and production a small distance to offer the market 2 cheese for 1 wine or 1 wine for 2 cheese. Suppose that a typical foreign country household in the autarky equilibrium is willing to swap 2 wine for 1 cheese. Now allow frictionless trade, and suppose that the new equilibrium price is equal to 1. Each home household offers cheese to foreign households. Formerly it cost 2 cheese for 1 wine, but now the 2 cheese will procure 2 wine, a gain from trade. Similarly, each foreign household can obtain 2 cheese for 2 wine, where formerly this would procure only 1 wine. Both households gain from trade.

What if losers are not compensated? A person must decide for or against liberal trade by weighing individual gains and losses. Ethical considerations give more weight to the poor. The case for liberal trade is strengthened because the illiberal trade policies of rich countries hurt the poor disproportionately, as documented by Edward Gresser (2002). Poor countries have comparative advantage based on cheap low-skilled labor, hence discrimination against their exports harms the poor citizens of poor countries. At home in rich countries, protection makes food and clothing more expensive, a regressive tax on poor consumers. Among the poor, losers from protection surely outweigh gainers.

Much opposition to liberal trade is based on confusion and ignorance. The confusion of absolute advantage with a valid theory of trade sows fear that a nation must protect itself from overwhelming competition. Ignorance of the harm done to the world’s poor by protection persuades many who favor income redistribution in rich countries to support protection of rich country importcompeting workers, who tend to be relatively poor.

SEE ALSO Barriers to Trade; Liberalization, Trade; North American Free Trade Agreement; Quotas, Trade; Tariffs; Trade, Angloportuguese; Trade, Bilateral

BIBLIOGRAPHY

Gresser, Edward. 2002. Toughest on the Poor: America’s Flawed Tariff System. Foreign Affairs (November/December): 9–14.

Krugman, Paul, and Maurice Obstfeld. 2005. International Economics. 7th ed. Boston: Addison Wesley Longman.

James E. Anderson

trade. Economic development has, from the earliest times, been manifest in and driven by trade, which has been one of the principal mechanisms by which prosperity has increased. One of the reasons for trade is specialization of production. Some examples are obvious. European countries are not very successful in growing bananas. Similarly, the distribution of natural resources like coal, iron ore, and oil has always been unequal. Thus each country specializes in producing those commodities in which it has a comparative advantage. Specialization allows economies of scale because it is more efficient to produce for a large world market than for a much smaller national market. Britain in the 19th cent. relied very heavily on export markets to sustain its textiles, engineering, and mining industries. Trade can be envisaged as an indirect form of production. The commodities imported rather than produced at home will always require less productive inputs than would be required under home production. Trade is thus an unqualified benefit to all parties, irrespective of whether trade is fair or a country is competitive.

But the fact that trade is universally advantageous does not mean that the benefits are equally distributed. Changes in the composition of output resulting from trade will produce both gains and losses. The impact of imperial free trade policies on 19th-cent. India boosted the export of raw cotton to Britain but had a devastating impact on Indian cotton manufactures. Similarly British manufacturers gained from access to overseas markets, while wheat producers suffered from competition from cheap grain from the USA. The overall gain is derived from the fact that, in principle, those who gain from trade could compensate those who lose and still be better off than they were initially. In an ideal world in which there existed unrestrained trade and free movement of labour and capital between countries, the price of inputs like labour and capital would be the same everywhere. There would be, in fact, a single integrated world market. In reality this is far from the case. Variations in natural resources, in which some countries are rich (Russia) and some are relatively very poor (Japan), and in technology, barriers to trade, and historical experience of development have maintained and augmented these differences.

There is little doubt that international trade and specialized production played a major part in the growth of the industrial economies in the 18th and especially the 19th cent. The depression of the 1930s was marked by the lowest level of international trade for centuries, while the boom in the 1950s and 1960s was as manifest in trade as in output and incomes. But many in the less developed countries have argued that trade has not been beneficial for them since they have been peripheral to those with greater comparative advantage. Indeed it has become a radical criticism of the free market system that it prospered through the exploitation of the less developed countries by the industrial nations. Attention is drawn to the experience of countries like Brazil or Egypt, which experienced growth without development through a comparative advantage in exporting raw materials, such as coffee, rubber, and cotton. Hence the support for import substitution policies and attempts to persuade the developed world to help by allowing trade on terms favourable to the less developed. Neither strategy was successful. But in the 1970s and 1980s the ‘four tigers’ of south-east Asia (Hong Kong, Singapore, South Korea, Taiwan) achieved unparalleled growth rates through the export of manufactures, from textiles to engineering and electrical goods, and thus provided a reminder of the benefits of trade.

Clive H. Lee

trade

In the Middle Ages, long-distance trade was rare. Travel was dangerous, and most people lived a subsistent existence on rural estates, where they grew just enough to support their families and pay a landlord for the use of the land. Rare and valuable goods were imported from the Middle East and, in later centuries, via the Silk Road that linked eastern Europe with central Asia. As money was in short supply, most of this trade was carried out by the barter system, in which goods were exchanged for other goods.

The expansion of the banking system, the improvement of roads, and the growth of manufacturing industries and a middle class all contributed to a rise in international trade during the Renaissance. Cities of the Low Countries and northern Italy became the wealthiest in Europe. These regions specialized in the making of cloth, silk, woven tapestries, armor, and other goods in demand throughout Europe. German cities prospered from a trade in silver, England sold its wool and herring, and the Scandinavian countries exported fur and timber. From port cities such as Amsterdam, Genoa, Lisbon, and Venice, merchants and navigators sailed to distant regions of Asia to trade in valuable goods in short supply in Europe, such as silk and spices.

The rise of a middle class went hand in hand with economic growth, and the wider circulation of money played an important role in the artistic flowering of the Renaissance. Prominent families such as the Medici of Florence thrived from loans and letters of credit that made longdistance trade possible. The Medici ran an international conglomerate, with banks, mines, mills, trading houses, and other businesses all over Europe; the vast wealth they acquired allowed them to take power as a hereditary ruling dynasty in Florence. The Medici and other merchant families displayed their wealth by patronizing artists, architects and sculptors, and commissioning new works of art for their homes, palaces, and private chapels.

Italy was well located to serve as a center of international trade. Its ports and manufacturing centers lay between western Europe and the Middle East, along convenient shipping routes through the Mediterranean. Trade was also conducted along the major rivers of the continent, including the Danube, the Rhine, the Loire, and the Rhone. As monarchies grew stronger and unified nations emerged, central governments extended their control of trade through taxes, tariffs, and customs barriers. At the same time, foreign trade helped diminish the feudal system, as the money economy allowed bonded serfs to leave their estates and sell their know-how and skills in the cities.

The age of exploration that began in the fifteenth century, with Portuguese expeditions down the coast of Africa and across the Indian Ocean to southern Asia, spelled the end of Italy's dominance of trade. Portuguese and other navigators opened up new sea routes and established colonies, which allowed Portugal and the rest of Europe to bypass the Italian middlemen who had controlled trade between Europe and the Middle East. Busy shipping lanes across the Atlantic linked England, France, and Spain with their overseas American colonies, which provided raw materials and eventually a hungry market for goods manufactured in Europe. Foreign trade replaced agriculture as the lifeblood of western Europe's economies, and would spur the industrial revolution that began in the eighteenth century.

trade / trād/ • n. 1. the action of buying and selling goods and services: a move to ban all trade in ivory a significant increase in foreign trade | the meat trade. ∎ dated, chiefly derog. the practice of making one's living in business, as opposed to in a profession or from unearned income: the aristocratic classes were contemptuous of those in trade. ∎  (in sports) a transfer; an exchange: players can demand a trade after five years of service. 2. a skilled job, typically one requiring manual skills and special training: the fundamentals of the construction trade | a carpenter by trade. ∎  (the trade) [treated as sing. or pl.] the people engaged in a particular area of business: in the trade this sort of computer is called “a client-based system.” ∎  (the trade) [treated as sing. or pl.] Brit. people licensed to sell alcoholic drink. ∎ inf. a person in gay male sexual encounters who is not penetrated sexually and usually considers himself to be heterosexual. 3. (usu. trades) a trade wind: the north-east trades. • v. [intr.] buy and sell goods and services: middlemen trading in luxury goods. ∎  [tr.] buy or sell (a particular item or product): she has traded millions of dollars' worth of metals. ∎  (esp. of shares or currency) be bought and sold at a specified price: the dollar was trading where it was in January. ∎  [tr.] exchange (something) for something else, typically as a commercial transaction: they trade mud-shark livers for fish oil the hostages were traded for arms. ∎  [tr.] fig. give and receive (typically insults or blows): they traded a few punches. ∎  [tr.] transfer (a player) to another club or team. PHRASES: trade places change places.PHRASAL VERBS: trade down (or up) sell something in order to buy something similar but less (or more) expensive. trade something in exchange a used article in part payment for another: she traded in her Ford for a BMW. trade something off exchange something of value, esp. as part of a compromise: the government traded off economic advantages for political gains. trade on take advantage of (something), esp. in an unfair way: the government is trading on fears of inflation.DERIVATIVES: trad·a·ble (or trade·a·ble) adj.

398. Trade

See also 131. DUES and PAYMENT ; 137. ECONOMICS ; 160. FINANCE ; 331. PROPERTY and OWNERSHIP .

cabotage

the act of navigating or trading along a coast.

chreotechnics

Rare. useful arts, as agriculture, commerce, and manufacturing.

coemption

Obsolete, the purchase of all of a given commodity in order to control its price. —coemptive, adj.

duopoly

the market condition that exists when there are only two sellers. —duopolist , n. —duopolistic , adj.

duopsony

the market condition that exists when there are only two buyers. —duopsonistic, adj.

emption

1. Rare. the act of purchasing.

2. Obsolete, the thing purchased. —emptional, adj.

emptor

Law. abuyer.

merchantry

1. merchants collectively.

2. the business of commerce or trade.

monopolism

the practices and system of a monopoly. —monopolist , n. —monopolistic , adj.

monopoly

an exclusive control of a commodity or service in a particular market, or a control that makes possible the manipulation of prices. —monopolist , n. —monopolistic , adj.

monopsony

the market condition that exists when only one buyer will purchase the products of a number of sellers. —monopsonist , n. —monopsonistic , adj.

multiopoly

the condition of free enterprise, without restriction as to the number of sellers of a given product.

multiopsony

a market condition where no restriction on the number of buyers exists. —multiopsonist , n. —multiopsonistic , adj.

oligopoly

the market condition that exists when there are few sellers. —oligopolistic , adj.

oligopsony

a market condition in which there are few buyers. —oligopsonist , n. —oligopsonistic , adj.

paternalism

fatherlike control over subordinates or employees in business. —paternalist, n. —paternalistic, adj.

preferentialism

the policy of giving preferential treatment in international trade. —preferentialist, n.

trade One of the reasons for trade is specialization of production. Some examples are obvious. European countries are not very successful in growing bananas. Similarly, the distribution of natural resources like coal, iron ore, and oil has always been unequal. Thus each country specializes in producing those commodities in which it has a comparative advantage. Specialization allows economies of scale because it is more efficient to produce for a large world market than for a much smaller national market. The commodities imported rather than produced at home will always require less productive inputs than would be required under home production. Trade is thus an unqualified benefit to all parties, irrespective of whether trade is fair or a country is competitive.

But the fact that trade is universally advantageous does not mean that the benefits are equally distributed. The impact of imperial free trade policies on 19th‐cent. India boosted the export of raw cotton to Britain but had a devastating impact on Indian cotton manufactures. Variations in natural resources, in which some countries are rich (Russia) and some are relatively very poor (Japan), and in technology, barriers to trade, and historical experience of development have maintained and augmented these differences.

There is little doubt that international trade and specialized production played a major part in the growth of the industrial economies in the 18th and especially the 19th cent. But the less developed countries have argued that trade has not been beneficial for them since they have been peripheral to those with greater comparative advantage. Indeed it has become a radical criticism of the free market system that it prospered through the exploitation of the less developed countries by the industrial nations. Hence the support for import substitution policies and attempts to persuade the developed world to help by allowing trade on terms favourable to the less developed.

TRADE

Trade involves the exchange, purchase, or sale of goods and services. Whether international or domestic, trade makes possible the division and specialization of labor on which our productivity is based. If we could not exchange or trade the products of our specialized labor, each person would need to be entirely self-supporting. Trade is, in economic terms, a means of increasing productivity, as much as investment, or technological progress. Specialized production, followed by trade, makes it possible for everyone to have more commodities than they had before trading, even if some gain more by trading than others. Even though trading, including international trade, is an indirect means of enhancing all domestic productivity, there is frequently a bias of nationalism, which runs deep and causes countries to be suspicious of one another. Countries often discourage international trade to protect domestic industries and the jobs of people who work in them. Nations will place taxes called tariffs on imported goods to make them more expensive and discourage people from buying them. Some degree of protectionism seems inescapable in a world of intensified production and competition, although there is a movement to create large international trading blocks to improve the standard of living of all the member nations.

See also: Standard of Living, Tariffs

trade trade follows the flag proverbial saying, late 19th century; meaning that commercial development is likely to follow military intervention.
trade wind a wind blowing steadily towards the equator from the north-east in the northern hemisphere (the north-east trade wind) or the south-east in the southern hemisphere (the south-east trade wind), especially at sea. Two belts of trade winds encircle the earth, blowing from the tropical high-pressure belts to the low-pressure zone at the equator; the system is seasonally displaced respectively to the north and south of the equator in the northern and southern summers.

See also every man to his trade, Jack of all trades, do a roaring trade, there are tricks in every trade at trick, two of a trade never agree.

trade †course, way, track XIV; regular practice of a business or profession XVI; buying and selling in this. — MLG. trade, track (OS. trada = OHG. trata), rel. to TREAD. trade wind orig. any wind that blows in a constant direction. XVII. f. phr. †blow trade blow in a regular or habitual course.

trade n. (usually trades) a trade wind: the north-east trades.

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