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An international commerce in services comprises much of the world's trade in the twenty-first century. From late medieval beginnings in rudimentary services related to ships, cargoes, and the transfer of wealth, the trade in services broadened in the nineteenth and twentieth centuries to include a dazzling array of activities. These services (among which electronic global capital transfers and digital data accessing are commonplace examples) all have roots in the burgeoning international trade in services of the early modern period.


By the fifteenth century, overseas merchants were playing an intermediary role in the construction, purchase and sale, hire, and registration of ships for correspondents and clients in distant ports. Shipbuilding centers with convenient access to raw materials and skilled labor had long been a feature of waterborne commerce. Along with new vessels, there was a market for shares in ships already in service. Ownership shares were small and widely dispersed as a means of limiting risk, and most oceangoing vessels carried the cargoes of non-owners under lease agreements and charter parties. Although ship ownership began to evolve into a separate mercantile function in the sixteenth century, investment in trading vessels was a relatively small part of the overall activity of most commercial enterprises.

Managing ships and cargoes for clients abroad was another well-established service provided by overseas merchants. These functions had once been in the hands of owner-shipmasters who accompanied their goods to market. With the expansion of long-distance commerce in the seventeenth century, itinerant ship owners became less common, and their role was taken over by sedentary correspondents whose duties included dealing with pilots and wharfingers, repairing and outfitting vessels, and recruiting and compensating crews. In addition, merchants served as purchasing and sales agents, supervising the loading and off-loading of cargoes; shepherded goods through customs; and dealt with carters, warehousemen, and tradesmen such as millers, coopers, and packers. To be competitive abroad, a merchant needed strong relationships with a multitude of functionaries and skilled craftsmen. By this means, the services of dockside laborers, shipyard artisans (shipwrights, rope makers, anchor smiths, sail makers, and chandlers), and others (such as cartographers and instrument makers) entered international commerce.


The trade in financial services figured prominently in the expansion of overseas commerce. The growth of intra-European trade in the fifteenth century had been encouraged by the experiments of bankers in Rome, Florence, Genoa, and Venice that led to increased security in expediting payment and transferring wealth. There were, as well, significant advances in international banking practices in the seventeenth century, notably in Amsterdam and London, that reflected the widening global character of trade.

A significant development in the early modern period was the system of monetary transfer based on bills of exchange. These widely used and highly negotiable financial instruments had many of the features of modern checks, except that funds were drawn from accounts in private hands rather than at banks. Before the expansion of commercial banking in the nineteenth century, expediting payments and facilitating the orderly transfer of wealth over great distances required a high degree of cooperation among merchants. The purchase, transfer, and clearance of bills of exchange, and the fees collected for these services, accounted for a significant part of the business of overseas trading firms.

Other financial services associated with the growth of international trade include the extension of commercial credit and long-term loans, as well as debt collection. Although bills of exchange served as short-term loans (determined by the amount of the time it took a bill to clear), merchants in long-distance trade typically provided commercial credit of six months, a year, and sometimes longer. It is not an exaggeration to say that the entire system of world trade depended upon credit, and that merchants unwilling to provide this service were at a competitive disadvantage. Credit arrangements had the effect of tying overseas merchants and their correspondents together in mutually dependent relationships. Evidence of the rising significance of banking services in international trade rests in the large number of overseas merchant houses that gave up commodity trade in the waning decades of the eighteenth century to concentrate entirely on financial services. By the twentieth century, the financing of international commerce had become a significant component of the world economy.

Maritime insurance had also evolved into a separate industry by the nineteenth century. By the early seventeenth century, merchant-underwriters in Amsterdam were providing safe and reliable insurance for ships and cargoes in long-distance trade. London had displaced the preeminence of Amsterdam by the mid-eighteenth century. The Royal Exchange Assurance and the London Assurance were both established in 1720, and there were numerous private underwriters in the city, the most important of which congregated at Lloyd's Coffee House. In addition, pockets of maritime underwriting appeared elsewhere, such as in New York and Philadelphia, where insurance offices were a feature of port life twenty years before the American Revolution.

In addition to arranging coverage for their correspondents abroad, merchants outside the underwriting centers offered a full array of insurance services such as estimating losses and assisting in the adjustment of claims. The importance of these activities, which grew in significance as the volume of commerce expanded, is evident in the number of trading houses that were specializing in insurance underwriting by the nineteenth century.


The early modern trade in services extended beyond ships, cargoes, banking, and insurance. For example, merchants served as attorneys representing the interests of their correspondents in an array of quasi-legal matters. The two most important concerned conflict resolution and the custom house. Disputes between merchants sometimes involved principals close at hand; sometimes the parties were separated by thousands of miles of ocean. If a merchant could not resolve a client's problem by acting as a referee, the next step was to organize an arbitration panel, usually comprised of three respected merchants functioning under court supervision, to achieve an enforceable outcome. Merchants also represented their clients at local custom houses by assisting with paperwork, resolving disputes, and negotiating the recovery of seized goods. During the nineteenth century, the quasi-legal services that had once been performed by general merchants were taken over by lawyers specializing in maritime law.

Other commercial services established in the early modern period have become permanent fixtures of world trade, including those related to the collection and transmission of information. Of special importance was the regularization of postal services in the seventeenth and eighteenth centuries, allowing the consolidation of mercantile networks and improvements in the efficiency of monetary transfers. This development, along with rising literacy, encouraged the expansion and professionalization of the business press. Early in the seventeenth century, widely dispersed printed commercial information became available in the form of bills of entry (detailing daily customs house activity in the larger ports) and newspapers (containing shipping news, prices current, mercantile notices, and advertising). The embryonic business press added to the utility of markets and exchanges, as did the availability of pamphlets, manuals, guides, and dictionaries dealing with all aspects of commercial life.

SEE ALSO Amsterdam; Banking; Correspondents, Factors, and Brokers; Finance, Insurance; London; Ships and Shipping.


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