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Trade centers on the exchange of goods and/or services. Exchanges may take place between two parties (bilateral trade) or amongst more than two parties (multilateral trade). In its original form trade necessarily used barter and the exchange of goods and services and recognized equal value desirable to both parties. Modern traders generally negotiate through the use of a medium of exchange, i.e. money, and rarely through barter: as a result one can separate buying and earning from selling. The invention of money (and subsequently of credit, paper money and non-physical money) greatly simplified and promoted the development of trade.

Most economists accept the theory that trade benefits both parties, and reject the notion that all exchange must exploit one party; because in order to occur in a free society, both parties must agree to a trade in order for it to take place. Trade exists for many reasons. As a result of specialization and division of labor, most people concentrate their energies on a small aspect of production, trading for the other necessities of life. Trade exists between regions because one region has an absolute or comparative advantage in the production of some tradable commodity, or because one region's size allows for the benefits of mass production. As such, exchange at market prices between locations benefits both.

Empirical evidence for the success of trade can emerge when contrasting countries such as South Korea, which has adopted a policy of export-oriented industrialization, with India, which has historically pursued a more inward-looking policy, though it has nowadays begun to open up its economy. Countries such as South Korea have fared much better (when measured by economic criteria) than India, and others, over the past fifty years, though its success also has to do with effective state institutions.

Although there are usually few trade restrictions within countries, international trade is usually regulated by governmental quotas and restrictions, and 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 many trade barriers.

Sanctions or trade isolations on specific countries are usually imposed in order to punish a nation for some action. An embargo, a more severe form of externally imposed isolation, is a blockade of all trade by one country on another.

History of Trade

Organisation of Trade

Different patterns of organising and administering trade include:

  • State control - trade centrally controlled by government planning.
  • Guild control - trade controlled by private business associations holding either de facto or government-granted power to exclude new entrants.
  • Free enterprise - trade without significant central controls; market participants engage in trade based on their own individual assessments of risk and reward, and may enter or exit a given market relatively unimpeded.

Types of Trade

See also

  • Link2exports - Export Country Profiles Export Zone - Country Profiles, is part of the Official British Chamber of Commerce Export Zone, it provides a comprehensive overview of every country in the world and includes demographic, political, social and financial overviews along with details of trade missions and essential business contacts.
  • Trade-Related Issues
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