International Trade :
History and Development
ABHIJITH K . SHAJU
INTRODUCTION TO TRADE
HISTORY OF INTERNATIONAL TRADE
EVOLUTION OF TRADE THEORIES
DEVELOPMENTS IN TRADE
Trade means exchange of goods, services, or
both.Trade is also called commerce.
Trading is greatly important to the global
Trade was also a boon for human
interaction, bringing cross-cultural contact to
a whole new level.
Trade originated in prehistoric times.It was
the main facility of prehistoric people, who
bartered goods and services from each other.
There is evidence of the exchange of obsidian
and flint during the Stone Age.
Materials used for creating jewellery were
traded with Egypt since 3000 BCE.
Historians believe, the first long-distance trade
occurred between Mesopotamia and the Harappan
civilization of Indus Valley around 3000 BC.
From the very beginning of Greek civilization to
the fall of the Roman Empire in the 5th century, a
financially worthwhile trade brought valuable
spice to Europe from the Far East, including
The fall of the Roman Empire, and the succeeding
Dark Ages brought insecurity to Western Europe and a
near end of the trade network.
The Sogdians ruled the East-West trade route known
as the Silk Road from the end 4th century AD to the 8th
century AD.(The Silk Road was originally opened up by
Zhang Qian and it gradually formed in the Han Dynasty
(206 BC-220 AD))
The Vikings and Varangians also traded from the 8th
to the 11th century as they sailed from and to
Scandinavia. Vikings sailed to Western Europe, while
Varangians to Russia.
Vasco da Gama restarted the European Spice trade in
1498. Earlier to his sailing around Africa, the flow of
spice into Europe was controlled by Islamic powers,
Mercantilism (pre-16th century)
A nation’s wealth depends on accumulated
Gold and silver are the currency of trade.
Free Trade theories(17th-18th century)
Absolute Advantage (Adam Smith, 1776)
Comparative Advantage (David Ricardo, 1817)
Neo classical Theories:
Heckscher -Olin Theory(1919)
Product Life Cycle Theory
New Trade Theory
19th Century: British colonialism based on the
principles of liberalism. European states forcing for
trade in Africa, India, Southeast Asia and Latin America.
The first ‘long-distance’ trade occurred between
Mesopotamia and the Indus Valley in Pakistan around
3000 BC, historians believe.
In the absence of proper roads, the most efficient
way to transport goods from one place to another was
The first and most extensive trade networks were
actually waterways like the Nile, the Tigris and the
Euphrates in present-day Iraq and the Yellow River in
Cities grew up in the fertile basins on the borders of
those rivers and then expanded by using their watery
highways to import and export goods.
The domestication of camels around 1000 BC helped
encourage trade routes over land, called caravans, and
linked India with the Mediterranean.
The invention of money has made trade simpler.
Today traders generally negotiate through the
medium of exchange, like money, which then
makes buying separate from selling, or earning.
GATT was designed by the UN in 1946
aimed to increase trade by tariff reduction.
Later, World Trade Organization (WTO)
established in 1995, (global international
organization dealing with the rules of trade
As transportation has become increasingly less
expensive and telecommunications have
improved,hence international trade has
By understanding international trade, we will
uncover one of the most important real life
applications of macroeconomics.
The importing and exporting of goods is big
business in today's global economy and it
balances the Nation’s Economic stability.
Dumping should be prevented.
The process of trade should favour the
Dominick Salvatore, International Economics, John Wiley & Sons Inc., 2004.
Krugman,Paul R. and Obstfeld, Maurice (2005).International Economics: Theory
and Policy,7th edition, Boston: Addison-Wesley.
Pdf files :
LECTURE NOTES in INTERNATIONAL TRADE POLICY (*)
Cevat Gerni Beykent University/İstanbul 2010.
James R. Markusen, An Introduction to International Trade Theory, 2006,January
9-20,University of Colorado, Boulder.