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Marketing Resources: The History of Trade

Trade is defined as the exchanges of currency, goods or services and occurs in a network called a market. A market is the network that allows trades to occur. The term, trade, is sometimes loosely called barter, financial transaction or commerce. Barter was the original form of trade which involved the direct exchange of services and goods; later down the line, paper money, bills, metals and precious metals were on one side of the barter.

It is believed that the act of trading took place throughout most of the human history that has been recorded. Evidence of exchange exists in the Stone Age with the trade of flint and obsidian. Egypt traded the jewelry-making materials since 3000 BC. When the Mesopotamian Sumerians traded with the Indus Valley’s Harappan civilization in the third millennium, this marked the first long-range trade. The western world nearly experienced a collapse in the trade market during the Roman Empire’s downfall; after the Dark Ages, Western Europe became unstable.

Between the 4th century AD and the 8th century AD, the East-West trade route was dominated by the Sogdians. This route was called the Silk Road and Talas and Suyab ranked among the north’s main centers; they were Central Asia’s main caravan merchants. While sailing to and from Scandinavia, the Varangians and the Vikings traded in between the 8th century and the 11th century. From the 13th century to the 17th century, the Hanseatic League monopolized the trade market over most of the Baltic as well as Northern Europe.

Christopher Columbus was brought to the New World, known today as the Americas, by a trip made to the East in 1492. Columbus sailed around the world towards the west in an effort to find a route to the East Indies that allowed him to travel only through water. Once he reached the Americas, he thought this to be the destination in which he intended. Ten years later is when Europeans realized that the land was not the East Indies, it was in fact new land. Finding this New World led to the availability of riches in forms other than spices.

An abundance of gold was found in Mexico, then known as the Aztecs, by Spaniard Hernando Cortez. Cortez, along with other Spanish explorers, heard of more gold which led them to conquer most of Mexico along with Latin America. Silver was also discovered, which led to the beginning of silver mining in South America and Mexico. Other treasures that the Europeans were introduced to via the New World include tobacco, corn, chocolate and tomatoes.

During President Kennedy’s New Frontier speech, he authorized the negotiation of tariff reductions with the European Common Market on a reciprocal basis of no more than 50 percent. This, entitled the Trade Expansion Act of 1962, allowed the United States to participate in multilateral trade negotiations between 1964 and 1967; this period was known as the Kennedy Round. The Kennedy Round ended on June 30, 1967 which is when the authority expired. Under this act, duties that were below 5 percent ad valorem, duties on tropical products and duties on agricultural commodities could be reduced to zero if they were exported by developing countries.

Between 1920 and the late 1930s in the 20th century, a major recession in the economy occurred known as the Great Depression. This had a major affect on trade and resulted in a significant drop in economic indicators, including trade. Many considered the lack of free trade to be what caused the depression. Because of this, the Bretton Woods Agreement was signed by 44 countries in 1944 to prevent trade barriers at a national level.

Department stores became the trademarks of urban life during the 20th century. In the earlier part of the 20th century, department stores became reassurance institutions that allowed Americans to believe the life was good, the stability and order prevailed and that beauty mattered. In the mid-1960s, the biggest department stores were Macy’s, Hudson’s and Marshall Field. These department stores were measured by the physical size and sales volume.

Objects with intrinsic value were the first uses of money and were named commodity money. Commodity money included any commodity that was available and that had intrinsic value; examples from the past include whale’s teeth, pigs, cattle and rare seashells. Under Montezuma in Mexico, cocoa beans were used as money. In medieval Iraq, an early type of money that was used is bread.

Currency was then introduced to standardize money so that a wider exchange of services and goods could be facilitated. The first stage of currency was metals and symbols to store value and represent commodities. This formed the Fertile Crescent’s basis of trade for more than 1500 years. In 1690, paper money was formed in the colonies by the Massachusetts Bay Colony and the official monetary system was determined in 1785.

Credit is a method of providing the buyer with the opportunity to purchase goods or services without having cash in hand. Credit cards originated in the United States in the 1920s. Although this is the case, they have been documented in Europe as far back as 1890. In the past credit cards have been made out of metal plates, paper, metal fiber, and celluloid.

In the late 20th century up to the early 2000s, free trade advanced further into policy. In 1992, the European Union lifted the internal trade barriers of goods and labor. The North American Free Trade Agreement (NAFTA) took effect on January 1, 1994. In order to facilitate free trade, the World Trade Organization was created on January 1, 1995. The World Trade Organization makes it easier for free trade to occur by mandating the nation trading status of mutually most favored nations between all signatories. In 2005, the Central American Free Trade Agreement was signed and includes the Dominican Republic on top of the United States.

Free trade is a policy for trade that allows trading to occur with the government interfering. Traders can act or transact as long as they have mutual gains from trading the services or goods. Under this policy, the price of the good or service is dependent on supply and demand. Within the free trade policy, goods can be traded without taxes, tariffs or other trade barriers. In addition to trading without these barriers, traders can also trade in services without the same trade barriers. Traders also have free access to markets, market information and can move capital and labor freely within and between countries.