Evolution of International Trade

Let us understand this as a chronological journey—from ancient civilizations to the modern global economy. Imagine we are unfolding a story across centuries, where trade evolves not just as an economic activity, but also as a political, cultural, and strategic tool.

Ancient Beginnings: The Silk Route

• The Silk Route is one of the earliest examples of long-distance trade. It stretched approximately 6,000 kilometers, connecting Rome in the West to China in the East.
• Now, don’t get misled by the word “silk” alone—it was much more than that. Spices, precious stones, ceramics, and even ideas and religions travelled along this route.
• Think of it as the ancient world’s version of globalization—where distant empires exchanged goods, culture, and even diplomacy.

The following figure shows an illustration of Silk Road in the 1^st century:

Medieval Revival of Trade

• After the disintegration of the Roman Empire, Europe experienced a period of stagnation. But by the 12th and 13th centuries, commerce began to revive.
• What played a critical role? The development of shipping.
• This allowed trade between Europe and Asia to flourish again. Ports like Venice and Genoa in Italy became major hubs.
• Trade shifted from being just overland (like the Silk Route) to also being maritime—faster and capable of carrying bulk goods.

Age of Colonialism and Emergence of Slave Trade

• From the 15th century onwards, we see the dawn of European Colonialism.
• European powers—Portuguese, Dutch, Spanish, and British—ventured into Asia, Africa, and the Americas, seeking spices, gold, and territory.
• A dark chapter begins here: the Slave Trade.
  • These European powers captured African natives and transported them forcefully across the Atlantic.
  • The goal: to make them work on plantations in the newly “discovered” Americas (a euphemism for colonization).
• Slave trade became a lucrative economic system for more than 200 years.
  • But gradually, abolition movements gained momentum:
    • Denmark abolished it in 1792,
    • Great Britain in 1807, and
    • The United States in 1808.

Industrial Revolution and Trade Transformation

• The Industrial Revolution was a turning point. It altered the nature of trade fundamentally.
• Industrialised nations needed raw materials like:
  • Grains, meat, wool, etc.
• However, here’s the twist: even as demand increased, the monetary value of these raw materials declined compared to manufactured goods.
  • This is key. Think of a cotton farmer in India getting pennies, while a British textile mill selling shirts for pounds.
• Hence, the core-periphery dynamic evolved:
  • Core (Industrialised Nations): Export value-added finished goods.
  • Periphery (Colonial/Non-industrialised Regions): Export primary products or raw materials.

Shifting Trade Patterns in the 19th Century

• By the late 19th century, the importance of raw-material-producing regions started to decline.
• Why? Because now, industrial nations began trading more among themselves.
  • Example: Britain trading with Germany, or France with the US.
• This marks a shift from vertical trade (between developed and developing regions) to horizontal trade (between developed countries).

Impact of the World Wars

• World War I and II disrupted this global trade network.
• For the first time, countries started using tools like:
  • Trade taxes (Tariffs)
  • Quantitative restrictions (Quotas)
• These were done for economic protectionism and strategic autonomy during wartime.

Post-War Liberalization of Trade

• After World War II, there was a recognition that restrictive trade damages global economic health.
• So, institutions were formed to liberalize trade and promote cooperation.
• The most important one: GATT (General Agreement on Tariffs and Trade).
  • Later evolved into the World Trade Organization (WTO).
  • Purpose: to reduce tariffs, remove trade barriers, and ensure a rules-based global trade system.