What is Trade?
Trade is any form of economic activity consisting of exchanging or transferring goods or services between different economic actors.
It is one of the eldest and most fundamental human activities for establishing the first economies and the flow and expansion of cultures.
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- Commercial activity is part of the top and majority occupations of human beings throughout history, especially after the rise of the bourgeoisie to power after the Renaissance and the subsequent beginning of capitalism.
- In this sense, the invention of money was fundamental for its development.
- It allows to establish a method of appraisal or assign a value on the same scale to different products and services.
- It had to give according to swap at the beginning of humanity.
- Today, trade occurs at different scales, inside and outside countries’ borders, bringing the most diverse products to potential consumers.
- The volume of this exchange is immense: in 2018 alone, exports from the least developed countries amounted to US $ 8.779 trillion, 193 billion destined for the more developed nations.
- At the same time, a process of the rise in world GDP is evident. Or put more simply: in the contemporary world, more and more productive, and more trade.
Origin of Trade
- At the beginning of trade, the surplus exchange for other goods.
- Like many other aspects of human culture, trade emerged during the Neolithic period.
- It was then that human groups began to use agriculture.
- This economic activity led to formerly nomadic or semi-nomadic peoples (hunters and gatherers, generally).
- Once they could obtain their food, they no longer needed to move around in search of new means of subsistence always.
- But on some occasions, the amount of food produced exceeded the needs of the population that planted it.
- Thus they could exchange the surplus for other goods from other people.
- The exchange could obtain other foods that allowed those societies to have a more varied diet and become more substantial.
- They could also obtain in exchange for their production-specific services: protection, construction, tools, etc.
- In other words, trade was born as the idea of exchanging desired goods in exchange for a surplus in those available for the mutual benefit of those involved.
History of Trade
- Commerce is as old as civilization. Its first manifestations arose during the Neolithic period, together with the emergence of agricultural and sedentary societies.
- As planting maximized the food obtained and allowed its accumulation, the possibility of exchanging the surplus with other producers arose.
- Thus, it was possible not only to maintain a diverse diet but also to access other types of goods and services in which each person specialized.
- New forms of production emerged, such as pottery, iron and steel, and other activities.
- Along with the material exchange, cultural elements also exchange, resulting from friction between the ancient inhabitants: languages, religions, ways of thinking, or information regarding distant peoples.
- Thus, the great ancient empires were the centre of trade in their respective regions, where different trade routes converged.
- Each had its currency, reflecting its culture and emblems, served as a wild card to facilitate exchange between producers and merchants.
- The global trade scheme developed over time, incorporating new technologies such as promissory notes or bills of exchange (debts). Which allowed operating with money that not yet had.
- The first banks emerged in the Middle Ages, long before the money had the central place in society today, thanks to the invention and expansion of capitalism in the 18th century.
- Later, the European empires’ expansion to the whole world brought mercantilism. And the need for nations to control their commercial activity, enrich themselves, and strengthen their States.
- Thus, trade took a great leap and eventually began to involve the flow of merchandise from one corner of the world to another, becoming an international activity.
- The real globalization of commerce came in the 20th century when the invention of the Internet. And telecommunications allowed the purchase and sale of goods and services rapidly throughout the planet.
What are the Types of Trade?
The wholesale trade handles large volumes of merchandise at a reduced price.
There are different ways to classify business activity. In the first place, we must distinguish the possible types of trade based on the volume of merchandise and its modes of sale, as follows:
1. Wholesale Trade
- Also called “wholesale” or “wholesale,” it is a type of purchase and sale of merchandise in which large volumes of merchandise handle a reduced price.
- It generally destined for resellers who will then proceed to retail trade, thus obtaining a profit.
2. Retail Commerce
- Also called “retail,” “retail,” “retail,” or “retail,” it is, on the contrary, the purchase and sale of merchandise on a small scale, generally made directly to the final consumer.
- On the other hand, we can distinguish between commerce forms based on the transport mechanism used to transport the producer’s merchandise to its consumers, thus speaking of land, sea, air, or river trade.
- Commerce through the Internet is also known as e-commerce or electronic commerce.
Finally, we must distinguish between:
Domestic Trade: It carries out between people who belong to the same country and shares the State’s jurisdiction.
Foreign Trade: It involves economic actors found in different countries.
Importance of Trade
- Trade is a fundamental activity of humanity, mostly responsible for disseminating knowledge, technologies, cultures, languages . And religions that have enriched different human societies since ancient times.
- It has also been, along with production, one of the main economic activities of human beings.
- We currently owe the enormous volume of monetary transactions in the contemporary world.
Balance of Trade
- The results obtained by subtracting imports from exports.
- The trade balance is the record of a nation’s imports and exports during a given period.
- It allows us to understand if its commercial performance has generated wealth or has consumed it to perpetuate the national functioning.
- The results obtained by subtracting imports from exports. If the figure is positive, it means that the country generates a trade surplus, which increases its capital.
- If it is negative, it observes that the government invests its money to buy what it needs to continue standing, decapitalizing itself.
The trade inside is what does among people present in the same country, subject to the same jurisdiction.
The trade outside is what takes place between people from one country and living in another.