A short history of trade

First global trade

The Portuguese royal family did not need to find a route west to India because an agreement with Spain secured them sole right of settlement anywhere south of the Canary Islands. That made Christopher Columbus’ idea of crossing the Atlantic even more interesting to the Spanish. In 1492 he discovered the New World. The Iberian Peninsula now became the centre of international trade. Portugal had a monopoly over the slave trade and dominated the Indian Ocean: in 1578 a ship sailed from Lisbon to Malacca, the main hub for trade with China, non-stop for the first time.

A short history of trade

Spain flooded Europe with gold and silver. But in 1577 the buccaneer Sir Francis Drake defeated the Spanish Armada on behalf of Queen Elizabeth I and paved the way for British and Dutch colonisers. Unlike the Portuguese, they sailed under licence of their kings and queens, rather than on behalf of them. The British and Dutch East India Companies were multinational corporations that established their own trading posts. This kind of privatisation of trade, something that also happened in Europe and the Atlantic, was a decisive factor in the rise of the British Empire as a global power at the time of mercantilism in the 17th and 18th centuries. Colonies were not simply buying markets, but also sales markets as large-scale triangular trade shows.

International trade boom

As democracy began to spread across the USA and Europe, so did the concept of entrepreneurship, which brought about the Industrial Revolution and the organised labour that drove it forward. The internationalisation of the economy was also powered by technological advancement as well as the new-found freedom of international markets at an institutional level. The Cobden-Chevalier Treaty, signed by the United Kingdom and France in 1860, served as a precedent for a wealth of international, bilateral trade agreements that led to the first-ever single international market. The differences in the cost of items such as wheat and beef between the USA and the United Kingdom fell dramatically at the turn of the 20th century. Between 1825 and 1900, the share of global economic performance accounted for by trade rose from 1 percent to 8 percent. In 2000, it had reached 16 percent – an increase by a factor of 600. But trade did not just revolve around goods. Financial capital, means of production and the labour force had never enjoyed such mobility, and this resulted in an unprecedented transfer of knowledge and culture.