Essay Sample on History of International Trade

Introduction

It is essential to understand the historical forces which resulted in the establishment of the global trading system that currently exists. Global trading system rise, like the other features of the current world economy, started in the ancient times and they then developed later when the industrial revolution commenced (World trade report, 2013). The international trade among continents and countries have existed for a long period and it was even present in the past civilizations. According to Maddison (2008), the traditional international trade entailed traded good that included precious metals, objects of art, textile, precious stones, food items, spices, and other items. During that period, the main roads that were used for trade across continents were amber road and silk route since they linked the western and the eastern world through cultural and commercial exchange and they also extended to about 4,000 miles across China, Arabia, India, Persia, and Europe. The silk route name come about through the lucrative trade in silk that began in China in 200 BC and took place in the subsequent six centuries.

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Later, people started to transport goods from one place to the other using the sea, China's Yellow River, and oldest waterways that included Tigris, the Euphrates in Iraq, and the Nile (World Trade Report, 2013). As a result of the transportation of goods, cities grew in the fertile basins that existed in the borders and they later expanded through watery highways to export and import goods. The introduction of industrial revolution during that period, high technological advancements in communications and transport unleashed from airplanes, railroads, automobiles, steamships, internet, and railroads reduced the cost of moving items, people, technology, and capital across the world (Obadan, 2008). Therefore, through these introductions, people were able to advance in their modes of trading internationally.

The 19th century marked an essential crossroads for international trade. Even though the global economy was already evident in both 17th and 18th centuries, Magellan's globe circumnavigation and the opening of new routes in Africa and Asia open more ways for international trade (Maddison, 2008). However, in the 17th and 18th centuries, there were advancements made in ship designing and navigation that made it easy for Europe to discover America. Furthermore, in the early 1800s, there was the introduction of the industrial revolution and this prompted the shrinking of the global economy, trade expansion, and technology and capital flows (World Trade Report, 2013). It is the shrinking of the global economy that is currently called "first age of globalization.

Steam power is considered as the initial revolutionary technology that resulted in the transformation of technology. Even though the early vessels were limited to the inland canals and rivers, in the late 1830s, steamships crossed the Atlantic regularly and in the 1850s service to West and South Africa commenced (World Trade Report, 2013). In the beginning, the steamships carried the commodities that were of high value including gold. However, through a series of technological improvements in the following decades, there was the introduction of more efficient ports, improved hull design screw propellers, and turbine engine. The above improvements resulted in big fuel-efficient steamships which drove down the transport costs and opened the transoceanic steamship trade of luxury goods and bulk commodities.

According to Obadan (2008), Suez Canal opening in 1869 marked a significant breakthrough in the transoceanic steam-shipping. Until that period, the steamships were unable to carry enough coal to enable it to circumnavigate Africa and this left the sailing ships to remain dominants of the far eastern trade routes. Through the creation of a significant shortcut from Europe to Asia, Suez Canal made steamships cost-efficient and viable on the route and this completed the conquest of transoceanic shipping in the late 1800s (Obadan, 2008). During that period of the industrial revolution, railways were also regarded as an essential steam associated transport. The first rail line in the world called the Stockton and Darlington Railway was opened in 1825 (Findlay and O'rourke, 2007). After its opening, it was immediately copied throughout Britain and other parts of the world including Germany, Belgium, France, and the other parts of Western Europe. Railways explosion in the united states was notable in the second half of 19th century in which newly introduced transcontinental networks played a significant role in linking the entire American hinterland to the global markets, forging national economy, and settlement of the west (Findlay and O'rourke, 2007).

After World War II, the global economy underwent a process called re-globalization (Obadan, 2008). According to economists, globalization refers to the international integration in labor markets, capital, and commodity (Bordo et al., 2003). A radical economic life transformation is usually presented with globalization process that led to market economy generalization, circulation of people, products, and information, increased production, and increased efficiency in the implementation of the technical systems. At least two episodes of globalization have been there from the mid-19th century (World Trade Report, 2013). The first episode commenced in the mid-19th century and it ended at the start of World War I. The second episode of globalization commenced World War II's aftermath and it continues to date. In the first and second episodes of globalization, output growth and rapid trade came about through significant shifts in the size of involved economies (World Trade Report 2013).

According to Kelly (2012), the recent episodes of globalization were mainly characterized with the movement of labor and improved integration in capital flows and trade, even though the elements play different roles in the two episodes. After the second world war, international trade took a long period to record its expansion as the merchandise exports increased by over 8% per annum between 1950 to 1973 (World Trade Report, 2013). After that period, growth in trade decreased because of oil price shocks that occurred two times, high inflation brought by monetary expansion, and insufficient macroeconomic adjustment rules (Kelly, 2012). Also, in the 1990s, there was a rapid expansion of trade that was partly driven by Information Technology sector inventions.

Regardless of the small contraction that came because of the dotcom crisis in the year 2001, global merchandise continued to grow and from 2000 to 2008 period the increase was about 6%. Generally, from 1950 to 2010 traded expanded by about 6.2% which was high compared to the period between 1850 to 1913 (Zhang et al., 2016). There was also a growth in the global per capita GDP that increased by 3% yearly. On the other hand, Ortiz-Ospina and Roser (2014) argue that the essential difference among the first age and second age of globalization is because the 19th-century version was mainly accompanied by international economic cooperation's rudimentary efforts. The version of the 20th century was mainly built on the foundation of new economic institutions (multilateral) called the Bretton Woods System. The multilateral economic institutions include the General Agreement on Tariffs and Trade, World Bank, and International Monetary Fund (Ortiz-Ospina and Roser, 2014).

The IMF was mainly started to reestablish the stability of the exchange rate for the era of the gold standard. It also preserved the freedom of countries across the globe in enhancing economic growth and full employment (Bordo et al., 2003). On the other hand, the World Bank was developed to offer soft loans for industrial development and economic reconstruction. Accordingly, GATT's aimed at increasing international trade through reducing or eliminating some subsidies, quotas, or tariffs and uphold meaningful regulations. In the new Bretton Woods System, the institutions made the exchange rates to be adjustable and fixed while the institutions made the international stabilization funds to be available to the nations that are facing difficulties in their balance of payments.

Conclusion

The expansion and increase in the process of globalization took place due to several factors including technological liberalization advancements (Ortiz-Ospina and Roser, 2014). There were several advances made in the liberalization of capital movements and the world that triggered globalization expansion. Also, technological advancements amplified a substantial decrease in coordination, communication, and transport costs. Furthermore, growing openness of emerging and developing market economies with a significant emphasis on the large economies including Easter Europe countries, Central Europe Countries, India, and China played an essential role accelerating globalization process (Bordo et al., 2003). Therefore, international trade has grown over the years since it started in 200BC. Through the different advancements in technology and communication, trade has been made easier across the globe.

List of References

Bordo, M.D., Taylor, A.M., and Williamson, J.G. eds., 2003. Globalization in historical perspective. University of Chicago Press.

Kelly, J., 2012. Rethinking industrial relations: Mobilisation, collectivism and long waves. Routledge.

Findlay, R. and O'rourke, K.H., 2007. Power and plenty: trade, war, and the world economy in the second millennium. Princeton University Press.

Maddison, A., 2008. The west and the rest in the world economy: 1000-2030. World Economics, 9(4), pp.75-99.

Obadan, M.I., 2008. Economic and Social Impact of Privatisation of State-owned Enterprises in Africa, The. African Books Collective.

Ortiz-Ospina, E. and Roser, M., 2014. Happiness and Life Satisfaction published online at OurWorldInData. org.

World Trade Report. 2013. Factors shaping the future of world trade. World Trade Organization.

Zhang, S., Wang, L., Liu, Z. and Wang, X., 2016. Evolution of international trade and investment networks. Physica A: Statistical Mechanics and its Applications, 462, pp.752-763.