TRADE

The geographical position of the Middle East has made the region part of far-flung trade networks, as both market and supplier, since antiquity.

The Middle East is the cradle of civilization, the place where agriculture and urban life are thought to have originated. The region was economically vibrant and a center of trade in early antiquity, and it connected far-flung markets across the Eastern Hemisphere during Roman times. The collapse of the Roman Empire fragmented governing institutions in northwestern Europe, dividing its markets from the rest of the world. The rise of Islam during the seventh century c.e. and its subsequent diffusion spread Arabic and a common legal system (shariʿa) across the southern Mediterranean and as far east as what now is Indonesia. Trade was rein-vigorated and, following the Mongol conquest and consolidation in east and west Asia, overland trade between the Middle East and China along the Silk Road also thrived.

Trade before the Modern Period

Before the modern period, the Middle East exported mainly high-quality manufactured products to Europe and Africa, with which it generally enjoyed a trade surplus. Raw materials and manufactured products went to Asia but, like others trading with this region, Middle Eastern merchants often ran deficits with their east Asian partners.

The area around the Indian Ocean was a main market and supplier of goods to the Middle East. Pepper and spices came from the East Indies and were re-exported as well as consumed locally. Teak for ship construction and other tropical woods were imported from India; porcelain and silk came from China. After silkworms were smuggled out of China during the sixth century c.e., the Middle East also became a producer and exporter of silk cloth. Arab and Iranian shipping dominated the Indian Ocean as far as the Straits of Malacca, where Chinese junks took over, sailing to Guangzhou (Canton) and other Chinese ports to sell carpets, linens, cotton and wool fabrics, metalwork, iron ore, pearls, and ivory.

Overland trade with the Baltic region went via the Volga and other Russian rivers. Along these routes, Middle Eastern traders exchanged manufactured goods for furs, wax, amber, and slaves. The ancient sea trade with East Africa expanded greatly with the spread of Islam and with the establishment of branches of family trading concerns by Arabs and Iranians down the East African coast. Middle Eastern traders exchanged cloth, glassware, weapons, and trinkets for Africa's wood, ivory, palm oil, and gold. Slaves were sent from Africa to the Middle East in large numbers, most remaining in the countries bordering the Red Sea and Persian Gulf, but some going as far as India and China. The trans-Sahara trade blossomed following the introduction of caravans between Egypt, North African ports, and tropical Africa, exchanging African gold, ivory, pepper, and slaves for salt, weapons, copper, textiles, glass-ware, and trinkets.

Trade with Europe eventually would come to dominate Middle Eastern exchange relations, but Europe's lagging development following the sack of Rome confined most European exports to the Middle East to raw materials such as wood, iron, furs, and slaves. In exchange, Europeans received the high-quality manufactures for which the Middle East had long been famous: glassware, metal goods, and fabrics. As corruption eroded Egypt's competitive position during the fourteenth century, manufactures brought by Venetian traders began to displace local products. During the first half of the sixteenth century, Portugal invaded and took control of the Indian Ocean trade, constructing fortifications in ports like Bahrain and charging protection rents to merchants for allowing their goods to pass. The Dutch then displaced the Portuguese from much of their empire, and Portuguese interference with
local shipping waned. Shipbuilding thrived in the Persian Gulf during the eighteenth century, and merchant families grew rich from pearling and long-distance trade. Gulf-based merchants carried a wide variety of goods—including live horses—east to South Asia and west to the African coast. Their predominance in their own region was challenged and gradually eroded during the nineteenth century. In mid-century, competition from British steam-powered ships began taking business from Arab shippers who relied on wind-powered dhows and boums. Near the end of the century, the British navy established protectorates over the smaller emi-rates near the mouth of the Gulf and soon dominated that sea.

During the nineteenth century, the terms of trade between the Middle East and Europe gradually shifted as Europeans penetrated Middle Eastern markets and pressed governments for changes favoring imports over articles produced locally. High value-added products (i.e., manufactured or processed goods rather than raw materials) increasingly came from Europe rather than being produced at home. For example, Morocco had been famous for its refined sugar, but its Middle Eastern markets were overtaken by sugar from southern Europe and by sugar from the New World that had been refined in Europe. A similar displacement occurred later with respect to coffee. Manufactured goods were similarly displaced as fine silk and woolen fabrics, high-quality paper, and glass, which formerly had gone from the Middle East to Europe, began to flow from Europe to the Middle East. New European products, such as clocks, spectacles, and weapons, entered Middle Eastern markets without local competition. Although yarn exports to Europe continued until the end of the eighteenth century, it was clear by the time of the industrial revolution that the Middle East was becoming a peripheral actor in world trade, exporting mostly primary products and importing mostly manufactured and processed goods from the industrializing European core.

Shifting trade patterns accelerated during the nineteenth-century era of globalization, which ended with World War I. Total world trade rose from some $1.7 billion in 1800 to $42 billion in 1913. During this period, the share of world trade going to the Middle East was halved, falling from about 3 percent in 1800 to 1.5 percent in 1913. The slope of the upsurge in trade reflected European investment in steamships and railroads, and what economists like John Gallagher and Ronald Robinson called "the imperialism of free trade": in the name of open markets, Britain forced weaker trading partners to abolish monopolies and local trade regulations and to adopt low uniform tariffs on imports. Referred to as capitulations, these institutional changes ensured that the market effects of competition from an industrializing Europe on artisan production in the Middle East (and elsewhere) would not be moderated by the state. This virtually guaranteed that the region would be incorporated into the global trading system as a dependent exporter of raw materials: tobacco, dried fruits, and cotton from Turkey; silk and opium from Iran; wheat, barley, and dates from Syria and Iraq; silk from Lebanon; oranges from Palestine; and coffee beans from Yemen.

Foreign investment and loans were key elements changing the terms of trade and fostering trade dependency. Egyptian overinvestment in cotton production during the U.S. Civil War displaced local food production and, when cotton prices collapsed, increased Egypt's foreign debt. The protection of foreign creditors served as a justification for imposing on the Egyptian government a joint British-French commission in 1876. Britain used this
opportunity to take control of the Suez Canal and, in 1882, of Egypt itself. Trade deficits combined with heavy foreign borrowing caused the Ottoman Empire to declare bankruptcy in 1875 and, six years later, led to the establishment of the Ottoman Debt Commission. This essentially parallel ministry of finance represented the interests of the Ottoman Empire's creditors, and imposed an early version of conditionality (i.e., the surrender of control over fiscal policy to an agent of foreign creditors) to ensure that they would be repaid.

The Modern Period

The discovery of oil in Iran at the turn of the twentieth century confirmed the position of the Middle East as a supplier of raw materials, defining its position in world trade for the next century. Competition between France and Britain for control of Iraqi oil influenced the way the defeated Ottoman Empire was divided into mandates governed by these two victors after World War I. During the interwar period, oil was found in Bahrain, Kuwait, and Saudi Arabia, while the Iraqi oil industry became the balance wheel regulating the development of production capacity in the region via the Red Line Agreement of 1928. During World War II, trade volume declined regionally and globally owing to blockades, dangers to shipping, and shut-in oil production. Afterward, the production and sale of petroleum came to dominate interregional trade. Starting in 1960, the Organization of Petroleum

Exporting Countries (OPEC) struggled to reverse the unfavorable terms of trade that had beset its Middle Eastern members since the nineteenth century by halting and then reversing the incipient decline in real oil prices that threatened to erode oil-exporter income.

Oil exports altered economic positions intra-regionally. Until 1948, Egypt and Turkey accounted for the majority of Middle Eastern trade. After that, the oil-producing countries captured an enormous proportion of total regional trade, especially exports. Attempts to foster intraregional trade through common markets and regional organizations such as the Gulf Cooperation Council mostly foundered on the shoals of economies deformed by dependent development—that is, development strategies emphasizing oil and gas production rather than goods and services aimed primarily at domestic and regional markets. Local industrial development also was affected by what is sometimes called "Dutch disease" (because the same situation affected Holland during the heyday of its exploitation of the riches of the East Indies), oil export–induced monetary inflation that decreased the competitiveness of local goods as compared to imports. Dutch disease makes domestic production uncompetitive, even at home, further discouraging economic diversification.

The Arab League trade boycott, imposed against Israel after its creation in 1948 and still in effect in a number of Arab countries, was another factor retarding the development of local industries in Arab countries; it also deprived Israeli farms and factories of a nearby market for their products and increased Israel's already massive dependence on foreign assistance. Together, these outcomes increased the power of government over civil society, both in Israel and in the Arab states, by diminishing the capacity of domestic business interests to exercise checks on the state. The boycott also aggravated a conflict that all the region's governments used to their advantage to discourage if not repress domestic dissent.

Middle Eastern trade oscillates in response to political crises and wars, many connected to the Arab–Israeli conflict. In general, crises tend to depress Middle Eastern oil exports, either through oil embargoes or as a result of war-induced oil price increases. For example, the global position of Arab oil exporters was gravely damaged by consumer efforts to find other sources of hydrocarbon imports following the 1973 Arab-Israel war and the Arab oil embargo, which enabled OPEC to raise crude oil prices to what then were unheard-of levels. Ten years later, the volume of oil exports from OPEC countries was half what it had been in 1973. (Oil income did not fall in proportion because of further oil price increases during that period.) Other conflicts, such as the revolution in Iran and the subsequent U.S. trade sanctions against it, and the three Gulf Wars in which Iraq was a major belligerent (1980–1988; 1990–1991; and 2003), also affected regional trade. The first Gulf War, between Iran and Iraq, was fought in part with oil exports. Iraqi exports were occasionally halted by Iranian attacks but Iraq continued to receive oil income from Saudi and Kuwaiti sales of oil from the former Neutral Zone. Meanwhile, Iran suffered under U.S. trade sanctions, which depressed its export income.

As regards the balance of trade overall, oil-exporting-country revenues usually have exceeded the cost of imported goods and services. Non-oil exporters, such as Egypt, Israel, Syria, Jordan, Yemen, and Turkey, ran trade deficits, some incurred to pay for oil imports. The deficits were covered by foreign aid and loans, leading to large foreign debts. These macro-level effects mask significant changes in non-oil-exporting economies. For most, the composition of exports has changed. Traditional raw-material exports like cotton and grain have declined owing to greater processing and consumption at home. A growing export trade in manufactured goods, such as high-tech equipment and finished textiles, is bringing new trade income to Israel, Turkey, Egypt, Syria, and Lebanon. On the import side, rising incomes from oil exports have trickled down to non-oil-exporting neighbors via labor migration and, prior to the collapse in oil prices in 1986, through intraregional foreign aid. This allowed imports of foodstuffs, durable consumer goods, industrial and transport machinery, and raw materials to rise.

The most disturbing component of Middle Eastern trade is armaments. Higher oil prices in the 1970s were offset by the aggressive marketing of weapons to Middle Eastern Muslim countries. The motives of arms buyers were diverse. Some, such as Iran, Iraq, and Saudi Arabia, sought arms from external patrons as a way to assert their political and religious authority in the region. Others felt themselves to be at a disadvantage as compared to their neighbors, especially Israel, with its virtually First World military industries and its ability to acquire weapons and advanced military technologies, mostly free, from the United States. The overall decline in the world economy following the 1973 Arab-Israeli war made trade-surplus oil exporters attractive targets of marketing efforts by arms exporters from throughout the world. Britain, France, China, and Russia joined the United States in building arms export markets in the Middle East. Beginning in the 1980s, when U.S. policy shifted toward greater marketization of supporting strategic industries by encouraging them to market weapons abroad, then expanding during the 1990s, following the collapse of the Soviet Union, even materials for so-called weapons of mass destruction became widely available for import into the Middle East and elsewhere.

see also gulf cooperation council; organization of petroleum exporting countries (opec); red line agreement.

Bibliography

Gallagher, John, and Robinson, Ronald. "The Imperialism of Free Trade." Economic History Review, 2d series, no. 6 (1953): 1–15.

Issawi, Charles. An Economic History of the Middle East and North Africa. New York: Columbia University Press, 1982.

Nitzan, Jonathan, and Bichler, Shimshon. The Global Political Economy of Israel. Sterling, VA; London: Pluto Press, 2002.

Schwartz, Herman M. States Versus Markets: The Emergence of a Global Economy. 2d edition. New York and Basingstoke, U.K.: Palgrave, 2000.

charles issawi
updated by mary ann tÉtreault

TRADE.

Trade is one of the basic processes that link individuals and groups. Trade binds people to one another through the expectations of reciprocal giving, through the formal calculus of wages and markets, and through the desires or needs to obtain items not locally available. In this way, trade is a fundamental element of human culture.

Trade and exchange are often used synonymously, but there is a basic difference. Trade refers to the movement of goods between individuals or groups where there is a general expectation of reciprocity and where the purpose is basically utilitarian. Exchange has a broader meaning, encompassing all movements of goods. The general expectation of reciprocity need not be a part of exchange, nor does exchange have to be utilitarian in nature. In contrast, both are central to trade.

Approaches to the Study of Trade

Various perspectives can be applied to understanding trade. Here it is discussed as reciprocity, exploitation, and adaptation, and in the context of globalization.

Trade as reciprocity.

The earliest anthropological approaches to trade focused on reciprocity and how the expectations of reciprocity shaped social relations. In the classic ethnography Argonauts of the Western Pacific (1922), for example, Bronislaw Malinowski described and interpreted a complex system of reciprocal trade in the Trobriand Islands known as the kula. The items traded in the kula were of two kinds: shell beads and armbands. The value of these items was determined by their age and renown—some were heirloom pieces and even had names. The goal of participants in the kula was to gain prestige by obtaining, and then giving away, large amounts of kula goods and particularly highly valued heirloom pieces. Participants could lose prestige if they gave away valued items but did not receive equivalents in return. Malinowski described individuals carefully planning kula expeditions to other islands and scheming ways to bring particular kula goods into their possession. In this way, kula was a system of reciprocal trade through which the Trobrianders created and maintained social status.

But what about less formal systems of reciprocal trade, like the giving of Christmas presents? If we give a Christmas present to our neighbors, we generally expect one in return. And, if we give a nice present, we expect a similarly nice one in return. There is no formal system like the kula in place, so how is reciprocity maintained? These more sophisticated questions about trade were asked by anthropologists after Malinowski, and many significant contributions were made. Among the most influential was the work of Marcel Mauss, whose essay The Gift (1954) posited a universal reciprocal structure for gift giving. Mauss argued that gifts symbolize the giver, and the act of giving symbolizes the relationship between the giver and the receiver. The act of giving a gift necessitates a reciprocal gift if a social relationship is to be maintained. If a reciprocal gift is not given, it signals the end of the relationship. Gift giving, then, often takes on a cyclical form (as is the case with Christmas presents) and is a fundamental way that humans maintain social relationships.

Anthropological work on trade as reciprocity was pulled together in a concise form by Marshall Sahlins. In Stone Age Economics (1972), Sahlins defined three forms of reciprocal trade: balanced reciprocity, generalized reciprocity, and negative reciprocity. Balanced reciprocity describes the forms of trade examined by Malinowski and Mauss, where there is an expected balance between what is given and what is received through trade. Generalized reciprocity is a less structured form of trade and takes place mainly within families and kin groups. For example, families often share an evening meal. Parents provide and prepare the food, and both parents and children share it. Children are expected to reciprocate by clearing the dishes, taking out the garbage, and loving and obeying their parents. Through these actions children maintain a general balance in the trade between family members, but no formal accounting is kept and no expectation of formal balance is ever made. This is the basic nature of generalized reciprocity. Negative reciprocity essentially refers to forms of cheating or stealing. Negative reciprocity occurs when one party in a trade relationship receives less than they give. Sahlins posited that negative reciprocity is most common when dealing with people from other societies for, as both Malinowski and Mauss imply, negative reciprocity within one's own society would seriously disrupt social relationships.

Trade as exploitation.

Sahlins's definition of negative reciprocity illustrates the idea that not all trade takes place on an even footing. Some forms of trade are unequal, even exploitive. In the 1970s and 1980s a number of anthropologists began examining trade as an element of larger systems of production and consumption, often employing Marxist modes of production models. Eric Wolf's Europe and the People without History (1982) is illustrative of this type of research. Wolf explored three "modes of production": kin-based, which is characterized by generalized and balanced reciprocity; tributary, where tribute or taxes are provided to a centralized political authority that manages and maintains the society; and capitalist. For Wolf (and many others), the capitalist mode of production is rooted in exploitation. Workers sell their labor for wages but they must, by the very nature of capitalism, be paid less than their labor is actually worth—if not, then no profit would be possible. Wolf explains that capitalists in Europe were able to find a way around this problem by obtaining raw materials (and even labor in the form of slaves) for next to nothing by taking them from colonial areas. In the process, they actively exploited and essentially dehumanized the people living in those regions by creating a formal structure of negative reciprocity—one in which social relations cannot be maintained.

Trade as adaptation.

The idea that trade is generally utilitarian in nature was seemingly ignored by anthropologists until the 1960s. At this time, theories of human behavior based on ecology began to be employed by anthropologists, and trade came to be seen as fundamental to the creation and maintenance of an ecosystem. Trade provided a mechanism through which matter, energy, and information moved through human-dominated ecosystems. For example, Stuart Piddocke (1965) argued that a reciprocal trade system known as the potlatch (and similar in nature to the kula ) was essential to the survival of the Kwakiutl peoples of British Columbia. Piddocke demonstrated that the environment in which the Kwakiutl lived was subject to fluctuations that, in the same year, would cause some populations to lack resources while others had excess resources. The potlatch, Piddocke argued, was a formal system in which populations redistributed resources from areas with excess to areas of scarcity. For the Kwakiutl, then, trade was part of their adaptation to a highly variable and unstable environment.

Trade, globalization, and meaning.

With increasingly global markets and the introduction of Western capitalism into all corners of the world, anthropologists have become increasingly concerned with the effects of trade on the cultures they study. As Wolf pointed out, initial trade relations in many of these areas were highly exploitive, and they essentially prevented the formation of social relationships between indigenous populations and Western capitalists. In most ways, the situation did not change much in the twentieth century, and many anthropologists are working at the turn of the twenty-first with indigenous populations to help them gain equity in trade relationships.

As Western products enter non-Western cultures, anthropologists have also become increasingly interested in the meanings people attach to things. How are new products integrated into society? What is the effect of the loss of indigenous products? Arjun Appadurai (1986) suggested that objects themselves are socially created, that their circulation through a society gives them meaning and purpose, and that they are recontexualized as they move through different social contexts. In this sense, the distinction between foreign and local goods becomes blurred, as "foreignness" and "localness" are attributes that are socially assigned and that can change as the context of their use changes, just as attributes such as "desirability," "utility," and "value" change in different contexts.

Trade not only brings Western products into non-Western cultures, but also many aspects of Western culture. Many anthropologists think that the adoption of capitalist modes of trade also promotes Western ideas such as profit, modernization, and individualism, pushing aside indigenous ideas of tradition and responsibility for the care of social relations. This process of Western ideas pushing out non-Western ones is called "Westernization," and is seen by many anthropologists as a major problem facing the non-Western cultures of the world. In a larger sense, Westernization is part of "globalization," the process through which international trade is increasingly binding the nations of the world together into a single, global economy. Again, many anthropologists view globalization as a major force acting to eliminate non-Western ideas and cultures from the global economy.

The Formalist/Substantivist Debate

In the 1950s a group of social scientists, the most prominent among them being Karl Polanyi, proposed that trade was a social construction like the rest of culture and could not be usefully examined outside of its unique social setting. This perspective came to be known as "substantivism." The substantivists argued that economic analyses of noncapitalist trade employing concepts like supply and demand, rational choice, profit, and other ideas linked to capitalist market economics was misguided, because these concepts were either meaningless or had different meanings in noncapitalist social settings. Other scholars, and archaeologists in particular, countered that markets and market-like economies were present for millennia before capitalism, and that many noncapitalist economies appear to be usefully analyzed with concepts and methods drawn from the study of capitalism. This perspective came to be known as "formalism." The "formalist/substantivist" debate consumed economic anthropology throughout much of the 1960s, with no clear winner emerging. In the early twenty-first century, most anthropologists see the benefits of both perspectives in understanding trade.

While Westernization and globalization may be forcing contemporary non-Western cultures to become more Western and global in their orientation, capitalist trade has had a much more profound effect on many historic non-Western cultures. In North America, for example, colonization by Europeans and the introduction of the fur trade in the 1600s led to competition between local groups, an increase in warfare, and dramatic population movements that transformed the social landscape of the Great Lakes and Plains regions. Trade brought with it not only Western goods (including guns, one of the items that fostered increased warfare), but also Western biota. European diseases such as smallpox and measles may have killed 80 percent of the indigenous peoples of North America. European plants and animals have dramatically changed ecosystems throughout the Americas. The point here is that trade brings with it many things in addition to the items being traded—ideas, diseases, plants and animals—and all these have an effect on the peoples involved in trade.

Trade and the Development of Civilization

With trade being such an important concept for anthropologists and other social scientists attempting to understand the historic and contemporary cultures of the world, it is not surprising that trade has been an important concept to scholars attempting to understand the evolution of cultures and, in particular, the development of civilization.

Trade as redistribution.

Elman Service (1962) saw trade as a basic element in the evolution of chiefdoms out of tribal societies. Chiefs, Service argued, functioned as the operators of centralized redistribution networks, which took in surplus goods from all populations in a society and redistributed them back to those populations, but spread them evenly so that no single population lacked goods they needed, and no single population could acquire an ongoing surplus. This system of redistribution only evolved among sedentary agriculturalists, because it was among these societies that redistribution was needed. Redistribution allowed regional fluctuations in agricultural production (due to variation in rainfall, for example) to be evened out. More importantly, however, Service argued that redistribution both required and fostered the centralization of political authority, and thus was essential to the evolution of chiefs. It was only with the creation of a formal position of redistributor—a chief—that the smooth functioning of a system of redistribution could be ensured. And once the position had evolved, chiefs quickly learned to use their authority to provide or withhold goods to increase their authority in other areas of social life.

Trade as legitimation.

But there are problems with Service's ideas. Not all chiefs function as redistributors, and not all societies with chiefs have resource bases that vary significantly. It is clear, however, that trade seems to be important in the evolution of many chiefdoms, and Mary Helms (1979) suggested that one reason might be that trade can serve as a mechanism for legitimating power. Helms studied the late prehistoric and early historic chiefdoms of Panama, where chiefs actively participated in and controlled trade in exotic goods such as gold ornaments, but had little to do with trade in basic, utilitarian goods of daily life. Helms argued that Panamanian chiefs used trade as a symbol of their ties to distant people and places and, through those ties, to exotic and even supernatural knowledge. Trade was not used as a means of controlling resources, but rather, of controlling knowledge and, through that control, of legitimating the chief's authority. The chief was the legitimate leader because, through trade, he had formed social relationships with neighboring and distant chiefs. He also gained knowledge of distant people and things through these relationships, and, in some cases, even knowledge of supernatural powers unknown to the society he governed but well understood by distant people with whom he was in contact through trade.

World Systems Theory

Immanuel Wallerstein developed world systems theory in the early 1970s as a new way of looking at the rapid expansion of capitalism. Wallerstein posited that in capitalism a clear geographical hierarchy of trade evolved. Europe was the core, the area where raw materials were converted into finished products. The rest of the world was the periphery, the area where raw materials were obtained and finished products consumed. Capitalism expanded rapidly because it needed raw materials to create goods and markets to consume them. Nineteenth-century colonialism was the political actualization of these capitalist needs. However, finished products always cost more than the value of the raw materials needed to make them, so the periphery, in providing raw materials and consuming finished products, was actively exploited by the core, a process world systems theorists came to refer to as "underdevelopment." World systems theory provided social scientists a means to understand why and how the "developing" world was never able to actually "develop" despite many attempts to aid them in doing so—because they were being actively "underdeveloped" by the capitalist core. World systems theory continues to be one of the primary means that anthropologists and other social scientists use to examine and understand trade relations and their effects.

Trade as finance.

One of the key aspects of the evolution of civilization is the creation of surpluses to finance the support of individuals who are removed from production to become political leaders, priests, artisans, soldiers, and the like. Elizabeth Brumfiel and Timothy Earle (1987) suggested that trade, in the form of mobilization of surpluses, is a process through which this key aspect of civilization is played out. They argue that political leaders evolve as individuals who are able to mobilize surpluses in order to finance their own support and, later, support for other political personnel. Over time, mobilization increases, and political leaders are able to finance support for larger numbers of people. Brumfiel and Earle suggest that this form of "staple finance" is often transformed into "wealth finance" as polities become larger and more complex. Political leaders employing wealth finance use trade to mobilize wealth, often in the form of exotic goods from distant locales, to finance support for political personnel. Wealth finance is less cumbersome than staple finance, as bulk goods such as food are not involved, and often provides political leaders with new avenues for social control. For example, complex administrative structures may be needed to maintain access to and control over trade in wealth items, and a market system may be required in order to provide political personnel a means to transform wealth items into staples. In this way, the mobilization of wealth through trade is seen as a driving force in the evolution of civilization.

Conclusions

Trade is the movement of goods between individuals or groups where there is a general expectation of reciprocity and where the purpose is basically utilitarian. Anthropologists have long been interested in trade because it is an important factor in shaping social relations. The earliest anthropological approaches to trade focused on reciprocity and how the expectations of reciprocity shaped social relations. But it was soon recognized that many forms of trade are unequal, even exploitive. Capitalism seems particularly exploitive, and with increasingly global markets and the introduction of Western capitalism into all corners of the world, anthropologists have become more and more concerned with the effects of trade on the cultures they study. Trade not only introduces Western products but also many aspects of Western culture, both good and bad, as well as Western plants, animals, and diseases. These have had a devastating effect on non-Western cultures and have profoundly impacted world history. Trade has also been important prehistorically and is an important concept to scholars attempting to understand the evolution of civilization. Trade has been seen as essential to the evolution of centralized polities, as trade provides means to both legitimate and finance positions of authority. With trade being such an important concept for understanding both contemporary and past cultures of the world, it is likely that research on trade will remain a central concern in anthropology and the other social sciences.

See also Capitalism ; Gift, The ; Globalization ; World Systems Theory, Latin America .

bibliography

Appadurai, Arjun, ed. The Social Life of Things: Commodities in Cultural Perspective. Cambridge, U.K., and New York: Cambridge University Press, 1986.

Belshaw, Cyril S. Traditional Exchange and Modern Markets. Englewood Cliffs, N.J.: Prentice Hall, 1965.

Brumfiel, Elizabeth M., and Timothy E. Earle. "Specialization, Exchange, and Complex Societies: An Introduction." In Specialization, Exchange, and Complex Societies, edited by Elizabeth M. Brumfiel and Timothy E. Earle. Cambridge, U.K., and New York: Cambridge University Press, 1987.

Curtin, Philip D. Cross-Cultural Trade in World History. Cambridge, U.K., and New York: Cambridge University Press, 1984.

Hall, Thomas, ed. A World-Systems Reader: New Perspectives on Gender, Urbanism, Indigenous Peoples, and Ecology. Lanham, Md.: Rowman and Littlefield, 2000.

Helms, Mary W. Ancient Panama: Chiefs in Search of Power. Austin: University of Texas Press, 1979.

Humphrey, Caroline, and Stephen Hugh-Jones, eds. Barter, Exchange, and Value: An Anthropological Approach. Cambridge, U.K., and New York: Cambridge University Press, 1992.

Malinowski, Bronislaw. Argonauts of the Western Pacific. London: G. Routledge and Sons, 1922.

Mauss, Marcel. The Gift: Forms and Functions of Exchange in Archaic Societies. Glencoe, Ill.: Free Press, 1954.

Piddocke, Stuart. "The Potlatch System of the Southern Kwakiutl: A New Perspective." Southwestern Journal of Anthropology 21, no. 2 (1965): 244–264.

Plattner, Stuart, ed. Economic Anthropology. Stanford, Calif.: Stanford University Press, 1989.

Polanyi, Karl K., Conrad Arensberg, and Harry Pearson, eds. Trade and Markets in the Early Empires. New York: Free Press, 1957.

Sahlins, Marshall. Stone Age Economics. New York: Aldine, 1972. Reprint, London and New York: Routledge, 2004.

Service, Elman. Primitive Social Organization. New York: Random House, 1962.

Wallerstein, Immanuel. The Modern World System. New York: Academic Press, 1974.

Wolf, Eric. Europe and the People without History. Berkeley: University of California Press, 1982.

Peter N. Peregrine

Trade

THE PATTERN OF TRADE

GAINS FROM TRADE

BIBLIOGRAPHY

Trade is the exchange of goods between locations. For example, bananas from Honduras exchange for automobiles from the United States. International trade between locations in different nations receives far more attention than does domestic trade because nations discriminate against foreigners with international policies that are contested. For example, in 2005, the U.S. Congress ratified a Central American Free Trade Agreement in a hotly contested vote.

Trade also means the exchange of services of factors of production such as labor and capital. For example, Bangalore call centers provide telemarketing labor to U.S. marketers, while U.S. computer engineers maintain hardware and software in Bangalore. Trade in services is quantitatively important, but the distinction between trade in services and trade in goods is often not important. For many purposes, the distinction between international and intranational trade is similarly irrelevant. This essay uses the term trade to mean international trade in goods, but much of its content also applies to intranational trade in goods and services. The distinction is crucial when international trade policy—discrimination against foreigners—is important. (Domestic trade is affected by domestic policy, but seldom controversially.)

The key questions are: What explains the pattern of trade? Is liberal trade policy a good thing? The householder’s answer to the first question is that nations import goods that are unavailable domestically or are cheaper than potential domestic substitutes and export goods that are unavailable or more expensive abroad. There are gains from this exchange, to answer the second question—voluntary transactions must be beneficial or they would not be made, once familiarity acquaints participants with exchange.

Economic analysis embeds the householder’s insight in an equilibrium system. Crucially, householders take prices as given in their decisions. When all households together react to a new market opportunity, they will necessarily have an impact on prices. International trade theory provides an answer to what makes a nation’s goods cheaper or more expensive in a world where the act of trade changes prices. It also provides an analysis of the gains from trade in complex, many-household production economies. Since all prices normally will change, some households will gain (for example, owners of property or specific skills in the expanding export sector of the economy) while others will lose (for example, owners of property or specific skills in the contracting import sector). Trade theory shows that the gains to the gainers must ordinarily be larger than the losses to the losers.

The answers convince the vast majority of economists about the desirability of trade, provided some compensation for losers from trade is made. But the explanation of how international trade affects the overall well-being of society is also subtle and sometimes misunderstood by a portion of the general population that tends to oppose liberal trade. Opposition to trade liberalization may also arise from well-informed opponents, including lobbies representing workers and firms that might be harmed by liberalization, as well as persons sympathetic to those workers and firms who are skeptical that fair compensation will be provided.

THE PATTERN OF TRADE

Imports are goods and services purchased by domestic households and firms from firms located in foreign countries. Exports are goods and services sold to foreign households and firms by domestic firms. Imports must be paid for by exports, so the market for a nation’s imports is linked to the market for its exports. The price of imports cannot be isolated from the price of exports. Moreover, exports increase the demand for factors such as labor used to produce them, while imports reduce demand for factors used to produce import substitutes. Thus factor markets at home and abroad are linked through the mechanism of trade. (If exports pay for imports every year, trade is balanced. This simplification does no real harm to the analysis. Unbalanced trade has international borrowing or lending as a counterpart, and in this setting exports must pay for imports over time, in present discounted value terms.)

The balanced trade requirement implies that the relative price of exports, the terms of trade, is equal to the volume of imports divided by the volume of exports. Thus trade determines relative prices and, conversely, relative prices determine trade. The cause of trade must be sought in relative price differences between countries. Indeed, with frictionless trade (that is, international trade without tariffs, quotas, or other barriers to trade), these must be the price differences that would prevail in the absence of trade (autarky).

Compare the relative price (of, for example, wine in terms of cheese) at home to the same relative price abroad in a prior equilibrium with no trade (autarky) or restricted trade. The country with the lower relative price of wine is said to have a comparative advantage in wine, while the other country has, symmetrically, a comparative advantage in cheese. Trade theory predicts that countries will export the good in which they have the comparative advantage. Krugman and Obstfeld (2005) cite a recent study showing that Japan’s opening to trade in the 1850s reveals data consistent with the prediction.

Comparative-advantage differences between nations are explained in trade theory by differences between countries in either technology or factor supplies. Both are realistic—Canada exports grain because its large endowment of agricultural land makes land relatively cheap, but its better technology also provides an edge relative to land-abundant Ukraine. Notice that the mechanism run by relative price differences implies that economy-wide forces (exchange-rate manipulations, environmental or labor standards) that tend to cause uniform (over goods) national differences in costs will tend to cancel out and have no effect on trade patterns.

Absolute, or “competitive,” advantage should be distinguished carefully from comparative advantage, as the former is the source of much fallacious reasoning. For example, suppose there are two countries considering whether they should trade with each other. Prior to the opening of trade, a naïve observer would compare the domestic prices or production costs in the two countries good by good and predict that the country with the lower cost, having an absolute or “competitive” advantage, will export the good. But economic theory establishes that this method fails whenever one country could undersell the other for all goods, since the importer could not pay for the imports by exporting. Instead, prices of goods and factors must change so that in the trade equilibrium each country is competitive in its export industry, in which it has a comparative advantage. In equilibrium, prices must clear markets for all goods and factors in the world economy, and exports must pay for imports.

Differences between countries can arise endogenously from their economic interaction, in contrast to the differences which are given prior to trade in the preceding account of comparative advantage. Differences which arise as a result of trade lead to theories of trade that do not necessarily imply comparative advantage—difference in relative prices in the absence of trade. One theory is based on economies of scale, whereby the wider markets brought by trade will confer a cost advantage on one of the countries. Another theory is based on monopolistic competition, whereby the wider markets brought by trade increase product variety as buyers seek the special characteristics of foreign brands.

GAINS FROM TRADE

There are gains from trade in all these models. Each nation can act through trade policy to take more, leading to destructive trade wars with mutual losses. International institutions such as the World Trade Organization (WTO) act to restrain the destructive tendencies of unilateral action.

Within national economies, some members of a nation must lose from trade. For example, factors of production used intensively in export sectors of the economy tend to gain disproportionately when trade expands, while factors used intensively in import competing sectors tend to lose disproportionately. This gives insight into the widespread political resistance to trade that occasionally erupts into protectionism. National institutions act to redistribute some of the gains (U.S. Trade Adjustment Assistance) or provide temporary relief from losses due to trade (antidumping, escape-clause protection). In equilibrium the gains must outweigh the losses; there are gains from trade on average. On the way to equilibrium, it is theoretically possible that losses may temporarily exceed gains, justifying temporary relief measures. Extensive investigation of U.S. cases suggests that losses from trade are small and of short duration and are swamped by the gains from trade.

Most professional economists support liberal trade because there must be gains on average. The average is a “typical” household. Suppose that in autarky equilibrium, the home (domestic) typical householder is willing to swap 2 units of cheese for 1 unit of wine. That is, he would be indifferent to moving his consumption and production a small distance to offer the market 2 cheese for 1 wine or 1 wine for 2 cheese. Suppose that a typical foreign country household in the autarky equilibrium is willing to swap 2 wine for 1 cheese. Now allow frictionless trade, and suppose that the new equilibrium price is equal to 1. Each home household offers cheese to foreign households. Formerly it cost 2 cheese for 1 wine, but now the 2 cheese will procure 2 wine, a gain from trade. Similarly, each foreign household can obtain 2 cheese for 2 wine, where formerly this would procure only 1 wine. Both households gain from trade.

What if losers are not compensated? A person must decide for or against liberal trade by weighing individual gains and losses. Ethical considerations give more weight to the poor. The case for liberal trade is strengthened because the illiberal trade policies of rich countries hurt the poor disproportionately, as documented by Edward Gresser (2002). Poor countries have comparative advantage based on cheap low-skilled labor, hence discrimination against their exports harms the poor citizens of poor countries. At home in rich countries, protection makes food and clothing more expensive, a regressive tax on poor consumers. Among the poor, losers from protection surely outweigh gainers.

Much opposition to liberal trade is based on confusion and ignorance. The confusion of absolute advantage with a valid theory of trade sows fear that a nation must protect itself from overwhelming competition. Ignorance of the harm done to the world’s poor by protection persuades many who favor income redistribution in rich countries to support protection of rich country importcompeting workers, who tend to be relatively poor.

SEE ALSO Barriers to Trade; Liberalization, Trade; North American Free Trade Agreement; Quotas, Trade; Tariffs; Trade, Angloportuguese; Trade, Bilateral

BIBLIOGRAPHY

Gresser, Edward. 2002. Toughest on the Poor: America’s Flawed Tariff System. Foreign Affairs (November/December): 9–14.

Krugman, Paul, and Maurice Obstfeld. 2005. International Economics. 7th ed. Boston: Addison Wesley Longman.

James E. Anderson

Trade

Sources

Intra-Indian Activity. Archaeological evidence clearly establishes that by the time of the Hopewell people, about 200 b.c. to a.d. 500, Native Americans engaged in trade on a continentwide basis. Artists in the Ohio Valley used shells from the Gulf Coast, mica from the Pacific Northwest, and copper from the Great Lakes. Furthermore, art objects traveled thousands of miles through many hands to end up in the burials of native leaders of many cultures. Over the centuries small family-based groups came together to trade goods and find mates. Some particularly popular locations, such as The Dalles on the Columbia River, apparently attracted crowds numbering into the thousands. As Europeans entered North America, their metal, glass, and textile objects

all entered native commerce and were widely traded among the Indians.

Furs. The trade in the Great Lakes area was the initial entry of North American goods into the world economy. Great Lakes Indians swapped their beaver robes for technologically advanced goods ranging from guns and kettles to beads and cloth. The fur trade set the pattern for other trade relationships between natives and Europeans, as both sides maneuvered and negotiated for the best price. Typically, as the populations of fur-bearing animals died out, Europeans wanted to trade directly with the Indians whose furs were still plentiful. At the same time, native peoples whose own fur stocks were depleted positioned themselves as middlemen to broker deals and continue their involvement in the trade. In the Southeast the pattern was repeated, with deerskins replacing furs, in the first half of the eighteenth century.

Luxury and Necessity. In a relatively brief time what had been novelties became essential parts of native culture. Guns supplanted the bow and arrow; woolen cloth substituted for buckskin; and glass beads took the place of natural adornments. Durable castiron pots soon replaced fragile pottery. When the pots reached the end of their lives, warriors flaked the metal to make knives, arrowheads, and other tools. By the early eighteenth century native groups from Maine to Louisiana were culturally dependent upon goods—everything from fishhooks to gunpowder—which they had no way to make for themselves. With no market for their products, many craftsmen died without passing on their skills, so that within a few generations many arts and crafts were all but lost in many native groups.

CHEATING THE INDIANS

During the colonial period unscrupulous whites frequently robbed intoxicated Indians of trade goods and defrauded them of their lands. Such a case arose in New Jersey in 1716, and fortunately for the Native Americans involved, the governor restored their lands.

Myself [John Kay] with several others sent for John Weitherill and heard the Indian’s complaint against him, which was that said John Weitherill had come to said Indian King and treated him with cyder and made him drunk, and that he came again to him the next morning and would have given him more cider and told him he sold him some land the night before, being land which said Indian King and other Indians lived on, and had set his hand to a deed or writing for the sale of said land. The said Indian King declared he remembered nothing of selling any land to said John Weitherill or setting his hand to any paper and further said he had always refused to sell that land and had reserved it for himself and the Indians to live upon and that the Indians had a right in it and would never suffer him to sell it.... If John Weitherill had got him to sign any paper it was by defraud and cheating him and that he could neither eat, drink, nor rest with quiet until that writing or paper was destroyed.

Source: W. Keith Kavenagh, ed., Foundations of Colonial America: A Documentary History, 3 volumes (New York: Chelsea House, 1973),

Alcohol. By far the most destructive aspect of the Indian trade was alcohol. Native Americans had virtually no exposure to beverage alcohol before 1500 and were as vulnerable to alcoholism as they were to smallpox, measles, and other diseases. Alcohol became an important medium of exchange by the late seventeenth century, and virtually every Indian trader sold it. Usually consumed in the form of rum or brandy, alcohol played a destructive role in native culture. Many Indians found alcohol highly addictive and were willing to do anything to get it. In 1774 William Bartram described a group of Creek warriors who were carrying twenty five-gallon kegs of liquor as trade goods. They kept it intact until reaching a trading post, where traders persuaded them to have drinks in celebration. They remained drunk for ten days. Bartram described the ensuing events: “White and red men and women without distinction, passed the day merrily with

these jovial, amorous topers, and the nights in convivial songs, dances, and sacrifices to Venus, as long as they could stand or move; for in these frolicks both sexes take such liberties with each other, and act, without constraint or shame.” When they ran low, women would sell recycled rum, which they had covertly spat out into a bottle after pretending to drink. The demand for alcohol caused distortions in the native economy, as hunters would trade skins for alcohol and go into debt for the trade goods that had become necessities. In the Southeast so much debt accumulated by the early 1770s that the London merchants withheld shipments of goods until receiving two million acres as payment.

Land. Trade provided a framework for negotiations between native peoples and Europeans in which land was a principal topic. Europeans and native peoples fundamentally misunderstood each other’s ideas about land ownership. In general, native peoples did not consider land something that any could own, buy, or sell. In their view land was given to the people to live on and was often revered as sacred and inseparable from the people who lived on it. Initially, at least, Native Americans were usually willing to share their land with Europeans. But the colonists mistook native willingness to share as an agreement to sell. They would draw up legal sales agreements, which Indians thought were agreements to live in peace. Plying native leaders with alcohol, colonists used so-called whiskey treaties to assert a claim to native lands. As white settlers moved in, conflicts often erupted in which native warriors demonstrated great courage, organization, and skill. Eventually, however, the superior weaponry of the Europeans produced military victories and a steady westward movement of the line of white settlement.

Sources

William Bartram, Travels through North and South Carolina, Georgia, East and West Florida... (Philadelphia: Printed by James & Johnson, 1791);

Christopher S. Peebles, “Moundville from 1000 to 1500 AD as Seen from 1840 to 1985 AD,” in Chiefdoms in the Americas, edited by Robert D. Drennan and Carlos A. Uribe (Lanham, Md.: University Press of America, 1987), pp. 33–36;

Richard White, The Middle Ground: Indians, Empires and Republics in the Great Lakes Region, 1650–1815 (Cambridge: Cambridge University Press, 1991).

trade / trād/ • n. 1. the action of buying and selling goods and services: a move to ban all trade in ivory a significant increase in foreign trade | the meat trade. ∎ dated, chiefly derog. the practice of making one's living in business, as opposed to in a profession or from unearned income: the aristocratic classes were contemptuous of those in trade. ∎  (in sports) a transfer; an exchange: players can demand a trade after five years of service.2. a skilled job, typically one requiring manual skills and special training: the fundamentals of the construction trade | a carpenter by trade. ∎  (the trade) [treated as sing. or pl.] the people engaged in a particular area of business: in the trade this sort of computer is called “a client-based system.” ∎  (the trade) [treated as sing. or pl.] Brit. people licensed to sell alcoholic drink. ∎ inf. a person in gay male sexual encounters who is not penetrated sexually and usually considers himself to be heterosexual.3. (usu. trades) a trade wind: the north-east trades.• v. [intr.] buy and sell goods and services: middlemen trading in luxury goods. ∎  [tr.] buy or sell (a particular item or product): she has traded millions of dollars' worth of metals. ∎  (esp. of shares or currency) be bought and sold at a specified price: the dollar was trading where it was in January. ∎  [tr.] exchange (something) for something else, typically as a commercial transaction: they trade mud-shark livers for fish oil the hostages were traded for arms. ∎  [tr.] fig. give and receive (typically insults or blows): they traded a few punches. ∎  [tr.] transfer (a player) to another club or team.PHRASES: trade places change places.PHRASAL VERBS: trade down (or up) sell something in order to buy something similar but less (or more) expensive.trade something in exchange a used article in part payment for another: she traded in her Ford for a BMW.trade something off exchange something of value, esp. as part of a compromise: the government traded off economic advantages for political gains.trade on take advantage of (something), esp. in an unfair way: the government is trading on fears of inflation.DERIVATIVES: trad·a·ble (or trade·a·ble) adj.