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The history of international trade chronicles notable events that have affected the trade between various countries.
In the era before the rise of the nation state, the term 'international' trade cannot be literally applied, but simply means trade over long distances; the sort of movement in goods which would represent international trade in the modern world.
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Chronology of events
1157 The Hanseatic League secures trading privileges and market rights in England for goods from the League's trading cities.
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1500 - 1776
1592 Japan introduced a system of foreign trade licenses to prevent smuggling and piracy.
1580 Portugal's loss of independence to Spain creates a monopoly in spices from the Indies; without competition the Spanish were able to raise European prices, and shut the free-trading Dutch out of the market.
1604 Hugo Grotius publishes Mare liberum (The Free Seas), advocating open use of the sea by maritime trade of all nations. In Britain, parliament moves in favour of free trade, but opposes the Dutchman's call for unlimited navigation rights; English and Dutch Republic traders are fierce rivals.
1685 The first British outpost in the East Indies was established in Sumatra.
1751 Benjamin Franklin's Observations Concerning the Increase of Mankind, Peopling of Countries, &c. (*) argues that competition from third-country suppliers would prevent British merchants selling manufactured goods above world prices to the American colonies, in the liberal tradition of free trade. However, the same document advocates mercantile laws as "generative laws" which "strengthen a Country doubly". Mercantilism was a nationalist theory which dominated thought about the correct trade policy to adopt in eighteenth century Europe: Export as much as possible, but import the minimum to create a "favourable" trade balance.
1764 The Sugar Act raises a 3 pence per gallon tarrif on molasses imported from the French West Indies, to make British West Indies sugar more competitive in the American colonies. Since there is insufficient supply from the British West Indies New England merchants are forced to buy the taxed sugar from the French West Indies anyway, with the tariff acting as an unpopular means of wealth transfer to the British exchequer from consumers in the colonies.
1770 Turgot's Lettres sur la liberté du commerce des grains demands the end to restrictions on free trade in grain, with the claim that all parties would thereby benefit.
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1776 - 1841
1776: An Inquiry into the Nature and Causes of the Wealth of Nations, questioned the wisdom of Mercantilism. Adam Smith argued that economic specialization could benefit nations just as much as firms. Since the division of labour was restricted by the size of the market, he said that countries having access to the largest markets would be able to divide labour more efficiently and thereby become more productive. Smith was later to say that he considered all rationalizations of import and export controls "dupery", which hurt the trading nation at the expense of specific industries.
1799 The Dutch East India company, formerly the world's largest company goes bankrupt, partly due to the rise of competitive free trade.
1816 In line with protectionist opinion, the U.S. Congress extended its 1789 tariff to manufactured goods. The intention of limiting free trade was to help local industries compete with the products of industrial England.
Both countries benefit when a totally inefficient producer sends the merchandise it produces least badly to a country able to produce it more efficiently at home.
1818 The majority of European intellectual opinion is persuaded by Ricardo's argument.
1828 The "Tariff of Abominations" is signed into U.S law with the express intention of raising the domestic price of British manufactured goods. This was in the interests of Northern producers, but was unpopular in the South, especially because England reduced agricultural imports in response.
1833 The U.S. tariff issue is defused by a protectionist, Henry Clay, who promotes a staged reduction of tariffs down to the levels of 1816.
1840 Opium War - Britain invades China to overturn the Chinese bar on opium imports (Britain was shipping a ton of opium per day from India into Chinese ports). The British case was argued in Ricardian terms against the import barriers the Chinese wished to impose; parliament argued that the trade in opium should not be restrained.
1841 Friedrich List's Das Nationale System der Politischen Okonomie disputed the equivalence between individuals and countries in the conduct of trade. Within a country the ideal economic system would be the free market, but the importance of developing national productive power made free trade between nations a danger for a country specializing in agriculture. He said that such a country would stagnate and never reach an industrial stage of development. He compared a period of protectionism for an industrially weak nation to a period of education for an individual; costly in the short term, but paying off in time. He acknowledged the immediate economic advantages of free trade, and advocated returning to this policy as soon as the 'industrial education' of Germany was complete.
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1842 - 1889
1842 first opium war ends.
1844 The ascendancy of free trade was primarily based on national advantage. That is, the calculation made was whether it was in any particular country's self-interest to open its borders to imports. Ricardo and others had shown that it might well be, but John Stuart Mill proved that a country with monopoly pricing power on the international market could manipulate the terms of trade through maintaining tariffs, and that the response to this might be reciprocity in trade policy. This was taken as evidence against the universal doctrine of free trade, as it was believed that more of the economic surplus of trade would accrue to a country following reciprocal, rather than completely free, trade policies.
1848 The infant industry scenario developed by J.S. Mill anticipated New Trade Theory by promoting the theory that government had the "duty" to protect young industries, although only for such a time as would be necessary for them to develop full capacity. This theory became policy in many countries, these nations attempting to industrialize and out-compete English exporters.
1868 The Japanese Meiji Restoration lead the way to Japan opening its borders and quickly industrializing through free trade. Under bilateral treaties restraint of trade imports to Japan were forbidden.
1873 The Wiener Börse slump signals the start of the continental Long Depression, during which support for protectionism grows.
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1889 - 1945
1890 William McKinley argued that the revenues generated from the current tariff levels were too high; by raising import barriers it was said that imports would drop sufficiently to lower tariff income, reducing the dangerously high treasury surplus (*). President Harrison tried to make the tariff more acceptable by writing in reciprocity provisions, and through direct payments to domestic sugar producers rather than tarrifs on sugar imports. The McKinley tariff sets U.S. rates to 50%, and was widely blamed for substantial consumer price inflation.
1892 France introduces the Méline Tariff, ushering in an era of protectionist measures.
1934 The Reciprocal Trade Agreements Act (RTAA) is passed in the United States, allowing for bilateral trade agreements to be made with other countries without a most favoured nation clause.
1945 MITI is given powers to control imports to post war Japan, in the hopes of helping reconstruction.
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1946 - 1995
1946 The Bretton Woods system goes into effect; it had been planned since 1944 as an international economic structure to prevent further depressions and wars. It included institutions and rules intended to prevent national trade barriers being erected, as the lack of free trade was considered by many to have been a principal cause of the war.
1947 23 countries agree to the General Agreement on Tariffs and Trade to rationalize trade among the nations. Low tariffs are beneficial to the economies of the nations in that it encourages imports, increases government revenues and gives local industries some motivation to improve their efficiency. High tariffs discourage trade between the nations, reduces or eliminates government revenues from this sector of taxation, and gives more monopoly power to local industry. So low tariffs are beneficial to the world economy but not free trade. Free trade does not necessarily mean increased trade among the nations. Nations who cannot compete in the world market will have their standard of living reduced and this reduction in their standard of living will reduce world trade. Free trade does not enable governments to earn taxes from this sector. Free trade transfers monopoly power from local industry to foreign companies and the job of government regulating the economy for the common benefit of everybody will be lost. Foreign companies cannot be regulated by government because they are aliens to a local economy.
1971 Without accepting the doctrines of free trade the, "Comprehensive Program for Socialist Economic Integration" moved the Comecon countries to world prices in calculating the value of intra-Comecon trade. The free market price was observed for five years and the mean of these prices used to give the relative value of the imports and exports between communist countries in the trading group over the following five years.
1974 The oil price shock was felt around the world, because production reductions increased the international price even on the open market (to countries outside the OPEC embargo). Some oil importing countries respond with the rationing of oil consumption.
1975 Inter-Comecon trade tied even more closely to the "world price" dictated by free trade.
1988 Solidaridad launches "Fair trade" labeling with the sale of Mexican coffee which was certified to meet ethical standards of sustainable development. This and other initiatives promoted the idea that some trade between regions could be socially beneficial (outside of the economic elites). The movement is especially active in campaigning to remove agricultural subsidies in the developed world (which some see as campaigning for free trade).
For the World Trade Organization Chronology of Free Trade see: WTO 1986 - 2005.
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See also
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