The elementary definition of trade is the transfer of ownership of goods from one person, the seller, to another person, the buyer, for an item of value. This transfer can take place on the very smallest of scales, for instance, from one person to another. Or a transfer of vast amounts of goods can take place between multinational corporations or even nations. When two traders exchange goods, it is called a bilateral trade. When the transaction happens between more than two it is called multilateral. Trade is basically a commercial or financial transaction, although it can also be barter. The network in which trade occurs is called a market. Trade is sometimes referred to as financial transaction, barter, or commerce.
Historically, trade became a common transaction because people began to specialize. In man’s earliest history, he was responsible for acquiring or making everything he or his family used. As time progressed and needs became more complex, skills became specialized. For instance, tailors created clothing, farmers grew food, or sailors and fisherman harvested seafood. Each person concentrated on his own specialty, but needed goods that came from his neighbors, who were specialists in something else.
At first, barter was the accepted function. Bartering has been said to date back 150,000 years. Evidence suggests that, in the Stone Age, obsidian and flint were widely traded. A good example of more recent bartering might be this. A farmer might exchange a milk cow for clothes for his family. Or a gristmill owner might barter flour or grain for lanterns and wicks. In more recent eras, bartering virtually disappeared; however, it is making a comeback in some areas. As specialization increased, bartering gave way to trading money for goods and services
Trade is the most common of transactions in the world today, but it has sometimes been used as an economic weapon by one country against another. Trade sanctions have always existed in the world, with the sanctions including specific goods. In man’s earliest history, it wasn’t unheard of for one person to tell another to not do business, or trade, with a third person. With the addition of other motivating factors, trade has often been the cause of physical, as well as, economic wars. Trade sanctions continue in modern times. Trade embargos are more severe, resulting in the complete isolation of one country’s products. Many trades are taxed by local or federal government. Some countries tax both imports and exports.
Removal of trade barriers except for reasons of national security and health is the main purpose of free trade agreements such as the North American Free Trade Agreement (NAFTA), European Free Trade Agreement, European Union and South American Community Nation. The KORUS FTA is the most economically significant bilateral free trade agreement that the United States has concluded since signing the North American Free Trade Agreement (NAFTA) in 1994.
The average person who seeks to buy a product is most familiar with retail trade. Retail trade is the selling of goods and merchandise from a fixed location. Some of these fixed locations are department stores, boutique, kiosks, or community markets. Retail goods are generally comprised of individual or small lots meant for direct use or consumption by the buyer. Business people are familiar with wholesale trade. Wholesale trade is sometimes defined as the buying of merchandise that is then sold to a retailer for retail trade. Wholesale trade is most prevalent in industry, commerce, professional businesses, and institutions. Wholesale trade pricing is sometimes offered to the general public, but this is not the norm.