What is trade ?
The word trade has always been used in a generic fashion and the attempts of deciphering the meaning of this word has only been done by economists and business people. We have been hearing this word since the time we started to understand the world. So what exactly is trade? Going by the standard definition of the term, it is nothing but a simple activity that involves exchange of goods and services. That’s how simple it is. Such exchanges of goods or services can be between two parties or several parties. Bilateral trade refers to the trade that takes place between two parties whereas multilateral trade occurs when more than two parties are involved in the transaction.
If we look at history books, trade was actually in the form of barter system where commodities were exchanged and not currency. The commodities to be exchanged had equal values and were equally desirable to both parties. In modern world, money is used as medium of exchange and barter system is no longer in existence. The term trade has acquired significant importance in today’s world.
Imagine a life without the concept of trade! Sure, it would not be as fascinating as it is now. The need and importance of trade can only be understood from the fact that trading is in existence since centuries. During initial times, people first started to trade among themselves, and then they started to venture into other villages, towns and even countries. Even many famous discoverers from far away countries found India when they were hunting for new places to trade. This word is also responsible for discovery of many unknown countries and conception of travel. Names like Marco Polo, Columbus, Vasco De Gama etc surely rings a bell in the world of trade and its origin. Trade as a whole is not only complex but exciting as well. One thing is pretty sure; trade is going to be in existence as long as humans are there on the planet. The concept of Trade is centered around the simple activity of the exchange of good and/or services. These exchanges may be the ones that simply take place between two parties.
The simple trade which takes place between two parties is known as bilateral trade. These exchanges may also take place amongst more than two parties.
These exchanges that take place amongst more than two parties is known as Multilateral trade. In its authentic and original form trade perforce used barter and the exchange of goods and services of a recognized equal value that is equally desirable to both parties.
Modern traders generally negotiate through the use of a medium of exchange, i.e.money. The barter system of course has become extinct now.
The invention of money and the subsequent creation of the concepts of credit, paper money and non-physical money have played pivotal roles in simplifying and promoting the development of trade.
Most economists agree and accept the very obvious theory that trade benefits both parties involved in the transaction. Trade is a concept that exists largely due to the differences in the cost of production of some tradable commodity in the various locations.