Trade is an economic activity that involves the exchange of goods and services between two or more people or entities. The practice of trading dates back to the early development of civilization. It allowed these early civilizations to specialize in what they were good at producing and trade that for other goods and services that they could not produce themselves. This allowed for the expansion of these civilizations and led to more prosperous societies.
As civilizations expanded, they began to build trading routes that connected distant cities and countries. They also developed a system of money, which they used to record their trading transactions. This led to the evolution of modern global trade.
In some countries, the government supports free trade by keeping businesses from selling dangerous or illegal products. Some governments also limit trade by imposing tariffs or special taxes on foreign goods and by setting quotas on the amount of certain types of imported goods.
These limitations to free trade can impact some households, such as those who work in industries that export or import. However, for many households the positive effects of trade via lower prices and increased product availability more than offset these negative impacts on employment and wages.
Several ways of measuring trade exist, but the most common is to use a country’s imports and exports as a share of its GDP. This metric provides an idea of a country’s level of integration in the world market. Countries that are more open to trade generally have higher GDPs than those that are less reliant on other countries for access to essential goods.