The key to understanding international trade is to recognise that a single country trading with the rest of the world is very much like a single person trading with other people. In particular a country that wants to buy wealth from abroad must either sell wealth abroad or borrow from abroad.
This is a very simple and basic reality but in studying international trade it is easily forgotten, becoming lost amongst all the very many complexities that globalisation throws up. Most of these complexities have arisen from the sticking plasters that have been necessary because we have no world currency to act as a lubricant in freeing up world trade. We would have had if we had listened to Keynes but we didn't - see chapter 67.
Just like an individual a country that buys more wealth than it sells becomes indebted - it becomes poor internationally and has less influence in the world, whereas if it sells more than it buys it becomes entitled to the difference - it becomes wealthy internationally and has more influence in the world. This is where the drive to export comes from - the desire to be wealthy and to have influence.
All the same factors that beset individuals beset countries - variable bargaining positions, wealth extraction and exploitation, the need for employment, vulnerability to environmental degradation and so on - but in the international sphere everything is much more extreme. Those who are exploited aren't merely disadvantaged, they often die. Protection from human rights abuses is often non-existent, and things that we like to think have been consigned to history such as child labour and slavery flourish.[244] Not only that, we ourselves are parties to it, enjoying cheap food, raw materials and many types of manufactured goods bought at the cost of hardship, misery and death for those we don't want to see or acknowledge.
A major reason for the more extreme conditions that prevail in international trade relative to domestic trade is the absence of state institutions. Although there is much talk of globalisation and the global economy and its benefits, it's not an economy in the sense that a country's economy is. An economy requires proper regulation and control for the benefit of everyone in that economy if it is to function well - in spite of what neoliberals tell us - but there is no-one regulating or controlling the global economy for the benefit of the people of the world. Recall from chapter 28 the list of state provisions to make markets at least approach fairness: property rules to establish ownership; courts to enforce contracts; trading regulations to protect buyers and sellers; a police force to investigate crimes and bring wrongdoers to justice; health, safety, labour and environmental standards to comply with accepted norms; social insurance to insulate against market risk; and taxation to fund all these and many more requirements (Rodrik 2012 p22). These are largely absent for international trade so there is very little protection available to participants and third parties. There are international organisations that do regulate and apply controls - the International Monetary Fund (IMF), World Bank, and World Trade Organisation (WTO) - but as will be seen they embrace the doctrine of unfettered markets and as a result the control they exercise benefits rich countries at the expense of poor countries - see chapter 73.
International trade has a very long history. It goes back at least 5,000 years and may well go back further. As humans spread out over the world and their descendants came into contact they found that each had things that the other wanted. If they could just take them they did, but if they couldn't they traded. Goods traded over long distances in ancient times had to be non-perishable, portable, and valuable in relation to their size. Therefore we see spices, rich textiles, precious metals fashioned into jewellery and ornaments, and useful items made of copper, bronze and iron making their way over long and tortuous river, sea and land trade routes. And let's not forget the slave trade, which goes back to the very beginnings of civilisation, and although no longer sanctioned by governments it is shamefully still alive and flourishing today.[245]
The growth in international trade or 'globalisation' as it is more generally known is usually regarded as a relatively recent phenomenon, yet there is some merit in the view that the heyday of globalisation was prior to the First World War. This is what Keynes said in his book 'The Economic Consequences of the Peace' published in 1919 after he resigned in disgust from the Paris Peace Conference at Versailles in the same year.
The inhabitant of London could order by telephone, sipping his morning tea in bed, the various products of the whole earth, in such quantity as he might see fit, and reasonably expect their early delivery upon his doorstep; he could at the same moment and by the same means adventure his wealth in the natural resources and new enterprises of any quarter of the world, and share, without exertion or even trouble, in their prospective fruits and advantages; or he could decide to couple the security of his fortunes with the good faith of the townspeople of any substantial municipality in any continent that fancy or information might recommend.
The First World War put an abrupt end to that degree of freedom, and it's debatable whether it has even now been re-established in spite of the vastly increased value of international trade that we see.[246]
For most of its history, world trade depended on gold as the medium of exchange. The value of gold was universally acknowledged, it was sought by everyone, and indeed most people considered wealth and gold to be the same thing.
An economy that trades with other countries is called an open economy; otherwise it is a closed economy. In the modern world all countries trade with at least some other countries, and most countries trade with many others.