The early history - from the 16th to and including the 18th century - of world trade was based on mercantilism - where governments regulated economies for the benefit of the state at the expense of its rivals. International trade was regarded as an important part of state business, and armies and navies were dispatched to enforce trading conditions on weaker countries. The aim of international trade was to accumulate gold and other resources and to prevent others from accumulating them, thereby strengthening the home country in its ability to provision large armed forces so as to wage and win wars. A major objective in support of this policy was to colonise and build empires in order to exploit poorer resource-rich countries with inferior military capabilities in Asia, Africa and America, while preventing other strong countries from doing the same. Tariff barriers to restrict the import of foreign goods were applied by the home country and forcibly removed wherever possible when applied by rival countries.
Adam Smith (1723 - 1790) was a sharp critic of mercantilism and its passion for the accumulation of gold. He showed that real wealth was created by the work of human beings, particularly when applying specialisation, and that gold was merely the medium of exchange for that wealth. His influential book 'An Inquiry into the Nature and Causes of the Wealth of Nations', usually abbreviated to 'The Wealth of Nations' (Smith 1776), was written at the beginning of the industrial revolution and hastened the decline of mercantilism and the start of classical economics, which espoused free trade and a laissez-faire approach. The British Empire spread this liberal economic model around the world, though in a very one-sided manner by forcing it on unwilling trading partners while retaining barriers at home - see chapter 73 section 73.3: 'The historic free trade myth'. The economic model developed by Smith largely holds today, with much of it embraced in the core beliefs of neoliberalism.
World trade began to expand slowly from the industrial revolution, but took off in the 19th century when transport and communication technology improved dramatically, supported by increasing political liberalisation. It declined very significantly when the First World War broke out and continued to decline between the wars as countries favoured self-sufficiency over interdependence.
Towards the end of the Second World War the Bretton Woods conference (July 1944) set the scene for international trade for almost thirty years. It had been recognised that everyone suffered from limited world trade, not only by going without goods that would benefit them, but also by fostering hostility from protective barriers such as high import tariffs and outright trade bans set up to limit or prevent imports from other countries. During this period gold was still the basis of trade, but instead of exchanging gold metal countries exchanged their own currencies at fixed rates in relation to the US dollar, and the dollar was tied to gold at the rate of $35 per ounce. It was a period of unusual stability, but it began to unravel in 1971 when President Nixon was forced to abandon the link between gold and the dollar because too many dollars were held in foreign countries than could be repaid in gold. This became known as the 'Nixon Shock'. It was caused by other countries, fearing that the dollar was overvalued - which it was - demanding gold in return for dollars, and with inadequate gold reserves the US was unable to honour its dollar exchange rate promise. Nixon promised that the link would be re-established as soon as conditions permitted it, and there were some attempts, but one by one other countries abandoned the link between their currencies and the dollar, and by 1973 the Bretton Woods arrangements were at an end. Afterwards all major currencies floated freely against each other with some minor currencies tied to stronger currencies. This meant that the value of one currency against another was set by supply and demand, with foreign exchange dealers acting as intermediaries. That event marked the first time in history that fiat currencies - where the value is guaranteed by governments - were completely detached from any external standard (Kaletsky 2011 p329), and the world is still coming to terms with the changes that it ushered in. One major effect was to make currency speculation mushroom to enormous proportions. This is the regime we are living with now.