“A Splendid Exchange” by William J. Bernstein

 AUTHOR: William Bernstein

AUTHOR: William Bernstein

A simple fact to share with you today. Without trade, there is no diplomacy and quite simply, diplomacy is the heart of trade. Throughout history, countries have sought to advance their commercial and economic interests by negotiating trade agreements. Multilateral institutions like the European Union use trade as formula to sustain peace in a region that was fraught with instability and conflict. By fostering an environment where national businesses and entrepreneurs can enter into the international marketplace, to this day, there is clear evidence that trade is a prerequisite to keeping peace between nations.

As you consider your interests and general fit in the world, we felt it was important to ignore the significant impact that trade has on the world, particularly in terms of its influence in the operations of diplomacy. As you dive deeper into the issue, you will start to certain patterns emerging. For instance, when you consider why certain countries are helped more than others in terms of aid and support, look behind whether there is any trade interest for the aiding country. If there is limited commercial interest, the likelihood of diplomatic relations being strong between those countries is likely to be weakened due to lack of economic motivation.

In order to help expand your understanding of the role trade plays in international relations, we recommend the book “A Splendid Exchange: How Trade Shaped the World from Prehistory to Today” by William J. Bernstein. This book is recommended as further reading to support Chapter 2 “Fit for a Global Profession” of the “Diplomatic Planner”. The world is unrecognisable without trade and not much has changed from our more prehistoric years. History has showed us how natural and beneficial trade is between countries and clearly we, even as individuals, become accustomed to free trade. We hardly notice how unusual it is to see products from places like China, Indonesia or Bangladesh right on our doorstep. We are in a highly privileged position to be able to get anything from around the world and not wait until next year for its delivery. Trade has opened our worlds up, both for ourselves in our personal lives and for those in other countries. We survive on trade and the benefits trade provides but none of this could have been possible without the more darker side to trade. 

Some of the earliest trade routes formed around the Persian Gulf around 3000 BC, where agriculture was being developed using the most simplest tools. The region of Mesopotamia is often referred to as the “cradle of civilisation” where trade began. Mesopotamia was rich with fertile lands but lacked vital resources like metal and timber that was needed to build shelters, boats and weapons. It became clear how necessary trade  was and so, the Mesopotamian nations of Assyria, Babylonia and Sumeria used their surplus to trade for goods that they needed from Persia and Lebanon. As civilisation slowly spread to Greece and Egypt, trade routes started to emerge along the Red Sea and the Mediterranean. This simple understanding of trade reminds me of the board game “Settlers of Catan” where you trade things like sheep, wood and coal to build roads, houses and grow your economy. If you haven’t played this, I highly recommend it.

As we move along history, we find out how vital camels are to trade which pretty much revolutionised trade. This was a little after the Ice Age, a period of millions of years that ended around 10,000 years ago. Prior to 1500 BC, camels were kept primarily for their milk but the nomadic tribes started to use them for transportation as they were superior for carrying cargo. As camels are able to walk on sand, luxury Arabian goods such as myrrh and frankincense started to make its way into the marketplace throughout the Arab peninsula and the Mediterranean sea.

Trade was also significant in the Muslim and Chinese world. Prophet Muhammad, peace be upon him, was raised by Abu Talib, a prosperous trader who taught him the trading arts such as textiles and raisins. According to the author, Chinese sources suggest that Muslim traders first arrived in China around 620 AD, carrying goods such as copper and ivory that was traded for luxuries such as gold and silk. The journeys these traders endured was not without its dangers. Trade was made on foot in treacherous terrain. Shipwrecks were common and many lives were lost at sea.

Commodities like spices, even to this day, is highly sought after by the Western world. Back in 1,000 AD, spices were highly desired by wealthy Europeans which meant profits for traders was usually above 100 percent. However, as payment, merchants often sold slaves mostly from the Balkan region who would be turned into soldiers. It wasn’t long until the plague, also known as the “Black Death” would endanger global trade which caused immense deaths. For instance, Venice lost nearly 60 percent of its population to the disease when it fit in 1348. The disease was known to have originated in China which was passed through the spices they were selling that were contaminated by infected rats in ships.

Moving forward, Bernstein shines a light on how the Portuguese perfect maritime technology that would mean Europeans opening their own trade routes in the Indian Ocean and strategic ports along the east coast of Africa. Spain was also growing in power and was sold the idea for Christopher Columbus, an Italian explorer to travel to India with hopes of finding an easier trading route. Unfortunately, he went off course and arrived in the Caribbean in 1492 with what he announced as being the New World. With such voyages, the rest of the world came to learn that the earth wasn’t flat which further expanded opportunities for trade.

The first globally-minded traders were the Dutch, the Portuguese and the Spanish who had powerful governments that made use of knowledge. With the increase in global trade, nations began looking into mutual benefit of corporate mergers. The two biggest powers at the time who considered this were Holland and England which operated the Dutch East India Company and the English East India Company, respectively, and became global superpowers. What helped Holland’s economic powers to grow was thanks to investments in trade and merger like the Dutch East India Company.

Bernstein goes into detail about the growth and understanding of economic theory as international trade grew around the world. As you may be aware, Adam Smith’s “The Wealth of Nations” became highly influential and led England to encourage a multitude of businesses to compete for price which still exists in today’s economy. Bulk trade was also starting to be introduced as a standard for competition which helped to reduce shipping costs for transcontinental trade.

Even in today’s modern world, we are still seeing child labourers forced to make cheap clothes and labourers in many developing countries getting outpriced by even cheaper labour elsewhere. Sweatshops still exist and child labourers are still not a thing of the past. When considering negotiations for international trade, think of those who are involved in the trade and those affected lower down in the ranks. Is trade really good for your country and the people, or just the bottom line? It isn’t unusual to sometimes consider imagining a country like a major corporation. You still have a very large stakeholder to work with and governance to apply and abide by. Some people will win and others will lose. At the end of the day, consider what is being lost and whether this outweighs with the gains made. Free trade doesn’t benefit everyone.

Currently the salary of the average worker in the West has remained stagnant for a full generation, while executive salaries are soaring. Low skilled labourers received very little rewards from free trade and it is patently clear that income disparity and economic inequality is a major cause for political and social turmoil. It is therefore our civil duty to be mindful of what we are willing to pay for and how our cash funds certain activities. What may be a splendid exchange for one may come at a detriment of another.

“A Splendid Exchange” is recommended for the purposes of the Diplomatic Planner. The Diplomatic Planner is a 12-month career development for diplomacy and internationals for professionals looking to explore or grow their expertise in the field. Both books are available for purchase via Amazon. For further recommendations, insights, case studies and practicable worksheets, please join the Grassroot Diplomat Diplomatic Academy via: www.grassrootdiplomat.org/register