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International trade is a dynamic and powerful force that affects nearly every individual, business, and nation in the world. Its scope and scale have also made international trade an immense, intense, and perennial subject of interest and inquiry. Some of the foundational works on international trade can be traced back to Adam Smith and David Hume, whose theories sought to debunk the commonly held idea of international trade at the time: mercantilism, which viewed exports as beneficial because they generated an increase in foreign currency and a nation’s wealth, and imports as detrimental because they were thought to decrease a nation’s wealth. Today, the general idea of comparative advantage informs almost all neoclassical economists’ models of international trade. However, neoclassical economists tend to assume that the theoretical benefits of international trade are clear, and thus, often ignore or dismiss the negative impacts of international trade and the studies that challenge their theories. In fact, many countries have not seen the benefits predicted by neoclassical economic theories. This is particularly evident when comparing the effects of international trade across developed and developing countries. Furthermore, there is evidence that international trade has developed along patterns that are not predicted by the traditional theories of comparative advantage. Given these, the practice of trade and its international impact can be much murkier.

In a time of trade wars, free trade skepticism, tech rivalry, and multipolar disorder, the European Union (EU) cannot evade its responsibilities the last defender of the World Trade Organization (WTO). Yet, it raises the question of whether the EU has power to defend the WTO. The EU is a multilateralist-oriented power of global magnitude. Unlike the United States, the EU is openly defending the WTO in the current crisis created by continued refusal to appointment WTO Appellate Body members. Like the United States, the EU is concerned with the illegitimate trade practices of China. Yet, the EU uses diplomatic pressure on China within the rules of the WTO. The EU is actively trying to rescue the rule-based trade system. Yet, it cannot do so alone. It needs support, not just form other WTO members but also from within Europe itself. The current crisis is in part rooted in the inability of the WTO members to update the WTO rulebook. The focus will be on the potential clash between a more assertive EU on sustainability and the absence of updated WTO rules on sustainable trade issues. This may force the EU to confront a deep-rooted policy dilemma. The question is whether the EU should continue to refrain from using its market power to promote sustainable trade in respect of the WTO. As the EU is about to ratify several bilateral trade agreements of commercial, geo-economic, and indeed geo-political importance, such as the EU–Mercosur or EU–Vietnam agreements, the rule-orientation of the EU faces growing domestic opposition as well as external contestation. Furthermore, the EU is modernizing its trade defense weaponry, the antidumping instrument, and has recently declared its intent to impose unilateral climate-related trade policy measures, the carbon-adjustment tariff, in the future. Thus, an incident such as the burning of the Amazon forest may force the EU to take a tougher stance on sustainability at the risk of bringing the EU on a collision course with the WTO itself, its rules, process, and member states. Consequently, the complex setup of the EU as a trade power could make it difficult to ratify WTO-compatible trade agreements in the future.

Trade governance rests upon certain economic assumptions and the ensuing political compromises made possible by the growth of an incremental legal consensus. The main economic assumptions are that trade will deliver upon the objectives of socio-economic development, stable, long-term employment opportunities and poverty reduction. These assumptions are theoretically sound, but are increasingly challenged by the complex political realities of global trade. The study of trade in the field of international political economy (IPE) has deep roots in the postwar disciplines of economics and political science. The literature on the history of trade regulation places the current system, with its emphasis on the legitimizing imprimatur of political power and the significance of binding treaty, into a more nuanced context in which present practices, while sometimes novel, are frequently older than most policy makers realize. In the two decades since the finalization of the Uruguay Round and the creation of the World Trade Organization (WTO), a host of significant issues have arisen as scholars and policy makers attempt to implement the WTO’s mandate and navigate the political waters of trade regulation as it relates to domestic law and policy. These include the set of issues raised by the broadening of trade regulation post-Uruguay Round to include trade related intellectual property rights and trade in services, the contentious issue of trade and economic development, and the issue of WTO reform.

Cities have played an important role in West African history. In the vast majority of African urban complexes, slavery and the slave trade have played an important role. As in most parts of the world, slavery has roots in the distant past, but its importance was increased by the demand for African slaves, first by the dynamic civilizations of the Mediterranean and the Middle East and then by European global imperialism. The efforts of Africa enslavers to supply these foreign markets meant the slaves were available for use within Africa. The number of those kept and used within Africa was generally greater than those exported. They were used as agricultural labor, concubines, soldiers, administrators, porters, servants, and artisans. There were contrasting patterns of slave use: peasants with small slave holdings, states incorporating slaves as soldiers and administrators, and a largely Muslim merchant class, which lived in cities but maintained large rural plantations. The process began in the 1st millennium bce but reached a peak in the long 18th century, when militarized states evolved to meet the demand for slave labor in the West Indies.

The political economy of protection is a field within economics, but it has significant overlap with its sister discipline, political science. For a political economy of protection, one needs at a minimum two types of economic agents: political decision makers who provide protection, and economic agents who are protected or even actively seek protection. The typical political economy scenario leads to an economic outcome that is not Pareto-optimal: From a general welfare perspective, the political interaction is not desirable. An important task of political economy research is to explain why and how political interaction takes place. For the first part of the question, it appears clear that if protection is actively sought, the protection seeker intends to benefit from his activities. However, if the policymakers were truly interested in Pareto optimality and welfare maximization, they would refuse to protect. Hence a crucial assumption in the political economy literature is that the politicians’ objective function differs from the general welfare function. For the second part of the question, theoretical political economy models consider either the election campaign phase when politicians are eager to win a majority of votes (preelection models) or the phase when the politicians have been elected and may benefit from the spoils associated with holding office (postelection models). Whereas in the election phase, politicians have an incentive to cater to the interests of that part of the electorate that is considered pivotal for the election outcome, in the postelection phase they may be open to, for example, special interest group (SIG) influences from which they derive utility. A first wave of theoretical political economy models originates from the 1980s. Building on these early advances, more elaborate models have been proposed. The most prominent one is the Grossman–Helpman protection for sale (PfS) model. It delivers a postelection general equilibrium framework of trade policy determination. In this common agency model, industry interest groups act as principals and offer the government a menu of contracts of campaign contributions in exchange for trade policy. The PfS model predicts that industries that lobby for protection will obtain trade protection in equilibrium, whereas nonlobbying industries will face import subsidies. Numerous papers have evaluated the PfS model empirically and found that the implied weight on contributions in the governmental welfare function and the implied share of the population represented by lobbies are both very high. Remedies for this surprising result exist, but it has also been argued that the found empirical regularities may be spurious. At the beginning of the 21st century, the majority of political economy literature is still theoretical, but better data availability increasingly offers the opportunity to empirically test theoretical results. A number of challenges remain for the political economy literature, however. In particular, more work is required to better understand policymaker interests. Moreover, an incorporation of political economy aspects into the new trade theory models that allow for intra-industry trade and firm diversity appears to be a promising avenue for future research.

This article reviews recent studies on the impact of financial frictions on international trade. We first present evidence on the relation between measures of access to external finance and export decisions. We then present an analytical framework to analyze the impact of financial frictions on firms’ export decisions. Finally, we review recent applications of this framework to investigate the impact of financial frictions on international trade dynamics across firms, across industries, and in the aggregate. We discuss related empirical, theoretical, and quantitative studies throughout.

International trade involves the movement of goods across borders, while immigration pertains to the movement of people across national boundaries. These two phenomena are strongly correlated. To some extent, the similarity between barriers to trade and migration explains this correlation, with distance being a crucial factor in both trade and migration. Geographically closer countries tend to engage in both trade and migration because of closer cultural connections. Immigration is itself also an important determinant of trade flows. Migrant networks play a vital role in reducing trade barriers by improving information sharing and facilitating business connections. This, in turn, leads to an increase in both exports and imports between countries. As trade increasingly relies on efficient firm and supplier matching, particularly within global supply chains, the influence of migrant networks becomes more significant. Finally, immigration also drives demand for goods and services from migrants’ home countries. Migrants often maintain strong ties to their home countries and prefer consuming products and services from those regions. This preference fosters increased bilateral trade flows between the home country and the country of immigration. In summary, international trade and immigration are closely linked, and understanding the interplay between international trade and immigration is crucial for comprehending the dynamics of the global economy.

The Ottoman empire, which at its height stretched around the Mediterranean from Albania to Morocco, from Egypt in the south to Crimea in the north, and from Iran in the east to Hungary in the west, represented an enormous trading bloc. Its internal trade, which was always much greater than its external trade, consisted largely of agricultural products with some manufactures, in particular textiles, which were traded both locally and to distant parts of the empire. External trade was dominated by agricultural products, which were exported to the West, and manufactured goods such as textiles, carpets and ceramics, and the import of textiles from the West, silk from Iran, spices from the East, and coffee from Yemen. Many of these commodities transited through the empire. There was also a significant trade in slaves into the empire from the Black Sea region and from sub-Saharan Africa. Commerce, which influenced Ottoman conquest policy, brought considerable revenues to the state, and Ottoman rulers invested heavily in infrastructure to support trade and to protect traders. They also attempted to control commodity exchange, imposing trade embargoes, fixing prices, and establishing a system of provisioning. The expansion of the world market in the 19th century affected the nature of Ottoman commerce. The empire became an exporter of raw materials and importer of manufactured products. Controls on internal trade were removed, allowing foreign merchants to operate freely, and its markets were opened up to an influx of goods from Europe, in particular from Britain.

Long-distance international trade for hundreds of years stemmed primarily from differences in climate. Generally free-trade policy and reduced transport cost superimposed another pattern by 1914; one of greater international specialization based upon land and labor abundance or scarcity. The broadly open trading world of the beginning of 1914 broke down first under the impact of war and then of the Great Depression. By 1945 the United States had emerged as the most powerful nation, committed to establishing a world order that would not make the mistakes of the preceding decades. The promotion of more liberalized trade among the wealthier nations, over the following decades hugely expanded the volume of trade. Trade in manufactures—based on skill endowments and preference diversity—came to dominate that in primary product. Services strongly increased in importance, especially with the rise of e-commerce. Oil displaced coal as the world’s principal fuel, redistributing income to those countries with substantial oil deposits. The greatest threat to the continuing expansion of world incomes and trade came from the Great Recession of 2008–2009, but the World Trade Organization regime discouraged the mutually destructive trade wars of the earlier period. However, the WTO was less successful 10 years later in restraining the damaging United States–China trade conflict.

A survey of the literature on trade has revealed that it is becoming more difficult for elected officials resist protectionist pressures by citing constraints imposed by global pacts and supply free trade. There are two main reasons why. First, the literature on the design and politics of international institutions increasingly emphasizes how they build in slack that can undermine government claims of being constrained. Second, as states accede to an ever-growing list of overlapping international institutions, there is often a choice among, or uncertainty over, which institution’s obligations apply. Where this situation creates more policy space for government officials, it also will make it more difficult for them to credibly tie their hands and supply free trade in the face of interest group pressures for protection. Currently, the literature is somewhat at a turning point. Questions about the design and politics of international institutions, and the growing thickness of the market for them, are very much in vogue. These questions have profound implications for the supply of free trade. The credibility of elected officials’ hands-tying strategies is likely undermined where institutions anticipate the political reactions of their members, or where members can shop for different rules on trade to accommodate domestic preferences. The irony is that the proliferation of international institutions may lead scholars of trade policy to renew their focus on domestic interest groups.

International trade agreements have played a significant role in the reduction of trade barriers that has taken place since the end of World War II. One objective of the theoretical literature on trade agreements is to address the question of why bilateral and multilateral trade agreements, rather than simple unilateral actions by individual countries, have been required to reduce trade barriers. The predominant explanation has been the terms of trade theory, which argues that unilateral tariff policies lead to a prisoner’s dilemma due to the negative effect of a country’s tariffs on its trading partners. Reciprocal tariff reductions through a trade agreement are required to obtain tariff reductions that improve on the noncooperative equilibrium. An alternative explanation, the commitment theory of trade agreements, focuses on the use of external enforcement under a trade agreement to discipline domestic politics. A second objective of the theoretical literature has been to understand the design of trade agreements. Insights from contract theory are used to study various flexibility mechanisms that are embodied in trade agreements. These mechanisms include contingent protection measures such as safeguards and antidumping, and unilateral flexibility through tariff overhang. The literature also addresses the enforcement of agreements in the absence of an external enforcement mechanism. The theories of the dispute settlement process of the WTO portray it as an institution with an informational role that facilitates the coordination among parties with incomplete information about the states of the world and the nature of the actions taken by each signatory. Finally, the literature examines whether the ability to form preferential trade agreements serves as a stumbling block or a building block to multilateral liberalization.

The Dutch Atlantic is often ignored because for much of its history it was quite small and seemingly insignificant compared to other European colonies in the Americas. However, it began with extraordinarily ambitious conquests and colonizing schemes. The present-day Dutch Caribbean—St. Martin, Saba, Eustatius, Aruba, Curaçao, and Bonaire—is but the remnants of what was, in the first half of the 17th century, an empire that claimed large portions of Brazil, the Caribbean, North America, and Africa. Forged during the decades-long Dutch Revolt against Spain, this budding empire collapsed soon after the Dutch gained Independence in 1648. European powers that had been allies against the Spanish turned against the Dutch to dismantle their Atlantic empire and its valuable trade. A series of wars in the second half of the 17th century reduced the Dutch colonies to a handful of smaller outposts, some of which in the Caribbean remain Dutch to this day. A recent wave of scholarship has emphasized the dynamism, ambition, and profitability of the Dutch Atlantic, whose fate reflected its origins in the small but dynamic Dutch Republic. Like the Republic, it was acutely sensitive to changes in international diplomacy: neither was ever strong enough to go entirely on its own. Also like the Republic, it was very decentralized. While most all of it was technically under the authority of the West India Company, a variety of arrangements in different colonies meant there was no consistent, centralized colonial policy. Moreover, like the Republic, it was never a purely “Dutch” affair. The native Dutch population was too small and too well employed by the Republic’s industrious economy to build an empire alone. As the Dutch Atlantic depended heavily on the labor, capital, and energy of many people who were not Dutch—other Europeans, some Americans, and, by the 18th century, a majority of Africans—colonial Dutch language and culture were overshadowed by those of other peoples. Finally, the Dutch Atlantic also depended heavily on trade with the other European colonies, from British North America to the Spanish Main. The Dutch were expert merchants, sailors, manufacturers, and capitalists. They created Europe’s first modern financial and banking infrastructure. These factors gave them a competitive edge even as the rise of mercantilist laws in the second half of the 17th century tried to exclude them from other countries’ colonies. They also displayed a talent for a variety of colonial enterprises. New Netherland, covering the territory from present-day New York to Pennsylvania and Delaware, began as a fur-trading outpost in the 1620s. However, by the time it was captured by the English in 1664 it was rapidly becoming a “settler colonial society.” Suriname and Guyana developed profitable plantations and cruel slave societies. In Africa and the Caribbean, small Dutch outposts specialized in trade of all sorts, legitimate and not, including slaves, textiles, sugar, manufactures, and guns. Although their territorial expansion ceased after 1670, the Dutch played an important role in expanding the sugar plantation complex of other empires, partly through their involvement in the Atlantic Slave Trade. Until the Age of Revolutions, the Dutch Atlantic remained a profitable endeavor, keeping the Dutch involved with Latin America from Brazil to Mexico. Venezuela in particular benefitted from easy access to Dutch traders based in Curaçao. Religion played a smaller, but still important role, legitimating the Dutch state and enterprises like the slave trade, but also opening up windows of toleration that allowed Jews in particular to gain a foothold in the Americas that was otherwise denied them. Although the surviving traces of the Dutch Atlantic are small, its historical impact was tremendous. The Dutch weakened the Spanish and Portuguese Atlantic Empires, opening up a path to Imperial power that would subsequently be seized by the French and British.

For over two millennia, the shores of Somalia have been the scenario of intense long distance interactions that reached as far away as India and China. The resources of the region and its strategic geographic location—a crossroads between Africa, Asia, and Europe—explain its prominent role in the Indian Ocean trade. Somalia was intensely integrated in this network, but at the same time developed its own forms of trade. From early on, the regions in the north (today’s Somaliland and Puntland) and the south (the Benadir coast) followed divergent trajectories, with the Benadir developing a strong urban tradition, while on the northern coast, trade remained associated with open seasonal fairs. At the same time, some elements were common to both regions and persisted through time, including local protectors (abbaan), trading diasporas (from Arabia, Iran, and India), caravans, and nomadic communities. Drawing on historical and archaeological research, this article examines the evolution of long distance relations in the Somali territories from the time of the Indo-Roman trade to the onset of colonialism in the late 19th century.

Government policies to protect and promote national culture are a perennial issue in the trading system. Controversy over trade and culture, in almost every instance, swirls around entertainment media—mainly movies, television, video, and music. The object of contention is that many states employ an assortment of financial, trade, and regulatory measures to subsidize locally produced entertainment, restrict imports, and favor national content over foreign content. Such measures often impede trade, pitting commercial interests in open markets and free choice against calls for state action to mitigate trade’s social repercussions. Differing perspectives on the motives behind these policies typify disputes over trade and culture. In one view, state regulation of entertainment media is cultural policy, an essential means of preserving a nation’s identity, culture, and way of life. From another vantage point, these policies are backdoor protectionism, a handout to local business and labor under the guise of cultural preservation. The problem of trade and culture therefore raises basic questions about politics: Why do states subsidize production and restrict imports? What drives political demands for trade protection and government aid? How can variation in policy responses be understood? In the World Trade Organization (WTO), disputes over trade and culture center on two related issues. The first is inclusion of a “cultural exception” in trade rules to green-light, on cultural grounds, state actions that interfere with trade in entertainment media. Although there is no cultural exception in the WTO, pressure to accommodate the “specificity” of entertainment media as a cultural phenomenon has complicated trade negotiations and at times required give and take to placate the opposing sides. The second issue is policy liberalization in entertainment media, which has lagged behind market opening in many other goods and services. Deadlock over trade and culture has inspired some WTO members to explore other options: the European Union (EU) and Canada spearheaded the push for a Convention on Cultural Diversity, and the United States has pursued policy liberalization in a series of free trade agreements. Important political questions again crop up: Why has culture stalemated the WTO, and why haven’t trade linkages like those for health safety standards been institutionalized for trade and culture? Why do international political alignments on this problem form as they do? What explains the design of trade rules for entertainment media, and what is the trade regime’s impact on state policy? The age-old conflict over trade and culture continues to play out and shows no signs of abating.

In the period from 600 ce to 1800 ce, the countries bordering the East and South China Seas were in frequent maritime communication, sharing in the process cultural practices and commodities. This article focuses on Chinese trade, with some attention to Japanese, Korean, Ryūkyūan, and Southeast Asian trade as well. In the early 7th century, Chinese Emperor Sui Yangdi expanded Chinese diplomatic connections in a variety of ways and overtook central Vietnam. During the ensuing Tang dynasty, south and west Asian maritime traders dominated the importing of aromatics, rare goods, and foodstuffs into China and the westward export of Chinese goods such as ceramics and silks. South Chinese ports such as Guangzhou were thriving international emporia. In the Five Dynasties, Song, and Yuan periods, Chinese shipping increased, and trade between China and Japan, as well as between China and Koryŏ, Korea, flourished. At the start of the Ming dynasty, a maritime trade ban was enacted, which led to an increase in tribute trade to China (which was not banned), as well as a high degree of contraband shipping. In 1567 the Chinese ban was lifted, and a period of vibrant China Seas trade ensued, which included Japanese red seal ships to Southeast Asia and Korea, and an increasing number of European merchants. In the mid-17th century, the Zheng family played a major role in intra-Asian trade, negotiating for advantage with both Japan and Spain, and largely competing with the Dutch VOC. With the consolidation of Qing dynasty power, China reopened her ports in 1684 and eventually established a central location for European trade in Canton, while allowing for Asian trade from other ports.

In recent decades, there has been a dramatic proliferation of preferential trade agreements (PTAs) between countries that, while legal, contradict the non-discrimination principle of the world trade system. This raises various issues, both theoretical and empirical, regarding the evolution of trade policy within the world trade system and the welfare implications for PTA members and non-members. The survey starts with the Kemp-Wan-Ohyama and Panagariya-Krishna analyses in the literature that theoretically show PTAs can always be constructed so that they (weakly) increase the welfare of members and non-members. Considerable attention is then devoted to recent developments on the interaction between PTAs and multilateral trade liberalization, focusing on two key incentives: an “exclusion incentive” of PTA members and a “free riding incentive” of PTA non-members. While the baseline presumption one should have in mind is that these incentives lead PTAs to inhibit the ultimate degree of global trade liberalization, this presumption can be overturned when dynamic considerations are taken into account or when countries can negotiate the degree of multilateral liberalization rather than facing a binary choice over global free trade. Promising areas for pushing this theoretical literature forward include the growing use of quantitative trade models, incorporating rules of origin and global value chains, modeling the issues surrounding “mega-regional” agreements, and modelling the possibility of exit from PTAs. Empirical evidence in the literature is mixed regarding whether PTAs lead to trade diversion or trade creation, whether PTAs have significant adverse effects on non-member terms-of-trade, whether PTAs lead members to lower external tariffs on non-members, and the role of PTAs in facilitating deep integration among members.

Safavid, Iran, was a modest economic player in West and South Asia in terms of population numbers, productivity, and resources. Yet its strategic location at the crossroads of Asia’s commercial arteries allowed it to punch well above its weight in terms of trade—especially trade in transit. The reign of Shah ‘Abbas I (r. 1587–1629) represents the high-water mark in this development. His forward-looking policies, beginning with his choice of Isfahan as Iran’s new capital and the subsequent resettlement of a large number of Armenians, expanded the ambit of the country’s commerce. Most importantly, he established a viable maritime alternative to the overland trade route by facilitating the maritime connection via the Persian Gulf, with the aim of depriving the Ottomans of revenue. In the process, Iran became more firmly connected to the wider Eurasian market, with commodities like silk and porcelain moving into the center of a hemispheric commercial network. In this, South Asia was clearly the regional “world economy,” manufacturing goods that were coveted by people all over West Asia and beyond, while the inhabitants of Europe, and to a lesser extent of the Ottoman Empire, Central Asia, and Russia, functioned as consumers who were generally forced to pay for their tastes and desires with hard cash.