Trade, the exchange of goods and services over long distances, and commercial activities, the exchange of products and services at specific markets, are core components of the economy. Trade and commerce have evolved in space and time, from low volume and limited extent before the industrial revolution, to the extensive flows and transactions that characterize the contemporary global economy. Historically, wealth was dominantly related to agricultural output implying that the largest economies were those with the largest populations, but these populations were mainly rural and with low income. As such, trade and commerce were marginal activities.
The industrial revolution irremediably changed trade and commerce with mechanization and its multiplying effects on production and consumption. Economic systems remain based on trade and transactions despite substantial growth in production capabilities since specialization and efficiency require interdependency. People trade their labor for a wage, often commuting in the process, while corporations trade their output for capital, having to access markets. Trade is the transmission of ownership in return for a counterpart, generally money, which is often defined as a medium of exchange. This exchange involves a transaction and its associated capital flows, information, commodities, parts, or finished products. All these activities define commercial geography.
Commercial geography can be considered a component of economic geography similar to transport geography. Still, it is relevant to see commercial geography as distinct, which allows the sphere of locations investigated by economic geography to interact with the sphere of circulation investigated by transport geography.
Trade, in terms of its origins and destinations, has a spatial logic. It reflects the economic, social, and industrial structure of the concerned markets, but also implies other factors such as transport costs, distance, trade agreements, exchange rates, and the reciprocal economic advantages proponents get from trade. For trade to occur, several fundamental conditions must be met:
- Commodities, from coal to computer chips, must be available for trade, and there must be a demand for these commodities. In other terms, a surplus must exist at one location and a demand in another, which implies reciprocity. A surplus can often be a simple matter of investment in production capabilities, such as building an assembly plant, or can be constrained by complex geological and environmental factors like the availability of resources such as fossil fuels, minerals, and agricultural products.
- Transport infrastructures, in allowing goods to be moved from their origins to their destinations, support the transferability of goods. There are three major impediments to transferability, namely regulatory barriers (tariffs, custom inspections, quotas), geographical barriers (time, distance), and transportation barriers (the simple capacity to move the outcome of a transaction). Distance often plays an important role in trade, as does the capacity of infrastructures to route and transship goods.
- Transactional capacity. It must be legally possible to make a transaction. This implies the recognition of currency for trading and legislation that defines the environment in which commercial transactions occur, such as taxation and litigation. In the context of a global economy, the transactional environment is very complex but is important in facilitating trade at the regional, national, and international levels. The fundamental elements of a commercial transaction involving the transportation of a good are the letter of credit and the bill of lading. The transport terms have been regulated since 1936 by international commercial terms, which define the respective responsibilities and risks of the actors involved. Such terms are regularly updated and revised to reflect commercial and regulatory changes in global markets.
Once these conditions are met, trade is possible, and the outcome of a transaction results in mobility (or interaction). Three issues are related to the concept of flow:
- Flows have a negotiated value and are settled in a common currency. The American dollar, which has become the main global currency, is used to settle and measure many international transactions. Further, nations must maintain reserves of foreign currencies to settle their transactions. The relationship between the inbound and outbound flows of capital is known as the balance of payments. Although nations try to maintain a stable balance of payments, this is rarely the case; flows are commonly imbalanced.
- Flows have a physical characteristic, mainly involving a mass. The weight of flows is a significant variable when the trade involves raw materials such as petroleum or minerals. However, in the case of consumption goods, the weight has little significance relative to the value of the commodities being traded. With containerization, a new unit of volume has been introduced; the TEU (Twenty-Foot Equivalent Unit), which can be used to assess trade flows.
- Flows have a range that varies significantly based on the nature of a transaction. While retailing transactions tend to occur at a local scale, transactions related to the operations of a multinational corporation are global in scale.
Transportation and Competitiveness
It is commonly assumed that regions compete over factors such as resources, labor, and governance to provide the most suitable economic advantages. Transportation is a key factor for competitiveness since it provides access to markets, labor, and resources. In particular, the mobility costs of workers and freight are the two most important factors of spatial competitiveness. However, the true extent of how transportation can improve competitiveness is often unclear since transportation is embedded in many economic and social processes.
The liberalization of trade was accompanied by a growth of transportation activities since transactions involve the mobility of freight, capital, people, and information. Developments in the transport sector are matched by global and regional interdependence and competition. Like commodities, goods, and services, transportation is traded, sometimes openly and subject to full market forces, but more often subject to a form of public control (regulation) or ownership. The core component of a transport-related transaction involves its costs that either has to be negotiated between the provider of the service and the user or are subject to some arbitrary decree (price-setting such as public transit). Since transportation can be perceived as a service, its commercialization (how it is brought to the market) is an important dimension of its dynamics. This commercialization takes place over a landscape composed of actors involved over modes, terminals, and the related supply chains. Most transport firms compete over cost, differentiation (offering different transport services in terms of nature or quality), or focus (highly involved in a specific region or type of service).
Logistics and Supply Chains
The development of logistics and the setting of global supply chains substantially impact commercial geography. The key difference between transportation and logistics is that while transportation deals with the mobility of passengers and freight, logistics focuses on organizing the different components of this mobility, such as the booking of transportation services, and the packaging and storage of goods. A global economy with an acute division between production and consumption underlines the relevance of logistics as a commercial and spatial strategy to improve efficiency and reduce costs. Freight has commonly been managed by private interests, particularly in the maritime shipping segment. Similarly, the logistics industry is also prone to private commercial interests that own modes, terminals, distribution facilities, and provide management services.
Transportation and Economic Opportunities
Transportation developments that have taken place since the beginning of the industrial revolution have been linked to growing economic opportunities. At each development stage of the global economy, a particular transport technology has been developed or adapted with an array of impacts. Economic cycles are associated with a variety of innovations, including transportation, influencing economic opportunities for production, distribution, and consumption. Historically, six major waves of economic development where a specific transport technology created new economic, market, and social opportunities can be suggested:
- The historical importance of seaports in trade has been enduring. This importance was reinforced with the early stages of European expansion from the 16th to the 18th centuries, commonly known as the age of exploration. Seaports supported the early development of international trade through colonial empires but were constrained by limited inland access. Later in the industrial revolution, many ports became important industrial platforms. With globalization and containerization, seaports increased their importance in supporting international trade and global supply chains. The cargo handled by seaports is reflective of the economic complexity of their hinterlands. Simple economies are usually associated with bulk cargoes, while complex economies generate more containerized flows. Technological and commercial developments have incited a greater reliance on the oceans as an economic and circulation space.
- Rivers and canals. River trade has prevailed through history, and even canals were built where no significant altitude change existed since lock technology was rudimentary. The first stage of the industrial revolution in the late 18th and early 19th centuries was linked with the development of canal systems with locks in Western Europe and North America, mainly to transport heavy goods. This permitted the development of rudimentary and constrained inland distribution systems, many of which are still used today.
- The second stage of the industrial revolution in the 19th century was linked with the development and implementation of rail systems enabling more flexible and high capacity inland transportation systems. This opened substantial economic and social opportunities through the extraction of resources, the settlement of regions, and the growing mobility of freight and passengers.
- The 20th century saw the rapid development of comprehensive road transportation systems, such as national highway systems and automobile manufacturing, as a major economic sector. Individual transportation became widely available to mid-income social classes, particularly after the Second World War. This was associated with significant economic opportunities to service industrial and commercial markets with reliable door-to-door deliveries. The automobile also permitted new forms of social opportunities, particularly with suburbanization.
- Airways and information technologies. The second half of the 20th century saw the development of global air and telecommunication networks in conjunction with economic globalization. New organizational and managerial forms became possible, especially in the rapidly developing realm of logistics and supply chain management. Although maritime transportation is the physical linchpin of globalization, air transportation and IT support the accelerated mobility of passengers, specialized cargoes, and their associated information flows.