This was the chant of male and female tea porters in China. They regularly carried loads of 150–200 pounds for 20 days over 140 miles through 17,000-foot mountain passes. They walked the “Tea Horse Road.”
What was the price of tea in China? One horse for 130 pounds of brick tea. China had many people, but few horses. This is a remarkable and ancient example of David Ricardo’s theory of comparative advantage, a source of competitive advantage. Simply put: Market forces will allocate a nation’s resources to those industries where it is relatively most productive. The trade between Tibet and China was horse for tea.
The Chinese produced a strong bitter tea compressed into bricks that the Tibetans enjoyed. The Tibetans produced a unique horse, the Nangchen. It is about 4.5 feet tall, has fi ne legs and enlarged lungs, is sure-footed in snowy mountain passes, and is almost inexhaustible. This tea-horse commerce began in 641 and was terminated by Mao in 1949. By the thirteenth century millions of pounds of tea were traded for 25,000 horses annually. This trade expanded into other goods and services over the 1,300 years of activity.
Strategic trade between countries is the backbone and purpose of globalization. Countries often continue to trade with each other even when engaged in hostilities, although in this extreme case trade is often accomplished through third parties. When the economy of the world declined in 2008–2012 in the “Great Recession,” an often spoken fear was that nations might resort to protectionist tariff s to preserve national economies. Such protectionism would stifl e international trade. It was just such protectionism that prolonged the Great Depression in the 1930s. Many organizations began to develop strategic plans for just such an eventuality. However, the fall in trade that occurred in the Great Recession was predominantly due to a fall in demand and not due to the imposition of tariff s and anti-dumping campaigns. Both rich and poor countries kept their markets open to encourage trade and turn the global recession around.
The recession of 2008–2012 may be the fi rst global economic downturn that was reversed by emerging nation resilience and not the developed economies. Globalization has underscored the importance of trade and the necessity of good trade relations between countries regardless of economic strength. Trade is about developing economic potential.
The United States is the largest single country economy in the world, with a GDP (Gross Domestic Product) of almost $16 trillion (2012). It is larger than Japan, Germany, France, and the United Kingdom combined.
All together they and China are the six largest economies in the world. All are dependent upon trade with each other. Yet it took a concerted eff ort by all countries to revitalize trade.
Historically, countries have gone to great lengths to initiate trade relations, as depicted by the opening story. It has always been a trade relationship based on an agribusiness industry or mining industry that opens doors between countries. All initial trade began as comparative-advantage activities centered around agribusiness, with some absolute-advantage trade in minerals or resources, and developed into competitive advantage trade as the relationships matured. Once the door had been opened, other products were discovered and traded.

QUESTIONS
1. Why do you suppose that Chairman Mao terminated tea-horse commerce in 1949? Why are some countries like Myanmar still reluctant to embrace the idea of world trade?

2. Explain why international trade begins as comparative-advantage activities centered around agribusiness and then develops into competitive-advantage trading of other products.

3. Explain why world trade may or may not eliminate future wars.