The World Economy by the OECD Development Centre
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The Trading World of the Indian Ocean

The population of Asia in 1500 was five times as big as that of Western Europe (284 million compared with 57 million), and the ratio was about the same in 1600. It was a very large market with a network of Asian traders operating between East Africa and India, and from Eastern India to Indonesia. East of the straits of Malacca, trade was dominated by China. Indian ships were not sturdy enough to withstand the typhoons of the China sea, and not adequately armed to deal with pirate activity off the China coast (see Chaudhuri, 1982, p. 410).

The Portuguese displaced Asian traders who had supplied spices to Red Sea and Persian Gulf ports for onward sale to Venetian, Genoese and Catalan traders. But this was only a fraction, perhaps a quarter, of Asian trade in one group of commodities. In addition there was trade within Asian waters in textiles, porcelain, precious metals, carpets, perfume, jewellery, horses, timber, salt, raw silk, gold, silver, medicinal herbs and many other commodities.

Hence, the spice trade was not the only trading opportunity for the Portuguese, or for the other later European traders (Dutch, British, French and others) who followed. Silk and porcelain played an increased role, and in the seventeenth and eighteenth centuries, cotton textiles and tea became very important. There were possibilities of participating in intra–Asian trade as well. In the 1550s to the 1630s this kind of trade between China and Japan was a particularly profitable source of income for Portugal.

Asian merchants were familiar with the seasonal wind patterns and problems of the Indian Ocean, there were experienced pilots, scientific works on astronomy and navigation, and navigational instruments not greatly inferior to those of the Portuguese.

From East Africa to Malacca (on the narrow straits between Sumatra and Malaya), Asian trade was conducted by merchant communities which operated without armed vessels or significant interference from governments. Although Southern India, where the Portuguese started their Asian trade, was ruled by the Empire of Vijayanagar, conditions in coastal trade were set by rulers of much smaller political units, who derived income by offering protection and marketing opportunities to traders. The income of the rulers of Vijayanagar and later the Moghul Empire was derived from land taxes, and they had no significant financial interest in foreign trade activities. In China and Japan the situation was different.

Asian merchants operated in mutually interactive community networks with ethnic, religious, family or linguistic ties and an opportunistic concentration on profit. In this respect their trading habits were not very different from those of Venetians or of Jewish traders in the Arab world of the Mediterranean. In Western Asia and the Middle East merchants were generally Arabs and Muslims, but further east they included “Gujarati vaniyas, Tamil and Telugu Chettis, Syrian Christians from Southwestern India, Chinese from Fukien and neighbouring provinces”. If they paid for protection and market access, they found that they were free to trade. If the protection became too expensive they usually had some leeway for moving elsewhere.

The Portuguese trading network was different in two respects. It consisted of a string of strongly fortified bases linked by a fleet of armed ships, so market forces were modified by coercion. Unlike the Asian trading communities or in the European trading companies which penetrated Asia at a later date, Portugal was involved in religious evangelism.

The headquarters of the Portuguese trading empire was established in 1510 at the captured Arab port of Goa, an island harbour halfway up the west Indian coast which was a Portuguese colony for nearly 460 years. It was the residence of the Portuguese Viceroy, and from 1542 it was the headquarters of the Jesuit order for all its operations in Asia. Malacca, the port which controlled trade and shipping from India to Indonesia and China, was captured in 1511 and kept until 1641 when it was taken by the Dutch. A base was established at Jaffna in Sri Lanka for trade in cinnamon. Most Portuguese shipments of pepper and ginger originated from the Malabar coast of India, but for higher value spices they obtained a base at Ternate in the Moluccas (between Celebes and New Guinea) for trade in cloves, nutmeg and mace.