When Vasco Da Gama reached the shores of Calicut, the first to greet him was a Muslim merchant from Tunis with the cold welcome: May the Devil take you! What brought you here? The trader understood the implications of the new arrival and the threat that it posed to his livelihood. For, Vasco Da Gama had discovered an alternative route to reach Calicut, circumventing the usual route used by the Arabs and the European traders.

The route from Calicut to Venice till 1498
Much of recorded history of this period is still lusocentric, describing this event either in terms of what a great discovery the new route was or how the Portuguese empire was established starting with this expedition. The landing of Da Gama's fleet in Calicut was indeed a cataclysmic event in international trade, as the Tunisian had understood. But, how cataclysmic?
Portuguese route circumventing Arabs and Venetians
courtesy: Wikipedia
The spice trade till then had been in the hands of two major groups of traders - the Arabs and the Genoese-Venetian syndicates. Till around the 13th Century, bundles of spices would commence their long journey from Malabar coast and take the Silk Route, which was protected by the might of Genghis Khan to Aden and thence into the hands of waiting Venetian merchants. Once the Silk Route was closed, spices started travelling in Arab dhows and Chinese junks to Jeddah (which replaced Aden), where the local rulers levied a tax on the cargo. It then crossed the Red Sea and reached the city of Tuuz (near Mount Sinai) where again it was subjected to tax. Finally, the cargo of spices travelled by camel back to Cairo; this was a hazardous trip due to the threat of banditry. From Cairo, the cargo was sent down the Nile River to Rosetta, where a tax was again levied. There it would again be loaded on camels for a day's trip to Alexandria where galleys from Genoa and Venice would be waiting for the precious cargo. By the time these spices reached the retail markets of Europe, the price would be more than 1000 per cent of what had been paid at Calicut.

It was this lucrative trade that the Portuguese had destroyed by discovering the Cape route to Calicut. Spices could now be transported to Europe untouched by Arab or Venetian hands. The distance was longer than the Cairo route, but cost of transhipment and taxes could be saved. No wonder, the Venetians received the news of Da Gama's adventure with a sense of shocked disbelief.

The loss of the spice trade would be like the loss of milk and nourishment to an infant,  wrote Girolamo Priuli, a prominent spice trader in his journal in July 1501. He continued: When this news reached Venice, the whole city felt it greatly and remained stupified, and the wisest held it as the worst news which could ever arrive.

Within the next couple of years, economic depression engulfed many of the trade centres of Europe, with firms collapsing and banks failing. The crisis was felt most in Venice which was the largest buyer of Asian spices. The Venetian Senate passed a resolution on 15th January 1506 on the alarming fall in trade as a consequence of the Portuguese arrival in Calicut: Since, as everybody knows, this commerce has now been reduced to the worst possible condition, it is essential to take some action and to provide our citizens with every facility for sailing the seas. 

They immediately formed a 5-member committee to advise the city government on how to handle the large number of business failures and bankruptcies. Venice also appealed to the Sultan of Cairo to reduce the rates of taxation so that their imports could compete with the Portuguese supplies. But, instead of reducing the tax on spices, the Sultan sent an armada apparently to assist the Zamorin to fight the Portuguese at sea. It was this mighty armada which was trapped and destroyed by the 6th Portuguese Armada led by Lopo Soares on 31st December 1504 off the coast of Panthalayani in Calicut. Some 2000 Arab and Egyptians perished in the battle, while 23 Portuguese sailors lost their lives. Significantly, the Egyptian force was carrying some Venetian guns and even two Venetian engineers who manufactured the first cannons for the Zamorin. 

Afonso D'Albuquerque had correctly assessed the situation after his conquest of Malacca in 1511: I hold it as very certain that if we take this trade of Malacca away out of their hands, Cairo and Mecca are entirely ruined, and to Venice will no spiceries . . .[be] . . . conveyed except that which her merchants go and buy in Portugal.

Will Durant has described the Portuguese discovery of the sea route to be as spectacular as the invention of the aeroplane. It transformed the direction of foreign trade (as can be seen in the accompanying maps) and destroyed the monopoly of the Italian states. Though Calicut and Venice - the largest seller and the largest buyer of spices - did not have any direct trade links, the loss of Arab supremacy over spice trade in Asia led to the fall of Venetian monopoly on the retail distribution of spices in Europe. Globalisation, anyone?