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Another facet of cooperation with independent city-states is the formation of a commercial union between traders of a particular country and various City-States, often referred to as a Merchant Confederacy. This organisation undertakes to protect its members, facilitate agreements with local suppliers, smooth over bureaucratic barriers and even defend merchant caravans and vessels from brigands. As a result, there is a boost in profits from all trade undertakings between entities in the Confederation.
This is a level 3 Policy, which requires practically all other Policies in the tree. This naturally makes it the final Policy with which a player completes the tree. Interestingly enough, its effect is somewhat less useful than other Policies, which further justifies adopting it last.
To make the most of this Policy, you should trade almost exclusively with city-states. But apart from that, you should aim to combine it with both Wagon Trains from the Commerce tree and Treasure Fleets from Exploration, which also increase Gold income from land and sea trade routes (respectively). Also, you should make sure someone doesn't push the Embargo City-States resolution through the World Congress.
If you feel that this is too much trouble, save yourself some stress and don't worry about it. Just enjoy the Gold boost from this one Policy...unless you happen to be developing those other two trees as well.
More commonly referred to as a commercial league or trading guild, a Merchant Confederacy is created to protect the economic interests and diplomatic privileges of merchants in cities and nations along trade routes. Although these confederations of merchants had no official standing, several – such as the Company of Merchant Adventurers of London (founded 1407 AD) and the even more powerful Hanseatic League (formed c. 1356) – had significant economic influence and dominated specific trade routes for lengthy periods. During the early Renaissance, merchant confederations were established in city-states such as Venice and Genoa to protect the interests of traders in certain commodities while abroad. These merchant leagues reached their peak during the 15th and 16th centuries, but declined thereafter as national governments and crown-chartered companies gradually assumed the regulatory and diplomatic responsibilities the leagues had formerly held.