I had mentioned staple rights (aka stacking rights, according to wikipedia), which is one form of the kind of trade law you are referring to. I believe they were specifically for river traffic, but they could easily be expanded to cover land routes (assuming they weren't used that way in real life, which I don't know enough to comment on).
Right now each city generates a list of "environs" from the surrounding biomes that describe the lands of the province. Each environ is something like "forested hills" or "river flood plain" and can support a certain number of each type of village. The number of villages is usually only a fraction of this maximum though, due to war/famine/plague/etc.
All villages are self-sufficient in terms of food, and each one produces basic surplus goods that are sent to the market villages and main city of the province. A farming village produces grain, an orchard village produces fruit, a fishing village produces fish, a forest village produces wood, and so on. Each village also produces a small amount of trade goods, depending on its climate and type. For example, you might get furs or fine timber from a cold forest village, and spices or tobacco from a warm farming village.
The industries that convert raw goods into more valuable goods exist in cities. They covert grain into beer, fruit into wine, flax/cotton/wool into clothing, and so on. More developed industries have a chance of creating "fine" goods, which are worth a lot more than the normal kind. So an advanced textiles guild would produce some fraction of fine clothes, an advanced blacksmith's guild would produce a fair amount of fine weapons and armor, and an advanced brewing industry would produce fine spirits and fine wine. Other factors can also change the "fine fraction," for example the textiles guild can use silk, furs, or dye to greatly improve the chance of producing fine clothing.
Once all these various goods are produced, the multipass trade function takes over. I was planning for it to calculate one step each month, but perhaps I should step it up to weekly or twice a month. Anyway, I don't know when it will be done since Battlefield Bad Company 2 just came out...