International Trade Law Thashira Gunatilake LLB(Colombo), LLM(Auckland) Attorney-at-Law

What Do You Mean By TRADE….? Trade refers to a global pattern of exchange in which goods and services produced in one political jurisdiction are consumed in another. When Did We Start Trading…? Archaeological evidence suggests that humans have engaged in formal patterns of exchange for longer than five thousand years. Informal patterns of exchange based upon infrequent contact (either violent or peaceful), have linked small human groups even prior to that. Do Parties Benefit From Trading….? At least in theory, trade can benefit all parties involved if it is organized on a transparent and equitable basis.

Trade in the Twentieth Century World War I caused international economic relations to collapse. At the beginning of the 1920s, most states adopted a protectionist economic policy. Tariffs were raised throughout the world in order to protect the national economies. In 1930, the USA had raised their tariffs by 60 % by signing into law the Smoot-Hawley Tariff Act. Many other nations thereupon raised their tariffs which led to a severe breakdown in world trade. This resulted in the worst global economic crisis ever and paved the way for the rise of fascism in Europe. Consequently, international trade decreased considerably – also due to the lack of an organized coordination of economic policy. It was the disaster of World War II that reminded the global community of the necessity for reorientation. Along with the United Nations (UN), a new international economic order was to be established in order to avoid the serious economic mistakes of the interwar years.

GATT (General Agreement on Tariffs and Trade) – The idea to institutionalize international relations and international trade was globally supported. This idea was reflected in the conclusion of the GATT in 1947. However, the General Agreement on Tariffs and Trade (GATT) was operated without an institutional home for forty seven years. Creation of WTO – The greatest step forward in the regulation of international trade occurred during the Uruguay Round of trade negotiations (1986-1994). At the end of the Uruguay Round, participating nations signed the Marrakech Agreement, creating the World Trade Organization (WTO). The GATT still exists under the umbrella of the WTO.

The most important facts are: General Agreement on Trade in Services (GATS) The Agreement on Trade-Related Aspects of Intellectual Property (TRIPS) Dispute Settlement Understanding (DSU) that provides judicial processes for the settlement of international trade disputes.

The Development of GATT and the Founding of the WTO Originally, the GATT was considered to be only an interim solution until the establishment of an International Trade Organization (ITO). This establishment, however, finally failed in 1950. As a consequence, the GATT provided the sole framework for international trade policy for over half a century. Since the GATT was lacking an overall institutional structure and this was legitimately considered a serious deficit, negotiations were held in 1986 within the framework of the Uruguay Round. These negotiations resulted in the foundation of the WTO. The WTO Agreement entered into force on 1 January 1995 – with 72 members. It stopped the fragmentation of GATT’s legal order.