[WTO Case Review Series No.23] Colombia—Measures Relating to the Importation of Textiles, Apparel and Footwear (DS461): The legality of trade restrictions intended to prevent money laundering

Author Name ITO Kazuyori (Hokkaido University)
Creation Date/NO. November 2017 17-P-030
Research Project Comprehensive Research on the Current International Trade/Investment System (pt.III)
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In this dispute, while Colombia's compound tariff system was judged as violating Article 2 of the General Agreement on Tariffs and Trade (GATT), Colombia argued that the violation could be justified under Article 20(a) of GATT, which exceptionally allows member states to adopt trade restrictive measures that are necessary to "protect public morals," because Colombia introduced the compound tariff system in order to prevent money laundering, drug trafficking, and organized crime. The Appellate Body admitted that each country has wide discretion as to what constitutes "public morals" in its society, but also emphasized that the trade restrictive measure in question must have a real effect on achieving the protection of public morals. This ruling will contribute to prevent member states from abusing this exceptional clause.

Then, how should we design trade restrictions in order to prevent money laundering? Ensuring consistency with World Trade Organization (WTO) Agreements is of great importance because the battle against money laundering calls for a comprehensive regulative framework including trade restrictions. This paper tries to find a legal and effective way of trade regulations to fight against money laundering based on the interpretive framework of an exceptional clause formulated through several precedents.