1.3 History of International Business

As a matter of fact, international business is as old as the oldest civilization. Throughout the history of mankind, countries traded to obtain needed items from silk to spices that were not readily available in their own countries. Asia, Middle East, Africa and Europe have been the major marketplaces of trade for hundreds of years. In history, there were famous “silk road”, which linked the market of China with Middle East and Europe, and the first international sea trade route established by the Europeans in the sixteenth century. With the advent of great naval power, Portugal and Spain opened the Americas, India, and the Pacific to trade. For more than three hundred years, trade in cotton, corn, horses, weapons and even slaves thrived among Europe, America and Africa.

Since the end of World War II, much has changed in the field of international business. The General Agreement on Tariffs and Trade (GATT) negotiation rounds resulted in trade liberalization, and this was continued with the formation of the World Trade Organization (WTO) in 1995. At the same time, worldwide capital movements were liberalized by most governments, particularly with the advent of electronic funds transfers.

The world today is more economically interdependent than at any time of the history. It is said twentieth century was the century of emerging globalization. “Globalization” has been one of the most frequently cited terms in economic and legal literatures. Many economists and business experts even conclude that globalization makes no business purely domestic. Even the small local companies are affected by global competition and world events.

In effect, globalization is rather an economic concept with significant legal meaning. It is an economic process which appears to be unstoppable. Undoubtedly, with the increasing globalization of economy, we will experience more cross-border activities. Many economists and business experts believe that no trade can be purely domestic in such a globalization process. The reality of the increasing economic interdependence among countries makes all trade international. No longer can an economic or policy change in one country occur without causing reverberations throughout the world's markets. For example, the deterioration in trade relations between the United States and China can affect the manufacturing plants in Canada or Mexico. The Mad Cow disease affected far more than the English cattle but the trade in beef worldwide.

Globalization can be attributed to many factors. Natural resources and raw materials are unevenly located around the world. Technology advances in communications has brought people closer than ever and made the world, to some extent, a village on the earth. Most of nations have moved away from pure protectionism of trade and increasingly toward free trade. Recent decades has seen a steady and robust movement towards regional integration, for example, EU and the development of free trade areas such as China-ASEAN and NAFTA. Technologies of patents, copyrights, trademarks and know-how are transferred by licensing agreements around the world, as freely as goods and services are sold. Greater political stability in newly emerged economically powerful countries has led to increasing trade volume around the world.

Globalization is also a legal event, as evidenced by the spread of rule of law among nations. Greater economic interdependence has required countries to reach agreement on important legal issues. The global economy has been affected by the development of widely accepted international conventions and practices, which provide a reliable and consistent legal environment for international business. Meanwhile, national laws are required to be harmonized and adjusted to new development in international business.