Weekend Economists Salute Our Favorite Bunnies March 29-31, 2013

[OrwellwasRight]

73. Anyone on this thread who claims to be concerned about the power of big banks and also supports FTAs

is in quite a conundrum. The US joining the GATS agreement (General Agreement on Trade in Services) at the WTO, and repeating the same language in its FTAs has the potential to institute a chilling effect on financial services regulations, both in the US and in foreign countries that have signed up to the same rules. How will a country like Bolivia, for example, stand up to the threat of an investor-state lawsuit from MetLife, Citibank, UBS, or any of the other giant financial conglomerates that have more money and power than most small countries???

Of course, we all like to sound informed and reasonable, and so of course want to say "I'm for free trade," so that we don't get accused of being protectionist troglodytes. But the rules under which that trade occurs matter. And the current rules favor the big banks as much as the big corporations. No one is going to stop free trade--and no one to my knowledge is trying--but if we forget that the rules under which such trade is conducted matter, then we are just putting more nails in the coffin of the 99%.

http://worldtradelaw.typepad.com/ielpblog/2012/03/wto-financial-services-rules-and-domestic-regulation.html

Excerpt:

Some countries that are trying to reregulate their financial systems worry that they may run afoul of trade commitments. The delegation for Barbados, for example, wrote last year about the trouble it might encounter imposing new rules while trying to abide by trade agreements.

“The notion of ‘too big to fail’ has been a concern even prior to the crisis, but the financial crisis realized banking regulators’ worst fears,” Barbados wrote to a W.T.O. committee in early 2011.

Yet nations that committed to the agreement in the 1990s “may find restrictions on size are contrary to the commitments given to limit adverse affects on financial service suppliers,” the Barbados letter said.

Barbados suggested amending the agreement on financial services to provide more flexibility. Its proposal was rejected.

http://www.ourworldisnotforsale.org/en/report/free-trade-agreements-contribute-financial-and-other-crises-owinfs-financial-services-brief-2

FTAs stop capital controls

During a financial crisis, or in order to prevent it, it is important that countries are able to control capital inflows and outflows, which mainly move through banks. Yet, the FTA model employed by both the EU and the US requires countries to remove restrictions on capital movement and facilitate cross-border capital flows. In the EU-Caribbean EPA, no restrictions on capital transfers between residents of the signatory countries are permitted, not even on large capital account transfers related to investments. Only in “exceptional circumstances“ are countries allowed to stop destabilising capital transfers. Also, any prudential measures taken to stop capital or trade flows that are financially destabilising are restricted by many conditions, which undermines many domestic policies to protect economies and societies.

The dangerous mix of FTAs and BITs

What is often forgotten is that foreign financial investors that enter a country under an FTA, can use already existing bilateral investment agreements (BITs) to sue host governments that introduce new social or environmental regulations. For instance, Argentina has been sued by more then 30 companies for its measures taken during its financial crisis (2000-2001). Foreign investors have already used a BIT to sue South Africa for its policies to reverse the legacy of apartheid and increase black ownership in the mining sector, which could also happen in the financial sector.

https://docs.google.com/viewer?a=v&q=cache:GMPvluy7Y9EJ:www.citizenstrade.org/ctc/wp-content/uploads/2012/03/TransPacificFactsheet.pdf+&hl=en&gl=us&pid=bl&srcid=ADGEESj4scb5MuJU2w_F_I4nA2SjLoqU1Hw4nlGDRf5lrMLSfJYwp2e0caeXKZGtScsxLv2yuIdoWRsAZR1jenh8WbDwkMFmJ89Q-2be0mSvlGRcWJfBXFGfhRvkDoO2Wbq4sifGKgaC&sig=AHIEtbRLUTq3yDfl0hyPtTOjOLRuJYiutg

Preventing Effective Regulation of Wall Street
The United States first expressed interest in the Trans-Pacific Partnership as a mechanism for
expanding financial service agreements throughout the Pacific Rim. Learning nothing from the 2008
financial collapse, U.S. negotiators appear to be pushing for a financial services chapter that would not
only provide Wall Street-based firms with greater access to financial service markets abroad, but also
explicitly limit governments' abilities to regulate banks, hedge funds and insurance companies.
Provisions that Wall Street supports include: prohibitions against limiting the size of financial
institutions (ie, safeguards against "too big to fail&quot ; prohibitions against firewalls between different types
of financial institutions (ie, reinstating the Depression-era Glass-Steagall Act); prohibitions against bans
on specific financial products (ie, banning the sale of toxic assets); and prohibitions against capital
controls (ie, tools designed to stabilize the flow of money into and out of a country).

The TPP is also expected to grant banks and
other transnational corporations the power to
challenge any laws, regulations and even court
decisions that they believe violate the pact
through international tribunals that circumvent
domestic judicial systems. Under these
"regulatory takings" cases, countries would be
forced to change their policies and/or pay stiff
penalties to the aggrieved corporations.