No to Liberalization/Deregulation at WTO: Letter to G-20 Finance Ministers
April 13, 2011
Dear G-20 Finance Ministers:
As you gather in Washington, D.C. to address pressing issues facing the global economy, we call on you to safeguard governments’ ability to implement policies that will reestablish and maintain financial stability in the wake of the worst financial and economic crisis in decades.
We are concerned that important financial reform policies that both G-20 governments and non-G-20 governments seek to implement in order to prevent future crises are already at risk. Leading trade negotiators, economists, financial experts and trade lawyers have warned that current World Trade Organization (WTO) provisions covering financial services restrict countries’ use of important financial regulatory measures. This includes some policies promoted by the G-20, such as those to avoid rapid inflows and outflows of capital and those designed to limit the risks derivatives trading can pose to commodity price anomalies and financial stability.
At the heart of the problem is the manner in which some of the key rules of the WTO’s current General Agreement on Trade in Services (GATS) text conflate liberalization and deregulation. When a country commits a financial sector to liberalization under the GATS rules, the country is simultaneously bound to not maintain or establish a list of non-discriminatory regulatory measures relating to management of capital inflows and outflows, bans of especially risky financial products and services, and more.
And, these WTO rules are strongly enforced, including with the imposition of trade sanctions for countries that fail to conform their domestic policies to the WTO regulatory constraints. In contrast to this system of strongly enforced deregulatory global financial governance, the various G-20 Communiqués’ commitments are not subject to any system of enforcement. Indeed, implementation of G-20 commitments and recommendations by WTO signatory countries in their domestic laws could put them in conflict with their WTO obligations. The very threat of the resulting WTO litigation and prospective sanctions poses a chilling effect on the reregulation supported by the G-20 and governments worldwide.
The United Nations Commission of Experts on International Financial and Monetary Reforms, which included distinguished academics, former finance ministers and central bank heads from around the world and was chaired by Nobel-prize winning economist Joseph Stiglitz, issued the following warning about the WTO financial services rules:
“Agreements that restrict a country’s ability to revise its regulatory regime—including not only domestic prudential but, crucially, capital account regulations—obviously have to be altered, in light of what has been learned about deficiencies in this crisis. In particular, there is concern that existing agreements under the WTO’s Financial Services Agreement might, were they enforced, impede countries from revising their regulatory structures in ways that would promote growth, equity, and stability.”
The UN Commission’s analysis and concerns have been echoed by an array of trade and financial regulatory scholars and analysts. They have also noted that the existing WTO provision that a country could employ as a defense were its prudential financial regulations challenged does not provide a meaningful safeguard. Last month, Barbados tabled a paper at the WTO which examines numerous ways in which current WTO rules conflict with common financial regulatory policies. The paper suggests that various financial reform measures undertaken by the European Union and the United States are in violation of WTO rules.
However, despite these warnings, efforts to expand WTO financial services liberalization under the current rules continue in the context of WTO Doha Round as if there had not been a crisis or development of a new global consensus in favor of more robust regulation of the financial sector. Indeed, the Financial Services Collective Request made in 2006 and hundreds of bilateral requests demanding that countries commit additional financial sectors to the current WTO rules remain unchanged. In addition, Doha Round negotiations to establish new, additional constraints on domestic regulation continue. This includes the efforts by the Working Party on Domestic Regulations to establish a new cross-cutting set of regulatory limits and the plan to adopt the 1998 Disciplines on Domestic Regulation in the Accountancy Sector, which would constrain governments’ regulatory polices in that sector.
Despite the stark conflict between the current Doha Round deregulatory agenda with respect to financial services and the G-20’s call for improved financial regulation, G-20 Communiqués have repeatedly called for a swift conclusion to the WTO Doha Round.
We ask that you address this risky disconnect. Success on the laudable G-20 goal of ensuring financial stability requires changes to the existing WTO rules covering the financial sector and changes to the Doha Round agenda with respect to financial services. We urge you to include in your forthcoming Communiqué a call for a thorough review and reform of the existing WTO rules to ensure that they provide countries with the policy space needed to implement sound financial reregulation. We also urge you to call for negotiation of a meaningful new WTO safeguard for financial regulation and a suspension of Doha Round-related negotiations that would expand on the existing financial regulatory limits. These steps are necessary so that governments may reregulate their financial systems without threat of WTO penalty.
As millions of people around the world continue to suffer the severe consequences of the recent global financial crisis, these WTO reforms are essential so that G-20 and non-G-20 countries’ governments alike have the ability to meet their citizens’ demands to safeguard against future crises and stabilize the global economy.
Sincerely,
International and regional networks
Africa – Europe Faith and Justice Network Belgium, France, Germany, Ireland, Italy, Malta, the Netherlands, Spain, Poland, Portugal, Switzerland, and the United Kingdom; and Zambia, Burkina Faso, Malawi, Uganda, DR Congo, Ghana, Cameroon, and Kenya
Agency for Cooperation and Research in Development (ACORD) Angola, Burundi, Burkina Faso, Central African Republic, Chad, Cameroon, DR Congo, Ethiopia, Guinea, Kenya, Mali, Mauritania, Mozambique, Rwanda, North and South Sudan, Tanzanias and Uganda
Alianza Social Continental/ Hemispheric Social Alliance Argentina, Bolivia, Brazil, Canada, Chile, Colombia, Costa Rica, Cuba, Ecuador, El Salvador, Guatemala, Haiti, Honduras, Mexico, Nicaragua, Paraguay, Peru, USA, and Uruguay
Association for Women’s Rights in Development International network with staff based in 20 countries including Brazil, Canada, Mexico, and South Africa.
Confederación de Trabajadores y Trabajadores del Agua y Medio Ambiente de las Américas (CONTAGUAS) Bolivia, Brazil, Canada, Chile, Colombia, Dominican Republic, El Salvador, Guatemala, Jamaica, Mexico, Nicaragua, Peru, Saint Lucia, USA, Uruguay, and Venezuela
Consejo de Investigaciones para el desarrollo de Centroamérica Guatemala, El Salvador, and Nicaragua
European Network on Debt and Development Austria, Belgium, Bulgaria, Czech Republic, Denmark, Finland, France, Germany, Ireland, Italy, Luxembourg, the Netherlands, Norway, Poland, Slovenia, Spain, Sweden, Switzerland, the United Kingdom
International Peoples’ Health Council International network headquartered in Nicaragua
The Pacific Network on Globalisation (PANG) Cook Islands, Federated States of Micronesia, Fiji, Kiribati, Nauru, Niue, Palau, Papua New Guinea, Republic of the Marshall Islands, Samoa, Solomon Islands, Tonga, Tuvalu, and Vanuatu
People’s Health Movement Global Australia, Bangladesh Ecuador, Egypt, Greece, India, Palestine, Philippines, Sri Lanka, USA, and Vietnam
Public Services International PSI represents 20 million members in 150 countries
Red de Género y Comercio Mexico, Guatemala, Brazil, Colombia, Uruguay, and Argentina
Southern and Eastern African Trade, Information and Negotiations Institute (SEATINI) Zimbabwe, Uganda, and South Africa
Trade Union Confederation of the Americas/Confederación Sindical de Trabajadores y Trabajadoras de las Américas (TUCA – CSA) Argentina, Aruba, Barbados, Bonaire, Brazil, Canada, Chile, Colombia, Curaçao, Dominican Republic, Ecuador, El Salvador, Guatemala, Haiti, Honduras, Mexico, Nicaragua, Panama, Paraguay, Peru, St. Lucia, Suriname, Trinidad & Tobago, USA, and Venezuela
West African Civil Society Platform on Cotonou Agreement (WACSOP-CA) Benin, Burkina Faso, Cap-Vert, Côte d’Ivoire, Gambia, Ghana, Guinea, Guinea Bissau, Liberia, Mali, Mauritania, Niger, Nigeria, Senegal, Sierra Leone, Togo
National organizations and sub-national networks
Africa Development Interchange Network (ADIN) Cameroon
African Peace Network (APNET) Ghana
Alianza Mexicana por la Autodeterminación de los Pueblos (AMAP) Mexico
Alliance of Progressive Labor (APL) Philippines
Americans for Financial Reform (AFR) USA
Alternative Information and Development Center South Africa
Asociación de apoyo a inmigrantes ecuatorianos Spain
Association for the Defense of Collective Interests (ACDIC) Cameroon
Association for the Taxation of financial Transactions and Aid to Citizens (ATTAC) Hungary
Association for the Taxation of financial Transactions and Aid to Citizens (ATTAC) Japan
Association for the Taxation of financial Transactions and Aid to Citizens (ATTAC) Norway
Association for the Taxation of financial Transactions and Aid to Citizens (ATTAC) Spain
Australian Fair Trade & Investment Network (AFTINET) Australia
Bangladesh Krishok Federation Bangladesh
The Berne Declaration Switzerland
Bharatiya Krishak Samaj India
Both Environment and Development Service (Both ENDS) The Netherlands
Brazilian Institute for Consumer Defense Brazil
Brazilian Institute of Social and Economic Analyses (IBASE) Brazil
Campaign for the Reform of the World Bank (CRBM) Italy
Caribbean Congress of Labor Barbados
Center for Media & Democracy USA
Central Unitaria de Trabajadores de Colombia (CUT) Colombia
Centre for Civil Society Economic Justice Project South Africa
Centre for Research on Multinational Corporations (SOMO) The Netherlands
Centre for Trade Policy and Development (CFPD) Zambia
Centro Alexader von Humboldt Nicaragua
Centro de Formación e Investigación Municipal, A.C. (CEFIMAC) Mexico
Chicago Political Economy Group USA
Citizens Trade Campaign (CTC) USA
Civil Education Solution for Poverty and Environmental Management (CESOPE) Tanzania
Colectivo de Mujeres Acción Política por la Equidad (APE) Ecuador
Comisión Nacional de Enlace (CNE) Costa Rica
Confederación Nacional de Unidad Sindical de la Republica Dominicana Dominican Republic
Confederation of Labor and Allied Social Services (CLASS) Philippines
Congregation of Presentation Sisters of Victoria Australia
The Congress of South African Trade Unions (COSATU) South Africa
Consumer Watchdog USA
The Council of Canadians Canada
Desarrollo, Educación, y Cultura Autogestionarios (DECA) Equipo Pueblo, A.C. Mexico
Ecologistas en Acción Spain
Economic Justice Network South Africa
Ecuador Decide Ecuador
Enda Tiers Monde Senegal
Federación Nacional de Trabajadores del agua Potable y Alcantarillado del Perú (FENTAP) Peru
Federation of Independent Trade Unions and NGOs (FITUN) Trinidad and Tobago
Food and Water Watch USA
Foro Ciudadano de Participación por la Justicia y los Derechos Humanos (FOCO) Argentina
Friends of the Earth (FOE) USA
Gender Action USA
Ghana Trade and Livelihoods Coalition Ghana
Global Compliance Research Project Canada
Global South Initiative Nepal
Grail Global Justice Network Australia
Grupo de Estudios sobre América Latina y el Caribe (GEAL) Argentina
Hecho en Bs. As. – empresa social Argentina
IBON Foundation Philippines
Information Group on Latin America Austria
Institute for Agriculture and Trade Policy (IATP) USA
Institute for Development Initiatives Pakistan
Institute for Economic Research on Innovation South Africa
Institute for Global Justice (IGJ) Indonesia
Institute for Policy Studies, Global Economy Project USA
International Brotherhood of Teamsters (IBT) USA
International NGO Forum on Indonesian Development (INFID) Indonesia
International Presentation Association of Presentation Sisters New York USA
Jubilee Debt Campaign The United Kingdom
Justice Peace Integrity of Creation Ireland
Kenya Debt Relief Network (KENDREN) Kenya
Koalisi Anti Utang (KAU)/Anti-Debt Coalition Indonesia
La Marcha Mundial de las Mujeres Peru
La'o Hamutuk/ The Timor-Leste Institute for Development Monitoring and Analysis East Timor
Mercy Justice Office Ireland
Mexican Action Network on Free Trade (RMALC) Mexico
Monitoring Sustainability of Globalisation (MSN) Malaysia
Mujeres por Diálogo Mexico
National Association of Consumer Advocates (NACA) USA
National Association of Nigerian Traders (NANTS) Nigeria
National Family Farm Coalition USA
Navdanya India
Network Movement for Justice & Development (NMJD) Sierra Leone
New Rules for Global Finance USA
Polaris Institute Canada
PowerShift Germany
Presentation Congregation Queensland Australia
Presentation Justice Network Ireland
Public Citizen USA
Red de Acción Ciudadana Frente al Libre Comercio e Inversión El Salvador
Red Nacional Género y Economía Mexico
Rede Brasileira pela Integração dos Povos/Brazilian Network for Peoples' Integration (REBRIP) Brazil
Research Foundation for Science Technology and Ecology India
Resistance and Alternative Mauritius
Roj Women’s Association The United Kingdom
Siembra Mexico
Social Watch Uruguay
Solidarité France
South African Municipal Workers Union (SAMWU) South Africa
Third World Network-Africa (TWN-Af) Ghana
Transnational Institute (TNI) The Netherlands
Transnational Migrant Platform The Netherlands
Tubali for Development Nigeria
United Methodist Church, Board of Church & Society Philippines
United Methodist Church, Migrant Ministry Philippines
Unidad Ecológica Salvadoreña (UNES) El Salvador
Union of Presentation Sisters (Aotearoa Sisters Unit) New Zealand
U.S. Public Interest Research Group (PIRG) USA
Voices for Interactive Choice and Environment (VOICE) Bangladesh
War on Want The United Kingdom
Welfare Association for the Rights of Bangladeshi Emigrants Development Foundation (WARBE) Bangladesh
Women in Development Europe (WIDE) Belgium
World Development Movement The United Kingdom
World Economy, Ecology & Development Association (WEED) Germany
Worldview The Gambia