Setting the Record Straight on the TISA Leak

BY

Director, International Programs at the Center for Economic and Policy Research

Last week, WikiLeaks released the largest trove of secret trade documents ever: draft texts of the proposed Trade in Services Agreement (TISA). While the major U.S. press has largely ignored the scoop, coverage from Forbes (warning about threats to data privacy), the Sydney Morning Herald (voicing concern about limits on "the ability of governments to regulate qualifications, licensing, and technical standards including in health, environment, and transportation services,") the Huffington Post (making the connection between Fast Track and TISA), Slate.com, as well as German, Greek, Italian, Turkish, Spanish, and other outlets have raised the alarm about the secret negotiations.

However, Edward Alden's "WikiLeaks and Trade: A Healthy Dose of Sunshine," posted at the Council on Foreign Relations, stands out like a sore thumb among the other analysis; it reads like a gleeful attack on the press statement of the Our World Is Not for Sale (OWINFS) global network, which I coordinate. Unfortunately, Alden's cursory "reading" of the texts exhibits a lack of understanding of the complexity of trade in services rules.

A first note: I agree with Alden's purported claims to appreciate informed public debate on the TISA, and am heartened to see him view the disclosure of secret documents as an important aspect of that informed debate. Unfortunately, this goal is undermined by his own erroneous commentary which, given his long history on trade policy, seems difficult to explain.

The OWINFS network and Public Services International (PSI) have published several analyses of the proposed TISA, including on the threat to public services and domestic regulation. In addition, Wikileaks helpfully included several analyses along with the published annexes, which curiously Alden does not seem to have read.

Alden's main point - that the documents say nothing about privatizing and deregulating services - is belied by 20 years of experience with the Global Agreement on Trade in Services (GATS) of the World Trade Organization (WTO), on which the TISA is based; on previous TISA research; and on analysis of the documents, along with the texts provided by WikiLeaks. It's true that if one searches the annexes for "privatize" or "deregulate," these words will not be found, as the texts do not use such terminology. Whether a word is written in a text has little bearing on the ultimate significance. This is especially so given trade panels' wide latitude to improvise new rules to address supposed threats to trade expansion. (Who could forget the WTO panel ruling, arguing that the U.S. had committed the gambling services sector even though the word "gambling" never appeared in the text of U.S. commitments?)

But that's not because increasing market share for private versus public companies or shrinking the regulatory jurisdiction of elected officials are not the central goals of the proposed TISA. Alden even acknowledges this at the beginning of his article, when he notes that "services trade is all about regulatory rules," and then helpfully calculates a "value" to these "regulatory barriers" which he seems, then, in a somewhat contradictory fashion, to argue in favor of removing.

But Alden then argues that the texts are "almost all" about transparency and non-discrimination, to counter his complaint that "opponents of TISA claim that the deal would make it impossible for countries to regulate in the public interest."

Except I never said it would be "impossible"; I stated that the goal of the

domestic regulation texts is to remove domestic policies, laws and regulations that make it harder for transnational corporations to sell their services in other countries (actually or virtually), to dominate their local suppliers, and to maximize their profits and withdraw their investment, services and profits at will.. [which] requires restricting the right of governments to regulate in the public interest.

There is a big difference between "restricting" something and "making it impossible". The latter is a spurious exaggeration; the former is a key goal of the proposed agreement.

To bolster his claim against this straw man, Alden trots out the self-canceling "right to regulate" language, which states: "Parties recognize the right to regulate, and to introduce new regulations on the supply of services within their territories in order to meet public/national policy objectives." But he left out the all-important proviso, which is that, modeled on the GATS, governments' right to regulate would stop when it conflicts with the regulatory constraints imposed by the agreement: "[m]embers' regulatory sovereignty is an essential pillar of the progressive liberalization of trade in services, but this sovereignty ends whenever rights of other Members under the GATS are impaired."

In other words, the government's "right to regulate" does not mean the right to choose how to regulate in the national interest. It is a misleading and meaningless provision. And, according to the text, it is still bracketed because the U.S. opposes it.

This is a crux of the matter. If the agreement were "almost all" about transparency and non-discrimination, there would be no need for a chapter disciplining the domestic regulation of countries. According to the text, the domestic regulation chapter sets out the rules for government measures (laws, regulations, rules, procedures, decisions, administrative actions, or any other form) relating to qualification requirements and procedures, licensing requirements and procedures, and technical standards, for the characteristics of services or how they are to be supplied. The Annex would clearly impose restrictions on government regulation over and above the requirement not to discriminate against foreign service providers, since both direct and indirect regulatory discrimination are already prohibited under another TISA article. So TISA is not simply about limiting regulatory discrimination as Alden claims. Proposed wording for the Annex would make regulations a TISA violation if they were "more burdensome than necessary" - a clear gift to transnational corporations seeking deregulation.

According to the analysis of the domestic regulation text provided on the WikiLeaks website [PDF]:

Foreign governments would also be able to enforce the Annex through TISA's dispute mechanism. The subjective and elastic terms and obligations in this Annex would be interpreted by tribunals of 'trade' experts whose mandate is to promote the ideological and commercial objectives of the agreement, not to protect the interests of nations and their people.

Likewise, the appropriation in trade-speak of the word "transparency" itself seeks to obscure more than it illuminates. As explained in the WikiLeaks-provided analysis of the proposed text on transparency [PDF]:

'Transparency' in this TISA text means ensuring that commercial interests, especially but not only transnational corporations, can access and influence government decisions that affect their interests - rights and opportunities that may not be available to local businesses or to national citizens. They may want to stop or change government decisions they don't like, or rally to support those that are being challenged.

The text, if adopted, would mandate that governments must provide foreign corporations with prior advanced notification of proposed new measures which could affect provisions of the TISA, with "reasonable opportunity" for "interested parties" (code for corporations) to comment on them, and negotiators are debating whether or not to require governments to respond to foreign corporations' inputs about their domestic laws. There will also be provisions for a TISA-prescribed judicial or administrative review, and a dispute settlement procedure, outside of the national judicial structure to which domestic corporations have recourse.

It seems to me that this goes far beyond what the general public might understand as "transparency." Thus when Alden says that transparency simply means "governments need to open up their regulatory process for input," he is obscuring the actual legal implications of the agreement.

Alden then attacks us for "going to bat for the monopolists" because OWINFS notes that the TISA has "potentially grave consequences for the deregulation of state-owned enterprises like ... national telephone company[ies]." [sic] But his argument seems to argue that our concern about the deregulation of state enterprises is indefensible because of the higher costs for Mexican telephone users under a private monopoly. The trade unions of Uruguay have been battling the TISA, and are forcing their government to reconsider its participation in the negotiations, partially based on the threats to state-owned enterprises (SOEs) including the national telephone company. Since it is one of the only TISA countries with an SOE in telecommunications, and the issue has been covered regularly in the Spanish language press in recent months, Alden might have looked there rather than making another apples-to-oranges comparison of state versus private monopolies.

In addition, communications services like telephone and postal services have greater social implications, such as promoting social cohesion and working against rural isolation. That's why it costs the same in the United States to send a letter to Kansas as to K Street. Companies - and Alden specifically mentions the pro-TISA interests of FedEx and UPS - seek to break up those letter delivery monopolies, yet this has serious implications for universal service obligations. Whether the national postal system should be operated by the state in the public interest under elected officials' democratic regulatory jurisdiction or controlled by foreign, private corporations for profit, are exactly the kinds of issues- that groups like ours believe should be the subject of public debate and the decisions made in the public interest, not by unaccountable trade negotiators operating in secret.

Alden also claims that "no country is proposing any measures that would restrict financial regulation of the sort embodied in the Dodd-Frank legislation. Instead, the texts simply say that regulators have to treat foreign companies the same way they treat domestic ones." This is one of the most dangerous dissimulations of all. For example, the standstill clause in the draft text is one of the most key, according to the analysis of the financial services annex provided by WikiLeaks [PDF]:

The general idea of the standstill clause is that regulatory qualifications, restrictions or limitations on the financial sector are being frozen and no new restrictions are allowed in the future. ... The consequence of this standstill clause is that in the future it will be difficult if not impossible to impose more restrictive regulations for the financial sector.

In addition, it specifically includes provisions that go beyond non-discrimination, as the analysis notes:

The TISA draft includes a provision that requires that each country removes or limits any measure, even if it is non-discriminatory, that has "significant adverse effects" on foreign financial services suppliers, for example when the latter cannot expand their activities in the whole of the host country, or cannot sufficiently compete in the host country even if all TISA provisions are respected.

So as the financial industry continues to innovate new risky products, which sometimes result in global financial instability, our government would be limited from imposing new restrictions on the sector under a potential TISA, especially if the measures had adverse effects on foreign financial firms. This goes far beyond "simply say[ing] that regulators have to treat foreign companies the same way they treat domestic ones," as Alden argues. It seems that this is exactly the kind of problem created by a "trade" agreement that Senator Warren has been raising the alarm about in recent weeks, against the protestations to the contrary of President Obama. Remember that shortly thereafter, Canada's finance minister argued that the Volcker rule violates a similar agreement, NAFTA, thus appearing to decide the case in the senator's favor.

Recent experiences with trade rulings also come down on the side of a more cautious approach. While President Obama, much like Alden, argues that critics are "making stuff up" about the potential negative implications of "trade" agreements, the WTO recently ruled that popular U.S. country-of-origin meat labeling (COOL) policy is in violation of the Technical Barriers to Trade agreement of the WTO, even though it is non-discriminatory. The United States vehemently disagrees, arguing that it is in the public interest to know the origin of our meat, and that foreign and domestic companies are treated the same under the policy. But the U.S. will now face trade sanctions from Canada and Mexico if we do not repeal the public interest legislation. Remember that the TISA, like all trade agreements, will go much further both in scope and coverage than current WTO rules (or there would be no point). Not to mention other cases against public interest regulation on dolphin-safe tuna and gambling measures which have been decided against the United States.

One final point. Mr. Alden argues that these types of agreements are in "our" interests because:

many of the most successful companies that employ Americans at good wages are 'service' companies. These include not just Google and Facebook, but also airlines, package delivery companies like FedEx and UPS, law firms, insurance companies, securities firms and banks.

Alden creates a false equivalence between U.S.-domiciled corporations like Google (infamous tax avoider), FedEx (infamous for union-busting), and the financial industry, and the interests of everyday Americans. Most trade policy critics acknowledge that corporations benefit - the problem is that they do so at the expense of workers, and often consumers as well. Any benefit to overall growth in the economy from the agreements is often offset by the increase in inequality, making most of us worse off.

We still have much to learn from the documents on the secret negotiations of the TISA. They are full of brackets, meaning that final decisions have not been made about many provisions. It must be kept in mind that the 17 TISA documents released by WikiLeaks on June 3rd - including annexes on financial services, transparency, telecommunications, professional services, the movement of natural persons, maritime transport, electronic commerce, domestic regulation, competitive delivery, and air transport - are only some of the TISA texts. We don't yet know everything they are negotiating. There is also much more analysis to be done, including to assess the implications for such areas of public regulation as health services, education, Internet freedom, environmental services, and other areas.

The fact that the Obama administration is engaging in secret talks about yet another trade agreement that most Americans have never heard of, which, if concluded, could be approved under "fast track" procedures (if President Obama is able to get them passed), should cause extreme alarm. Attacking those attempting to bring serious analysis and information about these secret talks to the American people does nothing to further the transparency Alden purports to appreciate.

Deborah James facilitates the Our World Is Not for Sale global network and coordinates, in conjunction with Public Services International, the global campaign against the TISA.