For the last two years of financial crisis, the WTO’s Committee on Trade in Financial Services has not seriously addressed the crisis, or any role that the WTO might have played in bringing it on. This is curious, since the WTO financial rules both require deregulation and, unlike other international bodies, actually have binding and enforceable dispute settlement.
It’s not for lack of trying. In meetings on March 31, the Kenyan and Tanzanian delegation asked to ensure that LDCs have “adequate policy space in confronting development issues.” The Indian delegation to these talks “mentioned the issue of standstill in the Understanding on Commitments in Financial Services. Many Members had made commitments according to the Understanding with a standstill clause. He wondered about the implications of that standstill commitment in the context of the major developments that had taken place.” He went on to ask about one of the major deregulatory requests made by the U.S., Canada and other countries.
You would think that this would be a perfect opportunity for the delegates of the Obama administration to clarify that there was a new sheriff in town, and further deregulation through WTO requirements were not being considered. Instead, even when given such a golden opportunity to announce the change of regime, said they were unwilling to discuss these issues in a non-negotiating forum. In other words, countries wanting the answer to that question must be prepared to discuss committing more to the WTO rules. Canada backed the U.S. up, and that was the end of the discussion.
But on June 24, things got a bit hotter. (The notes for this meeting were only recently disclosed to the public.) The first part of the meeting was relatively stale. The issues of Islamic finance and microfinance were brought up – believe it or not, among the most oft-raised issues in recent talks, and about as far as you can get from the issues that nearly brought down Wall Street, not to mention the hordes of unemployed and evicted.
That was the first agenda item. The second agenda item was even more alarming. The delegation from AIG (oops, the U.S.) had the audacity to suggest that it be allowed to make a presentation on the virtues of further market access (read: deregulation) of the insurance sector. This dragged on for half the session. The other delegations were incredulous, and began aggressively questioning (well, by Geneva standards) why such a presentation was appropriate.
Then, the levee broke. South Africa made a pointed question about the compatibility of rich countries’ bailouts, and whether they were consistent with GATS, or allowed by the so-called prudential “carve out.” Chile, Kenya, Argentina and China backed up the proposal. (As we've written, this isn't much of a carve-out... much more of a carve-in.)
Canada – presumably trying to offer cover to the U.S. for the bailouts – said that any questions about whether the bailouts were GATS-consistent should be handled bilaterally. The U.S. thanked Canada, and agreed that it was not the time or place to have this discussion.
Other delegations quickly called the North Americans on their hypocrisy – Brazil and India in particular. After spending half the session calling for a discussion of further deregulation of the insurance sector, now the rich countries did not want to talk about their bailouts.
The delegate of Bolivia put it well: “it was … quite strange to realize that the only committee that was not dealing with issues related to the financial crisis was in fact the Committee on Trade in Financial Services.”
Strange indeed. When do we get to see the Obama administration's new proposals on financial services? You know, the ones where we re-enshrine the right to regulate our domestic economies to ensure stability and prosperity?