Europe Admits Speculation Taxes a WTO Problem
April 30, 2010
Earlier this month, the European Commission (EC) released a Staff Working Document that admits that the commitments that Europe made under the World Trade Organization's (WTO) General Agreement on Trade in Services (GATS) can hinder the Europe's ability to impose financial transaction taxes (FTT). (These taxes can help deter speculative activity that undermines the real economy and jobs.)
Here's what they said:
As I blogged about last month, countries are increasingly raising questions about the GATS / regulation conflict at various WTO meetings. But the WTO Secretariat, in its most recent study of the matter, refused to state that financial transaction taxes, policies aimed at limiting bank size, or many other sound prudential regulations would be protected from WTO challenge. In fact, they confirmed many of the worst fears of WTO critics.
But to my knowledge, the EC document marks the first time since the financial crisis that a government entity has been so explicit about the potential for GATS to conflict with sound financial regulation. That's why the EC study, which also admits that transaction taxes could run afoul of various internal European treaties and directives, is such a big deal.
And just days after the EC study was released, a report by Kevin Gallagher supported by the United Nations trade group (UNCTAD) was also published that examined the GATS conflict with other types of "capital management techniques." As that study concluded:
What's the answer to the potential for GATS conflict with FTTs and other speculation taxes?
It's certainly not to bow to the WTO chilling effect, but instead to push for changes to the WTO.
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