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For folks like myself who come from a social science background (not to mention those that come from a hard science background), one of the most striking aspects of writing on NAFTA-WTO style rules is the relative predominance of negotiators, former negotiators, paid arbitrators, WTO staffmembers (past and present) and corporate-backed research in the literature.

In most other fields, the answers to questions like "Should there be a GATS?", or "Should the GATS be written in a more clear fashion?" or "Whose interests does the GATS serve?" would be resolved via sound reporting techniques, a dialetical method, or at least an examination of a broad range of existing and opposing viewpoints and sources. In the social sciences, the conclusions of writers or publishers with an economic (not to mention ideological) interest in certain points of view would be discounted, rejected out of hand, or at least examined exhaustively against contrasting viewpoints.

As we argued here and here, recent interventions by the USTR, WTO Secretariat and several practitioners do not meet these standards for investigation. This is hardly a revolutionary insight, since Kalypso Nicolaidis and William Drake made the same conclusion back in 1992: the "academic" work of elaborating the notions of "trade in services" was conducted by ideological and corporate campaigners that favored the GATS, which broke sharply with established ways of thinking about the proper place of regulation.

Despite all this, some academics and practitioners are stepping up to the plate and asking some of the tough questions. Regis Bismuth, an international law expert at the Sorbonne, recently wrote a piece in the Journal of World Trade entitled: "Financial Sector Regulation and Financial Services Liberalization at the Crossroads: The Relevance of International Financial Standards in WTO Law."

Bismuth addresses a key question we pose in our memos: do WTO rules state - or have WTO tribunals made interpretations that assure - that any policy that is ruled kosher by the so-called “international financial regulatory bodies” (like the Basel Committee for Banking Supervision, the International Monetary Fund (IMF), etc.) is automatically allowable under the GATS, and that the WTO just imports the definitions and disciplines of these more knowledgeable bodies? Financial reform advocates - both in and out of Congress - would be given a lot of comfort if the answer to this question were yes.

But the Bismuth study shows that, to the contrary, the WTO has failed to incorporate these standards, and may indeed conflict with them.

There have been several attempts, as the study documents, to give the WTO stamp of approval to Basel standards, and several countries have apparently been pressured to adopt these standards as part of their accession process or trade policy reviews - even despite the shortcomings of the existing Basel approaches.

But some developing nations and offshore financial centers (also known as tax and regulatory havens) have resisted even the inadequate Basel standards being read into the GATS.

The first proposals of the Basel Committee members within the CTFS principally aimed to prevent large emerging economies such as China or Brazil from adopting prudential regulations with protectionist purposes and complicating the establishment of foreign fi nancial institutions in these countries. On the contrary, the underlying idea of Antigua’s proposal was to consider that the Basel standards, among others, were likely to constitute discriminatory and unjustified measures since, when transposed into domestic regulations, they would complicate the capacity of the financial institutions of these small developing countries to supply financial services abroad.

In fact, as Bismuth notes, the Basel standards might "not pass the test of Article VI:5 GATS", which requires that:

5.        (a)         In sectors in which a Member has undertaken specific commitments, pending the entry into force of disciplines developed in these sectors pursuant to paragraph 4, the Member shall not apply licensing and qualification requirements and technical standards that nullify or impair such specific commitments in a manner which:

(i)        does not comply with the criteria outlined in subparagraphs 4(a), (b) or (c); and

(ii)        could not reasonably have been expected of that Member at the time the specific commitments in those sectors were made.

(b)        In determining whether a Member is in conformity with the obligation under paragraph 5(a), account shall be taken of international standards of relevant international organizations(3) applied by that Member. [Footnote (3) reads: "The term “relevant international organizations” refers to international bodies whose membership is open to the relevant bodies of at least all Members of the WTO."]

Bismuth also notes that the WTO hasn't officially interpreted the meaning of the prudential measures defense language, but that various unofficial practitioners favor certain interpretations, although various delegations have opposed those favored interpretations.

He lays out one possible reform of GATS:

By no means, domestic regulations based on Basel standards should be regarded as illegal or deemed to pursue non-prudential objectives. While national measures based on IOSCO or IAIS standards should be irrebuttably presumed consistent with the GATS, the non-recognition of the Basel Committee only means that domestic regulations based on its standards do not enjoy the same ipso jure presumption of validity. Pushing the analysis one step further, this issue raises the delicate question of whether a WTO court owes any deference to the Basel Committee standards. Plurilateral regulatory strategies have been regarded in a more favourable light by the Appellate Body than strictly unilateral ones. In our view, there should be a rebuttable presumption that domestic regulations based on international norms devised in a plurilateral context involving the major economies and establishing the conditions of a level playing field in the banking sector are deemed adopted for prudential reasons and, consequently, consistent with the GATS.

Interesting idea. Should definitely go on the list of reforms up for debate.

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