On Eve of Major WTO Meeting, 112 Civil Society Groups Tell U.S., EU: Stop Blocking Discussion of Strong Financial Regulation
On Monday, October 1st, the World Trade Organization (WTO) will make a decision on Ecuador's proposal to set up a process to discuss whether WTO rules leave policy space for robust financial regulations, including capital controls. This week, 112 major global consumer, labor, environmental and development organizations issued a strong statement urging their governments to support Ecuador’s proposal and ensure that global “trade” rules do not undermine countries’ ability to strengthen their own financial regulations to avoid future crises.
The 112 civil society organizations comprising the impressive list of signatories represent hundreds of millions of members from 160 nations. This includes the International Trade Union Confederation (ITUC), which represents 175 million workers globally, and Consumers International, an umbrella organization of 240 consumer organizations operating in more than 120 countries.
A powerful bloc of countries supported a proposal for a formal review of these WTO rules in late 2011, but some WTO members, including the United States and the European Union, blocked it. Now, the same countries have indicated their intent to quash this proposal to even discuss the issue of policy space for crucial financial regulations, much less consider updates to the old rules.
More than 100 countries, including many developing nations, have commitments under the WTO financial services rules. Countries that seek to re-regulate the financial sectors that they previously bound to comply with the WTO’s regulatory limits could face a WTO challenge and trade sanctions. To avoid such liability, they would need to avoid sensible post-crisis policies, such as banning risky financial services, limiting the size of financial institutions, imposing firewalls between commercial and investment banking, and using capital controls.
A clarifying discussion on the importance of capital controls, which even the IMF has accepted as a crucial policy, would be particularly timely. The statement from the globe-spanning organizations notes that "we cannot afford to wait until the next financial crisis to ensure that countries’ WTO commitments do not interfere with or chill financial regulation.”