Tucker on ABC on WTO attack on food labels

See our own Todd Tucker on ABC News last night discussing the WTO attack on consumer labels:


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Trying to Inch the WTO Away from Extreme Financial Deregulation

As regulators and legislators have wrestled with reforming the financial system in the wake of the crisis, one quiet corner of the debate has received less notice.  As we have reported in past posts, The World Trade Organization’s General Agreement on Trade in Services limits the kinds of financial regulations countries can impose.

These rules were hashed out during the 1990s – before the lessons of the financial crisis, and when deregulation was in vogue. Documents we obtained under the U.S. Freedom of Information Act show that, in the late 1980s and 1990s, U.S. government officials worked closely with Wall Street executives to sell these rules to wary developing nations.

Unlike the re-regulation being discussed in the G-20 or the Bank of International Settlements, these rules at the WTO are highly enforceable. While the near-total absence of re-regulation over the last 15 years has presented few opportunities to road-test this services agreement, tax havens like Panama have already threatened to use them against the tax transparency initiatives of cash-starved countries like Ecuador.  The U.S. lost a high-profile services trade case related to its ban on Internet gambling. Regulatory bans – even of questionable services – are prohibited under the WTO. And a European Commission staff paper about a potential financial transactions tax noted that it would be necessary to assess whether such a tax might conflict with the EU’s WTO commitments.

But the U.S., EU and the WTO Secretariat have spent the last 18 months trying to quash any discussion of these problems, much less consideration of possible updates to the old rules.

WTO Member States Try to Raise Issue at Ministerial Conference

Last fall, a group of countries led by Ecuador tried to get this problem on the formal agenda.  Their modest objective was for Trade Ministers at last December’s  WTO Ministerial Conference to acknowledge the need to review the WTO rules covering financial services in light of the financial crisis and the efforts internationally and domestically to strengthen regulation.

 Ecuador presented its proposal at the WTO’s Committee on Trade in Financial Services (CTFS) in late October in order to get the item on the agenda for December’s meeting.  A powerful bloc of countries – including India, Argentina, Turkey, Brazil, and South Africa – supported the proposal. However, the skewed “consensus” process in the WTO allowed the U.S., EU and Canada to block the discussion from moving forward at the Ministerial Conference, where Ministers would have been forced to recognize that there is a potential conflict between the WTO rules and the global consensus toward financial re-regulation. 

As is often the case in flawed WTO processes, it appears that Ecuador’s proposal was unfairly downplayed, perhaps to ensure that it would not be noted in the Ministerial Conference.   Because the CTFS finalized its Annual Report at the beginning of their October 31 meeting (the last meeting of the Committee in 2011), the discussion on Ecuador’s proposal that occurred later in the meeting was not included in the Annual Reports of the Committee on Trade in Financial Services or of the Council on Trade in Services.  The minutes from the October 31 CTFS meeting state that the Chair of the Committee noted that there was “some” interest in discussing the substantive issues raised by Ecuador.  An observer in the meeting, however, shared with us that the Chair had actually said that there was “broad” support.  The minutes also failed to take note that China and Venezuela supported the proposal, though the representatives from both countries joined the many others present in expressing support for the proposal. 

Ecuador reserved its right to raise the issue at the General Council meeting where the Ministerial Conference’s agenda was finalized.  Despite the fact that there was not consensus on any agenda items for the Ministerial, Ecuador’s proposal was blocked from the agenda, while other agenda items proposed by developed countries remained on the General Council agenda.   Ecuador was forced to raise its proposal under the  “Other Business,” section of the agenda, which was dealt with after 11 pm.  Despite this marginalization, again, a number of countries – including Argentina and Turkey -  spoke in favor of Ecuador’s proposal, and no countries opposed.  In the end, a brief statement about Ecuador’s proposal was included in the General Council’s Annual Report to the Ministers in the documents circulated at Ministerial Conference, but, unfortunately, the summary only lists the countries that spoke, but does not note their support, nor the fact that no country spoke in opposition. 

Activities at the Ministerial Conference

Since the efforts of Ecuador and its allies to include this issue on the agenda of the Ministerial Conference were thwarted, the government of Ecuador hosted a side event “Future of Trade in Financial Services: Safeguarding Stability” to raise this issue during the Ministerial.

During the side event, the Honourable Francisco Rivadeneira, Ecuador’s Vice Minister of Trade and Integration, strongly made the case for why Ecuador proposed a review of the WTO’s financial services rules -  to ensure that WTO members, particularly small countries like Ecuador, have sufficient policy space to engage in the regulation needed to ensure stability of the financial system. Alfredo Calcagno from UNCTAD’s  Division on Globalization and Development Strategies described in detail the concerns raised by UNCTAD’s 2011 Trade and Development Report, particularly how the ambiguities in the WTO’s General Agreement on Trade and Services (GATS) could restrict policy space for capital controls and other financial regulatory tools. Lori Wallach, Director of Public Citizen’s Global Trade Watch division, laid out the potential conflicts between GATS rules and needed financial regulations, based on a review of the legal literature.  Finally, Kavaljit Singh Director of Public Interest Research Centre in India gave a rousing presentation about how the financial sector must be properly regulated to ensure financial stability and inclusion, using examples from the Indian context.  

Unfortunately, the official proceedings of the Ministerial Conference went on in Alice-in-Wonderland - style as if no financial crisis had ever happened.   Without anything real to deliver after more than ten years of negotiations on the Doha round, the WTO struggled to demonstrate its continued relevance by trumpeting the accessions of Russia and Samoa – even though accessions are rarely considered to be news at the Ministerial Conference level.  If the powerful countries in the WTO – and its Secretariat – continue to refuse to acknowledge that its extreme deregulation rules require revision, the WTO will continue to lose legitimacy on the international stage.

 The good news is that Ecuador’s efforts did raise the profile of the issue among important WTO countries and that the Chair of the WTO’s Committee on Trade in Financial Services has agreed to keep Ecuador’s proposal for a review of the rules on the agenda for the Committee in 2012.  It will be important to watch closely to make sure that the U.S. and EU allow a robust review of the rules to go forward.


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Public Citizen Applauds Obama Administration’s Appeal of Trade Ruling Against U.S. Dolphin Protection Measures

Public Citizen commends the Obama administration for taking the necessary step of appealing today the harmful World Trade Organization (WTO) ruling against U.S. consumer and dolphin protection measures.

In September 2011, a WTO panel ruled that the U.S. dolphin-safe tuna labeling law violates WTO rules. The labels have been enormously successful in reducing dolphin deaths by tuna fishers – a major problem in the past, when tuna fleets set upon dolphins to catch tuna, since the two species associate with one another in the Eastern Pacific Ocean. The label allows consumers to “vote with their dollars” for dolphin-safe methods. Mexico successfully challenged the U.S. standard after decades of refusing to transition its fishing fleet to more dolphin-safe fishing methods.

The ruling’s implications are dire, especially in the context of a decades-long battle to save dolphins. This struggle has been beset by countless trade-related obstacles: 1991 and 1994 rulings under the WTO’s predecessor organization led to the U.S. eliminating the more potent import ban of dolphin-unsafe tuna, and environmentalists fighting successfully in U.S. court to block the Clinton and Bush administrations from also watering down the voluntary labeling policy. These groups narrowly blocked this executive branch effort, which U.S. courts deemed “Orwellian” and “a compelling portrait of political meddling.” The legitimacy of the WTO is likely to be further undermined if the WTO’s Appellate Body upholds the lower panel ruling. Consumer and environmental groups will see that the WTO allows anti-environmental forces a second (or third) bite at the apple, even when such forces fail in their U.S. legal and political efforts to undermine a domestic policy to which they object.

The Obama administration is considering expanding some of these anti-consumer and environmental rules in the first trade deal it is negotiating: the nine-nation Trans-Pacific Free Trade Agreement. The WTO ruling – and two others in 2011 against country-of-origin labels on meat and a ban on sweet cigarettes used to entice teens into smoking – show that a new approach to trade policy is needed, one that puts consumers, the environment and communities first.

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Public Citizen Applauds Obama Administration’s Continued Efforts to Reduce Teen Smoking

Appeal of Trade Pact Ruling Necessary First Step

Statement of Todd Tucker, Research Director, Public Citizen’s Global Trade Watch

Public Citizen commends the Obama administration for taking the necessary step of appealing the harmful World Trade Organization (WTO) ruling against U.S. efforts to reduce teen smoking.

In September 2011, a WTO panel ruled that the U.S. ban on flavored cigarettes – which are used to entice teens into smoking through cola, strawberry and clove flavors – violated WTO rules because one of these flavors (clove) is predominantly found in imports from Indonesia, another WTO member.

It would pose an unacceptable barrier to public health if any time a good is imported it has to be excluded from regulation, so this appeal is necessary both to defend the law and discourage further WTO attacks on consumer protection policies.

Corporate interests have been relentless in attacking anti-smoking measures, which took a giant leap forward with the signing into law of the 2009 Family Smoking Prevention and Tobacco Control Act (FSPTCA). The flavored cigarette ban was a key plank of the FSPTCA, which envisions a possible future ban on other flavored cigarettes such as menthols. One of the other major planks of the FSPTCA – enhanced warning labels – is currently being attacked by tobacco companies in federal courts. The legitimacy of the WTO is likely to be further undermined if the agency’s Appellate Body upholds the lower panel ruling.

Consumer and public health groups will see that their policy priorities are being undermined by industry in domestic courts when there is a U.S. law basis for a claim, and in the WTO when there is not. The combined effect is fatal to the viability of public interest regulation.

The Obama administration is considering expanding some of these anti-consumer rules in the first trade deal it is negotiating – the nine-nation Trans-Pacific Free Trade Agreement. The WTO ruling (and two others in 2011 against country-of-origin labels on meat and dolphin-safe labels on tuna) shows that a new approach to trade policy is needed – one that puts consumers, the environment and communities first.

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Bankers Trying to Use NAFTA to Kill Financial Reform

Remember the Volcker Rule? Proposed by former Federal Reserve Chairman Paul Volcker and endorsed by five former Secretaries of the Treasury, it aims to prohibit commercial banks from trading stocks, bonds, currency, and derivatives for their own profit. (Customers of banks could still ask their banks to buy and sell these financial instruments if the customers front the cash.) Banks' risky trades played a huge role in the development of the 2008 financial crisis and precipitated the bailout for these overextended banks.

A form of the Volker Rule made it into the Dodd-Frank financial reform bill that became law in 2010, but bankers are trying to cripple the rule as regulatory agencies write the details of how the rule will work. The Investment Industry Association of Canada has raised the possibility of attacking the Volker Rule with NAFTA. In a letter sent to the Federal Reserve last month, the Association claims:

[T]he Volcker Rule will clearly interfere and raise the costs of cross-border dealing in Canadian securities. As a result, the Volcker Rule may contravene the NAFTA trade agreement.

The Investment Industry Association of Canada perfectly illustrates how "trade" agreements can reach inside nations' borders and interfere with public interest regulations that have nothing to do with the flow of goods between countries. Since NAFTA was enacted, bankers have gotten much more aggressive in their attempts to block regulation through trade deals. For example, the Korea FTA, passed by Congress in October, included much worse restrictions on financial sector regulations than NAFTA. On top of that, the General Agreement on Trade in Services of the WTO has its own set of rules that conflict with policies on capital controls, bans on risky financial services, size limits on banks, and “firewalls” between banking and investment services.

Necessary efforts to make our financial system stable like the Volker Rule may continue to run into obstacles unless we have a turnaround in trade policy to protect, rather than restrict, the right of governments to regulate in the public interest.

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Pledge asks Congress to stand up for consumers’ right to know what’s on the dinner table

WTO ban editedJust when we thought that that the World Trade Organization (WTO) couldn’t do worse, it managed to wrap up 2011 with a series of dreadful decisions. The international body ruled against our country-of-origin labels on meat, dolphin-safe labels on tuna, and our ban on candy and clove flavored cigarettes. These are all US consumer policies we rely on to allow us to protect children’s health and make informed decisions. Thanks to such rulings, our government will have to either water down or eliminate these safeguards, or face trade sanctions.

It begs the question: Will this be last holiday season that you have a right to know where your food comes from, and how the environment, animals and people were impacted in its production?

We hope not. The press and Congress may be asleep at the wheel on this issue, but consumers can sound off the alarm by asking their congressional leaders to sign the Consumer Rights Pledge—a pledge to protect policies from the attacks of Big Business and a shameful WTO.

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Carolers Sing for WTO Turnaround at Ministerial

WTO Turnaround, 12.14.11

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Todd Tucker Talks Food Safety with Thom Hartmann

Our own Todd Tucker stopped by the Thom Hartmann program to explain how two recent WTO rulings might undermine consumers' right to know exactly what they are eating.

Check out the full interview here:

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WTO Turnaround: Food, Jobs and Sustainable Development First!

GTW will be heading to Geneva next week to join the global civil society response to the World Trade Organization's 8th Ministerial Conference. Our colleague Deborah James from Our World Is Not For Sale Network wrote this informative piece, published in Common Dreams, which explains the current complexities facing the multilateral trading system and our global call from civil society for a "WTO Turnaround".


WTO Turnaround: Food, Jobs and Sustainable Development First!

December 15-17, 2011, Trade Ministers will convene in Geneva, Switzerland for an 8th WTO Ministerial Meeting. After many failed Ministerial meetings and nearly ten years of negotiations, the Doha Round of WTO expansion is at a crossroads. Increasingly, developed countries have tried to push aside agreements to negotiate on key developing country issues intended to correct the imbalances within the existing WTO, which formed the basis of the development mandate of Doha. Instead, rich-country governments appear to be re-packaging the old liberalization and market access demands of their corporate interests as so-called “21st century” issues. This Ministerial will determine the future path of WTO negotiations, and the global Our World Is Not for Sale (OWINFS) network is calling for a fundamental transformation.

November 30 marked the 12th anniversary of the massive protests against the World Trade Organization (WTO) in Seattle, Washington, which succeeded in preventing the launch of the so-called “Millennium Round” of WTO expansion negotiations. Developing countries, led by African ministers and buoyed by massive street protests, opposed the launching of a new round of liberalization, focusing instead on their demands to fix the problems left over from the last round. Two years later, after receiving promises from rich countries that the next round would focus on development, these same countries acquiesced to a new “Doha Round.”

Throughout the last ten years, negotiations have collapsed several times, but have always been re-started. Unfortunately, the development mandate has been all but abandoned, with negotiations shifting to focus on the desires of corporations in rich countries, in services, agriculture, and manufactured goods, to achieve greater access to markets in developing countries. Nevertheless, they came perilously close to concluding in the summer of 2008. Since then, the emergence of the economic crises has resulted in a global re-think of the neoliberal economic model by citizens around the world, with resulting domestic pressure against governments to further entrench such a calamitous economic paradigm.

our world is not for sale 2photo: RonnieHall

In many countries – such as Brazil, India, South Africa, and China – leaders are no longer willing to roll over to U.S. and EU demands, as their geopolitical power has grown along with their economies. A key demand of the United States, roiling under the surface of the negotiations, is that these countries should no longer be treated as developing countries – although they have far more poor people than all of the Least Developed Countries (LDCs) combined. The Obama administration decided that since it could not get much of a stimulus package through the Republican-controlled House, the U.S. would focus on increasing exports to these “emerging markets” as a way to boost U.S. economic recovery. But since many of these countries did enact stimulus programs adequate to the size of their economies, and were thus faster on the road to recovery after the crisis than the United States, they are understandably reluctant to bail out the U.S. economy at the expense of their own jobs and development potential. (Unfortunately, past experience with WTO and bilateral trade agreements demonstrates that they are net job losers, thus exposing the jobs claim as a cover-up for pushing the trade agenda of corporate donors.)

Continue reading "WTO Turnaround: Food, Jobs and Sustainable Development First!" »

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Op-Ed: Trade rulings undermine consumer protection

Lori Wallach and Todd Tucker sound the alarm on the danger of three anti-consumer WTO rulings and the need to chart a path to a pro-consumer trade policy in an opinion piece in The Hill today:

Trade rulings undermine consumer protection

By Lori Wallach and Todd Tucker

“His name was Colin; here are his papers,” said the waitress presenting a bound prospectus to two diners who possess a limitless interest in the origin, diet and even friendship circle of the chicken they are about to order. The scene comes from Portlandia, the sketch comedy that skewers the bobo lifestyle.

Most of us aren’t quite so inquisitive about our food. But in an era of mass food-borne illness outbreaks, we do need retailers to provide basic information about our foods’ origins, and regulators to ensure the accuracy of these claims.

The country-of-origin labels we now rely on come from a 2008 law that ensures we know in which countries our meat was born, raised and slaughtered. The policy resulted from decades of consumer campaigning in response to slaughterhouses’ practices of routinely combining dozens of animals from diverse countries into the same hamburger patty, without having to even document the cattle’s origin.

Last month, the World Trade Organization (WTO) ruled that the law violated the global agency’s rules. A three-person tribunal in Geneva admitted that there was no strong evidence of quantifiable damage to Mexico and Canada, which challenged the law. Yet, if U.S. officials do not appeal or the appeal fails, the U.S. must weaken or eliminate the policy, or we face indefinite trade sanctions.

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COOL Ruling Not COOL

As we noted last week, the WTO has just issued a major ruling against U.S. country-of-origin labels (COOL) on meats. The decision confirms the direst predictions when the WTO was established, which questioned the wisdom of setting internationally binding rules against consumer protection.

The ruling and its six supporting annexes are hundreds of pages long, so going through all of them will take some time. Here are some additional items that we did not include in our longer analysis from Friday.

COOL is hearted by consumers

COOL is very popular, as the Obama team noted during the proceedings:

Numerous polls also indicate strong consumer support for mandatory country of origin labeling. Among the polls cited in various submissions received by USDA during the regulatory process are the following:

  • 92 percent of respondents in a 2007 Consumers Union poll believed that imported foods should be labeled with their country of origin
  • 88 percent of respondents in a 2007 Zogby poll indicated that they want all retail foods labeled with country of origin information
  • 95 percent of respondents in 2007 Zogby poll indicated that they have a right to country of origin information for food
  • 82 percent of respondents in a 2007 Food & Water Watch poll supported mandatory country of origin labeling
  • 82 percent of respondents in a 2004 nationwide poll conducted for the National Farmers Union supported country of origin labeling
  • 86 percent of respondents in a 2002 survey for Packer magazine supported country of origin labeling

However, the panel didn’t explicitly mention these polls. Throughout much of the proceedings, it was treated as an open question whether consumers actually wanted COOL.

Democracy is impermissibly uncertain; hortatory is the new mandatory

This WTO decision is the most recent of three cases with deeply troubling implications for consumers. In September, the WTO also ruled against U.S. efforts to reduce teenage smoking and dolphin mortalities. In the dolphin case, the purely voluntary dolphin-safe labeling scheme was deemed “mandatory,” despite the fact that tuna not having the label was and is sold in the U.S. After that ruling, we joked that “voluntary is the new mandatory.”

But this COOL ruling takes this joke to sad new levels, so that “hortatory is the new mandatory.”

Here’s why.

Continue reading "COOL Ruling Not COOL" »

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Your Ignorance is Agribusiness' Right, says WTO

Consumers and the environment are at risk following a series of World Trade Organization (WTO) rulings against popular U.S. policies.

As we noted earlier today, the agency issued a landmark ruling against U.S. efforts to reduce consumer confusion about the origin of the foods they eat. This followed two decisions from September against U.S. measures to reduce teen smoking and dolphin deaths. If the decisions are upheld on appeal, the United States will have to water down or eliminate its country-of-origin labels (COOL) for meats, dolphin-safe tuna labels, and ban on flavored cigarettes directed at kids.

These rulings confirm the worst fears of members of Congress and advocacy organizations, who warned Beef wtoof the dangers of expanding the scope of trade agreements beyond border tariffs into the domestic policy arena. This expansion was pushed by anti-regulation corporations, with substantial assistance from “free-market" ideologues who saw the WTO as a delivery mechanism for light-to-no touch regulation. (Ironically, these WTO decisions have negative implications for both more “free-market” and “interventionist” oriented consumer and environmental protection policies, as we explain below.)

What this ruling means for consumers

When the WTO rules against a country's policy, that country has to change the law to comply, or risk trade sanctions. In this case, Mexico and Canada (the "complainants") were successful in their challenge of U.S. labels.

The U.S. will have to get rid of COOL, or water down the policy to Canada and Mexico's satisfaction. Mexico's position was that the U.S. should simply revert to voluntary COOL, or utilize a weaker standard utilized by a global body known as Codex Alimentarius. But this is what the U.S. used to have that consumers wanted to move past. So it's unclear what would satisfy those countries.

The Obama administration may appeal the ruling, although the track record of successful appeals is very limited: the WTO rules against challenged policies 90 percent of the time, and upholds these rulings at the appellate stage an even higher percentage of the time.

The broader worry is that this ruling leaves the door wide open to attacks on similar consumer policies - not only in the U.S., but all WTO member countries - many of which use COOL.

After the jump, we provide more background on how we got here.

Continue reading "Your Ignorance is Agribusiness' Right, says WTO" »

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WTO Rules Against Country-of-Origin Meat Labeling Law: Third Ruling Against U.S. Consumer Safeguards in 2011

The World Trade Organization’s (WTO) ruling today against another highly popular U.S. consumer policy – country-of-origin labeling (COOL) for meat cuts and products – will only intensify public opposition to more of the same backwards trade pacts, Public Citizen said. A panel report released today announced that Mexico and Canada have succeeded in their WTO attack on the labeling rule; today’s WTO ruling is the third this year against popular U.S. consumer or environmental measures.

“Today’s ruling makes very clear that these so-called ‘trade’ pacts have little to do with trade between countries and a lot to do with our major agribusiness corporations being free to sell mystery meat in the United States, with neither consumers nor our elected representatives in Congress able to ensure its safety, much less even know where it is from,” said Lori Wallach, director of Public Citizen’s Global Trade Watch.

After 50 years of state efforts to institute COOL for meats, and federal experimentation with voluntary COOL for meat, Congress passed a mandatory COOL program as part of the 2008 farm bill. In their successful WTO challenge, Mexico and Canada argued that the mandatory program violated the limits that the WTO sets on what sorts of product-related “technical regulations” WTO signatory countries are permitted to apply. In their filings to the WTO, Canada and Mexico suggested that the U.S. should drop its mandatory labels in favor of a return to voluntary COOL, or to standards suggested by the Codex Alimentarius, which is an international food standards body at which numerous international food companies play a central role. Neither option would ensure that U.S. consumers are guaranteed the same level of information as the current U.S. labels.

Today’s decision follows WTO rulings this year against U.S. “dolphin-safe” tuna labels and a U.S. ban on clove, candy and cola flavored cigarettes.

“These three rulings – with the WTO slapping down safe hamburgers, Flipper and children’s smoking prevention policy – make it increasingly clear to the public that the WTO is leading a race to the bottom in consumer protection,” said Wallach.

In today’s ruling, the trade panel specifically found that COOL labeling requirements violated the Agreement on Technical Barriers to Trade (TBT), one of 17 agreements administered by the WTO. While the WTO has ruled on nearly 200 disputes, the TBT had played a major role in only a few cases thus far.

“There has been widespread concern that this provision could empower a WTO panel to second-guess the U.S. Congress, courts and public by elevating the goal of maximizing trade flows over consumer and environmental protection,” said Todd Tucker, research director for Public Citizen’s Global Trade Watch. “Today’s ruling shows that consumers’ concerns were well-founded.” 

“The Obama administration is in the process of negotiating its first-ever trade deal – the Trans-Pacific Free Trade Agreement – and so far it looks like it will replicate many of the anti-consumer rules present in the WTO terms and the North American Free Trade Agreement,” noted Wallach. “These WTO rulings show the need for President Obama to start fulfilling his campaign pledges to create a trade policy Americans can believe in and stop expanding the old trade pact model.”


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Sherrod Brown Tosses the Panama FTA

Well, not quite. But, man, that FTA text does look pretty heavy, and like it could put a hurtin' on some of the senators in the room that are against fair trade.

But here's a floor speech from fair trade champion Sen. Sherrod Brown (D-Ohio) on the night the Senate voted on the Panama, Korea and Colombia trade deals. It's about 30 minutes, and a very eloquent description of why these trade deals are no longer primarily about "trade," but about how we regulate our domestic economy. Brown's TRADE Act would go a long way to getting "trade" policy right.

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Benefits from WTO Doha Round are a MIRAGE

As the next WTO ministerial meeting in December approaches, the debate over the economic effects of the Doha round proposals is heating up again, for the umpteenth time. (For previous rounds of handwringing and number-crunching, see here and here.) On Monday, CEPII-CIREM, a French think tank, published the results of a modeling exercise using the MIRAGE model that attempted to measure the global effects of the implementation of various Doha proposals. The EU, which commissioned this study, somehow convinced Reuters to publish their sunny spin on the results.

Here’s the short of the CEPII-CIREM study. Even under optimistic scenarios, many developing countries will be worse off because of the Doha Round, which (on average) would bring annual income growth of only a dollar to each of us.

Discouraging results from latest round of modeling of Doha Round impact

The main result of the study is that the Doha proposals on goods and services liberalization and "trade facilitation" will only lead to an increase in global GDP of about two tenths of one percent - $152 billion - by 2025.  (The press release of the EU Trade press office bizarrely focuses on the expected rise in trade flows, as if the movement of goods across borders with the associated environmental costs is beneficial in itself.)

Even assuming the study's predictions would come to pass, $152 billion is a paltry sum for a policy project that has soaked up so much energy.  It amounts to an average annual growth in global GDP of about $11 billion per year over the 14-year implementation period. Considering the Doha Round was launched in 2001, we should really amortize the $152 billion over a 24 year period, bringing the gain down to growth of $6.3 billion a year. Divide that by every person on the planet, and it’s not quite a dollar per year. So, you can get the Doha Round and risk losing your job or you can get a Coke. Your choice.

Compare this “gain” to what we could harvest from investing our policy energy elsewhere. The Global Financial Integrity Project of the Center for International Policy, for instance, estimates that global illicit outflows of money from developing countries due to corruption, tax haven activity, and other illegal activities amounted to $1.26 trillion in 2008. That's over ten times the global economic growth that CEPII-CIREM expects from the Doha round. In other words, taking strong action on tax haven abuse and corruption would yield much greater economic gains.

The small size of the overall impact is not the only concerning part of the results. The topline number on the supposed boost to global GDP does not delve into the distribution of these gains among countries or within countries. According to the study, the Doha proposals on goods and services liberalization will actually cause the economies of Sub-Saharan Africa, Mexico, and the Caribbean to shrink.  Both skilled and unskilled workers in Mexico will see their wages fall under all "core" scenarios - goods and services liberalization and trade facilitation measures. Workers - either skilled or unskilled - in Brazil, the Caribbean, North Africa, Sub-Saharan Africa, Paraguay, and Uruguay will experience falling wages under some scenarios.

Doha Round vs. 6 hours of stimulus spending, and more!

Some other discouraging results:

Continue reading "Benefits from WTO Doha Round are a MIRAGE" »

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NAFTA is the One Ring of our Democracy

Steven Pearlstein and Paul Krugman have nice pieces about the 25th anniversary of the Economic Policy Institute, arguably the leading labor market-focused center-left economics think-tank in D.C.

A prominent narrative is that EPI has grown to prominence for its analysis of the factors driving inequality, including trade policy. As Pearlstein writes:

While EPI and its labor allies have clearly lost the policy battle over free trade, economists have finally come around to its view that trade has had a significant role in widening the U.S. income gap. Even the Institute of International Economics acknowledges that some of the $1 trillion in benefits the U.S. economy gets every year from trade should be used to help the millions of workers who are hurt by trade.

Krugman chimes in on this point:

Since Pearlstein makes a point of mentioning some ancient disputes I had with EPI, I guess I should say something about where all that stands. The main thing, I think, is that trade policy — where I still have some differences with EPI — is much more peripheral an issue than it seemed to be in the early 1990s. I once had a conversation with Bob Kuttner in which we agreed that while we were arguing about NAFTA, Sauron was gathering his forces in Mordor.

If the point is that NAFTA and similar deals are not the only cause of rising inequality, I couldn't agree more. But that's actually the wrong question to be asking. The main raison d'etre of NAFTA-style deals is to set in place a body of rules that become the "new normal" in domestic regulation and international law. As Lori Wallach and I write in a piece published in the American Prospect yesterday:

Since NAFTA, trade agreements have grown to encompass thousands of pages of text, and only a minority of the provisions deal with tariffs—trade policy’s historic remit. Today’s so-called “trade” deals set constraints on how governments can regulate inside their own borders. For instance, the recent pacts ban "Buy America" policies that ensure tax dollars are used to purchase American-made goods and allow corporations to challenge environmental policies for cash compensation. They include such severe limits on financial regulation that the financial services industry celebrated the Korea deal in particular as “the best financial services chapter negotiated in a free trade agreement to date,” according to Citigroup.

These constraints on domestic regulation have a corrosive effect on democracy, and begin to shift the center of political gravity away from elected officials and towards unelected global bodies and corporations. Over time (and we see this every day on Capitol Hill), policy proposals are watered down in order to avoid conflicts with our trade agreements. 

Krugman and Kuttner are right that NAFTA is not to the labor market as Sauron is to Mordor. Rather, NAFTA and the WTO are to our democracy what the One Ring is to Mordor. Sauron, in this analogy, represents corporations.

As Tolkein fans know, the One Ring was designed by Sauron, and draws whoever bears it back to his Oneringdarkness. Its inscription reads: "One ring to rule them all, one ring to find them, One ring to bring them all and in the darkness bind them." The ring represents a set of dark rules that are difficult if not impossible to wield for good, and were designed with Sauron's narrow interests in mind (not all of Mordor's).

Our trade agreements provide the legal and ideological underpinning of neoliberalism. Our government (like Frodo) put these shackles on voluntarily, but now it finds its trajectory negatively influenced by the force. It is of course difficult to hypothesize whether neoliberalism would be destroyed if we got rid of NAFTA-style deals or the WTO. But the system's proponents would have to justify their corporate goals on some basis other than "it's the law."

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Key U.S. Groups Call for Review of WTO Financial Rules Post-Crisis

Today, Public Citizen joined the AFL-CIO, Americans for Financial Reform, Citizens Trade Campaign, Consumer Watchdog, and U.S. Public Interest Research Group (PIRG) in releasing a letter to U.S. Ambassador to the World Trade Organization Michael Punke calling for a review of WTO rules to ensure that countries have sufficient policy space to re-regulate the financial sector.  The letter urges the U.S. government to support a proposal raised by member state Ecuador to include language in the upcoming WTO Ministerial Declaration that instructs the WTO’s Committee on Trade in Financial Services to review related WTO rules in light of the financial crisis.

The letter says, in part:
“Given that many of us worked tirelessly on the major financial reform package promoted by the Obama administration last year, we, the undersigned organizations, are concerned about how current and any future expanded financial liberalization under the current WTO rules may affect financial reregulation efforts here at home and in other countries. Therefore, we believe it would be appropriate, now that sufficient time has passed from the height of the financial crisis, for the Ministers meeting at the WTO’s December 2011 Ministerial Conference to instruct the Council on Trade in Services and the Committee on Trade in Financial Services to conduct a thorough review of WTO rules implicating financial services in light of the crisis. In the aftermath of the global financial crisis, governments around the world as well as an unprecedented array of scholars have called for improved domestic and international-level financial regulation as a means to avoid future crises and restore global financial stability. For these measures to succeed, it is critical that the policies of the various international economic bodies are coherent.”

The full text of the letter is here and after the jump.

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WTO is the big kid on the seesaw

The recent WTO attacks on U.S. consumer and environmental policies (see here, here and the one about to be announced here) have revived discussion of whether current trade agreements leave enough space for countries to regulate in the public interest.

Those who think not can cite to the fact that the WTO rules against challenged policies 90 percent of the time. Those who think yes often cite the WTO agreements’ so-called “exceptions” clauses. For instance, the WTO’s General Agreement on Tariff and Trade (GATT) Article XX reads in part:

“Article XX: General Exceptions Bigkid

Subject to the requirement that such measures are not applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination between countries where the same conditions prevail, or a disguised restriction on international trade, nothing in this Agreement shall be construed to prevent the adoption or enforcement by any contracting party of measures:

(a) necessary to protect public morals;

(b) necessary to protect human, animal or plant life or health;…

(d) necessary to secure compliance with laws or regulations which are not inconsistent with the provisions of this Agreement, including those relating to customs enforcement, the enforcement of monopolies operated under paragraph 4 of Article II and Article XVII, the protection of patents, trade marks and copyrights, and the prevention of deceptive practices;…
(g) relating to the conservation of exhaustible natural resources if such measures are made effective in conjunction with restrictions on domestic production or consumption;…”

Sounds pretty sweet, doesn't it? Similar provisions are contained in the WTO’s General Agreement on Trade in Services (GATS) Article XIV.

While the WTO’s proponents argue that these exceptions help preserve sovereign policy space, these defenses are unsuccessful over 96 percent of the time. Put differently, countries that actually go out of their way to invoke the so-called "defenses" are even less successful than those that simply lay down and take the beating. 

We can break down the record of these exceptions in more detail.

Typically, when the WTO Appellate Body and panels examine the exceptions, they take three steps.

Say that Australia wanted to defend its anti-smoking policies from WTO attack by invoking GATT Article XX(b) above. The panel would first establish whether it fell within the scope of the subparagraph (b) by determining whether the policy was connected to the protection of human health.

Then, the panel would inquire whether the policy were “necessary” to protect human health, a step which itself is typically broken up into "weighing and balancing" the legitimacy of the aim of the policy (yes, the WTO gets to make a call on the legitimacy of the policies the officials you elected pass), the contribution of the policy to achievement of the aim, the trade restrictiveness of the measure, and whether a less trade restrictive policy option is available.

All these factors are not weighed equally, as it turns out: the trade-related metrics are the big kids on this seesaw.

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Flipper gets axed by the WTO

Today, U.S. efforts to reduce dolphin deaths by corporate tuna fishers through dolphin-safe labels on tuna were found to violate the WTO. This follows last week's ruling that U.S. efforts to reduce teen smoking violated the trade organization's rules. These smackdowns of major consumer regulations will be followed by a third in the near future, when the WTO is expected to rule against country of origin labeling for beef.

What this ruling means for consumers and dolphins

When the WTO rules against a country's policy, that country Dolphin-safe-logo2 has to change the law to comply, or risk trade sanctions.

The U.S. will have to get rid of the dolphin-safe labels, or water down the policy to Mexico's satisfaction. Mexico's long-standing position (reiterated in this case) is that it should get to receive a dolphin-safe label, even though tuna corporations there use methods to capture tuna that are dangerous for dolphins.

The U.S. currently defines "dolphin-safe" as tuna not caught using dangerous purse-seine nets anywhere in the world. For tuna caught in the Eastern Pacific, a unique region where dolphins and tuna swim together, additional steps are required to earn the label.

Shipping fleets of the U.S. and many developing countries (like Ecuador) operating in the Eastern Pacific have been able to meet these higher standards, thereby giving greater assurance to consumers that their tuna purchases are not harming dolphins.

In contrast, much of the Mexican fleet has chosen not to take such steps. Mexico has advocated use of a distinct standard that even the WTO acknowledges is weaker than the U.S. standard. The WTO ruling wrote of that distinct standard:

... taken alone, it fails to address unobserved adverse effects derived from repeated chasing, encircling and deploying purse seine nets on dolphins, such as separation of mothers and their dependent calves, killing of lactating females resulting in higher indirect mortality of dependent calves and reduced reproductive success due to acute stress caused by the use of helicopters and speedboats during the chase. 7.739 We also note that, to the extent that the AIDCP standard addresses setting on dolphins and not other fishing techniques that may also result in adverse effects on dolphins, it would also not provide an effective or appropriate means of fulfilling the US objectives in this respect.

Nonetheless, the WTO ruled against the U.S. standard. (We explore more of the details of the ruling below.)

Initial reports indicate that the Obama administration will appeal the ruling, although the track record of successful appeals is very limited and the WTO rules against challenged policies 90 percent of the time.

The broader worry is that this ruling leaves the door wide open to attacks on similar environmental and consumer policies - not only in the U.S., but all WTO member countries.

What this ruling means for trade policy

All three of these cases have something in common: none of them related to efforts by the U.S. to intentionally discriminate against foreign goods, nor to protect our own producers. Indeed, in the beef and dolphin cases, no discrimination could even be proved. (In the smoking case, a finding of "discrimination" was established in a biased analysis we detail here.) This alone would suggest that a trade organization has no business passing judgment on such policies.

But we are in a new era of trade policy, where even non-discriminatory, reasonable, even-handed, popular policies (some with virtually no impact on international trade) can be ruled against.

What's more, all three consumer policies could be considered very "free market"-oriented. Rather than the big old government telling Americans what they can and can't consume, the dolphin and beef policies simply require honesty in labeling, so that the consumer can decide on their own free will what to consume, and let the market works its magic.

We've long known that more interventionist government policies (like import bans) can run afoul of trade rules. Indeed, the two adverse rulings at the WTO's predecessor organization in the early 1990s against the U.S. ban on dolphin-unsafe tuna led to the eventual removal of that effective and popular policy tool. Now, with today's ruling, we learn that even regulation by more "free market" means is on the WTO chopping block.

This is going to make it harder for the Obama administration to sell similar anti-consumer trade initiatives like the trade deals with Korea, Panama and Colombia to free-marketeers and environmentalists across the political spectrum.

The long saga of protecting dolphins

After passage of various dolphin protection laws in the 1980s, the U.S. fishing industry abandoned the cruel and environmentally devastating practice of surrounding dolphins with mile-long purse seine nets to trap the schools of tuna fish swimming under the hunting mammals.  The practice had led to the death of millions of dolphins in the Eastern Tropical Pacific, where dolphins accompany schools of tuna.  The U.S. laws forbid the sale of tuna caught with purse seine nets.

In 1991, a General Agreement on Tariffs and Trade (GATT) tribunal ruled that this ban violated GATT rules forbidding discrimination. With the debate over NAFTA’s passage raging, Mexico decided not to impose trade sanctions when the United States maintained the laws. The U.S. prohibition was again successfully challenged under GATT by the European Union in 1994.

After NAFTA’s passage, the Clinton administration launched an intense effort to change the U.S. law to bring it into compliance with the initial ruling, while Mexico threatened a new WTO case to enforce the old ruling. After a lengthy battle with Congress, the Clinton administration managed to pass a new policy that removed the ban on U.S. sales of tuna caught with purse seine nets.

However, an attempt by the Clinton and Bush II administrations to weaken the related labeling law defining what could be labeled “dolphin safe” was reversed after a series of U.S. court cases.

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WTO Rules Against Dolphin-Safe Tuna Labels

Round Three of the GATT-WTO Tuna-Dolphin Case: GATTzilla Kills Flipper Again

WASHINGTON, D.C. – The World Trade Organization (WTO) has ruled against the popular U.S. “dolphin-safe” tuna labeling in a case brought by Mexico, according to a panel report released today. The WTO has struggled to regain legitimacy following the highly visible 1999 Seattle protests that derailed plans to expand the organization’s remit – plans that have been sidelined ever since. Today’s ruling will intensify public opposition to the WTO, said Public Citizen. This is the third time the WTO and its predecessor General Agreement on Tariffs and Trade have ruled against America’s dolphin protection policies.

“It makes very real the threats these overreaching ‘trade’ pacts pose. The first round of this case in 1991 became known to environmental activists as ‘GATTzilla Kills Flipper’ and ignited U.S. public opposition to what would become the WTO,” said Lori Wallach, director of Public Citizen’s Global Trade Watch. “Until that first ruling, and then a second one several years later, all we could do was point out worrisome negotiating text that we thought could undermine vital domestic environmental and other public interest policies – and then, suddenly, we had the proverbial smoking dolphin.

“In this case, a WTO tribunal is telling American consumers that having the product labels that we rely on to make sure that our shopping and dining choices do not result in dolphins being killed is a WTO violation. These are labels that apply to domestic and foreign tuna alike, that we pushed our Congress to pass,” said Wallach. “Fury about a foreign tribunal ruling against a popular U.S. consumer labeling law on a common food product, which has been explicitly and repeatedly approved by our courts, is among the few things likely to unite Americans across the political spectrum.”

Added Todd Tucker, research director for Public Citizen’s Global Trade Watch, “Dolphin-safe tuna labels are strictly voluntary; Mexico can sell tuna in the U.S. market with or without the label. ‘Voluntary’ is the new ‘mandatory,’ according to this WTO ruling. It tells consumers that even voluntary labels, and the subjective consumer preferences they may cultivate, are ripe for WTO attack.”

This ruling comes on the heels of two other WTO attacks on consumer protection and information policies. Last week, the WTO ruled against U.S. measures to reduce teenage smoking, while a recently leaked ruling concluded that country-of-origin labeling for beef is a WTO violation. All three of these consumer policies are very popular with Congress and the public. These adverse WTO rulings are likely to make it more difficult for the Obama administration to gain approval for three trade deals with Korea, Colombia and Panama that contain similar anti-consumer provisions, Wallach said.

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What Big Bird Could Teach the WTO

When I was a kid, a particular Big Bird sketch on Sesame Street made a strong impression on me: "One of these things is not like the other":

It turns out that Big Bird could teach the WTO a thing or two.

As we wrote earlier this week, and have been discussing over at the IELP blog, the WTO ruled against a rare public health victory: namely, the Family Smoking Prevention and Tobacco Control Act of 2009 (FSPTCA).

This legislation included a number of provisions, but one that attracted a lot of attention was its ban on flavored cigarettes that often serve as starter cigarettes for teenagers because of their sweet taste. The ban included candy, cola and clove flavored cigarettes, but did not include menthol flavored cigarettes in its initial ban.

You or I can disagree with the reasoning, but there was a reason for that particular design: while some kids smoke menthols, so do large numbers of adults, specifically in the African American adult community. As the Obama administration documented in its submissions in the case (quoted at length below in language that would make University of Chicago, Cass Sunstein and the Freakonomics crowd blush), immediately withdrawing menthol from the market would increase hospital visits, and overnight create a massive black market for the cigarettes.

(And not that the administration argued this in its legal case, but can you imagine the political blowback of banning a product (menthol cigarettes) that is predominantly smoked by blacks, that will increase crime and smuggling in predominantly African American neighborhoods (many of which are already struggling), while leaving untouched regular tobacco products that are more often smoked by whites, whose neighborhoods are often less crime-ridden? This would be a pretty harsh blow to race relations in the U.S., and undermine support for public health regulation period.)

By my read, the architects of the FSPTCA had some pretty sound logic for their incremental approach, which contemplated restrictions on menthol in the future, after the efficacy of the teenage-targeted measures could be tested.

Returning to the clip above, as Big Bird shows us, one of the bowls of birdseed is substantially larger than the other three. The WTO panel did not study up on their Sesame Street when ruling against the FSPTCA. In the ruling, the panel decided that menthol and clove were "like products," and that (because Indonesia exported the latter to the U.S.) a ban on the latter was "discriminatory" within the WTO's Agreement on Technical Barriers to Trade (TBT).

While menthol and clove are both "flavored cigarettes," so are cola- and candy-flavored cigarettes. The U.S. argued, plausibly in my mind and to paraphrase Big Bird, that "one of these things is not like the other." Specifically, menthol. Why? Significant numbers of adults smoke them, particularly in the African American adult community. For that reason, it poses significant adverse effect risks that the others did not.

Cloves and candy flavored cigarettes, however, are not only flavored, but they are trainer cigarettes that appeal to teenagers in significant numbers, but not to adults in significant numbers.

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U.S. measures to reduce teenage smoking deemed WTO violation

U.S. measures to reduce teenage smoking violate World Trade Organization (WTO) rules, according to a panel ruling released late last week. Indonesia successfully argued that the U.S. Family Smoking Prevention and Tobacco Control Act (FSPTCA) of 2009 violated WTO rules. The ruling opens the door to more teenage tobacco addiction, while further imperiling the legitimacy of a WTO that rules against environmental, health and other national policies 90 percent of the time.

The FSPTCA took a series of unprecedented and bold measures to combat teenage smoking, including Warning the banning of many forms of flavored cigarettes. There is substantial evidence that tobacco companies produce and market these cigarettes as "starter" or "trainer" cigarettes in order to hook teenagers into a lifetime of nicotine addiction.

However, as the U.S. noted in its defense in the WTO case, the U.S. did not ban all types of cigarettes. In particular, regular tobacco and menthol cigarettes were excluded from the ban. The justification for these exclusions was that, unlike candy flavored or clove cigarettes, large numbers of adults are also hooked on regular and menthol cigarettes. To abruptly pull these products out of the market could cause a strain on the U.S. healthcare system (as lifetime addicts would instantly seek medical treatment for wrenching withdrawal symptoms) and might lead to a rise in illicit black market sales and associated crime. Nonetheless, various studies were ordered on the feasibility of banning menthol cigarettes in the future.

The FSPTCA banned candy and clove cigarettes regardless of where they were produced or who produced them. But Indonesia successfully argued that, since its exporters are the primary providers of clove cigarettes to the U.S. market, the FSPTCA constituted de facto discrimination, in violation of WTO rules under the Agreement on Technical Barriers to Trade (TBT). The WTO panel accepted this argument, despite the fact that the FSPTCA was totally non-discriminatory and many U.S. cigarette makers (such as those that make cola-flavored cigarettes) were also blocked from making these harmful products.

This severe blow to consumer protection comes on the heels of two other WTO rulings against America's dolphin-safe tuna and beef country-of-origin labels, and are likely to put a significant damper on the Obama administration's efforts to pass trade deals with South Korea, Colombia and Panama that contain similar anti-consumer rules.

More on the details of the case after the jump.

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Corporations push for WTO attack on green jobs

The Obama adminsitration is deliberating whether to get involved in a WTO attack on Canada's green jobs program, according to today's Inside U.S. Trade.

Last September, Japan announced that it would be challenging the Canadian province of Ontario's renewable energy program. As IUT reports:

The Ontario program, known as a "feed-in tariff" (FIT), enables producers of wind and solar energy to sell that electricity into the Ontario grid at a higher rate than what the government regulator offers for conventional energy. That higher rate can be up to six times greater than the rate for conventional energy, sources said.

However, producers can only qualify for the program if they use specific amount of Ontario goods Green-jobs-1 and services in establishing that renewable capacity. The domestic content requirement for projects that entered commercial operation in 2010 was 50 percent, and that increased to 60 percent in 2011, sources said.

The U.S. solar industry source contrasted this with "buy local" elements in the U.S. state and local green energy initiatives, which include a FIT program in Washington state and other renewable energy incentive programs in Massachusetts and Michigan.

Unlike the Ontario measure, these programs do not condition participation in the program on the use of domestic content. Instead, these U.S. programs allow both domestic and foreign producers to participate, but offer a small bonus for firms that use domestic content, the source said.

The source argued that this added bonus is not significant enough to affect the competitiveness of firms that do not source locally. The Ontario program, by contrast, completely excludes companies that do not produce a significant part of their product in the province, this source said.

While highlighting the differences between the U.S. and Canadian programs, this source made it clear that the U.S. solar industry opposes any type of local content requirement, and supports an initiative proposed among Asia-Pacific Economic Cooperation countries to phase out such requirements in the green energy sector.

This source acknowledged that U.S. state and local programs that provide a bonus for firms that source locally may also violate WTO rules, but suggested that these programs are not commercially significant.

In other words, Buy Local programs are fine, so long as they're not effective. Once green jobs policies start actually accomplish their goal of incentivizing local production (i.e. meaning something), that's when we launch a WTO attack.

As the sources cited by IUT note, multinational corporations aren't so much worried about the economic impact of a single green jobs program in a single Canadian province.

Instead, they appear to be worried that the program will set an example that will inspire other nations, states and localities to take comparable action. In other words, Ontario's FIT could have a positive demonstration effect by showing people that you can work together to democratically determine alternatives to the decimation of manufacturing jobs and our climate.

Under WTO rules, third countries can join a WTO attack initiated by another country. The good news (or what passes for good political news in the current climate) is that Obama's trade officials worry that, if they join the attack, it could boomerang and affect U.S. green jobs programs.

The bad news is that they are even having this discussion. Why take the side of solar panel companies that are apparently worried that they don't support enough local jobs to qualify? At a time when long distance shipping is contributing massively to global warming, it seems irresponsible not to look for ways to incentivize firms to produce, and purchase, locally.

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New Wall Street loophole opens U.S. up to WTO attack

The New York Times' Louise Story reported this morning that the pace of Wall Street reform has slowed to a crawl:

The rules are mandated by the Dodd-Frank financial regulatory law and range from curbs on executive compensation to consumer banking protection provisions to more transparency in the trading of derivatives, those complex financial instruments that contributed to the 2008 financial crisis.

So far, 28 of the financial overhaul rule-making deadlines have been missed, according to Davis Polk, a law firm that is tracking the rules. Of the 385 new rules to be written, the law firm says, regulators have completed only 24 requirements; they were supposed to have taken 41 such actions by now.

“There’s an attempt to kill this through delay,” said Michael Greenberger, a law professor at the University of Maryland and a former official at the Commodity Futures Trading Commission, which is in charge of writing batches of the rules.

But that's not the full story. Some derivatives rules are moving forward. They just happen to be rules that create new loopholes, as the NYT editorial page wrote last month in an editorial entitled "Mr. Geithner's loophole":

Until recently, the big threats to the Dodd-Frank financial reform law came from Republican lawmakers, who have vowed to derail it, and from banks and their lobbyists, who are determined to retain the status quo that enriched them so well in the years before, and since, the financial crisis. Now, the Obama Treasury Department has joined their ranks.

In an announcement on Friday afternoon — the time slot favored by officials eager to avoid scrutiny — the Treasury Department said it intends to exempt certain foreign exchange derivatives from key new regulations under the Dodd-Frank law. These derivatives represent a $4 trillion-a-day market, one that is very lucrative for the big banks that trade them.

There are numerous reasons to oppose the exemption of so-called foreign exchange (FX) swaps and forwards from the Dodd-Frank rules, as is ably argued by players and followers of the market themselves (see commentary from Zero Hedge, Quantitative Investment Management, Council of Institutional Investors, Stanford Professor Darrell Duffie, and the World Federation of Exchanges). The Wall Street banks that are among the huge players in this market want to preserve their elite club, even though Main Street sees little to no benefit from the trillions of dollars sloshing around the FX markets every day, much of it in speculative bets on interest rate and exchange rate movements around the world).

But there's an additional reason to oppose the swiss-cheese-ification of Dodd-Frank. The World Trade Organization's (WTO) services agreement groups FX swaps and non-FX derivatives in the same category, and subject them to similar de-regulation promoting rules. (The only exemption that the Clinton adminstration took in this sector is for ONIONS futures. You cannot make this stuff up.) These stability weakening WTO rules are strongly enforceable, unlike the stability-promoting global financial rules that others in the U.S. government are advocating.

As we noted in comments to the Treasury Department yesterday, WTO members are already suggesting that Dodd-Frank derivatives regulation may not be compatible with the WTO financial services commitments assumed by the Clinton administration during the 1990s.

The U.S. would have few strong defenses if Dodd-Frank were attacked at the WTO (or worse, by a private investor under one of our bilateral NAFTA-style deals).But the U.S. would likely cripple one of the few defenses it had if it argued that Wall Street self-regulation was merited for certain classes of financial exotica, but not for others. How then would the U.S. defend the "necessity" (a key test in trade law) of strong regulation for the non-exempted derivatives? Either government regulation is necessary across the board within the securities trading sector, or not at all. The time for carving out FX markets to a regime of self-regulation passed a long time ago - this handout to Wall Street banks should not now emperil the systemic regulation of shadow markets.

This conflict with Dodd-Frank shows the desperate need to have our "trade" rules catch up with our "financial" rules. Unfortunately, the services trade regime was crafted before the lessons of the financial crisis. The good news is, there's appetite from our trading partners - many of whom were cajoled into overcommitting in the WTO talks by Geithner in the 1990s - to reform the outdated rules. They just need to see a helping hand from the Obama administration, which up until now has simply been pushing further financial services deregulation through the Doha Round talks of the WTO.

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WTO attacks U.S. ground beef labeling

For the second time in a week, reports have surfaced about the WTO clobbering a U.S. consumer labeling policy. Last week, the U.S. voluntary dolphin-safe tuna label was deemed a WTO violation. This week, Reuters is reporting that the WTO has ruled that U.S. beef labels are a WTO no-no.

Corporate meatpackers are rejoicing, saying (according to Reuters)...  174768709v16_480x480_Front

COOL was a bad idea from the start. "This ruling is unfortunate for the U.S. government but the consequences of a poor decision have been revealed. We fully support WTO's preliminary ruling," Bill Donald, president of the National Cattlemen's Beef Association, said in a statement.

WTO interference in these types of labeling schemes are likely to further erode support for so-called "trade" deals. As author Eric Schlosser wrote,

"The days when hamburger meat was ground in the back of a butcher shop, out of scraps from one or two sides of beef, are long gone. Like the multiple sex partners that helped spread the AIDS epidemic, the huge admixture of animals in most American ground beef plants has played a crucial role in spreading E. coli 0157:H7. A single fast food hamburger now contains meat from dozens or even hundreds of different cattle..."

Consumers, ranchers, farmers and legislators worked hard to pass the labeling rules after seeing ground beef horror stories in Schlosser's movie and book Fast Food Nation.

Heck, even free marketeers will be upset with the WTO ruling, since labeling transparency allows the consumer to make the free choice as to what kind of product they want to buy without the government dictating the outcome.

Unfortunately, rather than fixing the WTO mess we've got, the Obama administration is working to expand these types of consumer-harming rules through not one, not two, but three additional unfair trade agreements. Indeed, President Obama is pushing a package of three NAFTA-style deals with Korea, Colombia and Panama that replicate and expand on the WTO threats to food safety.

What's worse, they'll allow some food processors with a presence in the U.S. and these countries with new rights to DIRECTLY attack U.S. consumer safety rules. If the investors win, then U.S. taxpayers have to hand over cash compensation to these corporations. Over $350 million in compensation has already been paid out to corporations under these cases. This includes attacks on natural resource policies, environmental protection and health and safety measures, and more. In fact, of the $9.1 billion in pending claims, all relate to environmental, public health and transportation policy – not traditional trade issues.

At a time when food safety and worker safety budgets are being cut, expanding these flawed rules is unconscionable. If you think that Obama should be spending his energy fixing the flawed trade rules already on the books rather than expanding these rules to new countries, say aye here and take action.

How did we get to a place where the WTO was telling us what type of consumer labels we could use? We have more data on the case after the jump...

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U.S. dolphin-safe tuna labeling rule deemed a WTO violation

One of the environmental movement's greatest achievements has been the passage of legislation that protects dolphins from being slaughtered.

Now, U.S. dolphin protection rules have gotten slammed yet again by the WTO. GATT-zilla versus Flipper Take One Zillion: flipper goes down to defeat one more time.

We'll take you through some of the history of this battle. Worryingly, the WTO found that even purely voluntary labeling convention like the U.S. "do Dolphin-safe-logo2 lphin safe" labels could be deemed mandatory (and thus give rise to a WTO violation) if they impeded non-labeled tuna's "marketing opportunities in the United States." In other words, even private consumer preferences for dolphin-safe tuna can lead to a WTO violation. This could cast a real chill on voluntary labeling practices, which a lot of supporters of free trade are in favor of.

Moreover, the Obama administration did not appear to even use all possible defenses to fight against this attack.

As Inside U.S. Trade reported today,

In a confidential interim report circulated to the United States and Mexico earlier this month, a World Trade Organization panel found that U.S. labeling requirements that preclude many Mexican tuna exports from receiving a "dolphin safe" label in the United States violate international trade rules, according to informed sources.

The interim panel report found that the U.S. requirements violate Article 2.2 of the WTO's Agreement on Technical Barriers to Trade (TBT). That article forbids WTO members from implementing "technical regulations" that are "more trade-restrictive than necessary to fulfill a legitimate objective."

The case is likely to go to the Appellate Body of the WTO. But, assuming the initial WTO panel was correctly applying the WTO's anti-environmental, pro-corporate trade rules, the U.S. will have to (again) water down its dolphin protection policies or face trade sanctions.

This case has a long and sordid history, as we documented all the way back in 2000:

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New memo on WTO conflict with measures to fight too big to fail banks

There are many ways that nations can check the growth of “too-big-to-fail” (TBTF) banks. One approach utilized in the past is adoption of firewalls between insurance firms, investment banks and commercial banks. This was used most famously in the United States through the Glass-Steagall Act from 1933 to 1999.

But various provisions of the World Trade Organization’s (WTO) General Agreement on Trade in Services (GATS) pose constraints on the type of size limitations a country may use. This is not surprising, since elimination of U.S. firewalls was a top priority for big banks in the original Uruguay Round GATS talks.

Moreover, Article 13.4 of the Korea-U.S. Free Trade Agreement (FTA) contains virtually identical anti-size-limiting rules,  as have many bilateral FTAs since the North American Free Trade Agreement (NAFTA).

We've just uploaded a new technical memorandum on this topic.

Section I outlines the basic policy options and debates confronting policymakers who wish to solve the TBTF problem.

Section II outlines the relevant GATS (and by implication, FTA) rules, and their possible conflict with these TBTF policy solutions – whether in the form of firewalls, licensing procedures or outright size limits. Section III concludes by suggesting a number of policy fixes.

Finally, Appendix I looks at the negotiating history of what relevant financial policies the United States bound to the GATS, including records released in response to Public Citizen’s requests under the Freedom of Information Act (FOIA). These documents show the disconnect between key U.S. negotiators and regulators during the Uruguay Round and subsequent financial services talks as to the reach of the core substantive obligations of the GATS. Appendix II details how the U.S. administered Glass-Steagall, which is useful for determining the exact intersection with GATS rules.

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Postscript on PMD

Last week's post on the WTO's prudential measures defense (PMD) sparked some discussion over at the IELP blog. (Wow, three acronyms in an opening sentence. Awesome!) It's a pretty wonkish issue, but/and I thought I'd follow up with a few additional observations.

On last week's post, I noted that there's four interpretations of the PMD: 1) it's totally self-cancelling: no prudential measures are allowed. 2) it disciplines nothing: any prudential measure is allowed. 3) that the PMD is an "exception" analagous to GATS Article XIV. 4) that the PMD is self-cancelling in the sense that the second sentence makes clear that GATS Article XVI on market access is a floor of treatment. Countries with relevant commitments at the WTO can't go below that that floor for prudential reasons, but they are given some additional flexibility vis a vis other GATS commitments.

While the debate over IELP focused on how these interpretations are different, it's worth noting what they have in common: a measure would have to be deemed "prudential" (and affect trade in financial services) to be covered. Presumably, there's a wide range of potential policies that would not be deemed prudential. (A set of recent papers from the IMF (see here and here) suggests typologies and interrelationships between measures that are about capital flow management or currency, or prudential or non-prudential. Some of the distinctions are very finely drawn, and I'm not sure at the end of the day that the distinctions have that much coherence. Not to mention that they wouldn't be binding on a WTO panel.) Casually speaking, I see "prudential" policies about keeping banks from hurting themselves (including in ways that have systemic residual effects), whereas "non-prudential" (but very important!) policies are about keeping banks from hurting the rest of us.

That's what the interpretations have in common. In essence, the PMD's first sentence represents a hurdle that policymakers have to meet: a policy has to be "prudential" for it to be covered by the PMD. (Arguably, policies that cap bank size or ban financial services or tax rapid capital outflows are about keeping banks from hurting us, not about keeping banks from hurting themselves. Thus, they may not be prudential.)

What sets Intepretation 4 apart is that it gives weight to the PMD's second sentence, and in particular its implications for GATS Article XVI that come from the applicable "exception."

Continue reading "Postscript on PMD" »

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PMD: "Strictly Business" interpretations of a WTO rule

Regular readers of the blog will recall we have a wonkish obsession with a much debated provision in the WTO services agreement related to financial regulations taken for prudential reasons. In 2009, we put out a report and literature review on the topic, and have regularly discussed the topic on the blog. For the last several years, we've submitted Freedom of Information Act (FOIA) requests from various U.S. agencies to try to get a better picture of what this and other WTO financial service obligations mean. The disclosures have been interesting, to say the least. And not only because they involve top officials and lobbyists like Tim Geithner that are still running around DC.

But before we get into what these documents show, some background is needed. For those fortunate enough to not be initiated, here is the provision, which is contained in Article 2(a) of the Annex on Financial Services to the General Agreemeent on Trade in Services:

2. Domestic Regulation    Epmd2

(a) Notwithstanding any other provisions of the Agreement, a Member shall not be prevented from taking measures for prudential reasons, including for the protection of investors, depositors, policy holders or persons to whom a fiduciary duty is owed by a financial service supplier, or to ensure the integrity and stability of the financial system.  Where such measures do not conform with the provisions of the Agreement, they shall not be used as a means of avoiding the Member’s commitments or obligations under the Agreement.

We'll call this PMD, and no, that's not a reunited hip-hop crew from Brentwood minus Erick Sermon. But it does mean "strictly business." (Sorry, I couldn't resist.) 

The prudential measures defense (PMD) is highly confusing. Those familiar with other text from WTO agreements will note that the first sentence sounds like it provides a lot of flexibility for financial regulators, while the second sentence seems to take it all away. After all, a country would only need a prudential defense if it were found guilty of violating WTO rules. What good is a defense if you can't use it?

There are a variety of ways a WTO panel could approach the interpretive challenge of the PMD.

Continue reading "PMD: "Strictly Business" interpretations of a WTO rule" »

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Int'l Call for G-20 Action on WTO Financial Deregulation

As finance mininsters descended on Washington, DC yesterday for this week's G-20, World Bank and IMF meetings, over 125 organizations representing 121 countries called on them to end the WTO' risky financial services behavior.
G-20 finance ministers

The WTO has repeatedly ignored warnings from the United Nations and other experts to lift outdated restrictions on financial regulation in light of the 2008-2010 financial crisis. And so far the G-20 has not intervened to help remedy this problem. In fact, despite the G-20's stated goal of ensuring financial stability and preventing future financial crisis, repeated G-20 communiques have recommended conclusion of the Doha Round without addressing WTO limitations on some of the financial policies needed to prevent future financial crisis.

International labor, religious, farming, environment, food security and trade and finance groups are urging the G-20 finance ministers to take a more responsible position on WTO to prevent outdated WTO rules from undermining the financial regulatory reforms our governments must implement to prevent future crises. Their letter comes on the heels of a statement made by over 250 international economists criticizing trade agreement limits on capital controls.

A recent paper prepared by the Financial Stability Board, the International Monetary Fund and the Bank for International Settlements further confirms worries that int'l trade agreement limits could undermine financial re-regulation. Nancy Birdsall, President of the Center for Global Development also recently discussed trade agreement restrictions on new financial policies.

A broad range of organizations are working together to try and change these outdated international trade agreement rules. Some of the signatories to this most recent letter included the Citizens Trade Campaign, Americans for Financial Reform, Teamsters, U.S. PIRG, Public Citizen, Public Services International, the Trade Union Confederation of the Americas, the Hemispheric Social Alliance, SOMO, Third World Network-Africa, Brazilian Network for People’s Integration, Australian Fair Trade and Investment Network, Acord International- Africa, SEATINI, War on Want UK, Eurodad, Council of Canadians, Institute for Global Justice, Friends of the Earth (USA), International NGO Forum on Indonesian Development, and IBON Foundation. 


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WTO compatibility of Dodd-Frank financial regulation questioned

Late last year, Barbados raised questions about the GATS compatibilty of U.S. financial regulation efforts at the WTO, according to documents that have recently been released. 

The island nation questioned how the GATS would intersect with nearly a dozen re-regulatory efforts by various countries. But, according to the minutes of the December 20, 2010 meeting where this came up, only the United States and EU reregulatory efforts were mentioned by name. This is very significant, since WTO delegations are typically loath to mention countries by name in these settings.

The delegate from Barbados argued the following:

As part of the remedial measures put in place in the aftermath of the crisis, one was the banning of naked short selling – a measure introduced in May 2010 by the German Financial Regulator (BAFin), which enacted a ban on naked short selling of credit default swaps on Eurozone government bonds.  However, under the GATS, a Member should not normally ban a highly risky financial service if it had made specific commitments relating to that sector.  Similarly, the new financial regulatory reform bill passed in the United States Senate in May 2010 included a provision that would force some of the biggest banks to spin off their trading in swaps into special subsidiaries or be denied access to the federal emergency lending window.  Another initiative included making credit default swaps available only to people who own the underlying debt.  However, Members with specific commitments in the sector ran the risk of contravening those commitment if they imposed limits on the types of financial services which an entity may provide, except under permitted circumstances...

The notion of too-big-to-fail had always been a concern, but the current financial crisis confirmed the regulators' worst fears.  The question had arisen lately as to whether the rules should vary according to the size and  level of sophistication of the financial entity.  Regulators had been moving in this direction lately.  Other proposals for enhanced regulation included the suggestion to set up a mega regulator, which would oversee individual regulators at the national level.  The powers of enforcement of such a mega regulator and the power to impose sanctions would need to be carefully considered, so as not to endow an institution with excessive power.  According to GATS Article XVI (Market Access) governments cannot prohibit or limit the size or the total number of financial service suppliers in covered sectors.  However, under the new US Financial Reform Bill 2010, an oversight entity would be set up to do exactly that, that is, to make sure that the size of banks was reduced if they appeared to be becoming too large.

Thankfully, Barbados appears to be raising these issues not as a precursor to a WTO dispute case, but instead in the spirit of proposing amendments to the GATS. Just some of the nearly dozen reforms they propose:

  • Rolling back the "standstill" on new regulations envisioned by the Understanding on Commitments in Financial Services.
  • Expanding the circumstances under which countries can be allowed to use capital controls without running afoul of their GATS commitments.
  • Amending the market access provisions of the GATS so that regulatory bans and size limitations can be utilized.
  • Amending the GATS terms that require compensation following a withdrawal of commitments, because the GATS can make "the securing of financial stability very costly."

The WTO's Committee on Trade in Financial Services will be taking up Barbados' proposal at their next meeting, so stay tuned.

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Liveblogging the Kirk Hearing on NAFTA Expansions

The Ways and Means Committee is having its second hearing on the NAFTA expansions to Korea, Panama and Colombia. The hearing is also looking at problematic attempts to expand the World Trade Organization's restrictions on domestic regulations, and the Trans-Pacific Free Trade Agreement (FTA). The U.S. Trade Representative, Ron Kirk, is testifying. I'll be live-blogging over at FiredogLake, and attempt to provide a real-time fact check. (If you want to watch the live feed, go here.)

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Don't abuse me: the prudential quandary

Mike Alberti over at Remapping Debate has published an investigative piece that looks at the financial services provisions of the Korea FTA. He reports:

Most free trade agreements contain a so-called “prudential carve-out” section that is designed to protect a country’s right to regulate its economy. The “Financial Services” Chapter of the FTA contains such a provision ...

Public Citizen’s Tucker wrote in an email that the net effect was the prudential carve-out section was “self-cancelling.” True exceptions to trade agreements would, in contrast, “clearly allow countries reprieve from their obligations under the agreement if the exception’s requirements are met.”...

According to Joshua Meltzer, a Global Economy and Development fellow at the Brookings Institution, who has written in support of the FTA, the limiting sentence of Article 13.10 is merely designed to “make sure that you basically don’t use prudential regulation as a disguise to get out of your commitment.”

The argument that prudential defense clauses are intended to root out abuse has been made elsewhere, and it is no more convincing this time around.

Continue reading "Don't abuse me: the prudential quandary" »

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New Poll Shows GOP Voters Oppose NAFTA-Style FTAs

A new Pew poll released today found that antipathy towards “free trade” agreements and the WTO is particularly intense among Republicans and Tea Party supporters. This finding reinforces the results of previous polls that popular concern for the direction of our trade policy is spreading far beyond just Democrats.

Republicans in the survey were more almost twice as likely to believe that “free trade agreements” (FTAs) like NAFTA and the policies of the WTO harm rather than help the United States (by a 54 to 28 percent margin). This opposition is more intense than that of the public overall, more of whom still believe the U.S. is hurt by such unfair trade deals (by a 44 to 35 percent margin).

Republicans who agree with the Tea Party (think of those who had more enthusiasm to show up at the election booth last week) viewed FTAs even more unfavorably: 63 percent of them thought that FTAs and the WTO were bad for the United States, in contrast to only 24 percent who have a favorable view.

More independents also believe that these trade deals have hurt rather than helped the U.S.

If the Obama administration thought that it would be easy to pass a Korea FTA through a Republican Congress, these new poll numbers prove that it is mistaken. The Republican and Tea Party voters who elected the new Republican majority in the House are deeply opposed to more NAFTA-style FTAs, and the new members of Congress will find it dangerous to cast votes on FTAs against their constituencies. 

The poll also found that 55 percent of Americans think that FTAs have lead to job loss, while only 8 percent think that they have created jobs. This gap is even wider among Republicans and Independents. President Obama has said that his number one priority is job creation. If he is trying to convince Americans that he has his priorities straight, the last thing he should do is pass another NAFTA-style FTA, since most Americans believe that these FTAs are job killers. 

What Obama must do is follow through on his presidential campaign commitments and reform the Korea FTA, including deep changes to the labor rights, investor-state enforcement, and financial services regulation provisions of the FTA. If his administration thinks it can make some cosmetic changes and get it approved by Congress, it is in for a rude awakening.

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Nationwide, candidates attack jobs and tax dollars going overseas, but why?

Check out this AlterNet piece by Lori Wallach and Todd Tucker to find out.

AlterNet logo 
"This election season, hundreds of candidates across the country are campaigning on their opposition to jobs and tax dollars going overseas. This makes sense, given poll returns that show opposition to unfair trade practices is one of the few things that unite Americans of different incomes and political parties. But many of the politicians’ 30-second television ads do not explain why this offshoring is happening..."

Read the entire piece here.

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Follow the Climate Reality Tour!

DSC01484 We’re pleased to unveil an exciting new project: the Climate Reality Tour.

You may have caught an earlier post, but in case you didn't, let's fill you in The Climate Reality Tour is a movement-building road trip to promote global economic policies that are fair for workers and shift away from the climate- and job-destroying status quo. The destination? The United Nations Climate Negotiations in Cancun in late November. And to bring home the sustainability point, we decided to go by bike. Yep, by bike!

With the world in the grips of overlapping global crises – food, economic/financial and climate – the stakes are high indeed. To save the planet requires confronting these crises simultaneously, and that means overcoming the false jobs vs. environment trade-off. In truth, corporations benefit from exploiting both while human beings and the earth suffer.

But this requires political will and resolve far beyond what we’ve seen from either political party, and even many leading civil society organizations. At Public Citizen, we’ve long believed our unsustainable global economic order, as etched in the tomes of the WTO and NAFTA-type trade deals, unfairly pits workers and ecosystems against one another. We’ve decried how the status quo sanctifies the rights or multinational corporations to exploit and destroy – even above the democratic rights of a people determine their own economic and eological futures.

Continue reading "Follow the Climate Reality Tour!" »

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The Political Genius of Sarah Palin: How One Facebook Post Sparked a Mass GOP Fair Trade Wave

There is some conventional wisdom that the GOP is more united than Democrats in favor of unfair trade deals. See for instance this ridiculous aside from the White House in the New York Times Magazine this weekend:

Rouse and Messina see areas for possible bipartisan agreement, like reauthorizing the nation’s education laws to include reform measures favored by centrists and conservatives, passing long-pending trade pacts and possibly even producing scaled-back energy legislation.

This is silly. Polls show that GOP and independent voters are at least as opposed to these deals as the Democratic base. (See here and here.) And, nowhere in the "everything and the kitchen sink" 48 page GOP "Pledge to America" unity document do they talk about trade or offshoring - showing that there is not a heckuva lot of GOP unity in support of unfair trade.

GOP candidates are responding to the public support for fairer trade. This cycle, we're seeing a much higher number of GOP running on fair trade than in the last two cycles, including pledging to renegotiate trade deals and end tax loopholes for companies that offshore jobs. Some are even attacking their Democratic incumbents' votes against fair trade (a vote for China PNTR, for instance).

But the message that I have seen probably 100 GOP candidates run on in this cycle is attacking the incumbent Democrat for voting for a stimulus bill with Buy America provisions criticized as weak.

Long-time readers will recall that we covered this issue in detail back in early 2009:

Enter Sarah Palin. Despite never having clarified her views on trade policy on the VP campaign trail (or in her previous run for governor of Alaska), Palin raised eyebrows earlier this year when she attacked the stimulus bill for not requiring that all money be spent here in America. Palin wrote on her Facebook wall about the stimulus bill:

“We were promised it would provide “green jobs” for Americans, but 80% of the $2 billion they spent on alternative energy went to purchase wind turbines built in China!”

At the time, I figured that this was just an accidental or not fully thought-through Facebook post. Little did I know that Sarah Palin was an absolute genius whose Facebook post would spark a mass GOP fair trade wave: virtually every GOP candidate across the country is today campaigning on this loophole in the stimulus bill.

So, what would be the solution to this problem? Well, for starters, we'd have to revisit the procurement commitments in the World Trade Organization (WTO) and other unfair trade deals in order to get even close to 100% true Buy America rules in government spending.

Sarah palin Even many free traders feel very strongly that there are moral, environmental and economic reasons to ensure that our tax dollars are used to support local jobs and production. But, as we've long argued, the WTO closes off this key, sovereign policy space. (See our book "States' Rights and International Trade" for more.) Luckily,

But Sarah Palin has pointed out the way forward: rather than falsely assume a bipartisan consensus in favor of Bush's trade deals with Korea and other countries, let's build on the true bipartisan consensus in favor of fair trade in government procurement and in other policy areas.

(Ed note: In the last two election cycles, Public Citizen has brought you detailed analysis of around 100 competitive and open seat congressional races. We found that the role of trade and offshoring increased in 2008 relative to 2006, and by all indications, 2010 will set a new record. Of about 170 races we are tracking, trade is playing in about 90 percent of them (150). That's right, we'll be releasing detailed candidate profiles of over 350 candidates - GOP, Democratic, and some third party.)

(Note: Public Citizen has no preference among the candidates.)

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IMF vs. WTO: who is better on financial services regulation?

Last month, the International Monetary Fund (IMF) prepared a "reference note" on trade deals and financial services. The note echoes our own finding that the World Trade Organization's (WTO) General Agreement on Trade in Services (GATS) constrains some regulations, even when they apply to domestic and foreign firms alike. Here are some of the more interesting tidbits from the IMF note:

If a member no longer wishes to conform to its specific commitments, it may modify its schedule by providing compensation in the form of alternative market access (even across sectors). However, this undertaking may involve difficult negotiation and can confuse understandings regarding the member’s commitments. (Page 5)

In the case of challenges by other WTO members on the legality of a specific (prudential) measure adopted by a member, a determination on the consistency of such a measure with the prudential carve-out clause would be made through the WTO dispute settlement mechanism. (Page 5-6)

While capital controls may be considered a legitimate part of the toolkit to manage capital inflows in certain circumstances,13 they may, in some cases, be inconsistent with GATS obligations. Such controls can take various forms, including pricebased measures such as explicit taxes or unremunerated reserve requirements with respect to specific investment vehicles (stocks, bonds, loans), or other measures, such as an outright prohibition against the sale of short-term securities to nonresidents. A country imposing such controls may have commitments under the GATS to allow nonresidents to provide the specific financial service unhindered and thus its underlying capital flows... (page 7)

The original commitments were often limited to the partial “locking in” of policies that had already been implemented on a unilateral basis at the time of the initial services trade negotiations (Uruguay Round, 1986–94).15 In the case of financial services, the relatively high number of commitments (second only to tourism services) is explained by the fact that negotiations were extended well beyond the Uruguay Round end date, and finally concluded in December 1997. While developed countries made more substantial commitments than developing countries,16 reflecting actual openness at the time, in practice, many WTO members have less restrictive policies than implied by their legal bindings; it would be inconsistent with their GATS commitments to apply more restrictive policies (unless justified for prudential reasons). It is nonetheless evident that, under significant external pressure, latecomers—25 emerging markets and low-income WTO accession countries—have made substantial commitments, either binding the sstatus quo or, in some cases, using those commitments to motivate domestic reform programs.... (page 8)

Some PTAs and BITs restrict the use of capital controls during macroeconomic and financial distress and do not provide for a “safeguard” clause. That is, a provision that allows a country to impose capital controls during times of macroeconomic or financial crisis. The absence of a safeguard provision can potentially create problems for the Fund... (page 11)

My main criticism of the IMF note is that it persists with the completely untested notion that the GATS prudential measures defense provision is a "carve-out" and that "governments have considerable leeway in introducing prudential measures that fit their needs." As we show here and here, these common operating assumptions miss the mark.

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Lula - US 'wets itself' on Brazil's WTO wins

In a recent Reuters article, "Brazilian mouse made U.S. elephant run on trade: Lula," Brazilian President Luiz Inacio Lula compared the recent Brazilian victories in trade disputes against the United States to a small mouse frightening an elephant.  President Lula explained how, in the past, Brazil has never dared to challenge U.S. trade policy but recent victories in trade disputes against the US has changed this.  Specifically, he likened it to "when you put a mouse near the elephant and see how the beast trembles and wets itself."

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No new jobs, just blackened lungs, in Uruguay v. Philip Morris dispute

One of the main claims made by proponents of the investment rules in FTAs or "bilateral investment treaties" (BITs) is that, in Scott Linicome's words...

the FTA investment provisions that they're carping about are actually designed to encourage mutual investment in FTA partner countries - i.e., to help the countries give each other money for silly things like factories and jobs - by providing certain basic protections for that investment.  

Notably, very few of the dispute cases I've read about involve new investment or new jobs. In some cases, as with the S.D. Myers case we discuss here, there simply is no major job creating investment at issue - maybe only a storefront office. In other cases, a foreign company has merely acquired a local company, so no new jobs are created.

In still other cases, a foreign investor had invested in a country long before the bilateral investment treaty 
was signed, but then subsequently utilizes the BIT to attack non-discriminatory regulations they don't like.

That's the case with the recent challenge by tobacco company Philip Morris under the Swiss-Uruguay BIT Picture1 against Uruguayan public health measures. Philip Morris, Inc. - a U.S. corporation at the time - bought up Abal, a Uruguayan tobacco company, during Uruguay's military dictatorship in 1979. In 1991, Switzerland and Uruguay inked a BIT. In 1999 and 2008, the ownership of Abal was shuffled around to Switzerland-based holding companies. In 2010, Philip Morris launched a case against Uruguay's public health measures, which went into effect in 2008 and 2009.

In other words, the implication of the BIT was not more jobs created in Uruguay, but a platform for a long existing entity to challenge Uruguay's efforts to reduce smoking deaths - and maybe, just maybe, put a chill on anti-tobacco legislation in other developing countries - now a primary market for Multinational Big Tobacco.

You can find Philip Morris' request for arbitration here, a legal analysis by investor-state expert Todd Weiler here, a piece by Juan Antonio Montecino and Rebecca Dreyfus here, and an earlier analysis by Luke Eric Peterson here.

Continue reading "No new jobs, just blackened lungs, in Uruguay v. Philip Morris dispute" »

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Your Tax Dollars Going to Foreign Banks? Lori Wallach Comments on CNN.

Cnn-logoThe Congressional Oversight Panel issued a report last week that showed much of the bailout money ended up going to foreign banks. Does that strike you as odd - or maybe even bad? If so, you should know that, under WTO rules, the U.S. has to give equal treatment to foreign and domestic banks.

As Lori Wallach put it, "Under the current World Trade Organization rules, the United States is pretty much required to take our tax dollars and, on the down side, bail out things that don't work. But the U.S. taxpayers don't get the profit for those risks on the upside when that globalization finance is profitable for the banks."

Click here to see Lori Wallach's comments on CNN's "The Situation Room."

Lori - CNN 8.12.10 small

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WTO Doha Round: Cranking up the Deficit

Hufbauer-schott-wong5034 The pro-WTO Peterson Institute for International Economics (IIE) recently published a new study projecting the effects of implementing the WTO Doha Round tariff cuts that are currently “on the table”, i.e. cuts that are in the “negotiating modalities drafted by the chairs of the Doha Round negotiating groups.”

The study finds that these tariff cuts that are on the table will lead to an increase in the annual U.S. trade deficit by $6.6 billion. The authors also test a scenario in which customs reform and liberalization in services, chemicals, electronics, and “environmental goods” are added to the “on the table” tariff cuts, which is supposed to make the Doha package more attractive to the United States. However, the authors estimate that adding in these additional sectors will still make the U.S. trade deficit rise by $6.5 billion.

Nowhere does the study indicate that this significant increase in the deficit may be a problem, though. This is partly because the authors use an overly simplistic method to estimate the GDP gains that are supposed to accrue because of the Doha Round. All they do is sum the increased imports to and exports from a country and then multiply that sum by 0.46, which is supposed to yield the “GDP gains” that the trade generates for that country (see footnote 5 here where they explain this questionable procedure). They treat imports and exports indiscriminately, so U.S. GDP is supposed to gain substantially even though the deficit rises higher. Under their methodology, U.S. exports could stay constant or even decline under the Doha proposal and U.S. GDP would increase significantly as long as imports increased substantially. It’s pretty surprising that this massive 200-page study would use such a simple method that glosses over the crucial difference between rises in exports and imports – we should expect something more sophisticated.

This calculation method is strange given how national statistical agencies calculate GDP. GDP equals all spending by consumers, businesses, and the government, plus exports, minus imports. The authors’ GDP growth calculation procedure strangely treats imports and exports as if they have the same effect on GDP.

IIE’s decision to gloss over the impact of a rising deficit is especially irresponsible at a time when the U.S. trade deficit is skyrocketing. Trade flow data for May was released Tuesday and it wasn’t pretty. The deficit increased by 5 percent even though the price of imported oil fell. The rise was so significant that some financial services firms revised their second quarter GDP growth projections downward, according to Reuters:

A 2.9 percent rise in overall imports suggested U.S. demand was holding up better than some had feared. But with more of that demand being sated by overseas products, the widening trade gap was seen weighing on U.S. gross domestic product.

RBS lowered its estimate of second quarter U.S. economic growth to 2.8 percent, while JP Morgan cut its to 2.5 percent. Both had previously forecast it at 3.2 percent.

This rise in the deficit was largely driven by surging Chinese imports, and the IIE study indicates that the Doha Round will only exacerbate the problems of our trade relationship with China. The nonagricultural market access offers on the table, mostly consisting of tariff cuts on manufactured goods, will raise U.S. imports by $12.7 billion annually, but only boost exports by $3.8 billion (see Table 1.2 here). China, on the other hand, will enjoy an export boost of $15.6 billion from nonagricultural market access, but will only import $6.7 billion more. This is the result of the concessions being so unbalanced in nonagricultural market access: under the Doha scenario, U.S. exporters will pay only $2.5 billion less in tariffs to export to other countries, whereas foreign businesses exporting to the U.S. will pay $11.7 billion less in tariffs (see Table 2.3 here).

We need a trade policy that promotes more balanced trade, not more of the same with the WTO.

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When does Wall Street get capped?

The Hill reported this morning that:

Rep. Paul Ryan (Wis.) and Sen. Judd Gregg (N.H.), the senior Republicans on the House and Senate Budget committees have praised a proposal by the fiscal panel’s Democratic co-chairman, Erskine Bowles, to limit government spending and revenue to 21 percent of gross domestic product.

As Dean Baker has written:

Most serious policy analysts believe that government should provide services that it does more efficiently than the private sector (e.g. defense), while leaving services it does less efficiently to the private sector. However Mr. Bowles apparently thinks that the government should instead adhere strictly to his magical 21 percent number. This means that Mr. Bowles would insist that the private sector provides services, even if it can be shown that the public sector is more efficient, because of his reverence for the number 21. In other words, Bowles is apparently prepared to slow growth and cost workers jobs out of his devotion to the number 21.

Actually, I'd love to see the financial sector get similarly capped. Oh wait, but that would run afoul of our trade agreements, which state:

In sectors where market-access commitments are undertaken, the measures which a Member shall not maintain or adopt either on the basis of a regional subdivision or on the basis of its entire territory, unless otherwise specified in its Schedule, are defined as:

(a)        limitations on the number of service suppliers whether in the form of numerical quotas, monopolies, exclusive service suppliers or the requirements of an economic needs test;

(b)        limitations on the total value of service transactions or assets in the form of numerical quotas or the requirement of an economic needs test;

(c)        limitations on the total number of service operations or on the total quantity of service output expressed in terms of designated numerical units in the form of quotas or the requirement of an economic needs test...

Unlike some policies that propose to constrain the size of the the financial sector or individual financial institutions (like a firewall between investment and commercial banks), a 21 percent cap on any service sector would be more likely to meet the GATS' definition of being "in the form of a numerical quota."

If government services were per se bound to GATS, the Bowles proposal would almost assuredly be ruled a GATS violation. They're not, but financial services definitely are. Yet another way that neoliberals selectively apply their ideology in the service of corporate welfare.

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Space to Watch for WTO Litigation

Graham Bowley had an interesting piece in the New York Times over the weekend about substantive and attitudinal differences in new bank regulation in the US and Europe. Here's what he wrote:

Germany has already initiated a partial ban on naked short-selling, and the European Union is formulating a much tougher crackdown than the United States on hedge funds and private equity firms, possibly even down to stipulating in precise terms how much leverage they can take on. It is also designing an ambitious pan-European financial supervisory authority that would create a common rule book for national banking supervisors but whose powers could also supersede them in some areas.

Kay Swinburne, a member of the European Parliament, said this step is “more dramatic” than the American supervisory reform, which foresees a council of regulators to watch for systemic risks, though oversight will continue to be divided between regulators.

Still, while in some specific areas Europe may be going beyond the United States, in broader areas European leaders are favoring much more limited action. There is likely to be no widespread European version of the Volcker rule, for example, according to Agnès Bénassy-Quéré, an economist and the director of Cepii, a research group in Paris — mainly because of the conviction that the cause of the financial crisis was risky trading by American institutions. In European eyes, European banks did not discredit themselves and so should not be meddled with.

For that same reason, while the United States favors requiring banks to set aside significantly more capital as a cushion against future losses, some European countries are fighting this. The move would be expensive, and German leaders, in particular, feel this would unfairly punish their banks for a problem caused by American banks — despite much evidence, according to analysts, that the European institutions, too, were involved in the free-wheeling culture that got the world economy into so much trouble.

While the WTO allows countries to have different regulations, it does require countries to limit the types of regulation they have in similar ways. And global banks despise different regulation, so they're likely to mine the policies that are different from one another for possible WTO violations. In fact, we've already seen rumblings of governments preemptively using the corporate talking points.

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Writing on WTO Deregulation Gradually Improving

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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Ongoing WTO-Wall Street Snow Job Continues

In March, Sen. Ron Wyden (D-Ore.) - the chair of the trade subcommittee of the Senate Finance Committee - became one of the first members of Congress to call the U.S. Trade Representative (USTR) to account for its inclusion of financial services deregulation-promoting provisions in WTO agreements and various U.S. trade deals. These terms were included at the behest of lobbying of big Wall Street banks, and sharply limit the kinds of financial regulations countries can enact without facing WTO challenges and other claims for compensation.

Unfortunately, USTR continued to dodge these issues in their written response to Wyden's question, as we note in this brand spanking new memo that goes through USTR's response point by point.

In the meantime, financial interests have stepped up their accusations that smart regulations violate WTO commitments. Just last week, the European Union attacked U.S. regulations meant to check the behavior of offshore insurance firms, while a pro-WTO think-tank alleged that German efforts to rein in risky speculation could also run afoul of the country's GATS commitments. This comes shortly after a European Commission paper stated that taxes on Wall Street to help Main Street could violate the WTO, and after years of Panama alleging that anti-tax haven measures could violate the WTO.

If you're interested in putting economic stability and job creation ahead of deregulation-promoting trade deals, you could do a lot worse than to ask your member of Congress to get on the bipartisan TRADE Act, which specifically addresses these questions, and which is supported by a majority of House Democrats, committee chairs and subcommittee chairs, across diverse caucuses in Congress.

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Europe Admits Speculation Taxes a WTO Problem

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:

"the compatibility of such a levy with Article XI of the General Agreement on Trade in Services (GATS), which provides that WTO Members cannot apply any restrictions on international transfer and payments for current transactions relating to their specific commitments, would have to be further assessed. As the EU has taken specific commitments relating to financial transactions, including lending, deposits, securities and derivatives trading and these commitments relate to transactions with third countries, a currency transactions tax could constitute a breach of the EU's GATS obligations."

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:

While the WTO’s financial services provisions remain untested in formal dispute settlement, they nonetheless represent the world’s only multilateral body with enforcement capacity to discipline capital controls, on terms that provide less policy space than the IMF Articles of Agreement. Capital controls may be disciplined under the WTO for approximately 50 of the WTO members.

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.

Continue reading "Europe Admits Speculation Taxes a WTO Problem" »

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If Congress wants to rein in Wall Street...

If the Senate wants to create a strong financial regulation, there is still much to be amended in the current financial regulatory bill. One of these needed amendments concerns our nation’s trade policy and the World Trade Organization's involvement in financial deregulation. Check it out in Citizenvox's latest : If Congress Wants to Rein in Wall Street, It Must Strengthen Financial Reform Bill !

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Lori Wallach Issues Statement on Doha "Stocktaking"

This week in Geneva, officials met at the WTO for a much-downgraded Doha "stocktaking" session. The results of the session essentially confirm what many WTO member countries say off the record: We will not see conclusion of the Doha Round this year or anytime soon, if ever. But, no one seems to want to be responsible for killing Doha, so countries schizophrenically agree to press ahead. "The question is, when will WTO member countries agree to replace the Doha Round with an updated agenda?" said Lori Wallach. "The Doha Round was launched in 2001 with a 2005 deadline, so it is not surprising that its terms conflict with resolution of the key challenges countries face today... Rather than proposing remedies to the financial and climate crises, the Doha Round agenda includes further financial deregulation and energy sector proposals that conflict with efforts now under way by the Obama administration and Congress and in other nations to stabilize the economy and transition to a low-carbon future."

Read Lori Wallach's official statement after the jump.

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That's All They've Got??!

On February 3, the WTO issued a document that many in Geneva call the “non-response” to over a year of growing questions from WTO member countries and others about the connection between the rules of the General Agreement on Trade in Services (GATS) on financial services and the global economic crisis.  Indeed, this was the Secretariat’s first major study  in nearly 12 years about the WTO’s financial service rules. This paper has been discussed in a hot debate on the IELP blog, and in a recent OECD-WTO study.

The new paper is a disappointment to anyone hoping for a convincing rebuttal to charges that the WTO’s General Agreement on Trade in Services (GATS) promotes financial services deregulation. The 76-page document includes a lengthy discursion on the GATS treatment of corporate branches versus subsidiaries, as well as a very defensive discussion of the causes of the crisis (bottomline, in their estimation: WTO rules are in no way implicated). The paper avoids altogether the question of WTO compatibility of the types of measures that member countries have implemented in response to the crisis. This is despite the formal demand via a paper tabled September 17, 2009 in the WTO’s Committee on Trade in Financial Services,  and via subsequent requests at the General Council in December. 

And, with respect to the question of how GATS rules promoted past financial deregulation and could conflict with reregulation, several points are especially worth highlighting:

1.    The Secretariat does not rebut any of the main concerns about the GATS rules’ deregulatory requirements raised in recent years.
2.    In fact, the Secretariat confirms many of these concerns.
3.    When dealing with a controversial issue where there is no record of official interpretation at the WTO, the Secretariat cites only unofficial sources making “don’t worry, be happy” arguments rather than reviewing all of the international law review and other analyses, or offering an official interpretation.

Here’s a Top 13 list of claims the WTO’s defenders would have liked the Secretariat to make, but which it did not, because it cannot: 

1.    That GATS rules only require that foreign firms be treated like domestic firms, and that a WTO panel would never rule against a non-discriminatory domestic regulation.
2.    That WTO panels have already established that countries are free to adopt non-discriminatory financial services regulations without risking GATS challenges.
3.    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.
4.    That countries that fear that past governments overcommitted domestic financial service sectors to GATS rules at the height of the deregulation craze can withdraw those sectors without having to pay out compensation to other WTO members.
5.    That anytime a country adopts a financial services policy for prudential reasons, then there is no way that this policy can be challenged at / ruled against by a WTO panel.
6.    That the GATS has been determined by a WTO panel to not restrict countries from adopting firewalls between commercial and investment banks (as the United States did under the Glass-Steagall Act and later amendments).
7.    That the GATS has been determined by a WTO panel to not apply to policies limiting the size of individual firms.
8.    That countries can ban financial services they fear are toxic, even if past governments signed up these sectors (perhaps inadvertently) to the GATS.
9.    That GATS contains no disciplines for capital controls that many developing countries are now seeking to use, and that countries now desiring to restrict capital flows (through financial transaction taxes or other means) can simply add these as limitations to their schedule in the Doha Round negotiations.
10.    That the Doha Round does not entail deeper financial services commitments.
11.    That the bank bailouts of the last two years present no GATS conflicts.
12.    That the Standstill provision in the Understanding on Commitments on Financial Services does not amount to a lock in of the regulatory status quo in place in the 1990s.
13.    That policies of the Treasury Department or Federal Reserve are not subject to GATS disciplines.

Indeed, the Secretariat would not have been able to support the above points, even had it wished to.

If you want to delve more into the nuts and bolts of this study, check out a new memo that I just posted.

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