Newsflash:
Elizabeth Warren Trans Pacific Partnership Locking Out Financial Regulation
Sunday, 29 June 2014 11:36

Locking Out Financial Regulation

Written by  Jayati Ghosh, TripleCrisis | Op-Ed

The world of international trade negotiators is an increasingly secret one, with even other agencies of national governments not fully aware of what is being offered by their negotiators in such deals. One current example is a pending "trade" deal called the Trade in Services Agreement (TISA), which is being negotiated among 50 countries, including the United States, the EU, Australia, Canada, Chile, Costa Rica, Hong Kong, Iceland, Israel, Japan, Liechtenstein, Mexico, New Zealand, Norway, Panama, Peru, South Korea, and Switzerland. This agreement is apparently supposed to be "classified" information – in other words, secret and unknown to the public that will be affected by it – for a full five years after it is enters into force or the negotiations are terminated!

That an international treaty that has binding and enforceable obligations can be treated as secret for five years after it comes into force is not only bizarre but almost unthinkable. The need for such secrecy would be inexplicable even if such agreements were actually in the interests of people whose governments are involved in such negotiations. That secrecy is sought would on its own be reason for concern, but the little that has been leaked out of the state of the negotiations suggests even more reasons for alarm, especially because such a deal would have far-reaching implications for financial stability and adversely affect everyone in the world.

One critical element of this relates to liberalisation of rules around financial services, discussed in an Annexe. An April 2014 draft of this Annexe is now available on Wikileaks in yet another important public service provided by this organisation. This draft may have been already superseded by the ongoing negotiations, which are apparently to continue in Geneva in the last week of June, but if it is an indication of what is under way then it deserves to arouse much more public outcry.

The draft defines financial services in the broadest possible manner: "A financial service is any service of a financial nature offered by a financial service supplier of a Party. Financial services include all insurance and insurance-related services and all banking and other financial services." This explicitly includes not just banking related activities but also security market transactions, asset management, brokering, derivatives market activity, provision of financial information and advice, and so on.

It was the deregulation of precisely these activities that created perverse incentives for risky behaviour and the moral hazard that were so marked in Northern financial markets in the run-up to the global crisis. And the crisis and its aftermath created devastation for real economies and continue to make people suffer through the consequent effects like fiscal austerity. The rampant market imperfections that characterise finance mean that if it is relatively unregulated or only lightly regulated, it will necessarily be prone to boom-and-bust cycles can be just as damaging in future.

Remarkably in such a context, the draft TISA seems to be locking signatory countries into a situation in which they will be unable to undertake the required re-regulation of finance even if such market imperfections persist and their adverse consequences get even more marked. The substance of the legal provisions is to attack or reduce the possibilities of the re-regulation of finance that was attempted in halting and limited manner in the aftermath of the Global Financial Crisis in 2008.

According to Professor Jane Kelsey, whose legal analysis of the document is also available on Wikileaks, the substantive rules target what the still powerful financial services industry sees as obstacles to its seamless global operations, including:

  • Limits on the size of financial institutions (too big to fail);
  • Restrictions on activities (e.g. deposit taking banks that also trade on their own account);
  • Requiring foreign investment through subsidiaries (regulated by the host) rather than branches (regulated from their parent state);
  • Requiring that financial data is held onshore;
  • Limits on funds transfers for cross-border transactions (e-finance);
  • Authorisation of cross-border providers;
  • State monopolies on pension funds or disaster insurance;
  • Disclosure requirements on offshore operations in tax havens;
  • Requiring that certain transactions must be conducted through public exchanges, rather than invisible over-the counter (OTC) operations;
  • Approval for sale of 'innovative' (often potentially toxic) financial products;
  • Regulation of credit rating agencies or financial advisers;
  • Controls on hot money inflows and outflows of capital;
  • Requirements that a majority of directors are locally domiciled;
  • Authorisation and regulation of hedge funds; etc.

But why would countries seek to sign such an agreement that ties their hands so comprehensively, and that too, when it obviously has to be done with such stealth? The continued political power of financial lobbies is clearly evident in this. And this comes not only from the unpleasant reality that big financial players contribute substantially to the campaign funds of leaders in most elected democracies. It also stems from the perception that many governments have that finance still represents a major source of GDP and the provision of cross-border financial services a major source of both foreign exchange and profitability.
Indeed, as Chart 1 indicates, until the Global Financial Crisis, the export of financial services was growing rapidly both in absolute terms and as a share of total global trade in commercial services. But 2007 proved to be a turning point – thereafter the recovery in dollar terms has been uneven at best and the share of financial services has fallen as a share of services trade.

Chart 1: Trade in financial services slowed down after the global crisis2014 628 chart 1

As Chart 2 shows, the country most interested in this is the United States, whose share of global trade in financial services still hovers around a quarter. By contrast, the United Kingdom has seen its share drop slightly while that of Germany has increased slightly in the region of 5%, but that role does explain the strong interest of those countries also in such negotiations.

Chart 2: USA still dominates in exporting financial services2014 628 chart 2

The peculiarity of these negotiations, however, is that even if they do provide more market access and more freedom of functioning to financial service providers in these countries, they will do so at the cost of much higher potential financial instability and all the attendant consequences for market volatility. And the unfortunate point is that such financial fragility in the core economic powers has not just ripple effects but generates financial tsunamis in much of the rest of the world, even if they have tried to institute their own controls and have not signed such agreements. It is remarkable how, despite all that the world's population has gone through because of the vagaries of finance in the very recent past, such deals that limit the power of governments to control finance are still even being considered, in secret behind closed doors.

Link to original article from TripleCrisis.com

Read 3128 times

ERA Legislation in your State

Unratified states Gold - Ratified States Purple

Latest News from the Warren Campaign

  • Will new senators push Democrats to the left?
    Will new senators push Democrats to the left?

    When Massachusetts Democrat Elizabeth Warren and the rest of the 2013 class of liberal senators start work this month, they'll have to do more than figure out the byzantine ways of getting things done in Washington.

    They'll also have to decide how seriously to engage a progressive movement that sees their assent a historic opportunity to shift the Democratic Party to the left.

    Written on Saturday, 05 January 2013 19:11 Read more...
  • Elizabeth Warren Wins Senate Banking Committee Seat: Sources
    Elizabeth Warren Wins Senate Banking Committee Seat: Sources

    WASHINGTON -- Nearly two years after Wall Street waged a successful campaign to keep consumer advocate Elizabeth Warren from running the Consumer Financial Protection Bureau, the incoming senator will be tapped to serve on the Banking Committee, according to four sources familiar with the situation. 

    Written on Tuesday, 04 December 2012 19:22 Read more...
  • Elizabeth Warren Redefines "Balanced Approach"
    Elizabeth Warren Redefines "Balanced Approach"

    Politico recently declared, "The Senate is about to become a liberal lion’s den." 

    In 2012, groups like the Progressive Change Campaign Committee, MoveOn.org, CREDO Action, and Democracy for America worked hard to build progressive power in Congress. This week's iconic photo of Senators-elect Elizabeth Warren (D-MA) and Tammy Baldwin (D-WI) walking together down the corridors of power is symbolic of the rising progressive tide. 

    Written on Sunday, 18 November 2012 14:20 Read more...
  • Elizabeth Warren Wins the "Which Side Are You On?" Debate
    Elizabeth Warren Wins the "Which Side Are You On?" Debate

    An overbearing and at times ridiculously aggressive Massachusetts Senator Scott Brown came across as a desperate man Thursday night, as he attempted to gain the upper hand in the first debateof this year's most closely-watched U.S. Senate race and, by extension, in a reelection contest that seems to be slipping away from him.

    Written on Sunday, 23 September 2012 16:27 Read more...
  • Mayor Menino to endorse Elizabeth Warren in Senate race at Roslindale Square rally on Friday
    Mayor Menino to endorse Elizabeth Warren in Senate race at Roslindale Square rally on Friday

    Mayor Thomas M. Menino is expected to endorse Democrat Elizabeth Warren on Friday in her bid to unseat Republican US Senator Scott Brown, according to two people with knowledge of the plan.

    Written on Thursday, 20 September 2012 19:47 Read more...
  • Elizabeth Warren's DNC Speech: "Corporations Are Not People"
    Elizabeth Warren's DNC Speech: "Corporations Are Not People"

    Bill Clinton may have stolen the show at the DNC last night with his 45-minute, half-ad-libbed barn-burner of a speech, but there were a few other noteworthy speakers as well. After dragging for an hour or two, the night's program picked up when Massachusetts Senate candidate, CFPB creator, and economic realtalker extraordinaire Elizabeth Warren took the stage.

    Written on Thursday, 06 September 2012 18:54 Read more...
  • Elizabeth Warren: Yes She Can?
    Elizabeth Warren: Yes She Can?

    It was a grim, sleety day in Chicopee, a gritty postindustrial town in western Massachusetts, where paint flakes off worn-out bridges and boarded-up factories. At a community relations luncheon, kind security guards were opening back doors and holding out umbrellas for the few willing to brave the freezing slush.

    Written on Wednesday, 16 May 2012 04:54 Read more...
  • Jonathan Klate: A candidate's connection
    Jonathan Klate: A candidate's connection

    Retired Amherst gentleman John Kick is not known as a political activist. In the Springfield union hall where he ventured last October to hear Democratic senatorial candidate Elizabeth Warren, he might have seemed a world-weary citizen with vague curiosity about the professor turned politician.

    But John's sorrowful demeanor and disconsolate eyes betrayed a woefully wounded heart. His son, Gabe, took his own life just a month earlier, at the age of 28. John keeps moving, somehow, in the dreadful private agony understood only by parents who persist in such an aftermath.

    Written on Monday, 26 March 2012 17:09 Read more...
  • The Ascendance of Elizabeth Warren
    The Ascendance of Elizabeth Warren

    If you’re reading this, you probably already know how you feel about Elizabeth Warren. Warren is currently running for Senate in Massachusetts, in the hopes of knocking out Republican incumbent Scott Brown. Very few first-time candidates are so well-known, or so passionately beloved.

    Written on Monday, 26 March 2012 00:00 Read more...
  • NOW PAC Endorses Elizabeth Warren
    NOW PAC Endorses Elizabeth Warren

    NOW/PAC is thrilled to announce its endorsement of Democratic candidate Elizabeth Warren for the U. S. Senate from the state of Massachusetts. Warren is the most prominent of the three Democrats vying to run against incumbent Sen. Scott Brown (R) in the general election. Recent polls show Warren neck and neck with Brown.

    Written on Monday, 05 March 2012 19:48 Read more...
  • Elizabeth Warren Says Washington Must Act Now To Help Stem The Tide Of Foreclosure
    Elizabeth Warren Says Washington Must Act Now To Help Stem The Tide Of Foreclosure

    Backs MA Congressmen, Attorney General Coakley Calling on Federal Housing Finance Agency to Take Action To Prevent Unnecessary Foreclosures

    BOSTON – It is past time for the Federal Housing Finance Agency (FHFA) to step up and help prevent unnecessary foreclosures in Massachusetts, said Consumer Advocate Elizabeth Warren, reinforcing calls from members of the Massachusetts Congressional delegation and Attorney General Martha Coakley.

    Written on Wednesday, 22 February 2012 07:54 Read more...
  • U.S. Rep. Jim McGovern this week endorsed Democratic candidate Elizabeth Warren for the United States Senate.

    U.S. Rep. Jim McGovern this week endorsed Democratic candidate Elizabeth Warren for the United States Senate.

    Written on Friday, 27 January 2012 20:35 Read more...
  • The Woman Who Knew Too Much
    The Woman Who Knew Too Much

    Millions of Americans hoped President Obama would nominate Elizabeth Warren to head the consumer financial watchdog agency she had created. Instead, she was pushed aside. As Warren kicks off her run for Scott Brown’s Senate seat in Massachusetts, Suzanna Andrews charts the Harvard professor’s emergence as a champion of the beleaguered middle class, and her fight against a powerful alliance of bankers, lobbyists, and politicians.

    Written on Wednesday, 16 November 2011 00:00 Read more...
  • Elizabeth Warren's Appeal
    Elizabeth Warren's Appeal

    For a few years now, politicians straining against all of the antigovernment demagogy have been searching for a way to energize public interest and remind voters of the essential government services and protections they rely on and all too often take for granted.

    Written on Sunday, 16 October 2011 00:00 Read more...
  • Berkshire Democrats Want Elizabeth to Run, Run, Run
    Berkshire Democrats Want Elizabeth to Run, Run, Run

    PITTSFIELD, Mass. —  More than a few local Democrats would be ecstatic if Elizabeth Warren decides to run against Scott Brown for the U.S. Senate. Warren is kicking around the idea of running and stopped in Pittsfield on Friday to meet with party members to gauge their support as part of a listening tour across the state.

    Written on Friday, 19 August 2011 00:00 Read more...

Sign the Petition - Sen. Sanders Run as a Democrat in 2016

Button-SandersPetition

Like Elizabeth Warren

Lori Wallach on the TPP from PDA Progressive Roundtable

Progressive Roundtable with Reps. Ellison and Pocan and Lori Wallach on TPP

TPP: The Biggest Threat to the Internet You've Probably Never Heard Of