Seattle to Brussels Network statement for the G20
The S2B network sent an open letters to EU trade negotiators asking them in concrete if “liberalisation of financial services in free trade agreements undermine G‐20 and EU attempts to regulate financial markets and tax havens?”.
Negotiations and agreements to liberalise financial services, in GATS as well as in free trade agreements (FTA), in the opinion of S2B Network “show many contradictions with the current official statements to strengthen regulation. We express our concerns that GATS and FTA rules which apply to liberalised financial services actually mean deregulation. For instance, fully liberalising financial services means that governments cannot impose limits on the total value of financial services transactions or assets (GATS Art. XVI), thus allowing the financial industry to become too big to fail. Also, the GATS requests made by the EU to many countries, including developing countries, in 2002 and 2005, were clearly asking to ‘eliminate’ many particular financial regulations, including some established after the experience of the Asian financial crisis and related to capital reserves”.
The GATS and FTA non‐discrimination rules also require that those who have fully liberalised financial services cannot discriminate between those foreign banks that receive subsidies or have been nationalized in the home country, as now happened during the crisis, and those who do not receive subsidies – which clearly puts the banks of poorer countries at a disadvantage. “The Cariforum‐EU EPA – underlined the S2B Network ‐ might undermine the EU’s call for tackling tax havens since eight of the Cariforum countries are tax havens according to the OECD, and the EPA provides for current account liberalisation for all residents (Article 122), capital account liberalisation for investors (Article 123), and liberalisation of financial services including ‘trust services’ and ‘over‐the‐counter’ trading of derivatives (Article 103).
We would like to ask for your interpretation of the GATS “Understanding on Commitments in Financial Services” according to which the EU and many WTO industrialised member countries have already scheduled their liberalisation commitments, and which includes a “standstill” on regulation and a commitment to allow any new financial service. Is the prohibition of short‐selling by the US and EU countries in fact illegal according to GATS rules and the Understanding, since even the ‘prudential carve out’ (Annex on Financial Services, Art. 2) does not allow prudential measures to be taken if they undermine liberalisation commitments? Are liberalisation commitments of over‐the‐counter trading of derivatives coherent with European leaders’ call to ensure appropriate regulation and oversight of all financial markets, products and participants ? Will the GATS rules continue to underpin the dangerous expansion of the financial industry until they are too big to fail?”
For the reasons mentioned above, they conclude “now is not a time to liberalise financial services in any trade and investment agreement, nor to conclude the WTO round based on the current negotiations. We hope the above concerns will be clearly reflected in the agenda of the EU, and G‐20, on financial reforms”.
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