Maryknoll Office for Global Concerns

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Trade: Pacts undermine financial reforms

Leaks from three major trade negotiations show that the U.S. and the European Union are pushing for rules that would undermine the ability of governments to create laws to protect public safety, health and the environment. The following article, published in the March-April 2015 NewsNotes, will focus on how the treaties will also undermine the important advances made in financial regulations since the 2008 crisis.

Together, these current trade negotiations affect more than 80 percent of the world’s formal economy. The World Trade Organization’s Trade in Services Agreement (TISA) involves 50 countries; the Trans-Pacific Partnership (TPP) is between 12 countries bordering on the Pacific Ocean; and finally, the Trans-Atlantic Trade Investment Partnership (TTIP) is between the U.S. and European Union. The agreements share many of the more worrisome provisions that would make financial crises like that of 2008, with its drastic effects on the lives of workers around the world, more likely to recur.

Despite the fact that these agreements will have massive effects on governments’ ability to regulate the economy, all three negotiations are being conducted in secrecy; in the case of TISA, negotiating countries have agreed to maintain the content of the accord secret for five years after passing into law, or, if they fail to achieve agreement, for five years after the end of the negotiations. Not even members of Congress are able to see the full texts of the negotiations. Sen. Ron Wyden [D-OR] stated, "The majority of Congress is being kept in the dark as to the substance of the TPP negotiations, while representatives of U.S. corporations—like Halliburton, Chevron, PHRMA, Comcast, and the Motion Picture Association of America—are being consulted and made privy to details of the agreement. [...] More than two months after receiving the proper security credentials, my staff is still barred from viewing the details of the proposals that USTR is advancing." The general public only knows some details of the negotiations from documents that were leaked by Wikileaks and others.

Jane Kelsey, law professor at the University of Auckland, New Zealand listed important reforms that would be illegal if TISA becomes law:

  • 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);
  • Authorization 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;
  • Requiring 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;
  • Authorization and regulation of hedge funds; etc.

These are many of the very reforms that were implemented in various countries in order to avoid future financial crises.

The trans-Atlantic negotiations contain two especially worrisome provisions. One, called the "stand still" provision, limits countries to the regulations that they currently have and makes any new financial regulations illegal. There is even the surreal possibility that any regulations made after 1994, when the WTO Services agreement was first established, to be considered "new," therefore making all post-2008 reforms de facto illegal.

The second provision, as described by Public Citizen’s Lori Wallach, "is language that basically guarantees that there is freedom of movement in financial data. And the problem there is, of course, there are lots of consumer privacy protections where you’re not supposed to be able to have your confidential information. For instance, banks can’t send in one package your Social Security number, your name, your address and information about your bank account. And these rules about the movement of data, for countries, for instance, in Europe, where there are really strong consumer privacy rules, would be a rollback of those basic rights and a real risk for consumers."

Another concern for many regarding the negotiations between the U.S. and EU, is that the TTIP is considered to be a "living document" with many key decisions to be made at a later date by a regulatory council that would play a key role in molding future regulations. Techdirt writer Glyn Moody writes that the council would "provide early access to all new regulations proposed by the U.S. and EU, allowing corporations to voice their objections to any measures that they felt would impede transatlantic trade… The end-result is likely to be an impoverishment not just of public policy-making, but of democracy itself."

Due to concerns over provisions like these and a host of others, a diverse opposition to these agreements is growing in the participating countries. In the U.S., the president needs permission from Congress to be able to negotiate (a Congressional responsibility in the Constitution). With this permission, commonly referred to as Fast Track, the administration negotiates the content of trade agreements and then sends the agreements to be voted on by Congress without the ability to amend or modify in anyway. The president’s Fast Track authority expired in 2007. Legislation will be introduced any day to re-authorize Fast Track.

Faith in action:

Contact your representative and senators and urge them to vote against any form of Fast Track trade promotion authority for the Obama administration. To send an email directly, use this link on our website.