In many cases, the major powers have presented these demands to countries from the global South as part of a non-negotiable FTA template. Poor countries that carefully limited their exposure on financial services at the WTO have often become bound to a more extreme version of those rules and obligations through the FTAs.
The US insisted that the negotiation of the Financial Services Agreement during the Uruguay round of the GATT continue for several years after the round had finished, until it was satisfied with the commitments that were made. The final package was estimated to cover 95 per cent of international trade in banking, securities, insurance, and information services as measured in revenue. 10
Moves began in 2000 to expand those commitments further, as provided for in the GATS. Those talks were incorporated into the Doha round of WTO negotiations in 2001. The round stalled in the mid-2000s. Moves to advance the services negotiations through plurilateral negotiations failed.
The governments that were pushing these talks moved outside the formal WTO boundaries to pursue TISA. They call themselves the 'Really Good Friends of Services'. Their goal is to make TISA the new platform for financial services. The US has said it wants to establish new negotiating rules in TISA, get enough countries to sign on that will enable it to be incorporated into the WTO, and then have the same rules adopted for negotiations at the WTO. 11 The European Commission has said TISA will use the same concepts as the GATS so that it can 'be easily brought into the remits of the GATS.'12
It is not clear how that might happen. Either two thirds or three quarters of the Members would need to agree to TISA coming under the WTO's umbrella, even as a plurilateral agreement. 13 Countries like Brazil and India have been very critical of TISA, and the US has not allowed China to join. But the pressure on WTO Members will be immense. If the plan did succeed, many South governments that resisted the worst demands of the GATS and the services aspects of the Doha round will find they end up with something more severe.
If TISA remains outside the WTO its coverage will be limited to the signatories. That is dangerous itself. The countries that were at the centre of global finance and were responsible for the GFC will be bound to maintain the rules that allowed that to happen. The minimal reforms they have adopted post-GFC will become the maximum permitted regulation. Several recent IMF papers have referred to the 'state of denial' among affluent economies about the potential for further devastating crises if they maintain the current policy and regulatory regime. 14 They also point out that many developing countries that took prudent steps after their experience with the Asian Financial Crisis and similar traumas are much less exposed. 15 Yet the architects of TISA aim to force those countries to adopt the flawed rules they had no role in negotiating, either as the new 'best practice' for FTAs or through the WTO.
The development of global finance rules under the guise of 'trade' was the brainchild of senior executives of AIG, American Express, Citicorp and Merrill Lynch in the late 1970s. Their role, and subsequently a broader lobby called the Financial Leaders Group, is well documented. The former director of the WTO's services division himself acknowledged in 1997 that: 'Without the enormous pressure generated by the American financial services sector, particularly companies like American Express and Citicorp, there would have been no services agreement'. 16
As the lobby evolved it was still led from Wall Street, but expanded to include the major insurance and banking institutions, investment banks and auxiliary financial services providers, from funds managers to credit-rating agencies and even the news agency Reuters. They were later joined by the e-finance and electronic payments industry, which includes credit, stored value and loyalty cards, ATM management, and payment systems operators like PayPal.
The industry lobbyists have also set the demands for financial services in TISA. The Chairman of the Board of the US Coalition of Service Industries is the Vice Chairman of the Institutional Clients Group at Citi. When the industry's demands, as expressed in the consultation on TISA conducted by the US Trade Representative in 2013, are matched against the leaked text it becomes clear that they stand to get most of what they asked for. Extracts from their submissions are listed at the end of this document.
A number of the provisions in the leaked text are already in the GATS financial services instruments, especially the voluntary Understanding. However, Colombia, Costa Rica, Pakistan, Panama and Peru, which are participating in TISA, appear not to have adopted the Understanding.
The new elements of TISA build on the GATS-plus rules in Korea-US Free Trade Agreement, and those proposed in the Trans-Pacific Partnership Agreement (TPPA) and the Trans-Atlantic Trade and Investment Partnership (TTIP). The TISA parties that are not yet bound by such agreements would therefore face especially onerous new obligations.
The following selection of provisions shows some of what is new and/or dangerous about TISA. They are only a sample of the legal issues.
The biggest danger is that TISA will stop governments tightening the rules on the financial sector. As noted above, this risk is greatest for countries that have not already adopted the WTO's Understanding on financial services, do not already have extensive financial services commitments with the US or EU under a FTA, or both. But it is a serious risk for all TISA parties, especially those with weak systems of financial regulation.
When the GATS was first developed governments were given some control over the extent to which the regulation of services was subject to the core GATS rules. Those core rules cover the right of foreign financial firms' to set up and operate in the host country; the cross-border supply of the broad range of financial services and products; the ability of their nationals to purchase of those services and products in another country; and the kind of domestic regulations they could adopt.
There are different ways of allowing governments to exercise control over such commitments.
The GATS gave governments flexibility to list the services that would be subject to the core rules, and further limit their exposure in those sectors (a 'positive list' approach).
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