Imperial manoeuvres

At the European Parliament in Strasbourg, France, on June 10, members vote on the issue of the TTIP talks. The posters on the desks read "no TTIP".

DAYS before United States President Barack Obama won for himself “fast track” authority in trade negotiations from Congress and the Senate, WikiLeaks released a set of 17 secret documents that are part of the draft treaty being considered in the TiSA (Trade in Services Agreement) negotiations. The TiSA, which is being negotiated in secret talks that were launched in 2012 by a select group of countries (identifying themselves as “The Really Good Friends of Services”, or RGF) outside the World Trade Organisation (WTO), covers a wide range of services varying from air transport and telecommunications through financial and business services to health and education.

Pushed by a group of developed countries frustrated by the inability to extract adequate liberalisation of the trade in services through the WTO, 19 of the WTO’s members plus all those belonging to the European Union launched these secret negotiations to further liberalise trade in services. The intent clearly was to create a club (that would include most countries of the Organisation for Economic Cooperation and Development, besides sundry others) whose members subject their trade in services to “regulatory disciplines”. These disciplines are expressly intended to free up trade in services, allowing free entry of foreign players into their domestic markets, either through the commercial presence of firms or through cross-border provision, and providing those players with “national treatment” or treatment as favourable as those afforded to domestic firms.

The overall objective appears to be to attract new members—during the negotiations or after arriving at an agreement—that do not want to be excluded from markets for services trade that may be or may prove important for them. The agreement would thus set minimum levels of services trade liberalisation that can be pushed for in a more universal forum like the WTO. The effort has already been successful. The number of countries involved in the negotiations is now placed at 24 (Australia, Canada, Chile, Chinese Taipei (Taiwan), Colombia, Costa Rica, Hong Kong, Iceland, Israel, Japan, Liechtenstein, Mauritius, Mexico, New Zealand, Norway, Pakistan, Panama, Paraguay, Peru, South Korea, Switzerland, Turkey, the U.S. and Uruguay) other than the members of the E.U. who, like the U.S., have been present from the beginning. What is noteworthy is that none of the BRICS (Brazil, Russia, India, China and South Africa) countries is part of the club yet.

Although the U.S. and its allies managed to get a General Agreement in Trade in Services (GATS) going, with special negotiations on 12 broad categories of services (with 160 sub-categories), the off-WTO negotiations were needed because they involved a “request and offer” process. Countries could make requests to others to liberalise rules and regulations in certain sectors and they themselves could decide how much liberalisation, if any, they would offer in different areas.

Although the broad direction of the GATS was clearly one of pushing for liberalisation, countries retained some degree of autonomy and room for manoeuvre. The RGF group’s effort, outside the WTO, is to push ahead with liberalisation among themselves and arrive at a set of “disciplines” that define the floor for liberalisation by all countries, which can then be “multilateralised” through the WTO.

The secretive nature of the negotiations is reflected in the fact that the documents are classified and were to be released officially either five years after the TiSA agreement came into force or, if no agreement was arrived at, five years after the close of the negotiations. Thus, just as in the case of the Trans-Pacific Partnership (TPP) and Transatlantic Trade and Investment Partnership (TTIP) negotiations, concerned citizens cannot arrive at an informed judgment on whether to support the agreement or not, and act to influence, if possible, the political establishment’s decision to join or stay out of the TiSA club. In fact, the TiSA negotiations are even more secretive than those discussing the terms of the TPP and the TTIP, with most people concerned about the process not even being aware of when the meetings that take forward the negotiations are held.

Secrecy is needed because the clauses in the agreement are likely to generate opposition from domestic citizens whose access to services and/or jobs may be adversely affected. There are two broad directions that the negotiations intended to take and have, indeed, taken. The first is towards greater liberalisation of services through changes in laws that provide corporations greater access to services markets abroad and ensure “national treatment”, or treatment equal to that meted out to domestic firms. The second is to ensure that future governments do not have the option of going back once liberalisation is implemented as part of the agreement.

One area in which the push to fast-track liberalisation of services has advanced rapidly is financial services. The implications of so-called freer trade in financial services comes through from the commitments that countries have made under the GATS (and its annexe on financial services) and an additional component called the “Understanding on Commitments in Financial Services” that was added on as an appendix to the Uruguay Round agreement. Although not part of GATS, it allows countries to make specific commitments on financial services.

Thus, the process of liberalisation went a few steps ahead in financial services as compared with other services. The TiSA tries to take this further. The Financial Services Annexe released by WikiLeaks on June 3 is the version of the document revised through negotiations as of February 23. (WikiLeaks released an earlier version relating to April 14, 2014, in June that year.) Bracketed phrases and sections in both documents show that the negotiations have still some distance to go. But what matters for financial interests is that the process is on.

This relatively accelerated liberalisation is of particular relevance because of a standstill clause that is to be attached to the process. The financial services annexe to the TiSA states that “any conditions, limitations and qualifications to the commitments” made in the agreement would be “limited to measures that a Party maintains on the date this Agreement takes effect”. That is, no new restrictions or measures that increase (not decrease) the extent of regulation of financial entities and the financial sector relative to the commitments made by a country under the TiSA would be permitted, especially with respect to cross-border trade in services, entry of foreign services suppliers and financial services purchased by public entities.

This standstill requirement in essence implies that domestic policy autonomy and flexibility in the financial services area are to be ended. It also completely erodes the powers of parliament in democracies with elected legislative bodies to introduce new measures to roll back liberalisation on the basis of experience. Given the evidence that much of the deregulation that preceded the 2008 financial crisis was responsible for precipitating that crisis, any such standstill imperative would foreclose attempts to strengthen regulation in the aftermath of such a crisis. Similar standstill clauses apply in other services areas as well.

Some of the intent of the draft comes through from specific articles. Thus, draft article X.15 calls for the avoidance of measures, even if not discriminatory, that have “significant adverse effects” on foreign service suppliers. Measures can be significantly adverse when foreign suppliers are unable to compete fully or expand their operations, even in an environment where no TiSA stipulation is being violated. This vague and near-omnibus clause allows foreign suppliers to demand further liberalisation on rather nebulous grounds.

The fact of the matter is that many regulations aimed at protecting the interests of depositors or investors or at pre-empting instability and financial fragility limit competition or excessive expansion. For example, a concern after the financial crisis has been the need to prevent expansion of financial firms so that they do not become systemically important or significant or “too big to fail”.

It is to be seen whether such measures would be considered significantly adverse from the point of view of foreign firms, forcing countries to abjure them, and taking liberalisation beyond what was expressly committed to by a country under the agreement. This is of relevance, because although draft article X.17 allows countries to opt for regulation for prudential reasons such as ensuring financial stability, it requires that such regulation is not of a kind that goes contrary to TiSA rules. Such contradictory provisions may finally prove meaningless because the ostensible intent of the article, which in this case is favouring prudential regulation, can prove difficult to realise.

What is most striking, in the context of the secrecy surrounding the TiSA negotiations, is draft article X.16, which proposes greater transparency when it comes to the authorisation of financial services of different kinds and even requires that “interested persons” must be given the information, opportunity and time to express their views on new laws or regulations.

This demand for “transparency” after the agreement takes effect, but secrecy while it is still being negotiated, is clearly aimed at favouring big finance. Once liberalisation with standstill is in place, the only “new” direction to go is towards further liberalisation. There is no consultation with parliaments and other people’s representatives when arriving at such an agreement. But to pre-empt even the remote possibility that any room for manoeuvre post-TiSA is used to enhance regulation of private interests, “interested persons” (read financial interests) are required to be consulted.

Needless to say, there is considerable distance to go before a commonly-agreed-to wording of the articles in the text is arrived at. And much of what is discussed here relates to financial services. But the outcome seems clear. As the texts of other annexes released by WikiLeaks, and the main text and other annexes if (hopefully) leaked in the coming months, are read and interpreted, the message would be that the TiSA reflects the next big push by corporate interests to open up services markets in both developed and developing countries, at the expense of workers and ordinary people.