By Public Citizen's Global Trade Watch
September 24, 2012
The global financial crisis highlighted the need for robust regulation of the financial services sector to ensure financial stability and to avoid future crises. However, trade and finance experts have raised concerns that the rules of the World Trade Organization’s (WTO) General Agreement on Trade in Services (GATS) and related WTO financial services rules could pose obstacles to post-crisis efforts to enhance regulation underway both on the domestic and international levels.
In June 2012, WTO member state Ecuador tabled a modest but important proposal the goal of which is to provide all governments with greater certainty that the WTO rules governing financial services provide sufficient policy space for needed financial reregulation and do not deter improved coherence between the WTO and other international bodies promoting financial reregulation. Ecuador specifically proposed that WTO members undertake a discussion at the WTO’s Committee on Trade in Financial Services (CTFS) about the current scholarship and opinion at the international level with respect to macro-prudential regulation and its relationship to the GATS rules.
This latest initiative comes as a follow up to an effort led by Ecuador in advance of the 2011 WTO Ministerial Conference. Then Ecuador proposed to insert language into the Ministerial Declaration to launch a review of the regulatory implications of the GATS rules relating to financial services. Argentina, Brazil, China, India, South Africa, Turkey and scores of other countries supported this proposal. But it was blocked by the United States, the European Union and Canada. The countries opposed to the review said that it was not necessary because the current WTO rules provide sufficient policy space for countries to maintain or establish robust financial regulation.