Last week I wrote about the baby steps that the European Commission is taking to bring more transparency to the Trade in Services Agreement (TISA) currently being negotiated. One of the things that the Commission is unlikely to publish – because the US won’t let it – is the negotiating text. Fortunately, we live in the age of whistleblowers and leakers, and one of them kindly supplied Wikileaks with a copy of the Financial Services Annex of TISA back in June:
Today, WikiLeaks released the secret draft text for the Trade in Services Agreement (TISA) Financial Services Annex, which covers 50 countries and 68.2% of world trade in services. The US and the EU are the main proponents of the agreement, and the authors of most joint changes, which also covers cross-border data flow. In a significant anti-transparency manoeuvre by the parties, the draft has been classified to keep it secret not just during the negotiations but for five years after the TISA enters into force.
Despite the failures in financial regulation evident during the 2007-2008 Global Financial Crisis and calls for improvement of relevant regulatory structures, proponents of TISA aim to further deregulate global financial services markets. The draft Financial Services Annex sets rules which would assist the expansion of financial multi-nationals — mainly headquartered in New York, London, Paris and Frankfurt — into other nations by preventing regulatory barriers. The leaked draft also shows that the US is particularly keen on boosting cross-border data flow, which would allow uninhibited exchange of personal and financial data.
Because the leaked document itself is pretty hard to parse WikiLeaks asked an expert in the field, Professor Jane Kelsey of the Faculty of Law, University of Auckland, to provide a detailed commentary. Here’s her summary:
The secrecy of negotiating documents exceeds even the Trans-Pacific Partnership Agreement (TPPA) and runs counter to moves in the WTO towards greater openness.
The TISA is being promoted by the same governments that installed the failed model of financial (de)regulation in the WTO and which has been blamed for helping to fuel the Global Financial Crisis (GFC).
The same states shut down moves by other WTO Members to critically debate these rules following the GFC with a view to reform.
They want to expand and deepen the existing regime through TISA, bypassing the stalled Doha round at the WTO and creating a new template for future free trade agreements and ultimately for the WTO.
TISA is designed for and in close consultation with the global finance industry, whose greed and recklessness has been blamed for successive crises and who continue to capture rulemaking in global institutions.
A sample of provisions from this leaked text show that governments signing on to TISA will: be expected to lock in and extend their current levels of financial deregulation and liberalisation; lose the right to require data to be held onshore; face pressure to authorise potentially toxic insurance products; and risk a legal challenge if they adopt measures to prevent or respond to another crisis.
I discuss four key provisions in the leaked draft text that threaten to destabilize the global economy by exceeding the scope and coverage of the existing services liberalization as applied to FDI [Foreign Direct Investment]. First, by extending the “right of establishment” to foreign financial service providers, they would be granted almost automatic entry into any host state that is a party to the agreement. Second, by establishing automatic coverage of any “new financial service, host states may not protect themselves from new, untested financial services in the future. Third, by prohibiting even non-discriminatory measures, foreign financial services providers receive special protection from any regulatory measures that may affect them, even if they affect national providers similarly. Finally, under the guise of “transparency”, this new draft text gives foreign providers political power in the host state to shape future financial services regulation.
As the first of those analyses makes clear, data and its flow has become such an important part of the modern world that it will be addressed by TISA in its financial annex – and doubtless elsewhere too. In particular, signatories will lose the right to pass laws that mandate the retention of their population’s personal data in the country of origin (or even in the EU). That’s a reminder that however obscure and remote this treaty might seem, it is likely to have very real impact on the world of business computing and personal privacy.