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WikiLeaks and Trade: A Healthy Dose of Sunshine

by Edward Alden
June 3, 2015

FedEx Mojave Airport California A FedEx MD-11 takes off from the Mojave Airport in California (Reuters).

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I love WikiLeaks. While I recognize that secrecy has its place, I strongly believe that the affairs of the people should, to the greatest extent possible, be conducted with the full knowledge of the people. Secrecy breeds distrust, and feeds claims that governments are only serving narrow corporate interests. Thus I was delighted to see in my inbox this morning that WikiLeaks has yet again purloined and published a series of trade negotiating texts, this time for the pending Trade in Services Agreement (TISA).

But here’s the problem. The organizations that work with Wikileaks to publicize the documents too often know nothing about what they actually mean, and have a vested interest in not learning so they can continue making outlandish claims. And so rather than illuminating the public debate, which is the goal of transparency, it ends up more distorted than it was when the documents were still secret.

Consider the press release put out today by the Center for Economic and Policy Research (CEPR), and an organization called the Our World is Not for Sale (OWINFS) global network. They claim that the leak “exposes secret efforts to privatize and deregulate services,” and that if Congress approves President Obama’s request for Trade Promotion Authority (TPA), it would harm “financial stability, public safety, and elected officials’ democratic regulatory jurisdiction.”

A little background is in order first. The TISA negotiation was launched in 2013 under the auspices of the World Trade Organization. The last successful round of multilateral trade negotiations, the Uruguay Round, made the first stab at opening up “trade in services” and did not get terribly far. Services negotiations are hard. For goods, the big issue is simply lowering or removing the taxes (tariffs) that countries charge on imports. But services trade is all about regulatory rules. If AT&T, for example, wants to provide more phone service in Mexico, it needs to be able to connect to existing land lines at fair rates, or be able to purchase spectrum to offer mobile phone services. Most countries do not want to see their monopolies in these sectors challenged, and so either restrict foreign participation outright, or use regulations and pricing to achieve the same ends. Only 24 countries out of 161 members of the WTO are participating in the TISA negotiations, though they include the United States, the European Union, China and other countries that make up about 70 percent of global services trade.

Services are still highly protected. As we explained in our recent CFR progress report on U.S. trade policy, translating these regulatory barriers into “tariff equivalents” shows how high the obstacles are for foreign services providers – 44 per cent in Mexico, for example, and 68 percent in China and India. This is harmful to the United States, because many of the most successful companies that employ Americans at good wages are “service” companies. These include not just Google and Facebook, but also airlines, package delivery companies like FedEx and UPS, law firms, insurance companies, securities firms and banks. The United States runs a growing trade surplus in services, in contrast to the large trade deficit in goods.

What would the TISA negotiations actually do? Here the Wikileaks texts are extremely helpful. It is quite clear, for example, that the texts say nothing at all about “privatizing and deregulating services.” Instead, in each sector the goal is to introduce competition, and to allow foreign service providers to compete on more or less equal footing with domestic ones. In the financial services texts, for example, no country is proposing any measures that would restrict financial regulation of the sort embodied in the Dodd-Frank legislation. Instead, the texts simply say that regulators have to treat foreign companies the same way they treat domestic ones.

The opponents of TISA claim that the deal would make it impossible for countries to regulate in the public interest. Again, the texts are helpful. The regulatory pieces are almost all about two things – transparency and non-discrimination. That means governments need to open up their regulatory process for input, much like U.S. notice-and-comment procedures, and cannot discriminate against foreign-owned companies (though even here many exceptions will be permitted). The text on “domestic regulation” states quite flatly that “Parties recognize the right to regulate, and to introduce new regulations on the supply of services within their territories in order to meet public/national policy objectives.”

Don’t get me wrong – there are real competitive implications in such an agreement, and countries with strong vested interests will resist even non-discriminatory treatment. Many countries will object to this sort of opening because it has the potential to hurt the profits of private monopolists or state-owned companies.

I understand this. What I don’t understand is when organizations claiming to speak for the developing countries and for worker interests in advanced countries go to bat for the monopolists. The CEPR/OWINFS press release, for example, warns that “The leaked telecommunications annex, among others, demonstrate potentially grave impacts for deregulation of state owned enterprises like … national telephone company[ies].” Really? Mexico, for example, has historically had among the highest costs for telephone and internet services in the world. That’s because service is dominated by a monopoly company, American Movil, which is the successor to the government-owned Telmex. The biggest shareholder of American Movil, Carlos Slim, is either the richest or second richest man in the world behind Bill Gates, depending on how their portfolios are doing. The Mexican government, to its credit, has been trying to break up Slim’s monopoly, and the TISA negotiations should help. But the opponents of TISA would rather go to bat for the world’s richest man.

I agree with the CEPR and OWINFS on one point they make, however. “Today,” they wrote, “the secrecy charade has collapsed.” Maybe now we can finally have an intelligent discussion of exactly what these trade agreements are doing, and just as importantly, what they are not doing.

Post a Comment 4 Comments

  • Posted by F D'Allessandro

    Could it be that perhaps the CEPR and OWINFS are on the payroll of Mr. Carlos Slim or have other vested interests in disseminating the information they obtain? Are these organizations including Assange’s truly transparent enough? Most information that is leaked belongs to the different American administrations within the last decades. One hardly reads leaked documents that stem out of rogue regimes or countries such as China and Russia. Don’t they have secrets they hide too? Transparency is a double edge sword when there are sinister motives behind it.

  • Posted by Myriam Vander Stichele

    Perhaps one should look better at some details before making sweaping statements like “In the financial services texts, for example, no country is proposing any measures that would restrict financial regulation”. However the leaked Annex text ( so we have not seen yet the market access rules in the general services text) does have an article X.4 that requires a “standstill” in regulations (“Any conditions, limitations and qualifications to the commitments […] shall be limited to existing non-conforming measures”). In other words, regulating in the future might be more difficult. Also,Art. X.10 does not yet make clear how far it will be possible to regulate services offered by foreigners that are new on a host market (see Swiss position).
    One of the problems that are being ignored is that companies like those of Mr Slim will be able to do acquisitions in other countries who open up while the company/Mr slim is able to have the means to do so from a monopoly and insufficient regulation at home (there is some experience in The Netherlands). Foreign competition does not always result in the best services for clients but the TiSA text does not provide instruments to ensure that best services (national or foreign) are being achieved.

  • Posted by Ellen Gould

    It is truly remarkable that Edward Alden of the Council for Foreign Relations can claim, despite the evidence, that TISA would merely ensure that regulations are transparent and and not discriminatory.

    Existing trade agreements already ensure that governments cannot regulate in a way that discriminates, even indirectly. The WTO’s agreement on services, for example, stipulates that identical regulations applied to foreign and local suppliers alike may still violate the agreement if they modify the conditions of competition in favour of local suppliers.

    But TISA goes much further. TISA includes an entire Annex on Domestic Regulation (https://wikileaks.org/tisa/domestic/TiSA%20Annex%20on%20Domestic%20Regulation.pdf) that would impose a variety of constraints on a government’s regulatory authority but does not mention the word “discrimination” once, since it is dealt with through other provisions in the agreement. Instead what the Annex would do, depending on which which of the proposed drafts is adopted, is to require that a wide variety of regulations not be “more burdensome than necessary to ensure the quality of the service” , be based on “objective” criteria, and a host of other prescriptions limiting non-discriminatory regulation. In the event of a challenge, it would be left to a trade panel to determine whether regulations were “unnecessarily burdensome” or not “objective”.

    Corporate lobbyists, such as the National Retail Federation, clearly see TISA as a vehicle for eliminating non-discriminatory regulation, as they stated in their TISA testimony to Congress:

    “[TISA should] Work to ease regulations that affect retailing, including store size restrictions and hours of operation that, while not necessarily discriminatory, affect the ability of large-scale retailing to achieve operating efficiencies…

    Although the Annex includes an assertion of the right to regulate, a WTO panel has made it clear that regulatory sovereignty ends where governments have bound themselves to trade provisions like TISA’s Annex on Domestic Regulation.

    The negotiators drafting TISA, the trade officials advising them, and the corporations lobbying for the agreement know that TISA will limit regulations even when they are completely non-discriminatory. Unfortunately for the public, the hapless politicians who rely on the Council of Foreign Relations for advice will not know this critical fact about TISA.

  • Posted by Dan Beeton

    The release to which Edward Alden refers is (clearly) not a CEPR release, and he should correct that. Anyone interested in an informative response from Deborah James, who is cited throughout the OWINFS release, can find it here: http://www.huffingtonpost.com/deborah-james/setting-the-record-straig_21_b_7555862.html

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