TTIP: Attack on financial regulation leaves citizens unprotected

1. TTIP: Attack on financial regulation leaves citizens unprotected Myriam Vander Stichele SOMO 12 December 2013

2. INTRO • What is at stake ? • the financial industry maintains power of to keep society hostage by risky and speculative behaviour • Discipline governments in the interest financial industry; no protection of citizens and the right to regulate • US and EU want to impose their standards on the rest of the world • What are ‘old’ concerns and what is new ? • Some technical explanation about texts NB: not the whole text available (e.g. domestic regulation?) and still some opposing views

3. SOME CLARIFICATIONS • “Trade in financial services”: • services are offered or consumed across borders e.g. a citizen in one country can save online with a bank in another country • establishment of a foreign financial service providers = opening up markets for foreign direct investors in the financial sector • “Financial services” and financial sector investors • trading in stocks and (commodity) derivatives (including the secretive risky ‘over the counter’ (OTC) derivatives), • ensionfund management, retail banks • ALLbank services and insurance services • trust services and tax advisory services (can help tax avoidance/evasion), • financial data transfer and processing services, • investment banks, hedge funds, private equity funds, • (stock and commodity) exchanges, • all kind of financial advisory consultancies such as (the much criticised) credit rating agencies.

4. ATTACK ON DEMOCRACY AND THE RIGHT TO REGULATE TTIP is about “disciplining” regulation: • Deregulation rules: prohibit limits on operationsa • Attacking the powers for financial regulators: conditions in framework on domestic regulation in financial services • Circumventing the parliaments:behind closed doors EU-US consultations before (!) a financial regulation is proposed to the parliaments • The financial industry can attack financial regulation: ISDS = importing US culture of financial industry attacking regulation

5. MORE FINANCIAL CRISES & STOPPING FINANCIAL REFORMS • More the competition and risks taking by US and EU financial sector; “competiveness” arguments against regulation • Contrary to ongoing financial reforms: • Supporting too-big-to-fail banks: • No difference between EU and US financial regulations: Beyond ‘national treatment’: equivalence & interoperability; G-20 standards • Massive and instable capital flows: Free flow of capital rule

6. AT THE SERVICE OF THE FINANCIAL INDUSTRY AND CITIZENS UNPROTECTED • Right to lobby by the financial industry • More profit making as a goal: incorporates financial industry demand, incl. force US to regulatory cooperation • ISDS: citizens cannot sue corporations • compatibility/equivalence of regulation: the EU and US financial firms could apply to rules of their home country – leaves consumers unprotected • Unaccountable regulatory process: participants in EU-US regulatory cooperation framework to harmonise regulation would not be accountable to parliamentarians,

7. IMPOSING FINANCIAL REGULATION ON THE REST OF THE WORLD Regulatory cooperation is to ensure that the EU-US regulations would be applied in the rest of the world. The EU wants to work closely with the US in international standard setting bodies to develop jointly international standards

8. TECHNICAL BITS & PIECES • Liberalisation commitments of financial services: The financial (sub-)sectors and financial products that are listed in the ‘shedule(s)’ of commitments to liberalise trade and investment • Services and investment texts: ‘market access’ and national treatment rules and impacts : prohibitions on regulation > Regulation is “determines” market access • Specific financial regulatory framework: Disciplines on domestic regulation regarding of financial services and investment • A framework for regulatory cooperation in financial services: aiming at equivalence and ultimately interoperability of EU and US rules; forcing US regulations not to harm EU financial industry & v.v. • An investor-to-state dispute resolution mechanisms that covers financial regulation (with a special panel determining prudential regulation as in CETA ???). • Freedom of current and capital flows related to the financial industry operations • Transparency rules include the right to lobby on regulatory proposals (business wants »proactive requirement« for »advising« governments how to change laws.

9. CONCLUSION & DEMANDS • No to undemocratic secretive lobby-driven financial regulation and freedoms to the financial industry • Regulatory cooperation and regulatory disciplines/restrictions are not to be part of a trade & investment agreement Tactics: • Alarm all parliaments and regulators and supervisors that they are loosing regulatory power to avoid financial crises; • Say: stop servicing the financial industry and more risks of bail outs to banks > no more liberalisation • Attack the lobbying of the financial industry, also in international regulatory financial bodies

10. More reading, see for industry: http://somo.nl/themes-en/trade-investment

11. Market access rules Members shall NOT maintain or adopt:  (a) limitations on the number of service suppliers whether in the form of numerical quotas, monopolies, exclusive service suppliers or the requirements of an economic needs test; <-> EP proposal on assessing social & economic impact of supermarkets before authorization, so as to limit big supermarkets and allow small shops (b) limitations on the total value of service transactions or assets in the form of numerical quotas or the requirement of an economic needs test; <-> tackling too big to fail by shrinking financial conglomerates <-> in order to tackle abusive practices of buying power by oligopolitistic companies (e.g. supermarkets) towards suppliers in many sectors, such companies need to shrink <-> tackling current level of concentration by a few TNCs = contrary to free trade rules! (c) limitations on the total number of service operations or on the total quantity of service output expressed in terms of designated numerical units in the form of quotas or the requirement of an economic needs test; <-> EU financial reforms: position limits on food commodity derivatives <-> many reforms de facto should result in reductions , and much more is needed !

12. Market access rule (2) d) limitations on the total number of natural persons that may be employed in a particular service sector or that a service supplier may employ and who are necessary for, and directly related to, the supply of a specific service in the form of numerical quotas or the requirement of an economic needs test; <-> foreign employees restrict job creation and transfer of technology (e) measures which restrict or require specific types of legal entity or joint venture through which a service supplier may supply a service; and <-> EU reforms of bank structure will require particular forms of separation (to prevent too-big-too-fail banks) <-> UK ‘ringfencing’ of banks (f) limitations on the participation of foreign capital in terms of maximum percentage limit on foreign shareholding or the total value of individual or aggregate foreign investment. = allowing all services sectors to be taken over by 100% ! <-> measures to support the development of national industries <-> protecting basic services being dependent on or intruded by foreign investors (e.g. telecom grid (KPN (NL) in hands of Mex mafia), electricity grid)