To: Organizations addressing Trade-Finance Linkages

1) Tax justice compromised by trade and investment

liberalization

2) Deadline May 13: Registration for World Conference on

Financial and Economic Crisis

3) Draft Outcome Document for Conference on Financial and

Economic Crisis available

4) WTO questions impact of GATS on financial crisis

5) Incipient but worrisome trends on trade protection, says

World Bank

6) London Summit anti-protectionist pledges rapidly become

dead letter

7) OECD claims mandate to follow up on G20 trade-finance

commitments

1) Tax justice compromised by trade and investment liberalization

"The fiscal impacts of trade liberalization", a chapter in the recently published

book "Tax Justice: Putting Global Inequality on the Agenda," seeks to offer
guidance and insights for governments to review the rules of trade - within or
outside agreements - that are in their interest to implement, having very
especially in mind the impacts on public finances.

The new book features contributions by several members of the Tax Justice
Network and was edited by Matti Kohonen and Francine Mestrum.

In a chapter devoted to the tax justice perspective in trade and investment

liberalization, author Aldo Caliari argues that structural adjustment
programmes, which became prevalent in most of the developing world from
the early 1980s, were based on an export-led growth paradigm that went hand
in hand with the downsizing of the state and, correlatively, its finances. But this
model predicated, at the same time, fiscal austerity, that is, states should
spend within their means. This philosophy lingered on as structural adjustment
policies were crystallised in a growing number of trade and investment
agreements.
However, developing countries typically rely on trade-related tariffs and taxes
to finance an average of 30 per cent of their budgets. As these sources of
revenue became a target in processes of trade and investment liberalisation in
countries that have limited capacity to collect the same revenue from other
taxes, contradictions began to emerge. Just as it seemed the export-led
growth was heading towards solidification, the contradiction between such
policies and the objectives of fiscal soundness became more marked.

The author makes its case by giving a thorough review of the impacts of a
number of trade and investment policies and rules contained in agreements on
the income and expenditure aspects of public finances.

The concluding section states "There is certainly a critique of export-led

growth and fiscal austerity policies on bases other than their internal logic - for
instance, their impact on workers' rights, the environment, or even growth
effectiveness itself. But while the model offered a solid internal logic the
challenging voices in the debate were hard to hear. The emerging internal
contradictions have, thus, played a critical role in helping trigger calls for a full
re-examination of the model and its eventual unravelling."

Read the book's Table of Contents at

http://www.coc.org/system/files/Tax+Justice-Table+of+contents.pdf

See the cover at http://www.coc.org/system/files/Tax+Justice-Cover.pdf

To order the book visit http://us.macmillan.com/taxjustice

A free copy of the full chapter contributed by Rethinking Bretton Woods

Project is available at http://www.coc.org/system/files/Tax+Justice-
Chapter+6.pdf (this contribution is being provided separately and free of
charge with permission by the copyright owners. Its reproduction is permitted
as long as it is appropriately quoted.)

2) Deadline May 13: Registration for World Conference on Financial and

Economic Crisis
(communication circulated on behalf of NGLS)

Dear Colleague,

NGLS has launched the registration process for civil society participation in the
UN Conference on the World Financial and Economic Crisis and its Impact on
Development which will take place at UN Headquarters in New York from 1-3
June 2009. All civil organizations previously accredited to the Financing for
Development process or in consultative status with ECOSOC are allowed to
attend. In order to attend, please complete the registration form as soon as
possible as the Conference is fast approaching.

The registration deadline is 13 May 2009. The form can be found at:
http://www.un-ngls.org/juneconference

More information on the background of the June Conference can be found in

the first issue of the NGLS Bulletin here: http://www.un-
ngls.org/spip.php?article950

Other useful information can be found on the website of the President of the
General Assembly at:
http://www.un.org/ga/president/63/interactive/uneconference.shtml

Kind regards,
NGLS

3) Draft Outcome document for Conference on Financial and Economic

Crisis available

At a session convened last Friday the President of the General Assembly

introduced first draft of the Outcome Document of the World Conference on
Financial and Economic Crisis, to be held in June 1-3. (document is available
at
http://www.un.org/ga/president/63/interactive/financialcrisis/outcomedoc.pdf)

The statement by the President of the General Assembly when introducing the
document is available at
http://www.un.org/ga/president/63/statements/onprepconference80509.shtml

4) WTO questions impact of GATS on financial crisis

The article below first appeared in the issue number 6678 of SUNS (April 8
2009), and is reproduced here with the kind permission of its editors.

Trade: Financial crisis not due to GATS liberalisation, says WTO official
Geneva, 8 Apr (Kanaga Raja) - The root causes of the current financial crisis
are not due to market access and national treatment commitments, but rather
due to a set of factors ranging from macro-economic imbalances, market
innovation and development of sophisticated complex financial products, and
regulatory shortcomings that did not address these, according to Mr. Hamid
Mamdouh, Director of the Trade in Services Division of the World Trade
Organization.

Mamdouh told a media briefing Monday that this was among the points that
emerged out of the discussions at a workshop commemorating the tenth
anniversary of the 1997 Financial Services Agreement. The workshop was
among the cluster of meetings in the services week from 30 March to 6 April
held at the WTO.

The agenda of the cluster of meetings, Mamdouh said, had been broadened to
bring into focus issues other than the request-offer and rule-making
negotiations within the Doha Development Agenda.

At the media briefing to report on the week of talks, Mamdouh said that
Members started focusing more and giving more attention to the regular work
of the Council for Trade in Services and its subsidiary bodies.

For the regular Council, he said, Members saw that it was time to start looking
again at the policy and regulatory issues in various sectors and have agreed
that the Council would conduct a series of sectoral discussions based on
Secretariat background notes. The Secretariat will be producing around twenty
background notes looking at the various sectors.

As to the Special Session of the Council which met on 6 April, the WTO official
said that Members were of the view that this cluster of meetings was
extremely useful. It was more of a GATS cluster than a Doha Development
Agenda (DDA) cluster. There was considerable will to pay more attention to
the regular services agenda of the WTO.

Mamdouh also said that Members welcomed the programme of sectoral

discussions which will be taking place in the regular Council on the basis of
background Secretariat papers and submissions from delegations focusing on
policy and regulatory issues in various services sectors.

Members at the Special Session also welcomed the monitoring function which
WTO Director-General Pascal Lamy initiated in December and stressed the
importance of that function in relation to trade in services-related measures.
They also stressed the importance of agreeing on a mechanism to extend
preferences to the Least Developed Countries.

Providing some background to the current situation in the services

negotiations, Mamdouh said that there hasn't been any negotiating meetings
on services since July 2008 and that the approach to the services negotiations
continued to be one of anticipation for the agriculture and non-agricultural
market access (NAMA) modalities to be adopted.

He said that after the Signalling Conference last July and the services
negotiations Chair's text, it was very difficult to take things forward without
progress on the other fronts of the Doha Development Agenda.

However, with the start of the new year, there was a sense among Members
that silence on the services negotiations in relation to the Doha Development
Agenda has been continuing for too long. And that was why it was decided
that a cluster of services meetings would take place, beginning on 30 March.

On the Secretariat producing some twenty background notes, Mamdouh said

that it was an exercise that took place about ten years ago, and in that time, a
lot has happened. Members feel that this is an appropriate time to do that
exercise again, as a lot has happened in terms of developments in the various
sectors, ways of doing business, and developments on the technological front.

He added that the role of government is now coming increasingly under focus,
in terms of the regulatory responsibilities of governments and how best they
should be performed. This kind of debate was raised mainly in the financial
sector, in the second half of 2008, but it is a perspective that is expanding
beyond the financial sector within the services sphere.

He was of the view that this is going to provide the services Council with a
very substantive programme of work for the coming year.

He also noted that there is a lot of attention being given to the monitoring
function - in terms of monitoring measures taken by governments in the wake
of the financial and economic crisis - that the WTO Director-General has been
emphasizing since December.

According to the WTO official, although this is a Trade Policy Review Body
(TPRB) function and the Director-General's report on measures taken by the
Members is discussed in the TPRB, it was emphasized that the fact that it is
discussed in the TPRB should not prevent any subsequent discussion within
the services Council or its subsidiary bodies of any of the measures.

He said that there was also the feeling that Members wanted to make sure
that the regular functions of the services Council and its subsidiary bodies
were brought back to focus and revived again - which has not been getting a
lot of attention over the past few years because of the almost exclusive focus
on the Doha Development Agenda.

At his briefing, Mamdouh also referred to the workshop that took place last
week to commemorate the tenth anniversary of the fifth protocol to the GATS,
which was the outcome of the financial services negotiations that was
extended beyond the Uruguay Round and was concluded in December 1997,
and entered into force on 1 March 1999.

He described it as a particularly significant event as it provided a lot of

perspective for what is happening now, and said that it reminded Members of
the achievement framed in that fifth protocol, particularly since the negotiations
were concluded in December 1997, six months after the financial market crisis
had erupted in South East Asia in July of the same year.

It was a period during which a lot of discussions had taken place

internationally about the root causes of the crisis and the relationship between
the reasons for the crisis and the liberalisation and opening of financial
markets.

"And at that time, most of the conclusions came out highlighting that the
financial crises were due to the lack of adequate regulations, or where
regulations existed, they were not enforced rigorously."

The conclusion also came out then, Mamdouh said, "that opening financial
markets for competition was a factor of stability", and not instability due to the
confidence that liberalisation brings to financial markets.

"It was very interesting to see those perspectives repeated last week (in the
workshop)," he added.

While we are experiencing new financial crisis of a different magnitude and

there are some qualitative differences also between the financial market crisis
ten to twelve years ago and this crisis, there are also similarities, particularly
when it comes to relating the crisis to the GATS negotiations and the interface
between the two sets of issues, Mamdouh said.

He highlighted a couple of points that he said emerged from the workshop.

First was that the root causes of the crisis this time around actually lie mainly
in a set of conditions ranging from macro-economic imbalances to financial
and monetary policies, to market innovation and the development of
sophisticated complex financial products, to rating agencies and how they
performed.

And most importantly was the regulatory shortcomings which did not address
effectively the way risk was managed in financial markets, and the way in
which products were approved and rated.

"There was also the point that making commitments under the GATS on
market access and national treatment would not stand in the way of
addressing the root causes of the financial crisis," said Mamdouh.

"Market access and national treatment commitments were not one of the root
causes of the crisis... This is one of the points that emerged out of the
discussion in the workshop," he maintained.
Mamdouh said that liberalisation as defined in the GATS has a very specific
meaning, and doesn't mean deregulation. This point, namely that liberalisation
under the GATS does not mean deregulation, was stressed (in the workshop).
As you liberalise, you need to regulate more. That was one thing on which
there was universal agreement, not just in this workshop, but in general.

Liberalisation under the GATS means two things, explained the WTO official,
in that you grant access to foreign financial service suppliers and you don't
discriminate against them. But you grant them access under exactly the same
conditions that you allow your own financial operators to operate.

Giving them access on a non-discriminatory basis does not in any way restrict
your ability to regulate your financial markets with respect to how risk should
be managed, how products should be approved, how products should be
rated, how financial institutions should spread their risk and manage their
investments. All these regulatory functions are not restricted or inhibited in any
way by your commitments under the GATS, he said.

Mamdouh said that the bottom line to all this is also that even if you need to
take actions that would contradict with your GATS commitments, there is what
is called the "prudential carve-out", which is a specific exception in the GATS
that allows Members to deviate from their obligations and commitments in
order to take measures for prudential reasons - measures designed to protect
depositors, policy holders, any person to whom a fiduciary duty is owed.

According to Mamdouh, that was one of the interesting features highlighted in

the workshop. He added that there was no finger pointing at the workshop or
analysis of any particular country on what it is doing.

Asked whether the notion that market access commitments did not trigger the
financial crisis was challenged by any delegation, Mamdouh maintained that
nobody challenged the conclusion that liberalisation as defined in the GATS
was not one of the root causes of this crisis. "And nobody challenged that
conclusion."

Trade experts noted that under the DSU, signatories to the Fifth protocol have
obligations to abide both by GATS rules and their commitments, in terms of
the Financial Services agreement and their schedules. It was not clear from
Mamdouh's comments and explanations whether his remarks (about
liberalization, market access and national treatment and that these did not
preclude regulations) applied only to the provisions of the GATS, or also to the
market access, provided under the Fifth protocol, by some 30 (developed)
WTO members who signed on to the 'Understanding on Commitments in
Financial Services', in scheduling commitments.

In the current Doha negotiations, and in its financial services talks, a number
of Members (like Switzerland etc) have asked developing countries to
undertake commitments in accordance with the Understanding.

Among others, the Understanding provides for a Standstill, requiring that any
conditions, limitations and qualifications to the commitments are to be limited
to "existing non-conforming measures."

The commitments referred to include those on supply through commercial

presence and introduction of new financial services - a term that seems to
cover a variety of derivative instruments that has brought the US financial
systems to this pass, including the collapse of Lehman Brothers, the current
efforts to rescue AIG insurance, and through it, several of the big-name Wall
Street and European banks that are counter-parties.

It was not clear from the media briefing whether at the workshop, or at the
cluster of meetings, these issues had been discussed.

5) Incipient but worrisome trends on trade protection, says World Bank

The World Bank has released "Trade Protection: Incipient but Worrisome
Trends," a Trade Policy Note. The Note, number 37 in the series and written
by Richard Newfarmer and Elisa Gamberoni, addresses the rising
protectionism tendencies around the world.

Summary:

With the current global economy crisis, political pressures demanding

protection are surfacing with increasing intensity around the world. Even
though G-20 leaders signed on November 15, 2008 to avoid these
protectionist measures, the trend in protection is increasing.

Several countries have adopted new protectionist measures. According to the

World Bank's monitoring, the trade effects of these measures are difficult to
evaluate because of the prevalence of non-tariff border measures, subsidies
and contingent protection. A remarkable trend emerging from these actions is
the reliance of developed countries on subsidies rather than border barriers,
while developing countries have deployed all forms of protection.

Increasing anti-dumping actions is another trend in the current economic

crisis. Developing countries accounted for the majority of initiations, though
developed countries accounted for the greatest number of duty impositions.

Trend in agriculture, finance and labor movement also deserve watching.

Protection to agriculture may not require new measures because existing laws
automatically provide increases in subsidies with declines in agricultural
prices. Also, in the financial sector, all nations have focused their financial
subsidies on domestically-owned banks rather than subsidiaries of foreign
banks. In addition, workers in some countries have campaigned for increased
restrictions on foreign labor.

The "Buy America" clauses attached to the US stimulus bill also generated a
storm in this global downturn. In late January, the US House of
Representatives passed a stimulus bill that would provide a 25 percent
competitive margin for US iron and steel for all expenditures under the bill and
several governments objected forcefully to the provisions.

However, several factors have clearly muted protectionist pressures, and

distinguish this global downturn from the pressures of the 1930s. Because of
the quite different political economy today, a few proposed restrictions have
been rejected or not enacted. Similarly, the more egregious forms of the Buy
America provision appear to have been circumvented. Moreover, changes in
trade policies involved steps toward greater liberalization, mostly related to
free trade agreements.

In order to cope with further protectionism, forceful leadership is required. The

Bank argues that the G-20, for its part, could adopt additional measures that
would strengthen the fragile consensus against protectionism.

Full paper is posted at

http://siteresources.worldbank.org/NEWS/Resources/Trade_Note_37.pdf

6) London Summit anti-protectionist pledges rapidly become dead letter

The World Bank has developed a Fact sheet on Trade Protectionist actions by
G20 countries since April 2 (and up to April 23). For being an account only of
measures after such date, the list is surprisingly long. In fact, the period
excludes the more than 47 protectionist measures that 17 G20 members had
implemented after their previous pledge in November 15, and shows the new
commitment made in London has not made much of a difference.

It is worth noting that, in the spirit of the G20 commitment by all members to
avoid implementing new trade barriers, the note seems to attribute equal
weight to protectionist measures by both developing and developed countries
that are part of the group. This is in spite of the fact that there are huge
differences in the capacity of G20 members to respond to the crisis. While
some countries are able to resort to issuing large amounts of debt to subsidize
industries and sectors affected by continued openness of markets, the
capacity of others to protect such stakeholders through financial measures
and subsidies is limited in a credit-constrained environment (not the smallest
constraint is the issuance of debt by large industrialized countries !)

The full fact sheet is available at

http://www.worldbank.org/html/extdr/financialcrisis/pdf/G20TradeFactSheet.pdf

7) OECD claims mandate to follow up on G20 trade-finance commitments

On April 24, OECD members that provide official export credit, alongside some
non-OECD countries (e.g. Estonia, Brazil and China) and multilateral financial
institutions (including IFC, the World Bank, the IMF and the WTO) issued a
statement on "The global financial crisis and export credits."

The statement, among other things, welcomes the G20 communique commitment
"to ensure availability of at least $250 billion over the next two years to support
trade finance through export credit and investment agencies and through the
Multilateral Development Banks" and says that a recovery of world trade flows is a
vital component in the broader recovery of the international economy and achieving
sustainable growth.

The governments and participating institutions recognise the need for a

coordinated approach to implementation and agreed to meet regularly in the OECD
to exchange information on the measures they are taking in support of the G-20
trade finance initiative.

The full statement can be found at

http://www.oecd.org/dataoecd/51/22/42624233.pdf

Aldo Caliari
Director
Rethinking Bretton Woods Project
Center of Concern