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UNNATURAL EBBS AND FLOWS IN GLOBAL BUSINESS PERHAPS THIS WILL MAKE
THERE IS AN UNWRITTEN CHAPTER IN HISTORY, ABOUT THE WAY IN WHICH THE
CLINTON, RUBIN, SUMMERS, GEITHNER URUGUAY ROUND OF THE GENERAL
AGREEMENT ON TARRIFS AND TRADE SOLD OUT THE U.S. MANUFACTURING BASE
IN FAVOR OF THE FINANCIAL SERVICES INDUSTRY.
IT WAS THIS AGREEMENT THAT DIRECTLY LED TO THE TOO BIG TO FAIL
PROBLEM AND IS AT THE ROOT OF BOTH THE GLOBAL FINANCIAL CRISIS AND
THE WEAK RECOVERY.
ONE WOULD THINK THAT FREE MARKET CAPITALISTS WOULD SEE HOW
SUPPORTING THESE INTERVENTIONS ARE ACTUALLY AN AFFRONT TO THE BEST
INTERESTS OF THE PUBLIC, AN ATTACK ON THE NATURAL DEVELOPMENT OF
MARKETS AND A SUPPORT TO THE DEVELOPMENT OF ANTI-COMPETITIVE
MONOPOLIES AND OLIGOPOLIES.
THIS IS IMPORTANT TO CONSIDER AS WE LOOK AT THE TRANS-PACIFIC
PARTNERSHIP. IT IS ALSO IMPORTANT THAT THE PUBLIC UNDERSTAND IF
HILARY CLINTON IS ON THE SAME PAGE AS HER HUSBAND REGARDING THESE
ARTIFICIAL TRADE AGREEMENTS THE CREATE DISEQUALIBREUM.
December 10, 1993, Friday
Seven Years Later: Deal Is Likely
BYLINE: Ron Scherer, Staff writer of The Christian Science Monitor
SECTION: ECONOMY; GATT OPENING GLOBAL MARKETS; Pg. 6
"But the financial services industry is unhappy that negotiators could not reach
agreement on when foreign banks will receive
nationaltreatm ent in a
country. ''How does the US
governm ent act at
is this poor
Citicorpe?''asks W illiam H aw ley,an offici
The apparent lack of progress is particularly galling because
sector, such as American Express and insurer
IG invested a lot of money and
political capital in the
''If the result is disappointing, the administration [will lose]
a lot ofbusiness
support when it takes the results to Congress, which must pass the implementing
legislation,'' Yeutter says."
WHAT THE GOODS ARE: "UNDERSTANDING ON COMMITMENTS IN FINANCIAL
A SMALL EXAMPLE:
"Notwithstanding Article XIII of the Agreement, each Member shall ensure that
financial service suppliers of any other Member established in its territory are
accorded most-favoured-nation treatment and national treatment as regards the
purchase or acquisition of financial services by public entities of the Member in its
"A Member shall permit financial service suppliers of any other Member
established in its territory to offer in its territory any new financial service. "
In 1975 Pan American, which was still there, and American International Group
(AIG) took a shot at trade in services. In 1979, I was in New York with the American
Express Company and was in charge of strategic planning and acquisitions. We were
having problems, which we now call market access problems (we did not have this
kind of terminology at that time), in thirty or forty countries. We had no remedy
under the trade laws or under the General Agreement on Tariffs and Trade (GATT),
which only covered goods.
To make a long story short, we decided that we would have to change that, which
meant starting a new round of trade negotiations including services. My boss, Jim
Robinson, chief executive ofﬁcer (CEO) of American Express, asked me to start a
new trade round as soon as possible. He asked, “How long will it take?” I said, “I
don’t know, ten years maybe. I don’t know. I have never done it. I am just reading
this book by Ken Dam called the GATT.”1He said, “Well, do it as soon as you can.” I
said, “I need some money.” He said, “Don’t worry about money. This is so important,
you will have an unlimited budget.” If there was one phrase that really pushed
trade and services that was it. We put a person in Brussels, a person in Tokyo, two
or three people in Washington, three people in New York, and so forth.
We enlisted the aid, which was really important, of Citicorp and also AIG. John Reed
came along a few years later as CEO. We had an alliance in which Jim Robinson of
American Express, John Reed, and Hank Greenberg of AIG were working together. I
was the go-between.
Having those three men with a lot of staff was the key. We went from zero
probability of success to having a chance. We went to the ministerial meeting in
1980, 1982, 1984, and 1986, and the Uruguay Round started.
The negotiations lasted an awfully long time. My colleagues in financial services
groups and advocacy groups here are calling for a three-year round. They should
remember that if the Uruguay Round had ended on time, services would have been
dropped. The round almost collapsed in 1990, and we finally got services in right
before 1993, at the end of the Uruguay Round.
One of the things that distinguish the American private sector from the rest of the
world again is its relationship to the media, which is very good. All kinds of events
are held with the U.S. media and sometimes the foreign media in attendance. This is
very, very important. We do not see this anywhere else in the world.
"In addition to pushing various bilateral agreements, 6 Greenberg and AIG were also
instrumental in pressuring for the 1986 Uruguay Round. Because of developing
country resistance, they couldn’t get the financial services negotiations done in time
for the single undertaking of the mid 1990s, and had to extend special sectoral
negotiations for several years. Summers and Timothy Geithner were instrumental in
working alongside the financial services industry to complete these talks, along with
the financial service-related aspects of China’s accession to the World Trade
In general, international talks on financial services liberalization advanced much
more rapidly than talks on prudential regulation, although the trade dimension
remains relatively isolated from the financial dimension in most advocacy and
regulatory circles, despite its powerful, binding dispute settlement mechanisms."
His firm, together with American Express, became the main domestic U.S.
constituents pushing for an expansion of the ambit of trade agreements into the way
that countries regulate their service sectors inside their borders. The goal was not
just national treatment, but the establishment of a regulatory ceiling globally. The
model was perfected in the United States, and then exported. One of their
consultants was the then-academic Larry Summers, and American Express said that
hiring Summers was the smartest thing he ever did. Greenberg and the AmEx CEO
provided their Washington lobby teams with a limitless amount of resources.4
------------REMEMBER, AFTER NEGOTIATING THE WTO GATTS ON FIN SVCS, TIM GEITHNER
WENT TO THE IMF AND THEN... HIS SELECTION TEAM FOR THE NY FED. THEY
WERE THOSE WHO LOBBIED FOR THE WTO GATTS AGREEMENT HE WON THEM:
Mr. Peterson was assisted in the search by an outside advisory committee with ties
to the New York Fed: Ann Fudge, Ellen Futter, Maurice R. Greenberg, Walter Shipley,
Paul Volcker, John Whitehead and Robert Wilmers. Search committee members, all
current members of the New York Fed's Board, are: Jill Considine, Loretta Lynch,
John Sexton, Jerry Speyer and Charles Wait.
Mr. Peterson also was advised by Robert Rubin, E. Gerald Corrigan, Lawrence
Summers, and Fred Bergsten. He also was assisted by Tom Neff, Chairman US of
LORI WALLACH: Yeah. This is actually a serious problem. So, most people don’t even
realize that the World Trade Organization has an agreement called the Financial
Services Agreement that explicitly applies to over a hundred countries and
mandates major deregulation. Just for instance, it has a rule that you cannot have a
domestic law, even if it applies equally to foreign and domestic companies, that
limits the size of a financial service firm—insurance, banking, securities. So when
everyone talks about putting into place rules about “too big to fail,” there’s a WTO
dictate that says you can’t do that. A lot of other really extreme deregulation rules.
That agreement was never brought to a vote in Congress, so a lot of members of
Congress have no idea it’s there.
Well, one interesting fact we found was, although Daddy Bush started negotiation,
Clinton is the one who locked it up. And it was actually Geithner, when he was in the
Treasury Department working for Robert Rubin during the Clinton administration,
who was the lead Clinton administration Treasury Department negotiator. So he is,
in a way, the guy who closed the deal. And so, he knows about it. He has to know
about the existing agreements. And so, theoretically, he should be the guy who’s
most aware of the perils, in the sense that he was part of the whole Clinton-era
deregulation, including domestically...
JUAN GONZALEZ: So, you’re saying, in effect, that if the Congress attempted, in one
way or other, to reinstitute a form of Glass-Steagall or to regulate the ability of—the
growth of these too-big-to-fail banks, that the United States could be running into
conflict with the World Trade Organization Financial Services Agreement?
LORI WALLACH: So this agreement was in 1999, which was at the peak of the sort of
lunacy for deregulation. So it, itself, the Financial Services Agreement, for instance,
has a rule that applies that you can’t regulate according to size. The US then took on
additional commitments, as did about thirty other countries, mainly rich ones, but a
couple of developing countries, and that’s called the Understanding on
Commitments in Financial Services. And that agreement is deregulation on steroids.
So the US actually has a specific WTO commitment that’s called “standstill,” and in
that commitment, we’ve agreed to basically lock ourselves into the place of
deregulation that we were in 1999.
Now, obviously, Congress is talking about re-regulating, but in our WTO
commitments, we’ve basically agreed, in the areas we’ve bound—and we’ve bound
everything. We did take one very important exception in the area of derivatives.
That would be for onion futures. We bound every other kind of security, stock,
derivatives, but we took a reservation for onion futures. It’s a really scary set of
limitations. Now, it’s obvious that there’s an imperative politically to re-regulate.
The question is, if sincerely there’s going to be re-regulation, this backdoor
deregulation has got to be closed. So the existing WTO rules have to be changed, and
obviously the Doha round’s further deregulation has to be stopped.
But a big part of this is, we need to make such a ruckus about it that basically a huge
spotlight is shined on the issue, because there are a lot of very powerful financial
service interests. By the way, they are the ones who wrote, largely, the Financial
Services Agreement, in cahoots with the government. There’s a book from an
American Express guy talking about how he and AIG and the others wrote these
rules. Those guys want more of the same. I mean, one of the agreements that we
found would be put into place automatically if the Doha round were adopted, as the
G-20 communiqué calls for, is a limit on accounting regulation, regulation of the
accounting sector, that was co-written by Arthur Andersen. I could not make this up.
This is actually the document. It’s done. And so, the last thing we need are these
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