The free trade agreements (FTAs) result in more unrestricted capital flows and financial services

http://www.thecornerhouse.org.uk/pdf/document/facilitate.pdf

The FTAs negotiated by the US and EU with developing countries also include a chapter on services and (sometimes a separate chapter on) investment. In the case of the EU's FTA negotiations with ACP countries in the Economic Partnership Agreements (EPAs) this results in GATS 'plus plus' as can be seen in the EPA signed between the EU and the Caribbean group (i.e. Cariforum States):

• because of GATS art. V, developing countries have to make quite substantial liberalisation commitments,
• the EPA includes elements which are not yet decided in the GATS negotiations or even elements which have been rejected in GATS negotiations,
• liberalisation of investment in non-services sectors is being subjected to the to the same rules as services investment, which include a hybrid mix of different GATS rules.

During FTA negotiations, the financial services sector is a major target of EU to achieve liberalisation. This can also be seen by the many articles on liberalisation of financial services in the FTAs the EU has signed with Chile and Mexico. The Caribbean EPA contains far reaching, sometimes modified[1], elements of the GATS Annex on financial services and the GATS Understanding on Commitments in Financial Services (see above).

During current FTA negotiations, the EU tries to introduce obligations on authorities to implement standards which would guarantee stability for their financial services sectors - an attempt which the Caribbean negotiators refused. The international standards which the EU wants to include in FTAs are many of those which are described in chapter 1 and which were hardly negotiated by developing countries, are:

• the Basel Committee's "Core Principle for Effective Banking Supervision",
• the International Association of Insurance Supervisors' "Insurance Core Principles",
• the International Organisation of Securities Commissions' "Objectives and Principles of Securities Regulation",
• the OECD's "Agreement on exchange of information on tax matters",
• the G20 "Statement on Transparency and exchange of information for tax purposes" and
  the Financial Action Task Force's "Forty Recommendations on Money Laundering" and
  "Nine Special recommendations on Terrorist Financing".

The Parties also take note of the "Ten Key Principles for Information Exchange" promulgated by the Finance Ministers of the G7 Nations, and will take all steps necessary to try to apply them in their bilateral contacts

Worrying restrictions to control capital flows
A very worrying aspect of the FTAs such as the Caribbean EPA is that it restricts even further the authorities' capacity to control capital flows. The rules go beyond what is being agreed in the GATS which already prohibits restrictions on all payments for current transactions in sectors which have been liberalised under GATS. It also goes further than what the Cotonou agreed about capital movements. However the Caribbean EPA -which is based on the model for all FTAs the EU is currently negotiating- goes further to:

• prohibit restrictions on all payments for current transactions between residents of the signatory countries,
• prohibit restrictions on the free movement of capital relating to direct investments with regard to transactions on the capital account of balance of payments,
• to require that measures ensuring the integrity and stability of a Party's financial system shall not be more burdensome than necessary to achieve their aim, and shall not discriminate against financial service suppliers of the other Party in comparison to its own like financial service suppliers,
• to limit the ways safeguard measures with regard to capital movements can be taken: only "in exceptional circumstances" when payments and capital movements between the Parties cause or threaten to cause serious difficulties for the operation of monetary policy or exchange rate policy in one or more [signatory States]; and only those safeguard measures with regard to capital movements "that are strictly necessary may be taken" for a period not exceeding six months.

Such rules prohibit countries to have the necessary flexibility to prevent a financial crisis or to act during times of financial crisis to protect the financial and other needs of the society of the host country. There are some provisions to deal with balance of payments problems, but these are made conditional.[2]

[1] For instance the rule in the Caribbean EPA on introducing new financial services is somewhat more nuanced than the GATS and stipulates: Each Party shall permit a financial service supplier of the other Party to provide any new financial service of a type similar to those services that the Party permits its own financial service suppliers to provide under its domestic law in like circumstances. A Party may determine the juridical form Š a decision shall be made within a reasonable time the authorisation may only be refused for prudential reasons is required

[2] See the Caribbean - EU EPA: Part VI - General And Final Provisions

Africans Should Confront ''Blind Governments'' on EPAs

The People Left Out!



By Stanley Kwenda



PHOTO: Sarah Mwandiyambira, a Zimbabwean cross-border trader

HARARE, Nov 11 (IPS) - African governments came under fire for ‘‘blindly’’ negotiating the controversial economic partnership agreements (EPAs) and not making an effort to educate ‘‘ordinary people’’ on what they were negotiating. (ROK's Note: Sounds Familiar?)

The politicians, who gather in Geneva for World Trade Organisation (WTO) meetings and in Brussels for EPA talks, should know that they are there on behalf of their citizens and not themselves, said Rangarirai Machemedze, director of the Southern and Eastern African Trade Information and Negotiations Institute (SEATINI). SEATINI helps to build African capacity in world trade talks.

IPS interviewed him at a ‘‘reflective meeting on the state of the economy and sustainable alternatives’’, held last week by the Zimbabwe Coalition on Debt and Development (ZIMCODD) in Zimbabwe’s capital Harare. ZIMCODD is a coalition of like-minded Zimbabwean civil society organisations working in the field of trade and economic development. ‘‘Resources permitting, we need to educate people on what their governments are negotiating for them,’’ Machemedze told IPS.

ZIMCODD is holding meetings in an attempt to step into the breach. ‘‘This meeting is meant to basically try and give participants a clear picture as to how a country's economy operates within the global economy. We want to help them understand and give them a clear picture of the global market place,’’ Dakarayi Matanga, ZIMCODD’s director, told IPS.

One of these people is Sarah Mwandiyambira, a Zimbabwean cross-border trader. She had heard about EPAs before but had not had a chance to get a proper explanation in order to understand what they are and what they really stand for. At one time she was close to her tears after she was given the lowdown on how the EPAs will work once they are signed into binding instruments by the European Union (EU) and African countries.

‘‘This is scary. Something must be done to stop the EPAs. I am only a single woman who survives on cross-border trade to send my children to school.’’ The EPAs have been criticised for opening African countries’ markets too quickly to products from the EU, thereby destroying local production – whether agricultural or industrial.

The EU’s efforts to impose new issues such as equal treatment of foreign and local companies when it comes to government procurement, the liberalisation of services, and other issues, have also drawn protest. Said Mwandiyambira, ‘‘I can't believe this is what our governments are negotiating for us. I believe if all Zimbabweans are to be educated on these EPAs they will disapprove of them. They are only there to take away our economic means.

After these discussions I can tell you that this is a very serious issue which we are taking lightly as Africans.’’ Another participant, Sekai Saungweme, a legal and research consultant based in Harare, was left fuming at the Zimbabwean government after gaining an understanding of what the EPAs are all about: ‘‘It's a very sad scenario and one wonders what our governments are getting into. What was on their minds when they initialled the EPAs? Why did they initial such a flawed deal?’’

Machemedze urged African governments to establish a common togetherness when approaching the negotiations, which have been provisionally signed but are still to be finalised. African governments are not doing what they should be doing, Machemedze insisted.

He also blames European governments and other Western powers of using divisive tactics and the carrot and stick approach in trade talks. ‘‘It's a colonial problem. The powerful nations use divide and rule tactics. For example, if an African country is seeking funding for a dam project then that country is told that if you want funding then you must support EPAs,’’ alleged Machemedze, who has been attending trade negotiation meetings over the past four years.

‘‘Midnight calls are the order of the day at these meetings. There are no fair negotiations. There are visits to the hotel rooms of African negotiators at night where they are promised all kinds of aid.’’

Machemedze also contends that even with the existence of an arbitration court at the WTO, African countries will not be able to take on European countries because of the sheer amount of resources that such cases demand.

He believes that Zimbabwe ‘‘should delink itself from international trade. People might say we are in a global village but what has Africa benefited from it? We have to build our local markets first and then trade on a scale that we can sustain. He suggested that African countries should strengthen their local markets and then try and establish trade links with emerging economic giants such as Brazil, Argentina and India.

"At least they can identify with these emerging economies and learn from these countries,’’ Machemedze concluded. (END/2008)

Source: http://www.ipsnews.net/news.asp?idnews=44652