from Renewing America

WikiLeaks and Trade: A Healthy Dose of Sunshine

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June 3, 2015

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Blog posts represent the views of CFR fellows and staff and not those of CFR, which takes no institutional positions.

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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.

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