Don Quijones: Wikileaks Exposes How TISA Will Gut Financial Regulations All Over the World

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By Don Quijones, Spain & Mexico, editor at Wolf Street, who also writes at Raging Bull-Shit. Originally published at Wolf Street

It’s almost impossible to keep anything secret these days – not even the core text of a hyper-secret trade deal, the Trade in Services Agreement (TiSA), which has spent the last two years taking shape behind the hermetically sealed doors of highly secure locations around the world.

According to the agreement’s provisional text, the document is supposed to remain confidential and concealed from public view for at least five years after being signed! But now, thanks to WikiLeaks, it has seeped to the surface.

The Really, Really Good Friends of Services

TiSA is arguably the most important – yet least well-known – of the new generation of global trade agreements. According to WikiLeaks, it “is the largest component of the United States’ strategic ‘trade’ treaty triumvirate,” which also includes the Trans Pacific Partnership (TPP) and the TransAtlantic Trade and Investment Pact (TTIP).

“Together, the three treaties form not only a new legal order shaped for transnational corporations, but a new economic ‘grand enclosure,’ which excludes China and all other BRICS countries” declared WikiLeaks publisher Julian Assange in a press statement. If allowed to take universal effect, this new enclosure system will impose on all our governments a rigid framework of international corporate law designed to exclusively protect the interests of corporations, relieving them of financial risk, and social and environmental responsibility.

Thanks to an innocuous-sounding provision called the Investor-State Dispute Settlement, every investment they make will effectively be backstopped by our governments (and by extension, you and me); it will be too-big-to-fail writ on an unimaginable scale.

Yet it is a system that is almost universally supported by our political leaders. In the case of TiSA, it involves more countries than TTIP and TPP combined: The United States and all 28 members of the European Union, Australia, Canada, Chile, Colombia, Costa Rica, Hong Kong, Iceland, Israel, Japan, Liechtenstein, Mexico, New Zealand, Norway, Pakistan, Panama, Paraguay, Peru, South Korea, Switzerland, Taiwan and Turkey.

Together, these 52 nations form the charmingly named “Really Good Friends of Services” group, which represents almost 70% of all trade in services worldwide.

As WOLF STREET previously reported, one explicit goal of the TiSA negotiations is to overcome the exceptions in GATS that protect certain non-tariff trade barriers such as data protection. For example, the draft Financial Services Annex of TiSA, published by Wikileaks in June 2014, would allow financial institutions, such as banks, to transfer data freely, including personal data, from one country to another – in direct contravention of EU data protection laws.

But that is just the tip of the iceberg. According to the treaty’s Annex on Financial Services, we now know that TiSA would effectively strip signatory governments of all remaining ability to regulate the financial industry in the interest of depositors, small-time investors, or the public at large.

1. TiSA will restrict the ability of governments to limit systemic financial risks. TiSA’s sweeping market access rules conflict with commonsense financial regulations that apply equally to foreign and domestic firms. One of those rules means that any governments that seeks to place limits on the trading of derivative contracts — the largely unregulated weapons of mass financial destruction that helped trigger the 2007-08 Global Financial Crisis — could be dragged in front of corporate arbitration panels and forced to pay millions or billions in damages.

2. TiSA will force governments to “predict” all regulations that could at some point fall foul of TiSA. The leaked TISA text even prohibits policies that are “formally identical” for domestic and foreign firms if they inadvertently “modif[y] the conditions of competition” in favor of domestic firms:

For example, many governments require all banks to maintain a minimum amount of capital to guard against bank collapse. Even if the same minimum is required of domestic and foreign-owned banks alike, it could be construed as disproportionately impacting foreign-owned banks… This common financial protection could thus be challenged under TISA for “modifying the conditions of competition” in favor of domestic banks, despite governments’ prerogative to ensure the stability of foreign-owned banks operating in their territory.

3. TiSA will indefinitely bar new financial regulations that do not conform to deregulatory rules. Signatory governments will essentially agree not to apply new financial policy measures which in any way contradict the agreement’s emphasis on deregulatory measures.

4. TiSA will prohibit national governments from using capital controls to prevent or mitigate financial crises. As we are seeing in Greece right now, capital controls are terrible. But for a government facing the complete breakdown of the financial system, they serve as a last resort for restoring some semblance of order. Even the IMF, which urged countries to abandon capital controls in the Washington Consensus years of the 1990s, recently endorsed capital controls as a means of maintaining the stability of the financial system. But if TiSA is signed, the signatory governments will be prohibited from using them:

The leaked texts prohibit restrictions on financial inflows – used to prevent rapid currency appreciation, asset bubbles and other macroeconomic problems – and financial outflows, used to prevent sudden capital flight in times of crisis.

5. TiSA will require acceptance of financial products not yet invented. Despite the pivotal role that new, complex financial products played in the Financial Crisis, TISA would require governments to allow all new financial products and services, including ones not yet invented, to be sold within their territories.

6. TiSA will provide opportunities for financial firms to delay financial regulations. If signed, TISA will require governments to address financial firms’ criticism of a regulatory proposal when publishing a final version of the regulation. Even then, governments would be obliged to wait a “reasonable time” before allowing the new regulation to take effect. In the United States, such requirements have produced delays sometimes lasting years in the enactment of urgently needed financial and other safeguards. If the same process is applied across the globe, it would make it almost impossible for government to constrain the activities of the world’s largest banks.

What that would likely mean is that when (not if) a new global financial crisis takes place in the not-too-distant future, the banks will once again be on hand to lead efforts to clean up and rebuild with taxpayer money the very sector that they themselves have destroyed. Lather, rinse, repeat. Only this time, on an even grander scale./p>

Global banking behemoth HSBC is not having a good 2015. Now, is it just in dire financial straits? Read…  Does HSBC Know Something Other Banks Don’t?

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    1. different clue

      Pelosi would remind them that impeachment is still “off the table”. And the Congressional Black Caucus would call them “ray-ciss”.

      I could be wrong about that. It would be an interesting experiment for progressives to found and launch an Impeach Obama! movement and see where it goes, and see who objects.

  1. TG

    Bottom line: Obama is scum. When he retires to his McMansion, never forget how he betrayed us. If you see him in public boo and hiss. If someone mentions him stick two fingers down your throat.

    Hilary Clinton is scum. Ditto Jeb, Marco Rubio, Scott Walker, Ted Cruz, etc.

    Bernie! Trump! Unless you want to be a good little sheep…

    If you want to do something useful, check out how your senators/representative voted.

    Give them a call. Don’t forget. Don’t forgive.

  2. MyLessThanPrimeBeef

    Can a good nation-friend of services later decide to become a nation-non-friend?

    How does one ‘exit?’

  3. James Levy

    This has to be understood as a desperate rear-guard defense of America’s ability to skim off the cream, an ability that has been in effect since 1945 and which our economy is based on. It is not about Obama, per se: this is a last-gasp effort to keep our corporations and banks “on top”. With a narrow industrial base and a fading advantage in most technologies, this round of economic agreements is crucial to lock in existing advantages for as along as possible. America preaches competition, but its big players have no interest in competition. They have enjoyed all the advantages of scale, of massive government investment and subsidy, of controlling the worlds reserve currency, and of the muscle and guile of the US Intel racket and the US military. Now they need to completely rig the rules of “trade” in order to maintain their spectacular profitability and inflated stock prices. Any but the most radical of presidents would have seen this as being a “vital national interest” and pushed hard for it. Given the power of the players behind it, it was inevitable that we would get it. The only questions left are: How much damage will it do? How long will it endure? What will inevitably replace it?

      1. jsn

        The likely signitories are the self acknowledged imperial provinces. Of course they won’t say as much to their erstwhile electorates, but as Greece is learning signing this sort of treaty is a signature in the people’s blood. The people would NEVER sign. That’s what makes elites necessary.

      2. Vatch

        Similarly, why would the U.S. government sign this? Because our government, like most governments, is largely controlled by billionaires and hecto-millionaires, and they can expect to profit from the weakening of financial regulations.

        One of these years, people in the U.S. might actually succeed in regulating credit default swaps. We might restore the Glass Steagall separation between banking functions. TiSA will delay or prevent such threats to the profits of the ultra rich.

      3. Mark

        When a C130 lands in a country with pallets stacked to the ceiling with $100 dollar bills, courtesy of the CIA, it helps decision makers make the right decisions.

        1. Synoia

          Yes, and would one be remiss if one did not speculate that some of the aforementioned C130s arrived with fewer pallets than when they departed.

          I wonder about Rumsfeld’s and Bremer’s Swiss bank accounts.

    1. Chauncey Gardiner

      Excellent comment, James Levy. However, IMO the outcome you foresee ultimately will depend on continued voter apathy, and there is a growing recognition among voters of how massively We the People and representative democracy have been betrayed and undermined.

      Although no one can predict the future, I consider the Scottish referendum a possible bellwether should the Over Class continue to pursue their policies so in evidence in this leak and other leaked segments of these three documents.

    2. tegnost

      excellent observation, but although not all on O., he really drove the buggy hard to bring the loot home

    3. TedWa

      “Any but the most radical of presidents would have seen this as being a “vital national interest” and pushed hard for it.”

      I disagree. Making excuses for Obama’s betrayal of the Constitution and almost 250 years of hard fought and won independence is making an excuse for the elites coup of the our government. Think of all the blood spilt for the freedoms we have enjoyed up till now. Being a Constitutional scholar he, more than most, should know better, and more than most the blame should fall directly on him. He created Too Big To Fail when even Bush wanted strings attached to the bailouts. He alone is behind everything in these trade agreements including their secrecy. He alone has audaciously handed over the reigns of government to corporations and allowed them to write the laws. I think maybe your defense of Obama might spring from guilt over voting for him?
      No, as Black Agenda reports, he’s awesomely evil and full of guile and is selling us all out for personal gain. We really need to stop electing psychopaths (sociopath is too kind) to lead our nation. The Peace Prize President with a kill list and who lied non-stop to be elected must shoulder the blame for these egregious acts, and so must we for electing him.

      1. James Levy

        Tell me, would Jeb Bush, Marco Rubio, or Scott Walker do anything differently? Hillary? Do any of them question or oppose this deal in any meaningful way? And if, as you say, poor defenseless Dubya, who got his way time after time, wanted “strings attached to the bailouts”, then why no strings? Didn’t Paulson work for him? Didn’t the initial Congressional rejection of the bailout give him cover for making the banks accept whatever terms he wanted them to? How is this ALL Obama’s fault, as you try to make it out to be, if the facts I demonstrate are accurate?

        Obama sucks. He’s awful. But he is a creature of a system. Cut off the head, and a new Obama will grow on it. We can all wait for the outcome in 2016, but I will bet my bottom dollar the winner will not repudiate this trade agreement and will in fact work hard to make it do what I say it is intended to do: protect the profits of American-based banks, brokerage houses, and multinational corporations.

        1. roadrider

          And if, as you say, poor defenseless Dubya, who got his way time after time, wanted “strings attached to the bailouts”, then why no strings?

          Because he was on the way out, had already mentally checked out the job and the new Wall St darling, Obummer, was whipping for the “no strings attached” deal. Read Confidence Men by Suskind – its all in there.

          Of course its “not all Obama’s fault” and he is, after all, just a tool and a toady of the real power behind the system. But he was in a unique position to throw a very large monkey wrench into the works and decided that he would rather throw in with the banksters than with the people.

          Tell me, would Jeb Bush, Marco Rubio, or Scott Walker do anything differently? Hillary?

          Here you fall into the TINA trap. Why do you assume that that gallery of scumbags are the only ones who could be president? The fact that they are the most likely to win is not an answer. My retort to you is “would Jill Stein or Bernie Sanders do anything different?”

          If we merely acquiesce to the takeover of the political system by the financial elites then we have no defense. The only solution is to abandon lesser evilism and stop thinking of the quadrennial cycle of presidential politics which is now nothing more than infotaintment masquerading as something more serious as the answer.

        2. TedWa

          Why no strings attached? Because Bush left it up to Obama to choose when both candidates went back to help Bush with bailout negotiations, Obama ruled the room and insisted on no strings attached. It’s on video record.

          You’re missing the point. Obama is a Republican neo-liberal that ran as a progressive and would not have gotten elected without all the lies he was spouting. Very articulate and very persuasive, but all of it lies as we now know. We don’t know what Hillary would do, but my guess is she would have done things very differently. Obama out Republican’d the Republicans and I really don’t think she would have done that. This is not saying I’d ever vote for her or make a defense of her, just a statement of the facts as I understand them.

          The system was still Republican vs. Democrat for the most part until he got elected on pretenses. Now there is no distinguishing characteristics between the parties, except maybe on climate change.

          If you’re as sick of how things are, support someone that says they do not like any of these trade agreements, Bernie Sanders. The democratic party is nearly gone, when in reality it should be the Republican party fading into obscurity due to lies to get us into wars. ObamaBush does the same damn thing and he is why the Democrats are Democricans and detestable. He’s taken the party where it should not have gone and now there really is no difference between the 2. I voted for him in 2008 thinking we need to get rid of everything Bush and Cheney, instead he’s doubled down on their detestable deeds. I can think of no one more deserving of ridicule and scorn than that man. He should be impeached but not for the reasons the Republicans might want to impeach.

          1. Vatch

            “We don’t know what Hillary would do, but my guess is she would have done things very differently.”

            I’m curious; what reasons do you have for saying this? My impression is that she is extremely loyal to the billionaire class. It’s not an accident that the Rich and the Super Rich have donated so much to the Clinton Foundation.

            I agree with you about Sanders, and I agree with Roadrider about Stein and Sanders. I voted for Stein in 2012, and I recently sent a donation to Sanders. I also voted for Obama in 2008. Ugh.

            1. TedWa

              This wasn’t a question of the billionaire class, this was a lame duck Republican President who wanted strings attached to any bank bailouts. What democrat would have refused? Not even Hillary – if that is what the right and the President handing off the Presidency to her wanted. No question.

              1. TedWa

                Nevermind how great she would have looked to democrats when the press played it up while she was running. The press completely avoided Obama’s role in the bailouts, or hid it. Reminds me of the NYT (I think) holding back an article exposing the Bush administrations spying on Americans – which would probably have cost him the re-election
                We gettin played.

        3. different clue

          I suspect your view of the purpose of Obamatrade is obsolete. It is to protect the transnational Upper Classes and Over Classes whatever their domicile of convenience may be. It is to enshrine the profits and power of banks, brokerage houses, multinational corporations reGARDless of what “country” they “belong to”. Obamatrade is designed to degrade the whole working reality of “country”. Any country. Every country.

  4. sd

    Increasingly, this looks and sounds exactly like the New World Order tin foilers have always been afraid of.

    1. Vatch

      You are correct. Although the “Tin Foilers” aren’t the same as the Tea Partiers, there is overlap between the two groups. There’s also a surprising amount of similarity between Tea Partiers and Occupiers (Occupy Wall Street, etc.). Despite their differences, the people in these groups are deeply concerned about abuses by powerful organizations and individuals who are not accountable to the people.

  5. TedWa

    I’d say the intangible “war between the classes” we all grew up with has now become tangible.

  6. lifeislikeabeanstalk

    In light of the above it occurs to me that Greece’s vote today was similar to the US Congress vote re TARP. With the noticeable difference that Greece went straight to the people in a referendum – and the people voted ‘No’. With much thanks to the reporting and the raiders comments here at NC – it has been becoming increasingly of concern that Greece is a trial run for the rest of us. And while democracy – even in the face of the difficulties faced by the Greek people is working there, those who create public debt are tightening the noose (via the TSA) on the future.

  7. gordon

    Surely this has been around for 20 years or so. I seem to remember a trade in services agreement as part of the Uruguay Round, and that it attracted overwhelming opposition back then.

    1. Ignacio

      As I recall GATT negotiations were not secretive. This is not just another agreement but a step towards some kind of new global governance, and it does not look much democratic. Transparency is the core of democracy.

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