How Does Global Financial Regulation Affect the Doha Round?
Question: World leaders at the G-20 Summit issued plans for reregulating the financial industry to help solve the economic crisis. Yet, bizarrely those same leaders will push for completion of the current WTO negotiations – called the Doha Round – which at its core calls for further financial services deregulation and pressures governments to limit their regulation of banks.
Just some of the WTO limitations many governments have placed on their financial regulatory policies are:
A ban on policies that limit the size of financial institutions (aimed at dealing with the too big to fail problem). A “standstill” on financial regulation of sectors already committed to WTO jurisdiction, so countries risk WTO challenges if they reregulate elements of the financial industry. Foreign firms must be allowed to offer any new financial product or services – no matter how risky – limiting the ability of countries to keep out harmful products, such as the credit default swaps and collateralized debt obligations that fueled the current financial crisis.
Moreover, the WTO Doha Round, the WTO expansion negotiations launched in 2001, has as one of the main elements of its agenda further financial service deregulation and liberalization. What is wrong w/these people?
Paul Solman: My guess is that completion of the Doha Round, if it’s ever to happen, will mainly involve trade “liberalization,” especially in agriculture, where the West has long protected its farmers at the expense of agriculture in emerging economies like Brazil. Considering how significant the “beggar-thy-neighbor” protectionism of the 1930s was thought to be in exacerbating the Great Depression, many economists think further trade agreements would be an encouraging development.
When the WTO met in May, there was scant talk of financial deregulation, from what I’ve read. That WAS part of the program, but I very much doubt that it is any longer. Remember, the Doha trade negotiations have many specific aspects to them; it’s not just a take-it-or-leave document.