PSI blog on the Financial Crisis

Canada-European Union free trade agreement would put corporate interests ahead of environmental, public governance and workers’ rights

Draft details of the proposed Comprehensive Economic and Trade Agreement (CETA) were jointly released this week by Public Services International and the European Federation of Public Service Unions, working with union affiliates and civil service organizations in the Canadian Trade Justice Network.

While Canadian companies are mostly interested in reducing European regulatory barriers to entry for products like meat and genetically modified crops, European companies see Canada's public services, including water treatment, transportation, energy and even health care, as ripe for privatisation.

Because these services are often delivered through public spending at the provincial and municipal level, the EU is also pushing to liberalize local procurement rules, which will weaken democratic controls over how communities spend public money.

Commitments to sustainable development in existing Canadian and European trade agreements, as well as those under negotiation, do little to ensure the highest protection of our air, earth and water from corporate activity. These agreements go out of their way to protect investors from burdensome regulations. A fundamental policy shift is needed in Canada and Europe that places environmental, public health and human rights concerns above the limited interests of corporations.

Labour Rights: An agreement on labour issues will be meaningless if workers’ rights are corroded by investor-rights provisions, relegated to a side agreement, and defended by sanctions that are non-binding and not enforceable. Investors should be required to abide by the highest standards. Workers’ organizations must be included in economic and social decision-making. Any comprehensive agreement must commit to raise labour standards and strengthen inspection and enforcement mechanisms for labour law, especially with respect to migrant workers and others facing precarious economic and social situations.

Protection for public services: Any agreement should fully protect public services as delivered by the current system, as well as the ability to create new public services, without reservation, and without negative impacts from a trade agreement.

The right to regulate: There should be complete reservation of the right to domestic regulation regarding public services, culture, finance, public health and the environment.

Public procurement is a public right: The agreement should not include any commitment to open or liberalize public procurement, particularly at the municipal level. Local governments must retain the policy space they need to use public money in support of sustainable local economic development. Canada and all the EU Member States need to ratify ILO Convention No. 94 on social clauses in public procurement.

Text of the CETA document, plus analysis fact sheets can be found at:
www.tradejustice.ca (English)   www.commercejuste.ca (French)

Taxing financial transactions

Kimmo Kiljunen, a Finnish member of parliament, has written the following article for PSI Focus issue 16-02. The full Focus on Public Services magazine can be accessed here: www.world-psi.org/focus

The global financial crisis has led to the worst economic downturn since the Depression of the 1920s. Governments have called on taxpayers to save the system, but many people are asking who should really be paying the bill.

Over the past 30 years, financial innovations, in particular derivative instruments of all kinds, have contributed to spectacular increases in turnover in all asset markets. At the same time, exchange rates, stock prices and commodity prices have undergone wide swings, providing the basis for speculative short-term capital flows. Today, the volume of currency transactions and interest rate speculation is many times greater than the volume of trade in goods and services or of exchanges of real stocks or investments. The entire economic system has become very vulnerable, and we are now all paying the price.

No wonder, then, that there is a renewed interest in the Tobin tax, and in particular the broader family of financial transaction taxes. The European Parliament recently adopted a resolution welcoming the G20 leaders’ agreement to work towards an international framework for taxing financial transactions. For many idealists this is close to a miracle. Just two years ago, the introduction of a Tobin tax was something they could only dream about. Now, even that is seen to be too limited, since it would apply only to currency transactions.

Everyone who has followed the financial crisis now acknowledges that continuing ‘business as usual’ is not an option. We have witnessed a systemic crisis. Now we need new regulatory mechanisms and firm governance of financial markets. We need much greater accountability and transparency. We need to shut down tax havens and eliminate legalised tax evasion. In particular, we need to tax all financial transactions.

Is it not strange that there are turnover taxes on all forms of trade, except in the one commodity that is traded most extensively – money!

There are many arguments in favour of financial transaction taxes. They would, for example,
• ensure a fairer sharing of the burden of taxation, by ensuring that the financial sector pays for bailing out the financial system, and not only taxpayers;
• improve the stability of the financial system by helping to shift the incentives for speculators away from short-term gains towards longer-term investments;
• raise revenues for public spending – there is huge potential to generate resources for public spending that has been hidden in the financial sector; and
• improve accountability and transparency, by providing a means of overseeing financial transactions, just as turnover taxes allow for supervision of trade in goods and services. The lack of financial oversight has been one of the key causes of the current crisis.

Such taxes would be progressive and therefore fair. By taxing transactions in stock, bond, currency exchange and derivatives markets, they would be targeting the loosest money belonging to the rich. Since almost all financial transactions are now done electronically, the taxes would be relatively cheap and easy to collect.

Above all, they would be next to impossible to avoid, as long as there is a collective will to impose them. It is our task to generate this will. Financial transaction taxes are undoubtedly the taxes of the future.  

UNCTAD Trade and Development Report 2009

The Trade and Development Report 2009 presents a gloomy global economic outlook in the context of the ongoing global financial and economic crisis. It looks at the channels through which this deep crisis, which originated in developed countries, is spreading to developing and transition economies: through financial flows, international trade and commodity prices, migrants´ remittances and external debt.

 

The Trade and Development Report 2009 examines in some detail the short-term policy responses taken to tackle the immediate effects of this crisis. These include fiscal stimulus packages, monetary policy easing, and support for ailing financial institutions. Monetary easing and large bailout operations may have prevented a meltdown of the financial system, but they have been insufficient to revive global demand and halt rising unemployment. Countercyclical fiscal policy measures that have a direct effect on aggregate demand should be reinforced, in a coordinated global manner.

 

In analysing the causes of the crisis, the Trade and Development Report 2009 focuses on the role of excessive risk-taking made possible by financial deregulation and innovation in obscure financial instruments. It highlights the problem of the predominance of financial markets over the fundamentals of the real economy. The experience with this crisis proves that free financial markets do not lead to optimal social and macroeconomic outcomes, and suggests that the relationship between the State and market forces needs to be fundamentally reviewed. The Trade and Development Report 2009 discusses why and how the overall effectiveness of strengthened financial regulation will depend on the way in which measures for financial reform at the national level are combined with a reform of the international monetary and financial system.

More here: http://www.unctad.org/Templates/webflyer.asp?docid=11911&intItemID=3492&lang=1

APEC Business Advisory Council supports a conclusion of the Doha Round but warns of risks to WTO's relevance

The APEC Business Advisory Council (ABAC) has warned that business interest in the multilateral process is waning and that the WTO may be perceived as less relevant, if a conclusion to the Doha Round is further delayed.

Earlier this week, ABAC members met with WTO Ambassadors and Director-General Pascal Lamy in Geneva, to express their support for a rapid conclusion of Doha and to convey their strong belief in the primacy of the multilateral trading system.

While business generally supports the multilateral process and the WTO, explains Tony Nowell, ABAC Liberalization Working Group Chairman, scepticism has been steadily rising because of the widening gap between rhetoric and action.

Conversely, he says, support has been growing for the establishment of a Free Trade Area of the Asia-Pacific (FTAAP). APEC Leaders have instructed officials to develop specific recommendations for moving forward on an FTAAP, an idea espoused by ABAC since 2006.

More here: http://www.apec.org/apec/news___media/media_releases/20091015_abac_doha.html

Asean+6 to create world's biggest economic bloc

Asean and its six major trading partners reaffirmed their resolve to create the world's largest economic bloc through the "East Asia Free Trade Agreement" and "Comprehen-sive Economic Partnership in East Asia" within 15 years.

The consensus to move forward with economic integration was a successful climax to the four-day Asean Economic Ministers (AEM) meeting under Asean+3 (China, Japan and South Korea) and Asean+6 (Asean+3 and India, Australia and New Zealand).

The 16 member countries will lead the region to pass the US and European Union in becoming independent economic zones. The achievement in the future will not only strengthen their regional trade relations but also wean them from imports from outside the region.

Full text from The Nation here: http://www.nationmultimedia.com/2009/08/17/business/business_30109929.php

Abandon "lunatic idea" of further deregulation of services trade

The leaders of the Group of 20, at their summit meeting in Pittsburgh (USA), must commit themselves to reform of the World Trade Organization to build financial stability, and pull the plug on the "lunatic idea" of further deregulation of the services trade and in particular, of trade in financial services on the Doha Round agenda.

In a report, "No Meaningful Safeguards for Prudential Measures in World Trade Organization's Financial Service Deregulation Agreements," released on the eve of the Pittsburgh summit, the Washington-based Public Citizen challenged the view of the WTO officials and proponents of the WTO that GATS only calls for liberalisation of trade in financial services, and not deregulation, or that the "prudential carve-out" in the GATS Financial Services Annex provides a safe harbour against regulatory challenges.

Read more here: http://www.twnside.org.sg/title2/wto.info/2009/twninfo20090921.htm

Doing Business 2010: World Bank Discourages Extension of Social Protection

The ITUC issued a communiqué criticizing the 2010 edition of the World Bank's Doing Business report, which was published Wednesday.

Even though the World Bank has endorsed improved social safety nets to protect the millions of workers who have lost their jobs due to the global economic crisis, the latest edition of the Bank’s highest circulation publication discourages countries from adopting social protection schemes by designating governments that do so as anti-business. Doing Business 2010, launched today by the World Bank, also recommends that countries should reduce severance pay for dismissed workers and reduce or eliminate requirements for prior notice about job cuts.

Here is the web link to the English ITUC's communiqué. "Doing Business 2010: World Bank Discourages Extension of Social Protection":

http://www.ituc-csi.org/spip.php?article4275&lang=en

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La CSI a émis un communiqué critiquant l'édition 2010 du rapport « Doing Business » de la Banque mondiale, qui fut publiée mercredi. Pour la version française du communiqué cliquez sur le lien électronique. « Doing Business 2010 : La Banque mondiale décourage l’extension de la protection sociale »: http://www.ituc-csi.org/spip.php?article4276&lang=fr

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A continuación se encuentra el enlace para el comunicado publicado por la CSI criticando la edición 2010 del informe "Doing Buisness", que fue publicada el día miércoles por el Banco Mundial. Hagan clic aquí para la versión española de "Doing Business 2010 – El Banco Mundial desaconseja la ampliación de la protección social": http://www.ituc-csi.org/spip.php?article4277&lang=es

It's business as usual: the World Bank says that increased social protection schemes are anti-business

The "Doing Business 2010" report contradicts the World Bank reiterated endorsement of improved social safety nets and continues discouraging workers' protection against job losses says an article that appeared on the Website of the International Metalworkers’ Federation (IMF).

Read full text here: http://www.imfmetal.org/index.cfm?l=2&c=20622&nb=2

Tri-national union declaration on NAFTA

Trade unions representing workers from Canada (Candian Labour Congress), Mexico (UNT) and the US (AFL-CIO) have published a joint declaration on the occasion of the NAFTA Leaders Summit held in Guadalajara, Mexico, 9-10 August 2009.

Over the last fifteen years, NAFTA has been presented as a way to bring more and better jobs to the region while reducing emigration from Mexico to the United States and Canada. However, NAFTA did not create the jobs it promised. Instead, increased trade largely benefited the corporate elite in all three countries.

The current economic crisis has exacerbated the difficult social and economic conditions that surround NAFTA, and governments need to undertake measures to address them. These include rebuilding infrastructure, using clean, renewable energy sources, re-regulating the financial sector, reforming labour legislation and strengthening public services. The union declaration also addresses a number of pressing issues, which include labour law reform, migration and development and the promotion of the rule of law.

In their conclusion, the unions say, "The time has come to recalibrate our relationship and focus on a path built upon shared economic growth and sustainable development. We hope that the Leaders Summit serves as an opportunity to lay out a new agenda for North America, one which makes our region competitive, sustainable and just, and our organizations commit to working together to promote that agenda."

Read the declaration in full here:  Spanish   English    French

Obama’s New Trade Enforcement Measures a Welcome first Step

The Obama administration unveiled new trade enforcement measures aimed at saving jobs and creating new jobs in the United States by leveling the global playing field for American workers and businesses.

U.S. Trade Representative Ron Kirk, speaking at a U.S. Steel plant in Braddock, Pa., near Pittsburgh, said the administration is committed to better enforcement of America’s trade laws, including workers’ rights around the world.

AFL-CIO President John Sweeney praised the commitment to better oversight and enforcement of trade laws.

Full text here: http://blog.aflcio.org/2009/07/16/obama-administrations-new-trade-enforcement-measures-welcome-first-step/