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21st century trading

Published 11 March 2013

21st century trading

"These agreements were written by a handful of financial sector lobbyists and bureaucrats in the 1990s, before we really understood the perils of deregulation."

US attempts to create a Trans-Pacific Partnership Agreement to counter China's growing influence in the Pacific region could threaten financial stability by making it impossible for those nations taking part to regulate cross-border finance, according to a new report on international trade and regulations.

The report, Capital Account Regulations and the Trading System: a Compatibility Review, released by the Global Development and Environment Institute at Tufts University, the Center for the Study of State and Society in Buenos Aires and Boston University's Pardee Centre, reveals that US trade and investment treaties are the most constraining in terms of granting nations the policy space to regulate cross-border finance, and suggests that nations should refrain from taking on new commitments without the proper safeguards to put strong regulation in place.

One of the chapters of the report is written by Gates Cambridge Scholar Todd Tucker [2012], who is doing PhD in Development Studies.

The report is the second publication of Boston University’s Pardee Center Task Force on Regulating Capital Flows for Long-Run Development, and builds on the Task Force's first report published in March 2012. The new report is the outcome of a workshop co-sponsored last June in Buenos Aires, Argentina with the Centre for the Study of State and Society (CEDES) in Argentina and GDAE.  The Task Force, which is co-chaired by GDAE's Kevin P. Gallagher and Leonardo E. Stanley of the Center for the Study of State and Society in Buenos Aires, consists of former and current Central Bank officials, IMF and WTO staff, members of the Chinese Academy of Social Sciences, as well as scholars and members of civil society.

It was initially convened in September 2011 as consensus was emerging that the global financial crisis had re-confirmed the need to regulate cross-border finance. The first report argues that international financial institutions – and in particular the International Monetary Fund – need to support measures that would allow capital account regulations (CARs) to become a standard part of economic policy. However, it states that some policymakers and academics have expressed concern that many nations — and especially developing countries — may not have the flexibility to adequately deploy such regulations because of the trade and investment treaties they are party to.

Todd, who was research director at Public Citizen focusing on trade and investment issues, says: "These agreements were written by a handful of financial sector lobbyists and bureaucrats in the 1990s, before we really understood the perils of deregulation. Our task force will be traveling to Geneva, DC, Beijing and beyond to advise policymakers on how to upgrade 20th century trade rules for 21st century financial realities."

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Picture credit: Chanpipat and www.freedigitalphotos.net

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