US: Not Always a Tool of Wall Street

I’ve been on a self-imposed blackout of following trade law developments while writing my dissertation, after a decade of doing almost nothing but.

But I’m here at the American Political Science Association meetings, where a few colleagues have presented papers on recent World Trade Organization (WTO) disputes, rekindling my interest. If you have a chance to check out work by Cosette Creamer and Tonya Putnam, I highly recommend them.

Anyways, one of the last cases I tracked at all was a WTO case brought by Panama against Argentina’s anti-tax haven legislation. Though launched in 2012, there has still been no final panel ruling. Nonetheless, the US Trade Representative’s office has disclosed some of its own thinking on the case.

While the US did not unambiguously take Argentina’s side, the Obama administration did offer some words of support.

Namely, USTR writes that:

Members may apply different regulations to different types of financial entity, and limit the types of services that each such entity may supply. It may be the case that one Member allows supply of a particular financial service by a type of entity that does not exist under a second Member’s regulatory regime. If there were a WTO dispute regarding the second Member’s treatment of the first Member’s distinct type of entity, it might be the case that the second Member’s regulatory system recognized no type of entity “like” the first Member’s entity. The panel would need to consider the possibility that there were accordingly no like services for comparison purposes.
While this may not mean much to the casual reader, it’s actually a quite pro-regulatory statement. As I wrote here, the Reagan and Bush I administrations had maintained that WTO rules did not threaten US firewalls between commercial and investment banking (i.e. Glass Steagall). To paraphrase USTR, if commercial-banking-by-deposit-taking-banks doesn’t exist in a country, it may not matter for WTO discrimination purposes… even if commercial-banking-by-investment-banks does exist.
USTR also pronounced on the prudential measures defense for financial regulations:
By its terms, and unlike other provisions in GATS and GATT, the exception establishes no other standard or qualification on a Member’s ability to take measures for prudential reasons, such as requiring a “rational” relationship between the measure and the prudential reason, or a showing that the measure is “reasonable” or “necessary” to achieve a purpose.
I wrote about this measure here, and made the argument that it actually is more anti-regulatory than what the US now claims. It’s good to see USTR publicly pronounce differently (even if I think they are wrong as a matter of treaty text).
These are both useful clarifications. It will be interesting to see if WTO adjudicators back up the US position.
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