Draft terms of Trade in Services Agreement would overturn millennia of good business practice
WikiLeaks last week again pierced the veil of official secrecy that surrounds global trade negotiations. The peek it gave us should alarm everyone.
Big Business and national governments wanted to conceal the terms of the proposed Trade in Services Agreement (TISA) while keeping consumers, unions, environmentalists and the vast majority of businesses in the dark. Thanks to WikiLeaks, they failed.
The draft agreement WikiLeaks released on June 19 is fresh, written in May. It is a model of secret law, blatant in its disregard for transparency, democratic process and history. Its opening page says the terms are to remain secret for five years after negotiations formally end or the proposed new rules take effect. Talks to refine that agreement were to resume Monday in Geneva.
Even the secrecy-shrouded Trans Pacific Partnership that President Barack Obama and his Big Business allies want to ram through Congress without changes and only perfunctory debate does not include a five-year veil of secrecy after adoption. WikiLeaks has released a portion of TPP draft documents to the public.
It is impossible to obey a law or know how it affects you when the law is secret. And that is what this agreement would be, a new rulebook for trade in services — principally banking, insurance and trusts.
The 18-page draft agreement involves 50 nations, which produce more than two-thirds of officially measured global economic activity. That means the consequences of the new rules would be enormous, especially for those living in the more than 140 countries not taking part in the talks. Whether people can get loans or buy insurance and at what prices as well as what jobs may be available will be affected by any new trade rules.
Keeping us in the dark
The TISA leak marked the second anniversary of WikiLeaks founder Julian Assange’s taking refuge in Ecuador’s London Embassy, demonstrating that he may be cornered but he has not given up the fight for open government.
If this is the first you have heard of this agreement, it is not surprising. Not one of the five big American newspapers — The New York Times, The Los Angeles Times, The Wall Street Journal, The Washington Post and USA Today — wrote a word about the document. Ditto the major TV networks.
Why the secrecy? Why shut down the marketplace of ideas?
The answer becomes obvious upon reading the draft: It is intended to subvert the creation, by governments, of rules that benefit all of society and instead make sure the rules enhance the power of the financial services industry and reduce its accountability.
The idea of a global agreement on trade in services has plenty of merit. In the long run, we will all be better off with a free flow of capital — and labor — and with rules that make business operate efficiently across borders. But as Adam Smith taught, the invisible hand of the market’s broad benefits are destroyed when competition is thwarted and the producers conspire to set prices (and rules that affect prices) rather than letting the market work its magic.
We should not be surprised that multinational companies and national governments prefer to keep us in the dark. If you had the power to avoid all that messy democratic process, with debate about the merits of policies, demands that you justify your proposals and results that might not be to your liking, wouldn’t you try to make secret deals that impose your will on everyone else?
In February the U.S. Chamber of Commerce, which primarily represents the interests of the biggest American companies, urged adoption of a new trade in services agreement, noting the huge potential gains for Americans because the U.S. is a leader in finance and the technology that enables complex financial products. The tone of the announcement made it clear that the Chamber was thoroughly briefed on the terms — terms that ordinary citizens were not supposed to know for years to come.
The Chamber’s statement read, “The TISA should prohibit restrictions on legitimate cross‐border information flows and bar local infrastructure mandates relating to data storage.”
The first part makes sense. The second, about not having to keep records locally, is a red flag.
The importance of records
A key issue in the trade talks concerns the seemingly mundane issue of business records. Most of us give no thought to recordkeeping. But having locally available, verifiable and reliable records has played a major and underappreciated role in the creation of wealth, the reduction of violence and making sure the guilty are convicted while the innocent go free.
Requiring business records and setting rules for what they must contain date to before the Code of Hammurabi nearly four millennia ago, as I teach my Syracuse University College of Law students. Standards pertaining to business records were so important that they are found in seven of Hammurabi’s first 12 codes. More appear later among the 282 rules, some of which have been lost to time.
Hammurabi’s Code drew on several thousand years of experience, but the issues remain relevant to banks, insurers, trust companies and warehousing. Sections 122 and 123 required that when anything is entrusted to another, the owner “shall show everything to some witness, draw up a contract and then hand it over for safe keeping. If he turn it over for safe keeping without witness or contract and if he to whom it was given deny it, then he has no legitimate claim.”
The ancient code allowed six months to locate witnesses. Under modern law a company eager to hide an employee or agent whose testimony would be inconvenient can send that person off to a jurisdiction where no treaty or local law can compel them to return or even to testify under oath. (The various “Law & Order” television series did several episodes making this point.)
History teaches that requiring verifiable and original business records that are kept on site and that must be generally available for inspection by government, litigating parties and others encourages trust and reduces violence. We should pay deference to thousands of years of human experience. The TISA does not.
By statute and regulation, the federal and state governments require a host of businesses to not only maintain records but also to do so in their original form and to make them readily available for inspection.
Such laws come with limitations. For example, the comptroller of the currency has a right to inspect the books and records of national banks, but state banking authorities may do so only under limited circumstances, usually requiring a court order.
Time for debate
It is hard to imagine any benefit from letting companies doing business in one nation keep their original records in another country.
It is also hard to make the case that the cost of keeping a duplicate record at the home office in a different country is a burden. Redundant record-keeping is the norm today, thanks to the creation of photo-duplication services more than a century ago for paper documents. Today no prudent company would keep a single set of digital records in a single location and instead has servers in, say, Manhattan, Mumbai and Montreal so that meltdown, fire, flood or worse in one place does not wipe out the records needed to conduct business.
Be that as it may, any trade in services deal should come after robust public debate about how much freedom each sovereign country should relinquish when it comes to changing its banking, insurance and other regulations. Rules must change with conditions. A trade in services agreement should neither lock existing rules in place nor impose onerous burdens on change.
Now that WikiLeaks has given us a peak at the terms of the deal, we should all call our legislators and demand talks be held in the open, not behind closed doors where only governments and the biggest companies affected by the rules know what is really going on.