Wizards of Money Part 14: "The Trade Federation and the InterGalactic Banking Clan"
TABLE OF CONTENTS
1. Introduction
2. The Deterioration of the Galactic Republic and
the Emergence of the Trade Federation
3. A "Background Briefing" on GATS
4. A Huge Event in the History of GATS – European Union
Member leaks the EU’s GATS "Grab Bag" of Requests to Other Nations
5. The Ongoing Battle Between Corporations and States
6. How Breaking Your Own Rules Can Bite You in the Butt!
This is the Wizards of Money, your money and financial management series,
but with a twist. My name is Smithy and I'm a wizard watcher in the Land
of Oz. This is part 14 of the Wizards of Money series and it is entitled
"The Trade Federation and the InterGalactic Banking Clan".
In this, the fourteenth edition of Wizards, we are going to take a look
at the Earthly versions of the Star Wars Movies troublemakers known as the
Trade Federation and the Intergalactic Banking Clan, responsible for starting
and financing the Clone Wars. Our modern earthly descendants are known as
the World Trade Organization and the US Coalition of Services Industries,
founded by financial services giants in the early 1980s. These two bodies
have formed strong alliances over the past two decades to bring us a very
special and powerful trade agreement known as the GATS – which stands for
General Agreement on Trade in Services. This agreement is said to cover international
trade in anything you can’t "drop on your foot" – that means anything from
banking to healthcare, childcare and education to communications and media
to the postal service to water treatment services.
As we will see, the GATS agreement poses significant threats to the future of critical social services internationally and may empower corporations to challenge governments over public funding of services such as education and healthcare. In this episode of Wizards we’ll examine the implications of all this, see why GATS is now at a critical stage of negotiations, and look at some leaked "shopping lists" from the European Union that caused quite a stir in April this year.
But then…we’ll also see that the Earthly Trade Federation and Services Clans, while demanding a huge grab-bag of goodies of the "can’t-drop-on-your-foot" variety, have ended up shooting themselves in the foot. First, recent trade measures implemented by the US to protect the steel and farming industries are themselves probably illegal under existing trade agreements. Not surprisingly, the world outside America is fast losing enthusiasm for lowering their own trade barriers further. Second, the recent wave of corporate scandals across America has primarily come from the providers of services you can’t drop on your foot – telecommunications (WorldCom and Global Crossing), energy and water services (Enron, Dynergy and Vivendi), education (Edison Schools), banking and brokerage (well – just about all the big ones!). The rest of the world is not amused! They certainly don’t want such shady operators taking over their own services.
To get to know these trade issues better we’ll talk to Dr Pat Ranald at the Australian Fair Trade and Investment Network, hear an excerpt from an Australian Broadcasting Commission show call Background Briefing, and also hear the words of Democract [corrected] ex-Senator Bob Kerrey and former US Treasury Secretary Robert Rubin about the recent WTO-illegal moves of the US. We’ll also discuss a brief chat I recently had with Ambassador Charlene Barshefsky, former US Trade Representative under the Clinton Administration, about particular trade issues.
But first, to refresh your memory, or in case you thought the recent
movies too cheezy for your tastes – lets see how alliances between Trade
Federations and Banking Clans can get whole galaxies into a whole lot of
trouble, based on a story from a galaxy far, far away …
This is from www.starwars.com/databank
"The Republic had enjoyed several centuries of growth and prosperity. It was inevitable that its wealth would foster those with greed to match. The varied instruments of trade and commerce banded together into galaxy-spanning organizations meant to aggrandize their profits. Coalitions such as the Trade Federation, Corporate Alliance, Commerce Guild, Techno Union and the Intergalactic Banking Clan consolidated their individual markets under governing bodies of such size that they exhibited pull on the actions of the Galactic Senate." They formed a separatist movement called the Confederacy of Independent Systems, and geared up for war to destroy the Republic – "with promises of reform and unyielding devotion to capitalism".
"The Trade Federation was a consortium of merchants and transport providers that effectively controlled shipping throughout the galaxy. … It had attained enough clout in the Galactic Senate, as if it were a member world".
"Helping control the incredible amounts of credits, dataries, and other forms of currency flowing through the galaxy was the InterGalactic Banking Clan. This business entity allied itself with the growing Separatist movement in the Galaxy, and IBC Chairman San Hill personally committed his forces to the Confederacy of Independent Systems – in a non-exclusive pact, of course." After all, he is a banker. "The IBC profited from both ends of the clone wars", financing the efforts of both the Republic and the Confederacy of Independent Systems.
And so began the Clone Wars between the Republic and the Independent Systems Movement. These wars eventually culminated in the destruction of the Republic and the formation of the Empire managed by the dark lord Darth Vader, once a Jedi Knight trained in the pursuit of peace … but later tempted by all the attractions of the Dark Side.
The Imperial March…
Now, fast forward to the Trade Wars of the 20th and 21st
centuries on Earth. Lets go to 1981 when, according to a briefing from the
Transnational Institute (TNI) based in the Netherlands:
"the Chief Executive Officers of AIG, American Express and Citigroup concluded that there was a need to form a broader business coalition to push the demand to include "trade in services" in the GATT agenda. They mandated American Express Vice President Harry Freeman to form a coalition of services industries that would reach well beyond New York financial circles. In 1982 the US Coalition of Services Industries (USCSI) was officially launched under Freeman’s chairmanship."
Note that the GATT is the General Agreement on Tariffs and Trade, and is basically the umbrella agreement covering all these sub-agreements like GATS, which covers only trade in services. These agreements are administered by the World Trade Organization or WTO.
The TNI document called "Behind GATS 2000" goes on to say "Between 1982 and 1985 USCSI worked closely with the US Trade Representative (USTR) and the Department of Commerce to place services on the global trade agenda. In late 1983 the USTR submitted a report to the GATT on the growing importance of services in the world economy… and suggesting possible approaches to a new regime. When the GATT Uruguay Round was launched in September 1986 … negotiations formally started on a multilateral regime for trade in services within the GATT." This is the round of trade talks that ultimately gave rise to the World Trade Organization (WTO) and the one in which the GATT (the umbrella agreement) gave birth to an army of sinister-looking sub-trade agreements, one of which was the GATS – covering services – and born in 1994.
The US services sector, spearheaded by the financial sector, had lobbied hard for this one and they couldn’t be more pleased with their new baby, who is now eight years old. A few years later the European services industries jumped on the bandwagon of lobbying their governments hard for favorable provisions under the GATS. By June 30 this year all WTO member countries had to submit their shopping "wish lists" to other member countries. This means that they submitted a list of every service in other countries they want their own corporations to get access to. The actual responses from countries will start in March 2003. To date the discussion on "wish lists" and country positions have been between big business and government, and definitely behind closed doors, with one exceptional leak as we see in a minute.
There are four modes of services provision under the GATS – from e-commerce
across borders to a full commercial presence, which includes all foreign
dierct investment related to services provision. It is all the requests being
made under this latter mode that has lead many groups to conclude that GATS
is largely a reemergence of the Multilateral Agreement on Investment (MAI)
in a new disguise. Recall that the MAI was shot down in flames after the
text of it was released to the public and spread across the Internet a few
years ago.
Speaking of leaked documents, the full text of the European Union’s GATS
"wish list" was leaked to the public in April 2002 causing an absolute uproar
in many countries around the world. Even though the EU demands on US services
industries were pretty heavy, we hardly heard a peep about this in the US
media.
I found out more about this recently when I visited Australia. While there I heard an excellent episode of a show called Background Briefing run on the Australian Broadcasting Commission’s Radio National. The whole hour was devoted to GATS, and here is an excerpt from it about the release of the EU GATS shopping list.
Excerpt from Background Briefing on ABC Radio Nation, produced by Tom Morton.
3 minutes.
That was an excerpt from ABC Australia’s show Background Briefing. That episode was produced by Tom Morton.
The release of public documents that have come out of secret negotiations between publicly funded officials and private interests can be quite shocking and can cause quite a stir. They often get a lot of attention because of the realization of the extent of the violation of the public’s trust, and the "giving away" of goods people thought were in the public domain. But such leaks play a very important role in democracy and the system of checks and balances needed to make it work. So too with these recently released documents, which thoroughly shocked many and confirmed already existing suspicions of others.
I will post a link to all these documents on the Wizards of Money web site at www.wizardsofmoney.org
One of the guests on this show was Dr Patricia Ranald of the Australian Fair Trade and Investment Network. Since I thought she provided such good educational material I decided to interview her for this Wizards of Money episode. Here is the interview I did with Pat Ranald who helps us understand the GATS agreement and the dangers it poses in more detail.
Interview with Pat Ranald of AFTINET
20 minutes
Under another agreement, the North American Free Trade Agreement or NAFTA, which is already fully implemented, there is a special provision known as Chapter 11. This, seemingly obscure, provision of NAFTA has received a lot of attention recently and journalist Bill Moyers gave it some good coverage in his NOW show that runs on PBS back in February of this year. I’ll put some links to this on the Wizards of Money web site at www.wizardsofmoney.org. In that show it was explained that Chapter 11 of NAFTA enables a corporation to directly sue a government for regulations or other government actions that interfere with investments.
Whatever the intent of this provision its effect has been to encourage corporations to sue governments over regulations that harm profits. To give you an idea of what’s going on and how these provisions are being used here’s a sample of three cases that have been filed under NAFTA Chapter 11.
Interestingly I had the opportunity to pose some questions about all this to Ambassador Charlene Barshefsky, former US Trade Representative under the Clinton administration at a meeting on May 30, 2002. I am an actuary and the Spring Meeting of the Society of Actuaries was held at this time. She was the keynote speaker on May 30 and she spoke primarily about, you guessed it, GATS! And also she spoke about how wonderful it would be for the financial industry and how we, as financial professionals, should make it clear what we want out of these agreements.
Not only is she a great big advocate of the direction GATS is taking but she is also on the board of American Express, ultimately one of the founding fathers of GATS through its founding role in the US Coalition of Services Industries. At the end of the "Go GATS" pep talk I was the first to ask a question, because I really wanted to know about Chapter 11 of NAFTA. So I asked if she thought Chapter 11 was a big threat to regulation of industry and democratic accountability. She replied that it was very controversial but it’s intent was basically to prevent government stealing property. When I probed further into this issue using the Methanex versus US case as an example of something different than "stolen property" she responded that … No, that wasn’t really a NAFTA case, it had been settled by state law.
I was soo confused that I just sat down and shut up at that point… What was she talking about? It took me many months to find out. I sought information on these cases from the Trade Representative’s office to no avail and then finally discovered that it’s the State Department that usually defends these cases. You find a whole host of all the legal filings on the State Department web site hidden away at www.state.gov/s/l/c3439.htm…Looking through these documents and also calling the State Department directly I discovered that no ruling has yet been made in the Methanex case. In all likelihood, what Ambassador Barshefsky did in her answer to me was confuse the Methanex case with the Ethyl Corporation case, where the resolution of the contested law was purely a matter of Canadian law, regardless of NAFTA. After all they both involved gasoline and government names that start with a "C".
But my goodness, what is the world coming to when the former Trade Federation Chief gets her cases mixed up! I rushed to order the tape of the session from the audio company called AVEN, since the session was advertised as being one you could buy afterwards. But they told me – at the last minute Ambassador Barshefsky refused to be recorded and to have tapes made available. I’ll also put some links to the brochure for this session on the Wizards of Money web site
May 30, 2002 seemed to be chock full of interesting trade information. For, on that very same day I also came across a discussion between former Treasury Secretary Robert Rubin, former Nebraska Senator Bob Kerrey and former IMF chief Stanley Fischer who were talking at New School University in New York. In that session which was aired on C-SPAN they basically came right out and said that the US was breaking its own trade rules through the recently imposed steel tariffs and farm subsidies. They were also quite candid about why the US will probably get away with breaking its own rules. Here’s an excerpt – Bob Kerrey followed by Robert Rubin…
Robert Rubin and Bob Kerry discuss GATT-illegal steel tariffs and farm subsidies
C-SPAN recording at New School University, New York. May 30, 2002
3 minutes
That’s all for Wizards Part 14. Wizards has a web site at www.wizardsofmoney.org