From a background note by the WTO Secretariat on financial services (not public as far as I can tell, so I'm not going to post the whole thing here):
Measures that do not constitute a limitation on market access as defined by the Agreement, nor a limitation to national treatment, fall within the realm of regulation, whose exercise is guaranteed by the GATS. Liberalization in the GATS sense is therefore not synonymous with deregulation of service activities. As a matter of fact, even within the context of comparable commitments on market access and national treatment, Members may operate completely different regulatory frameworks, ranging from leaving the services concerned unregulated to establishing stringent regulatory requirements in areas such as licensing, capital adequacy or liquidity.
...
... none of the root causes of the financial crisis can be attributed to services trade liberalization as provided for in the GATS, namely granting market access and national treatment. For one, excesses in monetary policy or the build-up of a bubble in real estate markets, and the policies that could potentially curb the detrimental effects arising from those situations, are in no way connected to liberalization commitments undertaken by Members. On the other hand, malfunctions of the financial services sector in recent years seem to be more related to idiosyncrasies of the sector (e.g. search for yield, absence of due diligence, lowering of lending standards) and regulatory loopholes (e.g. regulatory arbitrage, inadequate capital and liquidity regulation, unregulated suppliers). Even though a large exposure to foreign financial institutions and markets may exacerbate the transmission of shocks (IMF 2007), the crisis cannot be attributed to the involvement of foreign financial institutions per se.
And from a rough transcription of Joe Stiglitz at about 28:25 of this video (via Eyes on Trade):
National leaders say we need more regulation, but at the WTO they are saying we have to push the agenda of deregulation, even though we have had the biggest crisis over the past 75 years caused by deregulation, and even though the spread of the crisis around the world was faciliated by capital market and financial market liberalization.
It would be great if the two sides could sit down and talk to each other, but alas all we have are competing views that will not get reconciled.
I agree with the WTO Secretariat that WTO financial services commitments played little, if any, role in the financial crisis. However, I would like to ask them whether these commitments contribute to, or encourage, deregulation to at least some degree.
With regard to Stiglitz (and Wallach), my questions are:
(1) How are we better off with a financial services industry that is completely insulated from foreign competition? Shouldn't we distinguish between "deregulation" and "anti-discrimination" as policy goals pursued at the WTO?
(2) What specific regulatory actions would you like to see governments take that you believe are threatened by WTO financial services rules? Are there instances where domestic regulation proposals have been threatened by WTO rules?
