Negotiations “could undo the effective regulation that sheltered Australia from the global finacial crisisi”: Leon Carter from the FSU. Photo: Andrew De La Rue Leaked WikiLeaks documents reveal the Abbott government is pressing ahead with secret trade negotiations aimed at bringing about radical deregulation of Australia’s banking and finance sector.
Highly sensitive details of the Trade in Services Agreement (TiSA) negotiations, obtained by The Age, show Australian trade negotiators are working on a financial services agenda that could end the Australian government’s ”four pillars” banking policy and allow foreign banks much greater freedom to operate in Australia. It could also see Australians’ bank account and financial data freely transferred overseas, and allow an influx of foreign financial and information technology workers.
Experts warn the proposed changes could undermine Australia’s capacity to independently respond to and weather any future global financial crisis.
But Trade Minister Andrew Robb says the TiSA negotiations are a ”key focus” in his policy to ”open as many doors as possible” for Australian financial services exports.
”Financial services are a key part of the negotiations for us, given the strength of our sector in areas including banking and wealth management, particularly in the major, growing markets of Asia,” Mr Robb told Fairfax Media.
The negotiations potentially pre-empt the Abbott government’s Financial System Inquiry – chaired by former Commonwealth Bank chief executive David Murray – which will present an interim report on July 15.
Fifty World Trade Organisation members, including Australia, Canada, Japan, South Korea, Taiwan and the European Union (representing its 28 member countries), are engaged in the TiSA negotiations.
Australia’s major banks strongly support the talks, with ANZ arguing that there is ”a significant opportunity not only for lowering barriers to trade for current parties to the negotiations, but also to set important targets for further liberalisation in the future by nations currently not party to the negotiation”.
Key provisions in the leaked draft text include a United States proposal for a ”standstill” on financial regulation. Dr Patricia Ranald, research associate at the University of Sydney and convener of the Australian Fair Trade and Investment Network, said the US wants to ”tie the hands” of governments.
”Amendments from the US are seeking to end publicly provided services like public pension funds, which are referred to as ‘monopolies’ and to limit public regulation of all financial services,” she said.
”They want to freeze financial regulation at existing levels, which would mean that governments could not respond to new developments like another global financial crisis.”
The draft TiSA text also includes US and European Union proposals for each party to the agreement to allow financial service providers of other parties the right to establish or expand within its territory, ”including through the acquisition of existing enterprises”.
The application of ”most favoured nation” and ”national treatment” to the acquisition of financial services providers would preclude an Australian government blocking foreign takeovers of Australian banks, although it is possible that Australia could obtain a ”carve out” for its four pillars policy preventing the big four banks from merging and for legislation that limits individual shareholdings in Australian financial sector companies to 15 per cent.
The draft text also provides that foreign banks would be allowed to operate directly into Australia, without having to set up a local branch. Foreign financial institutions would also be allowed to bring into Australia ”temporary” workers, including computer, telecommunications, actuarial and legal specialists. ”Temporary” is not defined in the leaked text.
The US has also proposed measures that would allow Australian customers’ financial data to flow freely to other TiSA countries where Australian privacy laws would not apply.
ANZ argues data protection and privacy laws are becoming ”an area of significant divergence” between countries, inhibiting the free provision of financial services.
ANU associate professor Matthew Rimmer expressed alarm that ”TiSA does not seem to be motivated by any desire to improve the protection of privacy of consumers in an age of cloud computing and US National Security Agency surveillance.”
The EU and US are also proposing an international dispute settlement process for ”prudential issues and other financial matters”. If agreed this could mean that an external panel would judge Australia on its financial regulation, including prudential standards.
Dr Ranald pointed out that the TiSA negotiations are taking place outside of the World Trade Organisation and are not subject to WTO transparency practice in which draft texts have been released for public discussion. ”This document moves in the opposite direction, stating on the front page that it must remain secret for five years,” Dr Ranald said.
Parliamentary consultation on TiSA has been minimal, with the talks only briefly mentioned in Senate estimates hearings.
Financial Services Union national secretary Leon Carter said there was ”a real danger” the secret TiSA negotiations ”could undo the effective regulation that sheltered Australia from the global financial crisis” and result in ”a tidal wave of finance job losses in Australia”.
The leaked draft TiSA financial services chapter can be found at www.wikileaks.org