USCIB and other industry groups have written to U.S. Treasury Secretary Timothy Geithner to argue against calls by some academics to change capital control rules in U.S. trade and investment agreements. Presently, U.S. free trade agreements and bilateral investment treaties generally preclude the imposition of capital controls, except in extraordinary circumstances. But some have argued that broader use of such measures may be needed in light of the 2008 financial crisis.
In the letter, the business groups argued that U.S. investment treaties and trade agreements already permit governments to take necessary action, including capital controls, to ensure the safety and soundness of their financial systems. “That flexibility is more than sufficient to allow countries to take necessary actions to deal with a financial crisis,” the letter stated.
“Moreover, the critics advocating these changes inaccurately characterize the United States as some sort of outlier in including these rules in their trade agreements and BITs. In fact, most Western European, Canadian and Japanese investment treaties (which are far more numerous than U.S. agreements) have long included similar provisions requiring the free flow of capital. Most of those agreements are not as flexible as U.S. trade agreements and BITs because they do not contain the prudential flexibility found in U.S. agreements.”
According to USCIB Vice President Stephen Canner, the industry letter is timely in light of next week’s upcoming round of talks under the Trans-Pacific Partnership initiative.
Staff contact: Stephen Canner