USCIB Supports Respect for Arbitration Awards in U.S. GSP Program

USCIB Vice President Shaun Donnelly (left) and Chevron Supervising Counsel Andres Romero-Delmastro (right) testifying as panelists before the US Government’s GSP Subcommittee

USCIB went on the record at the January 30 Public Hearing of the USTR-led interagency Generalized System of Preferences (GSP) Subcommittee, supporting respect for the GSP eligibility criteria, specifically the need for “respecting and enforcing international arbitral awards.”  USCIB Vice President for Investment Policy Shaun Donnelly joined member company Chevron as the two business experts testifying on the specific issue of Ecuador’s continuing eligibility for GSP in light of the country’s very troubling record in a long-running major investment arbitration case filed by Chevron.

USCIB joined Chevron in recommending that, in light of Ecuador’s continuing refusal to enforce final arbitral awards by the panel, Ecuador’s access to GSP unilateral trade preferences should be suspended until they come into full compliance with those panel orders. According to Donnelly, after a senior official from the Ecuadorian Attorney General’s office presented the government’s case, a senior Chevron attorney detailed the long saga of Ecuadorian non-compliance. Donnelly then offered broader comments to the sub-committee on the important policy implications of Ecuador’s non-compliance and the importance of maintaining and enforcing the clear eligibility criteria laid out in the GSP statute. The Ecuador investment arbitration case was one of nine “country eligibility cases” on the agenda for public comments before the GSP subcommittee in its two-day meeting January 30-31.

“We at USCIB are strong supporters of the GSP program but it is not an entitlement for Ecuador or any other beneficiary developing countries” Donnelly explained.  “When a country refuses over many years to respect legitimate arbitral awards, in this case from an investment arbitral panel under the U.S.-Ecuador Bilateral Investment Treaty (BIT), the U.S. government’s patience must have a limit. Ecuador has clearly fallen short of the standards under the GSP statute. I think the detailed case presented by Chevron was compelling.”

Chevron and USCIB have been filing formal comments and testifying to the GSP sub-committee along these same lines regularly since 2012. USCIB has long been a leading voice in the U.S. and international business communities on the importance of foreign direct investment (FDI)  to economic growth and development in both the capital exporting and destination countries.  A vital key to incentivizing FDI flows in all direction is strong, transparent and enforceable investment protection, most often in the form of international investment agreements such as BIT treaties or investment chapters in Free Trade Agreements (FTAs.)  When investment disputes arise, access to and respect by all parties for the Investor-State Dispute Settlement (ISDS) arbitration system under those legally-binding investment agreements is essential.

USCIB has led international business advocacy on investment and ISDS issues, including respect for arbitral panel decisions, for many years including at meetings of the OECD, UNCTAD, and UN Commission on International Trade Law (UNCITRAL.)

To read Donnelly’s full testimony, click here.

Business Asks for Realistic Approach on OECD Corporate Governance Principles

During February’s meeting of a key steering group of the 30-nation Organization for Economic Cooperation and Development, negotiations on the newly revised OECD Principles on Corporate Governance reached a crucial stage.  The principles are to be finalized for adoption at May’s OECD ministerial meeting in Paris.

Commenting on the negotiations of the government experts, members of the OECD’s Business and Industry Advisory Committee(BIAC) asked their governments to sustain the notion that “one size does not fit all” in corporate governance standards.

Every national regulatory system has to find its own balance between regulation by governments and self-regulation, BIAC members said.  A level of diversity is necessary for the maintenance of an internationally competitive environment, and companies welcome the new emphasis given to the effective enforcement of existing corporate governance rules.  Business believes, however, that having clear, concise and understandable OECD principles is necessary for their effective enforcement.

The 38 business federations from all the OECD countries belonging to BIAC – and the companies they represent – will continue to take the discussions on corporate governance seriously and participate actively in the elaboration and revision of corporate governance laws and codes in their countries.

Staff contact: Ariel Meyerstein 

BIAC website

More on USCIB’s Corporate Responsibility Committee

More on USCIB’s Trade and Investment Committee

ICC statement on Tobin tax


Department of Policy and Business Practices

Commentary by the ICC Presidency

The “Tobin tax” – a business viewpoint


Since originally raised in 1974 by Professor James Tobin, Nobel Memorial Pricze winner in economics, the question of taxing international transactions in different currencies has over the years been proposed in various versions and for a number of different reasons.  While ICC considers that greater stability of financial markets is desirable, it also believes that a “Tobin tax” would be harmful to international trade, economic growth and welfare, and businesses throughout the world. The smallest nations would be most hurt. The tax would not prove feasible in practice since it would require uniform implementation throughout the world, and would need to encompass not only spot transactions but also substitutes and supplements such as currency swaps, forwards and futures in order to limit evasion.

Tobin’s original idea

Tobin’s original idea was to introduce an internationally uniform tax on all spot conversions of one currency into another, proportional to the size of the transaction. The impact of such a tax would obviously punish short-term trading more seriously than longer-term trading. A major concern was to make currency exchange rates reflect to a larger degree long-run fundamentals relative to short-range expectations and risks, and thus reduce volatility. A second objective was to preserve and promote the autonomy of national macroeconomic and monetary policies. To raise revenues for international purposes was never a main motivation of Professor Tobin, but is a major purpose of many of the present supporters of such a tax.

Transactions are necessary to cover currency risks

An estimated 1,500 billion US dollars are traded each day on the world’s foreign exchange markets. Most transactions are for less than one week – most within a day – and the interbank share is approximately 70-80 per cent of the total. To a large extent, the high volume of the transactions reflects genuine needs to cover currency risks and spread the risks among different participants in the exchange market, in much the same ways that insurance risks are distributed on the international reinsurance market. Certainly, a single trade transaction may easily result in ten currency transactions because the currency risk is passed around among currency dealers like a hot potato. In most countries there are strict regulations regarding how much uncovered currency exposure banks may accept.

Harmful effects

A consequence of a Tobin tax would be to reduce short-term trading.  But there would be no guarantee that exchange rate volatility would diminish because liquidity would also diminish.  Indeed, minor currencies might become more volatile and vulnerable to manipulative speculative attacks. Reduced liquidity would also make stabilizing long-term arbitrage more risky. Thus, customers’ transaction costs would increase more than the tax levied. As with stock and security markets, some degree of short term trading – or speculation – is desirable on most currency markets to increase liquidity.

Transactions between minor currencies would be particularly hurt because there are no cross rates between many of them. Hence, it is necessary to use a major currency – for instance the US dollar (which is part of 80 to 90 per cent of all currency transactions) – as an intermediary currency. This implies two transactions or more (if an additional intermediary currency is required). Consequently, the tax might be doubled or tripled for conversions between many minor currencies. Because of the costs involved, pension funds and other portfolio managers would increase their home bias. Less capital would be available for international capital markets in general, and for investments in minor currencies in particular.

At a reasonable rate, say 0.05 per cent, the increased domestic autonomy the tax would provide in setting interest rates would be negligible.  And to the extent it did work, there might be a loss of discipline on economic policy stemming from abroad.

A Tobin tax would not prevent speculative attacks on a currency where the expected gain might be high — not unusually 10 per cent or more over a week. Furthermore, a tax could neither rectify nor repair unsustainable economic policy, which more often than not is the main reason why a currency comes under attack.

An impracticable tax

A Tobin tax would prove impracticable since it would require worldwide coverage, or at least coverage encompassing the G 10 countries, supplemented by a penalty on transactions to tax havens. Unilateral implementation would move currency trading offshore. Not only spot transactions, but also derivatives like currency swaps, forwards and futures would need to be taxed, since they are substitutes for and supplements to spot transactions.

ICC notes that Professor Tobin today is no longer a proponent of the tax that bears his name — inter alia, because the currency regime is now very different from the time when he originally proposed the tax and because he supports free trade as an instrument for raising welfare throughout the world.


In conclusion, ICC is firmly of the view that it would not be feasible to implement a Tobin tax.  And even if it were feasible, such a tax would neither significantly prevent speculative attacks on currencies nor increase national economic autonomy. The tax would throw sand in the wheels of international trade and investment and would harm the prospects for raising global economic growth and the welfare of all peoples.

About ICC

ICC is the world business organization, the only representative body that speaks with authority on behalf of enterprises from all sectors in every part of the world.  ICC promotes an open international trade and investment system and the market economy.  Business leaders and experts drawn from the ICC membership establish the business stance on broad issues of trade and investment policy as well as on vital technical and sectoral subjects.  ICC was founded in 1919 and today it groups thousands of member companies and associations from over 130 countries.