250 economists condemn restriction of capital controls in Trans Pacific Partnership

Media Release: Professor Jane Kelsey. Tuesday February 1, 2011

More than 250 international economists, including some of the best-known commentators on the global financial crisis, have signed an open letter calling on the US government to remove of capital controls from the ambit of its free trade agreements, including the Trans-Pacific Partnership Agreement.

“When such prominent economists and Joseph Stiglitz and Dani Rodrik speak, New Zealand should listen”, said Professor Jane Kelsey, a strong critic of the TPPA.

Unrestricted capital flows is a standard requirement of US free trade agreements, with no right even to take emergency measures in a balance of payments emergency, she said.

Both the Labour Party and the Greens have been proposing a financial transaction tax that would become impossible to institute under such an agreement.

“Even the International Monetary Fund, once a leading champion of full capital account liberalisation, now says that capital controls have a legitimate role to play in restraining speculative financial flows and maintaining financial instability.”

A number of countries, including Brazil, Indonesia, Taiwan and South Korea have adopted such controls in the past two years. Korea’s measures would have raised conflicts with its FTAs with both the US and the European Union; however, neither of these agreements is yet in effect.

“The New Zealand government needs to guarantee New Zealanders that it will demand a carveout of capital controls from any financial services and investment negotiation in the TPPA and make that position clear in the next round of negotiations in Chile in February”, said Professor Kelsey.

“The Labour Party also needs to take a public position on the issue.”

Ends.

A copy of the letter from economists is here (pdf, 78kb).

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