If by June 15 the Australian government signs the Fifth Protocol of the
General Agreement on Trade in Services (GATS) – another treaty
of the
World Trade Organisation -- then Australia's banks will be left exposed
to foreign takeovers, by virtue of an international treaty that has
achieved only scant public scrutiny.
Our politicians are absorbed in the GST and Republic debates while this
serious threat to Australia's economic sovereignty is about to happen
without any serious public debate on the implications of signing the
Fifth Protocol of GATS.
* The Joint Standing Committee on Treaties has approved the
signing
of the Protocol, on the grounds that it is consistent
with current
government policy ("Report 19, The Fifth Protocol
to the General
Agreement on Trade in Services an Five Treaties
Tabled on 30 June
1998", March 1999).
* The Multilateral Agreement on Investment (MAI) was defeated
after
about 18 months of exposure and opposition.
* It is now URGENT that the Fifth Protocol be EXPOSED and
STOPPED.
* What the World Trade Organisation says Australia is offering
by
signing the Fifth Protocol of GATS:
"Eliminates a prohibition on the acquisition of
control of any of
Australia's four main banks. Also eliminates a measure
which
prohibits banks (resident or non-resident) from
holding shares in
the Commonwealth Bank of Australia and other entities
from holding
more than five percent of its issued share capital
(B)",
("Non-attributable summary of the main improvements
in the new
financial services commitments", WTO medial release,
26 February
1998).
* What the Australian Department of Foreign Affairs and Trade
"National Interest Analysis" says of Australia's
offer under the
Fifth Protocol":
"1. Elimination of the prohibition on banks (resident and non-resident)
from holding shares in the Commonwealth Bank of Australia (CBA) and
other entities from holding more than five per cent of its issued share
capital. This followed the completion of the sale of the CBA on 19 July
1996 …
"4. Removal of the blanket prohibition on foreign takeovers of the four
major banks. However, Australia's schedule of commitments will continue
to make clear that foreign acquisitions remain subject to the national
interest test under Australia's foreign investment policy guidelines and
the Foreign Acquisitions and Takeovers Act 1975."
Comment: The DFTA says that the "national interest test" will still be
applied to any proposed takeovers of Australian banks, but Australia's
"Schedule of Specific Commitments: Supplement 4", (Ref:
GATS/SL/6.SUPPL.4) does not make this at all clear.
* URGENT ACTION:
1. Alert other organisations, especially those involved in the STOP
THE MAI CAMPAIGN, to this the back door change to
the "four pillar"
policy of the government.
1. Urgently lobby politicians of all persuasions to STOP THE FIFTH
PROTOCOL OF GATS being signed.
Fifth Protocol of GATS: open season
on Australian banks?
Patrick J Byrne, Researcher Officer and National Executive Member of the
National Civic Council. Email:
freedom@connexus.net.au
If the Australian government signs the Fifth Protocol of the General
Agreement on Trade in Services (GATS) by June 15, then Australia's banks
will be left exposed to foreign takeovers, by virtue of an international
treaty that has achieved only scant public scrutiny.
The Fifth Protocol of GATS is another treaty of the World Trade
Organisation. It follows on the controversial Multilateral Agreement on
Investment (MAI), which caused world-wide public protests that resulted
in the agreement effectively being shelved last year.
In Australia, a Joint Standing Committee on Treaties inquiry concluded
that the MAI should not be signed "until a thorough assessment has been
made of the national interest and a decision is made that it is
Australia's interest to do so".
The GATS treaty was signed in 1994. It aims at liberalising trade in a
wide range of service industries. Subsequently, various Protocols were
to be negotiated and signed.
The Fifth Protocol of GATS aims to eventually open up various services
industries (banking, insurance, and other financial services) to foreign
competition, investment and takeovers. Countries that are signatories to
the agreement make offers as to particular service industries they are
initially prepared to open up to foreign competition. Further offer can
be made later.
Among other things, Australia's "Schedule of Specific Commitments"
offers to allow foreign takeovers of Australian banks.
Given that the Treasurer had still not clearly declared open season for
foreign multinationals on the Australian banks, it was rather
extraordinary that in February 1998 Australia's representatives at the
Fifth Protocol negotiations should have pre-empted any revision of
government policy by offering to remove the blanket ban on bank
takeovers as part of a binding international treaty.
It smacked of a change of Federal government policy via the back door.
The Government, or Treasury, or whoever was responsible for putting up
Australia's Schedule, could have sought an exemption for Australian
banks until such time as the government formally reviewed its "four
pillar".
For example, the European Union has set out a range of exemptions in
relation to the refusal to permit foreign corporations to obtain
licences to operate in banking, the insurance industry and investment
services in the financial industry.
Australia's Joint Standing Committee on Treaties did hold an inquiry
into the Fifth Protocol. It was advertised last year as one of eight
treaties under consideration, but gave no indication as to the Treaty's
significance for Australia's banking industry.
A number of submissions objected to the proposal to allow foreign
takeovers of Australian banks. However, in its recent report on the
Fifth Protocol, the Committee disputed their concerns. It accepted
Treasury's argument that the Fifth Protocol would not automatically
allow foreign takeovers of any of Australia's big four banks.
Treasury and the Committee claimed that any attempted takeovers would be
subject to the Foreign Acquisitions and Takeovers Act 1975, "involving
consideration by the Foreign Investment Review Board, the Australian
Prudential Regulation Authority, the Australian Competition and Consumer
Commission, and, ultimately, by the Commonwealth Treasurer. This process
will be unchanged by accepting the Fifth Protocol," the Committee said.
However, the WTO appears to think differently to Treasury and the Joint
Standing Committee on Treaties.
A WTO statement of February 26, 1998, said that Australia's offer under
the Fifth Protocol, "eliminates a prohibition on the acquisition of
control of any of Australia's four main banks. [It] also eliminates a
measure which prohibits banks (resident or non-resident) from holding
shares in the Commonwealth Bank of Australia and other entities from
holding more than five percent of its issued share capital."
If a foreign takeover bid is made for an Australian bank, which
jurisdiction will decide if it can go ahead once the Fifth Protocol is
signed? Will it be decided "ultimately by the Commonwealth Treasurer",
as Treasury and the Treaties Committee claim? Or will it be decided by a
disputes committee of the WTO, as stated in the 1994 GATS agreement that
Australia has already signed? Or will it be decided in an Australian
court, particularly if any of the GATS Treaty should be enacted into
Australian law?
The GATS treaty imposes serious obligations, and an enforcement
mechanism, on countries that ratify the Treaty.
In the case of say a foreign takeover dispute, if no agreement can be
reached with other aggrieved signatories to GATS, the case goes to a WTO
arbitration panel. If found against, Australia would be liable to pay
compensation to those disadvantaged by a breach of the Treaty. If
Australia refuses to pay compensation, or decided to unilaterally modify
or withdraw from the Treaty, other nations would have the right to take
commensurable trade retaliation measures against Australia.
Article XXI of GATS allows a signatory to modify or withdraw from any of
its trade liberalisation commitments, but only after three years. Three
months' notice must be given and Australia would have to "enter into
negotiations with a view to reaching agreement on any necessary
compensatory adjustment".
It is quite extraordinary that after the public outcry over the MAI, the
Fifth Protocol of GATS may well be signed within seven weeks without any
serious public debate.
-- Patrick J Byrne Researcher Officer and National Executive Member of
the National Civic Council. Email:
freedom@connexus.net.au
Key documents listed below with URLs, or available on request.
Electronically from:
<freedom@connexus.net.au>
>From Pat Byrne: Tel: 03 93265757 Fax: 03 93282877.
582 Queensberry St, North Melbourne. Vic 3051
Doc. 1:
-- GATS treaty Annexes, Source:
http://www.wto.org/wto/services/services.htm
http://www.wto.org/wto/services/gatsintr.htm
Long series of documents.
-- GATS Protocols 1-5, Source:
http://www.wto.org/wto/services/prots.htm
One page document
-- Australia's "Schedule of Specific Commitments: Supplement 4", (Ref:
GATS/SL/6.SUPPL.4), setting down Australia's specific offers to the WTO
under the Fifth Protocol. (It is a 7 page, WordPerfect document at,
<http://www.wto.org/services/finsched.htm>.
If you have difficulty
downloading/opening this document, it is available on request from the
National Civic Council, Tel: 03 93265757 Fax: 03 93282877.)
Doc. 2:
-- WTO's "Non-attributable summary of the main improvements in the new
financial services commitments", 26 February 1998, the WTO's summary of
country specific offers under the Fifth Protocol.
Source:
http://www.wto.org/wto/services/finsum.htm).
NOTE: First 2 pages give the WTO's summary of Australia's offer.
-- Other WTO documents commenting on the GATS and Fifth Protocol.
Source:
http://www.wto.org/wto/services/financia.htm
Doc. 3:
Australian Department of Foreign Affairs and Trade, "NATIONAL INTEREST
ANALYSIS of the Fifth Protocol.
Source:
http://www.austlii.edu.au/au/other/dfat/nia/1998/1998015n.html
Four page document
Doc. 4
Joint Standing Committee on Treaties, "Report 19: The Fifth Protocol to
the General Agreement on Trade in Services and Five Treaties Tabled on
30 June 1998", Nineteenth Report.
NOTE: CHAPTER 2 deals with the critical issues
Source:
http://www.aph.gov.au/house/committee/jsct/ppgrep.htm