WASHINGTON Feb 8 A coalition of leading
business groups has urged the Obama administration to reject a
call to give U.S. free trade partners more freedom to control
the flow of capital in and out of their countries.
Loosening rules on capital controls in future free trade
agreements and bilateral investment treaties would be both
"counterproductive and unjustified," the U.S. Chamber of
Commerce, American Petroleum Institute and 15 other groups said
in a letter on Monday to top U.S. officials.
It "would undermine the very policies the president is
actively promoting: expanding U.S. exports; supporting and
generating good-paying American jobs; and advancing broader
national economic, foreign policy, and national security
objectives, such as the rule of law, anti-corruption
disciplines, poverty reduction and political stability," they
The letter was sent to U.S. Secretary of State Hillary
Clinton, Treasury Secretary Timothy Geithner, U.S. Trade
Representative Ron Kirk and other top officials in President
Barack Obama's administration.
The debate erupted as the Obama administration pushes to
substantially complete talks on a regional trade pact with
eight countries in the Asia Pacific region by November.
The proposed TransPacific Partnership pact would include
Australia, Peru, Chile, Singapore, which already have free
trade agreements with the United States, as well as Vietnam,
Malaysia, New Zealand and Brunei, which do not.
More than 250 economists in a letter to Clinton, Geither
and Kirk called last week for more lenient capital controls
rules than Washington had negotiated in previous free trade
The economists, who included Nobel laureate Joseph
Stiglitz, said new research by the International Monetary Fund
and others found restricting the inflow of short-term capital
can help developing nations "stem the development of dangerous
asset bubbles and currency appreciations and generally grant
nations more autonomy in monetary policy-making."
Many U.S. free trade pacts and investment treaties strictly
limit the use of capital controls and give private foreign
investors "the power to effectively sue governments in
international tribunals over alleged violations of these
provisions," the economists said.
Some recent pacts required a "cooling off" period before an
investor could sue and also limited the amount of compensation
they could win. "However these minor reforms do not go far
enough to ensure that governments have the authority to use
such legitimate policy tools," the economists said.
(Reporting by Doug Palmer; Editing by Paul Simao)