Trade Deals, Not Regulatory Dialogues, Prompt More Timely Action On Cross-Border Financial Services Issues

By Brai Odion-Esene and Taylor Thomas

The U.S. and EU have reiterated their desire to conclude the Transatlantic Trade and Investment Partnership (TTIP) by the end of 2016. At present, TTIP does not include a financial services chapter. Public and private sector supporters have pushed for such a chapter; support spans government, from the U.S. Congress and the EU Trade Commission, to American and European insurers and financial services organizations.

Supporters argue the existing U.S.-EU dialogues for financial services are ineffective in reaching final agreements. They are  “conducted on an ad hoc basis without tangible results,” 15 U.S. Representatives wrote in an April letter to President Barack Obama. Since TTIP negotiations started in 2013, the Obama administration has declined to open discussion on a financial services chapter, and stated existing dialogues are the appropriate fora for discussing these issues.

To evaluate whether dialogues suffice for these discussions, we compared timeframes and relative output of trade agreements and dialogues. We contrasted the Trans-Pacific Partnership (TPP) and TTIP with the ongoing Financial Markets Regulatory Dialogue (FMRD) and the U.S. Securities and Exchange Commission-European Securities and Markets Authority (SEC-ESMA) Dialogue. TPP was negotiated in eight years, and odds are TTIP will conclude within a similar window. TTIP negotiations started in 2013, and both sides are determined to conclude talks by the end of 2016 (though it is worth considering the impact of Brexit on this timeline).

On the other hand, the FMRD is a “forum for discussion” for EU and U.S. regulators, and has met approximately twice a year since 2002. The SEC-ESMA Dialogue, begun in 2004, has taken second chair to the FMRD, with no apparent recent statements or meetings. However, both agencies are a part of the FMRD.

So, in its 14th year, the FMRD appears no closer to conclusively addressing the key cross-border priorities of its constituents. Ultimately, dialogues bring regulators together for process and bureaucracy-oriented discussions over the long term. Trade agreements are results driven efforts that can resolve cross-border regulatory concerns in a shorter time frame.