Financial services groups look for bigger say in Doha round

U.S. trade officials are coming under pressure from the U.S. financial services industry and agriculture groups dueling for influence over the multinational trade talks that the administration hopes to close by the end of the year.

“For too long we’ve played second fiddle to agriculture,” said Ekrem Sarper, director of financial services for the Coalition of Service Industries. “We’re trying to show we’re a sector that matters and that needs attention paid to it.”

{mosimage}The complaint from financial services, and to an extent from some manufacturing groups, is that the stalemated farm talks put at risk a negotiation that could provide huge benefits to U.S. banks, insurance companies and securities firms, as well as U.S. exporters of goods.

Financial services groups have tried to raise their profile in a couple of ways. First, they convinced a bipartisan group of House members to form a new congressional services caucus that has called on U.S. Trade Representative Susan Schwab to work for an ambitious deal that strengthens the domestic services economy.

Leaders of the group, which has 25 members so far, include Reps. Joseph Crowley (D-N.Y.), Gregory Meeks (D-N.Y.) and Deborah Pryce (R-Ohio). They are focused not only on financial services but on telecommunications, audio-visual, and express-delivery services.

In addition, high-profile chief executive officers of some of the nation’s leading banks and insurance and securities firms have leaned on the administration. In an April 16 letter to President Bush, the CEOs of 20 firms, including Goldman Sachs, Merrill Lynch, JPMorgan Chase, Fidelity Investments, Met Life and Citigroup, said that financial services should be a first-tier priority in all negotiations, particularly in the WTO talks.

As this group argues, the financial services sector is not receiving the attention it deserves based on its contribution to the national economy. Financial services account for $1 trillion in U.S. economic output, which is eight times greater than total U.S. agriculture output, according to the April 16 letter.

Neither group has mentioned the role that agriculture has played in the Doha negotiations. And financial services representatives, even in private, are careful to place more of the blame on the European Union, Brazil and India for the stalemate in agriculture.

Financial services groups also are not calling for the U.S. to improve its offer to reduce farm subsidies, and a forum spokesman said the group does not want to micromanage the talks.

But some lobbyists in the sector do see agriculture as holding up work on a services deal that could have a greater impact on the U.S. economy.  One financial services lobbyist said the reality is that Brazil is not going to come forward on services unless the U.S. moves on agriculture. U.S. farm subsidies have been heavily criticized internationally.

Separately, U.S. Chamber of Commerce President Tom Donohue said this week that U.S. business groups should support a U.S. move to further cut farm subsidies, although Donohue added that the EU, Brazil and India should do the same.

However, the Bush administration is under intense pressure from agriculture groups not to reduce farm subsidies further. And more than half the Senate signed a letter to President Bush earlier this month warning that the U.S. should not offer larger farm-subsidy cuts.

The 58 senators who signed the letter included presidential contenders Barack ObamaBarack Hussein ObamaDemocrats cannot afford to play hardball on immigration reform Trump's tariffs are a case of crony capitalism Obama to visit Kenya, South Africa for Obama Foundation in July MORE (D-Ill.), Hillary Rodham Clinton (D-N.Y.), Chris Dodd (D-Conn.) and Sam Brownback (R-Kan.). Sens. John McCainJohn Sidney McCainMulvaney aims to cement CFPB legacy by ensuring successor's confirmation Trump mocks McCain at Nevada rally Don’t disrespect McCain by torpedoing his clean National Defense Authorization Act MORE (R-Ariz.) and Joseph Biden (D-Del.), who are also running for president, did not sign the letter.

“We cannot support a deal that directly reduces net farm income through steep cuts in farm programs in return for minimal market access gains whose effect on farm gate receipts is speculative at best,” the letter said.

While many observers believe President Bush wants to close a Doha deal before leaving office, they are less sure the administration would pick a fight with so many members of Congress, particularly since it could have consequences in the 2008 Senate election, when the GOP will be defending 21 seats.

WTO members are aiming to conclude their talks by the end of this year, and Deputy U.S. Trade Representative Peter Allgeier told reporters this week that a solid services outcome would have to be a piece of such a deal.

However, American Farm Bureau President Bob Stallman said in a separate press conference on April 23 that he’s not worried the administration will offer to reduce farm subsidies to finish a Doha deal. The letter from the financial services CEOs “didn’t give me heartburn,” he said.

 Stallman was also busy testifying to members of the House and Senate about his organization’s farm bill proposal, which generally would maintain the existing farm subsidy program.