Not only is the proposed Volcker Rule universally hated, it undermines US trade policy and violates its commitments to the World Trade Organization and free trade. So says the US Chamber of Commerce in a letter to Ambassador Ron Kirk, the head of the Office of the US Trade Representative.
The Chamber is not wrong in highlighting the unpopularity of the Volcker Rule around the globe. China may ignore it completely and Canada, Japan and the UK also have complained. Even within the US regulatory universe it’s not popular. Both Commodity Futures Trading Commission Republican commissioners Jill Sommers and Scott O’Malia have come out against it. Commissioner Sommers has long said she was deeply concerned that there has not been adequate coordination with the SEC and the international regulatory community. Commissioner O’Malia is most concerned about the lack of cost-benefit analysis of the impact of the rules.
Now the Chamber wants the Office of USTR to weigh in and be an “active voice” in the process. “The Chamber believes it is important that USTR evaluate the Volker Rule in the context of our trade commitments and be an active voice in the inter-agency process so that regulators understand the costs to the American economy and potential retaliatory actions the United States faces if other nations treat the Volcker Rule as a trade violation or choose to adopt similar restrictions on US sovereign debt,” the Chamber said in its letter.
One of the Chamber’s main concerns is the rule’s discriminatory aspects. The rule, which exempts US Treasury debt instruments from the ban on proprietary, may limit other countries’ ability to issue sovereign debt, the Chamber pointed out. US lawmakers added the exemption to the Dodd-Frank Act to preserve the ability of US dealers, which include the largest US banks and non-banks, as well as foreign banks, to underwrite the regular sales of US government debt. “The Volcker Rule is discriminatory, as foreign sovereign debt is subject to the regulation, while. This creates a discord in G20 and invites foreign governments to retaliate at a time when we need those same regulators in foreign countries to support initiatives to liberalize trade in financial services.”
To remedy this, the Chamber wants the USTR to review the impact of the law to make sure it does not harm the economy “and America’s standing in the worldwide economy.” The findings can then “better inform regulators of the potential negative consequences of the Volcker Rule as they contemplate the drafting of a final rule.”