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Capital Flows, Trade and Investment Treaties, and Development

Capital, both domestic and foreign, is an essential ingredient of
economic growth.  However, in developing nations with relatively weak financial systems, capital flows need to be managed so as not to trigger financial crises.   Capital controls and other capital management techniques serve this end.  There is a new consensus within the economics profession in general and the IMF in particular that capital controls are an essential part of the toolkit for developing nations wishing to achieve stability.  Despite this consensus, the United States still effectively outlaws the use of capital controls in its existing and pending trade and investment treaties.  GDAE researchers are involved in conducting economic analyses of the impact of capital controls in various developing countries, and in examining the “policy space” for capital controls in various trade and investment treaties.

Task Force on Regulating Capital Flows for Long-Run Development:

Regulating Global Capital Flows
Capital Account Regulations and the Trading System: A Compatibility Review
This March 2013 report highlights a number of potential incompatibilities found between the trade and investment treaties and the ability to deploy CARs. It builds on the findings of the first Task Force and presents the findings of a second Task Force convened at a workshop led by GDAE Senior Researcher Kevin P. Gallagher, and cosponsored by GDAE in conjunction with the Pardee Center for the Study of the Longer-Range Future at Boston University and the Center for the Study of State and Society (CEDES).
Also available in Spanish and Portuguese.


Regulating Global Capital FlowsRegulating Global Capital Flows for Long-Run Development
This report, published in March 2012 by the Task Force on Regulating Global Capital Flows for Long-Run Development published, is based on a workshop convened by GDAE Senior Researcher Kevin P. Gallagher in conjunction with the Pardee Center for the Study of the Longer-Range Future at Boston University and the Initiative for Policy Dialogue at Columbia University. The report posits that there is a clear rationale for capital account regulations (CARs) in the wake of the financial crisis.
Also available in Spanish.


Economists Statements:

Economists Issue Statement on Capital Controls and the Trans-Pacific Partnership Agreement. In a letter delivered on February 27, 2012 over 100 economists from six of the nine countries involved in the Trans-Pacific Partnership Agreement issued a letter urging negotiators to promote global financial stability by allowing the use of capital controls in the agreement.

Economists Issue Statement on Capital Controls and Trade Treaties. In a letter delivered on January 31, 2011, more than 250 economists urged the Obama administration to reform U.S. trade rules that restrict
the use of capital controls.  GDAE researcher Kevin P. Gallagher and Sarah Anderson, director of the Institute for Policy Studies Global Economy Project, initiated the statement.

Articles and Reports:

The Global Governance of Capital Flows: New Opportunities, Enduring Challenges, Brittany A. Baumann and Kevin P. Gallagher, PERI Working Paper No. 320, April 2013

Capital Account Regulations and the Trading System: A Compatibility Review, Task Force on Regulating Global Capital Flows for Long-Run Development, March 2013 (Also available in Spanish and Portuguese)

The Social Cost of Self-Insurance: Financial Crisis, Reserve Accumulation, and Developing, Countries, Kevin P. Gallagher and Elen Shrestha, Global Policy Journal, November 2012.

Financial Crises and International Investment Agreements: The Case of Sovereign Debt Restructuring, Kevin P. Gallagher, Global Policy Journal, September 6, 2012.

Navigating Capital Flows in Brazil and Chile, Kevin P. Gallagher, IPD Working Paper, June 2012.

The Global Governance of Capital Flows: New Opportunities, Enduring Challenges, Kevin P. Gallagher, PERI Working Paper, May 2012.

Avoiding capital flight to developing countries: a counter-cyclical approach, Stephany Griffith-Jones and Kevin P. Gallagher Financial stability in emerging markets: dealing with global liquidity Ulrich Volz (ed.), German Development Institute, April 2012

Regulating Global Capital Flows for Long-Run Development, Task Force on Regulating Global Capital Flows for Long-Run Development, March 2012 (Also available in Spanish.)

The Myth of Financial Protectionism: The New (and old) Economics of Capital Controls, Kevin P. Gallagher, PERI Working Paper, January 2012

The IMF, Capital Controls and Developing Countries, Kevin P. Gallagher, Economic and Political Weekly, Vol XLVI No. 19, May 2011

Regaining Control? Capital Controls and the Global Financial Crisis, Kevin P. Gallagher, PERI Working Paper No. 250, Political Economy Research Institute, February 2011

Curbing Hot Capital Flows to Protect the Real Economy, Stephany Griffith-Jones and Kevin P. Gallagher, Economic and Political Weekly, Vol 46 No. 03 January 15 -21, 2011

Policy Space to Prevent and Mitigate Financial Crises in Global Trade and Investment Agreements," Kevin P. Gallagher, UNCTAD/G-24 Discussion Paper, 2010.

"Capital Controls and 21st Century Financial Crises: Evidence from Colombia and Thailand," by Bruno Coelho and Kevin P. Gallagher, PERI Working Paper No. 213, Political Economy Research Institute, January 2010. 

Opinion Articles, Policy Briefs, and Interviews:

The Political Economy of Managing Capital Flows in South Korea and South Africa, Kevin P. Gallagher, GDAE Globalization Commentary, from Triple Crisis Blog, April 5, 2013

External factors’ crucial role in Brazil’s slowdown Kevin P. Gallagher, Letter to the Editor of Financial Times, March 27, 2013

IMF's New View on Capital Controls, Kevin P Gallagher and Jose Antonio Ocampo, Economic & Political Weekly Vol - XLVIII No. 12, March 23, 2013

Capital outflow should be regulated, Kevin P. Gallagher, Letter to the Editor of Financial Times, February 7, 2013

The IMF’s New Transfers Policy and the Trading System by Kevin P. Gallagher, Investment Treaty News, January 14, 2013

The IMF’s New View on Financial Globalization: A Critical Assessment, by Kevin P. Gallagher, Pardee Center Issues in Brief, No. 26, December 2012

What was heresy is now (still far from) endorsed as orthodox at the IMF Kevin P. Gallagher, Al Jazeera, December 11, 2012

The IMF’s Half Step, Kevin P. Gallagher, Project Syndicate, December 5, 2012

Regulating Global Capital Flows Cover Global Financial Reform and Trade Rules: The Need for Reconciliation,
by Kevin P. Gallagher and Leonardo E. Stanley
Pardee Center Issues in Brief, No. 24
September 2012

Let’s not get ‘carried away’ by Bernanke’s latest twist, Kevin P. Gallagher, Financial Times, September 25, 2012

Brazil: Emerging markets can regulate global finance, by Kevin P. Gallagher, Financial Times, July 10, 2012

Historic Moment for the IMF, Kevin Gallagher, Stephany Griffith-Jones, and Jose Ocampo, Financial Times, May 29, 2012

Cross-border financial regulation is justified now more than ever, by Kevin P. Gallagher, Poverty Matters Blog from The Guardian, April 19, 2012

Close the flood gates of speculative capital flows, by Kevin P. Gallagher, Al Jazeera, April 11, 2012.

Regulating Global Capital Flows for Development, by Kevin P. Gallagher, United Nations G-24,  Policy Brief No. 68, April 7, 2012

At 65, the IMF is changing - for the better, by Kevin P. Gallagher, Al Jazeera, March 12, 2012.

Taming the liquidity tide, by Kevin P. Gallagher, Financial Times, March 9, 2012.

Malaysia needs to maintain capital regulation tools, by Michael Lim Mah-Hui and Kevin P. Gallagher, The Edge Malaysia , March 5, 2012.

Capital controls are not beggar thy neighbour, by Kevin P. Gallagher, Financial Times, January 23, 2012.

The IMF must heed G20 decisions, by Kevin P. Gallagher, The Guardian, November 29, 2011.

Spotlight G20: BRICS should condition Euro bailouts on growth and more say, Kevin P. Gallagher,GDAE Globalization Commentary, from Triple Crisis Blog, November 3, 2011.

Capital Account Regulations for Stability and Development: A New Approach, by Kevin P. Gallagher, Stephany Griffith-Jones and Jose Antonio Ocampo, Pardee Center Issues in Brief No. 22, November 2011.

Beyond the G20: Mitigating the Global Imbalances in the Absence of Global Coordination, by Kevin P. Gallagher, Global Policy Journal, November 2011.

The G-20's Helpful Silence on Capital Controls, by Jose Antonio Ocampo, Stephany Griffith-Jones and Kevin P. Gallagher, Project Syndicate, October 2011.

The Pros and Cons of Capital Controls, by Kevin P. Gallagher, Interview with EconSouth Now, September 29, 2011.

Trading Away Financial Stability in Colombia: Capital Controls and the US-Colombia Trade Agreement, by Kevin Gallagher, Latin American Trade Network Brief 66, April 2011.

Damming Capital, by Jose Antonio Ocampo, Kevin P. Gallagher and Stephany Griffith-Jones, Project Syndicate, April 19, 2011.

IMF is turning from ideology to evidence, by Kevin Gallagher, Financial Times, April 18, 2011.

The IMF's welcome rethink on capital controls, by Kevin P. Gallagher and Jose Antonio Ocampo, The Guardian, April 6, 2011.

Reforming United States trade and investment treaties for financial stability: The case of capital controls, by Kevin Gallagher, International Institute for Sustainable Development Investment Treaty News, April 5, 2011.

Why Global Trade Treaties Need Fixing, by Kevin Gallagher, The Guardian, January 31, 2011.

How the US Can Fix Its QE2 Problem, by Kevin Gallagher and Stephany Griffith-Jones, The Guardian,November 18, 2010.

Capital Controls are Prudent but Not Easy, by Kevin Gallagher, Financial Times, October 20, 2010.

Trading Away Stability and Growth in China? by Kevin Gallagher, East Asia Forum, July 6, 2010.

Obama must ditch Bush-era trade deals, by Kevin Gallagher, The Guardian, July 1, 2010.

New Sovereign Debt Management Regime Should be G20 Focus, by Kevin Gallagher, Financial Times, June 21, 2010.

US trade agreements threaten emerging markets' financial stability by Kevin Gallagher, Financial Times, May 11, 2010.

Trading away financial stability by Kevin Gallagher, The Guardian, May 4, 2010.

Would the Real IMF Please Stand Up? by Kevin Gallagher, Financial Times, April 21, 2010.

Capital Controls and Trade Agreements, United Nations G-24,  Policy Brief No. 55

Control that Capital by Kevin Gallagher, Foreign Policy, March 29, 2010.

Why the IMF changed its mind about capital controls, The Guardian, Video featuring Kevin Gallagher.

Capital controls back in IMF toolkit, The Guardian, March 1, 2010 - The IMF has changed its mind and realised Keynes's capital controls are a good thing. It's time to practise what they preach.

"U.S. BITs and Financial Stability," by Kevin P. Gallagher, Vale Columbia Center Policy Brief #19, February 23, 2010.

Helping Brazil to help itself, The Guardian, December 10, 2009 - The IMF should end its Washington consensus policies and encourage Brazil to strengthen, not eliminate, capital controls.

Trading on thin ice, The Guardian, October 27, 2009 - The US-Colombia free-trade agreement is dangerous, outdated and out of touch with trade treaties across the globe.

New Media:

Kevin Gallagher on Global Policy TV
PolicyTalk: International Economic Development and Speculative Capital Flows

GDAE's Kevin Gallagher discusses speculative capital flows in developing countries and the need for the G20 and International Monetary Fund to allow countries to regulate capital in order to prevent asset bubbles, currency appreciation and layoffs in the developing world. (April 23, 2012)

 

Kevin Gallagher on Global Policy TV
PolicyTalk: The New Economics of Capital Flows

GDAE's Kevin Gallagher discusses the new economics of capital controls and how they are helping to correct international markets. (January 20, 2012)

 

 

Kevin Gallagher interviewed by the Real News Network on capital controls and the G20.Will the G20 Control Hot Money?
Kevin P. Gallagher and Triple Crisis blogger Ilene Grabel were interviewed by the Real News Network on the G20 and capital controls. This interview is part of the Triple Crisis Blog's 2011 Spotlight G20 series. (October 2011)

 

 

GDAE's Kevin P. Gallagher and Sarah Anderson of the Institute for Policy Studies were interviewed by the Real News Network to explain why capital controls are an important policy tool developing countries can use to prevent financial instability. The interview follows the release of the Economist Letter, signed by more than 250 prominent economists around the world urging the Obama Administration to remove restrictions in its trade agreements with developing countries that limit the use of capital controls (Jan. 31, 2011).



Kevin Gallagher on QE2Who Pays for the Fed's QE2?
GDAE's Kevin Gallagher was interviewed by the Real News Network on the consequences of the Fed’s proposed quantitative easing and its implications for G-20 leaders who attempted to prevent a “currency war” at the Seoul summit. (November 2010)

 

Kevin Gallagher Hot Money Creating Havoc in te Global EconomyHot Money Creating Havoc in the Global Economy
Part two of GDAE’s Kevin Gallagher’s interview with the Real News Network on why many developing countries are adopting capital controls as a countermeasure to the Fed’s proposed quantitative easing and why the IMF is supporting them. (November 2010)

 

Read more about GDAE's work on Foreign Investment.

Read about all of GDAE's work on Globalization and Sustainable Development.

 

The Global Development and Environment Institute’s Globalization and Sustainable Development Program examines the economic, social and environmental impacts of economic integration in developing countries, with a particular emphasis on the WTO and NAFTA's lessons for trade and development policy. The goal of the program is to identify policies and international agreements that foster sustainable development.

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