Capital Controls, GATS Disciplines and the Need for a More Coherent Global Economic Governance Structure

The paper examines GATS disciplines on capital transfers in light of the challenges stemming from massive surges of short-term capital. It notes that the Agreement does not provide Members with sufficient policy space to deploy controls on capital inflows in sectors and modes of supply where specific commitments have been made, in circumstances where such controls may be necessary for protecting the recipient's country monetary, exchange rate and financial stability. Furthermore, the paper argues that GATS disciplines on capital transfers reveal a more fundamental problem relating to the lack of coherence of a global economic governance structure that has failed to adapt to the profound changes the global economy has gone through since Bretton Woods' times. Such structure is in need of urgent reform to secure a regulatory framework suitable for managing the interface between trade liberalisation, capital mobility and macroeconomic and financial stability in an increasingly interdependent global economy