GA Resolution: Fairness in Currency Exchange

[Ananke II]

This is the discussion thread. Please go here to cast your vote.

Fairness in Currency Exchange
A resolution to reduce barriers to free trade and commerce.

Category: Free Trade
Strength: Significant
Proposed by: Krioval


Description: The World Assembly,

RECOGNIZING the importance of international commerce and industry,

DETERMINED to promote both free and fair opportunities for international trade,

NOTING that the most WA member nations have their own separate currencies, and that the effective values at which these can be exchanged for each other can vary from market to market as well as over time,

CONCERNED that inefficiencies involved in this exchange process, including a lack of up-to-date knowledge about effective values, may impede the natural flow of trade between nations,

ELUCIDATING that as exchanging currency that comes from any one nation for currency that comes from any other nation is a form of international trade this business does not count as a purely ‘domestic’ form of economic activity, and that this business is therefore not covered by any limitations that the World Assembly may have accepted on its right to intervene in member nations’ domestic taxation policies;


1. DECLARES that the governments of WA member nations:
a) May not impose any special taxation upon the process of exchanging currency from any one nation for currency that comes from any other nation, nor permit any sub-national government or other organisation within their jurisdictions to do so either, although any general taxes that are applicable to all other forms of commercial activity within those national or sub-national jurisdictions may also be imposed upon this business;
b) Have the right to decide for themselves whether the currency exchange business within their own territories shall be handled by government agencies, by commercial enterprises, or by both of those possibilities;
c) May not allow any commercial enterprises to have or be party to legally-protected monopolies or oligopolies over this currency-exchanging business within their jurisdictions;
d) May not allow any government agencies to have legally-protected monopolies or oligopolies over this currency-exchanging business within their jurisdictions unless those agencies conduct this business purely on a non-profit-making basis and do not charge fees for doing so that exceed the levels necessary to cover their reasonable expenses;
e) May not permit any bodies that are carrying out currency-exchanging operations within their jurisdictions to practice favouritism or unfair discrimination in this business;

2. CREATES the World Currency Exchange Commission (or WCEC) to monitor exchange rates between the currencies of World Assembly members, and declares that:
a) WCEC must collect accurate information about international exchange rates, on as frequent a basis as is reasonably possible, and must make this information freely available to all governments, businesses, and individuals within WA member nations;
b) All governments, businesses, and individuals within WA member nations must cooperate with WCEC in the gathering of this data, and must make the information that WCEC provides to them freely available to all interested parties;
c) WCEC has the power of binding arbitration in any appeals about the application of this resolution’s terms within particular nations that may be brought before it, including the power to order the payment of appropriate compensation to any people who have been adversely affected by abuses of these rules, and there is a general right of appeal from all member nations’ own legal systems to WCEC for this purpose.

Coauthored by: Bears Armed

[Pompadoodle]

Absolutely no way. This resolution would effectively remove the right of nations to regulate their own foreign exchange markets, even in wartime or during financial crises (circumstances when exchange controls are often necessary).

Its an assault on our sovereignty, with no humanitarian benefit.

Count me totally AGAINST.

[Inutoland]

International finance isn't really my area of expertise.

You make a convincing case, Pomp. I'm always slightly inclined to vote for the WA to butt out, anyway. Count me AGAINST too

[Walabamba]

Against

[Takaram]

Against.

[Coltonians]

This is ridiclous. Just another case of the WA getting into my business. NO!

[Harpoon Man Henrik]

Ananke II said that I could attempt to defend my resolution here even though my WA nation is elsewhere (delegate in Antarctic Oasis, as it stands). Here goes.

Aug 19, 2010 7:43:11 GMT -5 Pompadoodle said:

Absolutely no way. This resolution would effectively remove the right of nations to regulate their own foreign exchange markets, even in wartime or during financial crises (circumstances when exchange controls are often necessary).

Its an assault on our sovereignty, with no humanitarian benefit.

Count me totally AGAINST.

Ouch. I must not have done the best in defining the role of the WCEC, since this interpretation is not a new one. As I was reading the text, the WCEC collects and releases information only, and the "binding appeal" clause was meant to apply only to those governments who were not releasing the information in a timely manner.

As for setting controls over foreign currency trade in one's own nation, this resolution can't affect that. I can see scenarios in which the WCEC is told that a given currency has no value in another country - for whatever reason - and that would be in full compliance with the text. The clause dealing with "unfair discrimination" or "favoritism" was meant to ensure an even exchange rate for anybody trying to make an exchange at a given location; it is *not* meant to dictate currency values within a nation's jurisdiction. In that light, I don't see the attack on national sovereignty, and I certainly didn't intend for the resolution to read that way. Should it fail, I would be extremely interested in making those protections more explicit.

As for the humanitarian benefits, my original goal for this was to make sure that foreign guests to another nation were not discriminated against in the process of exchanging currencies. I feel that this would amount to double taxation if they were charged a high fee for the conversion along with whatever value-added or sales taxes would be charged for buying a good or service. Again, if this fails, I will try to make this "consumer protection" aspect a bit more clear.

All in all, I'm glad for the feedback. Thanks for letting me know about some of the problem areas.

[Pompadoodle]

@harpoon Man

Thanks for the feedback. Lets look at the resolution as written.

Provision 1a:

May not impose any special taxation upon the process of exchanging currency from any one nation for currency that comes from any other nation, nor permit any sub-national government or other organisation within their jurisdictions to do so either, although any general taxes that are applicable to all other forms of commercial activity within those national or sub-national jurisdictions may also be imposed upon this business;

'Special taxation' is a term that could have very wide applicability. Say for example my nation was having a foreign exchange crisis, and money was leaving the country rapidly. I would wish to be able to prevent that. But if I tried to do so by levying a tax on currency exchange, then I couldn't do that. Even some sort of quota system could be interpreted as 'special taxation'. Basically, I'd be screwed.

Provision 1c:

May not allow any commercial enterprises to have or be party to legally-protected monopolies or oligopolies over this currency-exchanging business within their jurisdictions;

This appears to open up all nations using commercial forex to unrestricted competition. A system for licensing companies to trade in foreign currency could be interpreted as a 'legally protected oligopoly'. Effectively, I would have to open up my forex market to any and all foreign banks.


Provision 1d:

May not allow any government agencies to have legally-protected monopolies or oligopolies over this currency-exchanging business within their jurisdictions unless those agencies conduct this business purely on a non-profit-making basis and do not charge fees for doing so that exceed the levels necessary to cover their reasonable expenses;

I'm not convinced that this is workable. How can foreign exchange trading be a non-profit business? The door seems open for any government foreign exchange trading scheme to be legally challenged.

Altogether its a dangerous resolution. If its allowed to go through it would be incredibly destructive of national economic sovereignty, especially for left-leaning nations. It would also lead to a massive increase in financial speculation, with predictable destabilizing consequences.

Regardless of how it was intended, the proposal as written should be firmly and decisively rejected.

I remain AGAINST.

[Pompadoodle]

Just to add a bit more.

Its not the WCEC that concerns me so much as the possibility of what my country's domestic courts would do. If the resolution is passed, then it becomes part of our domestic legal code.

Now if Pompadoodle were a Corrupt Dictatorship or similar, then our domestic courts would no doubt interpret the provisions of the resolution in whatever way the government saw fit. But Pompadoodle isn't a dictatorship- its a Civil Rights Lovefest, and we have a free and fair legal system with an independent judiciary.

Thus it is the challenge to our rules on currency transactions that would come through our own courts that is problematic. And bad as it would be for Pompadoodle it would be even worse for government types such as Left-Wing Utopia and Scandanavian Liberal Paradise. Those places have free and fair courts and almost certainly government-controlled foreign exchange. Theres a distinct possibility that the resolution would lead to their entire forex system being declared illegal by their own courts.

[Harpoon Man Henrik]

Strangely enough, Krioval is also a "Civil Rights Lovefest" (Harpoon Man Henrik hasn't been around long enough to see where it's going yet), and we actually came in just below average in "Most Pro-Market" nations. So I see your point, and I'd like to know if there's a fix for the problems you mentioned. If so, I could withdraw support from this resolution and work on the corrections. I do think that standardizing currency transactions by informing the public of valuation changes is useful and would encourage international trade. The limits on taxation were probably a bit naive on my part, though I would like to see some level of protections for travelers.

I do have strong contempt for currency and commodity speculators or all kinds, and as Krioval tries to function as a pro-trade pro-socialist nation, the last thing we would want to do is to encourage currency destabilization. Again, if there's a workaround, I'd like to know about it. If all this resolution would do is to encourage nations to restrict international trade, then it's counterproductive.

[ImperialPoland]

against

WA needs to butt out

[Dinarii]

Against. I really see no reason for the WA to get involved on this issue.

[Pizmo Beach]

Like Pompadoodle said . . . an assault on our sovereignty.

[aniporo]

normally, I would be for such a thing like this but for practical reasons (like sovereign affairs and such), I will be against this resolution like most people.

[Lock Arbor]

This has been a huge debate in our forum and in NationStates, and to be honest, foreign business isn't my specialty. Now watching over foreign exchange rates and making sure things don't run wild is okay with me. However this legislation appears to be controlling taxes on foreign exchange rates even during war time. Simplify this legislation and you might have my vote and others.