OTTAWA — The Harper government is urging the United States to make changes to a post-financial crisis banking regulation, a policy Canada insists violates the North American Free Trade Agreement.
But despite the warning it appears the Canadian government has no immediate plans to launch a formal challenge under the trade deal.
Finance Minister Joe Oliver used a speech Wednesday in New York City to call for adjustments to the so-called “Volcker rule,” a policy he said would ban proprietary trading of non-U.S. government securities.
Oliver warned that U.S. investors will find themselves at a disadvantage unless special exemptions are made because the rule would prohibit them from trading in Canadian government debt. The Volcker rule was adopted in 2010, but has yet to be fully implemented.
“I also believe with a strong legal basis that this rule violates the terms of the NAFTA agreement,” Oliver told a Wall Street crowd at an event hosted by the Securities Industry and Financial Markets Association.
“I hope that the U.S. administration sees that changing the Volcker rule is in its own best interest and that of its biggest trading partner.”
Oliver also said Americans should have no concerns about Canada’s credit standing since its rating is better than that of the U.S. government.
The Volcker rule, named after former Federal Reserve chairman Paul Volcker, was part of an overhaul of U.S. banking regulations known as the Dodd-Frank Act.
It is intended to limit banks’ riskiest trading bets that could implode at taxpayers’ expense. These investments helped trigger the 2008 financial crisis.
In recent years, senior Canadian officials — including former finance minister Jim Flaherty and former Bank of Canada governor Mark Carney — warned the U.S. government about the Volcker rule’s wide-reaching impacts.
Three years ago, Flaherty and Carney sent separate letters to Washington policy-makers to complain that reforms under the Volcker rule would reach well beyond their intended scope, and beyond borders.
But even following Oliver’s strong remarks Wednesday, it appears the federal government would rather continue pressing the U.S. administration to make changes instead of launching a formal complaint under NAFTA.
Asked whether Ottawa intended to challenge Volcker under NAFTA, a Finance Department spokesman would only provide a short email reply: “Discussions are ongoing with U.S. Treasury.”
A spokeswoman for Oliver’s office said the minister has personally raised his concerns over the Volcker rule in past bilateral meetings with Treasury Secretary Jacob Lew. Their most-recent discussion on the matter came in February when finance officials from the Group of 20 countries gathered in Turkey, she said.
With files from Associated Press