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Sat, Mar 02, 2002 - Page 19 News List

Global accounting rules threaten to restrict domestic regulation

An agreement promoted by Enron's auditor, Arthur Andersen, would allow countries to challenge the accounting regulations of other governments through the WTO


As the US Congress and regulatory officials consider ways to tighten auditing and accounting rules to prevent a repeat of the Enron debacle, a little-known global agreement that places untested new requirements on the domestic regulation of professional services such as accounting is quietly advancing -- with the help of firms like Arthur Andersen, Enron's much-criticized auditor.

The new rules would give the WTO oversight of domestic regulation of accounting. Any new national regulation could be challenged by other countries as unfair if it was "more trade restrictive than necessary."

Critics of the new rules say such a standard could hobble a government's ability to regulate scores of services. But US officials say the requirement,simply will prevent governments from setting discriminatory rules, limitations and quotas that interfere with the right of foreign service companies to enter their markets.

So far, the new rules, which are being drafted by the WTO with the help of executives from Arthur Andersen and other companies, have attracted little outside attention. They fall under the General Agreement on Trade in Services, or GATS, a 1994 pact that seeks to liberalize trade in everything from architecture to real estate brokerage, the way the General Agreement on Tariffs and Trade, or GATT, has done for many goods.

The services agreement has generated none of the public controversy that has swirled around the organization's attempts to promote merchandise trade. Even after street protests disrupted the group's Seattle conference in 1999, talks on services moved forward.

But after the Enron collapse drew public attention to controversial accounting practices, public interest groups and critics of free global trade have begun to worry that the services agreement may stand in the way of efforts to curb future abuses.

"The Enron-Andersen crisis just shows that governments need to retain the ability to experiment with deregulation and then, if they realize they've gone too far, to re-regulate," said Ellen Gould, an independent consultant and researcher working on contract with Georgetown University. "What the WTO and these agreements seek to do is make deregulation a one-way street."

Even critics agree that in the current atmosphere, unfair-trade complaints would be unlikely against the measures now being discussed. But they ask how the new rules will be interpreted when future issues arise, and a government proposes measures disliked by a trading partner.

"What we really need to ask is to what degree are global agreements like this going to limit our ability to regulate services domestically," said Patricia Arnold, an associate professor of business at the University of Wisconsin's Milwaukee campus. "The long-term goal of GATS is to eliminate barriers in the cross-border trade in services."

US trade officials said such fears are overblown. They point to recent changes in banking regulations, also covered by the services agreement, that were not challenged by any nation on trade grounds.

"We think that these things are written sufficiently broadly enough not to cause any problems," said a senior trade official.

Joshua Ronen, a professor of accounting at New York University, said the detailed agreement on accounting now being drawn up does not specify what licensing requirements or exam standards nations use; it merely insists that any such regulations be legitimate and transparent. "I don't think they will have any impact on any reform the United States has in mind," Ronen said.

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