Mike Moore's speeches
Renato Ruggiero's speeches,
The study, "Open Markets in Financial Services and the Role of the GATS" See footnote 1 explains that trade
liberalization in this sector will:
enhance competition and improve sectoral efficiency, leading to lower costs, better
quality, and more choice of financial services;
improve financial intermediation and investment opportunities through better resource
allocation across sectors, countries and time, and through better means of managing risks
and absorbing shocks; and
induce governments to improve macroeconomic management, domestic policy interventions in
credit markets, and financial sector regulation and supervision.
of financial services can have strong positive effects on income and growth. Developed and
developing countries with open financial sectors have typically grown faster than those
with closed regimes. The economic success of Hong Kong (China) and Singapore has been
greatly facilitated by internationally-oriented financial service sectors. Many developing
countries such as Argentina, Brazil, Ghana, Hungary, Indonesia, and Pakistan have become
increasingly integrated in the world's financial markets.
services sector has expanded rapidly in recent years. The study notes that employment
increased by 25 to 50 per cent in a number of industrialized countries since 1970 and now
represents 3 to 5 per cent of total employment. Value-added in the financial service
sector has also grown considerably over the past 25 years and now reaches between 7 and 13
per cent of GDP in Hong Kong (China), Singapore, Switzerland, and the United States.
service sector growth reflects the rise in international financial market activities.
Lending and securities trading, and derivative markets have experienced rapid growth in
the past 10 years, with many developing and transition economies also benefitting
from improved international market access. Foreign ownership of banking assets, an
indicator of commercial presence in this sector approaches 20 per cent in the United
States, Argentina and Chile. Consequently, the study says, cross-border trade in financial
services more than tripled between 1985 and 1995 and now exceeds US$50 billion for
the most important trading countries. Data for the United States suggests that trade via
commercial presence in foreign markets is even more important than cross-border trade.
identifies a number of challenges which must be met if countries are to reap the full
benefits from trade liberalization in the financial services sector. It states that
"macroeconomic stability, structural policies which minimize distortionary
interventions in the financial sector and prudential regulation and supervision" must
underpin the benefits of liberalization. The study notes that there is no universally
applicable liberalization strategy and that the specific circumstances of each country
should be taken into consideration.
stresses that maintaining the stability and security of the financial services system is
of paramount importance. The authors point out that the General Agreement on Trade in
Services (GATS) allows WTO Members to take prudential measures to protect investors and to
ensure the integrity and stability of their domestic financial systems. It also permits
the use of temporary non-discriminatory restrictions on balance-of-payments and transfers
in the event of serious balance-of-payments and external financial difficulties. Moreover,
the management of monetary and exchange rate policy falls outside the scope of the GATS.
overall assessment concerning the benefits of trade liberalization and the challenges for
Member governments, the study states: "The benefits from participating in the
multilateral negotiating process under the GATS, through market access and national
treatment commitments, can accrue to countries without in any way compromising their
ability to pursue sound macroeconomic and regulatory policies." Indeed, notes the
study, "there are circumstances where forward commitment to liberalization may help
to support the development of better macroeconomic and regulatory policies."
Footnote: 1 The study, the first in a series of
studies on topical issues, is available in English, French and Spanish and may be
purchased for CHF 30.- from the WTO's Publications Division.