Long road to a global open market

Date: 24/06/1999

By Gareth Harding
WHEN more than 70 countries agreed to liberalise their financial services sectors in 1997, many thought it would usher in a brave new world of market opening and increased investments.

World Trade Organisation chief Renato Ruggiero hailed the agreement as "historic", while Trade Commissioner Sir Leon Brittan spoke of a "triumph" after 11 years of heated talks.

But 18 months after it was signed, 15 countries, including Luxembourg and Brazil, have yet to ratify the deal and two of the world's largest potential markets, Russia and China, remain outside the trade club and therefore not subject to its rules on financial services.

Nevertheless, European and American firms, which between them control more than two-thirds of the €1.26-trillion annual international trade in services, expect to make rapid inroads into the emerging markets of central Europe and eastern Asia when their markets are fully liberalised.

The WTO agreement on financial services opens up 95% of the world's banking, insurance and securities markets to competition. Although still in its infancy, it has encouraged greater market opening in countries which already have relatively liberal service sectors.

The US has agreed to ease the requirements on foreign banks which want to obtain a licence to operate in the country and has pledged to abolish some of the curbs, such as citizenship requirements, imposed by individual states.

EU governments have also promised to eliminate a number of measures standing in the way of market access. Austria has said it will scrap rules which require foreign banks to register in the country before doing business there and Belgium has agreed to abolish measures obliging financial institutions to conduct securities trading only through stock exchange firms incorporated in the country.

While progress has undoubtedly been made since the 1997 agreement was signed, EU countries will be pushing for further liberalisation of financial services markets when the next round of global trade talks begins later this year.

Union negotiators will press for an easing of restrictions on providing cross-border services and progress on regulatory issues such as transparency. They will also be calling on signatory countries to improve their original offers on market access.

Article forms part of a survey 'Financial Services'.

Keyword: WTO agreement on financial services.