RESTRICTED
WORLD TRADE S/FIN/M/14
20June1997
ORGANIZATION
(97-2629)
Committee onTrade inFinancial Services
REPORT OFTHE MEETING HELD ON5JUNE 1997
Note bytheSecretariat
1. Thefourteenth meeting oftheCommittee onTrade inFinancial Services waschaired by
Mr.Yoshio Okubo ofJapan. Theagenda forthemeeting wascontained inWTO/AIR/596 andconsisted
ofsixitems: requests forobserver status; recent developments infinancial services trade; exchange
ofviews onprogress inbilateral negotiations; technical issues regarding theSchedules ofSpecific
Commitments andLists ofArticle IIExemptions infinancial services; organization offuture work;
andother business.
ItemA: Request forObserver Status
2. TheChairman recalled thattheOECD Secretariat andtheACP Group (African, Caribbean
andPacific Group ofStates) hadbeenrequesting observer status intheCommittee. With regard to
therequest bytheOECD Secretariat, henoted thattheWTO Secretariat hadalready beengranted
observerstatusinthemeetingsofOECDCommitteesrelatedtofinancialservices,namely,theCommittee
onFinancial Markets andtheInsurance Committee. Regarding therequest bytheACP Group, he
alsonoted thattheWorking Party onProfessional Services hadgranted observer status toitatitsmeeting
on15May. TheCommittee agreed togrant observer status totheOECD Secretariat andtheACP
Group.
ItemB: Recent Developments inFinancial Services Trade
3. TheChairman observed thataspartofitsreview andsurveillance function, theCommittee
should beinformed ofanydevelopments inMember countries relating tofinancial services trade,
particularly withregard toliberalization measures. Delegations wereinvited toinform theCommittee
onsuchdevelopments.
4. Therepresentative ofVenezuela proceeded toindicate thatasaresult ofadeeprooted crisis
oftheirfinancial system, which affected more thanhalfofitscommercial banks andledtotheclosing
down ofonethirdofthose banks, hiscountry underwent important macroeconomic imbalances from
1994until1996. Thiscrisis hadbeenovercome asaresult oftwoprograms. Thefirstsetofmeasures
hadbeendeveloped torespond toanemergency situation between June1994 andMarch 1996, and
thesecond hadbeenaimed atrestoring balance andfurther strengthening economic reform, having
beenintoeffect since April 1996. Thissecond program hadledtoaseries ofinstitutional andlegal
changes which directly affected thefinancial system. Theregulatory regime forthesector hadcontinued
toimprove interms oftransparency andefficiency since 1994. Asregards thebanking system, new
regulations wereputinplacethatfacilitated thetransformation intouniversal banks forthoseinstitutions
wishing todoso,andCongress wascurrently discussing adraftlawforthecreation andoperation
ofapension fundwhich, onceintoeffect, would putVenezuela inanadvanced position inthearea
ofsocial security andencouragement oflongtermsavings. Intheareaofstock andcapital markets,S/FIN/M/14
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progress hadbeenmade intrying toliveuptointernational standards withtwonewlaws: thefirst
lawrelating toclearing houses, andthesecond relating tocollective investment entities. Thelatter
included inonelegalinstrument threemodalities forcollective investments, i.e.mutual funds, collective
real-estate investment entities andriskcapital funds. Inaddition, there wasanother lawrelating to
capital markets being discussed inCongress which would include themostsignificant progress achieved
internationally inthearea. Theregulatory institutions wereundergoing aprocess forstrengthening
theirtechnical capacity andefficiency; forinstance, amanual ofrulescovering theholding ofaccounts
inthebankingsectorinaccordancewithinternationalrequirementsfortransparencyhadbeenestablished.
Hestated thattheprivatization ofbanks which hadbeennationalized during thecrisis hadbeenasuccess.
Thebanks re-privatized inthefirstpublic auction hadallbeenacquired byforeign financial institutions.
Thesecond phase ofauctions would beheldinthefollowing dayswithparticipation offoreign
institutions. Furthermore, national banks wereincreasing theirlevels ofcapital despite thefactthat
theywerealready overthelegalrequirements andinternational standards. Thiscapitalization hadbeen
conducteddirectlybyshareholdercontributionsorthroughallianceswithforeigninstitutions.Confidence
hadbeenrestored intheVenezuelan financial system. Thedelegate confirmed thedetermination of
hisgovernment tomaintain apolicy ofmodernization, promotion ofcompetition andfullopening of
thefinancial sector.
5. Therepresentative ofKorea stated thatinorder tocopewiththechanging environment in
financial services hiscountry wasreforming thefinancial system, andliberalization hadbeenadvanced
since 1995. Asaresult ofjoining theOECD, Korea hadaccelerated theliberalization calendar inthe
financial sector. Forexample, theaggregate oflisted shares owned bynon-residents inasingle company
hadbeenlimited to15%oftotalshares inJuly1995; theceiling today was23%andwould increase
by3%every yearuntil2000, when itwould beeliminated. There wasalsoanewlicensing scheme
forfinancial institutions which nolonger applied theeconomic needs testtotheestablishment offoreign
bankbranches, securities firms, insurance companies, andinvestment trustcompanies. TheKorean
government would continue tobecommitted toderegulation andfinancial market opening. Hesaid
thatplans wereunder preparation toimprove thestructure andthefunctioning ofthefinancial system,
itspractices andregulations.
6. Therepresentative ofJapan updated onrecent developments intheongoing financial system
reform inhiscountry. Theamendments totheForeign Exchange Control Lawhadpassed theDiet
inMay, andthenewForeign Exchange Lawwould beineffect from April 1998. While related
Government andMinisterial Ordinances wereyettobeformulated, thefundamental feature ofthenew
legislation wasclear, namely, toreplace almost allpriorapproval andnotification requirements imposed
oncross-border, cross-currency capital transactions byex-post reporting, andtoabolish theAuthorized
ForeignExchangeBankSystem.Governmentalcontrolwouldbeexercisedunderexceptional,emergency
circumstances, butdailycapital transactions would enjoy substantial freedom withtheseliberalizations.
Astotheother elements ofthereform, theideabehind themwastoconduct acomprehensive review
ofawiderange offinancial regulations toenhance efficiency inthemarkets, provide afairenvironment
forthetransactions ofconsumers, andultimately revive theTokyo market asoneofthemajor financial
centres. Deliberations werebeing made bygovernment councils, suchastheSecurities andExchange
Council, theFinancial System Research Council, andtheBusiness Accounting Council. Thereports
ofthose Councils would bepublished laterinthemonth, which would provide ablue-print planto
complete thereform bytheyear2001. While therestofthereform wasstillinapreparatory stage,
thefundamental revision oftheForeign Exchange Law would leadtotangible andsubstantial
improvements totheJapanese trading environment infinancial services. Japan hoped thatits
liberalization efforts would beechoed byfurther liberalization commitments bytrading partners.
7. Therepresentative oftheUnited States saidthathiscountry recognized itsresponsibility to
continue toprovide amore efficient financial sector, bothforU.S. consumers andinternational
participants intheU.S. financial sector. Theunderline principle interms ofoperating thesectorS/FIN/M/14
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continued tobetoaccord allfinancial institutions national treatment. Nevertheless, there were
irregularities regarding differential treatment amongst the50states thataffected American andforeign
participants alike. Heindicated thatsome progress hadbeenachieved regarding interstate banking
andefforts would continue toregularize thesystem toextend thebenefits toboththeAmerican consumer
andforeign participants inthemarket. Heindicated theimportance offoreign participants asasource
ofinnovation andcompetition intheU.S.market, andsaidthatforeign participants remained welcomed.
Their onlytestwould betogetthrough theregulatory andprudential regime thathadbeentightened
upduetoproblems intheareaofinternational banking. TheU.S.hadtightened upitsprudential and
regulatory oversight interms ofensuring thehighest quality offinancial instruments andtheconfidence
tooperate inthemarket. Currently, theywerelooking atthenextmajor stepinterms ofliberalizing
theirmarket. TheTreasury Department wasmoving ahead interms ofproposing theremoval ofthe
1933Glass Steagall Actwhich segregated securities, insurance, andbanking functions within theU.S.
market. Inlightofthecurrent regulatory system andtheprudential environment, theywereexamining
whether some reform ofthesegregation ofthefinancial markets waslongoverdue inorder togoback
toamore efficient andinteractive market. TheTreasury Department wassuggesting thatbanks be
abletoacquire securities andinsurance companies andviceversa. Congress wasbeginning tohave
hearings ontheproposal andthedebate wasopened tocomments fromforeign participants intheU.S.
market. Inaddition, theTreasury hadsuggested toexamine whether thefinancial sector should be
allowed toenter intothecommercial sector; inother words, whether acommercial bankintheU.S.
should bepermitted toacquire aretail outlet ormanufacturing entity, although nospecific
recommendations hadyetbeenmade inthearea. Hehoped progress would bemade regarding the
Glass Steagall reform andsaidthatanyreform achieved would beimmediately available toforeign
participants intheU.S.market.
8. Therepresentative ofThailand saidthat,inaddition towhathehadannounced intheprevious
meeting, there were further developments intheirbanking sector. InJanuary 1997, 3newlocally-
incorporated banks weregranted licenses. Thegovernment wasconsidering theapplication ofexisting
foreign fullbranches tosetup2additional branches. Thecabinet approved afinance ministry proposal
toeliminate taxesonfeeincome andinterest income derived fromforeign currency loans tobusinesses
operating outside Thailand. Inaddition, itagreed toremove awithholding taxonprofit repatriated
byforeignandThaibanksundertheBangkokInternationalBankingFacility(BIBF).Regardinginsurance
services, onMarch 25,1997, 28licenses hadbeengranted tolifeandnon-life insurers including
domestic companies aswellasjointventures. Thedelegate re-emphasized theprinciple ofprogressive
liberalization. Inthefuture, liberalization would certainly continue, butatapaceinlinewiththe
improvement indomestic macroeconomic policy andfinancial regulatory framework. Inparticular,
Thailand wasmoving towards amore flexible foreign exchange regime andsubstantially strengthened
prudential regulations. Inother words, therighttiming forfurther reform needed tobeconsidered
inlightofthecurrenteconomicdownturnandproblemsinthefinancialsectorinThailand.Nevertheless,
theyintended totrytheirbesttomaintain theprogress ofliberalization inthefinancial sector. Further
stepsinthatdirection werebeing taken; asecond round oflocally incorporated banking licenses would
begranted bytheendof1997; existing foreign banks withBIBF licenses would beabletoopenadditional
provincial branches anddomore localcurrency banking business; theimplementation ofmerger and
acquisitionpolicyforailingfinancecompanieswouldtakeplace;andfinancecompanieswouldbeallowed
todomore banking business suchassaving deposits, foreign exchange business andnationwide
branching.
9. Therepresentative ofEgypt indicated thatregarding theirfinancial sector twomajor processes
were ongoing atagradual butsteady pace, namely, theprocess ofprivatization andtheprocess of
liberalization. Astoliberalization, ithadcome alongway;forexample, thestock andcapital markets
were100% liberalized. Inthebanking sector, foreign bankbranches andjointventures withforeign
equity upto51%wereallowed. Intheinsurance sector, approval hadbeengranted totwojointventure
companies tooperate insurance business inEgypt. Thefree-zone companies wereabletooperate locallyS/FIN/M/14
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provided theycomplied withtheprovisions oftheInsurance Act.Since 1995, Egypt hadbeenconducting
afundamental reform oftheinsurance rating system byderegulating allclasses ofbusinesses except
fireandmotor, which would bederegulated afterthree years. Newmeasures would beapplied to
improve thecompetitive environment oftheEgyptian market. Hestated theintention tocontinue in
thefuture withfurther liberalization, butthosefurther stepswould depend onthedevelopment ofEgypt 's
economy,theconcessionsmadebytradingpartners,finalizingapropersafeguardmeasureintheservices
sector, andprogress innegotiations covering other services sectors.
10. Therepresentative ofIsrael stressed theimportance theyattached toachieving amultilateral
agreement ontrade infinancial services. Henoted thatIsrael'sSchedule ofSpecific Commitments
submitted during thelastround reflected anopenandliberal approach inthisfield. Inrecent years
Israel hadendorsed measures toenhance theconditions allowing forthepresence offoreign insurance,
banking andcapital market service suppliers within itsborders. Itspolicy wastoplacenomarket access
limitations ontheactivities offoreign financial suppliers, demonstrating itscommitment totheprinciples
ofnational treatment andMFN. Hecalled forthesubmission ofnewandimproved offers andadded
thatthose would betaken intoaccount when considering Israel'scommitments.
11. Therepresentative ofPakistan indicated thatasaresult oftheircommitment totheliberalization
ofthefinancial sector, hisgovernment hadalready privatized twoofitsmajor public sector banks;
theremaining three were awaiting privatization. Having saidthatandnotwithstanding Pakistan 's
commitment toliberalization, heemphasized theneedtobearinmind theprinciple ofappropriate
flexibility intheliberalization process throughout thenegotiations.
12. Therepresentative ofIndia saidthatinApril 97,theyhadimplemented amonetary policy
whereby certain measures forderegulation hadbeentaken. India removed thereserve requirements
oninterbank borrowing; theceilings oninvestment bybanks indebtmarkets werealsoremoved and
hadbeenmade subject toprudential norms. Certain regulations onconsortium lending andsyndicated
loans hadalsobeenremoved; asaresult, banks werefreetodecide onthekindofloandelivery system
theywished touse. Other measures hadbeentaken toliberalize themarket thatwould alsoleadto
more competition andefficiency inthemarket.
13. Therepresentative ofJamaica expressed hishope tohearcomments ongeneral experiences
regarding theintegration ofdifferent financial services within asingle institutional framework. His
understanding wasthatthere wasasignificant move internationally, andcertainly inthemore mature
economies, forareform ofthefinancial sector. Itwould beuseful forthemtoseewhether there was
aclearunderstandingofthedistinctiontobemadebetweenprudentialsupervisionandregulatoryreform.
Inhisview, governments andcentral banks hadaprimary andresidual responsibility inprudential
supervision forthose institutions thatincaseoffailure might haveasystemic impact ontheeconomy;
whereas, forthose institutions where theriskwasmerely thefailure ofthedepositors orinvestors,
central banks feltnoprimary norresidual responsibility, andtherefore thelosses would notbeborne
bytaxpayers. Thiswasapoint hewished tofindoutfromthose countries moving inthose directions.
Thefactwasthatanumber ofcountries wererecognizing thattherecould andshould besome distinction
between theinterlocking ofmanagement andtheintermingling oftheoperations ofnearbanks, insurance
companies andcommercial companies withbanks.
14. Inresponse, theU.S.representative indicated thatwhen theyspoke ofregulation inthefinancial
sector, theobjective wastoensure thatregulation wasinpursuit ofprudential behaviour inthesector.
Headded thatregulation foranyother sakeserved noimmediate purpose thathewould beableto
identify.
15. Therepresentative oftheEuropean Communities commented ontheirexperiences following
thequestion raised byJamaica. Thesingle market hadbeencompleted covering insurance, bankingS/FIN/M/14
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activities andsecurities markets. TheEChadtaken theapproach ofproviding foraminimum and
essential harmonization ofprudential requirements which enabled anyentity within thejurisdiction
ofaMember State tooperate andoffer, throughout thewhole Community without restriction, any
service thatitwasauthorized tocarry outinitshome country. Therefore, there wasfullmutual
recognition without anyrestrictions suchaslimitations onthenumber ofbranches oronaccess tostock
exchanges bybranches, noranyrestrictions oninsurance policy contracts. Heremarked thatinthe
Community therewasnosegmentation between insurance, securities andbanking firms. Itwaspossible
tointegrate thefunctions provided thatsubsidiaries were separately capitalized, andhadspecial
authorization tocarry outeither banking, securities orinsurance services. They could bepartofthe
same group. Forthese purposes, theEC'sapproach wasoneofconducting consolidated supervision
which theywere aiming tonegotiate andextend toother countries tomake itpossible toexchange
information with regulators ofthose countries, sothatfinancial groups could besupervised
internationally. Henoted withsatisfaction andhopethestatement made bytheU.S.regarding regulatory
reform, because intheglobalized system, EUcompanies tended tobemembers ofgroups which offered
through separately capitalized andsupervised subsidiaries different financial services. Hehoped those
groups would haveaccess toanyoftheU.S.markets when thereforms tookplace.
16. Inseeking clarification therepresentative ofJamaica stated thatcertain prudential requirements
forentry intothemarket might benecessary, i.e.inexercise ofconsolidated prudential supervision,
andthere wasadistinction between theconditions formarket entry andtheconditions fornational
treatment thatwould beaccorded bytheregulatory authority oncethesupplier hadentered themarket.
Inhisviewthere were anumber ofissues inthatrespect thatanumber ofdelegations would liketo
clarify. Theissues wereimportant particularly when theprudential requirements thatmaybeapplied
bycertain international organizations might bemorestringent thanthoseapplied inthedomestic market,
andwhere theregulatory reform undertaken domestically might notbeproceeding atapaceinline
withthestage ofdevelopment ofthedomestic market.
17. TheChairman indicated theusefulness ofupdating theCommittee onrecent developments and
saidthatthediscussion could include prudential aspects aswell. Hesuggested tokeepthisitemon
theagenda offuture meetings.
ItemC: Exchanges ofViews onProgress inBilateral Negotiations
18. TheChairman observed thatMembers hadbeenengaged inbilateral negotiations since the
previous meeting oftheCommittee. Forthesakeoftransparency, heurged participants togivetheir
views onprogress made inthose negotiations. Heindicated thatitwould alsobehelpful ifdelegations
wereabletoupdate theCommittee onhowtheywereprogressing intheirpreparation ofinitial offers.
19. Therepresentative oftheUnited States announced thattheywould beabletotableanMFN
based conditional offerby14July. They hoped thatother Members would alsotableoffers bythat
date. IfMembers waited toomuch afterJulyitwould bedifficult toseehowtimewould permit
Members tosuccessfully conclude thetalks. While shefullyunderstood thedifficulties thatcountries
faced inputting together theiroffers, shehoped thatthose countries unable totable theiroffers by
Julywould beinaposition toshare withtheCommittee atitsJulymeeting theparameters oftheir
offers onanindicative basis ataminimum. TheU.S. hadsubmitted 44request listswhich were
comprehensive, covering banking, insurance andsecurities forthemost part. Those listshadbeen
submitted tobothdeveloped anddeveloping countries from various geographic areas oftheworld.
TheU.S.hadalready metwith20countries andmore meetings would takeplace thenextday. They
wereverypleased withthepositive toneinalmost allbilaterals, andalsowiththerepresentation from
capitals andhoped thatitwould continue throughout thenegotiations. They looked forward totheS/FIN/M/14
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positive tonebeing translated intoconcrete meaningful offers, soallMembers would beinaposition
toreach asuccessful conclusion ofthenegotiations by12December.
20. Therepresentative ofJapan indicated thattheywereencouraged bythedevelopments thathad
taken place inmany countries regarding financial services liberalization andbythepositive and
forthcoming attitude ofdelegations. Inlightofthelimited timeframe, itwasimperative toproceed
asefficiently andexpeditiously aspossible. Tothatend,submission ofinitial offers intimewas
important. Japan announced itsintention totableitsoffer bythefollowing meeting.
21. Therepresentative ofAustralia saidthattheywerealsoimpressed bythegenuine commitment
ofcountries andpleased bythestrong representation from capitals. Shestressed theimportance of
sustaining momentum through theearlytabling ofrevised offers. Sheannounced thatAustralia would
betabling asignificant offerinJuly. Sheadded thatareport onthereform oftheirfinancial system
hadbeen finalized andwasunder consideration. Thereport contained anextensive number of
recommendations onimproving thefinancial system regulatory framework. TheTreasury was
considering howtorespond tothose recommendations intheirtotality withanannouncement expected
inSeptember. Sheadded thattheywould beinabetter position thentodiscuss withdelegations what
theresponses might mean interms oftheiroffer. Shestated thattheaimofhergovernment wasto
improve thecompetitiveness ofthefinancial system. Australia wasprepared todiscuss withother
countries questions ofhowmuch andhowsooncountries should liberalize based ontheirexperience.
22. Therepresentative ofBahrain stressed theimportance ofreaching amultilateral agreement
inthisareaforglobalization andtransparency. Thiswould beforthepurpose ofabetter andmore
profound relationship between countries thatwould helpcreate peace intheworld. Regarding
developmentsintheirfinancialsystem,hesaidthathiscountryhadagoodtrackrecordasaninternational
financial centre. Heindicated thattheywould havenoproblem inpresenting theirofferon14July.
23. Therepresentative ofHong Kong stated thattheywere alsoencouraged bythebilateral and
plurilateral meetings theyhadheld. Hepointed outtheopenness ofHong Kong'sfinancial system,
andstressed thatitssuccess gaveagoodexample ofthebenefits ofsuchopenness. Heindicated their
intention totableanimproved offer wellbefore thetarget dateof14July.
24. Therepresentative ofKorea indicated thatthebilateral negotiations hadhelped clarify views
andpositions. Thetonewaspositive andhewasoptimistic although there were some obstacles to
overcome. Herecalled that,according totheSingapore Ministerial Declaration, thetaskofthefinancial
services negotiations wastoachieve significantly improved market access commitments withabroader
levelofparticipation intheagreed timeframe. Korea stood ready tocontribute tothistask. Inlight
ofthis,hesuggested thatMembers follow some principles intheinterest ofasuccessful conclusion.
First, allconcerned Members should participate inaconstructive manner, making bestefforts tosubmit
high-quality offers within theagreed timeframe; second, theagreement should bebased ontheMFN
principle without exception foranycountry; andthird, amorerealistic andconstructive approach should
befollowed which tookintoaccount thedifference inlevels ofdevelopment among Members.
25. Therepresentative ofEcuador indicated thattheyhadreceived several requests andhad
participated insome bilateral meetings. Inthepastyears hiscountry hadstarted agradual process
aimed atmodernizing thefinancial sector andimproving thesupervisory system. Inhisview the
negotiations should beconducted bearing inmind theprinciples ofreciprocity andmutual benefits,
andinanatmosphere offlexibility.
26. Therepresentative ofSwitzerland indicated thattheyhadconducted bilateral meetings and
presented theirrequests aswell. Indoing sotheyhadtaken thefollowing approach: Switzerland 's
requests were formulated seeking realvalue-added interms ofmarket access andnational treatmentS/FIN/M/14
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commitments, tobetaken ontopofthelevelofcommitments intheinterim agreement. Thus, they
hadrequested theremoval ofMFN exemptions, confirmation oftheinterim agreement commitments,
binding oflegislative andregulatory improvements which hadoccurred since 1995, among others.
Headded thatafter thesecond round ofbilaterals, Switzerland believed thatafairamount of
improvements could bereached. However, itwasalsounder theimpression thatmany countries were
notyetcomfortable withconsidering thereflection ofsuchpotential intheirschedule ofcommitments.
Inhisview, itwasofgreat importance togenerate momentum forthenegotiations andrespect the
agreed timeframe forthepurpose ofensuring predictability andconfidence. Switzerland would be
ready tosubmit animproved andconditional offerby14July,anditstrongly hoped thatothers would
follow.
27. Therepresentative ofChile made thefollowing statement:
"The bilateral meetings Chile heldthisweek withseveral delegations gaveustheopportunity
toseethatthereisafavourable desire toreach substantive agreements inthefinancial services sector,
based ontheprinciples ofthemost-favoured-nation. However, oneaspect ofthediscussions heldraised
concern among thecompetent authorities inChile. Some questions raised inthecontext ofoneof
ourbilaterals are,inChile'sview, outside thescope oftheGeneral Agreement onTrade inServices
andinparticular oftheAnnex onFinancial Services. Apparently, itistheopinion ofoneimportant
Member ofthisOrganization thatthemeasures adopted inthecontext oftheactivities conducted by
acentral bank, oramonetary authority, orbyanyotherpublic entity inpursuit ofmonetary orexchange
ratepolicies would besubject totheGATS disciplines. InChile'sopinion, thisinterpretation isincorrect
since Article Iandtheprovisions oftheAnnex onFinancial Services bothspecifically except from
thescope anddefinition oftheGATS themeasures adopted inthecontext ofactivities conducted by
acentral bank oranymonetary authority oranyother public entity inthepursuit ofmonetary or
exchange ratepolicies. ForChile, stilladeveloping, small andopen economy, thisunexpected
interpretationmayhaveimportantimplications,theextentofwhichourauthoritiesarepresentlyassessing
since, should thisbecorrect, itwould imply aserious impairment ofitscapacities tomanage monetary
andexchange ratepolicies. Thisissue isasource ofconcern since, asstated before, thiscannot be
drawn fromtheGATS provisions themselves. Thissituation would haveasaprobable consequence
adelay ingetting theresults ofthestudies andanalyses which arepresently being conducted bythe
authorities oftheMinistry ofFinance andbyother entities responsible fortheseissues; itmight imply
adelay ofseveral weeks inthedecision making process which ispresently under wayinthecontext
ofthese negotiations andwasintended tocomply withthedeadlines agreed uponinthisCommittee."
28. Therepresentative ofCanada stated thatasaresult ofconsultations withtheirfinancial industry,
theyhaddeveloped interest lists,inawiderange ofcountries throughout various geographic regions.
Those listshadbeenputforward. They werepleased bytheopenandconstructive dialogues inthe
bilaterals, andtherecent developments infinancial markets thathadbeenannounced. They intended
totableanoffer inJulyandlooked forward tomany other countries doing likewise.
29. TherepresentativeofTurkeystatedthathisdelegationwaspleasedbytheliberalizationmeasures
taken since1995inmany countries, andthepositive andoptimistic toneofthebilaterals. Heemphasized
theimportance ofreflecting theachieved levelofliberalization inthespecific commitments ofcountries.
Headded thatinthecourse ofthemultilateral negotiations, Members should notlosesightofthefact
thatreciprocal concessions must bebalanced forallparties.
30. TherepresentativeoftheEuropeanCommunitysharedtheviewexpressedregardingthepositive
toneofthebilaterals andtheimportant participation from capitals. Hisdelegation hadaround 20
bilaterals withawiderange ofcountries, andhadmade over30requests. Hesaidthattheirmainconcern
wasabout therespect andguarantee oftherights offoreign operators already inthemarket, the
protection oftheirinvestments andtheability tocontinue operating onthebasisofnational treatment.S/FIN/M/14
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Healsoexpressed concern about having thepresent degree ofliberalization andimprovements made
since June1995 reflected intheinitial offers, andhehoped thatthiswould bethecase. TheECalso
expected thatwhenever bilateral liberalization agreements hadbeen concluded, there would bea
confirmation thattheywould apply onanMFN basis andbound intheschedules. Histhirdconcern
related toareas where, inaddition tothebinding oftheexisting regime, itmight benecessary totake
some additional stepstoensure thatareasonable degree ofmarket access andnational treatment were
provided. Astotheiroffer, heannounced hisdelegation 'sintention totableitassoonaspossible,
certainly by14July. Thisoffer would notbeonlyarestatement ofthepresent schedule; itwould
alsogrant basically fullaccess totheinternal market oftheEU,fullMFN treatment, anditwould
reflect thepresent situation including theimprovements thathadtaken place. Theconditional nature
ofthatoffer would provide thenecessary flexibility toadapt orevenimprove ittaking intoaccount
theprogress made inthenegotiations. Heexpected thatanearly tabling oftheEC'soffer would
encourage other Members totabletheiroffers by14July, andinanyevent, togiveclearindications
ofwhattheywould beready tooffer inthenegotiations.
31. TheChairman saidthatthepositive, constructive andopen dialogue being conducted was
veryencouraging. Hehadalsonoted thecomments thatparticipation from capitals hadhelped. He
hoped thatthisconstructive frame ofmind would bemaintained throughout thenegotiations. He
suggested tokeepthisitemintheagenda offuture meetings.
ItemD: Technical Issues Regarding theScheduling ofSpecific Commitments andListing of
Article IIExemptions inFinancial Services
32. TheChairman recalled thatattheprevious meeting, theCommittee briefly discussed howto
dealwithsome technical issues regarding thescheduling ofcommitments andthelisting ofArticle
IIexemptions infinancial services. Clarifying some oftheissues would behelpful inimproving offers.
Some interest hadbeenexpressed infurther discussing theissue ofthedistinction between modes 1
and2.However, delegations hadalsostressed thatsuchadiscussion should notcause anydelay in
theprogress ofthecurrent negotiations.
33. Therepresentative ofHong Kong recalled thatsome useful discussion ontechnical issues
including thedistinction between modes 1and2hadtaken place attheprevious meeting. Inhisview
thereremained some interesting issues thatwereoutstanding andshould beconsidered. Some ofthose
issues hadwideimplications andwererelevant tomany sectors otherthanfinancial services, andperhaps
needed tobeconsidered inawider context andinalonger timeframe thantheonetheCommittee
had.However, other issues could usefully beconsidered atthepresent timeandmight facilitate clarity
inscheduling. Ashadbeenmentioned intheprevious meeting, hisdelegation would welcome informal
technical discussions open toallMembers, inawaythatdidnotdetract from themain business of
thenegotiations.
34. Therepresentative ofAustralia expressed interest indiscussing technical issues aswell. In
herviewitwould beverydifficult toresolve those issues inthetimeframe ofthenegotiations. Trying
toresolve those issues could takeaway valuable timeandresources from thecentral purpose ofthe
negotiations. Sheshared theviewthatanysubstantive solution could havewider systemic implications
forservices scheduling. Therefore, itmight bebesttotrytodevelop apragmatic, procedural solution;
onethatdidnotprejudge anylonger-term decisions, buthelped facilitate thenegotiations. Shesuggested
anapproach fordealing withtheseissues byMembers considering theoption ofaprocedural solution,
exploring veryinformally whatsuchaprocedural option might looklike,andfinalizing quickly this
procedural solution perhaps before thesummer break.S/FIN/M/14
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35. Therepresentative ofKorea stated thatthedifference between modes 1and2wasnotamatter
ofsubstance, butamatter ofstandard. Hereiterated, ashisdelegation hadsuggested intheprevious
meeting, thattheSecretariat could prepare anoteproposing themostreasonable waytotackle these
issues.
36. Therepresentative ofMorocco stressed theneedtotackle thesetechnical issues without making
itapriorcondition tocontinuing thenegotiations. Theprocess toclarify those issues should becarried
outatthepresent timetoavoid problems ofinterpretation ofcommitments inthefuture. Hesupported
theproposal ofhaving informal discussions ontechnical issues inparallel withthenegotiations and
stated thattheSecretariat could prepare anotecontaining concrete proposals forMembers todiscuss.
Therepresentative ofThailand saidonbehalf ofASEAN thatthediscussion oftechnical issues was
important andhelpful inimproving theoffers. They supported having informal consultations open
toalldelegations onthese issues andhaving theSecretariat dosome preparatory work forMembers
todiscuss.
37. Therepresentative ofJamaica stressed thatitwould beimportant toclarify these issues soas
nottoaffect thequality ofthecommitments. Hesupported having aninformal meeting opentoall
Members, where those whohadidentified technical issues forclarification would bring them tothe
table. Henoted thatsome delegations hadproposed having theSecretariat prepare anotefordiscussion,
buthepreferred thattheMembers themselves tackle those issues, andtrytogetsome clarification
astowhataprocedural option meant inaninformal meeting.
38. Therepresentative oftheUnited States fullysupported theview thatthework ontechnical
issues should notdelay theimportant work toseekimproved offers inthenegotiations. Herdelegation
alsosupported trying tofindapragmatic solution tothose issues inaninformal process, conducted
inparallel withthenegotiations, within ashort timeframe, trying toreach some sortofproblematic
solution bytheJulymeeting. Thiswould allow toaddress those issues butalsorecognize thatamore
extensive discussion oftheissues withrespect tonotonlythefinancial sector butalsoother sectors
would needtotakeplace overthelonger term. Therepresentative ofVenezuela alsoshared these
views insupport ofaninformal meeting, andadded thatcontribution fromMembers tothediscussion
would bewelcomed. However, theparticipation oftheSecretariat could perhaps beuseful insuggesting
pragmatic solutions andhelping identify thedifficulties thatoften arisewithregard totheSchedules
andListsofMFN Exemptions. TheEuropean Community stated insupport ofprevious speakers that
theseissues werecomplex andaffected many othersectors. Theyexpected thatafull-fledged discussion
ofthose issues could takeplace aftertheendofthenegotiations. Meanwhile, Members should ensure
thatapragmatic solution wasfound providing enough clarity intheformulation ofcommitments so
thatcountries wereabletomake commitments regarding cross-border trade andconsumption abroad.
39. TheChairman noted thatitwaspointed outthatthemode 1and2issuewasanimportant one,
andinterest hadbeenexpressed intrying tofindapragmatic solution. Theissuewasatechnical one,
andMembers could ofcourse clarify themeaning oftheircommitments intheirindividual schedules.
Headded thatthepurpose ofdiscussing thismode 1-mode 2issue, atthisstage, would betoassess
whetherpracticalwayscouldbefoundquicklytofurtherpromotetransparencyortoremoveuncertainties
withrespect tothemeaning ofthecommitments. Suchanexercise could facilitate Members tomake
improved offers. Atthesame time, itshould bestrictly neutral withrespect tothesubstance ofthe
commitments. Given thelimited timeframe, thediscussion tobepursued would needtobekeptto
therequired essentials. Issues ofabroader nature might perhaps betaken upinthecontext ofpreparation
forthenextround ofservices negotiations, taking account ofthework inother bodies. Hesuggested
asapossible option tohaveinformal discussions onthisissue withtheparticipation ofallinterested
delegations. Hesuggested asking theSecretariat toorganize suchinformal discussions which would
beopentoalldelegations. TheSecretariat could thenreport ontheresult ofthose discussions tothe
Committee atitsnextmeeting. Healsoencouraged those Members whoencountered practical questionsS/FIN/M/14
Page10
inthecontext ofimproving theircommitments under modes 1and2oranyother aspects intheir
schedules toconsult withtheSecretariat, andherequested theSecretariat tobeready toassist delegations
inpreparation oftheiroffers.
40. Therepresentative ofJamaica suggested thatsince theparticipation ofexperts fromcapitals
enrichedthediscussions,itwouldbehelpfultohavethemtakepartintheinformaltechnicalconsultations
thathadbeenproposed. Inhisviewindividual consultations withtheSecretariat would beveryuseful,
butabroad stock taking ofthemore important technical issues would beofbenefit forthose delegations
thatwerenotenriched byparticipation fromcapital. Therepresentative ofPeruinquired whether the
document S/FIN/W/9 would beupdated inpreparation fortheinformal discussion ofthetechnical issues.
TheSecretariat indicated thatashorter paper briefly summarizing whattheproblem wasandexploring
possible ways toaddress itwithin theshort timeframe available, could beprepared ifthought useful.
41. Inlightofthepreceding discussion, theChairman asked theCommittee whether itwould agree
tohissuggestions justmade, i.e.tohavetheSecretariat organize informal consultations andreport
totheCommittee atitsnextmeeting. Participation oftheexperts fromcapitals insuchconsultations
would behelpful andwelcomed, buttheirparticipation wasfordelegations todecide. TheCommittee
soagreed.
ItemE: Organization ofFuture Work
42. TheChairman recalled thattheCommittee hadagreed onanindicative timetable forcompletion
ofthenegotiations attheprevious meeting. Heindicated thattheCouncil forTrade inServices had
taken aformal decision on29Maytoconclude thepresent negotiations on12December, having regard
toarecommendation thathadbeenmade bytheCommittee. Thetextofthatdecision wasindocument
S/L/39 of2June1997. Henoted thatinresponse toarequest made attheprevious meeting ofthe
Committee, theSecretariat hadprepared anoteonsome issues concerning theadoption ofaprotocol,
which hadbeencirculated asS/FIN/W/11. Itspurpose wastoassist delegations inconsidering specific
issues involved inadopting aprotocol, andthenotecontained anumber ofsuggestions based onpast
experience innegotiations onfinancial services andother services sectors. Hesuggested thatthe
Committee reflect onthevarious points made inthenote, andrevert tothose issues insubsequent
meetings when theCommittee would discuss adraftoftheprotocol. Hesuggested tohavethenext
meeting oftheCommittee onthedatepreviously agreed, i.e.onThursday 17July. TheCommittee
soagreed.
43. TheChairman reminded delegations thattheagreed dateforsubmission ofinitial offers was
14July,andheexpected tohearfromMembers inthenextmeeting onthecontent oftheoffers. The
Secretariat asked thattheoffers besubmitted inelectronically readable form, wherever possible.
ItemF: Other Business
44. Noissues were raised under other business.