RESTRICTED
WORLD TRADE S/FIN/M/17
5November 1997
ORGANIZATION(97-4845)
Committee onTrade inFinancial Services
REPORT OFTHE MEETING HELD ON17OCTOBER 1997
Note bytheSecretariat
1. Theseventeenth meeting oftheCommittee onTrade inFinancial Services waschaired by
Mr.Yoshio Okubo ofJapan. Theagenda forthemeeting wascontained inWTO/AIR/693 of
3October 1997, andconsisted offiveitems: exchange ofviews onprogress inbilateral negotiations;
recent developments infinancial services trade; organization offuture work; procedural issues regarding
modification andentry intoforce ofschedules, andother business.
ItemA: Exchange ofViews onProgress inBilateral Negotiations
ItemB: Recent Developments inFinancial Services Trade
2. TheChairman reported onthestatus ofthesubmission ofoffers; intotal, twenty-four offers
hadbeensubmitted. Fiveofthemhadbeenpresented sincetheprevious meeting byIceland, Slovenia,
Nigeria, Kenya andEgypt. TheSecretariat hadcirculated theoffers asdocuments S/FIN/W/12/Add.20
to24.TheChairman invited those delegations thathadsubmitted offers since theprevious meeting
tointroduce them.
3. Iceland indicated thatsince theestablishment oftheEuropean Economic Areathere hadbeen
radicalchangesinthelegalframeworkgoverningcommercialandsavingsbanks,othercreditinstitutions,
securities transactions, mutual funds, andthestockexchange. Themostimportant aspects ofthatprocess
consisted of:theadoption ofstricter rulestoensure theeconomic viability ofbanks andother financial
institutions while strengthening supervision; aprocess ofderegulation including agradual liberalization
ofcapital movements completed in1995; andtheabolition ofrestrictions oninvestments incommercial
banks bynon-residents. Intheinsurance sector, foreign competition hadforced domestic companies
tomerge andrationalize; theadvent ofinsurance brokers enhanced competition insectors previously
dominated bydomestic insurance companies, suchasautomobile insurance andsmall fishing vessel
insurance, andreactivated previously stagnant sectors, suchasinvestment-related lifeinsurance. In
addition, certain insurance monopolies, suchasinthefieldoffireinsurance forhouses, hadbeen
abolished. Itsoffertookintoaccount thatliberalization process andreflected theopportunities provided
byexisting legislation.
4. Egypt indicated themainimprovements initsoffer. Inthebanking sector, itallowed foreign
bankbranches andjointventures, andstated thatforeign equity participation mayexceed 49percent.
Intheinsurance sector, theofferreflected animprovement innational treatment, established adate
fortherelaxation oftheeconomic needs test,andincreased theforeign equity participation limitto
51percent. Inregard toother financial services, which included securities andfinancial leasing, the
offerconfirmed fullliberalisation, since nolimitations hadbeenlisted. Moreover, theofferdidnot
include anMFN exemption list.S/FIN/M/17
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5. Nigeria stated thatitsoffer allowed foreigners, bothindividual andcorporate, toownupto
100percentequity inanydomestic enterprise. Moreover, MFN treatment wasaccorded toallcountries;
however, asamember oftheEconomic Community ofWest African States, Nigeria wasnegotiating
theuseoftravellers cheques inthecourse ofeconomic integration ofthesub-region. Kenya stated
thatitsoffer represented animprovement ofitsUruguay Round commitments inthesector. Itwas
based onthemost recent reforms thathadtaken place initsfinancial system, andontheprevailing
legalframework inKenya. Itinvited anyquestions andcomments inwriting which would beforwarded
totherelevant authorities. Slovenia indicated thatthecontent ofitsofferwasinlinewithwhathad
beenpreviously announced, except fortheaddition ofanewelement, i.e.theremoval ofrestrictions
forestablishment insecurities trading. Other mainfeatures weretheremoval oftheMFN exemption,
removal ofaneconomic needs testintheareaofbanking, andtheincrease ofmarket access inthe
banking sector through establishment intheformofbranches. Moreover, theaccess tothesecurities
market hadbeenimproved through banks.
6. TheChairman invited delegations thathadnotyetsubmitted offers togiveanyindications on
theprogress made. Healsowelcomed reports onrecent developments infinancial services trade as
wellasonrecent developments infinancial markets. Hefurther invited comments onthegeneral course
ofthenegotiations. South Africa announced thatadraftofferhadbeenprepared butduetopolitical
consultationswhichneededtobecompleted,ithadbeenunabletocirculateittoMembers.Theimproved
offerwould reflect theliberalizing changes which hadoccurred inSouth Africa since 1995. Theoffer
would bepresented shortly.
7. Perusaidthatitsauthorities werefinalizing theoffer, which would bepresented inthefollowing
days. Theoffer would reflect thenewandliberal regime ofthefinancial system asprescribed by
legislation enacted in1996, which provided fornewfinancial products andnostateintervention in
setting thecostsofoperations andservices offered. Improvements intheofferincluded thoseconcerning
incorporation inthebanking andother financial services sector, withnorestrictions inmode 3except
forrequiring institutions totaketheform oflimited companies when incorporating, andaguarantee
ofnational treatment forforeign direct investments. Indonesia saidthatitwould continue taking a
positive approach tothenegotiations despite thedifficulties encountered recently. Discussions and
consultationshadbeencarriedoutwithitstradingpartners.Indonesiawasclosetoaconcreteformulation
ofanoffer. Indoing so,itwasseeking abalance, taking intoaccount thecurrent situation ofthe
country, between theinterest oftrading partners andthemultilateral system, andtheimportance of
theprinciple ofprogressive liberalization which wasthewisest approach fortheincreasing participation
ofdeveloping countries. There weresome technicalities tobeworked onbefore submitting theoffer,
butitwould beontimeforasuccessful conclusion ofthenegotiations byDecember.
8. Mexico stated thatduetodelays intheprocess ofinternal consultations, itsofferhadnotyet
beenpresented; however, some indications astoitscontent could begiven. Theofferwould contain
significantimprovementssuchasgreatersectoralcoverage;theinclusionoftheadministrationofpension
funds andtheactivities ofstock exchange specialists; enhanced market access through anincrease in
foreign participation inallfinancial intermediaries; andtechnical changes which would facilitate
comprehension. Theofferwould besubmitted verysoon. Poland announced thatitsofferhadbeen
prepared andwassubject toaninternal procedure atthatmoment. Theconclusion ofthatprocess
hadbeendelayed byachange inthegovernment; nevertheless, theofferwould besubmitted assoon
aspossible. ThePhilippines wasworking toimprove its1995 commitments. Upon completion of
theinternalprocess,animprovedofferwouldbesubmittedinNovember.ThePhilippineswasreviewing
itsfinancial sector regulation withaviewtoadopting more prudent financial policies; liberalization
inbanking andother financial services would bepursued butwithproper pacing andsequencing.S/FIN/M/17
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9. TheDominican Republic announced thatanofferimproving its1995commitments would be
tabled inthefollowing days. Itwould contain commitments intheinsurance sector andinbanking
andother financial services, withnoexemptions toMFN treatment. Chile indicated thatalthough
itsauthorities hadbeenworking intensively inthepreparation ofanoffer, important technical questions
stillrequired some clarification. Ithoped tobeabletosubmit itsoffer inthefollowing weeks.
10. SriLanka stated itsappreciation oftherationale andpolicy objectives fortheliberalization
offinancial services. Italsorecognized theneedforcountries toenter intobinding obligations for
thatpurpose. Ithadalready taken substantive positive measures inthatdirection, which included,
forexample, avariety ofpossibilities afforded toforeign nationals andentities toparticipate inthe
provision offinancial services. Itexpected tomake itsofferinearly November. Italsothanked the
Secretariat forconducting aregional seminar inColombo ontheGATS andnegotiations inprogress.
Brazil observed agreater levelofcommitment toasuccessful conclusion ofthenegotiations thanin
previous weeks. Thatobservation wasevidenced notonlybythenumber ofoffers already presented
orbeing worked on,butalsobytheincreased awareness ofpossibilities andlimitations deriving from
thespecificities ofthesituation ineachMember. Acombination ofambition andrealism inexpectations
wasfundamental inovercoming thedifficulties thathadledtofailure inthepast. Brazil wasengaged
inanattempt toovercome thedifficulties thathadsofarprevented itfromsubmitting anoffer. Itwas
seriously exploring approaches allowing toidentify areaswhere realistic commitments could beoffered
andwasconsidering tabling anoffer bythenextmeeting oftheCommittee.
11. Malaysia recognized thebenefits thatcould bederived from aliberal trading environment.
Itobserved thatmany Members hadbeengiving advice regarding thevirtues ofliberalization ofthe
financial sector. Some ofthose Members, however, hadtaken positions demonstrating reservations
astothevirtues ofliberalization inotherareasintheWTO context, specifically inregard toliberalization
ofsectors ofinterest toMalaysia. Such inconsistency wasnothelpful. Malaysia wascommitted to
doing what itconsidered good foritseconomy. Nevertheless, itwashoping tocontribute tothe
negotiations, asindicated inthebudget speech made bytheDeputy Prime Minister onthatveryday.
Malaysia expected tobring proposals forfurther improvements toitsexisting schedule before thenext
meeting oftheCommittee.
12. Tunisiaindicatedthatitwasonthevergeoftablinganofferimprovingitscommitmentsregarding
thefinancial market, thebanking sector andtheliberalization offoreign investments. Foreign
participation would beallowed upto50percentinfinancial institutions andother Tunisian enterprises.
Itwould liberalize foreign lending byresident enterprises within certain ceilings forbanks aswellas
forother enterprises. Forexport companies, itwould allow thefreefinancing ofliaison offices and
subsidiaries abroad, alsowithin aceiling. Inbanking services, theofferwould include merchant banking
andthecriteria andprocedures fortheapproval offoreign banks. Other improvements related toleasing,
securities investment companies, andtheexercise ofsecurities brokerage asabusiness. Bolivia said
thattheprocess ofeconomic liberalization, initiated in1985, continued toprogress. Inlinewiththat
process, itsgovernment wascommitted topresenting anoffer which wasstillunder preparation in
thecapital. Tothateffect anational commission hadbeensetupwiththeparticipation oftheCentral
Bank, theSuperintendent ofBanks andarepresentative oftheForeign Affairs Ministry. Itwasexpected
thattheoffer would meettheinterests ofitstrading partners.
13. Thailand restated itscommitment tothefinancial services negotiations. Itscontribution had
beensubmitted in1995, andremained valid. Itsauthorities, nevertheless, hadbeenconsidering how
toimprove thesecommitments inlightoftheobjectives oftheGATS. Insodoing, Thailand wastaking
intoaccount itsfinancial situation andtherequests from trading partners. Itcould notcommit to
presenting anofferatthefollowing meeting, butitwould doitsbest. Senegal informed theCommittee
ofaworking meeting heldbyitsauthorities witharepresentative oftheSecretariat toexplore the
practical modalities forpreparing aschedule ofcommitments infinancial services, andtoanalyze theS/FIN/M/17
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specificities ofthefinancial sector regulation inSenegal. Indoing so,dueconsideration hadtobe
given toexisting regional treaties inwhich Senegal participated, aswellastheimplications thatSenegal 's
commitments inthesector would havefortheother 7Members oftheWest African Economic and
Monetary Union. Itconfirmed itsdetermination tosubmit anoffer assoonaspossible.
14. Inassessing theprogress ofthenegotiations, theEuropean Communities reiterated theobjective
ofthenegotiations which wastoleadtoanagreement notonlyconsolidating thepresent degree of
market access, butalsosetting theground forincreased international trade andinvestment. Inits
discussions thatweek withindustry representatives, itsawacommitment bythem toinvest abroad,
butonlywhentherewasapredictablelegalenvironmentforinvestmentandoperationinthehostcountry.
Countries wishing todevelop theirfinancial systems oraspiring tocreate regional financial centres
could reach those objectives more easily iftheywereready toundertake commitments intheWTO,
offering realmarket access opportunities andguarantees fornon-discriminatory operating conditions.
Against thisbackground, theassessment wasstillnuanced. Thenumber ofnewoffers waslimited
since thelastmeeting, andthere wasstillalongwaytogo.Although itappreciated thenewoffers
made, itwasstillawaiting submissions byanumber ofcountries thathadanimportant roleinthe
negotiations. Quite anumber ofpositive andencouraging signals hadbeenreceived, nevertheless,
intwoways; firstly, nocountry hadcontested theeconomic benefits ofliberalization inthefinancial
sector; andsecondly, animportant number ofcountries hadindicated theirintentions tosubmit improved
offers assoonaspossible. Some ofthose improvements weresignificant. However, those promises
needed tobeconfirmed bytheactual tabling ofoffers asquickly aspossible, toenable meaningful
discussions totakeplace during theweek of10November. Ifadealwhich allparticipants could accept
were tobereached, substantial improvements ofcommitments inforce since 1993 and1995 were
required.
15. Canada observed thatitsoffer tabled inJulywould bindthecurrent regime onafullMFN
basis; however, theofferdidnotcover anyanticipated change totheregime. Themain prospective
change related toforeign bankbranching. After theprevious meeting, itsgovernment hadreleased
adiscussion paper tosolicit theviews oftheindustry ontheproposal. Itexpected toconclude those
consultations andhavedraftlegislation ready bytheendoftheyear. Accordingly, itexpected tobe
abletotable atthenextmeeting arevised offer which would reflect thepolicy commitment ofthe
Canadian government.
16. Japan wasencouraged bytheoffers submitted andbythedetailed indications given bythose
whohadnotyetdoneso.Itstated thattheprocess ofliberalization under theGATS should takeplace
withduerespect fornational policy objectives andthelevelofdevelopment ofindividual Members.
Accordingly, thereshould beflexibility fordeveloping country Members toprogressively extend market
access inlinewiththeirdevelopment situations. Members should aimatpromoting theinterest of
allparticipants onamutually advantageous basis. Some Members hadachieved sustainable, non-
inflationary growth under sound macroeconomic management, astrong supervisory system, andrules
fortransparent transactions. Those countries thatwerealready prepared forliberalization should take
theleadinopening theirmarkets andsetanexample. Itencouraged those Members inlessfavourable
conditions tomake efforts toliberalize theirmarkets, bearing inmind thatmore foreign participation
would strengthen theirfinancial system through providing more capital andexpertise. Itunderlined
thattheestablishment ofamultilateral framework infinancial services depended onthesuccess ofthe
negotiations.
17. Switzerland expressed concern astothelimited number ofoffers tabled sofar,especially
considering thatonly60daysremained fortheconclusion ofthenegotiations. Itinvited those, who
hadnotyetsubmitted offers tocontribute tothemultilateral effort. Hong Kong, China stated that
itappreciated thecomplications faced byMembers inpreparing offers. Itwould certainly helpif
proponents oftrade liberalization weremore consistent intheirapproach. Itsoverall impression ofS/FIN/M/17
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thenegotiations wasundoubtedly positive. Itechoed thecallforanearly submission ofoffers before
theNovember meeting oftheCommittee.
18. Hungary recalled thatitsconditional offer would bindnotonlytheexisting liberal regime,
butalsotheliberalizing measures under preparation. Inthatrespect, itinformed thatthefirstdraft
ofthelegislative package, necessary toallow commercial presence through branches, hadbeendiscussed
bytheGovernment theprevious day.Korea echoed theobservation astotheneedofusing theremaining
timeforthenegotiations efficiently. Itemphasized theimportance oftheefforts tobemade byboth
developed anddeveloping countries, especially bytheadvanced countries, toconstruct common ground
based onmutual understanding.
19. Turkey indicated thatalthough itsliberal offerhadbeentabled already, itsGovernment was
working onlegislation toperfect thefinancial system. Ithoped thatthisbillwould bepassed before
the12December deadline. NewZealand echoed otherdelegations astotheneedforprompt submissions
inlightoftheshort period oftimeleftforthenegotiations. Australia washeartened bytheefforts
made byMembers inpreparing offers despite thedifficulties. Inthatrespect, itadded thatthe
transparencyandpredictabilitythatwouldbeprovidedbytheofferscouldonlyassistMembersindealing
withthose difficulties. Norway noted thatthepositive spirit seenintheprevious meeting hadimproved.
Toprovide forrealandfairnegotiations totakeplace before theDecember deadline, iturged Members
tosubmit theiroffers byNovember. Itdidnotwishthata"take itorleave it"situation would emerge
asaresult ofoffers being heldbackuntilDecember, which would jeopardize apositive outcome of
theprocess. Italsoechoed thecallforduerespect ofthedifferent levels ofdevelopment ofcountries.
20. TheUnitedStateswelcomedtheimprovedoffersandtheindicationsofforthcomingsubmissions.
Only withimproved offers could Members enter intoanintensive negotiating phase which would be
critical forasuccessful outcome inDecember. Itreiterated what theU.S. wasseeking, namely,
substantially improved offers thatguarantee therightofestablishment, permit fullmajority ownership,
provide national treatment, andmaintain theexisting rights offoreign financial service providers, across
afullrange ofsubsectors. TheU.S.recognized thatanumber ofcountries might notbeabletocommit
toacomplete opening oftheirmarkets byDecember, norwould theybeabletorespond toallits
requests. Mindful ofthat,ithadunderscored itspriorities andhadgiven concrete andconstructive
suggestions toaddress alloftheconcerns involved. Ithadadvanced thebilateral process asfaras
itcould intheabsence ofconcrete offers. FortheU.S., success meant substantially improved offers
fromacritical mass ofcountries. Itreiterated itsviews astowhatwasbeing negotiated. Exchange
ratepolicy andtheright ofmonetary authorities totakeappropriate monetary policy measures was
notthesubject ofthenegotiations. Inthiscontext, itreferred toaletter sentbytheSecretary ofthe
Treasury, Mr.Rubin, totheDirector-General oftheWTO, Mr.Ruggiero, addressing those points.
21. TheChairman wasencouraged bythestrong confirmation ofthecommitment ofdelegations
toaccelerate their efforts inachieving asuccessful conclusion bythedeadline. Hereiterated the
importance ofmaximising theefforts andmaking progress interms ofthenumber andsubstance of
theoffers forthenegotiations tosucceed.
ItemC: Organization ofFuture Work
22. TheChairman observed that,according totheindicative timetable, thenextmeeting should
takeplace onFriday, 14November. Intheinformal consultations thathehadconducted, suggestions
hadbeenmade tohavethatmeeting atsenior level, andtoadvance thedateofthemeeting to12
November inorder toallow senior levelofficials tospend theirtimemore intensively intheCommittee
andinbilateral negotiations inGeneva. Inviewofthose consultations, TheChairman suggested to
havethenextmeeting oftheCommittee atsenior levelonWednesday, 12November, anddependingS/FIN/M/17
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ontheprogress ofthenegotiations, tohaveafollow-up meeting onFriday, 14November, ifthought
useful.
23. TheCommittee soagreed.
ItemD: Procedural Issues Regarding Modifications andEntry intoForce ofSchedules
24. TheChairman indicated thatintheinformal meeting which tookplace thedaybefore, drafts
ofaProtocol andtwoaccompanying decisions, onetobemade bytheCommittee andtheother by
theCouncil, hadbeendiscussed. TheSecretariat explained thecontent ofthose drafts asrequested
bytheChairman. TheChairman observed thatakeyquestion intheinformal discussion wasthedate
tobefilled inparagraph 2oftheDraft Protocol, which would determine theperiod inwhich Members
needed tofinalize theirratification andother procedures fortheformal acceptance oftheProtocol.
Inthatregard, preliminary views hadbeenexpressed intheinformal discussions astothelength of
thatperiod. Some delegations suggested thattheperiod bekeptasshort aspossible, perhaps until
autumn 1998, since itwasdesirable toimplement theresults ofthenegotiations asquickly aspossible.
Others, however, suggested alonger period, untilearly 1999, duetotheneedtosecure ample time
forthecompletion ofdomestic ratification procedures. TheChairman stressed thatthematter was
ofaprocedural nature, andshould beguided bypractical needs andpragmatic considerations. He
proposed tocontinue informal consultations andexpressed thedesirability ofdelegations communicating
theirviews tohimbyearly November, sothattheCommittee could reach aconsensus onthematter
before thelastweek ofthenegotiations. Hesuggested thattheCommittee revert tothatquestion at
itsfollowing meeting.
25. TheCommittee soagreed.
ItemE: Other Business
26. Noissues were raised under thisagenda item.