RESTRICTED
WORLD TRADE S/FIN/M/19
17December 1997
ORGANIZATION(97-5603)
Committee onTrade inFinancial Services
REPORT OFTHE MEETING HELD ON8DECEMBER 1997
Note bytheSecretariat
1. Thetwentieth meeting oftheCommittee onTrade inFinancial Services waschaired by
Mr.Yoshio Okubo ofJapan. Theagenda forthemeeting wascontained inWTO/AIR/738 of
19November 1997, andconsisted offouritems: exchange ofviews onprogress inbilateral negotiations;
recent developments infinancial services trade; organization offuture work; andother business.
ItemA: Exchange ofViews onProgress inBilateral Negotiations
ItemB: Recent Developments inFinancial Services Trade
2. TheChairman reported onthestatus ofthesubmission ofoffers; intotal45offers hadbeen
submitted bythemorning of8December. Thirteen ofthem hadbeenpresented since theprevious
meeting inNovember bySenegal, Chile, Poland, Cyprus, Bulgaria, Jamaica, Mexico, Ghana, Kuwait,
Pakistan, Malaysia, Dominican Republic andNicaragua. TheSecretariat hadcirculated theoffers as
documents S/FIN/W/12/Add.33 toAdd.45. Switzerland, Australia andHungary hadsubmitted revised
offers, alsosince theprevious meeting. Heindicated thatalistoftheoffers hadbeenmade available,
which initsfinalformwould beadopted astheresults ofthenegotiations onFriday. TheChairman
invited those delegations thathadsubmitted offers orrevised offers since theprevious meeting to
introduce them.
3. TheDominican Republic saidthatitsofferincluded commitments ininsurance andinsurance
related services aswellasinbanking andother financial services, withnoMFN exemptions. Senegal
wasconvinced thatliberalization inthefinancial sector mustbedoneinawaywhich wascompatible
withthelevelofeconomic development ofeachcountry. Itindicated thatitsoffercovered life,accident
andhealth insurance; non-life insurance; reinsurance andretrocession; services auxiliary toinsurance;
acceptance ofdeposits andotherrepayable funds fromthepubic; lending ofalltypesincluding consumer
credit, andallpayment andmoney transmission services. Theoffer might beimproved further as
soonaspossible. Australia indicated thatitsrevised offer incorporated asignificant improvement
consisting oftheremoval ofablanket prohibition onforeign acquisition ortakeover ofitsfourmajor
banks. Theofferwasbeing made toencourage other Members tosubmit newandimproved offers.
Nicaragua saidthatitsofferhadbeendesigned tosubstantially liberalize itsfinancial services market
andprovide ample access toforeign investment. Theofferincluded newcommitments inafullrange
ofinsurance services, aswellascommitments inalargenumber ofbanking andotherfinancial services.
Those commitments represented amajor effort aimed atbringing itsfinancial services inlinewith
international practices. Hungary saidthattherevision represented animprovement initsoffer by
withdrawingadiscretionarygovernmentlicensingrequirementpreviouslycontainedinitsMFNexemption
list.S/FIN/M/19
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4. Polandindicatedthatitsofferrepresentedanimprovementofitsexistingcommitmentsinfinancial
services, particularly inregard tomarket access forthesupply ofinsurance services. Itreflected
legislative andregulatory changes thathadoccurred since1995, including newlawsinbanking, public
trading insecurities andinvestment funds. Italsocovered certain liberalization commitments forthe
future inlinewithPoland 'sobligations attheOECD. More specifically, theoffer included full
liberalization ofmodes ofsupply 1and2inreinsurance, retrocession, andinsurance ofgoods in
international trade; market access through licensed branches ininsurance andbanking sectors asfrom
1January 1999; market access through licensed branches forsecurities companies would bepossible
asfrom 1January 1998, andtheremoval ofresidency requirements forbrokers andadvisors active
inthecapital markets.
5. Brazilindicatedthatitsofferimprovedits1995commitments,notonlyreflectingchangesalready
incorporated inBrazilian legislation butalsointroducing commitments relating tofuture liberalization
inareas suchasreinsurance. Regarding insurance, theoffer covered subsectors thathadnotbeen
included in1995suchasbody, machinery andcivilliability insurance forvessels, andwork accident
insurance. Thelatter wasanareastillinthehands ofthepublic sector butwould beliberalized to
allow private sector participation. Regarding reinsurance, thenumber oflimitations hadbeenreduced
andthetransitional character ofthemonopoly oftheBrazilian Reinsurance Institution hadbeenclarified.
Inthatregard, future regulations would allow private sector participation inreinsurance services which
Brazil would reflect initsschedule within twoyearsaftertheadoption oflegislation. Regarding banking,
theofferallowed commercial presence offoreign banks, based onacase-by-case authorization bythe
Executive Branch. Regarding capital markets, changes hadalsobeenintroduced, forinstance, toallow
commercial presence ofsuppliers notcharacterized asfinancial institutions bytheBrazilian lawfor
activitiessuchastradingandclearingservicesforsecuritiesandderivatives,publicofferingsofsecurities,
advisory services, andportfolio management ofinvestment funds. Brazil alsocommented ontheissue
offinancial sector liberalization andrestructuring. Recent economic events haddemonstrated the
importance ofasound andstrong financial system insupport ofmacroeconomic policy. Initsview,
liberalization wasnotapanacea; itwould haveavalue added totheextent thatitwascarried outin
abroad context offinancial sector restructuring. Moreover, restructuring encompassed much more
thanliberalization; itcovered appropriate rules, adequate capitalization ofinstitutions andgood
supervision, among other factors. Inaddition, theprocess ofbuilding upafinancial system wasnot
uniform inallcountries; ithadtobeadjusted tothechoices behind macroeconomic policy andthere
wasnogeneral rule. Brazil hadinitiated in1995 aprocess offinancial restructuring based onthree
pillars: first,aprocess ofliquidation ofbanks andmergers offinancial institutions; second, areduction
ofpublic sector participation inthefinancial sector; andthird, theopening upofthemarket. Asa
result, 3public sector banks hadbeenprivatized, theinsurance market wasbroadly liberalized, alarge
number offoreign banks hadalsoentered themarket, andthecapital market alsohadforeign
participation.
6. Israel introduced itsofferwhich hadbeensubmitted inNovember. Theofferreflected legal
changes andliberalizing actions thathadtaken place since 1995, andcontained fullbindings regarding
mode 3withrespect tomarket access andnational treatment inmost financial services sectors, in
accordance withtheAnnex onFinancial Services.
7. TheChairman invited delegations whohadnotbeenabletosubmit offers orrevised offers
togiveanyindications orprogress reports.S/FIN/M/19
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8. Côted'Ivoire stated thatitsoffermight notbesubmitted by12December duetoprocedural
delays; nevertheless, itwould besubmitted totheCommittee assoonastheinternal procedure was
completed. Indonesia announced thatitsofferhadbeenapproved byMinisters, andmight besubmitted
thefollowing day. Itsmain features hadbeenindicated attheprevious meeting oftheCommittee.
Egypt announced thatafinaloffercontaining further improvements would besubmitted within three
days, which would include further improvements inboththebanking andinsurance sectors. Romania
stated that,despite adelay duetoachange intheCabinet, itsoffer would besubmitted inthenext
fewdays. Theofferhadbeendesigned tobroaden itscommitments infinancial services tosecurities
services inaddition toinsurance andbanking services.
9. Thailand announced thatitsofferwasready tobetabled bytheendoftheday.Theofferwould
grandfather foreign commercial presence andallow greater foreign participation, including majority
ownershipinThaifinancialinstitutions,inlinewiththeprogrammeoftheIMFtorehabilitateitsfinancial
system. Colombia indicated thatitsofferwasbeing finalized initscapital, butduetologistical reasons,
would notbepresented before Thursday 11December. TheCzech Republic stated thatasaresult
ofbilateral consultations ithadprepared arevised draftschedule withtheintention ofsubmitting it
atthismeeting. Unfortunately, duetoachange ingovernment itwasunable todoso.Ithoped to
obtain thenecessary mandate onWednesday 10December.
10. TheChairman repeated hisappeal todelegations thatnewoffers orrevised offers should be
submittedimmediately.Hetheninviteddelegationstocommentonthegeneralcourseofthenegotiations.
TheEuropean Communities reiterated thatitsought anMFN agreement onapermanent basis, atthe
highest achievable level. Itexpressed some concern, because timing wasbecoming asubstantive issue,
astheDirector-General hadmentioned inastatement made intheprevious week. Sufficient timewas
required toscrutinize theoffers andtodecide ontheiracceptability. Time wasalsoneeded forinternal
procedures. There wasalsoconcern about theclarity andtheleveloftheoffers. Itcalled foroffers
atahighleveltobetabled quickly. Although thepossibility ofasubstantive package wasclearly in
prospect, timewasperilously short. Ifapackage wasnotdelivered, theeffort oncountries having
currency crises, andtheeffect ontheworld trading system could undoubtedly benegative.
11. Hong Kong, China reiterated themessage delivered onmany occasions suchastheAPEC
Meeting ofEconomic Leaders andtheFinance Ministers 'Meeting inKuala Lumpur thatMembers
remained fullycommitted totheprocess offinancial liberalization andasuccessful conclusion ofthe
negotiations. Itadded thatthedifferent stages ofdevelopment ofMembers needed toberecognized
andthepolitical realities ofwhatwaspossible, particularly under thecurrent circumstances, needed
tobeunderstood. Iturged allMembers toapproach thefinaldaysofthenegotiations witharealistic
andpragmatic mind. IfMembers failed toreach agreement, everything from 1993 onwards could
evaporate. Thiswasnotaposition thatMembers would allow themselves tobein.Japan, although
encouraged bylast-minute developments, recalled thatonlyfivedaysremained forthenegotiations.
Iturged Members thathadnottabled offers yettopresent them assoonaspossible. Itpointed out
thatthenegotiating environment wasverydifferent fromthatofsummer 1995, particularly duetothe
financial turmoil. Thismade itevenmoreimperative tosucceed thistime. Itemphasized theimportance
ofbeing reasonable atthetimeofassessing eachother'soffers; inparticular, specific bilateral issues
should notbemade animpediment tothesuccess ofthemultilateral exercise. Japan haddecided to
takeamost constructive position bytabling afurther improved offer. Itwasready toconsider
incorporating initsoffer allofthemajor elements ofthebilateral measures agreed withtheUnited
States oncondition thatitsmajor trading partners alsomade substantial additional commitments, and
thatthefinalresult would beanMFN-based deal. Switzerland sawaconstructive attitude among
delegations, andappreciated thenewsubmission ofoffers andtheannouncements offorthcoming ones.
Initsviewthemomentum ofthenegotiations wasaccelerating; nevertheless, itwasputting Members
inthedifficult situation ofhaving onlyashort period oftimenotonlytoassess theoffers butalsoS/FIN/M/19
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tofollow theirinternal decision-making procedures. Iturged those Members thathadnotyettabled
offers tomaterialize theircontributions totheprocess forthesakeofallMembers. Itrecognized that
major progress hadbeenmade since 1995, andunderlined thatSwitzerland would judge theresult by
what hadbeenachieved sofarandwhatremained tobeachieved by12December. Judging bythe
positive spirit present inthenegotiations during theprevious twoweeks, Members could count on
certain flexibility thatwould permit asuccessful conclusion on12December.
12. TheUnited States appreciated theefforts ofthose countries which hadcome forward with
improved offers. Ithadhoped toseemore offers onthetable atthisstage, particularly given that
onlyfivedaysremained before thedeadline, andhoped thatthesituation would change inthecoming
hours because theydidnothavetheluxury towaitmuch longer. Itremained committed toachieving
asuccessful outcome ofthetalks, butforsuccess tobeachieved, itneeded toseegood offers
immediately. Itannounced thetabling ofarevised offer. Thisrevision consisted ofchanges toreflect
theRiegle-Neal Interstate Banking legislation inamanner fullyconsistent withtheGATS. Italso
reflected theremoval ofsome restrictions inthe50States, andtheaddition ofsome minimal reservations
thathadbeenomitted in1995. Thedelegation indicated thattheU.S.financial market remained very
open, providing national treatment andaggressively inviting foreign participation. Canada waspleased
withthepositive comments made, butshared theconcerns previously expressed byothers about some
offers coming laterintheweek. Itjoined therequest fordelegations toconsider making offers as
soonaspossible.
ItemC: Organization ofFuture Work
13. TheChairmanindicatedthatastothedateofthefollowingmeeting,anairgram(WTO/AIR/743)
hadbeensentforameeting on12December 1997at10.00 a.m.toconclude thenegotiations. However,
itseemed necessary tohaveameeting inthemiddle oftheweek fortransparency purposes. Therefore,
hesuggested thatashort informal meeting oftheCommittee beheldintheafternoon ofWednesday,
10December 1997, at14:30 p.m., toconduct astocktaking ofthesituation.
14. TheCommittee soagreed.
ItemD: Other Business
15. Noother itemwasraised under thisagenda item.