WORLD TRADE
ORGANIZATIONS/CSS/W/27
18 December 2000
(00-5569)
Council for Trade in Services
Special SessionOriginal:  English
COMMUNICATION FROM THE UNITED STATES
Financial Services
The attached communication has been received from the delegation of the United States with
the request that it be circulated to Members of the Council for Trade in Services.
_______________
I. INTRODUCTION
1. The United States presents this initial sectoral proposal on financial services for consideration
by WTO Members.  This proposal will be complemented by other negotiating approaches as were
provided in the U.S. submission to the WTO C ouncil for Trade in Services in Special Session,
“Framework for Negotiation,” including horizontal approaches and request-offer.  The WTO financial
services negotiation concluded in 1997 was a significant step towards opening global financial
markets.  We believe, however, that there are benefits for all economies in further liberalization of
trade in financial services.  We are eager to hear other countries’ experiences regarding liberalization
of trade in the financial services sector.
2. At a later date, we will provide further thoughts related to this initial proposal, including the
possibility of more detail for specific sub-sectors, or to respond to financial services issues that maybe raised in other sectoral proposals.
II. IMPORTANCE OF TRADE IN FINANCIAL SERVICES
3. Liberalization of trade in financial services, when undertaken in conjunction with transparent
and strong regulatory regimes, benefits countries in many ways, some specific to the financial
services sector and others related to the overall health of their economies.
4. Financial services liberalization –  including for example, for insurance, banking, securities,
asset management,  pension funds , financial information, financial advisory,  and other financial
services  - enhances and strengthens capital market efficiency, bolsters financial sector stability,
stimulates innovation, and provides consumers with the broadest range of services at the lowest cost.
Indeed, studies, including those carried out by the WT O Secretariat, have found that financial services
liberalization, including the presence of foreign financial services institutions, can result in less
distorted and less volatile capital flows and promot es economic stability.  Liberalization also helps
ensure that foreign and domestic savings are channelled. efficiently and productively.  
5. Openness to foreign participation in  financial services sectors provides a diversity of choice
and increases quality for consumers (both households and businesses).  Such participation encouragesS/CSS/W/27
Page 2
innovation and ensures that consumers have access to the latest technologies and products, and can
enhance financial market development and stability.
− A recent study of financial crises in emerging markets in Latin America showed that during
the period of crisis, foreign banks established in those countries increased their local lendingrelative to domestically-owned institutions.
− Liberalization of securities markets can mean  lower cost financing and new investment and
savings vehicles for consumers and investors.
− Access to financial advisory services can help local businesses determine the optimal way to
raise capital, provide consumers with retirement planning choices, and assist investors indiversifying their portfolios.
− Regarding insurance, the business community is demanding innovative services  and packages
of, services  to help share risk and facilitate trade, such as, for example, transport-related
insurance and reinsurance.  Individuals also need innovative  and diverse types of insurance
services - disability insurance; long-term care insurance; other supplemental. services.
− Some governments also have decided that traditional social security systems should be
supplemented by self-directed retirement accounts and employer-provided programs.  Thisstimulates capital market development and creates a need for competent private pension funds
management.
6. A strong and vibrant  financial sector is particularly important for emerging economies to
provide a basis for trade in a diverse range of goods and services.
− Ambitious commitments for financial services help attract financial service providers, which
in turn makes countries more attractive destin ations for investment in e-commerce networks
and associated technologies.
− The tourism sector is hindered without access to strong insurance services, to help offset risk
associated with new or ongoing projects.  Tourism also requires access to banking services,
secure loans for expansion or repair, and up-to-date credit card systems.
− Agricultural producers benefit from access to financial information services, including the
latest information on global price trends, enabling them to make informed decisions about
crop allocation and timing.  Crop insurance helps WTO farmers protect themselves from
natural disasters or weather shifts.  Such producers also benefit from access to foreign
banking services, to provide varied and low cost lending instruments that might not be
possible through traditional sources.
− Liberalization of financial services often creates new, related opportunities for other sectors.
For example, banks, insurance companies and securities firms rely very heavily uponspecialized software and have high data pro cessing needs, thus creating new markets and
demand for computer-related services.
7. Liberalization of financial services also offers benefits in terms of job creation.  Both
underlying financial services activities and ancillary services - such as accounting, legal services, and
compute-related services - are highly labor intensive and promote the development of highly skilled
jobs.S/CSS/W/27
Page 3
8. Liberalization of financial services also promotes growth and access to new technologies.
This has sped the development of on-line banking, securities trading, insurance services, and financial
information services.  Over time, cross-border trade in services will account for a greater share of all
financial services.
9. In addition to the domestic benefits of liberalization, we see that emerging markets are
playing an increasing role in exporting financ ial services.  For example, China, Hong Kong,
Singapore, Mexico, and Brazil are regional and international providers of several types of financial
services.
III. PROPOSAL
10. The following are general benchmarks for financial services liberalization, recognizing that
WTO Members may require  certain flexibility on a sector-specific and mode-specific basis.  In certain
situations , these benchmarks  could be achieved through phased liberalization or commitments that
take effect in the event that a decision is made to open up a particular activity  to the private sector.
There are two complementary elements to the proposal: (1) common commitments constituting
fundamental liberalization, and (2) transparency and other principles for regulation of this sector.  We
believe that WTO Members need to address all of th e elements in these areas to ensure  that their
economies fully benefit from financial services.  We emphasize that the benchmarks discussed in thisproposal are without prejudice to provisions such as Paragraphs 2 and 3 of the Annex on Financial
Services.
1. Fundamental Liberalization
11. Provide a clear and uniform description of the financial services sector when scheduling
commitments.   We believe that the definitions in the Financial Services Annex continue to provide a
comprehensive and coherent basis for scheduling commitments.  An examination of the 1997
commitments as well as a number of accession country schedules concluded since 1997, reveals that
the Financial Services Annex has been used, in whole or in part, by a large majority of countries.
Furthermore, those countries scheduling on the basis of the Financial Services Understanding accept
the Financial Services Annex definitions by reference.  The definitions are not inflexible and providethe means to address and provide further liberalization for certain subsectors (for example, addressing
marine, aviation, and transport insurance separately from the rest of non-life insurance in order to
record cross-border commitments).
12. Although financial services have continued to evolve since the time that the Annex was
developed, we find that the definitions in the Annex are very broad and remain relevant.   We also
believe that the definitions provide plenty of flexibility for any  convergence of financial services  and
can accommodate different regulatory approaches.  These broad definitions also cover services the
purchase of which is compulsory (for example, certain types of insurance).
13. Remove restrictions on supplier’s ability to establish preferred form of commercial presence ,
whether as subsidiary, branch, or joint-venture; and at the level of equity participation preferred by the
service supplier.
14. Remove restrictions on supplier’s  ability to supply certain financial services on a
cross-border basis .  We find useful the growing trend to make Mode 2 commitments for all financial
services sub-sectors included in the Financial Services Annex.  Regarding Mode 1, it seems feasible
in the current trade and regulatory climate to ensure commitments for the following sub-sectors,
recognizing that others  could be elaborated:  financial information and advisory services; reinsurance
and retrocession; marine, aviation, and transport (MAT) insurance; insurance intermediation, such asagency/brokerage; and  services auxiliary to provis ion of insurance, such as consultancy, actuarial,S/CSS/W/27
Page 4
risk assessment, and claim settlement services.  We are interested in learning more about country
experiences in liberalizing these and other sectors, and more generally, in allowing cross-border
services to be provided to consumers  in the business community.
15. Remove  quantitative limitations on the number of service suppliers, in the form of numerical
quotas, monopolies or exclusive providers or economic needs tests.  Remove  mandatory cession
requirements.
16. Provide appropriate commitments regarding temporary entry of natural persons.
17. Remove discrimination between domestic and foreign suppliers regarding application of
laws, regulations, and practices.
18. Ensure that acquired rights for commercial presence are protected (grandfathering).
2. Regulatory Principles
19. WTO Members already have work underway in the Working Party on Domestic Regulation
(WPDR) to discuss transparency and other issues.  The U.S. has provided a Communication
[S/WPDR/W/4] that suggests the need for improved disciplines pertaining to development, adoption,
and application/enforcement of regulations, including those related to licensing procedures.  We
believe that such improvements would be very per tinent to financial services, since many financial
services sectors are highly regulated.
20. While the cross-sectoral work of the WPDR continues to unfold, we think that it would be
useful for WTO Members  to have a more focused discussion of these and other principles as they
apply to the financial services sector, including country-specific experiences.  This work might
usefully take place in the Committee on Trade in Financial Services, in parallel with the ongoing work
of the WPDR.  This could provide useful cross-fe rtilization for the WPDR’s cross-sectoral work.
21. We provide some initial views on this topic in the Attachment  - “Transparency and  Other
Principles for Regulation of Financial Services.”
IV. CONCLUSION
22. Financial services is a key sector that  underpins global economic growth and plays a major
role in the development of infrastructure for trad e in goods and services.  Liberalization of trade in
financial services, when undertaken in conjunction with transparent and strong regulatory regimes,
benefits countries in many ways.  Building upon the results of the 1997 WTO Financial Services
negotiations, this initial proposal provides general benchmarks to address key remaining obstacles to
trade in insurance, banking, securities, asset management, pension funds, financial information and
advisory services, and other financial services.  The U.S. encourages WTO Members to adhere fully
to the broad definitions in the GATS Financial Services Annex when scheduling commitments; to
remove remaining national treatment and other restrictions for commercial presence and, inappropriate sectors, for cross-border supply; and to observe transparency and other principles in
regulating this important sector.S/CSS/W/27
Page 5
Attachment
Transparency and Other Principles for Regulation1 of Financial Services
23. With a view to enhancing the understanding, acceptance, and timely observation of regulatory
standards and procedures by financial services suppliers, and thereby making regulation more
effective, Members should maintain high levels of transparency and follow other principles in theirdomestic regulatory processes.  To that end, Members should:
I. TRANSPARENCY IN DEVELOPMENT OF REGULATIONS
(a) When proposing new regulations or amendments to existing regulations, except in
emergency circumstances ,  make such proposals publicly available, provide the
rationale for them, permit and solicit comments from the public, provide reasonable
time for preparation and submission of such comments, and establish procedures for
submission of such comments.
(b) Publish new regulations or amendments to existing regulations in an appropriate
governmental or other widely available publication and, in so doing, include
explanations which address major concerns raised and alternatives proposed in the
comments received.
(c) Establish and maintain a mechanism to respond to inquiries from the public for
information.
II. TRANSPARENCY IN APPLYING REGULATIONS
(a) Ensure not only that all laws, regulations, procedures, and administrative or judicial
decisions of general application are publicl y available pursuant to GATS Article III,
but also that they are publicly available at reasonable cost
(b) Allow reasonable advance notice before requiring compliance with new or amended
regulations, except in emergency circumstances.
(c) Establish in writing the activities for which an authorization or license to supply a
service is required.
(d) Establish in writing, and make available to the public, all procedures and criteria for a
service supplier to obtain, renew, retain, or relinquish an authorization or license  to
supply a service, and for the competent authority to suspend, revoke, or terminate an
authorization or license to supply a service.
(e) Establish, where feasible, and make available to the public, the period of time
normally required to reach a decision on a complete, uncontested application for an
authorization or license to supply a service.
(f) On request, and as appropriate, provide applicants information on reasons which
could justify denial of authorization or license.
                                                     
1Regulations or their equivalent for Members that do not generally have measures in the form of
regulations in this sector.S/CSS/W/27
Page 6
(g) Make publicly available , through statutes, regulations, or otherwise , information
regarding types of conduct, practices, and activities, the violation of which could
result in disciplinary actions by the competent authority.
(h) Establish and make available to the public procedures for disciplinary actions for
violations, including procedures for: (1) notification of such alleged violations, (2)responses by the party subject to such disciplinary action, and (3) explanation of
decisions.
(i) Pursuant to GATS Article VI:2(a), establish and make publicly available the
procedures for any review or appeal of administrative decisions.
(j) Make names, official  addresses, and official contact information of competent
authorities publicly available.
III. OTHER PRINCIPLES IN APPLYING REGULATIONS
(a) Maintain independence of the regulator from influence by individuals and entities it
regulates and create procedures to avoid conflicts of interest where there are
governmental entities that also are commercial actors in the marketplace.
(b) Promptly acknowledge receipt of an application, where acknowledgement of an
application is required.  If the application is incomplete, notify the applicant withoutundue delay.  Inform the applicant of the authorization or licensing decision within a
reasonable period of time after all the necessary information for a decision on the
application has been received.
(c) On request, and as appropriate, provide the applicant with the reasons for denial of an
authorization or license and, where an application has been denied for technicalreasons that can be remedied, permit the applicant to resubmit the application.
(d) As a general practice, allow authorizations or licenses to  enter into force without
undue delay in accordance with their terms and conditions unless there is a uniform
practice of delayed implementation based on public interest concerns.
(e) Pursuant to GATS Article VI:2(a), include, where appropriate, in procedures for any
review or appeal of administrative decisions, the opportunity for the affected service
supplier to submit its views and supporting documents.
(f) Where fees are charged in connection with applications for an authorization or
license, set them at reasonable levels.
(g) Where an examination for authorization or licensing is required, schedule such
examinations at reasonably frequent intervals, for example, at least once per year, and
open examinations to all eligible applicants, including foreign and foreign-qualifiedapplicants.
Additional principles for the insurance sector:
(h) For licensed suppliers, the competent authority should endeavour to avoid the
application of prior product approval (form or rate)  requirements   for insurance
products supplied to consumers in the business community.S/CSS/W/27
Page 7
(i) Where prior product approval requirements exist, the competent authority should
consider mechanisms to accelerate the introduction into the market and approval of
insurance products.
__________