WORLD TRADE  
ORGANIZATION  TN/S/W/43 
S/FIN/W/43 8 June 2005 
 
 
(05-2335) 
Council for Trade in Services Special Session Committee on Trade in Financial Services Original:   English 
 
   
COMMUNICATION FROM AUSTRALIA, BAHRAIN, CANADA, THE EUROPEAN 
COMMUNITIES, JAPAN, NORWAY, OMAN, PANAMA, SINGAPORE, SWITZERLAND, 
THE SEPARATE CUSTOMS TERRITORY OF TAIWAN, PENGHU, KINMEN AND 
MATSU, AND THE UNITED STATES 
 
Liberalization of Financial Services
 
 
 
 The following communication, dated 6 June 2005, from the delegations of Australia, Bahrain, 
Canada, the European Communities, Japan, Norw ay, Oman, Panama, Singapore, Switzerland, the 
Separate Customs Territory of Ta iwan, Penghu, Kinmen and Matsu, and the United States is being 
circulated to the Members of the Council for Trade in Services and the Committee on Trade in 
Financial Services.  
 
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I. IMPORTANCE OF FINANCIAL SERVICES LIBERALIZATION FOR ECONOMIC 
GROWTH, STABILITY AND DEVELOPMENT 
1. "Financial services" includes banking, securiti es, insurance, asset management, pension 
funds, financial advisory and inform ation and other financial services.  Financial services companies 
provide essential finance, risk transfer and investment management tools to a wide range of consumers, including other companies, to help economies grow and diversify and become more 
competitive exporters of goods and services.   
2. Opening the financial sector to foreign par ticipation and competition not only introduces 
innovation and technology, but can help  to bring down the cost of financial services.  It thus improves 
the competitiveness of domestic companies, who are important users of financial services, on the world market.  In its latest World Investment Report, UNCTAD concludes that in today's global 
economy, an internationally competitive services, in cluding financial services, sector is essential for 
development.  And in many countries – including developing countries and emerging markets – the 
share of financial services in GDP is significant. 
3. Opening the financial sector to foreign partic ipation, coupled with strengthened regulation 
and supervision, helps accelerate such positive tr ends.  There is now a large body of economic 
research, including the World Bank's "Finance fo r Growth", which has found that an efficient 
financial sector, including foreign participation, is important for growth and stability.  Policies that 
impede competition, such as entry restrictions and restrictions on foreign banks, have been shown to 
raise the cost of financial services and hurt economic performance.
1  Studies from the WTO and 
elsewhere found that increased competition through fo reign supply contributes to financial sector 
                                                      
1 World Development Report 2005, World Bank. TN/S/W/43 
S/FIN/W/43 Page 2 
 
stability and efficiency and helps improve  transparency of regulatory regimes.
2  One report indicates 
that countries with fully open financial services sect ors grow on average one percentage point faster 
than other countries.3    
4. Therefore, a vibrant financial sector is pa rticularly important for emerging economies and 
developing countries. Indeed, many emerging market s themselves are becoming exporters of financial 
services, often to other developing countries, incl uding as regional hubs, and/or to service their 
expatriate communities around the world.   
II. LIBERALIZATION TARGETS FOR DOHA NEGOTIATIONS 
5. The GATS provides a framework under which coun tries can undertake financial services 
liberalization while enabling regulators to protect th e stability and integrity of the financial system. 
6. The financial services negotiations should continue  to build upon trends that have been taking 
place in many emerging markets.  For supply through commercial presence, almost 50 Members4 
have made significant GATS commitments and many economies already have liberalized beyond the 
level of "bound" commitments.  Improved GA TS commitments, including and building upon any 
liberalizations as appropriate, will help signal ope nness to foreign investment and spur economic 
growth. 
7. The following benchmarks should help WT O Members consider the scheduling of 
meaningful GATS commitments: 
• Use the agreed definitions in the GATS A nnex on Financial Services for scheduling 
commitments. 
 
• For all sectors, commercial presence (mode 3) commitments are important, including the right 
to establish new and acquire existing companies, and in the form of wholly-owned 
subsidiaries, joint ventures or branches.  For cross-border (modes 1 and 2), appropriate 
commitments should be provided dependi ng on the particular sub-sector.   
 
• For the above mentioned modes, remove di scrimination between domestic and foreign 
suppliers regarding application of laws and regulations ("na tional treatment").  Remove non-
discriminatory limitations such as monopolies, numerical quotas or economic needs tests and 
mandatory cessions. 
 
• Transparency in development and application of  laws and regulations, transparent and speedy 
licensing procedures, and other regulatory issues also should be considered.   
  
 
 
                                                     
 
2 Kono, Masamichi, Patrick Low, Mukela Luanga, Aaditya Mattoo, Maika Oshikawa and Ludger 
Schuknecht (1997) “Opening Markets in Financial Services and the Role of the GATS,” WTO Special Study, 
Geneva: World Trade Organization. 
3 Mattoo, Aaditya, Randeep Rathindran and Arvind Subramanian, “Measuring Services Trade 
Liberalization and Its Impact on Economic Growth: An Illustration,” August 2001, World Bank Policy Research 
Working Paper No. 2655. 
4 The total includes EU Member States.  TN/S/W/43 
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III. CONCLUSION 
8. We, the co-sponsors of this statement, are convi nced that further liberalization of financial 
services will help promote economic growth and im proved standards of living for all WTO Members 
and are an essential element of the Doha Developm ent round.  We urge all WTO Members to provide 
meaningful financial services offers with a view to  achieving substantial liberalization in this key 
sector. 
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