RESTRICTED  WORLD TRADE  
ORGANIZATION  S/FIN/M/58 
7 May 2009 
 (09-2254) 
Committee on Trade in Financial Services  
  
 
REPORT OF THE MEETING HELD ON 31 MARCH 2009 
 
Note by the Secretariat
1 
  
1. The Committee on Trade in Financial Services he ld a meeting on 31 March 2009, under the 
chairmanship of Mr. Tom Goodwin (United Kingdom ).  The agenda is contained in Airgram 
WTO/AIR/3341.   
A. 
ACCEPTANCE OF THE FIFTH PROTOCOL TO TH E GENERAL AGREEMENT ON TRADE IN SERVICES 
EMBODYING THE RESULTS OF THE FINANCIAL SERVICES NEGOTIATIONS  
2. The Chairman  recalled that three WTO Members had yet to accept the Fifth Protocol:  Brazil, 
Jamaica, and the Philippines.  At the previous  meeting, the three Members had informed the 
Committee that they were not in a position to i ndicate a specific timeframe for the acceptance of the 
Protocol.  He invited these three Members to pr ovide further information on the status of their 
domestic processes.   
3. The representative of Jamaica  said that internal discussions on the Protocol were still 
ongoing, but that there had been no appreciable  change in Jamaica's position concerning the 
ratification of the Protocol.  He added that he  would keep the Committee abreast of any further 
developments.  
4. The representative of the Philippines  said he was unable to provide any indication as to when 
the domestic processes for the acceptance of the Pr otocol would be completed.  However, he 
reiterated that the Executive Branch in the Philippin es was working closely with the Senate to secure 
acceptance of the Protocol as soon as possible. 
5. The representative of Brazil  said that the domestic procedures had not been concluded yet.  
He would keep the Committee inform ed of any further development. 
6. The Chairman  thanked these delegations for their updat es, and encouraged them to accelerate 
their internal procedures for the acceptance of the Protocol.   
7. The Committee took note  of the statements made and decided  to revert to this agenda item at 
the next meeting. 
B. TECHNICAL ISSUES  
8. The Chairman  recalled that there had been no discussi on under this agenda item at the last 
meeting.  He remained convinced that the Committe e could have a positive role in supporting, from a 
technical viewpoint, the Doha Round market access negotiations that were underway.  The Committee 
                                                      
1  This document has been prepared  under the Secretariat's own responsibility and without prejudice to 
the positions of Members and to their rights and obligations under the WTO.  S/FIN/M/58 
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  could also provide an appropriate forum for dialogue between the trade community and the regulatory 
community.   
9. He reminded Members that his predecessor had started a process of informal consultations 
with a view to discussing relevant technical issues, which he had continued.  He reported periodically 
on these discussions to the Committee.  So far, th ree issues had been addressed: Issues related to 
mode 1 and 2 commitments on financial services ; Islamic Finance; and Microfinance.  The 
discussions had been based on room documents prepared under the Chair's responsibility.  
Discussions had not led, of course, to any sort of common view on these issues.  Nor had this been the 
purpose of these meetings.  Rather, the meetings helped Members better understand these issues, and 
identify potential trade aspects that might  have a bearing on current negotiations.  
10. The Chairman added that, as announced in an in formal meeting on 26 January 2009, he had 
requested the Secretariat to circulate the three ro om documents used in these consultations to the 
whole Membership.  The documents were circulat ed as Job(09)/6, Job(09)/7, and Job(09)/8.  He 
clarified that the documents had been circulated  on his own responsibility, for the sake of greater 
transparency, and as a way of facilitating debate among a wider group of delegations. 
11. He was also aware that some delegations were  thinking about how best to pursue this work 
and were already considering further topics for discu ssion.  He welcomed that and invited delegations 
to contact his successor after this m eeting with any concrete suggestions. 
12. The representative of Pakistan
 referred to the issue of Islamic banking.  He said that Pakistan 
had six full-fledged licensed Islamic banks (IBs)  and 12 conventional banks that had licenses to 
operate dedicated Islamic banking branches (IBBs).  The total assets account ed for a market share 
of 4.5% of total banking industry assets.  The mark et share of deposits stood at 4.2%.  The total 
branch network of the industry comprised more th an 330 branches with presence in over 50 cities and 
towns.   Pakistan's Islamic banking offering had al so received international acceptance as evidenced 
by the oversubscription of Sukuk floated in the inte rnational market.  The number of international 
players/investors who applied for Islamic banki ng licenses in the country including multinational 
banks also bore testimony to that.  The results of  the fourth Annual Islamic Banking News Poll placed 
Pakistan Central Bank at second place in the catego ry of "Best Central Bank in Promoting Islamic 
Finance".  
13. He explained that Pakistan's Central Bank w as pursuing a strategy envisaging a 12% market 
share by 2012, extension of the outreach of financ ial services with focus on underserved regions and 
poor and vulnerable groups, establishing a robust and effective regulatory and Shariah-compliant 
framework, with the aim to align the indus try with international best practices.  
14. On the regulatory front, the Central Bank was following the approach of building on the 
existing regulatory framework to accommodate Isla mic banking transactions.  Pakistan was of the 
view that the conventional banking regulatory fra mework offered a strong base for developing an 
Islamic banking regulatory framework.  Using the conve ntional framework as a base, he said that the 
Central Bank would focus on adjustments and additio n of a few parameters to recognize and manage 
the unique aspects of Islamic Banking.  It would al so be ensured that developments in Pakistan's 
Islamic Banking regulatory framework was in line with  internationally accepted principles so that the 
regulatory system was able to address cross-jurisdictional issues.  
15. He then turned to the three specific questions  raised in document Job(09)7.  He said that 
Pakistan preferred a "separate" classification of Islamic banking to bring more clarity and 
predictability.  Acknowledging that certain Members he ld the view that the cu rrent classification was 
robust enough to account for Islamic banking, he sai d his country was ready to discuss the issue with 
interested Members and the Committee.  Regarding the other two issues – restrictions and prudential  S/FIN/M/58 
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  regulations – he said that Islamic banking was still in the process of evolu tion, as more experience 
was gained, his country would be in a better positi on to offer a more definite view.  However, 
consultations were held with Pakistan's Central Bank in order to identify specific prudential 
requirements. 
16. The Committee took note  of the statements made and decided  to revert to this agenda item at 
the next meeting.  
C. RECENT DEVELOPMENTS IN FINANCIAL SERVICES TRADE  
17. The Chairman  reminded Members that no interventions had been made under this agenda 
item at the last meeting.  He said that the workshop  to mark the tenth anniversary of the entry into 
force of the Fifth Protocol, held in the morning of 31 March, not only provided an opportunity to 
mark a significant step forward in financial services  negotiations at the WTO, but also allowed for a 
very interesting exchange on a wide range of topi cs.  The event highlighted a number of ways in 
which the current financial crisis might have impli cations for the work of the Committee.  Some of 
the issues raised at the workshop, for example those related to financial regulation, and the interaction 
between regulation and GATS obligati ons and disciplines, had far reac hing implications for the work 
of the Committee.  He said that the reason for this standing item on the agenda was to ensure that the 
Protocol remained relevant and appropriate, bear ing in mind developments in the real world.  
Members had recognised this when  the Committee met informally earlier this year, and said they 
wanted further opportunity to discuss this.  The workshop had offered a limited opportunity to have a 
discussion in an open and informal mode.  This formal meeting of the Committee provided a further opportunity to continue that discussion.  
18. The representative of Tanzania
, speaking on behalf of the LDC group, said that the financial 
services industry was being transformed by techno logical advances and structural change.  An 
efficient and well managed financial services indus try was of crucial importance to all countries, 
including the LDCs, due to its subs tantial contribution to the produc tive and social sectors for growth 
and prosperity.  The increasing importance of se rvices in the global economy had led most countries 
to seek export markets for services.  This trend ar ose from the need to build and strengthen national 
capacities in the domestic services se ctor in the face of expanding demands of the rapidly changing 
and increasingly more complex and competitive gl obal economies.  Subsequently, LDCs required 
putting in place appropriate legal and institutional frameworks so as to provide and maintain a 
favourable business environment for providers of fina ncial services on a global scale.  He said that in 
order to achieve this objective, LDCs needed  financial assistance and technologies from more 
advanced countries.   
19. He further explained that LDCs economies we re generally characterized by severe supply 
constraints largely due to structural weaknesses.   Globalization and liber alization had given new 
dimensions to existing constraints in these poor countries as they struggl ed to adjust and cope with the 
challenges of the new competitive international envir onment.  While they were determined to improve 
their competitiveness in the production and trade of goods and services, LDCs modernisation efforts 
were held back by a lack of efficient and effec tive skills and related resour ces.  Furthermore, their 
regulatory mechanisms and conditio ns were underdeveloped.  Members therefore should step up their 
support and assistance for the modernization of the services sector in LDCs, including the development of regulatory systems and capacity of  the type needed to face current demand.   
20. Before concluding his statement, he commented  briefly on the current global financial crisis, 
which was threatening markets and millions of people whose livelihood depended on the globally 
interconnected financial economic and social archit ecture.  He stressed in that regard that a 
comprehensive, inclusive and equitable solution was required in response to this unprecedented crisis.  
It was obvious that the financial sector needed th e establishment of better regulation and systems in S/FIN/M/58 
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  order to avert trade distortions and devastations wh ich tended to hit the poor countries most.  While it 
might be necessary for developed countries to appl y bailout and fiscal stimulus packages for the 
reconstruction of their national economies, it was eq ually necessary to ensure that they fully honoured 
their commitments and related obligations to deve loping countries and especially LDCs.  That  would 
support the LDCs development efforts towards th e achievement of the Millennium Development 
Goals and the mitigation of adverse effects arisi ng from the crisis.  Reducing aid to countries that 
were struggling to develop would worsen an alr eady precarious situation.  Responses with a narrow 
domestic focus would not only be ineffective, but w ould also exacerbate the crisis that all Members 
were collectively confronting.   
21. He concluded by emphasizing that this crisis was another proof of the important need for 
developing countries, particularly  LDCs, to have adequate policy space in confronting development 
issues.  The crisis also stressed the need for th e outcome of the Doha Round to be anchored on a 
strong development content.  For these reasons, LD C's would like to appeal once again for a more 
transparent monitoring and the early notificati on of all kinds of support programmes operated by 
Members at all levels. 
22. The representative of India
 merged his interventions regarding technical issues and recent 
developments in financial services trade into one .  He started by commenting on the informal 
documents on Islamic banking, microfinance, and is sues related to commitments on modes 1 and 2.  
Regarding Islamic banking, he said that India's regul atory framework did not recognise such a distinct 
service.  However, he considered that there w as enough flexibility in the GATS to actually take 
commitments of the kind explained in the paper.  Tu rning to microfinance, he said that its importance 
in developing countries cannot be underestimated.  There was, however, a need to further discuss how 
microfinance related to the work of the Committee, and whether it had implications, for example, for 
the scheduling of specific commitments on financial services.  Turning to the paper on modes 1 and 2, he said that the issues related to commitments on these two modes of supply should be revisited in 
light of the current financial crisis.   
23. He appreciated the work that had been done through these informal discussions, but suggested 
other issues to be taken up, including, for example, the discussion of specific entries in developed countries' schedules of commitments.  In that re gard, he considered that such a discussion was 
necessary given the capacity constraints faced by developing countries in interpreting domestic 
regulatory requirements included in schedules of speci fic commitments.  This was an issue that India 
would like to discuss in the future. 
24. Turning to the current financial crisis, he c onsidered that it was a classic case of market 
failure arising from asymmetric information.  He said that Members needed to look at a number of 
issues in respect of trade in financial services relating to market access and national treatment.  India had raised these issues in the past, both in the Tr ade Policy Review Body and in the General Council. 
As an example, he mentioned the issue of st andstill in the Understanding on Commitments in 
Financial Services.  Many Members had made co mmitments according to the "Understanding" with a 
standstill clause.  He wondered about  the implications of that standstill commitment in the context of 
the major developments that had taken place.  Another issue that could be discussed was the 
plurilateral request on financial services.  He wo ndered where this request stood in the current 
context.  In his view, these issues had to be rai sed and discussed because they had implications for the 
work in the WTO in general, and the Committee in particular.  Other issues included the drying up of 
trade finance for developing countries, the rise in in terest rate spreads particularly for developing 
countries and for corporates in developing countries , where the interest rates spreads were much 
higher than in developed countries.  He suggested th at the new Chairman could take note of all these 
issues and deal with them as he saw fit.   S/FIN/M/58 
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  25. The representative of Chile  considered that the workshop held in the morning of 31 March 
was timely and relevant.  All th e presentations made were excellent.  The  workshop addressed not 
only the negotiations leading to – and the features of – the Fifth Protocol, but also the challenges 
ahead regarding trade in financial services.  In hi s view, the most important message that emerged 
from the workshop was the importance of an approp riate regulatory framework to support financial 
services liberalization.  This was a message that shoul d be stressed – that liberalization of financial 
services must coexist with a sound regulatory frame work.  Another important message emerging from 
the workshop was that the Fifth Protocol was stil l relevant and should con tinue to be relevant, 
particularly at the present time when protectionist measures were being adopted on many fronts.  These protectionist pressures should be resisted and avoided.  
26. Regarding the future work of the Committee, he  said that the issues raised and discussed at 
the workshop provided a good foundation.  He said that the current situation required stepping up the 
work of the Committee.  For example, the elemen ts on trade in financial services contained in the 
monitoring report produced by the Director-Gener al should be addressed and analysed by the 
Committee in the future.  He hoped that that would b ecome part and parcel of the Committee's work.  
Other issues related to the financial crisis s hould also be addressed by the Committee.   
27. The representative of Nepal
 supported the statement made by Tanzania on behalf of the least-
developed countries.  He added that  LDCs were being victimized by events they had not contributed 
to at all.  In this context, he called on Members to compensate LDCs in order to help them prevent 
their economic condition from worsening.  
28. The representative of Kenya  said that this was a very important sector due to its contribution 
to economic development.  The presentations and di scussions at the workshop earlier in the morning  
had made it clear that prudential regulation was ve ry important to ensure financial stability and 
consumer protection.  Developing countries should therefore have enough flexibility to put in place a 
wide range of policies to ensure that the sector re mained stable and there was effective protection for 
consumers.  Another issue that came out clearly of the workshop was that , due to the increasingly 
global nature of banking activities, international cooperation and coordi nation had become crucial.    
29. Kenya's banking sector had proven stab le thus far, even in the face of the current crisis.  There 
were negative impacts arising from the crisis, however.  For example, even if the financial sector had remained stable, the country was witnessing a reducti on in the official aid for development, with 
negative consequences for the implementation of  national economic development programmes.  
Therefore, even sound and stable financial sectors were  being affected by the crisis.  These were very 
important issues for the Committee to consider.  In his view, the Committee had the mandate to 
continue to look at the implications of the financ ial crisis, and to come up with recommendations that 
developing countries in particular would take into account in order to limit the negative impact of the 
crisis on them. 
30. The representative of the United States
 expressed her appreciation for the suggestions made 
by other Members regarding the future work of the Committee.  However, keeping in mind that 
financial services issues were being discussed in other fora, she cautioned about bringing into the 
Committee issues that could be considered as prim ary for those other fora.  Additionally, she 
cautioned about entering into areas that could be c onsidered as market access.  In that regard, the 
Committee might not be the appropriate place to discuss the plurilateral request, which had been 
targeted to specific Members. 
31. The representative of Pakistan  referred to the issue of microf inance.  Pakistan's microfinance 
industry had a current network of 1.8 million customer s, but was recording an impressive growth rate 
(47% in 2007, followed by 13% as of September, 20 08).  A microfinance strategy had been adopted 
in Pakistan in 2007, aiming at increasing the nu mber of micro-finance borrowers to 10 million S/FIN/M/58 
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  by 2015.  A comprehensive legal regulatory and s upervisory framework for formal microfinance was 
introduced.  Pakistan's strategy was to create an enabling environment for microfinance institutions to 
form partnerships with commercia l banks or to transform into regulated entities.  In order to 
strengthen the institutional framework and address ma rket failures, Pakistan acted on three fronts, 
namely the supply of guarantee facilities, ins titutional strengthening, and the improvement of 
financial services.  Microfinance and Islamic banki ng had significant grow th potential and could 
contribute effectively in supporting national and intern ational efforts to alleviate  poverty.  He looked 
forward to a meaningful exchange of informa tion on these issues, with a view to promoting 
international trade in financial services. 
32. The representative of Canada
 said – in reference to India's proposal to do some work 
interpreting different Members' schedules of commi tments – that questions about other Members' 
schedules should be addressed bilaterally.  He failed to see the Committee starting to decrypt 
individual Members' schedules.  Regarding India's pr oposal to look into the issue of trade finance, 
there was already the Working Group on Debt, Trade,  and Finance which was dealing with that, and  
Members should make sure that the Committee woul d not be duplicating work done elsewhere in the 
WTO. 
33. Regarding proposals to look into the coll ective request on financial services, the 
representative of Canada agreed with his colleague from the United States that the Committee was not necessarily a negotiating forum.  He added that, Ca nada being the coordinator of that collective 
request, he could make a few comments in the cont ext of this agenda item, without getting into 
negotiating issues, but to provide some insight in to Canada's thinking.  If some Members had 
questions related to the negotiations, these could be addressed in bilateral meetings.  He considered 
that collective requests in general were probably in th e same state as the Round in general.  One of the 
key messages arising from the workshop held in  the morning was that liberalization was not 
incompatible with sound regulation and that, furt hermore, liberalization was conducive to stability 
and would be a key factor for economic recovery.  That  was indeed Canada's approach to this issue.  
34. Canada was a "demandeur" in financial ser vices negotiations and had coordinated the 
collective request for this sector.  From that persp ective, some features of Canada's financial system 
were worth highlighting.  Firstly , Canada's capital requirements for financial institutions were 
generally above minimum international standard s, and Canada's banks had built up a relatively 
healthy capital buffer based on these higher standards.  Secondly, Canada had been well served by its 
cap on leverage, by which the asset-to-capital ratio on large banks in Canada were lower than in some 
other markets.  Thirdly, large Canadian inv estment dealers had been bank-owned since the 
early 1990s and were regulated on a consolidated ba sis.  In addition, Canadian households generally 
had relatively smaller mortgages and the system had not had the same sort of exposure to sub-prime 
components of lending that might be found in other ma rkets.  In his view, Canada's experience was a 
good example of how a liberal regime, together wi th market access commitments, could be certainly 
compatible with sound regulation.  He added that  Canada stood behind the collective request, with all 
the caveats about the state of the Round being taken into account.   
35. He then turned to the suggestions made regard ing the Committee's future work.  He saw three 
distinct levels in terms of the economic crisis.  The first priority was to stabilize the financial system.  
International cooperation in different  fora, together with domestic initiatives, were aimed at that.  
Such work was not necessarily rela ted to the activities of the Committee.  A second level would be to 
correct regulatory shortcomings, viewed from a system-wide macro prudential framework.  Again, 
experts were already working on this in a number of  different fora, and this was not necessarily an 
area where the Committee should get out in front of.  Finally, there was a third level, which had to do with resisting protectionism and promoting market access.  In his view, it was this third level where the focus of this Committee might be useful in the future.    S/FIN/M/58 
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  36. The representative of Chinese Taipei  agreed that trade liberalization was part of the cure for 
the current crisis, but that liberalization should be underpinned by sound prudential regulation and 
supervision.  Therefore, some additional interna tional guidelines or standards should be expected to 
emerge from international standard-setting bodies.  Fo r example, the crisis had made it apparent that 
in the past there had been no approval mechanisms for the sale of structured products, and that no 
distinction used to be made be tween different types of investors, thereby failing to protect the 
consumer.  And these issues were related to libera lization.  In his view, therefore, the Committee 
could serve as a forum to promote dialogue between the trade community and the regulatory community.  By doing so, the Committee would be encouraging the development of necessary 
guidelines and standards, and therefore the developm ent of sound regulatory frameworks.  That could 
be very useful to Members.  
37. The representative of the European Communities
 agreed with Canada that liberalization was 
fully compatible with regulation and supervision.   Both goals should be pursued simultaneously.  
Turning to the proposals made by some delegati ons, he considered that issues arising from the 
plurilateral request should be discussed bilaterally.  
38. The Chairman  considered that the debate under this ag enda item had been very helpful.  He 
first noted the comments made by Tanzania that , under the current circumstances, transparent 
monitoring was a function for this Committee.  Th is idea had been supported by a number of 
delegations, and he personally tho ught that it should be part of the work of this Committee going 
forward.  He also agreed with those delegations th at had noted that the work shop held in the morning 
of 31 March, had been well organized by the Secret ariat and well executed by the speakers.  One of 
the most important messages to take away from the workshop was that trade liberalization and 
regulation must be mutually reinforcing.  As s uggested by one delegation, information should be 
shared with international standard-setting organi zations.  The representative of Ìndia had raised a 
number of issues for possible future work, including the meaning of the standstill commitment in the 
"Understanding".  This, as well as other suggestions, would be noted on record, and he left to his 
successor to decide on how best to take those issues forward. 
39. The Committee took not of all the statements made and decided  to revert to this agenda item 
at the next meeting.   
D. OTHER BUSINESS  
40. There was no issue raised under this agenda item.  
E. APPOINTMENT OF THE CHAIRPERSON  
41. The Committee elected  Mr. Sudhir Sooklal, from South Africa, as the new Chairman of the 
Committee.  
42. The new Chairman  said that he would continue the process of informal consultations started 
by his predecessor, including on the various issues raised during the meeting.   
 
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