WORLD TRADE  
ORGANIZATION  RESTRICTED 
S/FIN/W/84 
26 June 2012 
 (12-3407) 
Committee on Trade in Financial Services Original: Spanish 
  
 
COMMUNICATION FROM ECUADOR 
 
Proposal for discussing progress in respect of macro-prudential regulation and 
its relationship with GATS rules 
 
 
 The following communication, dated 26 June 2012, from the delegation of Ecuador is being 
circulated to the Members of the Comm ittee on Trade in Financial Services. 
 
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 1. In 2009, Ecuador co-sponsored a number of pr oposals, in both the Committee on Trade in 
Financial Services and the General Council, on the need to analyse the measures taken during the international financial crisis,
1 with a view to helping Members, in  particular the developing countries, 
understand how world trade flows were being affected.  This analysis revealed divergent positions on 
the effects of the measures which were taken by some Members and which must continue to be 
examined with a view to improving the multilateral trading system. 
2. In October 2011, Ecuador submitted a sec ond proposal to the Committee on Trade in 
Financial Services with a view to Members instru cting the Committee to review WTO rules so as to 
promote and ensure the preservation of a policy sp ace for macro-prudential regulation that maintains 
the integrity and stability of the financial system. 
3. The proposal prompted much discussion in the Committee and, according to the Chair's 
conclusion, received the support of most Member s.  For this reason, although some Members 
considered it unnecessary to include the issue in a Ministerial Declaration, the essence of the 
Ecuadorian proposal remained on the Committee's agenda for 2012. 
4. Some of the Members that thought it unnecessary to  bring the proposal to the attention of the 
Ministers stated that "the GATS […] provided for th e appropriate policy space, in particular through 
the prudential carve-out" for the app lication of macro-prudential measures.2  However, the fact that 
these Members consider such policy space to be pre sent in the context of GATS rules does not mean 
that others feel the same level of certainty. 
5. Ecuador's main concern in this respect is of a systemic nature:  the importance of ensuring 
that all countries have the capacity to safeguard th e stability of their financial systems, including 
against any possible escalation of the international fi nancial crisis, on the basis of a clear and agreed 
understanding of existing WTO regulations, in par ticular in the context of the discussion on new 
forms of macro-prudential regulation, which h as been taking place in a number of relevant 
international and regional bodi es and national institutions. 
                                                      
1 S/FIN/M/61;  WT/GC/W/617. 
2 S/FIN/M/71. S/FIN/W/84 
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  6. Members seem to agree, however, that since th e financial crisis of the late 1990s and the 
recent crisis, there has been a marked shift in th inking regarding the useful ness of macro-prudential 
regulation and capital management techniques as fi nancial system safeguard and strengthening 
mechanisms in dealing with any new episodes of cr isis and, above all, in  protecting developing 
countries from any spillover effects. 
7. The work carried out by the Committee on Tr ade in Financial Services between 2009 and 
2010, which examined the impact of the financial crisis on trade in financial services, enabled 
Members to share information and experiences, and s howed that regulatory reform was of the utmost 
importance and that countries needed to ensure that there was appropriate regulation (which for 
Ecuador means rules allowing policy space for macro-prudential regulation and the integrity and 
stability of the financial system), as well as a co nsistent application of regulation throughout the 
world.  The discussion also showed that the in ternational community was confronted with a 
substantive regulatory reform agenda.
3 
8. Moreover, international bodies, some of which have historically held a negative view of 
capital management techniques, have significan tly moderated their position and have recently 
produced documents suggesting that the countri es which applied macro-prudential regulations 
(specifically for capital management purposes) dealt w ith the crisis more effectively than those which 
did not.4 
9. At the Round Table on the Future of Financia l Regulation, organized by the International 
Monetary Fund in April 2012, a number of policy positions refining the fina ncial regulation agenda 
(conceptualization of good and best practices, ev aluation of current systems, identification of 
shortcomings, institutional and s upervisory capacity, etc.) emerged, and emphasis was placed on the 
need to ensure the effective and coordinated im plementation of agreed policies through inclusive 
consultation processes between countries.5 
10. The Doha Declaration of the Ministerial Conference of the United Nations Conference on 
Trade and Development, drafted in April 2012, re flects countries' concerns about the importance of 
proper supervision and regulati on of financial markets to promote financial stability and 
socio-economic development.6 
11. The G-20 has also expressed the need to stre ngthen the regulation and supervision of the 
financial sector.7  One way of achieving this objective is to  ensure policy space for the application of 
macro-prudential measures. 
12. Members seeking greater clarity in respect of GATS rules, beyond the analysis of their 
macro-prudential regulation needs, have also noted the opinions of various trade and finance experts 
and international organizations, which have warned of possible conflict between these financial 
stability tools and WTO rules.8 
                                                      
3 Paragraph 131, S/FIN/M/64. 
4 IMF, Recent Experiences in Managing Capital Flow s - Cross-Cutting Themes  and Possible Policy 
Framework , 2011. 
5 IMF, Policy Round Table on the Future of Financial Regulation, statement by Managing Director, 
Christine Lagarde, 17 April 2012. 
6 UNCTAD XIII Ministerial Declaration, paragraphs 20, 30 and 44. 
7 G-20 Global Plan for Recovery and Reform, London, 2009, paragraphs 13-16. 
8 The United Nations Conference on Trade and De velopment (UNCTAD) maintains that the use of 
capital controls and other types of financial reform may be circumscribed or prohibited by the commitments undertaken by countries at multilateral level.  The organization considers the GATS to include provisions 
relating to payments, transfers and financial services th at may limit the application of these types of measure  S/FIN/W/84 
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  13. It is therefore necessary to promote a proper link between WTO rules and the work of other 
international organizations responsib le for safeguarding the stability of the global financial system.  
Ecuador believes that in this way Members will have  greater confidence and trust in the existence of 
space for the application of macro-prudential polic ies and capital management techniques within the 
framework of the relevant prudential rules of the GATS. 
14. On the basis of these criteria, at the Ma rch 2012 meeting of the Committee on Trade in 
Financial Services, Ecuador summarized the discuss ion on its proposal and mentioned some of the 
suggestions made by other Members on possible ways of moving the debate forward.  As a result, it 
became clear that various alternatives, such as pr eparing a legal interpretation of the GATS rules in 
relation to the need for macro-prudential regulation,  or the analysis and identification of specific 
measures on the scope of GATS rules, were not viable because of some Members' concerns.  In both 
cases, it was considered that discussions of this natu re could in the long term narrow the scope of the 
existing rules, to the detriment of the interests of all the Members. 
15. The purpose of this proposal is to find the appropriate space to fulfil the objective of 
increasing Members' confidence in respect of GATS ru les and their relationship with current thinking 
on macro-prudential regulation, while respecting the discussion limits requested by the entire 
Membership.  At the same time, it seeks to encour age more specific work on this issue than that 
carried out by the Committee in 2009 and 2010. 
16. Accordingly, Ecuador proposes that the Co mmittee on Trade in Financial Services hold a 
dedicated discussion on the steps forward that have b een proposed at international level in respect of 
macro-prudential regulation and its relationship wi th GATS rules.  This Member-driven discussion 
could begin on the basis of a background paper, prepared by the Secretariat, covering the main issues 
relating to the current thinking of internationa l bodies and renowned experts on macro-prudential 
regulation. 
17. The discussion could also be an opportunity to hear everyone's views on the questions 
submitted by Members, thus encouraging an illustrativ e and useful exchange of experiences.  Such 
questions might include the following: 
(a) What types of new macro-prudential measures have countries identified in recent 
years and why are they considered necessary in  relation to those in existence prior to 
the recent crisis? 
(b) In light of the objective to maintain a sound financial system, how do these measures 
relate to trade in financial services, or is trade in financial services complementary to 
the adoption of these measures? 
(c) The IMF has proposed the development of global standards relating to 
macro-prudential policy.  Is it necessary fo r the WTO to cooperate more actively with 
other international bodies that discuss these needs, so as to ensure that the 
organization's rules are consistent with a ny standards that might emanate from such 
discussion? 
                                                                                                                                                                     
which are required to re-regulate and restructure financial systems (UNCTAD, Trade and Development 
Report, 2011 ; pages 100-104).  Moreover, the joint FSB-IMF-BIS communication on macro-prudential policy 
tools, dated 14 February 2011, states that the multilate ral aspects of macro-prudential and capital management 
policies need to be fully considered, along with their effectiveness, as some countries have subscribed to 
international instruments that may be limiting; even those that have not will need to be aware of the implications 
of such measures for the international monetary and financial system. S/FIN/W/84 
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  (d) Given that the discussion on the space provided for by GATS rules takes place 
between national regulators (normally officials from economic and financial 
institutions or central banks) and national negotiators (which represent their countries 
in regional or multilateral negotiation forums on a regular basis), it is vital to maintain 
adequate coordination and bala nce between the objectives of both parties.  What is 
Members' experience regarding the best practices for coordinating work between 
these actors? 
(e) In financial services, capital flows cannot be considered merely a part of the 
provision of a service;  on the contrary, large movements of capital are in themselves a service.  What special characteristics do financial services have in relation to the 
GATS by virtue of the requirements on th e non-imposition of restrictions on capital 
transactions in sectors in which a Me mber has made specific commitments? 
18. Ecuador would like to know the Membership's  views on this proposal, which should form 
part of a Member-driven dedicated discussion aimed at meeting the needs of all Members within the 
framework of current WTO rules. 
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