WORLD TRADE  
ORGANIZATION  RESTRICTED 
S/FIN/M/71 
4 November 2011  
 
(11-5605) 
Committee on Trade in Financial Services  
  
 
REPORT OF THE MEETING HELD ON 31 OCTOBER 2011 
 
Note by the Secretariat
1 
  
1. The Committee on Trade in Financial Services held a meeting on 31 October 2011, under the 
chairmanship of Mr Quan ZHAO  (China).  The agenda is contained in Airgram WTO/AIR/3837.   
A. A
DOPTION OF THE ANNUAL REPORT TO THE COUNCIL FOR TRADE IN SERVICES  
2. The Committee adopted the annual report, as contained in document S/FIN/W/82.     
B. TRANSITIONAL REVIEW UNDER SECTION 18 OF THE PROTOCOL ON THE ACCESSION OF THE 
PEOPLE 'S REPUBLIC OF CHINA  
3. The Chairperson recalled that the Committee w as mandated to conduct this review pursuant 
to section 18 of the Protocol on the Accession of the People's Republic of China.  He reminded 
Members that paragraph 4 of Section 18 of the Protocol stated that the review would "take place after accession in each year for eight years.  Thereafter there will be a final review in year 10 or at an earlier date decided by the Genera l Council".  Pursuant to that ma ndate, the Committee had conducted 
a review of China's implementation of commit ments and other obligations during the 8 years 
following China's accession, from 2002 to 2009.  This would be the final review.  
4. Written communications had been received in  advance from the delegations of Japan 
(S/FIN/W/79) and the European Union (S/FIN/W/82) .  In addition, China submitted the information 
required by Annex 1A of the Protocol of Accession (S/FIN/W/83). 
5. The representatives of the European Union and Japan briefly introduced their respective 
communications. 
6. The representative of the United States said th at the Transitional Review Mechanism (TRM) 
had been created largely because China was admitted to WTO membership before it had revised all of 
its trade-related laws and regulations to become  WTO-compatible, and because China was allowed a 
variety of transition periods before it took on certain WTO obligations.   
7. The focus of the transitional reviews had cha nged over time.  For the first five years of 
China's WTO membership, the re views focused predominantly on the scheduled phase-in of key 
commitments that China had made in its Protocol of Accession.  However, once that phase-in period 
had ended, and China could no lo nger be considered a new WTO Member, the focus of the TRM 
shifted.  At that point, the transitional reviews focused more on China's adherence to the range of 
WTO rules that obligate all Members.   
                                                      
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/71 
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  8. Although China had taken a number of steps to  implement its banking services commitments, 
there were some instances in which it still did not seem to have fully implemented particular 
commitments.  For example, in its GATS Schedule,  China agreed that qualified foreign financial 
institutions would be permitted to establish Chine se-foreign joint banks immediately after China 
acceded to the WTO, and it did not schedule any limit ation on the percentage of  foreign ownership in 
these banks.  To date, however, China had, in pract ice, placed limits on the sale of equity stakes in 
existing Chinese-funded banks to fore ign investors.  Separately, fore ign banks continued to face slow-
downs in obtaining regulatory appr oval to expand their operations in China through the establishment 
of new internal branches.   
9. He further said that China had issued measures that in theory would implement most of its 
insurance commitments.  However, in practice, Ch ina often had taken an unduly long time, exceeding 
its own regulatory deadlines, to approve requests by  foreign insurance comp anies already established 
in China's market to expand their operations thro ugh new internal branches or sub-branches.  The 
United States also continued to seek on-the-ground evidence that China was fu lly complying with its 
own regulations, which in theory allow for the option of foreign insurance companies submitting 
applications and obtaining approvals for multiple, concurrent internal bran ches, just as China's 
regulator did for Chinese insurance companies.  China also sometimes had been slow to approve 
requests related to the establishment of new insurance companies.   
10. In addition, serious concerns remained regardi ng foreign companies' access to China's market 
for enterprise annuities services, which involve certa in types of pensions.  China's licensing system 
for this service sector had been cl osed for the past four years. 
11. Meanwhile, in two instances, Members had in itiated WTO dispute settlement proceedings 
against China in order to obtain market openings or  the elimination of restrictions.  In 2008, the 
United States, the European Union and Canada ha d brought a case challenging restrictions on foreign 
suppliers of financial information services that ha d been imposed by a Chinese regulator that also 
operated its own competing financ ial information service.  Following consultations at the WTO, 
China agreed to, and did, establish an independent  regulator for the financial information services 
sector and remove restrictions that had placed fore ign suppliers at a serious competitive disadvantage 
in China's market.   
12. In 2010, the United States brought a case challenging China's restrictions on foreign suppliers 
that operate electronic networks that process paymen t transactions involving credit, debit, prepaid and 
other payment cards.  Despite committing to open th is sector to foreign suppliers by 11 December 
2006, China instead had created a national champion, allowing only one domestic entity to provide 
these services for the typical transaction in whic h a Chinese consumer makes a payment in China's 
domestic currency.  He clarified that this case was pending before a dispute settlement panel. 
13. He also noted that, in China's regulation of the financial services sectors, like many other 
sectors, it appeared that China had made progress but  had not yet implemented all of the cross-cutting 
transparency commitments that it had made when it acceded to the WTO.  Some concerns remained, 
even after 10 years of WTO membership.  First, w ith regard to China's commitment to publish all 
laws, regulations and other measures pertaining to or  affecting trade in goods or services (as set forth 
in paragraph 331 of China's Working Party Report) , China had complied with this commitment in 
many respects.  However, it still did not appear th at China published measures that provide "internal 
guidance".  
14. Second, with regard to China's commitment to publish measures for comment before 
implementing them (as set forth in paragraph 2(C)2 of Part I of China's Protocol of Accession), although China's financial services regulators of ten employed notice-and-comment procedures 
through their websites, they did not always seek co mments for relevant measures, and in some cases  S/FIN/M/71 
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  where they did allow for comments, the time for pr oviding them was so short that it was unworkable.  
At the meeting of the US-China Strategic and Economic Dialogue in May 2011, China had committed 
to issue a measure in 2011 requiring Chinese agenci es to publish all proposed trade- and economic-
related administrative regulations  and departmental rules on the State Council Legislative Affairs 
Office website for a public comment period of not l ess than 30 days from the date of publication, 
subject to specified exceptions.   
15. Third, with regard to China's commitment to make available all laws, regulations and other 
measures pertaining to or affecting trade in services in one or more WTO languages (as set forth in paragraph 334 of China's Working Party Report), he noted that China's National People's Congress, 
through its website, sometimes provided English transla tions of its laws relating to financial services.  
In addition, China's financial services regulators, through their websites, sometimes provided English 
translations of their regulatory measures.  However,  the websites were not always updated in a timely 
manner, and translations of many re levant measures were not provided. 
16. Looking ahead, the United States urged China to take immediate steps to address the concerns 
he had raised and further improve foreign companies' access to its financial services sectors.  The 
United States also urged China to improve transparen cy with regard to the regulation of its financial 
services sectors.  Transparency was critical to the proper functioning of the international trading system, and China needed to live up to its commit ments.  He concluded by saying that the United 
States would continue to engage China, both at th e WTO and bilaterally, until all of these outstanding 
issues were satisfactorily resolved. 
17. The representative of China said that his count ry's financial services industry had developed 
significantly due to the opening-up policy implemen ted since WTO accession.  In the banking sector, 
by the end of 2010, a total of 185 banks fro m 45 countries and regions had established 216 
representative offices in China; 74 banks from 25 countries and regions had set up 90 branches in 
China; banks from 14 countries and regions had estab lished 37 wholly foreign-owned banks, 2 joint 
venture banks with 6 branches and 1 affiliated in stitution, and 1 wholly foreign-owned finance 
company had been established.  In  2010, the total assets of business institutions of foreign banks in 
China stood at 1.74 trillion RMB, a year-on-year growth of 29.13%. 
18. China had honoured all of its WTO commitmen ts for opening up its securities service 
industry.  Outside the scope of the commitments, China had taken the initiative to implement some 
opening-up policies for securities companies as follows : first, qualified securities companies meeting 
specified conditions were allowed to expand th eir business scope and gr adually add securities 
brokerage, self-operation, asset management a nd other businesses; second, qualified foreign 
institutional investors (QFII) were allowed to  hold shares of liste d domestic-funded securities 
companies via securities transactions at securities exch anges in accordance with law; third, qualified 
overseas investors and listed domestic-funded securities companies were allowed to establish strategic 
partnerships and hold shares of listed domestic-funded securities companies subject to the permission 
of the China Securities Regulatory Commission (CSRC).  By the end of 2010, China had approved 
the establishment of 12 Sino-foreign joint ventur e securities companies and 37 Sino-foreign joint 
venture fund management companies.  The foreig n equity ownership in the 17 joint venture fund 
management companies reached 49%.  Thirty-eight  and twenty two overseas securities institutions 
were directly engaged in B-share transactions at the Shanghai Stock Exchange and the Shenzhen 
Stock Exchange, respectively. 
19. By August 2011, insurance companies from 16 countries and regions had set up 52 foreign-
funded insurance companies in China (26 for life insurance, 21 for property insurance and 5 for 
reinsurance).  By the end of 2010, the insurance premium income and total assets of foreign-funded 
insurance companies amounted to RMB63.43 billion  and RMB262.11 billion, respectively, that was 
19 times and 29.3 times the amounts reached before China's accession to the WTO, respectively.  S/FIN/M/71 
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  Four of the six foreign-funded insurance brokers  established were listed among the top 10 insurance 
companies nationwide by revenue from insurance brokerage.  
20. He then turned to the questions raised by Me mbers, starting with those related to banking 
services.  
21. Regarding banking regulation, he said that the China Banking Regulatory Commission 
(CBRC) had played a leading role since its est ablishment and set up a multi-tiered regulation and 
coordination system to facilitate the regulatory co operation in the financial industry, especially the 
banking industry.  First, a regulation and coordination  system had been established at the level of the 
State Council.  Second, the financial regulator s at various levels had signed memoranda of 
understanding on regulation cooperation.  In June 2003, a Memorandum of  Understanding on the 
Regulatory and Supervisory Responsibilities had been  signed by the CBRC, the CSRC and the China 
Insurance Regulatory Commission (CIRC), and a Memorandum of Unders tanding on Strengthening 
In-depth Cooperation and Inter-industry Regulation Cooperation in Banking and Securities Industries 
had been signed by the CBRC and the CIRC in 200 8.  The CBRC and the People's Bank of China had 
been coordinating banking regulation and monetary policy since this year.   
22. Third, the government had promoted the shari ng of information among financial regulators.  
In 2005, the CBRC, the CSRC, the CIRC and the People's Bank of China had jointly set up a system of financial statistical information, and formulat ed the Interim Measures of the CBRC, the CSRC, the 
CIRC and the People's Bank of China for Information Sharing which stipulated the contents, mechanisms and responsibilities of all departments c oncerned in information sharing.  Fourth, the 
CBRC provided training on new regulatory require ments not only to CBRC staff but also to 
employees in the banking industry, so as to ensu re that regulatory requirements were uniformly 
implemented. 
23. Regarding transparency of financial regula tion, the Working Rules of Legal Affairs 
promulgated by the CBRC in 2006 explicitly stipulated that all regulatory rules and standards be made 
public in the official journal and website of the CBR C.  To further encourage public participation in 
legislation and improve the transparency of la ws and regulations, the CBRC had formulated and 
distributed the Circular on Several Issues Concer ning Strengthening Laws a nd Regulations, reiterating 
that all rules and standards shall be made public a nd be timely released on the official website of the 
CBRC.  In addition, the circular also explicitly stipulated the procedures for soliciting public opinions on laws and regulation.  Public opi nions were to be solicited for all laws and regulations before their 
official promulgation, and the time limit to comment on draft regulations be no less than one month in 
principle.  In addition, the drafters of laws and regulations should communicate and exchange views 
with the public in case there were significant differences of opinion. 
24. Replying to questions regarding the restrictions  on foreign financial in stitutions, he said that 
according to China's Services Schedule, qualified fo reign financial institutions were allowed to 
establish wholly foreign-owned banks, including subs idiaries with legal person status and branches.  
China did not make commitments on the acquisiti on of domestic banks by foreign financial 
institutions, but allowed foreign investors to acquire equities of domestic banks up to a certain level.  
According to the Measures on Administration of Equ ity Investment of Overseas Financial Institutions 
in Chinese-funded Financial Institutions, the percenta ge of equity investment of a single overseas 
financial institution in a Chinese-f unded financial institution might not exceed 20%.  The requirement 
that "if the aggregate percentage of equity invest ment of multiple overseas financial institutions in a 
non-listed Chinese-funded financia l institutions reaches or exceeds 25%, such non-listed Chinese-
funded financial institutions shall be regulated as a foreign-funded financial institution", was in 
accordance with Article 4 of the Law on Chinese- Foreign Equity Joint Ventures and was in no 
violation of China's commitments in the WTO.  S/FIN/M/71 
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  25. According to a recent evaluation conducted by Chinese banking regulators, opening-up had 
played an indispensable role in the reform, de velopment and innovation of China's banking industry 
and in improving its overall efficiency and compe titiveness of the banking indus try.  At present, the 
opening-up of China's banking industry was basically in line with its economic development and its 
financial regulatory capacity.  
26. However, the Chinese banks were still in an initia l stage of development, and the international 
financial context remained turbulent.  The restric tions on foreign financial institutions therefore met 
the requirements of prudent banking regulation, ai ming to protect the interests of depositors and 
safeguard financial stability.  He added that China would not change the foreign equity restrictions 
under the existing policy framework in the near future.  Chinese banking regulators would guide 
Chinese- and foreign-funded banks to further expa nd the scope and depth of cooperation and compete 
on an equal footing based on their comparative advantages.  
27. Foreign banks wishing to establish branches must  comply with laws and regulations as well 
as prudent conditions, as per the Regulation of the People's Republic of China on the Administration 
of Foreign-funded Banks and its  Implementation Rules.  The CBRC imposed no limitations on the 
number of branches to be established by foreign-funded  banks, which were treate d as domestic banks.    
28. In accordance with the existing laws and regula tions in China, a branch established by a 
foreign-funded bank in China was not an independent  legal entity and thus its civil liabilities had to be 
borne by the headquarters.  In case a foreign-f unded bank established several branches in China, the 
CBRC conducted integrated supervisio n and regulation over such branches.  The foreign-funded bank 
must appoint a branch in China as an administrative bank to be responsible for the uniform business 
management in China, as well as the reporting and s ubmission of consolidated financial information 
and summarized information of all branches w ithin China.  The CBRC did not assess related 
prudential requirements, including capital adequacy  ratios, on branches of foreign-funded banks 
operating in China. 
29. Turning to the questions on e-payment services, he said that China had always honoured its 
WTO commitments allowing foreign service suppliers to  offer e-payment services in China.  First, in 
line with the specific commitments made on "all payment and money transmission services, including credit, charge and debit cards, traveller chequ es and bankers drafts (i ncluding import and export 
settlement)", and other related provisions stipulated  in the Regulations of the People's Republic of 
China on the Administration of Foreign-funded Banks, many foreign-funded banks in China, such as 
HSBC, Standard Chartered, Bank of East Asia a nd Citibank, had already obtained permission to be 
fully engaged in RMB bank card, online banking  and other e-payment services.  Second, non-
financial institutions, such as Paypal, Accor and ot hers were already offering online payment and 
other e-payment services in China, and the Pe ople's Bank of China regulated these services in 
accordance with the Administrative Measures for the Payment Servi ces Provided by Non-financial 
Institutions (Order No.2 [2010] of the People's Bank of China).  Third, the market was fully open for 
international bank card clearing service companies like  Visa and MasterCard to issue branded foreign 
currency cards via domestic banks in China and to process transactions via domestic banks' networks.   
30. China UnionPay had not monopolized the e-payment transactions market, but it had been the 
only service provider of e-payment inter-bank cleari ng of bank cards.  China had not made any WTO 
commitment on the payment clearing services provide d by non-financial institutions such as Visa.  
The payment clearing services of bank cards belonged to the clearing services of monetary assets as 
well as the "settlement and clearing services for financial assets, including securities, derivative 
products, and other negotiable instruments" in the classification of financial services.  China had not 
made any commitment on payment clearing services of bank cards in its Schedule of Specific Commitments in services.  He added that China would gradually open up payment clearing services S/FIN/M/71 
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  of bank cards according to the development of bank cards in China, but would not provide any 
specific timetable.  
31. Regarding banks' data processing systems, he said that China had made WTO commitments 
on the provision and transfer of financial inform ation, and financial da ta processing and related 
software by suppliers of other financial services.  However, pursuant to the Article XIV of the GATS, 
Members were entitled to adopt and enforce related laws and regulations for the protection of the 
privacy of individuals in relation to the pro cessing and dissemination of personal data and the 
protection of confidentiality of individual records an d accounts, subject to the requirement that such 
measures were not applied in a manner which would constitute a means of arbitrary or unjustifiable 
discrimination between countries wher e like conditions prevailed, or a disguised restriction on trade in 
services. 
32. China had formulated specific policies on inform ation security, data confidentiality and other 
issues.  For instance, the Electronic Payment Gu idelines (No.1) (Announcement of the People's Bank 
of China, [2005] No.23), the Guiding Opinions of the People's Bank of China on Further Strengthening Insurance of Information Security of Banking Financial Institutions (Yin Fa [2006] 
No.123), the Notice of China Banking Regulatory Commission on Solely Foreign-funded Banks and 
Sino-foreign Equity Joint Banks to Engage in the Bank Card Business (Yin Jian Fa [2007] No.49) and 
other rules and regulations explicitly stipulated requirements on establishing data systems within 
China by the institutions engaged in domestic bank card business.  Therefore, the policies on 
establishing important financial data processing systems within China had been explicit and 
consistent, without any change.  At the same time, the requirements on establishing data systems 
within China were equally applied to Sino-funded and foreign-funded institutions, and foreign-funded 
banks were not treated in a discriminatory manner. 
33. He then addressed the questions on securities ser vices.  On the quotas of qualified foreign 
institutional investors (QFII), he explained that sinc e the pilot project of QFII system in 2002, the 
State Administration of Foreign Exchange (SAFE) , the CIRC and other depa rtments concerned had 
cooperated in the implementation and approval of new quotas of QFII and encouraged qualified 
medium- and long-term overseas funds to invest  China capital markets, in accordance with the 
international and domestic economic  and financial situation, the state of the domestic securities 
markets, and the balance of payments.  In D ecember 2007, total QFII investment increased from 
RMB10 billion to RMB30 billion.  By Sept ember 2011, the SAFE had approved 103 QFII 
institutions, with a total investment of US$20.69 billion, not reaching the upper limit of total 
investment.  In light of this situation, China was not thinking of further increasing the investment 
quotas of QFII. 
34. Several issues had been raised on insurance se rvices.  China had strictly honoured its WTO 
commitments, and did not impose economic needs tests or quantitative restrictions to access the market.  Second, based on the opinions solicite d from both domestic-f unded and foreign-funded 
insurance companies, the CIRC would promulgate  related supporting measures on the training of 
insurance companies' senior staff.  Third, the CIRC was considering opening up the statutory business 
of compulsory traffic accident liability insuran ce for motor vehicles to foreign-funded insurance 
companies.  However, no timetable for such openi ng had been established yet.  Finally, regarding 
licence applications, he said that China had strictly  applied the principle of national treatment in the 
insurance industry.  The same laws, regulations, tr ansparency standards and approval procedures were 
applied to the applications for branch establis hments filed by both domestic-funded and foreign-
funded insurance companies.  China imposed no restriction on the number of branches to be 
established at one time and did not discriminate in the examination and approval of applications.   S/FIN/M/71 
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  35. The representative of Cuba congratulated Chin a for its efforts over the last 10 years to 
implement its commitments on financial services.  Ch ina had also been an example of transparency 
and had complied with notification obligations in line with its Protocol of Accession.   
36. By way of conclusion, the Chairperson invited the Committee to take note of the statements 
made.  Secondly, he requested the Secretariat to prepare a report, to be presented to the Council for 
Trade in Services.  It would be a f actual report, stating basically that:  
(a) Pursuant to section 18 of the Protocol on the Accession of the People's Republic of 
China, the Committee conducted the final revi ew of the implementation by China of 
the WTO Agreement and of related provisions  of the said Protocol, in the meeting 
held on 31 October 2011;   
(b) written communications had been received fro m Japan and the European Union; and 
(c) the details of the discussion, including all the interventions made at the meeting, 
would be found in the meeting report, to be issued as document S/FIN/M/71. 
37. The Committee so decided. 
C. TRADE IN FINANCIAL SERVICES AND DEVELOPMENT  
38. The Chairperson said that at the last mee ting the Committee had agreed to organize a 
workshop early next year on this topic.  He also  recalled that he had co mmitted to hold informal 
consultations on the organization of this workshop, pa rticularly with regard to the participation of 
experts from international organizations.  Clarity was needed in this regard so that the Secretariat 
could propose a draft programme for the event.  Should delegations decide not to invite any 
international organizations, it would be imperative that they already start developing very clear ideas 
as to their respective contributions both in terms of participation of experts a nd focus of presentations.  
This was a necessary condition for the Secretariat to be able, as expected, to draft the programme.  In 
the absence of external participation, there must be a strong commitment fro m all delegations not only 
to contribute, but to define the contributions early on.  Unfortunately, due to other engagements, including the preparation for the next Ministerial Conference, he had been unable to find an 
appropriate time to consult so far.  He would hold th ose consultations after this  meeting, in the course 
of November.  
39. The representative of China said that discussi ons on the relationship between trade in 
financial services and development had been fr uitful and thought-provoking.  He encouraged 
Members to participate in the workshop so as to have a comprehensive and balanced discussion on 
this issue. 
40. The representative of Indonesia supported Chin a's proposal made at previous meetings, 
particularly with regard to the identification of  the essential components of the regulatory framework 
needed to protect markets from external shocks a nd to ensure financial stability.  The recent financial 
crisis had highlighted the importance of a s ound regulatory framework.  In 2004, Indonesia had 
launched the Indonesian Banking Architecture - a co mprehensive basic framework for the Indonesian 
banking system, detailing the direction, outline, and st ructure of the banking industry for the next five 
to ten years.  The economic crisis of 1997 ha d exposed the institutional weaknesses in the banking 
industry and lack of adequate supporting infrastructure.   It also demonstrated the need for reinforcing 
the fundamentals of the system in order to build r esilience against internal and external shocks.  The 
Architecture, which was considered  necessary to strengthen the fundamentals of the banking industry, 
focused on six pillars, namely a) healthy banking stru cture; b) effective regulatory system; c) effective 
and independent supervisory system ; d) strong banking industry; e) adequate infrastructure; and f) S/FIN/M/71 
Page 8  
 
  robust consumer protection.  Since its inception, improvements had been made  in all six pillars.  
Turning to the workshop, she proposed, as a topic for discussion, the sharing of experiences among 
Members on crisis management protocols.   
41. The representative of Australia made reference to the presentation her delegation had made at 
the last meeting on the development of the Austra lian financial system, and replied to a question 
posed on that occasion regarding the establishment of banking entities from developing countries.  
She said in that regard that there were a total of  36 branches and 9 subsidiaries of foreign banks in 
Australia, with 8 branches and 2 subsidiaries origina ting in developing countries.  She supported the 
idea of holding a workshop.   
42. The representatives of Argentina, Barbados, Ch inese Taipei, Ecuador, the European Union, 
Korea, Japan, Switzerland, Turkey, and the United Stat es promised the participation of experts at the 
workshop.   
43. The Committee took note of the statements made an d decided to revert to this agenda item at 
the next meeting. 
D. RECENT DEVELOPMENTS IN FINANCIAL SERVICES TRADE  
44. The Chairperson said that Ecuador had subm itted a communication containing a proposal for 
furthering work on regulatory measures in financia l services to be included in the forthcoming 
Ministerial Declaration (S/FIN/W/80).  
45. The representative of Ecuador said that the propo sal consisted of the inclusion of a paragraph 
in the forthcoming Ministerial Declaration in which Ministers would instruct the Committee to 
continue to review the WTO rules so as to prom ote and ensure the preservation of policy space for 
macro-prudential regulations.  He recalled that in discussions held at the Committee on the impact of 
the financial crisis on trade in financial services,  it had become clear that countries around the world 
had to take broad regulatory measures to mitigate the effects of the international financial crisis, and 
that sufficient policy space was needed  to implement those measures.  
46. The magnitude of the financial crisis had pr ompted organizations such as the G-20, the 
International Monetary Fund and the UN Commissi on of Experts on Reforms of the International 
Monetary and Financial System, to propose substan tial reforms with a view to ensuring certainty, 
transparency and strong regulatory capacity.  In th at sense, the WTO Director-General had expressed 
the need to properly re-regulate the financial syst em and to introduce macro-prudential reforms.  
47. Ecuador's priority was the construction of a new international financial architecture that 
would serve as a development tool.  Consequently , his government could not conceive of a WTO 
Ministerial Conference in which ministers did not reflect on the work carried out by the WTO to 
mitigate the effects of the crisis, on the role play ed by the WTO in the international community's 
efforts to improve financial systems regulation, an d, above all, on the actions taken by the WTO to 
strengthen countries that had no capacity to emit rese rve currencies.  In the case of Ecuador, a small, 
open, and dollarized economy, the need to maintain  sufficient policy space was even more urgent, if 
the country was to prevent a repeat of the financ ial crisis of last century, which caused a sudden 
capital outflow, the collapse of the financial system, the loss of the country's monetary sovereignty, and the expulsion of millions of nationals through migration. 
48. The international financial crisis had had om inous effects on a great portion of the world 
population.  Many renowned academics, as well as ma ny multilateral organizations, had affirmed that 
financial deregulation was one of the main causes of  the crisis and that re-regulation was a necessary 
condition to the restoration of public confidence in the system.  One important aspect of these  S/FIN/M/71 
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  initiatives at the international level was to ensure th at the rules of international agreements to which 
countries adhered to be compatible with the globa l tendency towards the im provement of financial 
regulation.  About 100 Members had made liber alization commitments on financial services during 
the Uruguay Round.  When a country committed its financial sector under the GATS, it also undertook a commitment not to maintain certain ty pes of regulation and to allow the free flow of 
capital.  
49. The objective of this proposal was to bette r understand the practical effect of GATS 
disciplines on Members' efforts to establish macro- prudential policies and to strengthen the stability 
of their financial systems.  The crisis had modified  certain paradigms shared by regulators, academics, 
and policy makers in the 1990s when the GATS was negotiated.  Since that paradigm was changing, 
the WTO must make an effort to adapt its rules and processes to the new realities and to the emerging 
consensus.  The proposal was to review the GATS asp ects related to trade in financial services, in 
light of the conceptual developments over the last  years, including the reform of the international 
monetary system, the role of reserve currencies, the global imbalances, the Triffin dilemma, "too-big-to-fail" institutions, the "shadow" banking syst em, and cross-border regulatory arbitrage.  
50. His delegation reserved its right to present this proposal to the General Council.  
51. The representatives of Argentina, Barbados, Bo livia, Brazil, Cuba, the Dominican Republic, 
India and South Africa supported the proposal, and generally considered that the Committee should 
review the GATS rules relevant for financial ser vices in light of recent developments, without 
prejudice to the final outcome of such exercise.    
52. The representative of Australia said that the Co mmittee was the appropriate body for this type 
of discussions.  Her delegation was open to review the effects of the financial crisis, including the 
resulting regulatory reforms, and th e implications - if any - for WT O rules.  The GATS and the Annex 
on Financial Services already afforded Members a high level of discretion and, at the same time, did not allow measures that were purely protectionist in effect.  
53. The representatives of Chinese Taipei, the Europ ean Union, Korea, Norway and the United 
States did not support the inclusion of a specific paragr aph in the forthcoming Ministerial Declaration.  
These delegations considered that the GATS alrea dy provided for the appropriate policy space, in 
particular through the prudential carve-out.  The representatives of Chinese Taipei, Korea and Norway 
opined that Members should continue exchangi ng views on their experiences and discussing issues 
related to the financial crisis within the framework  of the Committee, without  the need for a specific 
mandate coming from Ministers.  On his part, the representative of the United States saw merit in 
capacity building, in working with financial re gulators to better understand how GATS commitments 
on financial services and financial regulation could re inforce each other.  His delegation was open to 
conducting such a dialogue and consideri ng how the Committee could contribute.  
54. The representative of Canada gave the view  that the GATS prudential carve-out had 
functioned quite well and had provided Members w ith the flexibility to safeguard their domestic 
financial systems and reform their regulatory regi mes.  The current GATS framework did not prevent 
Members from undertaking meaningful commitments. 
55. The representative of Turkey agreed with the rationale of Ecuador's proposal and saw merit in 
examining the effects of macro-prudential regula tion in relation to the GATS Annex on Financial 
Services.  However, it might be difficult to reach  consensus on specific language for the Ministerial 
Declaration.  But that should not result in di smissing the proposal.  Rather, the Committee should 
analyse these issues next year, with a view to be tter understanding the scope of the GATS prudential 
carve out.  He suggested in particular that the Secretariat prepared a Note on the legal meaning and scope of the prudential carve-out, including exampl es of prudential regulations that Members might S/FIN/M/71 
Page 10  
 
  take.  This would help Member s better understand the scope of their regulatory policy space in line 
with GATS rules.  
56. After this exchange of views, the representa tive of Ecuador indicated that his delegation 
would continue working towards a consensus on this  paragraph for the Ministerial Declaration, and 
reserved his right to revert to this issue at the next meeting. 
57. Upon request by the Chairperson, a representative of the Secretariat clarified procedural 
issues raised by this proposal.  The proposal contai ned two tracks - the preparation of the Ministerial 
Conference (which was not taking place in this Co mmittee) and the substance of the subject matter, 
which fell within the mandate of the Committee.  Sin ce this was the last meeting of the year, it would 
not be possible for the Committee to work further on this proposal prior to the Ministerial.  However, 
the Committee did not need to be tasked by Minist ers to continue discussions on the substance.  On 
the face of it, the suggested language essentially instru cted the Committee to pro ceed with work that it 
was already doing, but did not aim at starting a new process.  It would not add anything to the existing 
terms of reference of the Committee.   
58. The Chairperson noted that there was some inte rest in discussing the substantive issues raised 
by Ecuador. 
59. The Committee took note of the statements made an d decided to revert to this agenda item at 
the next meeting. 
E. TECHNICAL ISSUES (CLASSIFICATION )  
60. The Chairperson recalled that the Committee had conducted a very interesting discussion on 
classification issues at the previous meeting.  The summary of that discussion, which was held - as 
agreed - in informal mode, was contained in an In formal Note issued under the Chair's responsibility 
(JOB/SERV/87). 
61. The Committee turned to informal  mode to continue the discussion.  An informal summary 
would be circulated after the meeting under the Chair's responsibility.  
62. The Committee took note of that statement and deci ded to revert to this agenda item at the 
next meeting. 
F. ACCEPTANCE OF THE FIFTH PROTOCOL TO THE GENERAL AGREEMENT ON TRADE IN 
SERVICES  
63. The Chairperson recalled that Brazil and Jamaic a had yet to accept the Protocol and invited 
them to provide any update on the status of thei r domestic ratification processes.  In response, the 
representatives of Brazil and Jamaica stated that the situation had remained unchanged.   
64. The Committee took note of those statements and de cided to revert to this agenda item at its 
next meeting.  
 
 
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