RESTRICTED  WORLD TRADE  
ORGANIZATION  S/FIN/M/48 
4 March 2005 
 
 (05-0933) 
Committee on Trade in Financial Services  
  
REPORT OF THE MEETING HELD ON 10 FEBRUARY 2005 
 
Note by the Secretariat
1 
 
1. The Committee on Trade in Financial Services he ld a meeting on 10 February 2005, under the 
Chairmanship of Ms. Miyon Lee (Republic of Korea) .  The proposed agenda is contained in airgram 
WTO/AIR/2493.  
2. The representative of Australia  announced his intention to introduce a statement under Other 
Business on liberalization of financial services.  Also under Other Business, the representative of 
Korea  wished to announce a seminar on financial ser vices liberalization.  Finally, the Chairperson  
indicated that she would make a brief statement on the selection of a new chair for the Committee.  
The Chairperson  proposed that the agenda be adopted w ith the addition of those items under Other 
Business.   
3. It was so agreed . 
ITEM A: ACCEPTANCE OF THE FIFTH PROTOCOL TO THE GATS 
4. The Chairperson  recalled that three WTO Members had yet to accept the Fifth Protocol, 
namely:  Brazil, Jamaica, and the Philippines.  Sh e also recalled that at the last meeting some 
delegations had expressed their concerns about such  a delay.  She invited these three Members to 
provide information on the status of their domestic processes. 
5. The representative of Brazil  said that the situation regarding the acceptance of the Fifth 
Protocol in Brazil had not changed much since the last meeting.  The lack of approval by Congress was not due not to any objection to the contents of the Protocol.  Indeed, the content of the Protocol 
corresponded to the level of market access provided by existing regulation in Brazil. The delay was 
linked to the additional commitments that had been taken by Brazil under the Pr otocol and that would 
require a law.  This law had been approved but its constitutional character was questioned in the 
Supreme Court of Justice.  Since the constitutiona l character of this law was still under dispute, 
Congress did not feel it was appropriate to approve th e Fifth Protocol.  He also clarified that the 
questioning of the law was not motivated  by its c ontents, but rather by a formal aspect regarding the 
type of law that should have been adopted in this  case.  Under these circumstances, it was not possible 
to indicate a timeframe for the final acceptance of  the Protocol, but efforts were underway to 
overcome this situation and proceed  to the formal acceptance.  
6. The representative of the Philippines
 said that the acceptance of the Protocol was still being 
considered by Congress.  Since the last meeting,  the Philippines had sought to engage the executive 
branch in trying to facilitate the ur gent ratification of the Protocol, hopefully before the present Senate 
had concluded its work.  He emphasized that the Philippines were committed to ensuring the 
ratification of the Fifth Protocol.  
                                                      
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/48 
Page 2  
 
 7. The representative of Jamaica
 said that many Members had raised this question during the 
Trade Policy Review of Jamaica that had been held the previous month.  She invited all Members to 
look at the document containing all the responses prov ided by Jamaica during the Review.  She added 
that ratification of the Protocol would have to be further delayed as more time was required to put in 
place certain critical and necessary measures fo r strengthening the regulatory and institutional 
framework of the financial sector, particularly in the areas of pension supe rvision and prevention of 
money laundering.  These measures were intended to benefit both providers and consumers of 
financial services.  Jamaica stood ready and was willi ng to ratify the Protocol, although it was not in a 
position to provide a more concrete  timeframe at this time.   
8. The representative of the United States  said that her delegation had met bilaterally with Brazil 
to obtain more details on the issue evoked by the Br azilian representative.  After learning the details 
of the case, however, she considered that it should no t pose any impediment to Brazil to quickly ratify 
its commitments from 1997 and accept the Fifth Protocol. She expressed the hope that this could be done as quickly as possible.  Regarding Jamaica's st atement, she  recognised the need for strong 
financial services regimes to support liberalizati on, but did not believe that the process of 
strengthening or making modifications to regula tions, which was something many Members did, 
including the United States, should hold up the quick ratification of Jamaica.  The United States remained concerned that three countries had still not ratified the 1997 package.  
9. The representatives of the European Communities
, Japan  and Switzerland  also urged the three 
Members to complete the acceptance procedures.  
10. The Committee took note  of the statements made and decided  to revert to this agenda item at 
the next meeting. 
ITEM B: TECHNICAL ISSUES  
 
11. Since there were no interventions unde r this agenda item, the Chairperson  invited the 
Committee to reflect further about possible technical  issues that might be worth discussing in this 
Committee, for example, issues that could contribute to clarifying doubts about the application of the 
Agreement to this sector or to advancing the negotia tions.  She reminded Members of the issues raised 
in the recent past that had been evoked in the annotated agenda pr epared for the meeting held in 
June 2004 (Job(04)/72).  At the suggestion of the Chairperson, the Committee decided  to revert to this 
agenda item at the next meeting. 
ITEM C: RECENT DEVELOPMENTS IN FINANCIAL SERVICES TRADE 
 
12. The Chairperson  recalled that at the last meeting Mr Kong, Jaw-Sheng, Chairperson of the 
Financial Supervisory Commission in Chinese Ta ipei, had made a thorough presentation, updating 
Members on the situation of financial markets in Chinese Taipei, and explaining the rationale, 
objectives, organization and functio ns of the recently established integrated regulatory agency. 
13. The representative of Egypt  announced that his delegati on would make a presentation on 
recent developments in Egypt's securities markets at a future meeting, hopefully the next meeting.   
The presentation would be made by a senior official from the consolidated Cairo-Alexandria Stock Exchange.  Under the guidance of the Capital Ma rket Authority, the Cairo-Alexandria Stock 
Exchange had established a strong and impressive  record of liberalization for domestic and 
international investors.  This had been accomp lished in the framework of an on-going and 
comprehensive financial sector re form strategy which Egypt had been undertaking since the 1990's in 
tandem with the development of significant regu latory disciplines and institutional capacities 
supportive of securities activities.  In his view, it would be useful for the Cairo-Alexandria Stock Exchange to share its recent experience, and in teract with the membership of the Committee,  S/FIN/M/48 
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 including the capital based officials, on different aspects related to the role of capital markets in 
promoting economic growth.   
14. Before drawing the discussion to a close, the Chairperson  highlighted the importance of using 
this agenda item to stay updated on recent develo pments affecting financial services trade at the 
national, regional and global levels.  Presentations  on national experiences turned out to be very 
interesting and informative.  She encouraged all Members to come up with more presentations or 
statements of that kind.  Additionally, she reminded Members of the discussions held last year on e-finance, that could be continued this year.  
15. The Committee took note
 of the statements made and decided  to revert to this agenda item at 
the next meeting.   
ITEM D: DATE OF THE NEXT MEETING. 
16. The Chairperson  suggested that the Committee hold its next meeting during the next cluster 
of services meetings, in June 2005.  The exact date would be announced in due course.  
17. The Committee so agreed . 
ITEM E: OTHER BUSINESS 
18. The representative of Australia  introduced a room document drafted jointly with a few other 
delegations, whose intention was to assist Members in preparing their revised offers for financial 
services.  The paper highlighted the importance of  financial services liberalization for economic 
growth, stability and development.  It cited usef ul studies providing evidence of the benefits of 
reform.  It also noted the importance of an a ppropriate regulatory framework, as recognised in the 
GATS, and made some suggestions that Members coul d consider in the preparation of their offers.  
He added that the aim was to formally submit th e document as a joint statement at the up-coming 
meeting of the Special Session of the Council for Tr ade in Services.  He en couraged Members to co-
sponsor the statement. 
19. The representative of the Republic of Korea  made some general comments on the joint 
suggested paper, which highlighted the perceived be nefits from financial services liberalization.  It 
also suggested some benchmarks to be considered in the current services negotiations.  He urged all 
Members to provide improved and meaningful services offers with a view to achieving substantial liberalization. 
20. The representative of Antigua and Barbuda
 made some preliminary comments on the paper, 
which outlined some of the merits of liberalizing financial services in terms of economic development 
and financial stability.  In his view, what was particularly interesting was the call for further 
liberalization in mode 3, a call Antigua and Barbud a also made to developed countries in areas of 
interest.  He highlighted the importance of non-di scrimination for small and vulnerable States, given 
their efforts to diversify and develop.  This de legation might make additional comments at future 
meeting of the Committee. 
21. The representative of Morocco  said that the document went in depth on many issues and 
could enrich the debate in the Committee. His dele gation agreed that financial services liberalization 
contributed to growth, stability and development. He took this opportunity to remind Members that 
Morocco began a financial sector reform process in the 1990s in order to set up a modern and liberal 
system.  These reforms contributed to improving th e financial sector.  Rega rding liberalization under 
mode 3, he said that his country's offer would incl ude the elimination of restrictions on the supply of 
services under this mode.  Although trade of financ ial services under modes 1 and 2 presented certain S/FIN/M/48 
Page 4  
 
 risks in some sectors, the Moro ccan offer on financial services would also contain important 
commitments on both modes.  Morocco provided national treatment in all sectors where commitments had been made.  
22. The representative of Japan
 supported the joint statement. The message was simple and clear: 
liberalization of financial services was beneficial fo r all countries.  Openness to foreign participation 
in the sector strengthened the efficiency of financ ial markets, improved its stability, and stimulated 
innovation and competition.  Financial markets played a crucial role as an infrastructure for all other 
businesses, it was thus imperative that financial markets served the economy efficiently and effectively.  A vibrant financial sector was partic ularly important for emerging economies in order to 
build a solid basis for economic development. High- level commitments for financial services helped 
attract financial service providers, thus making countri es more attractive destina tions for investment.  
There was no doubt that liberalization must be  supported by a strong regulatory framework to 
safeguard prudential considerations.  A right balan ce between regulation and liberalization was key to 
the sound long-term development of the financial se rvices sector.  Liberalization must be supported 
by transparent regulatory procedures.   
23. The representative of Switzerland
 also supported the statement;  further liberalization in the 
area of financial services would help prom ote economic growth for all Members.  
24. The representative of Canada  welcomed the statement as well.  In his view, it constituted an 
important contribution to the Committee's discuss ion of the relevance of liberalization for the 
deepening of financial service sectors, particularly  in emerging economies. Canada thus supported the 
paper and encouraged all Members to reflect on its relevance for initial and re vised offers in this 
phase of the negotiations. 
25. The representative of Norway  concurred and encouraged all Members to examine the 
statement, to consider its recommendations in preparing their revised offers, and to sign as co-
sponsors. 
26. The representative of Hong Kong, China  recognised that financial services were a very 
important sector in their own right and in terms of  their role in stimulating economic growth and 
maintaining financial stability.  They were an ar ea where a large number of Members had substantial 
interest and therefore were well suited for trade-o ffs in these negotiations.  Active engagement would 
be essential.  His delegation would be looking forw ard to more substantive improvements in both the 
outstanding initial offers and the revised  offers to be submitted very soon.  
27. The representative of the European Communities  welcomed the statement and expressed his 
delegation's readiness to co-sponsor it.  He inv ited other Members to consider doing the same. 
28. The representative of South Africa  expressed concerns with the assumption that foreign 
participation necessarily promoted innovation and technology transfer.  She noted the crucial 
importance of regulation and institutional capacity in that regard.  Another issue to be highlighted was 
the relevance of technology itself, which sometimes was not accessible to many people in developing 
countries. 
29. The representative of Chile  said that financial services negotiations were indeed a very 
important component of the current services round.  The statement contained many elements to which 
Chile could subscribe.  He fully agreed that a vi brant financial services sector was important for both 
developing and developed economies.  A deep, well regulated and competitive financial sector 
supported an efficient allocation of resources, be ing therefore an essential component of economic 
growth.  Foreign financial services providers could make a contribution to the development of the 
sector under clear and appropriate rules, including prudential regulation and corporate governance.   S/FIN/M/48 
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 Chile had opened its financial sector to the estab lishment of foreign provid ers on a national treatment 
basis to the extent such national treatment did not reduce the capacity of financial regulation.  During 
most of the period, Chile had maintained restri ctions on capital transactions, such as the reserve 
requirement.  His country's experience suggested, first,  that liberalization - in the sense of eliminating 
restrictions to the local establishment of foreign pr oviders - did not imply a weakening of the capacity 
to regulate the financial industry.  On the cont rary, regulation should be strengthened.  Second, 
liberalization in that sense did not necessarily involve the full liberalization of the capital account.  These were related, but separate issues.  The discussion of whether the capital account should or 
should not be liberalized was important, but it sh ould not be mixed with the benefits of foreign 
participation in the domestic financial market.  In  Chile's experience, fore ign participation did not 
increase the risk of financial crises.  Such risks were directly related to  the quality of financial 
regulation and macro-economic polic ies followed by the authorities of a country. Thus, financial 
regulation should be strengthened a nd modernised as the industry was opened to foreign competition.  
Foreign participation did not im pede the conduct of monetary po licy either. He said he would 
continue examining the statement and come back w ith further comments at a future meeting of the 
Committee. 
30. The representative of the United States
 supported the statement.  It drew upon a number of 
presentations made by the International Monetary Fund and, most importantly, by the World Bank 
and set only moderate targets for negotiators in the Doha Round.  She encouraged all Members to 
associate themselves with, or ind eed co-sponsor, the statement. 
31. The representative of Singapore  said that financial services were not only an important sector 
in their own right, but provided a critical infrastruct ure for all economic activities.  He also stressed 
that financial liberalization had to be coupled with strengthened regulati on and supervision.   
32. Turning to another issue, the repr esentative of the Republic of Korea  reminded Members of 
the invitation sent out by a number of delegations, incl uding his, to attend a seminar on the benefits of 
financial services liberalization.  It would be held  during the afternoon.  The seminar could be a good 
opportunity to better understand the critical impo rtance of financial services liberalization for 
economic growth.  He encouraged all Members to attend. 
33. The Chairperson  made a brief statement on the election of her successor for this year.  She 
recalled that according to the rules of procedure, the Committee should elect its chairperson at the end 
of the first formal meeting of the year.   However,  the selection of chairs for the subsidiary bodies was 
linked with the selection of the chair for the Council for Trade in Services, which would take place at 
the next General Council meeting, on 15 and 16 February.  Therefore, the formal election of the new 
Chair for this Committee would take place at the next meeting.  
34. The Committee took note  of the statements. 
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