Financial Services Firms Lobby Developing Countries at WTO
A group representing some of the largest financial sector corporations have been taking part in meetings at the World Trade Organisation ahead of services negotiations next week in an attempt to convince developing country members to open up their financial services sector under the General Agreement on Trade in Services (GATS).
WTO members will be negotiating in the Special Session of the Council of Trade in Services in the week starting 21 February.
At that session, developed countries are expected to also present a paper calling for the removal of all restrictions limiting the participation of foreign firms in the finance sector.
Below is a report on this.
Martin Khor
TWN
Financial services firms lobby developing countries at WTO
By Goh Chien Yen
TWN
Geneva
14 February 2005
A group representing some of the largest financial sector corporations have been taking part in meetings at the World Trade Organisation ahead of services negotiations next week in an attempt to convince developing country members to open up their financial services sector under the General Agreement on Trade in Services (GATS).
The Financial Leaders Group (FLG) which represents large companies in financial services such as Citigroup, Morgan Stanley and Goldman Sachs, took the leading part in a seminar at the World Trade Organisation last Thursday (10 February), in which developing countries were urged to open up their financial sector and to offer national treatment to foreign finance firms.
WTO members will be negotiating in the Special Session of the Council of Trade in Services in the week starting 21 February.
The seminar was sponsored by a group of developed country members which call themselves 'Friends of financial services', and which include the US, Japan, the EU and Switzerland. It was opened by former WTO Director-General, Renato Ruggiero, who is currently the Vice-Chairman of Citigroup European Investment Bank.
In their statement, which was distributed to delegates, the FLG urged 'WTO members to submit their financial services offers expeditiously,-those that have not yet tabled offers to do so, and those that tabled offers should present revised and improved offers by May 2005-.These should not only provide guarantees for existing market access and existing investments, but they should create new market opportunities.'
This is necessary 'if the Doha Development Agenda is to achieve its goals and the financial services negotiations are critical to the success of the Doha Round,' the FLG tried to impress upon the delegates.
According to the FLG, financial services include 'banking, insurance, insurance intermediation, asset management, pension and retirement services, payment systems including credit card, brokerage and securities.'
Mr Nic De Maesschalck, of The World Federation of Insurance Intermediaries (WFII), speaking at the seminar, gave examples of the kind of market opening the FLG has in mind, when he encouraged WTO member countries to open up their insurance sub-sector. The WFII is a member of the FLG.
He recommended that foreign insurance intermediaries once established locally shall have the same opportunities as state owned or state affiliated enterprises to compete for domestic insurance business. Furthermore, foreign insurance brokers and agents will be treated no less favourably than domestic services suppliers with respect to capital, solvency, reserve, tax and other financial requirements, subject to the provisions of the Annex on Financial Services
He also encouraged WTO members to eliminate foreign equity shares requirements, and advocated that joint venture partners should solely determine the percentage of shares held by each partner.
According to trade sources, some of the major developed countries are planning to submit a paper on financial services during the special session of the Council on Services on 21 February.
The paper is expected to be in the form of a joint statement by the countries, and it is expected to bear resemblance to the demands made by the FLG.
According to sources, the statement is expected to call on WTO members to remove distinctions between domestic and foreign suppliers of financial services regarding the application of laws and regulations. It is expected to also call on WTO members to grant foreign financial services providers under mode 3, 'the right to establish new and acquire existing companies and in the form of wholly owned subsidiaries, joint ventures of branches.'
They are, in other words, demanding the removal of all restrictions on limitations on the foreign ownership of financial services companies.