RESTRICTED
WORLD TRADE S/FIN/M/5
7July1995
ORGANIZATION
(95-1884)
Committee onTrade inFinancial Services
REPORT OFTHE MEETING HELD ON29JUNE 1995
Note bytheSecretariat
1. Thefifthmeeting oftheCommittee onTrade inFinancial Services waschaired byMr.Frank
Swedlove ofCanada. Thediscussion followed theagenda contained inAirgram WTO/AIR/117.
2. Onthereview andconsideration ofdraftfinalschedules andMFN exemptions, theChairman
firstreported thatthirty countries hadsubmitted draft revised schedules. These countries were;
Australia, Brazil, Canada, Chile, Colombia, theCzech Republic, theDominican Republic, theEuropean
Community, Hong Kong, Hungary, Indonesia, Japan, Korea, Kuwait, Malaysia, Mexico, Morocco,
NewZealand, Norway, Pakistan, Philippines, Poland, Singapore, theSlovak Republic, South Africa,
Switzerland, Thailand, Turkey, theUnited States, andVenezuela.
3. TheChairman theninvited countries toannounce anymodifications totheprevious drafts of
schedules asaresult ofbilateral negotiations inthepastweek. Argentina expressed itsintention to
maintain itspresent schedule ofcommitments onaconditional basis.
4. TheUnited States stated thatthroughout thenineyears offinancial services negotiations, the
U.S.goalhadbeentotakeastepforward tosecure substantially fullmarket access andnational treatment
forforeign financial services providers. TheU.S.hadnotasked allcountries tomove immediately
tocomplete openness, buthadasked allmajor current andfuture financial services markets tocommit
themselves tosignificant opening onapredictable schedule. Many countries including developing
countries haddoneso,buttheoffers ofsome commercially important andgrowing markets remained
inadequate interms ofmarket access andnational treatment. Free-ridership undermined theWTO,
andanMFN-based agreement required solidcommitments byallparties. Although commitments to
provide national treatment toalready established firms were onthewhole satisfactory, there were
deficiencies insome offers especially withrespect tonewfirms. Fortoomany important markets,
offers didnotprovide newmarket access forbanking, securities, insurance, fundmanagement, and
other financial services activities. Some offers didnotfullyprotect thecurrent market access offoreign
firms, andseveral offers specifically reserved therighttoforce divestiture ofthecurrent holdings of
U.S.andother foreign firms. Under these circumstances, theU.S.haddecided ontwoactions; one
wastomaintain anoffer thatprotected theexisting activities offoreign financial services providers
intheU.S.; theother wasnottobindopentheU.S.market norguarantee national treatment fornew
entrants andnewactivities. Therefore, on1July, theU.S.would nothaveanMFN obligation that
covered newactivities inbanking, securities, insurance, fundmanagement, andotherfinancial services.
However, thisdelegation added thattheU.S.hadalonghistory ofoffering fullmarket access toits
financial markets, andthiswould remain itsnormal practice. TheU.S.hadnointention ofimposing
newrestrictions onfinancial services companies already intheU.S. Thisdelegation didnotseethis
astheendoftalks, butwasprepared tocontinue negotiating intheWTO, noworlater. Thedelegation
remained ready tomake significant contributions toamultilateral agreement.
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TheEuropean Community mentioned thatithadbeen ready toconfirm anMFN-based
commitment onanirrevocable basis, andthatmostoralldelegations believed thatprogress hadbeen
made. Though thisprogress wastough andslow, adealwaswithin reach. Thisdelegation wastherefore
leftconfused andperplexed bytheU.S.statement. Delegations mustnowusetheremaining twenty-four
hours toconvince theU.S.delegation oftheimperative needtoreach asatisfactory conclusion and
tosalvage thepossibility ofimproving thepresent situation.
6. Thisviewwasshared byJapan, which wasalsogreatly disappointed bytheU.S. response.
Thisdelegation strongly hoped thattheU.S.would reconsider andgetbacktoafirmandpermanent
MFN-based commitment. Thedelegation didnotunderstand whytheU.S.wished totrigger apossible
vicious chain reaction ofMFN exemptions. Possible ramifications fortheother ongoing negotiations
inbasic telecommunications andmaritime transport were feared. Australia alsofound itextremely
disappointing andunnecessary fortheU.S.toseektofollow thepathjustexplained. Inbuilding the
process ofliberalization, itwasnecessary toreflect realism. Thisdelegation would seektherethinking
oftheU.S.position, which wasabombshell thatcould seriously affect other agendas. Hong Kong
echoed theremarks ofJapan andAustralia, andstated thatitsdelegation wasprepared touseallpossible
means intheremaining short timetoreverse thissituation andexpressed thehopethatcommon sense
would prevail intheend. Switzerland noted thatmany significant improvements hadbeenmade, and
thatoneshould tryhardtoseeksolutions thatwould enable alltopreserve asfaraspossible theimproved
commitments onthetable. Ifthenegotiations didnotsucceed, itwould haveimplications fortheother
ongoingnegotiationsintheWTO.NewZealand,Canada,andNorwayexpressedsimilardisappointment
asprevious speakers, andcalled foralldelegations tousethenexttwenty-four hours toattempt toreach
some kindofsolution.
7. Onprocedural issues, theChairman confirmed thatifcountries didnotsubmit finalrevised
schedules and/or finalMFN exemption listsbefore midnight ofthefollowing day,thecommitments
made inDecember 1993continued toapply. Although itwaspointed outthatpreparation wasnecessary
onprocedures regardless oftheoutcome ofanyfinalnegotiations, theChairman feltthatinthepresent
situation itwasnecessary toconcentrate ontheaspect ofsubstance. Itwasagreed thattheCommittee
would meetagain intheafternoon ofthefollowing day.