AEI STUDIES ON SERVICES TRADE NEGOTIATIONS Claude Barfield, series editor THE DOHA ROUND AND FINANCIAL SERVICES NEGOTIATIONS Sydney J. Key INSURANCE IN THE GENERAL AGREEMENT ON TRADE IN SERVICES Harold D. Skipper Jr. LIBERALIZING GLOBAL TRADE IN ENERGY SERVICES Peter C. Evans REDUCING THE BARRIERS TO INTERNATIONAL TRADE IN ACCOUNTING SERVICES Lawrence J. White
The Doha Round and Financial Services Negotiations
Sydney J. Key
The AEI Press
Publisher for the American Enterprise Institute WA S H I N G T O N , D . C . 2003
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Library of Congress Cataloging-in-Publication Data Key, Sydney J. The Doha round and financial services negotiations / Sydney J. Key. p. cm. Includes bibliographical references and index. ISBN 0-8447-4182-5 (pbk.) 1. Financial services industry—Law and legislation 2. Foreign trade regulation. I. Title K1066.K49 2003 343'.087—dc 22 2003063553 3 5 7 9 10 8 6 4 2
Printed in 2003 by the American Enterprise Institute for Public Policy Research, Washington, D.C. The views expressed in publications of the American Enterprise Institute are those of the authors and do not necessarily reflect the views of the staff, advisory panels, officers, or trustees of AEI. The views expressed by the author in this publication should not be interpreted as representing the views of the Board of Governors of the Federal Reserve System or anyone else on its staff.
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FOREWORD, Claude Barfield ACKNOWLEDGMENTS 1 2 INTRODUCTION INTERNATIONAL TRADE IN FINANCIAL SERVICES E-Finance 6 Modes of Supply 7 Services Provided across Borders 8 Foreign Direct Investment 9 Presence of Natural Persons 9 LIBERALIZATION AND REGULATION Three Pillars of Liberalization 12 National Treatment and Market Access 13 Nondiscriminatory Structural Barriers 15 Freedom of Capital Movements 18 Strengthening Domestic Financial Systems 20 Minimum Standards and Codes of Good Practices 22 “Surveillance” 23 The Prudential Carve-Out in the GATS 24 NATIONAL TREATMENT AND MARKET ACCESS “Binding” Existing and Ongoing Liberalization 28 IMF Conditionality 30 Permanence of GATS Commitments 31 Foreign Direct Investment 32 Remaining Barriers to Entry and Operation 33 MFN Exemptions 34 Barriers within the Scope of the Prudential Carve-Out 35 Cross-Border Services 37 Binding Gaps versus Remaining Barriers 38 Uncertainty about WTO Jurisprudence 39 v
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More Liberal Approaches for Wholesale Services 39 Evolving Regulatory Responses to Retail Cross-Border Services 40 Negotiating Goals 41 5 NONDISCRIMINATORY STRUCTURAL BARRIERS Regulatory Transparency 44 Rules about Developing and Applying Rules 44 Sound Financial Systems 46 “Effective Market Access” 47 General Anticompetitive Measures 49 “Necessity” and Domestic Regulation 50 Recognition of Prudential Measures 51 Harmonization 52 Facilitating Access 52 The Intra-EU Approach 53 Remaining Second-Pillar Barriers 54 Applicability of the Intra-EU Approach 55 CONCLUSION 43
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NOTES REFERENCES INDEX ABOUT THE AUTHOR
In advanced industrial economies, the services sector accounts for a substantial portion of each nation’s gross domestic product. Despite the increasing importance of trade in services, the General Agreement on Trade in Services (GATS), which was negotiated during the 1986–94 Uruguay Round and entered into force in January 1995, marked the first time that rules for opening markets in services were included in the multilateral trading system. The GATS called for periodic negotiating rounds, beginning no later than 2000, to...