Financial Liberalization

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Staff Working Paper ERSD-2006-03

March 2006

World Trade Organization Economic Research and Statistics Division

LIBERALIZING FINANCIAL SERVICES TRADE IN AFRICA: GOING REGIONAL AND MULTILATERAL

Marion Jansen : Yannick Vennes Manuscript date:

WTO

March 2006

Disclaimer: This is a working paper, and hence it represents research in progress. This paper represents the opinions of the authors, and is the product of professional research. It is not meant to represent the position or opinions of the WTO or its Members, nor the official position of any staff members. Any errors are the fault of the authors. Copies of working papers can be requested from the divisional secretariat by writing to: Economic Research and Statistics Division, World Trade Organization, rue de Lausanne 154, CH 1211 Geneva 21, Switzerland. Please request papers by number and title.

LIBERALIZING FINANCIAL SERVICES TRADE IN AFRICA: GOING REGIONAL AND MULTILATERAL Marion Jansen1 and Yannick Vennes Economic Research and Statistics Division World Trade Organization Draft March 2006

Abstract
This paper analyses the possible gains from regional and multilateral liberalization of financial services trade for African countries taking into account the implications of such liberalization for financial regulation and capital account liberalization. It also describes existing efforts to integrate financial markets within four African regions (WAEMU, CEMAC, SADC and COMESA) and discusses the existing GATS commitments of the relevant countries with respect to financial services. Although the regions differ significantly, there is scope for further regional integration in all of them. Significant scope also exists for further multilateral liberalization of financial services, in particular with respect to Mode3.

Key words: regional integration, WTO, financial services trade, Africa JEL classification: F13, F15, G21, G38.

The authors started to write this paper when the second author was visiting the Economic Research and Analysis Division of WTO as an intern in summer 2005. They thank Johan Delport, Cheikh Ahmed Diop, Zdenek Drabek and Juan Marchetti for comments on an earlier version of this paper. The opinions expressed herein are those of the authors and not meant to represent the position or opinions of the WTO or its Members, nor the official position of any staff members. Any errors are the fault of the authors.

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1.

INTRODUCTION

Africa is home to some 30 regional trade arrangements (RTAs), many of which are part of deeper regional integration schemes. On average, each African country belongs to four RTAs.2 There has been a renewed push in recent years toward broader and deeper preferential trade arrangements in Africa. RTAs involving African countries are not limited to the continent. The Southern African Customs Union (SACU) is negotiating a free trade agreement (FTA) with the United States. South Africa, the largest African economy, has already signed an FTA with the European Union (EU) and the African, Caribbean and Pacific (ACP) group of states is negotiating Economic Partnership Agreements (EPAs) with the EU. An interesting detail about EPAs is that they explicitly intend to foster regional integration within Africa. Thirty four African countries are besides member of the WTO and are currently negotiating trade liberalization at the multilateral level in the context of the Doha Round. This raises questions concerning the desirability of regional as opposed to global trade liberalization for African countries. Most of the research comparing the economic effects of RTAs with those of multilateral liberalization has been carried out in the context of merchandise trade. Overall this literature does not come to a unanimous conclusion as to the relative welfare effects of the two approaches.3 Proponents of RTAs argue that the trade creation effects of RTAs tend to exceed their trade diversion effects with resulting...
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