Financial Services and the WTO: Liberalisation Commitments of the Developing and Transition Economies

Abstract

This paper analyses the results of the financial services negotiations under the General Agreement on Trade in Services (GATS) at the World Trade Organization (WTO). It shows that the negotiations have contributed to more stable and transparent policy regimes in many developing and transition countries, and that the commitments do not in any way compromise the ability of countries to pursue sound macroeconomic and regulatory policies. However, even though the number of countries that participated in the eventual agreement was impressive, the liberalizing content of commitments was in many cases quite limited. Numerical estimates suggest that, in general, the African and Eastern European participants made much more liberal commitments than the Asian and Latin American participants. On the whole, the outcome probably reflects the balancing by each participant of the benefits of unilateral bindings against the gain from retaining bargaining chips for future multi-sectoral negotiations. Certain aspects of the outcome raise concerns. First, there has been less emphasis on the introduction of competition through allowing new entry than on allowing (or maintaining) foreign equity participation and protecting the position of incumbents. Secondly, even where immediate introduction of competition was not deemed feasible, little advantage has been taken of the GATS to lend credibility to liberalization programmes by precommitting to future market access.