International Investment, Trade Liberalization and Competition: Some Issues for the Insurance Sector to Consider

Abstract

The insurance sector has long been in the van of international investors conducting operations through subsidiaries abroad. The reinsurance market has been a pioneer of globalization. Their representatives were strong supporters of the setting up of the General Agreement on Trade in Services (GATS), an essential pillar of the World Trade Organisation (WTO). Both entered into force on 1 January 1995 as a result of the Uruguay Round of negotiations launched at Punte del Este in 1986 under the aegis of General Agreement on Tariffs and Trade (GATT). US insurance interests had been among the ®rst to champion negotiations by lobbying in the early 1980s, that led to the inclusion of services in that Round, albeit on a ` separate track''. Again the insurance sector was at the heart of the Financial Services Leaders Group hosting international co-operation that played such a positive role in the ®nal successful outcome in early 1997 of the ®nancial services negotiations, that had been extended following stalemate at the end of the Uruguay Round in December 1993. Now their leaders are geared up for the services negotiations, mandated under the GATS to start in January 2000, as part of a new Round, the shape of which will be agreed at the WTO Ministerial Meeting in Seattle (two months after this writing). What are the principal features of the scene that will confront the negotiators during the Round as they press for greater liberalization of both international investment and trade and for a level competitive playing ®eld for services such as insurance? What are the risks and uncertainties that will have to be managed in this complex and inter-linked scene? Although the focus of the insurance industry will no doubt be on the implementation of the Uruguay Round commitments and further opening of access to insurance markets around the world, they should be aware of issues that are likely to impact on this straightforward aim. This paper selects a few of these for a closer look: the investment dimension; further development of the GATS framework; and the trade linkage with competition policy. First some important background features are described.