The 1997 World Trade Organization Accord on Financial Services: Its Impact on and Implications for the World Insurance Industry

Abstract

In his recent book Against the Gods: The Remarkable Story of Risk, Peter Bernstein identi®es two notions about risk which would seem to have particular application to the WTO negotiations on ®nancial services, recently concluded in December 1997. First of all, he continually makes the distinction between ` games of chance'' and ` games of skill and strategy''. The former are those where events are independent of one another and probabilities can be calculated and assessed impersonally, as with one's chance of winning the lottery or the risk that one will die in an airplane accident. ` Games of skill or strategy'', on the other hand, are those where outcomes are determined more by the conduct of actors and external circumstances operating within complex and interdependent sets of rules and constraints. Secondly, he notes that games may conclude but not necessarily be completed, and identi®es the particular dif®culties of assessing outcomes in ` uncompleted games'' where a further sequence of rounds may be required before a de®nitive assessment of winners and losers can be made. While the 1997 WTO negotiations on ®nancial services have now concluded successfully, it can be argued that the ` game'' of ®nancial services trade liberalization has not yet been completed, making a full and de®nitive assessment of results most dif®cult. The ` games countries play'' in international negotiations such as those on ®nancial services are clearly not ` games of chance''. To the extent that they should be treated as ` games''atall,multilateral intergovernmentalnegotiations ± wheremanycountriesattempt to achieve multilateral agreement on sets of commitments which must conform to a basic framework and must in the end be mutually acceptable to one another ± are clearly skill-based, strategic endeavours in which the countries and the industries affected pursue mixes of con icting and complementary goals. In the conduct of the negotiations themselves and their outcome, all the participating countries, from the largest and most powerful exponents of trade liberalization to the mid-sized or smaller LDCs, are seeking to preserve and/or enhance their own domestic and common international interests on the core issues affecting trade in ®nancial services. What complicates the situation even more is that, at one remove from the intergovernmental negotiations themselves and operating typically within each of the individual countries, although also increasingly on a transnational basis, there are the bankers,