Policy statement

Joint Statement on the WTO Financial Services Negotiations by the International Chamber of Commerce & Financial Leaders Group

Commission on Trade and Investment, Hong Kong, 22 September 1997

The International Chamber of Commerce and the Financial Leaders Group together represent a broad segment of the financial services industry throughout the world. On the occasion of the annual meetings of the International Monetary Fund and the World Bank, our two private sector organizations together call on governments to bring the negotiations in the World Trade Organization on liberalization of financial services to a successful conclusion by the 12 December 1997 deadline.

Liberalization under a truly multilateral and non-discriminatory agreement will remove many obstacles to the provision of cross-border financial services or the establishment of local subsidiaries. In particular, it should do away with regulations or procedures that inhibit foreign investment. This alone will provide, not just a shot in the arm, but lasting stimulus to the world economy.

The ICC and the FLG are convinced that the opening up of financial services will provide powerful impetus to growth in all economic sectors among signatories of the WTO agreement. Liberalization will be indispensable for the financial world of the future, considering the heavy demand for capital in an increasingly global economy. Nowhere is liberalization of financial services more urgent than in east Asia, with its huge infrastructure development needs.

Financial services - banking, securities, insurance, asset management - are the essential lubricant for world trade and investment. The financial services sector handles US$ 1.2 trillion per day in foreign exchange transactions. International financing extended by banks reporting to the Bank for International Settlements is estimated at US$ 6.4 trillion, including US$ 4.6 trillion net international lending.

Experience shows that greater competition - always the direct consequence of liberalization -increases the efficiency of a country’s financial system and encourages its development. The benefit is not confined to big international banks, securities houses or insurance companies, but is felt by every citizen throughout the domestic economy. Liberalization will stimulate wealth creation by providing easier and more varied access to capital on competitive terms. Internationally, the positive effects of a freer market in financial services are improved distribution of financial resources, increased trade and investment and healthier societies with higher living standards.

We reject suggestions that domestic providers of financial services are justified in regarding foreign competition as a threat. Local firms’ knowledge of their own markets gives them a distinct advantage. The presence of foreign participants in the market will stimulate the domestic industry, providing local enterprises with access to additional resources, including foreign investment and expertise.

Emerging economies stand to benefit significantly from the opening up of their financial services markets. Internationally, the creation of more integrated capital markets worldwide will facilitate economic development where it is most needed. At the national level, more innovative domestic capital markets will help to direct funds to productive investment.

The ICC and the FLG want to make it abundantly clear that the private sector - the providers and users of financial services - regards a successful conclusion of the Geneva negotiations as essential to future economic well-being for all nations, whether developed, newly industrialized, or emerging economies.

Unless governments reach agreement, the existing interim accord on financial services will lapse and we shall be back to square one. Governments will face the bleak prospect of beginning all over again in the year 2000. This would be in marked contrast to the step by step progress of multilateral trade negotiations, which culminated in the Uruguay Round agreements.

We therefore urge those countries that have not yet done so to table improved offers that will make a deal possible. Failure in December would be a blow to business confidence and a severe handicap to further economic growth fuelled by financial services.

Success in Geneva will crown the dramatic achievements of dismantling barriers to trade and investment over 50 years, first under the General Agreement on Tariffs and Trade, and now under the WTO. During this period, growth in international trade has far exceeded domestic economic growth and has thus been the driving force for increased prosperity. But the process will not be complete, nor will it achieve its full potential, if it is not accompanied by corresponding liberalization of financial services.

 

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