2184. Financial Services and the World Trade Organization: Liberalization Commitments of the Developing and Transition Economies

Aaditya Mattoo
(September 1999)
Financial services negotiations through the World Trade Organization have helped many developing and transition economies develop more stable and transparent policy regimes, and their commitments in no way compromise their ability to pursue sound macroeconomic and regulatory policies. But the Asian and Latin American participants, especially, held back on commitments to financial liberalization. And there was less emphasis on introducing competition by allowing new entry than on allowing (or maintaining) foreign equity participation and protecting the position of incumbents.

Mattoo analyzes the results of the financial services negotiations under the World Trade Organization's General Agreement on Trade in Services (GATS).

He shows that the negotiations have contributed to more stable and transparent policy regimes in many developing and transition economies and that the commitments in no way compromise the countries' ability to pursue sound macroeconomic and regulatory policies.

But 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 how each participant balances the benefit of unilateral commitments against the benefit of retaining bargaining chips for future multisectoral negotiations.

Two aspects of the outcome cause concern:

This paper - a product of Trade, Development Research Group - is part of a larger effort in the group to advance research on trade in services. Copies of the paper are available free from the World Bank, 1818 H Street NW, Washington, DC 20433. Please contact Lili Tabada, room MC3-333, telephone 202-473-6896, fax 202-522-1159, Internet address ltabada@worldbank.org. The author may be contacted at amattoo@worldbank.org. (53 pages)

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