7:02 AM Oct 13, 1994
US CHANGES AGAIN ON FINANCIAL SERVICES
Geneva 12 Sep (Chakravarthi Raghavan) -- The United States appears to have again changed its mind on the issue of financial services and has indicated it will no longer pursue its 'two track' approach and press for quick liberalisation by developing countries and others. However, the US is still pressing the important economies, developed and developing, to improve their financial services commitments and agree to a full liberalisation approach over a period of time. The US position, made known in Washington some days ago, would appear to have been conveyed by the US services negotiator, Richard Self, at Wednesday's meeting of the interim group on financial services which functions under the WTO Preparatory Committee's Sub-Group on Services that is overseeing the continuing post-Marrakesh negotiations in the services area. Negotiators from other countries were not clear whether the US was giving up finally a position on which it was isolated or whether it would attempt its objectives in a different way. But in any event it seems to be related to the Congress not adopting a proposal mandating retaliation against countries that did not provide reciprocal market access for US financial services (which would have been a violation of GATT rules), as well as the Clinton administration giving up its request to Congress, under the Uruguay Round implementing legislation, for continued fast-track authority. In the last weeks of the Uruguay Round negotiations in October-November 1993, the US had suddenly reversed its position and had adopted what was known as a two-track approach. The US had then said that it would provide market access for fully liberalised financial services in the US market on a reciprocal basis, and enter in its schedule an MFN-exemption on this for all other GATS members. For the latter it would only commit itself in the GATS annex to guarantee current access -- for existing branches and subsidiaries in the US for banking and other financial services, and in the limited areas of business they are now authorized. This created a furore and most leading developing country economies threatened to withdraw their own offers on the table, and adopt the US stand of providing on MFN basis only current access. Ultimately a compromise was evolved under which negotiations on financial services were to continue beyond the signature of the Final Act at Marrakesh. Under this compromise, in the form of a ministerial decision, six months after entry into force of the WTO, members would be free to improve, modify or withdraw all or part of their commitments in the financial services sector without offering compensation. At the same time they would also be free to finalise their positions relating to MFN exemption in this sector. For its part, on 13 December the US entered a revised schedule of services commitments, in which it provided for market access in banking, securities, insurance and other services without any stipulation about MFN exemptions. The major target of the US was Japan, but others like the Asean, India, Brazil and a few other major developing economies were also in its sights -- though in their case the US was not insisting so much on instantaneous financial services liberalisation, but rather for commitments to do so within a period of 5-10 years. Since then the US-Japan framework talks (under threat of the revived Super 301) have ended with both sides claiming success. It has not resulted in full liberalisation of the Japanese market in financial services, but there are indications that over a period of time, the US financial service enterprises might be able to get better access to the Japanese market. The US is still sending its service negotiators in this area to key Third World capitals to press for and obtain greater concessions. Along with continued negotiations on financial services, negotiations are also continuing on maritime services, basic telecommunication services, and on movement of natural persons as a mode of supply for services. Some of the Third World countries targeted by the US for financial services have been telling their domestic audiences and the US too that any improvements by them would depend on what the US could offer reciprocally -- in terms of movement of natural persons and or in other areas of market access like goods. But it is not very clear what the US room for manoeuvre in these are -- particularly given the promises already given by President Clinton to Congress as well as other limitations. For example, without 'fast-track authority', it is not clear what the administration would be able to offer in return and ensure that what its offers would get through the US Congress without changes. And if it cannot, would the US have other 'leverage' and use it to try to force some of these Third World countries to give the US more.