3:02 PM Mar 29, 1995

US PUSHING THIRD WORLD ON FINANCIAL SERVICES

Geneva 28 Mar (Chakravarthi Raghavan) -- The United States is pushing all "commercially important" economies to "substantially improve" their offers for liberalising financial services markets within an agreed time-frame, so as to provide effective full-market access and national treatment (as between domestic and foreign suppliers).

Financial services cover banking, insurance and securities markets.

The US is targeting some 40 countries -- the OECD countries as well as the "emerging markets" of Asia, Latin America and Eastern Europe -- and wants them all to make improved offers, and agree to achieve full liberalisation within a definite time-period, as the price for the US not entering an MFN-exemption in its own schedules.

The US assistant treasury secretary, Jeffrey Schafer, who is in Geneva with a Treasury team to undertake bilateral negotiations, and to attend the multilateral meeting of the Council on Trade in Services, told newsmen Tuesday at the WTO that the US is a "bit disappointed" by progress in the bilateral and multilateral talks, but that it hopes a satisfactory agreement could still be reached before end of June.

He would not mention the countries whose offers are found to be disappointing and which have to be improved to enable the US side to extend its own domestic markets and benefits of future liberalisation on an MFN-basis to all WTO members.

However, the US is known to be pressing South and South-East Asian countries, Far Eastern economies like South Korea (bilateral talks are also on with China as part of the US-China talks for WTO entry), and some of the economies in Latin America like Argentina, Brazil and Venezuela.

Even where these countries want to undertake liberalisation over a period of time, the US wants them to commit themselves to a time-schedule which Schafer suggested should be no more than five years.

As a result of the Marrakesh ministerial decision, the negotiations on financial services and on "movement of natural persons" as a cross-cutting mode of delivery for all services, have been continued beyond the conclusion of the Uruguay Round.

The negotiations are to end by 30 June, with an option for all participants to revise the schedules they have filed, in the light of the negotiations.

The decision to extend the negotiations was taken in the light of the sudden reversal of position by the US in Nov-Dec 1993 -- when it threatened to enter an MFN exemption provision in its schedule, to deny Japan and several of the developing countries the benefits of future liberalisation measures in the US and assure them only with current access.

Several of the others thereupon threatened to withdraw their own "offers" and as a result, a decision was taken to allow for continued negotiations and countries filing their final schedules in this area at the end of the period.

However, several of the Third World countries are also under pressure from the World Bank to liberalise their financial services sectors unilaterally and to bind them in the WTO to provide "security" and "assurance" to foreign investors.

Besides the negotiations on financial services and movement of natural persons, negotiations are also under way on basic telecommunications and maritime services, both to be completed in 1996.

Schafer said the US expects some of the OECD countries and emerging markets to put improved offers on the table and agree to full liberalisation over a time-period, this should be definite and not a vague future date, and would depend on the situation of individual countries.

Schafer though would not be pinned down about the target -- which he suggested could vary from end of the year to 4-5 years -- not for the time-phase to be linked up with any other liberalisation action by the US, such as full phase-out of its restrictions on imports of textiles and clothing.

Under the Uruguay Round Agreement on Textiles and Clothing, there is a 10-year transition to achieve full integration or application of normal GATT trading rules to this sector.

The US has announced a time-schedule that would imply 51% of restrictions remaining in force till the end of the 10th year beginning 1 January, and restrictions to be removed overnight.

This assurance lacks so much of credibility that Third World countries generally fear the likelihood of the US and European industry coming back towards the end of the 10-year transition for a further extension.

Schafer was asked whether the US would agree to stipulations in the "offers" of Third World countries to a phase-out period linked to its own actions on the MFA.

"There can be no link to the MFA phase-out or a deadline linked to that," Schafer said, adding "the phase-out of existing restrictions in financial services should be less than five years".

According to trade officials, only the US, EU, Japan and Canada have put in new offers, and the US is pressing other "commercially important" countries to do the same.

Since the resumption of bilateral and plurilateral talks after Marrakesh, the December Mexican "peso crisis" as well as the Barings collapse in Singapore -- showing both the vulnerability of Third World economies to financial market liberalisation and short-term movement of funds into their banking or insurance sectors or in securities trading as well as the inadequacy of Banking supervision in the home countries -- new concerns have come up in the Third World countries.

Schafer tried to brush aside such concerns, arguing that it would be wrong to interpret the problems of Mexico as related to its liberalisation of the financial services sectors under NAFTA. The commitment of Mexico, he said, was only in its initial stages of implementation and the problems that developed there last December could not be related to this. The US accepted, and expected, its trading partners to undertake prudential safeguard measures, but these should not become "protectionist barriers," Schafer added.