Financial Services Liberalization in the WTO

The stakes were high in the financial services negotiations that were completed in December 1997 at the World Trade Organization (WTO). The developing countries were eager to strengthen and modernize their financial systems. The industrial countries sought access to important emerging markets in Latin America and Asia for their banking, insurance, brokerage, and other financial services firms. In the end, both sides agreed to bind unilateral and regional financial opening and reform that was already under way in many countries, industrial and developing alike.

The authors assess the agreement reached in the WTO, identifying its shortcomings and suggesting ways that it can be bolstered in future negotiations. They analyze the impact of the agreement, and of the Asian financial crisis, on the state of liberalization and market opening in several important emerging-market economies―including a summary of the remaining obstacles to establishing efficient and open financial sectors. This book estimates the benefits of opening the financial sector to foreign competition. It assesses the macroeconomic benefits that flow from an improved financial sector and discusses the risks and costs involved in liberalization. The authors conclude with a blueprint for future efforts to liberalize financial services and emphasize that the recent financial services agreement represented only a beginning step in that process.

Wendy S. Dobson, Visiting Fellow (1990-91, 1998), is Senior Fellow at the Faculty of Management at the University of Toronto. She served as Associate Deputy Minister of Finance in the Canadian government and Canada's G-7 Deputy (1987-89). She was president of the C.D. Howe Institute (1981-87) and has written on Canadian issues in macroeconomic and trade policy and on international economic relations, including Economic Policy Coordination: Requiem or Prologue? (1991). She is a member of the Advisory Committee of the Institute for International Economics.