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Background back to top
At the end of the Uruguay Round negotiations in
1993, negotiations on financial services, along with those on basic
telecommunications and maritime transport, remained unfinished. Specific
commitments to provide market access and national treatment were made in the
sector, but they were not considered enough to conclude the negotiations.
Broad exemptions to the principle of MFN (most-favoured-nation) treatment
(based on reciprocity) remained. The Second Annex on Financial Services to
the General Agreement on Trade in Services (GATS) and the Decision on
Financial Services adopted at the end of the Round provided for extended
negotiations in this sector.
The negotiations were to be held during a
six-month period following the entry into force of the GATS; i.e. until the
end of June 1995. At the conclusion of this period, members of the WTO had
the possibility to improve, modify or withdraw all or part of their
commitments. They were also able to introduce additional MFN exemptions.
Until the end of this period, existing broad MFN exemptions based on
reciprocity were not applied.
The interim Agreement of
1995 back to top
The 1995 negotiations were concluded on 28 July
1995 instead of 30 June as initially planned. The agreement was called the
“interim” agreement, since negotiators again decided that the results of the
negotiations were not satisfactory and envisaged further negotiations in
twoyears' time, i.e. in 1997. As a result of the 1995 negotiations, 29 WTO
members (counting the EU as one) improved their schedules of specific
commitments and/or removed, suspended or reduced the scope of their MFN
exemption in financial services. Those improved commitments were annexed to
the Second Protocol to the GATS. Three other countries — Colombia, Mauritius
and the United States — decided not to improve their commitments, and took
broad MFN exemptions based on reciprocity.
As a result of those extended negotiations, and
with new accessions to the WTO, 97 members of the WTO (counting the EU
individually) had commitments in financial services by mid-1997 in the area
of financial services, compared with some 76 countries at the end of the
Round. The Second Protocol and the commitments annexed to it entered into
force on 1 September 1996 except for a small number of countries which were
unable to complete their internal ratification procedures and formally
accept the Protocol before 1 July 1996. For those remaining countries, the
commitments entered into force 30 days after acceptance.
The negotiations in 1997 back to top
The negotiations were reopened in April 1997.
Members again had an opportunity to improve, modify or withdraw their
commitments in financial services and to take MFN exemptions in the sector
from 1 November until 12 December 1997(1).1 As a result of the negotiations,
a new and improved set of commitments in financial services under the GATS
was agreed on 12 December 1997. A total of 56 schedules of commitments
representing 70 WTO member governments(2) and 16 lists of MFN exemptions
(or amendments thereof)(3) were annexed to the Fifth Protocol to the GATS,
which was open for ratification and acceptance by members until 29 January
1999.
Some 52 member governments(4) accepted the Protocol
by the due date, and those members decided to put the Protocol into force on
1 March 1999 in accordance with the terms of the Protocol. It was also
decided by the Council for Trade in Services that the Protocol would be kept
open for acceptance until 15 June 1999 for the remaining 18 members(5). For
those members accepting after 1 March, the Protocol will enter into force
upon acceptance.
With five countries making commitments in
financial services for the first time, the total number of WTO members with
commitments in financial services will increase to 104(6) upon the entry into
force of the Fifth Protocol.
As a result of the negotiations, the United
States, India and Thailand decided to withdraw their broad MFN exemptions
based on reciprocity; only a small number of countries submitted limited MFN
exemptions or maintained existing broad MFN exemptions. Several countries,
including Hungary, Mauritius, the Philippines and Venezuela, reduced the
scope of their MFN exemptions. The United States submitted a limited MFN
exemption in insurance, applicable in a circumstance of forced divestiture
of US ownership in insurance service providers operating in WTO member
countries.
The new commitments contain significant
improvements allowing commercial presence of foreign financial service
suppliers by eliminating or relaxing limitations on foreign ownership of
local financial institutions, limitations on the juridical form of
commercial presence (branches, subsidiaries, agencies, representative
offices, etc.) and limitations on the expansion of existing operations.
Important progress was also made in “grandfathering” existing branches and
subsidiaries of foreign financial institutions that are wholly or
majority-owned by foreigners. Improvements were made in all of the three
major financial service sectors — banking, securities and insurance — as
well as in other services, such as asset management and provision and
transfer of financial information.
Footnotes:
1. Korea submitted on 20
January 1999 an improved schedule of commitments. back to text
2. The WTO members concerned are: Australia;
Bahrain; Bolivia; Brazil; Bulgaria; Canada; Chile; Colombia; Costa Rica;
Cyprus; Czech Republic; the Dominican Republic; Ecuador; Egypt; El Salvador;
the European Communities (15 member states); Ghana; Honduras; Hong Kong,
China; Hungary; Iceland; India; Indonesia; Israel; Jamaica; Japan; Kenya;
Korea; Kuwait; Macau; Malaysia; Malta; Mauritius; Mexico; New Zealand;
Nicaragua; Nigeria; Norway; Pakistan; Peru; Philippines; Poland; Romania;
Senegal; Singapore; Slovak Republic; Slovenia; South Africa; Sri Lanka;
Switzerland; Thailand; Tunisia; Turkey; the United States; Uruguay and
Venezuela. back to text
3. Submitted by Australia, Canada, Honduras,
Hungary, India, Mauritius, Nicaragua, Pakistan, Peru, Philippines, Senegal,
Switzerland, Thailand, Turkey, the United States and Venezuela. back to text
4. The 52 members governments are: Bahrain;
Canada; Chile; Colombia; Cyprus; Czech Rep.; Ecuador; Egypt; EC and their
member states (Austria, Belgium, Denmark, Finland, France, Germany, Greece,
Ireland, Italy, Portugal, the Netherlands, Spain, Sweden, United Kingdom);
Hong Kong, China; Hungary; Iceland; India; Indonesia; Israel; Japan; Korea,
Rep. of; Kuwait; Macau; Malaysia; Malta; Mauritius; Mexico; New Zealand;
Norway; Pakistan; Peru; Romania; Senegal; Singapore; Slovak Republic; South
Africa; Sri Lanka; Switzerland; Thailand; Tunisia; Turkey; United States and
Venezuela. back to text
5. As of 1 June 2008, Brazil, Jamaica and the
Philippines have not yet accepted the Protocol. back to text
6. Including the Kyrgyz Republic and Latvia, both
new members of the WTO. back to text
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