Financial services and the World Trade Organization - liberalization commitments of the developing and transition economies

The author 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 multi-sectoral negotiations. Two aspects of the outcome cause concern: 1) There has been less emphasis on introducing competition by allowing new entry than on allowing (or maintaining) foreign equity participation and protecting the position of incumbents. 2) Where it was deemed infeasible to introduce competition immediately, participants have taken little advantage of the GATS to lend credibility to liberalization programs by pre-committing to future market access.