RESTRICTEDWORLD TRADE
ORGANIZATIONS/FIN/M/29
14 March 2001
(01-1291)
Committee on Trade in Financial Services
REPORT OF THE MEETING H ELD ON 29 NOVEMBER  2000
Note by the Secretariat
1. The Committee on Trade in Financial Services held a meeting on 29 November 2000.  The
agenda is contained in airgram WTO/AIR/1446.
Item A: Acceptance of the Fifth Protocol to the General Agreement on Trade in Services
Embodying the Results of the Financial Services Negotiations
2. The Chairman recalled that at the last meeting the delegations of Nigeria, Jamaica, and Poland
had provided some information on the status of ratification procedures in their countries.  Since then,
the delegations of Kenya and Nigeria had sent communications to the Council for Trade in Services
requesting the re-opening of the Fifth Protocol for their acceptance (documents S/C/W/176 and 177,
respectively).  These requests would be taken up for decision at the Council meeting of 1 December.
He invited delegation's comments on these requests.
3. The representative of Kenya was pleased to inform the Committee that the instrument of
acceptance to the Fifth Protocol to the GATS had been signed by the Minister for Foreign Affairs and
International Cooperation on 28 September 2000.  His delegation had deposited the instrument with
the Secretariat and requested the reopening of the Fifth Protocol to the Council for Trade in Services.
He expressed appreciation for the understanding shown by Members, as internal ratification processes
took longer than expected.
4. The representative of Nigeria recalled his delegation's statement at the April meeting of the
Committee informing of the delay in accepting the Fifth Protocol due to the political circumstances of
Nigeria, having only recently transferred to democratic rule.  In that occasion, his delegation had
assured Members that, in spite of the difficulties then encountered, Nigeria was still committed to its
obligations in the WTO and would continue to make  concerted efforts to ensure that all necessary
domestic processes for accepting the Protocol would be brought to an early conclusion.  He was
delighted to inform Members that all necessary domestic processes had been concluded and theinstrument subsequently ratified.  Nigeria had also formally requested the reopening of the Protocol to
the next Services Council meeting in order to brin g its commitments in the financial services sector
into full legality.  He expressed appreciation to Members for the understanding shown while the
domestic ratification process had lasted.
5. The representative of the European Communities welcomed both Kenya and Nigeria's
announcements.  Her delegation knew from experience that it could always take longer than expected
to get documents or legislation together.  She hoped that Members would support the reopening of
the Fifth Protocol and that the actions by Ke nya and Nigeria would encourage others who were
conducting their own processes to complete them as quickly as possible.
6. The Chairman invited the other Members that had not yet accepted the Protocol to provide any
further information on the status of their domestic processes.S/FIN/M/29
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7. The representative of Uruguay referred to the letter sent by the Director-General of the WTO,
dated 19 September 2000, in relation to the acceptance of the Fifth Protocol to the GATS.  In that
connection, on 22 November 2000, the Minister of Foreign Affairs of Uruguay had sent a
Memorandum in response to the note from the Director-General.  In that reply, it was stated that the
executive power of Uruguay had again sent to the national parliament the bill in question, reiteratingits priority nature, for the purposes of its adoption.  At the time, it was understudy in the Commission
of International Affairs of the Chamber of Representatives.  The reply also stated that Uruguay was
ready to continue to support the negotiating process on service under way in the WTO.
8. The representative of Poland recalled that, as indicated in previous meetings, it had been
necessary to amend the law on public turnover in securities in order to pave the way for the smooth
ratification of the Fifth Protocol. The state of play as far as that amendment was concerned, was that
in October the Lower Chamber of the Polish Parlia ment had approved and submitted it to the Upper
Chamber, the Senate.  The latter had approved the amendment law on 21 November, and according to
the procedure, it had to return it to the Lower Chamber for its final adoption, which was expected to
take place in the following two weeks.  After signing by the President and publication, it would be
necessary to wait for 14 days for its entering into fo rce.  At that stage, it would be possible to initiate
the domestic procedure concerning the adoption by Poland of the Fifth Protocol.
9. The Chairman said that the Committee would take note of the comments made in relation to
both Nigeria and Kenya, as well as the updates received from two other Members.  He also
encouraged those that had been unable to update the Committee on the state of ratification procedures
in their respective countries to do so as soon as possible.
Item B: Technical Issues
10. The Chairman recalled that at the previous meeting the Committee had a brief discussion of this
item.  While a few delegations had indicated that they were looking at possible new activities and
their coverage by the classification contained in the Annex on Financial Services, one delegation had
expressed reservations as to the need to revisit th e definitions in the Annex.  In that context, the
delegation of Japan had raised a question of how to classify some services that had appeared with theadvent of the Internet and the rapid proliferation of electronic trading systems giving concrete
examples.  The complete statement by Japan was contained in Job No. 7051, dated 7 November 2000.
11.  The representative of Canada indicated that a number of interesting issues had been raised,
which were still under consideration by his delegation. The representative of Hong Kong, China
considered that there were problems as stated by Japan, for example, whether the Internet portals that
provided loans or deposit rates quotations should be regarded as money brokers.  Those Internet
portals acting as the intermediaries between banks and depositors performed similar brokeragefunctions as money brokers in the inter-bank markets.  In short, the matter should be further
considered in a meeting with a view to arriving at some measures that could solve the problem.
12.  The representative of the European Communities said that his delegation was studying the
comments made by Japan, however, his delegation was not sure that there were new services
involved.  This matter was being looked at from a technical point of view.  The representative of theUnited States said that her delegation was also considering Japan's statement.  However, the initial
impression was that the current very broad definitions in the Financial Services Annex, which manycountries had used for scheduling commitments, as well as the broad definitions that countries used
for scheduling telecom commitments most likely s hould cover some of the issues raised by Japan.
Her delegation would want to avoid any conflict between the work of the Committee and the generaldiscussion that had taken place under the Services Council related to technology neutrality.S/FIN/M/29
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13. The representative of Korea expressed his delegation's interest in the matters related to
electronic finance.  At the time, relevant regulation schemes and approval standards for the newly
developed e-finance was being reviewed.  Considering the fact that e-finance was in its early stages
and continuously developing at a tremendous rate, it would be difficult to predict the future of
electronic financial services.  Moreover, there had been no consensus on whether e-finance could beincluded in the traditional services classification list.  Therefore, his delegation would welcome a
discussion of these issues by the Committee in order to facilitate future service negotiations on e-
financial services.
14. The Chairman observed that Japan's statement had raised the interest of delegations and, based
on the representations that had been made, it continued to receive active consideration in capitals.
More time was necessary for reflection, thus the Committee would revert to this at the next meeting.
He encouraged Members to make their views known in writing to allow pre-consideration of thoseviews by other Members, with a view to  facilitating a more substantive exchange.
Item C: Other Issues for Future Discussion
15. The Chairman recalled that at the previous meeting the discussion under this item concentrated
on a proposal by Japan, for requesting information from international organizations working on
regulatory issues on financial services.  While some delegations would accept an informationgathering exercise with no links to any discussion about prudential measures, and pursued in a more
gradual and controlled manner, others strongly opposed such an exercise regardless of how it might
be conducted.  The latter expressed concerns as to the objective of this proposal as they failed to see
the relevance of the information that could be gath ered to the Committee's work.  They also had felt
that such an exercise could develop into a discussion of the legitimacy of Members prudentialregulations.  Suggestions as to alternative ways in which delegations could have access to the
information in question had also been voiced.  Given that the proposal had been still under
consideration by some delegations, the Committee had decided to revert to the matter.
16. In relation to the concerns that had been expressed, the representative of Japan reiterated that
his delegation also did not want to get into a discussion of prudential regulations.  The proposed
exercise only intended the gathering of information from international organizations dealing with
regulatory issues in the financial sectors in order to deepen the understanding of those issues.  That
would be helpful in the context of future liberalizat ion of the financial market.  Regarding the format,
his delegation was flexible, for instance, just co mpiling information regarding standards would be
acceptable.  Japan was ready to accommodate the concerns expressed by some delegations.
17.  The representative of Chile expressed support for the proposal made by Japan.  As his
delegation understood it, the information gathering exercise should enhance Members' positions for
the negotiations.  As to how to proceed, his delegation suggested asking international organizations
for a written report first and then invite them for a debate with Members later.  The representative of
Australia concurred.  Her delegation had a number of issues in the area of classification and other
areas, which could be well served by the information provided by relevant international organizations,provided that the questions were focused in order to get the relevant information. The representativesof Switzerland, Argentina,
 and Norway  also supported the Japanese proposal, together with the
suggestion by Chile.
18. The representative of the United States reiterated the support for the general thrust of Japan's
proposal.  Her delegation also supported the operation al suggestions made by Chile in that the work
be done in two stages and that the Committee would have adequate time to review the documentation,and decide a more precise purpose for the discussion, before inviting presentations by the
international organizations involved.  The representative of Canada concurred and added that the
Committee could first invite written submissions by key international organizations, such as the BasleS/FIN/M/29
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Committee, IOSCO and IAIS and, depending on the results, the Committee might then decide to
either request oral presentations and/or request fu rther written submissions from other organizations
deemed appropriate.
19. The representative of the European Communities also voiced his support.  His delegation
understood the exercise as seeking background information and not something that delegations would
target on or try to turn into some sort of major consultations on individual Member's regulation.  It
was quite clear from discussions in other fora in the services context that domestic regulation was up
to national governments to look at; his delegation would have concerns if discussions in the
Committee could lead to some other understanding.  It was also clear from the interventions made
thus far that there was no intention to assess the stat us of individual countries in the implementation of
the core standards.  The Canadian suggestion to have a first tier of organizations, targeting specific
information from those organizations, might be a way to move forward.  The two-stage approach
proposed by Chile would allow the Committee plenty of time to ensure that any of the individual
concerns would be met before deciding on a second phase.
20. The representative of India said that Japan's proposal was still under consideration in capital.
He found the clarifications given by the proponent helpful and they would be conveyed as well.
21. The representative of Korea expressed concern with the fact that Japan's proposal of compiling
information on international standards, rules and financial regulations could be expanded to defining
financial prudential measures. Considering the fact that even the international financial organizations
such as the OECD, BIS, IOSCO and IAIS had not restricted governments autonomy as to prudential
measures, as their standards were followed on a voluntary basis, it was not appropriate for the WTO
to establish restrictive standards on financial regulations.  His delegation felt that work related toprudential measures in the financial sector should be handled by the said organizations with expertise
in that area.  Korea could agree to the Japanese proposal provided that there should be a wide
consensus on the proposal among Members and that the job of compiling the international rules and
standards should be aimed at assisting the reform of  regulatory systems in developing countries, and
not for the purpose of defining prudential measures.
22. The representative of Malaysia appreciated Japan's clarification as to that delegation not
wishing to see the information gathering exercise eventually turned into a discussion on prudential
measures.  Malaysia continued to have concerns as to the outcome of the exercise.  At the previous
meeting Japan had said that the information to be obtained was intended to serve as background
information for delegates in preparation for negotiations in financial services.  The Committee was to
look at trade issues and negotiations in financial services, but looking at prudential regulation was not
appropriate given that other independent agencies had that competence.  In any case, his delegationdid not see the value-added in carrying out this exercise if, as suggested, the Committee would seek
information and do nothing with it.  Malaysia was no t convinced that that would be the case.   Should
the exercise happen, there would be discussions based on the information compiled and that
information would be about prudential measures.  The information to be gathered would include
measures set by those international organizations and, it could also be assumed that, it would includemeasures taken by national governments as well.  In that case, delegations would definitely start
discussing about those prudential measures, which would be impinging on what other international
organizations were doing in this particular sector.  Lastly, the biggest concern for Malaysia was that
eventually the exercise would impinge on the ri ght of national governments to take prudential
measures independently, as provided for in the Financial Services Annex.
23. The representative of Mexico appreciated the clarifications made and would forward them to
capital so as to review the position on the matter.  At that stage, however, Mexico shared the views
expressed by Malaysia and reiterated that all matters of concern to Members had to be first discussed
in full by the Members themselves.  Therefore, consultations with other international organizations onS/FIN/M/29
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matters that had not even been discussed by the Members were not acceptable.  Members had the
right to resort to those international organizations to consult them on matters of concern to them and,
if deemed appropriate, to present the results of those consultations to the Committee.  However, a
multilateral approach to such consultations was someth ing that Mexico could not go along with at that
stage.
24. As Malaysia, the representative of Philippines was of the view that this issue should be
approached in a very cautious manner by delegations.  If it were strictly an information gathering
process for educational purposes then perhaps the danger would be obviated.  However, in the WTO
even the most innocuous information gathering and educative exercises turned into something else.
Thus the information might be used for purposes related to defining or restricting what was termed
prudential measures in the Annex on Financial Services.  The proposed exercise could indeed result in
the Committee on Trade for Financial Services discussing and questioning whether measures whichwere in place, but not scheduled, were indeed prudential in nature.  Having had the misfortune of
going through financial crisis in the Asian region from 1997 onwards, his delegation was very
cautious about any initiative that would even indirectly impinge on the ability to resort to prudential
measures.
25. The Chairman observed considerable support for the Japanese proposal and appreciation as
well for the clarification and openness of that delegation to amending their proposal to meet
delegations' concerns. Chile had offered the possibility of a two-step approach, i.e. requesting
information in writing first and then determining if  the Committee wished to entertain discussing the
submissions with the submitting organizations.  One delegation had suggested that there must be
adequate time to review the information and another that a focused approach be followed in terms ofthe number of organizations to be contacted.  At the same time there had been a number of
delegations that continued to register some concerns.  A fundamental question had been raised,
namely, how would the Committee utilize this inform ation.  As a general rule of thumb, in terms of
the Committee’s work, more information rather than  less seemed better.  The ultimate control over
assessing the relevance of the information would always be with the Members of the Committee.Additionally, while some Members of the Committee were also members of the organizations from
which it had been proposed to seek the information, others were not. The proposed exercise could
enhance the transparency of the existing information because Members who were part of those
organizations were perfectly able to get it and use it in the negotiations anyway.  The exercise would
benefit those Members that were not part of those organizations and thus had no access to their work.
The Committee required more time for Members to reflect and seek further clarification from their
capitals.
Item D: Recent Developments in Financial Services Trade
26. The Chairman invited delegations to update the Committee on regulatory or economic
developments that affect financial services trade.
27. The representative of Argentina made the following statement “the Government of Argentina is
committed to deepen reforms in financial services.  Such reforms are critical to promote economic
growth through a more efficient intermediatio n between savings and investments and wider
diversification of risks.  In order to achieve such objective priorities have been set.  High on the list
among those priority areas of change, Argentina intends to move forward with the implementation of
a number of the key standards for sound financial systems agreed under the orbit of the Financial
Stability Forum.  Argentina has participated in the first round of experimental case studies onobservance of standards and codes.  The first report on its transparency practices, which was
published on April 1999, indicates that transparency is generally high in data dissemination, fiscal,
monetary and financial policies, and the disclosure aspects of banking supervision.  In order to
comply with the other relevant key standards for s ound financial systems, Argentina is in the processS/FIN/M/29
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of undertaking self-assessments in the areas of payment systems, securities and insurance among
others.  Simultaneously, a Report on the Observance of Standards and Codes (ROSC) on Banking will
be carried out shortly by the IMF/World Bank, which will follow up on an already completed and
published self-assessment conducted by the Central Bank of Argentina.  A fully-fledged Financial
Sector Assessment Program (FSAP) will be carried out in 2001”.
28. The Chairman said that the Committee would take note of the statement of Argentina.  As it
was customary, the Committee would have this item on the agenda of the next meeting to entertain
other similar updates.
Item E: Date of the Next Meeting
29. The Chairman proposed that for the coming year, the Committee continue to align its meetings
with those of the Services Council and as the Council had not yet defined a date for the first meeting,
he would select a date based on the Council's calendar and would inform delegations accordingly.  Noobjections were raised.
Item F: Other Business
30. The Chairman said that the Secretariat had received a communication containing a statement on
the Liberalization of Trade in Insurance Services by the Commission on Financial Services and
Insurance of the International Chamber of Commerce.  The statement seemed to contain usefulinformation concerning the interests of the ICC in the financial services negotiations.  He suggested
making it available to Members of the Committee.  No objections were voiced.
31. The representative of the United States apologised for raising an issue under this agenda item
related to the report of the Committee to the CTS, contained in document S/FIN/5.  Her delegation
had some comments and would like to request changes to that document.  Regarding paragraph 1, itsfirst sentence indicated that the Committee held four formal meetings during 2000 but that this
meeting should also be counted as a fifth meeting.  In paragraph 2 of the report regarding the
ratification of the Fifth Protocol, it should be noted that Kenya and Nigeria were going to ask for the
reopening of the Protocol for their acceptance. Given that the announcement had been made at that
meeting, there could be reference to that in the repo rt so that it would be counted for in the progress
during the year 2000.  Also in paragraph 2, it should be reflected that the US and some other countries
had spent a lot of time urging those countries still pending for ratification to do what was necessary to
ensure speedy ratification of the commitments, in addition to requesting reports on the status of the
domestic processes.  Several countries had felt that it was very important that those remaining
countries ensure speedy ratification of their commitments.  Regarding paragraph 3, dealing with
classification among other issues, in the middle of that paragraph there was reference to some
countries saying that the Committee might need to look at the existing classification in the Annex onFinancial Services, with a view to reflect changes in the markets.  The US would note that to have a
balanced and full report of the discussion that had taken place over the past year, that paragraph 3
should also indicate that some delegations noted that the current definitions under the Financial
Services Annex provided sufficient flexibility for such market developments.  In paragraph 3 also
there was an issue which related to classification, but the US thought it should be moved toparagraph 4,  which pertained to future work of the group.  The final sentence of paragraph 3, which
in English began "additionally it has been proposed to have a full discussion on various negotiating
approaches that have been used so far", that issue was raised under the Future Work.  The US had
made a statement and then circulated it later in writing to the Members of the CTFS.
32. The Chairman explained that the closing date for annual reports for the Committee, as well as
other Councils and subsidiary bodies in the WTO, had been the end of October which explained the
stated number of meetings.  The suggestions made were friendly and helpful in the context of, forS/FIN/M/29
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example, the acceptance of the Protocol.  He proposed that those remarks be reflected in the report of
this meeting, rather than having to issue a revisi on of the said document.  The representative of Hong
Kong, China said that it would be helpful to indi cate somehow the period covered by all  reports of
services bodies to avoid confusion.  The representatives of Uruguay and Brazil  concurred. A
representative of the Secretariat said that it would certainly be possible to find various ways of
signalling the fact that the annual reports cover unti l October, due to the need to have them issued
prior to the last General Council’s meeting of the year.  It could be done in the annual reports
themselves, although that would entail issuing revisions of each one of them to make that point, or in
the report of the Chairman of the CTS to the General Council.
33. The Chairman concluded that his suggestion had been accepted and that the point raised by
Hong Kong, China as to finding a way to clarify the period covered by the reports would be addressed
by the Services Council Chairman's report to the General Council.
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