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Group of Negotiations on Services, “Communications from the European
the United States" dated October 17, 1989 .....
URUGUAY ROUND NEGOTIATIONS ON
Tuesday, July 17, 1990
HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON FINANCIAL INSTITUTIONS SUPERVISION,
REGULATION AND INSURANCE,
Washington, DC. The subcommittee met, pursuant to call, at 2 p.m., in room 2359A, Rayburn House Office Building, Hon. John J. LaFalce (chairman of the task force) presiding.
Present: Chairman LaFalce, Representatives Torres and Bereuter.
Mr. LAFALCE. The Task Force on the International Competitiveness of United States Financial Institutions will come to order.
Today, our task force will hear from representatives of the Bush administration on two key issues affecting the ability of United States financial services firms to complete in global markets: One, the services agreement being negotiated as part of the Uruguay Round; and two, the issue of “financial dumping;” that is, the concern that foreign financial institutions may be selling financial services below cost in the United States market.
Advances in computer and telecommunications technology are leading to the rapid globalization of the financial services industry.
Companies need not look only to domestic providers for finance and financial firms can, at least in theory, follow their customers around the world.
This globalization process has the potential to increase the efficiency of world capital markets and provide the widest possible array of financial services at the lowest possible price to consumers all over the world.
This can occur, however, only if this new global market is an open market.
The GATT has long been the multilateral mechanism through which countries have attempted to ensure an open world trading system, but the GATT has been slow in keeping up with the times.
Long focused on issues in manufacturing trade, the GATT has historically not dealt with services and investment--areas that are becoming increasingly more important elements in world trade.
The United States has, until recent years, maintained a clear competitive edge in the service sector.
In financial services, in particular, U.S. firms are known for product and technological innovation. But the competitive edge that U.S. financial firms have historically enjoyed is at risk if our firms cannot introduce new technologies and market their products freely overseas at the same time that foreign firms operate freely in our own domestic market.
While I am pleased that the development of a financial services agreement is finally being taken up within the GATT, I am seriously concerned by what appears to be little progress to date.
Negotiations are to conclude this fall and yet we have little to show for months of effort.
It is my understanding that U.S. negotiators have put forward a proposal for the elimination of certain specific barriers, but the specifics of any agreement have yet to take shape.
This agreement must be more than a paper framework to be filled in at some later date-it is imperative that specific barriers be eliminated and that more open markets be achieved.
If the agreement does not accomplish those goals, we might be better off with no agreement at all.
There are some key issues on which I would appreciate the administration's views.
One issue I believe is of central importance in these negotiations is that of "linkage"—the provisions for cross-retaliation between services and goods.
The issue is a highly controversial one, but I am concerned that without such linkage, retaliation cannot be made effective.
Another central issue is the question of temporary entry of key personnel.
A financial services agreement will be of no use if a market is perfectly open, but U.S. firms are precluded from bringing in sufficient personnel to effectively establish their financial services operations.
Knowledge and expertise are key elements of competitiveness within the industry, and such skills are not necessarily fungible. If the use of existing expertise is denied, meaningful market access cannot be achieved.
Our negotiators must also be watchful regarding how the agreements reached within the Uruguay Round impact on European Community directives of key concern to the United States financial services industry.
In particular, we must be attentive to any impact that agreements made in the Uruguay Round might have on the second banking directive, the pending investment services directive, or the European Community capital directive.
Today we will also explore the issue of "financial dumping." In the course of the task force deliberations, concern has been expressed that some foreign firms are effectively underpricing in the U.S. market.
I know this problem is of particular concern to Chairman LaFalce who recently wrote to the Treasury on this issue.
It is not clear to me that United States anti-dumping laws and procedures provide an appropriate mechanism for addressing this problem, if indeed, the charge regarding the actions of foreign firms is justified.