Chairman LAFALCE. I hate to be accused of implying anything

Mr. WILSON. As you correctly stated. A freeze works to the disadvantage of countries that have generally open trading regimes, as we think we do, in services, with certain exceptions.

For that reason we are not enamored with the European Community proposal and we have not agreed to it.

Chairman LAFALCE. What is this discussion of reservations against obligations under the financial services agreement? What is that all about, Mr. Barreda?

Mr. BARREDA. Mr. Chairman, when we put forward an absolute standard of national agreement, right of establishment, it is certainly possible that some countries may not be able to meet that absolute standard with respect to all financial service activities.

So under the model we have in mind, a country could sign on to the agreement and then say "I cannot provide this for this particular activity." And still we would be getting sufficient coverage that it would be worthwhile having those commitments into the agreement.

But then the check on that is that when all the reservations are done, and this is part of the request offer negotiations, Ms. Powers mentioned, countries would have to decide whether that country had put up enough to be given the rights under the agreement. That will be a call made at Brussels, and there will be a negotiation on what the reservations are.

Chairman LAFALCE. If there is too great an ability to declare a reservation, the agreement could be without meaning.

Mr. BARREDA. That is correct.

Chairman LAFALCE. So there will have to be a very close monitoring-I shouldn't say monitoring-very close attention to what areas and under what circumstances reservations could be made? Mr. BARREDA. It is really more than monitoring, Mr. Chairman. There are two negotiations. One is the rule and then a negotiation on reservations and that is why your point about how little time we have is so true.

Chairman LAFALCE. What happens if we are unable to conclude something by December? What are the alternative options?

Mr. WILSON. In the services area you are talking about?

Chairman LAFALCE. Can we extend the time for the GATT—— Mr. WILSON. That is one option, but not one that the administration favors. But we negotiate under a certain authority given to us by the Congress, in this case in the Trade Act of 1988, and if—— Chairman LAFALCE. How long does your authority extend?

Mr. WILSON. Our authority for fast track implementing legislation effectively ends I think June 30, 1991, which means that we have to notify the agreements that we intend to enter into by I think March 30 of 1991, for that fast track legislation process to

run.

There is a possibility of extending the ability to do this for 2 years, from 1991 to 1993, if the administration goes back and asks the Congress and gives good reasons as to why this authority should be extended.

Chairman LAFALCE. I would say a very unlikely prospect to anybody whe stening.

Mr. WILSON. Yes. I think that certainly is the assessment of the administration. We do not intend to negotiate past December 1990 in these negotiations.

What are the options if these negotiations do not――

Chairman LAFALCE. I think the congressional perspective is if it can't be done by December 1990, it can't be done and therefore let us proceed somewhere, somehow else.

Mr. WILSON. I think the administration agrees -100 percent on that, if we can't get it done by December 1990, we can't get it done. Chairman LAFALCE. I can see bilaterals and regionals and some protectionist action on the part of the Congress, almost certainly the latter.

Mr. WILSON. We would hope it does not come to that, but certainly you have outlined I think what the basic options are.

Chairman LAFALCE. With that, ladies and gentlemen, go ye therefore and do your work.

Thank you, very much.

Mr. WILSON. Thank you.

[Whereupon, at 3:50 p.m., the hearing was adjourned.]

APPENDIX

July 17, 1990

STATEMENT OF

THE HONORABLE FRANK ANNUNZIO

AT

INTERNATIONAL COMPETITIVENESS TASK FORCE HEARING

TUESDAY, JULY 17, 1990

I want to congratulate Chairman LaFalce on his work as chairman of the International Competitiveness Task Force. When I appointed him chairman of this Task Force in January, I knew he would bring to the job the vigor that it required. As anyone who has followed the Task Force knows, he has been just that, and the Task Force has had a series of briefings and hearings that could form the basis for an entire graduate school in international banking issues. With the Task Force now very near the end of its term, I look forward to receiving its report.

Today's hearing on the progress of the financial services agreement under the Uruguay Round is an important and topical hearing. Services are becoming an ever increasingly important part of international trade, particularly for the United States. In 1989, the United States' trade in services amounted to $434 billion, or 35 percent of the United States' total international trade, figures which are expected to increase dramatically in the coming years.

GATT, however, only covers trade in goods. The increase in service trade means however, that more and more trade is not covered by GATT. For the United States, which is rapidly developing a service oriented economy, this means that we can be the subject of discriminatory practices without an effective mechanism designed to prevent it.

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I have been increasingly concerned about a second aspect of service trade, and that is the issue of foreign service providers dumping services in the United States. Dumping is ordinarily thought of as a goods-related concept. Nothing conceptually, however, precludes it from services. The definition of dumping simply requires that the service be provided below cost or below the price the same service is offered in the dumpers home market.

In more than one briefing, this Task Force has heard the issue of financial services dumping raised. We all have heard examples of so-called "razor-thin" or "aggressive" pricing designed to capture market share. Often this pricing is so far under what other prices for the same service are that one wonders how one can make a profit on it. If a foreign firm cannot profit over the longrun, then it is dumping.

I myself have raised this issue in the Subcommittee field hearings on May 14 and on the House Floor on June 5, when I discussed the domination of the letter of credit market for municipal securities by Japanese banks.

I have become so concerned with the issue of dumping of financial services that I wrote to both Secretary of the Treasury Brady and Secretary of Commerce Mosbacher expressing my concern and asking them to raise the issue at the Uruguay Round talks on financial services.

Last month Secretary Mosbacher responded to my letter. He confirmed what this Task Force had been hearing and I had been stating, namely that American firms are concerned about dumping in services. He indicated that "more specific concerns about actual cases of dumping, including financial services, have been raised by some of our private sector advisors."

Regrettably, I have not received a response from Secretary Brady.