Testimony of S. Bruce Wilson Assistant United States Trade Representative for Services, before the Task Force on the International Competitiveness of U.S. Financial Institutions Subcommittee on Financial Institutions Supervision, Committee on Banking, Finance, and Urban Affairs July 17, 1990 "Current Multilateral Negotiations on Trade in Services, Good afternoon Mr. Chairman and Members of the Task Force. I am Bruce Wilson, Assistant United States Trade Representative for Services, Investment, and Intellectual Property. It is a pleasure to appear before the Task Force to discuss the current multilateral negotiations on trade in services, including financial services. I would like to divide my remarks into three parts. First, I will give an update on the Uruguay Round negotiations as a whole. Second, I will discuss the services negotiations taking place as part of the Uruguay Round. Finally, I will briefly describe how negotiations on financial services fit into the overall services negotiations. The Uruguay Round The Uruguay Round was launched in 1986 and constitutes the eighth round of negotiations under the General Agreement on Tariffs and Trade (the "GATT") since it was founded in 1947. This round is the most comphrehensive multilateral trade negotiation ever. For example, it dwarfs the previous round, the Tokyo Round, in both breadth and depth of subject matter. The Uruguay Round encompasses fifteen different negotiating groups in both traditional and nontraditional areas. Traditional areas include such things as tariffs, nontariff measures, balance of payments and other GATT provisions, subsidies and countervailing duties, antidumping, textiles, agriculture, and tropical products. Nontraditional areas include trade-related investment, traderelated intellectual property (e.g., patents, copyrights and trade secrets) and services. The U.S. priorities in this round are agriculture, industrial subsidies, tariffs and non-tariff measures, and dispute settlement in the traditional areas and all the non-traditional areas services, trade-related investment and trade-related intellectual property. The Uruguay Round is expected to conclude at a closing ministerial meeting in December in Brussels. In order to meet this deadline, the negotiating pace has accelerated in all the negotiating groups since the beginning of this year, and especially over the past several months as the negotiating groups have been preparing the outlines or profiles of final agreements for presentation next week in Geneva to the Trade Negotiating Committee (the "TNC"), the body which oversees the negotiation as a whole. The TNC will review these profiles and then provide any necessary political guidance to the negotiating groups for the final negotiating push in the fall before Brussels. In the United States, the Office of the United States Trade Representative, headed by Ambassador Carla Anderson Hills, has overall responsibility in the Executive Branch for coordinating the development and execution of U.S. negotiating positions in the Uruguay Round. Due to the complexity of specific subjects, particularly in the new areas, USTR must rely heavily on other agencies for both resources and expertise to carry out these negotiations. For example, we work with the Patent and Trademarks Office on trade-related intellectual property issues, the Federal Communications Commission on the telecommunication services negotiations, and, of course, with the Treasury and Commerce departments on financial services and insurance. We also rely heavily on private sector advice through our formal advisory committees. Our Services Policy Advisory Committee is chaired by John Reed, CEO of Citicorp. Services Negotiations Successful negotiations on services is one of our top priorities for the round. It has been estimated that U.S. companies in all services sectors sell between $150 - $200 billion worth of services each year to foreign customers, and that this figure could go appreciably higher if foreign barriers to U.S. services providers could be reduced. Services cover a broad field of economic activity indeed, some 70% of U.S. gross national product is generated through services activities. For purposes of these negotiations, the services that receive the most attention are those most likely to be involved in international commerce and include telecommunications services; tourism; transportation; professional services (particularly lawyers, accountants, advertising); architectural, engineering and construction services; and, of course, financial services. Despite the diversity of these services sectors we believe that there are certain cross-cutting trade principles that potentially apply to all sectors. These principles include, most importantly, the right to various forms of market access (i.e., the right to establish an enterprise, the right to sell across borders, and the right to temporarily move persons across borders to provide services), and the right to national treatment (i.e., the right of a foreign service provider to be treated no less favorably than a domestic service provider). For that reason, we believe that we can achieve the greatest level of market liberalization overseas for U.S. service industries by attempting to negotiate a comprehensive, ambitious and enforceable set of international rules applicable to the broadest possible range of service activities. These rules would govern what governments can and cannot do vis-a-vis foreign services and foreign service providers. In this regard, the United States tabled a comprehensive proposal for a general services agreement in October 1989. Negotiation on this broad set of rules is progressing well at this stage and we are optimistic about a positive result by the end of December. These rules will draw heavily on the U.S. proposal of October 1989. In addition to negotiation of a broad set of rules, we have determined that for two key sectors telecommunications services and financial services - it would be advantageous from the U.S. standpoint to negotiate additional, more tailored provisions because of both the strategic economic nature and unique features of these two services sectors. Accordingly, we have been pursuing sector specific negotiations in these two areas in the Uruguay Round as a complement to our negotiations of a general services agreement. Financial Services With respect to financial services, we look to Treasury to head our negotiating efforts in this sector because of their technical expertise and institutional responsibilities in this area. We coordinate closely with Treasury on both the development and execution of our negotiating positions. As for insurance, Commerce is the key executive branch agency because of their long-time responsibilities in this area and we look to them to take the lead in proposing U.S. negotiating positions in this area. Generally speaking, our substantive proposals on financial services track very closely with our positions for a general services agreement, particularly with regard to the market access and national treatment provisions, but also in regard to the temporary movement of personnel, transfers and payments, and monopolies. Negotiations on financial services have really taken off in the past several months, and I think we now have a good deal of negotiating momentum in this area as we move into the autumn. To introduce the specifics on the negotiations on financial services and insurance, I would like to turn to my colleagues, Mr. Barreda of Treasury and Ms. Powers of Commerce. I will be happy to respond to any questions you may have at the appropriate time in our discussion. Thank you. TESTIMONY OF WILLIAM E. BARREDA OF THE TREASURY FOR TRADE AND INVESTMENT BEFORE THE TASK FORCE ON THE INTERNATIONAL COMPETITIVENESS SUBCOMMITTEE ON FINANCIAL INSTITUTIONS SUPERVISION, COMMITTEE ON BANKING, FINANCE AND URBAN AFFAIRS INTRODUCTION I am pleased to have the opportunity to discuss the Uruguay Round negotiations on financial services, an issue that the Treasury Department places among its top priorities. Financial services are clearly a key component of Treasury and Administration efforts to liberalize trade in services. In this regard, Treasury has been working closely with the Office of the U.S. Trade Representative, which has responsibility for the general services negotiation, and with the Department of Commerce, which has responsibility for insurance. The presence of significant obstacles in some countries has made it difficult for U.S. firms to obtain equality of competitive opportunity and make the most of their comparative advantage. Part of the problem is that international rules in this area are limited to member countries of the OECD. U.S. financial institutions tell us that they feel vulnerable in many of the markets that offer the greatest opportunities for future growth. The GATT negotiation on financial services is therefore an opportunity for the U.S. and other Uruguay Round participants to fill a gap. To put it in terms that are relevant to the work of this task force, broadly applicable international rules on financial services can help U.S. firms compete on more even terms with foreign financial institutions. The international competitiveness of U.S. financial insitutions is also clearly tied to their performance in the domestic financial marketplace. My statement today will not, however, examine the domestic side of the current financial modernization issues, which include the appropriate activities banks may engage in, reform of the regulatory structure, and the interrelationship of these factors with the federal safety net. The Treasury Department, together with other government agencies, is now undertaking a study of the federal deposit insurance system which will examine many of these issues. The study is expected to be completed by the end of this year. Also, |