U.S. Trade in Financial Services: An Overview (CRS Report for Congress)
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| Release Date |
Aug. 10, 2001 |
| Report Number |
RL31110 |
| Report Type |
Report |
| Authors |
Patricia A. Wertman and William H. Cooper, Foreign Affairs, Defense, and Trade Division |
| Source Agency |
Congressional Research Service |
Summary:
Financial services -- banking, securities, and insurance -- are a key element of the U.S. economy.
With international trade in services generally rising, financial services have become a critical
element of new and proposed multilateral, regional, and bilateral trade agreements, as well as a
source of some disputes with major trading partners. Congress not only oversees this critical
industry, but it also has very substantial responsibilities with regard to U.S. trade, trade policy, and
trade agreements, of which financial services are today an important part.
U.S. policy has been to extend national treatment to foreign financial firms operating within the
United States and to seek national treatment for U.S. firms operating abroad. In addition, the United
States has sought to improve market access by seeking the reduction of various barriers, including,
for example, limits on types of products that may be sold, ceilings on the level of activity, or
limitations on the right to establish a commercial presence within a country.
The World Trade Organization (WTO) provides the first multilateral framework for trade in
financial services -- the Financial Services Agreement (FSA) of the General Agreement on Trade
in Services (GATS). The FSA went into effect on March 1, 1999, after difficult and drawn out
negotiations. It's impact has largely been to bind current practices, but it is a work-in-progress.
Under Article XIX of the GATS, a new set of negotiations on services, including financial services,
commenced in February 2000. Financial services will also likely be part of a new round of WTO
negotiations that might be launched.
Although the completed, but still pending, agreements with Vietnam and Jordan do not open
up financial markets of any significant size, they may provide opportunities for some U.S. firms.
The United States is negotiating free trade agreements with Chile and Singapore. The financial
sectors of these two countries are largely open, but financial services issues, nevertheless, are
important aspects of these negotiations. The United States is also in the midst of negotiating the
proposed Free Trade Area of the Americas (FTAA) with the 34 countries of the Western Hemisphere
(excluding Cuba), an area with which the United States already enjoys a healthy surplus in financial
services. The FTAA is to be implemented by December 2005.
Financial services trade remains an important element of established U.S. regional and bilateral
trade arrangements and relationships. The North American Free Trade Agreement (NAFTA),
historically the first trade agreement to address financial services trade issues, fully opened the
financial markets of our two NAFTA partners, Canada and Mexico, resulting in a financial services
trade surplus for the United States. The European Union (EU) is fully open without a bilateral
accord. Financial services trade with Japan is modest. It has not grown appreciably in recent years,
and the United States has been pressing Japan to open up its financial services market to more trade.
WTO access for China is likely to open a few opportunities for U.S. financial firms in the short-term,
with opportunities likely increasing as the Chinese economy develops. This report will be updated
as events warrant.
