The New WTO Agreement on Financial Services and Chapter 14 of NAFTA : Has Free Trade in Banking Finally Arrived?

This article discusses the U.S. policy rationale for seeking free international trade in financial services and assesses whether U.S. policy goals have been met through recent trade agreement negotiations. Free trade in financial services has been a goal of U.S. trade policy since the early 1980's. Over a period of fifteen years, the United States concluded several agreements on financial services with key trading partners. The most significant agreements are the World Trade Organization (WTO) Agreement on Financial Services (FSA) and Chapter 14 of the North American Free Trade Agreement (NAFTA) on Financial Services. In both of these trade agreements, U.S. negotiators succeeded at least partially in achieving the U.S. goals of establishing a framework of principles for financial services trade and achieving national treatment and greater market access for U.S. financial institutions in key markets. Neither trade agreement, however, achieves full liberalization. In the case of the FSA, the framework of principles is subject to significant exceptions and only partial market access concessions have been made by many countries. NAFTA achieved both a firmer framework of principles and more concrete market opening results than the FSA, but some barriers to trade still remain. These results are not surprising given the special status of the financial services industry in the view of national governments, and the enormous gap in development of financial markets between the United States and other countries, especially developing countries. FSA and NAFTA Chapter 14 can best be viewed as tentative first steps towards achievement of U.S. policy goals that will only be fully realized after further negotiations on sensitive issues of regulatory policy have been undertaken