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Saturday, December 13, 1997 Published at 12:19 GMT



Business

Milestone world trade agreement

The World Trade Organisation has reached a landmark agreement which will open financial markets to more foreign competition.

Under the deal hammered out in Geneva, nearly 100 countries are bound to open their financial services markets to varying degrees from early 1999.

The Director-General, Renato Ruggerio, said: "We have done it. We have made an historic deal. This is a golden year for the international trading system."

The deal opens up signatory countries' high-revenue banking, insurance, asset management and brokerage markets to more foreign competition.

It is hoped that the accord, hammered out by senior US and European Union trade officials, among 70 members of the WTO, will bring more security and predictability to volatile markets.

Negotiations for greater openness in the world's multi-trillion dollar banking, insurance and security sectors have been underway for years.

The United States, whose backing was essential to make the pact worthwhile, pushed negotiations two hours past a deadline in an attempt to work out final details. The US government questioned the Malaysian policy over access to insurance markets.

Cross-border trade tripled between 1985 and 1995 and revenue now exceeds $50 bn for the most important trading countries. When the pact takes effect, revenue from the affected markets is expected to double.


[ image: The World Trade Centre in New York]
The World Trade Centre in New York
Two years ago the US blocked agreement on the grounds that some Asian and Latin American countries had not offered enough access to their markets.

This time, Washington was concerned that some of the offers to open markets which are currently on the table would probably be withdrawn.

US insurers and bankers supported the deal, remarking on improvements in the liberalisation bids that some 70 countries had put forward.

Financial services groups in the US welcomed the agreement. "It is a very good deal," said Bob Bastine, of the Coalition of Service Industries. He said he hoped it would help bring stabilisation and "increase confidence in emerging markets."

The US Securities Industries Association said in a statement: "We welcome this accord which will accelerate the global trend towards more market oriented financial systems."

The European Union fought hard for a comprehensive agreement, determined to avoid a repeat performance of the scenario two years ago when it played a "white knight" role in salvaging an interim deal that expired last month.

Most Asian countries, including the financially beleaguered South Korea, Indonesia and Thailand, recipients of International Monetary Fund aid, agreed to further market opening moves.

US negotiators, in their efforts to squeeze more concessions from previously fast-growing Asian nations, insisted that serious commitments from these countries would reassure investors who have fled the region since the summer when the currency turmoil first started.

The United States is the largest, most open financial services market. More than 400 foreign insurance firms and 1,000 overseas banks and investment houses are active in the US economy.

The agreement comes at the end of a highly successful year for the WTO. In February, 69 WTO members signed a deal liberalising telecommunications market.

Last December the United States, the EU, and Japan among other countries signed a pact to eliminate tariffs on the trading of information.
 





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