Academic journal article ABA Banking Journal

Open Borders Open Opportunities for U.S. Banks

Academic journal article ABA Banking Journal

Open Borders Open Opportunities for U.S. Banks

Article excerpt

Open borders open opportunities for U.S. banks

Free trade agreements should include financial services, too, ABA told the Office of the U.S. Trade Representative in a recent letter.

In fact, ABA wrote, the North American Free Trade Agreement (NAFTA) should begin with banking - certainly where Mexico is concerned. At present U.S. banks can only assist U.S. exporters up to the Mexican border. That should change.

NAFTA will be welcomed by many U.S. banks. Regional and smaller banks located near the Mexican border, as well as money-center banks, have expressed strong support. Two-way benefits. The free-trade agreement currently being worked out among the U.S., Canada, and Mexico "represents an important market opportunity for commercial banks, which we believe should be pursued in our national interest," said ABA. U.S. banks could make use of a more open competitive environment to broaden their markets, improve profitability, and diversify risk.

The benefits for Mexico are clear, too. Growing employment and higher income resulting from increased exports under the trade agreement could improve Mexico's economic and social prospects. Increased exports could help Mexico pay off foreign debt, the bulk of which is held by U.S. banks.

To make the free trade agreement work, ABA said, banks should be permitted to branch into Mexico and Canada with full access to the two countries' financial markets, payments systems, capital markets, and automated teller machine networks. ABA also said that the three nations should work out favorable tax agreements. …

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