Throughout recent history, we can identify periods during which isolationist and protectionist forces seem to dominate the international arena, and other periods during which trends toward greater openness have prevailed and have led to an increase in all forms of international commercial transactions. Although the pressure from different types of protectionist interests at the international level is still considerable--and it is even debatable whether, in the final analysis, the progress we have seen toward the establishment of regional groups means progress toward enhanced relations among countries globally, or whether it simply amounts to the establishment of barriers between different regions--we cannot deny the fact that we are witnessing a revival of views favoring free trade at different levels in several areas of the world. This resurgence in pro-free-trade views can be seen not only at the global level, but also at the regional level, where we are seeing the establishment or revival of a number of arrangements that tend to be outward-looking rather than isolative in tenor.
Many of these views in support of greater openness focus on trade in services, which, as has been reiterated many times, is continually increasing in economic significance, gaining ground on trade in goods. A major component of trade in services is undoubtedly financial services, which I shall discuss here.
I will begin by making a few general comments in Part II about the implications of the progress toward more liberal trade in financial services. In Part III, I will briefly review some of the contents and ideas relating to financial services reflected in the framework of the General Agreement on Trade in Services (GATS), which establishes the basic principles and some specific commitments to guide the process of liberalizing trade in financial services at the multilateral level.
Next, in Part IV, I will touch upon certain specific aspects of the North American Free Trade Agreement (NAFTA) insofar as they relate to trade in financial services. I will look at this arrangement as one which, while based on fundamental principles fairly similar to those of the OATS, establishes agreements within a specific geographic area that are in many aspects more concrete than those concluded in the Uruguay Round. In Part V, I will examine the process of liberalization, harmonization, and integration that is underway in the European Union (EU). The EU presents an interesting point of reference, demonstrating the process toward more advanced integration of financial services, with all of its accompanying ups and downs.
Finally, after having examined the basic aspects of the foregoing liberalization processes, I will comment in Part VI on their implications or derivations for Latin America. I will discuss the outlook for future development of the financial systems in the countries of that region within the context of the liberalization and integration processes now underway or soon to begin.
II. GENERAL CONSIDERATIONS
Liberalization of financial services has a very specific connotation, with characteristics that clearly differentiate it from similar processes for goods or even other services. Liberalization of trade in financial services should involve, at the least, work toward the following five fundamental freedoms:
* the freedom to establish a commercial presence in the foreign territory in question through subsidiaries, branches, or offices (the "right of establishment");
* the freedom to offer financial services in the country in question (preferably without being required to obtain specific authorizations from host country authorities);
* the freedom of users to obtain financial services from any supplier without considering the nationality of the supplier or its owners;
* the absence of foreign exchange controls that limit the free circulation of capital; and
* the existence of a single securities market, or at least sufficiently integrated and harmonized securities markets to permit cross-border issuance and trading of all types of securities. …