Cooperation and Convergence: The View from Brussels
The European Union ( EU) is a good example of convergence in the sense that the 15 Member States (MS) have agreed a very close degree of integration between their respective economies, in the areas of capital movement, export of goods, provision of services and movement of persons.
The financial sector is of course a vital component of this economic integration. We have worked hard over the last few years to create convergence in financial services, helped by the complete liberalisation of capital movements, which we have had since 1990. European legislation now provides for freedom to do cross-border business in the insurance, banking and securities sectors, whether on the basis of branches set up in host countries or on the basis of freedom of services.
Although convergence within Europe has been and continues to be a major goal this does not mean that the European market is closed in on itself. A few years ago some commentators saw in our internal market programme the risk that a 'fortress Europe' would result. I believe that experience now shows that this view was quite unjustified.
Capital movements freedom applies just as much to transfers between EU MS and other countries as it does to transfers between MS. The EU territory is open to the setting up of subsidiary companies owned by nonmember state parents, which once incorporated in a EU MS have the same freedoms as locally-owned firms to provide financial services and set up branches in other MS. In other words such companies also have the benefits of the 'European passport'.
What the Commission would like to see is an equally open and liberal policy applied in other world markets. We are very pleased therefore with the outcome of the GATS negotiations in Geneva last July, where the EU negotiators were able to persuade countries like Japan and Korea to maintain their offers of most favoured nation (MFN) status despite a US preference for a more limited approach. We now have a valuable interim agreement which will last until 1997, and which we hope will be the basis for yet further progress.