The present study conducts an economic assessment of the impact financial services liberalization on foreign bank presence, in the context of the World Trade Organization (WTO). It focuses on how the General Agreement on Trade in Services (GATS) affects foreign direct investment (FDI) of commercial banks. For this purpose, an empirical model is developed to test how country-specific locational factors, as well as membership to the GATS and regional trade agreements (RTAs) affect commercial banking FDI. The model is run with FDI flow data for selected GATS signatories during 1990-2004, a period in which membership to several RTAs, as well as progress in GATS liberalization was observed. The findings show there is a strong positive relation between commercial banking FDI and a set of locational factors. Further evidence on the impact of membership to some RTAs in the country sample is found. However, no evidence on the positive impact of GATS liberalization on FDI is found. Considering the results, countries seeking to attract greater FDI will fare better if they improve their location factor conditions unilaterally. The value of the GATS for the present rests on its binding effect on the current level of liberalization. Future trade rounds may bring more promising results for financial services; given that the built-in progressive liberalization agenda of the GATS is an ongoing process.

This book focuses on the relationship between FDI and financial service liberalization in the context of the WTO. By conducting an economic assessment on the extent of GATS liberalization in commercial banking it seeks to empirically clarify if the multilateral liberalization efforts under the WTO promote FDI.

Trade in services, far more than trade in goods, is affected by a variety of domestic regulations, ranging from qualification and licensing requirements in professional services to pro-competitive regulation in telecommunications services. Experience shows that the quality of regulation strongly influences the consequences of trade liberalization. WTO members have agreed that a central task in the ongoing services negotiations will be to develop a set of rules to ensure that domestic regulations support rather than impede trade liberalization. Since these rules are bound to have a profound impact on the evolution of policy, particularly in developing countries, it is important that they be conducive to economically rational policy-making. This book addresses two central questions: What impact can international trade rules on services have on the exercise of domestic regulatory sovereignty? And how can services negotiations be harnessed to promote and consolidate domestic policy reform across highly diverse sectors? The book, with contributions from several of the world's leading experts in the field, explores a range of rule-making challenges arising at this policy interface, in areas such as transparency, standards and the adoption of a necessity test for services trade. Contributions also provide an in-depth look at these issues in the key areas of accountancy, energy, finance, health, telecommunications and transportation services.

This book focuses on the relationship between FDI and financial service liberalization in the context of the WTO. By conducting an economic assessment on the extent of GATS liberalization in commercial banking it seeks to empirically clarify if the multilateral liberalization efforts under the WTO promote FDI.

Though the GATS targets market failures which affect the global provision of financial services (FS), it is far from offering optimal results. Part of the reason rests on the complex architecture of the agreement that allows for a considerable degree of variability in the level and progress of liberalization on a country-by-country basis via the country schedules of commitments.Despite the need for an assessment on the degree of financial services liberalization in WTO member countries, the literature on the topic is scant. This resides in the difficulty of identifying comparable parameters of liberalization, and in trying to observe the de facto level of liberalization, which may divert considerably from the guaranteed level of market access and national treatmetn (NT) inscribed in the GATS country schedules of commitments. The present paper seeks to contribute to the literature on financial services liberalization, with an analysis of the scheduled commitments and most-favored nation (MFN) exemptions undertaken by 30 of the 34 OECD members. This qualitative evaluation hopes to offer insights of the liberalization effect on commercial banking FDI, by highlighting how entry, establishment and competition of foreign banks is determined through market access and NT limitations under the GATS framework.

This paper analyzes the links between multilateral, and unilateral financial liberalization, the former represented by the General Agreements on Trade in Services (GATS). It provides an overview of the main features of the GATS and what the participants in banking and securities within its framework, and compares GATS liberalization with the actual state of liberalization of the participants’ financial sectors. The results suggest that in many countries multilaterally liberalized financial sector policies are more restrictive than the actual state of openness or development of financial sectors. Many emerging markets liberalized little under the GATS despite often well-developed financial markets, while the opposite was true in some less developed developing countries.

The authors estimate that Russia will gain about 7.2 percent of the value of Russian consumption in the medium run from WTO accession and up to 24 percent in the long run. They estimate that the largest gains to Russia will derive from liberalization of barriers against multinational service providers. Piecemeal and systematic sensitivity analysis shows that their results are robust."--Abstract.