When it comes to the determination of American banks, insurance companies, and securities houses to break into the lucrative emerging markets of Asia and Latin America, I stand foursquare behind their objective.
American banks are right to believe that unlocking those markets will pay huge dividends both for themselves and for the world.
I also share America's frustration that some of those markets are not open enough.
These hopes and fears, after all, are almost identical to those of the banking industry in Europe, too.
My overriding aim in pushing hard for a deal on financial services in the World Trade Organization is driven not by some blind faith in the merits of free trade, but by a hard-nosed belief that this will genuinely give us the best lever with which to pry those markets open in the long term.
The European financial industry overwhelming supports this view, but so far some American banks seem to be skeptical. And the Clinton administration has withdrawn its support for a multilateral agreement at this time.
I think it is clear that the rest of the world sees no choice but to push ahead with or without the United States. I am confident that Europe, Japan, Latin America, and the rest of Asia will agree by the end of the month to confirm the package on the table granting one another multilateral, nondiscriminatory treatment for two to three years.
During that period, negotiations for further liberalization will continue. But we need the United States in those continuing liberalization talks, not only because of the sheer weight of its economy but because Europe and America must continue to work together to improve the quality of the existing liberalization blueprint.
U.S. participation is in the interest of the United States. The contrary view is based on several false assumptions.
The first is that America can win better access for its banks by striking bilateral tit-for-tat deals with those whose markets it wants most. In most cases, the emerging economies of Asia and Latin America are not so determined to enter the American, or European, market that they will make serious concessions to Washington in return.
The second false assumption is that Washington has the strength to negotiate bilaterally with so many countries. The interest and frustration of U.S. negotiators is currently focused on a small number of countries. But as economic reform takes hold in Asia and Latin America, American banks will show increasing interest in emerging markets there. Will Washington have the capacity to make 20 or 30 separate deals while U.S. banks wait in the wings before deciding whether to invest?
Third, it is wrong to say that if a developing country grants to the World Trade Organization a lesser degree of access than the nation currently offers, it is setting in stone a new level of protectionism.
When a country makes a commitment to the World Trade Organization, it is pledging never again to shut off its banking market below the level of that offer. That gives greater certainty than foreign bankers now enjoy in such markets. It does not reduce the current level of access. Indeed, without such pledges, those same countries would be free to close their markets altogether at any time, and America would have no recourse against them.
Fourth, it is curiously defensive for banks in an economy as resilient as America to assume that a most favored nation concession is a favor to others and not to oneself. Look no further than the City of London, Europe's greatest financial center, to see just how convinced bankers, insurers, and securities traders are of the merits of opening one's market first. It brings in new business, fuels the creation of ever more sophisticated financial instruments, and provides cheap, quality capital to boost the economy at large.
Banks are the first to gain from all those developments. Nor is it credible to fear the competition that would flow from allowing banks in developing countries to enjoy open access: neither Malaysia or Korea is about to destabilize Wall Street.
We will continue to push for a global, multilateral agreement on an interim basis over a number of years, and will urge our partners to improve their offers right up until the end-of-July deadline. I am convinced that over the years, the benefits of access to capital at competitive rates will sweep away the entrenched resistance to banking reform in some of the emerging economies.
A multilateral pact to open markets will urge this process forward, preventing any one country from slipping back into protectionism if recession strikes or the going gets rough.
