Open access to foreign financial markets is essential to maintaining a viable financial services industry in New York City, said a senior economist at the Federal Reserve Bank of New York.
"The best prospects for growth are in Asia and in Latin America," said Rae D. Rosen, senior economist at the New York Fed.
Speaking to journalists in New York this week, Ms. Rosen argued that the failure of Asian and Latin American financial markets to allow in U.S. firms was slowing growth in employment at American banks, securities firms, law and accounting firms, and insurance and fund management companies.
"We tend to get very excited about shipping apples to Japan but lose sight of the fact that in terms of the future, financial services is where the money is," Ms. Rosen said.
The economist, who is preparing a study on the relation of foreign financial markets to New York City, said employment in banking and other financial sectors has been steadily declining in the city as a result of mergers, restructurings, and the transfer of back office processing to other locations.
Ms. Rosen said there are few opportunities for New York-based firms to expand their businesses domestically.
In contrast, an increasing amount of the activity at banks, securities companies, law firms, and fund managers comes from international operations.
Most cross-border transactions, such as loans or capital market issues, are registered under either New York State or British law.
"New York City and New York State will benefit more than any other city or state from the opening of other financial markets," Ms. Rosen said.
The United States pulled out of international negotiations in June 1995 after failing to gain significant commitments from developing economies to open up their financial markets to foreign competition.
The current agreement regulating international trade in financial services under the Geneva-based World Trade Organization expires in December 1997.
Ms. Rosen suggested that unless the United States obtains concessions, many New York-based firms involved in the financial services business will find their growth stymied because they are unable to open offices needed to expand overseas.
"We tend to focus on goods, rather than services, but services are where the growth is, and services are where New York's strengths are," Ms. Rosen said.
She added that even if many international deals are arranged in New York, U.S. firms still "can't offer the full range of financial services in most countries."
At least one lawyer with a firm that does extensive overseas work agreed with Ms. Rosen's assessment. "As a general rule, the broader the market access, the more business we'd expect to do," said Randal Quarles, a partner with Davis Polk & Wardwell.
