Citing lack of progress in multilateral talks to liberalize trade infinancial services, the U.S. administration has thrown its support behind a bill that would allow the United States to retaliate against countries that don't allow U.S. financial institutions to operate freely in their markets.
Speaking in Washington last week. Treasury Secretary Lloyd Bentsen said the United States will make "a major push over the next few weeks to encourage the key emerging markets of Asia and Latin America to offer better commitments."
"Countries that are now closed must do more than simply offer a standstill that locks in existing barriers against U.S. financial institutions," Mr. Bentsen said.
Hearing Are Reopened
The U.S. official's remarks came as the Senate and House reopened hearings on the Fair Trade in Financial Services Act.
The bill would offer the United States a legal framework for barring foreign financial institutions from operating here if their home countries do not grant U.S. institutions the same opportunities banks from those countries have.
U.S. banking sources said the administration was supporting the legislation in the hope of gaining Congressional support for the North American Free Trade Agreement with Mexico and Canada.
Bankers Show Concern
"The thinking is that if the administration can show it's tough about breaking down barriers to U.S. companies in other countries, it will be easier to get Congressional support for NAFTA," said one senior industry source.
U.S. Bankers generally supported the bill but expressed concern that the U.S. might be moving too aggressively.
This, they said, would ill serve the U.S. economy by locking additional players out and reducing liquidity in the U.S. market.
Targets of Bill
"There's always the worry that it might operate in a mechanized way and some other country might retaliate," said another senior banking source.
"Do we really want to deny foreign financial institutions expansion while you're negotiating to libiralize trade in financial services?"
A senior European Community official, who declined to be identified, said the European Community views the bill as mainly aimed at opening markets in developing countries in Asia and Latin America, and in Japan.
U.S. banks, and to an even greater extent U.S. securities firms, have been pressing for the right to open businesses in countries which restrict foreign competition in their home markets.
Secretary Bentsen specifically mentioned Japan and Latin America as two markets in which the administation has been seeking better opportunities for U.S. financial institutions but said that "we have a long way to go."
"We have made it clear that we will not agree to lock our markets open on an MFN [most-favored-nation status] unless, or until, other countries commit to open their markets to U.S. financial institutions."
Major Push Is Set
"Countries that are now closed must do more than simply offer a standstill that locks in existing barriers against U.S. financial institutions." Mr. Bentsen said.
He added that the administration will make a major push over the next few weeks to encourage the key emerging markets of Asia and Latin America "to offer better commitments."
He also gave clear warning. that the pending legislation would include retaliatory measures against countries which shut out U.S. financial institutions.
"We will not assure countries that keep their markets closed the right to expand operations here," Mr. Bentsen said.