How Strong is the Case for Free Trade in Financial Services? Walking the Tightrope between Domestic Stability and International Shocks

• Published in: World economy Vol. 22; no. 9; pp. 1221 - 1232
• Main Authors: Steinherr, Alfred, Perée, Eric
• Format: Journal Article
• Language: English
• Published: Oxford, UK and Boston, USA Blackwell Publishers Ltd 01-12-1999; Basil Blackwell for the Trade Policy Research Centre, etc; Blackwell Publishing Ltd
• Subjects: Alliances; Convergence; Economic impact; Economic theory; European Union; Exchange rates; Finance; Financial services; Free Trade; International economics; Manycountries; Negotiation; Studies; Trade in services
• ISSN: 0378-5920; 1467-9701
• DOI: 10.1111/1467-9701.00256

This paper reviews the arguments in favor of free trade in financial services, tempered by the practical experience gained during the financial crises of 1997-1998. As such this paper may be useful background material for the next round of WTO negotiations. Financial services were already on the agenda of the last round of trade negotiations where liberalization met considerable resistance from emerging and developing countries. Also, the industrial world does not represent a homogenous block. US and UK policies are much more pro-free trade in financial products than those of other countries. Several OECD member still maintain limitations to free trade in financial products, while several countries of the EU have only eliminated restrictions in the early 1990s as part of the run-up to monetary union.