Multilateral trade policy in the WTO and bilateral free trade agreements
In the Geneva-based World Trade Organisation (WTO) more than 150 countries negotiate mutual access to their markets, also for banking services. The Doha Round on the further liberalisation of trade in goods and services, launched in 2001, has not yet been concluded. To allow its conclusion, the differing interests of the WTO members when it comes to opening their agricultural, industrial and services markets need to be balanced.
In the run-up to and during the Doha Round, the Association of German Banks contributed its standpoint on liberalisation in general and the liberalisation of financial services in particular. The private banks continue to take the view that the liberalisation of trade, investment and right of establishment will give the German business community new profit and growth opportunities through better access to fast-growing foreign markets. For the banks, this would be particularly the case on liberalisation of their right of establishment and operation in emerging-market countries. But, conversely, the European internal market should be kept open to foreign competition so that it remains competitive and adaptable. Sticking to established structures would kill jobs and prosperity in Germany in the long term.
The best route to such liberalisation remains the multilateral route via WTO trade rounds and accession. At the same time, bilateral negotiations on free trade agreements and regulatory dialogues with major economic partners may be helpful.
On the one hand, the WTO, with its large membership, the firmly binding effect of market access commitments by members thanks to an effective dispute settlement mechanism carrying the threat of sanctions for breaches of such commitments and the principle of equal competition (most-favoured-nation principle), remains the preferred trade policy vehicle. In addition, a substantial conclusion to the Doha Round would work like a global economic programme – without fiscal costs.
On the other hand, regulatory barriers can be addressed less effectively within the framework of the WTO and the market access success rate per country is lower than with bilateral agreements between the EU and the same countries. What is more, bilateral negotiations are less complex than multilateral negotiations, so that progress in liberalisation can be achieved faster, even if it is limited to the two negotiating parties and to the detriment of third countries.
Given that the Doha Round has been ongoing since 2001, the EU has since 2006 been looking increasingly to conclude bilateral free trade agreements with third countries parallel to these multilateral negotiations. An agreement with South Korea was signed on 6 October 2010 and, subject to parliamentary ratification, can enter into force in mid-2011. The Association of German Banks welcomes this agreement with one of the EU’s major trading partners. It will make it markedly easier for European banks to offer their services via offices in Korea, which will, not least, also benefit the European companies operating there. Of the numerous negotiations in progress between the EU and other countries, an agreement with India in particular could greatly facilitate market access there for the European financial industry.
Besides multilateral and bilateral trade agreements, the EU has established coordinated European Commission and member state trade diplomacy, by means of which further market access problems encountered by the business community can be addressed. In addition, the European Commission conducts regulatory dialogues with major trade partners (USA, Japan, BRIC countries). In these dialogues, which supplement trade policy, regulatory market access barriers can be dismantled, particularly through recognition of equivalent home-country rules for offices in host countries.
