Financial Services Negotiations under the General Agreement on Trade in Services (GATS): A Case Study of Indian Banking and Insurance Sectors

The General Agreement on Trade in Services (GATS) was entered into force on 1 January 1995 along with other WTO Agreements. The objective of the Agreement is to establish a multilateral framework of principles and rules for trade in services with a view to the expansion of trade under conditions of transparency and progressive liberalization and as a means of promoting the economic growth of all trading partners and the development of developing countries. At the end of the Uruguay Round (UR) negotiations in 1994, negotiations on financial services, along with telecommunications and maritime transport, remained unfinished. During these negotiations developed countries like Canada, Japan, Sweden and Switzerland proposed a ‘two-track’ approach to liberalisation of financial markets. It means a ‘lower track’ commitment by countries with low per capita income and richer countries would expected to undertake tougher ‘fast track’ commitments. The Asian countries are objected to this and they feared that this would use as a pressure tactic to liberalise their financial service sector prematurely which was considered as fundamental to their economic independence and development. The Second Annex on Financial Services to the GATS and the Decision on Financial Services provided for extended negotiations in this sector. The negotiations were to be held during a six-month period following the entry into force of the GATS; i.e. until the end of June 1995.