U.S. Praises Global Financial Agreement

Senior Clinton administration officials Saturday praised a landmark global agreement that opens the world’s multi-trillion-dollar banking and insurance sectors to greater international competition, declaring it both a windfall for two of America’s most powerful industries and an important stimulant for new growth in the developing world.

“This agreement is good for America and good for the global economy,” Deputy Treasury Secretary Larry Summers told reporters. He appeared at a White House news conference only hours after delegates from 102 member nations of the World Trade Organization, meeting in Geneva, successfully concluded more than a decade of complicated, often acrimonious negotiations.

Summers and U.S. Trade Representative Charlene Barshefsky also suggested that the accord--and its prospect of cheaper, more plentiful capital--will give an important psychological boost to battered and reeling Asian economies.

“I would hope that the existence of this agreement . . . can contribute to confidence almost immediately,” Summers said. As for its longer-term impact, he said that greater competition in financial services, ranging from bank lending to life insurance, will make capital more easily available to local businesses and entrepreneurs in Asia and elsewhere--a development that can only spur new economic growth.

“We can provide long-term capital that can be invested,” declared Gary Benanav, chairman of New York Life Worldwide Holding Inc. and one of two senior executives whom the White House made available to reporters after the news conference. “They [fast-developing nations] need those kind of funds, not the hot, short-term money that they have been getting.”

*

The Geneva agreement came two years after the United States rejected an earlier version because only 45 other nations offered serious market-opening measures. The current agreement contains 71 national offers, and Barshefsky said some of the most significant initiatives came during the final days before the WTO’s self-imposed deadline of midnight Friday.

The WTO was established in 1995 to set rules for global trading and resolve disputes among its 131 members.

Among the countries that reportedly made last-minute concessions are Indonesia, Brazil and India. Both Summers and Barshefsky said they believed that the turmoil in Asia spurred at least some of these initiatives.

“Countries recognized they would have to come forward with improved offers or there wouldn’t be a deal,” Barshefsky said. “There was never a second thought that we would walk away if the deal wasn’t right.”

Nations must ratify the agreement by the end of January 1999; it is supposed to take effect a month later. Under U.S. law, the accord does not require Senate ratification.

Barshefsky said the accord means whole new areas of business will open up in a sector where American companies have traditionally been among the world’s most powerful players.

Last year, U.S. financial services were sold abroad at seven times the level of foreign financial services sold in the United States. And because the U.S. market was already open to foreign competitors, officials say they gave up little in the just-concluded negotiations in return for greater access abroad.

“Financial services will now be a two-way street,” Summers said. “That will be good for our firms, and it will be good for their citizens.”

*

The broad sweep of the agreement is likely to be key to its impact. Barshefsky said the market-opening commitments cover more than 95% of the world’s $2 trillion in insurance premiums. Substantial chunks of the $38-trillion bank-lending sector and the $18-trillion securities business also fall under the scope of the accord.

To demonstrate business support for the accord, the White House not only made the two executives available for comment but distributed a set of letters from the insurance and banking industries.

Said Benanav, whose company is one of the country’s biggest life insurers: “I believe the entire insurance industry is supportive of this deal.”

However, there was no letter of endorsement from Maurice Greenberg, chief executive of the New York-based insurer American International Group Inc. He has opposed any accord that might let Malaysia force his company to divest part interest in its wholly owned subsidiary there. Malaysia has committed to allow up to 51% foreign ownership of financial services companies operating there but has refused to make exceptions for companies already doing business there under more liberal laws.

Barshefsky said the administration failed to win concessions on the issue but that under the terms of the Geneva agreement, the U.S. reserves the right to take reciprocal action against Malaysia. “This practice of forced divestiture is unacceptable and fully inconsistent with the market-opening character of the WTO agreement,” she said. “We will spend the next 13 months prior to ratification [seeking] improvements . . . with specific countries.”