The World Trade Organization and financial stability: the balance between liberalisation and regulation in the GATs
The WTO General Agreement on Trade in Services and its Annex on Financial Services provide the international legal framework for the regulation of cross-border trade in financial services. This paper analyses some of the main provisions of the GATS and the Annex on Financial Services to determine its impact on domestic financial regulation and whether the GATS framework can achieve its objectives of liberalising international trade in financial services while allowing states to maintain adequate domestic regulatory institutions. The paper argues that the GATS provides a flexible framework for states to negotiate liberalisation commitments while allowing sufficient domestic regulatory authority to achieve financial stability objectives. The extent to which states can depart from their GATS obligations to achieve regulatory objectives has become the source of academic debate and policy interest. Although the WTO has played little or no role in the financial regulation debate, the GATS contains certain disciplines that could potentially have significant implications for limiting regulatory discretion over financial markets. The paper suggests that the Doha Development Agenda should address some of these issues as they relate to the regulation of cross-border trade in financial services. The role of the WTO in this area raises important issues regarding the institutional design of financial regulation and related issues of global financial governance.