Worldwide deal on financial services close

A global agreement to open the world market in financial services appears to be in reach, despite concern that the economic turmoil in Asia would make governments there wary about further liberalisation.

The negotiations, carried out under the auspices of the World Trade Organisation, begin in earnest on Monday and are due to end on 12 December. If an agreement is reached, a plethora of restrictions across the globe on direct overseas investments by banks, insurance companies and securities houses would be lifted.

"We have seen the momentum really pick up here this week and we are guardedly optimistic that with new offers from 59 countries since April that there is a substantial deal on the table," said a WTO spokesman.

It is the third time that WTO members have tried to reach an agreement on financial services. The first attempt during the 1993 Uruguay Round negotiations ended in failure. An interim accord was reached in 1995 but excluded the US, which walked out of the negotiations because it did not believe Asian governments were offering enough.

All the Asian governments , apart from Indonesia and India, had submitted fresh offers by late last week.

"The problems for a country liberalising are that it might have a weak industry it wants to strengthen before opening up its market," said Andrew Buxton, chairman of Barclays and join-chair of the Financial Leaders Group, an ad hoc committee of financial services executives advising the negotiations. "We don't want an immediate big bang. We would prefer (them to adopt) a programme that last for a few years."

Brian Hindley, a trade expert at the London School of Economics and a staunch free trader, said: "It is a terrible time to ask East Asian countries to make offers of more liberalisation and everyone understands that."

Mr Buxton said the US was unlikely to walk away from the talks again, as this time round the European Union and the US have been working closely together.

But while Asia seems prepared to open up its financial services markets sufficiently to appease the US, WTO officials say Brazil could prove to be the joker in the pack. Brazil has yet to submit its offer and is reluctant to open its financial services market to foreign competition.