Financial Services Trade After the Crisis: Policy and Legal Conjectures

Abstract

The financial crisis of 2008-09 has cast palpable doubt on the relevance of the current legal framework governing trade in services for financial crisis prevention and management. The crisis revealed the limited utility and effectiveness of services trade law in dealing adequately with the trade-related regulatory fallout from the financial upheaval and the potentially distortive measures taken to mitigate its effects. Even as the crisis had little to do with trade policy as a contributing factor, such a statement still leaves unanswered the question of whether services trade law can or should play a more critical role in shaping the post-crisis financial architecture. The paper posits a number of trade-related policy and legal ramifications flowing from the financial crisis and its resolution. The post-crisis period affords a unique opportunity to clarify the scope of GATS law in financial services; establish with greater precision the remit of the prudential carve-out; and complete long stalled rule-making journeys on the key outstanding GATS disciplines of necessity and subsidies without which the law of services trade runs the very genuine risk of remaining a construct more theoretical than real.

Keywords: WTO, GATS, financial crisis, financial services, prudential carve-out, subsidies in services

JEL Classification: F02, F13, F23, F36, F42, F53, G01, G15, G18, G38, K33