Trade in Financial Services: The Case of Chile
161
raised and debated to take advantage of the opportunity for bilateral negotiation of a financial services chapter. In general, negotiations should be approached in a pragmatic way. First and foremost, one should avoid grand illusions such as converting the domestic financial market into a major global financial services center. Instead, such negotiations rather are mercantilist in character. Marketaccess and national treatment commitments are requested in exchange for often limited commitments on the part of trading partners (especially if these partners are substantially large economies). In particular, in a negotiation with a country that is an exporter of financial services, that exporter’s request for commitments will not be based on a truly tradeliberalizing strategy. Rather, market-access requests will be based on the specific petitions of the domestic exporting financial services industry and will focus on reduced entry and supervision burdens.52 Thus, carefully assessing and anticipating the direction and form of these requests is a crucial element in the preparation of bilateral negotiations. Of course, if a small country has offensive interests, they should be identified from the start, and a strategy for pursuing them in the negotiations should be designed. This aspect relates, for instance, to countries such as Colombia, El Salvador, and Guatemala, which may be interested in providing financial services to migrant workers in the United States. Such interests should also be identified early to assess any political costs that might outweigh the economic benefits of trade liberalization (which mainly accrue to consumers of financial services). Defensive positions will likely emanate from the domestic industry, but financial regulators should also be consulted because they are important stakeholders in the negotiation. Moreover, clarifying the defensive priorities will help when concessions become necessary for closing the negotiations. Another important reminder is that the purpose of these negotiations is enhanced market-access opportunities, not financial integration in terms of mutual recognition or harmonization of prudential standards. That is, the EU or the United States will not be looking to integrate financially with negotiation parties in the same sense as has been done in the EU single market. The basic and fundamental commitment the EU and the United States seek is an environment based on national treatment. Thus, after the negotiations, the financial services providers of the small economy will not necessarily be granted the right to open branches in the foreign market on the basis of their home-country supervision. A good starting point for assessing the likely scope of negotiations and the nature of likely requests emanating from key partners is to perform a