Will the Third World open to business?
13 September 1999
Kees Jan Kuilwijk, senior associate, Herbert Smith
Tom McQuail, partner, Lovell White Durrant
Konstantinos Adamontopolous, head of european law, Hammond Suddards
City lawyers are looking forward to the World Trade Organisation (WTO) ministerial talks, where governments will thrash out the agenda for the liberalisation of financial services in the Third World.
The talks will take place in Seattle in November and will concentrate on breaking down barriers such as licensing and tax rules which stop financial services companies operating in the WTO's 135 member states.
Many developing countries operate protectionist policies to prevent companies entering these markets and are likely to oppose change.
However, a powerful lobby is assembling in the West. Former foreign secretary Lord Douglas Hurd is holding a meeting of City and services industry chiefs this month in a bid to shape the Seattle agenda.
But will the talks open doors for City firms? Or will developing countries deny western lawyers the prospect of expansion?
Kees Jan Kuilwijk, senior associate in charge of the trade law department at Herbert Smith, says a growing number of clients want to move into Third World countries. He says if the talks are successful, WTO-related work will become as important to firms as EU competition law.
Kuilwijk says several law firms have already set up world trade groups, including Ashurst Morris Crisp, Clifford Chance, Lovell White Durrant, Linklaters & Alliance and Herbert Smith.
Kuilwijk says: "Work on competition law refers to Europe and that is just 15 member states, but the WTO has 135 member states. It would be logical for firms to have WTO experts in their offices."
However, Kuilwijk hopes the WTO will adopt a policy of "national treatment", which will ban countries from discriminating against any other member state on financial services issues.
He adds that since the WTO replaced the General Agreement on Tariffs and Trade in 1995, about 140 complaints of unfair practice have been lodged and 50 cases have been investigated.
Tom McQuail, competition law partner at Lovell White Durrant's Brussels office, supports greater market freedom, but says the rights of all parties must be protected.
"It is a fairly complex issue and that is illustrated by the history of trade even where there is a reasonably open market in, for example, the US and Europe. But problems have arisen and still do arise, for example, the banana dispute [involving a claim that the EU discriminates against Central American growers and the US companies which market the products] which has been going on for a long time," he says.
"From the Third World countries' perspective, they may wish to protect national firms against large multinational firms. But these fears are not necessarily justified.
"Opening up those markets encourages investment and development. However, it should not be imposed on those countries and obviously there should be safeguards against exploitation."
Konstantinos Adamontopolous, head of the European law unit at Hammond Suddards, says: "Third World countries operate from a very protectionist environment and it is very difficult to establish financial services there.
"Countries may remove trade barriers but have traditionally been more reluctant to eliminate barriers regarding services, and different countries pursue different agendas. For example, the UK is very good on financial services and so is keen to open up worldwide."
He predicts the financial services sector will do well out of the talks but warns there is a danger the farming lobby may force compromise.
"The agricultural lobby is a famously very dynamic form of demonstration and when the farmers come over to Brussels that is the worst scenario for the European Commission.
"But this is a horse-trading exercise and financial services is a strong lobby."