Asia money woes muddy WTO finance service deal

Asia money woes muddy WTO finance service deal

TOKYO (Reuter): U.S. officials start a swing through key Asian capitals next week to drum up support for a global pact to open financial services markets, but currency turmoil in the region is complicating efforts to forge a deal.

"India is moving in the opposite direction, there is potential for a good part of Southeast Asia to move in the opposite direction, and the Americans are not going to sign unless they get improvements in (other countries') offers," said one financial analyst.

"These will be strenuous negotiations."

Deputy U.S. Trade Representative Jeffrey Lang and a U.S. Treasury official will be in Tokyo on Monday to discuss the status of World Trade Organization (WTO) talks to open up financial services, along with other bilateral trade issues.

Lang then plans to go to South Korea, the Philippines, Malaysia, Indonesia, Thailand and India.

The United States moved in mid-July to spur the WTO talks by holding out the prospect of equal access to its market for all other countries in the Geneva-based body.

Japan, the European Union and Canada have also made fresh offers in the negotiations, which face a mid-December deadline, but Washington is especially keen to see better proposals from key emerging economies in Asia.

Worries

The recent Asian currency crisis, however, has boosted worries in some countries in the region about efforts to ease financial service sector controls.

Thailand, the Philippines and Indonesia have effectively devalued their currencies after failing to fight off speculative attacks, and Malaysia has engaged in expensive intervention and introduced limited capital controls to support the ringgit.

Some critics say liberalization could make the currencies of developing countries more vulnerable to speculators while damaging domestic firms. Malaysian Prime Minister Mahathir Mohamed has called currency speculators "rogues", "robbers" and "anarchists" seeking to destroy economic progress.

Washington, however, has made crystal clear its message to Asia: that the Thai crisis should not be used as an excuse to reverse the drive for freer world financial markets.

"The speculative activity we saw in the weeks leading to the crisis was the result, not the cause, of Thailand's problems," Deputy Treasury Secretary Lawrence Summers told a U.S. congressional group on Tuesday. "We believe the whole world stands to gain from a global, efficient capital market."

Japan, like Canada and the EU, supports the drive for a financial services deal.

But some officials say privately that America's aggressive approach to the talks can do more harm than good. "Sometimes it can be counter-productive," the financial analyst agreed.

Washington pulled out of the last bid to reach a financial services pact in 1995, arguing that proposals from key emerging economies were not sufficient. The EU then convinced other countries to agree to an interim deal excluding the United States. That accord expires at the end of the year.

The next round of formal talks on the WTO pact is slated for September.