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.