Contingent Commercial Policies and the Credibility of Financial Market Liberalization

Abstract

The focus of this essay is on the rationales for, and potential implications of, applying contingent commercial policies to trade in financial services. This is a neglected issue in the international finance literature, which tends to focus on the effects of (usually exogenous) monetary and fiscal policies on output and relative prices (especially exchange and interest rates). The existence of accessible contingent commercial policies is likely to have important implications for the credibility and feasibility of further liberalization of financial markets. While attention will center primarily on financial services, the issues addressed here are quite general, in that they pertain to most types of traded services, particularly those subject to regulatory oversight.