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He also highlights:
There are reasons why trade in goods and services have had different historical experiences. It has been easier to determine and oversee public policy objectives towards trade in tangible goods, not least because they rely on the use of factors of production in their creation which are more fixed in location and thus easier to act on from of policy perspective. And the Most Favoured Nation principle and practice has a long history in goods trade.
Trade in financial services went down what looks like, with the huge benefit of hindsight, an odd road with the separation of domestic and international markets. It took the global financial crisis to finally lay this idea to rest. The crisis also reminds us powerfully that financial services carry risks which create severe externalities, which can be amplified by cross-border spillovers. The response to the crisis has, of necessity, involved a careful definition of the public interest and the re-design and re-building of the regulatory system at the international and domestic level in order to provide assurance that the public interest will be protected.
Mr. Bailey sais: “This leads to two important questions. First, can open financial markets and free trade exist on a stable basis? Second, is the regulatory system so complicated and delicate that it can only exist in a manner that supports free trade and open markets inside regional trade blocs? You will by now be unsurprised to know that my answers to these questions are – yes, free trade in financial services can exist on a stable basis, and – no, it does not have to be confined within regional blocs. Common regulatory standards are a necessary condition for free trade in finance, and they can also be a sufficient condition. Multilateral open markets are a prize worth having for all. Of course, they can only exist with the broad support, and to ensure that outcome the case for free trade has to be repeated.”