May 15, 1992
TO: INTERNATIONAL COMMITTEE NO. 11-92
RE: INSTITUTE LETTERS TO TREASURY CONCERNING NAFTA NEGOTIATIONS
__________________________________________________________
In the attached letters to the Department of Treasury the
Institute expressed its concerns regarding the ongoing
negotiations for a North American Free Trade Agreement.
The U.S. proposal that the Agreement permit a broad range
of cross-border financial services to date has been rejected by
both Canada and Mexico. In lieu of the U.S. proposal, Canada
recently proposed that the Agreement impose a standstill that
would prohibit any new limitations on cross-border activities.
However, a standstill may serve to lock the U.S. market into an
open position while securing little if any increased access for
U.S. advisers abroad.
In the absence of an agreement to permit cross-border
advisory services, a U.S. investment management firm seeking to
advise and distribute Mexican mutual funds may be required to
establish a Mexican securities firm subject to a $10 million
capital requirement. In addition, Mexico seeks to limit U.S. and
Canadian firms to a specified market share and impose caps on the
market participation of individual firms as well. The Institute
proposed that U.S. firms should be allowed to establish one or
more special purpose subsidiaries in Mexico that would perform
investment advisory and fund underwriting services only and that
would not be subject to a $10 million capital requirement. Such
special purpose firms should be subject to their own market share
caps, determined independently of the caps imposed on securities
firms generally.
We will keep you informed of developments in the
negotiations.
Angela C. Goelzer
Assistant Counsel - International
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