The Doha Round and Financial Services Negotiations

The Doha Round and Financial Services Negotiations AEI STUDIES ON SERVICES TRADE NEGOTIATIONS Claude Barfield, series editor THE DOHA ROUND AND FINANCIAL SERVICES NEGOTIATIONS Sydney J. Key INSURANCE IN THE GENERAL AGREEMENT ON TRADE IN SERVICES Harold D. Skipper Jr. LIBERALIZING GLOBAL TRADE IN ENERGY SERVICES Peter C. Evans REDUCING THE BARRIERS TO INTERNATIONAL TRADE IN ACCOUNTING SERVICES Lawrence J. White The Doha Round and Financial Services Negotiations Sydney J. Key The AEI Press Publisher for the American Enterprise Institute WA S H I N G T O N , D . C . 2003Available in the United States from the AEI Press, c/o Client Distribution Services, 193 Edwards Drive, Jackson, TN 38301. To order, call toll free: 1-800-343-4499. Distributed outside the United States by arrangement with Eurospan, 3 Henrietta Street, London WC2E 8LU, England. Library of Congress Cataloging-in-Publication Data Key, Sydney J. The Doha round and financial services negotiations / Sydney J. Key. p. cm. Incl udes bibliographical references and index. ISBN 0-8447-4182-5 (pbk. ) 1. Financial services industry—Law and legislation 2. Foreign trade regulation. I. Title K1066.K49 2003 343†². 087—dc 22 2003063553 3 5 7 9 10 8 6 4 2 Printed in 2003 by the American Enterprise Institute for Public Policy Research, Washington, D. C. The views expressed in publications of the American Enterprise Institute are those of the authors and do not necessarily reflect the views of the staff, advisory panels, officers, or trustees of AEI. The views expressed by the author in this publication should not be interpreted as representing the views of the Board of Governors of the Federal Reserve System or anyone else on its staff. Printed in the United States of America Contents QFOREWORD, Claude Barfield ACKNOWLEDGMENTS 1 2 INTRODUCTION INTERNATIONAL TRADE IN FINANCIAL SERVICES E-Finance 6 Modes of Supply 7 Services Provided across Borders 8 Foreign Direct Investment 9 Presence of Natural Per sons 9 LIBERALIZATION AND REGULATION Three Pillars of Liberalization 12 National Treatment and Market Access 13 Nondiscriminatory Structural Barriers 15 Freedom of Capital Movements 18 Strengthening Domestic Financial Systems 20 Minimum Standards and Codes of Good Practices 22 â€Å"Surveillance† 23 The Prudential Carve-Out in the GATS 24 NATIONAL TREATMENT AND MARKET ACCESS â€Å"Binding† Existing and Ongoing Liberalization 28 IMF Conditionality 30 Permanence of GATS Commitments 31 Foreign Direct Investment 32 Remaining Barriers to Entry and Operation 33 MFN Exemptions 34 Barriers within the Scope of the Prudential Carve-Out 35 Cross-Border Services 37 Binding Gaps versus Remaining Barriers 38 Uncertainty about WTO Jurisprudence 39 v vii xiii 1 4 3 11 4 27 vi CONTENTSMore Liberal Approaches for Wholesale Services 39 Evolving Regulatory Responses to Retail Cross-Border Services 40 Negotiating Goals 41 5 NONDISCRIMINATORY STRUCTURAL BARRIERS Regulatory Transparency 44 R ules about Developing and Applying Rules 44 Sound Financial Systems 46 â€Å"Effective Market Access† 47 General Anticompetitive Measures 49 â€Å"Necessity† and Domestic Regulation 50 Recognition of Prudential Measures 51 Harmonization 52 Facilitating Access 52 The Intra-EU Approach 53 Remaining Second-Pillar Barriers 54 Applicability of the Intra-EU Approach 55 CONCLUSION 43 6 57 61 87 101 107 NOTES REFERENCES INDEX ABOUT THE AUTHOR Foreword Q In advanced industrial economies, the services sector accounts for a substantial portion of each nation’s gross domestic product.Despite the increasing importance of trade in services, the General Agreement on Trade in Services (GATS), which was negotiated during the 1986–94 Uruguay Round and entered into force in January 1995, marked the first time that rules for opening markets in services were included in the multilateral trading system. The GATS called for periodic negotiating rounds, beginning no later than 2 000, to achieve further liberalization of trade in services. Serious individual sector negotiations, however, did not shift into high gear until a comprehensive new round of multilateral trade negotiations was launched at the November 2001 ministerial meeting of the World Trade Organization (WTO) in Doha, Qatar. The American Enterprise Institute is engaged in a research project to focus on the latest round of trade negotiations on services.Mounted in conjunction with the Kennedy School of Government at Harvard University, the Brookings Institution, and the Coalition of Service Industries Research and Education Foundation, the project entails analysis of individual economic sectors: financial services; accounting; insurance; electronic commerce; energy; air freight and air cargo; airline passenger services; and entertainment and culture. Each study identifies major barriers to trade liberalization in the sector under scrutiny and assesses policy options for trade negotiators and inte rested private sector participants. AEI would like to acknowledge the following donors for their generous support of the trade-in-services project: American Express Company; American International Group; CIGNA Corporation; FedEx Corporation; Mastercard International; the Motion Picture Association of America; and the Mark Twain Institute. I emphasize, however, that the vii viii FOREWORD conclusions and recommendations of the individual studies are solely those of authors.Issues for the Financial Services Negotiations In this study, Sydney J. Key analyzes the role of the GATS and the WTO in the liberalization and regulation of the financial services sector and identifies six broad goals for the financial services negotiations in the Doha round. What makes her analysis unique is that she integrates the two very different perspectives of trade policy and financial regulatory policy. Throughout the study, Key emphasizes the complementary and mutually reinforcing relationship between eff orts to open markets under the GATS and the intensive ongoing international work on strengthening domestic financial systems, including prudential regulation and supervision.The study examines the role of the GATS and the WTO in relation to what Key characterizes as the three pillars of liberalization necessary to achieve â€Å"international contestability of markets†: (1) opening markets to foreign services and service suppliers through GATS commitments to provide â€Å"national treatment† and â€Å"market access†; (2) implementing domestic structural reforms that would eliminate nondiscriminatory structural barriers to trade in financial services; and (3) liberalizing capital movements. Key explains that the GATS deals with third-pillar liberalization only insofar as it affects countries’ specific commitments to liberalize trade in services; in general, liberalization of capital movements is a matter of concern for the International Monetary Fund (IMF). Key emphasizes the importance of focusing on fundamental first-pillar liberalization in the Doha round financial services negotiations and sets forth four first-pillar goals: first, binding in the GATS existing and ongoing liberalization that provides market access and national treatment; second, removing remaining barriers to national treatment and market access and binding the resulting liberalization; third, narrowing or withdrawing the broad exemptions that some countries have taken from the most favored nation (MFN) obligation of the GATS; and, fourth, using an incremental approach for cross-border services that combines strengthening GATS commitments and achieving greater liberalization in practice. CLAUDE BARFIELD ix How far should the Doha round financial services negotiations extend into the realm of second-pillar liberalization?Like other authors in this series, Key grapples with the role of the GATS with regard to the domestic structural reform needed to reduce or elimina te nondiscriminatory structural barriers to trade in services. Key believes that the Doha round financial services negotiations should proceed selectively by concentrating on the areas in which the GATS and the WTO have a comparative advantage. She singles out two particularly important second-pillar goals for the Doha round financial services negotiations: developing stronger GATS disciplines on regulatory transparency; and removing barriers to â€Å"effective market access† and binding the resulting liberalization.Key argues that GATS rules on transparency in developing and applying regulations, together with the closely related principle of procedural â€Å"fairness† in applying regulations, would not only help eliminate barriers created by opaque and unfair regulatory procedures but also help ensure that a country does not use its regulatory process to undermine its commitments to national treatment and market access. Key explains how GATS rules on transparency in financial services regulation could both complement and build upon the work on transparency that is part of international efforts to strengthen domestic financial systems. The other second-pillar goal set forth by Key involves anticompetitive domestic regulatory measures that cannot be justified on prudential grounds and serve primarily to keep foreign financial firms from competing in host-country markets by making entry impractical or too costly—thereby denying them â€Å"effective market access. Key explains that identifying barriers to effective market access that could be negotiated in the Doha round requires a country’s trading partners to determine whether, in practice, a host country’s measures keep foreign firms from competing in its markets and whether a â€Å"critical mass† of regulators believes that the measures are inappropriate for prudential purposes. She points out, however, that even if the prevalent regulatory view is that the measures cannot be justified on prudential grounds, host-country regulators must be persuaded to accept it. What about barriers to trade in financial services that are created by legitimate prudential measures? Key explains the importance of the â€Å"prudential carve-out† for domestic regulation in the GATS Annex on Financial x FOREWORDServices: it ensures the GATS will not interfere with the ability of national authorities to exercise their responsibilities for prudential regulation and supervision to protect consumers of financial services and to promote the integrity and stability of the financial system. She notes that while prudential measures sometimes impose additional requirements on foreign firms, they may also create barriers simply because they differ among countries— that is, financial firms operating on a global basis may often find it burdensome to comply with a multitude of different national rules. Key identifies two approaches for dealing with barriers create d by prudential measures.One would have home-country regulatory authorities convince host-country authorities that their prudential concerns can be addressed with less sweeping requirements. These efforts could take place bilaterally or in various international fora, including the financial services negotiations under the auspices of the WTO, where finance ministries play a major role. A second approach would have home- and hostcountry authorities negotiate a recognition arrangement. Although the GATS Annex on Financial Services facilitates unilateral or mutual recognition of prudential measures by permitting a departure from the MFN obligation of the GATS for such arrangements, Key explains why the WTO is not the appropriate forum for their negotiation.In conclusion, Key summarizes the forces affecting the outcome of the Doha round financial services negotiations and the importance of that outcome to the process of financial sector liberalization: Success in achieving the financial services goals discussed in this study depends significantly on factors beyond the scope of the negotiations. As the GATS explicitly recognizes, liberalization of trade in financial and other services is an ongoing process. For financial services, this process is being driven in large part by market forces and new technologies. It is also being driven by the growing recognition among policymakers that market opening can benefit host-country consumers of financial services and, at the same time, contribute to the resiliency of domestic financial systems.The development of international minimum standards and codes of good practices for sound financial systems and their implementation by individual CLAUDE BARFIELD xi countries provide a strong foundation for moving ahead with further liberalization of trade in financial services. The negotiations in the Doha round can play an important role in helping to accelerate the process of liberalization as well as solidifying its results in th e form of binding commitments subject to the WTO dispute settlement mechanism. CLAUDE BARFIELD American Enterprise Institute for Public Policy Research Acknowledgments Q The author greatly appreciates the assistance of the many individuals who read all or part of the manuscript and provided valuable comments and suggestions in their areas of expertise.She would like to thank Alistair Abercrombie, Claude Barfield, Nicholas Bayne, Stijn Claessens, Steven Fabry, Bernard M. Hoekman, Cecilia Klein, Masamichi Kono, Robert D. Kramer, Patrick Macrory, Ann Main, Marilyn L. Muench, Kathleen M. O’Day, Patrick Pearson, Mary S. Podesta, Amelia Porges, Peter E. W. Russell, Hal S. Scott, Richard E. Self, Jonathan D. Stoloff, and T. Whittier Warthin for reading the manuscript in its entirety. She would also like to thank Peter Berz, Barbara J. Bouchard, James M. Boughton, David T. Coe, Kenneth Freiberg, Ralph Kozlow, Ross B. Leckow, Michael D. Mann, Juan A. Marchetti, Peter K. Morrison, Will iam A. Ryback, David Strongin, Mark W. Swinburne, Andrew Velthaus, and Obie G.Whichard for reading drafts, and often redrafts, of particular sections. Finally, the author would like to thank Juyne Linger for her work in editing the manuscript. xiii 1 Introduction Q The General Agreement on Trade in Services (GATS), the first global trade agreement to cover financial and other services, is an important new element in the international framework for liberalization and regulation of the financial sector. Participation in the GATS, however, does not necessarily mean that a country has made strong commitments to open its markets to foreign services and service providers. Indeed, the strength of commitments varies substantially among countries.The GATS therefore requires periodic negotiating rounds on financial and other services to improve commitments and thus achieve â€Å"a progressively higher level of liberalization. †1 The GATS was negotiated in the Uruguay Round, which was l aunched in 1986 and formally concluded in April 1994. 2 Financial services, however, was one of several sectors for which negotiations on specific commitments were extended, and final agreement was not reached until December 1997. 3 In 2000, in accordance with the deadline established by the GATS for initiating a new round of services negotiations, work began again on financial and other services. This occurred despite the failure of the Seattle ministerial meeting of the World Trade Organization (WTO) in December 1999 to launch a comprehensive new round of trade negotiations.Subsequently, at the Doha ministerial meeting in November 2001, WTO members reached agreement on an agenda for comprehensive multilateral trade negotiations that incorporated the so-called â€Å"built-in† agenda for financial and other services. 4 The ministerial declaration set January 1, 2005, as the deadline for completing the Doha round; the declaration called for the next ministerial meeting, subseq uently scheduled for September 2003 in Cancun, to assess progress and provide any necessary political guidance. 5 1 2 THE DOHA ROUND AND FINANCIAL SERVICES NEGOTIATIONS For financial services liberalization, four aspects of the GATS and the WTO are particularly significant: First, the WTO is a multilateral forum in which the primary goal is reducing or eliminating trade barriers to promote competitive markets and thereby support economic growth and development.The new prominence of this goal at the multilateral level complements the intensive work on strengthening domestic financial systems in a variety of other international fora, ranging from institutions such as the International Monetary Fund (IMF) to specialized bodies such as the Basel Committee on Banking Supervision. 6 Indeed, the efforts to liberalize trade in financial services and the efforts to strengthen domestic financial systems, including prudential regulation and supervision, are mutually reinforcing. In addition, t he WTO is a forum in which all members have the opportunity to participate on an equal basis. Multilateral trade agreements are negotiated in the WTO without the â€Å"conditionality† that links IMF or World Bank financial assistance to the implementation of specific policy measures by a borrowing country. In principle, therefore, GATS commitments to liberalization have â€Å"domestic ownership†Ã¢â‚¬â€that is, they reflect a country’s recognition of the need for policy reform—a quality that the IMF has found to be a crucial determinant of the success of its programs. 8 Second, the GATS provides a mechanism for parties to undertake legally binding commitments subject to enforcement under the WTO dispute settlement mechanism. A GATS commitment is permanent in that it cannot be withdrawn without compensation of trading partners. Failure to honor a commitment could open a country to a dispute settlement proceeding and, ultimately, WTO-sanctioned retaliatory measures by its trading partners. Thus, backsliding in the face of protectionist domestic political pressures could be extremely costly. As a result, binding even the status quo is extremely important.Moreover, for negotiations that stretch over many years, the â€Å"status quo† in the final phase is often different from that at the outset of the negotiations, in part as a result of the negotiating process itself. Third, the GATS is based on the most-favored-nation (MFN) principle, which precludes discrimination among foreign countries. Under the MFN obligation of the GATS, a WTO member must accord to services and INTRODUCTION 3 service suppliers of any other member treatment â€Å"no less favorable† than the treatment it provides to â€Å"like† services and service suppliers of the most favored foreign nation. 9 The reach of the MFN obligation is very broad ecause it applies to all measures affecting trade in services that are covered by the GATS, not just thos e for which a member has made specific commitments to liberalization. 10 Although the GATS does allow members to enter into economic integration agreements—such as the Treaty establishing the European Community (EC Treaty)11 and the North American Free Trade Agreement (NAFTA)—without extending the benefits of the agreements to all WTO members, it establishes stringent criteria for an agreement to qualify for this exception. 12 If a WTO member undertakes liberalizing measures in connection with services obligations in an agreement that does not meet the criteria, it must apply the measures to all WTO members on an MFN basis. 3 Fourth, the GATS negotiating process can itself have a positive impact on domestic policymaking, particularly in emerging market economies and other developing countries. Governments that participate in the negotiations are forced to account to their trading partners for the barriers they impose and to explore the possibility of overcoming domesti c political constraints to reduce or eliminate those barriers. A continuing challenge for the trading partners is to use the GATS negotiating process to provide support for and to harness political and market forces that are creating pressures for liberalization within a host country. In this regard, a country’s â€Å"readiness† for reform is critical. Thus, the outcome of the GATS process depends heavily on factors beyond its purview.The next chapter of this study presents a brief discussion of the international provision of financial services and their coverage by the GATS. The third chapter provides a framework for analyzing the role of the GATS and the WTO in liberalization and regulation of the financial sector. The fourth chapter focuses on the barriers to national treatment and market access that need to be addressed in the financial services negotiations in the Doha round. The fifth chapter examines nondiscriminatory structural barriers and identifies certain a reas of domestic structural reform that could usefully be dealt with in the GATS negotiations. The final chapter presents the conclusions of this study. 2 International Trade in Financial Services QThe financial sector is a critical component of a nation’s economy: It not only contributes directly to output and employment but also provides an essential infrastructure for the functioning of the entire economy. The financial system serves as a channel through which savings can be mobilized and used to finance investment and, at the same time, facilitates transactions necessary for internal and external trade. It also helps to manage risks and reduce so-called information asymmetries between providers and users of funds. 1 For these reasons, a sound and efficient financial system is imperative for economic growth and development. A sound financial system also increases the resiliency of a nation’s economy, thereby helping it to withstand external shocks such as movements in exchange rates or a major increase in global interest rates.International trade in financial services—together with enhanced prudential regulation and supervision and other basic structural reforms—can play an important role in helping countries build financial systems that are more competitive and efficient, and therefore more stable. Financial services trade can enhance capital market efficiency; improve the quality, availability, and pricing of financial services; stimulate innovation through the dissemination of new technologies, know-how, and skills; and promote the use of international good practices in areas such as accounting, risk management, and disclosure of financial information. 2 The rapid growth of trade in financial services in recent years reflects a combination of economic, technological, and regulatory factors. These include new and expanding markets in developing and transition economies, technological advances, and progress in reducing or elimin ating a variety of host-country barriers (see chapter 3). 4 INTERNATIONAL TRADE IN FINANCIAL SERVICES 5 Trade in services, as defined in the GATS, includes services provided across borders and through foreign direct investment. The cross-border provision of services—for example, the provision of financial services from an office located in one country to residents of another country— is broadly analogous to trade in goods. 4 By contrast, foreign direct investment involves the establishment of a commercial presence, such as a branch or subsidiary, within a host country. 5 The GATS approach of defining international trade to nclude services provided to host-country customers through the establishment and operation of a commercial presence differs from the approach used for balance-of-payments purposes, in which once a local branch or subsidiary has been established, the services it provides to host-country customers are treated as domestic. 6 In this study, the term â₠¬Å"financial services† refers to financial services other than insurance, which is the subject of another study in this series. 7 Although the GATS definition of financial services encompasses both â€Å"insurance and insurance-related services† and â€Å"banking and other financial services (excluding insurance),†8 they have been negotiated and listed in the financial services schedules as separate subsectors. 9 These subsectors are, however, closely linked.Many of the major commercial and investment banks operating internationally are part of financial conglomerates that also include firms engaged in insurance underwriting, and banks often engage directly in insurance brokerage activities. Moreover, the development of new types of products and instruments is blurring the distinctions between financial subsectors. Major financial firms now provide a wide range of financial services to customers in other countries. These include commercial banking activities such as lending and deposit-taking; investment banking activities, such as underwriting securities and advising on mergers and acquisitions; trading activities, that is, brokering and dealing in securities and other financial instruments; and asset-management activities, including management of mutual funds and pension funds.Other financial services provided internationally include financial information and data processing services; investment advisory services; payment and money transmission services, including credit cards; settlement and clearing for financial assets; and financial leasing. 6 THE DOHA ROUND AND FINANCIAL SERVICES NEGOTIATIONS Many financial services provided internationally are wholesale in nature; that is, they are provided to â€Å"sophisticated† customers such as corporations and institutions, other financial services firms, and wealthy individuals. 10 Both foreign direct investment and cross-border supply are important means of providing wholesale financia l services.In the banking sector, when wholesale services are provided through establishment of a commercial presence, direct branches of the foreign bank—if permitted by host-country regulation—are usually a more efficient form of organization than subsidiaries. Unlike subsidiaries, branches are not separately incorporated in the host country and operate using the firm’s consolidated worldwide capital (but see chapter 4 regarding lending limits based on branch capital-equivalency requirements). E-Finance Technological advances have long had a major impact on the conduct of wholesale financial activities. Business-to-business electronic transactions within the financial sector have been used for more than two decades, both domestically and internationally.Financial firms have also provided online services to nonfinancial firms over closed proprietary networks for a number of years. Widespread access to the open network technology of the Internet, however, offers a whole new range of possibilities to provide services to a much broader base of customers at substantially lower costs. As a result, online services provided to wholesale customers—both within and across national borders—are growing rapidly. This growth includes not only traditional financial services but also new types of services designed to facilitate business-to-business e-commerce activities. 11 The same technological and cost-saving possibilities exist for the provision of electronic banking and other financial services to retail customers.Within some countries, the provision of some types of financial services over the Internet and through web-enabled technologies, such as mobile telephony, is expanding dramatically. Prominent examples include discount brokerage and mutual funds in the United States, and banking services in Finland, Norway, and Sweden. 12 The cross-border provision of INTERNATIONAL TRADE IN FINANCIAL SERVICES 7 financial services to retail cus tomers over the Internet, however, is still in its infancy. In general, the international provision of retail financial services still takes place primarily through locally incorporated subsidiaries. 13 Indeed, a number of banks are now using their host-country subsidiaries as a base from which to provide electronic banking services to host-country retail customers.The lack of widespread development of cross-border retail banking and other financial services—through the Internet or more traditional methods—reflects host-country regulatory requirements aimed at ensuring adequate consumer protection, consumer preferences, and tax considerations. Some countries actually require the establishment of a commercial presence to provide retail financial services. Even when regulatory requirements for cross-border services involve nondiscriminatory application of host-country prudential standards, firms operating on a global basis may have difficulty meeting a multitude of diffe rent national requirements. Perhaps even more important, consumers may prefer dealing with a local commercial presence, particularly because redress against a local establishment is usually readily available through the domestic legal system.In addition, in a number of countries, consumers receive more favorable tax treatment on financial products that are provided through locally incorporated entities. 14 Modes of Supply In an effort to include all of the ways in which services are provided internationally, the GATS defines â€Å"trade in services† in terms of four so-called modes of supply. Mode 1 and mode 2 cover services provided across borders; for financial services, the distinction between these two modes is not always clear. Mode 3 covers services provided through establishment of a commercial presence—that is, through foreign direct investment, a term that is not used in the GATS.Mode 4 covers services provided through the temporary presence of â€Å"natural persons,† which includes nonlocal employees of a foreign service provider. The GATS uses modes of supply not only to define the scope of its coverage but also as the basis for specific commitments to liberalization that WTO members undertake. 8 THE DOHA ROUND AND FINANCIAL SERVICES NEGOTIATIONS Services Provided across Borders. In this study, the term â€Å"cross-border services† is used broadly without attempting to assign a geographic location to the transaction. Thus, this study does not attempt to determine whether a transaction â€Å"takes place† in the country of the service provider or in the country of the customer.For example, a cross-border financial services transaction could be carried out in a number of different ways: (a) a representative of, say, a foreign bank might visit the country of the customer to arrange a loan; (b) the customer might travel abroad to visit the office of the foreign bank; or (c) the transaction might take place via telephone , fax , or, increasingly, the Internet, which, in this context, is simply another technological means of delivering the service. 15 The GATS, however, distinguishes between services provided to nonresidents â€Å"from† the country of the service supplier (mode 1 or crossborder supply) and services provided â€Å"in† the country of the service supplier (mode 2 or consumption abroad). Usually—but as currently defined by the GATS, not necessarily—mode 2 involves physical movement of the consumer, such as the movement that occurs in tourism. 6 For financial services, however, the line dividing these two modes of supply is not always clear, especially in the case of example (c) in the previous paragraph. Indeed, because financial services are intangible, assigning a geographic site to their provision across borders is difficult and often arbitrary and will become more so as the importance of e-finance increases. From a regulatory perspective, a major issue is whether, and to what extent, the rules of the host country—that is, the country of the customer—are applied to the cross-border transaction. 17 Suppose, for example, that employees of a foreign bank visit the host country to arrange cross-border loans.Even when the host country does not have a regulatory framework in place for cross-border banking services, host-country bank regulators sometimes look at factors, such as the frequency and duration of visits and the permanence of the host-country infrastructure for the visiting employees, to determine whether, for regulatory purposes, the cross-border activity rises to the level of a host-country office. 18 Or suppose that a foreign broker-dealer solicits host-country customers to purchase securities. Securities regulators often use solicitation— in addition to the actual conduct of business with domestic residents—as INTERNATIONAL TRADE IN FINANCIAL SERVICES 9 criterion for determining whether the foreign firm is subject to hostcountry broker-dealer registration requirements. 19 In response to the increasing use of the Internet by the securities industry, a number of regulators also examine factors such as whether a web site is being used to target host-country customers (see chapter 4). 20 Besides regulatory jurisdiction, another important jurisdictional issue arises in the event of a dispute; here the question is which country’s courts have jurisdiction to try the case and which country’s laws apply. 21 Foreign Direct Investment. The inclusion of foreign direct investment in the GATS reflects its importance as a way of providing services internationally. 2 By contrast, the General Agreement on Tariffs and Trade (GATT) does not cover foreign direct investment; for goods, there is only a relatively narrow agreement, negotiated in the Uruguay Round, on trade-related investment measures (TRIMs). 23 Although the GATS includes establishment of a commercial presence as a mod e of supply, it does not have a separate framework for investment like that of the NAFTA or the widely used bilateral investment treaties (BITs). 24 These agreements cover portfolio investment as well as direct investment in both goods and services. Moreover, unlike the GATS, they include provisions to ensure the protection of investments—specific rules governing expropriation and compensation, for example—and also provide for arbitration of disputes between private investors and host-country governments. Presence of Natural Persons.The fourth mode of supply in the GATS, the temporary presence of natural persons, includes the temporary presence in the host country of employees of firms providing services across borders or through a commercial presence. For example, for financial services, this mode of supply covers the presence of nonlocal staff of a host-country branch or subsidiary of a foreign financial firm as well as agents of the firm visiting the host country to facilitate the provision of cross-border services. 25 Although the presence of natural persons is listed as a mode of supply in the GATS, and members can negotiate sectorspecific commitments, countries usually make commitments for the temporary presence of natural persons as â€Å"horizontal commitments† that 10 THE DOHA ROUND AND FINANCIAL SERVICES NEGOTIATIONS apply to all services sectors. 6 For the financial services sector, however, most countries that belong to the Organization for Economic Cooperation and Development (OECD) have incorporated into their schedules a set of commitments allowing the temporary entry of senior managerial personnel and certain types of specialists in association with the establishment of a commercial presence. 27 3 Liberalization and Regulation Q Policymakers, particularly in emerging market economies, are increasingly recognizing that opening markets to foreign financial firms can benefit both consumers of financial services and the domesti c economy as a whole. As noted in chapter 2, the presence of foreign firms can create more competitive and efficient markets for financial services, thereby supporting economic growth and development and contributing to a more resilient domestic financial system.At the same time, however, ensuring adequate prudential regulation and supervision of financial firms and markets, together with other fundamental domestic structural reforms, is essential to obtain the maximum benefits of liberalization while minimizing the risks. Basic structural reforms include increasing transparency and accountability in both the private and public sectors; introducing effective risk management techniques; and developing the institutional infrastructure, such as insolvency laws and appropriate judicial procedures. Because measures to promote competitive markets and to strengthen domestic financial systems are complementary and mutually reinforcing, the relationship between financial sector liberalizatio n and regulation has two distinct dimensions. On the one hand, liberalization requires reducing or removing anticompetitive regulations that pose unnecessary barriers to trade in services. On the other hand, liberalization requires increasing the strength and quality of certain regulations and, in some areas, introducing new regulations. Thus the process of liberalization involves, inter alia, reaching a consensus on where to draw the line between regulations that are simply anticompetitive barriers to trade—and should therefore be eliminated—and regulations that serve legitimate purposes. For financial services, the GATS contains a â€Å"prudential carve-out† for domestic regulation. 2 In the GATS, the term â€Å"prudential† is used broadly 11 12 THE DOHA ROUND AND FINANCIAL SERVICES NEGOTIATIONS o encompass not only measures to promote the integrity and stability of the financial system (as the term has traditionally been used in banking regulation) but also measures designed to protect consumers of financial services. The prudential carve-out, discussed later in this chapter, is designed to ensure that any obligations undertaken or commitments made in the GATS will not interfere with the ability of national authorities to exercise their responsibilities for prudential regulation and supervision. Whether a particular measure is prudential or simply being used to avoid a country’s obligations and commitments under the GATS is, however, an issue that could be brought before a WTO dispute settlement panel. All countries impose certain rules that are clearly prudential.Even if a measure is prudential, however, it may create a barrier to trade in financial services. This could occur because a host country imposes additional prudential requirements on foreign financial firms vis-a-vis their domestic counterparts. Such barriers could also be created simply because prudential rules differ among countries—that is, even if eac h host country applies the same rules to foreign and domestic firms, financial services firms operating on a global basis often find it burdensome to comply with a multitude of different national prudential rules. A critical question is whether such barriers could be addressed without jeopardizing prudential goals.Specifically, in what areas and under what conditions might financial services regulators be able and willing to recognize each other’s regulations and supervisory practices as being as effective as their own? The GATS is permissive with respect to such recognition arrangements. However, as will be explained in chapters 4 and 5, the WTO is not the appropriate forum for financial services regulators to negotiate recognition of prudential measures. Three Pillars of Liberalization â€Å"International contestability of markets† refers to the creation of markets that are competitive and efficient on a global basis—a goal that can be achieved by removing all types of barriers to foreign participation in hostcountry markets. International contestability is, in effect, based on three pillars of liberalization: (1) national treatment and market access; (2) the LIBERALIZATION AND REGULATION 13 removal of nondiscriminatory structural barriers, that is, domestic structural reform; and (3) freedom of capital movements. For financial services, the GATS has so far dealt mainly with the first pillar. An important question for the Doha round is how far the negotiations should extend into the second pillar. The GATS deals with the third pillar only insofar as it affects countries’ specific commitments to liberalize trade in services; in general, liberalization of capital movements is a matter of concern for the IMF 4 . National Treatment and Market Access. The first pillar of international contestability of markets is liberalization aimed at opening markets to foreign services and service suppliers and ensuring that they enjoy substantially the same treatment as their domestic counterparts. Such liberalization requires reducing or removing barriers that discriminate against foreign services and service suppliers with regard to entry and operation in a host-country market. A host country might, for example, discriminate against foreign financial firms by refusing to grant licenses for their branches or subsidiaries; imposing limitations on their ownership position in domestic firms or on their aggregate market share; or prohibiting them from engaging in certain activities that are permissible for their domestic counterparts.First-pillar liberalization also requires removing various quantitative limitations on the overall provision of services in a host-country market. Although these barriers may not, on their face, be overtly discriminatory, they are typically used to block entry by foreign services and service suppliers. A country might, for example, limit the number of service suppliers in a particular market by rest ricting the number of new licenses that may be issued or by relying on an economic needs test, which involves an assessment of â€Å"needs† in the market by host-country authorities. 6 Because these measures have the effect of imposing some type of quantitative limitation on foreign entry, they are similar to the more overtly discriminatory barriers.To deal with these first-pillar barriers, the GATS uses the principles of â€Å"national treatment† and â€Å"market access. † Article XVII (National Treatment) relies on a generally accepted definition of national treatment—that is, it 14 THE DOHA ROUND AND FINANCIAL SERVICES NEGOTIATIONS requires a host country to treat foreign services and service suppliers no less favorably than â€Å"like† domestic services and service suppliers. 7 Barriers to entry or operation that discriminate against foreign services or service suppliers vis-a-vis their domestic counterparts would therefore be inconsistent with national treatment. The GATS does not attempt to define market access.Instead, Article XVI (Market Access) provides a list of restrictive measures, primarily quantitative, that are typically used by host countries to deny entry to foreign services or service suppliers. A country that does not maintain any of these measures is regarded as providing full market access. 8 The list includes seemingly nondiscriminatory quantitative barriers to entry that apply to both domestic and foreign firms, such as limitations—in the form of numerical quotas or economic needs tests—on the number of service suppliers or their total assets. It also includes quantitative barriers to entry that are clearly discriminatory and thus are also inconsistent with national treatment, such as limitations on foreign ownership interests in domestic firms.As a result, some overlap exists in the national treatment and market access provisions of the GATS—that is, certain measures may be inconsi stent with both national treatment and market access. 9 The list of measures in Article XVI also includes restrictions on the type of legal entity through which services may be supplied—for example, requiring establishment of a subsidiary as opposed to a branch. In the GATS, national treatment and market access are â€Å"specific commitments† as opposed to general obligations. 10 As a result, national treatment and market access do not apply across-the-board to all services sectors; instead, they apply only to sectors, subsectors, or activities that a WTO member specifically lists in its schedule of commitments. 1 If a member is making only a partial commitment to national treatment or market access within a listed sector, subsector, or activity, any limitations must be listed in its schedule. 12 The use of specific commitments for national treatment and market access instead of obligations applicable to all services sectors is in some respects a structural weakness of the GATS. 13 Under a more ambitious approach, such as that used in the NAFTA’s services and investment provisions, national treatment and market access would apply in each sector unless an exception was specifically listed in a country’s schedule of LIBERALIZATION AND REGULATION 15 commitments or one of the public policy exceptions, such as the national security exception, applied. 14 Nondiscriminatory Structural Barriers.The second pillar of liberalization required for international contestability of markets is aimed at removing nonquantitative and nondiscriminatory structural barriers. Such barriers are associated with national measures that do not discriminate between domestic and foreign services and service suppliers. A secondpillar barrier could arise because a national measure is primarily anticompetitive or fosters anticompetitive behavior by private parties. In some cases, the barrier could be associated with the inadequacy or absence of domestic regulationâ €”for example, the lack of an adequate domestic legal framework for insolvency. A second-pillar barrier could also arise because of differences in national rules, including prudential rules, that make it difficult to conduct operations on a global basis.Removing second-pillar barriers goes far beyond achieving national treatment and market access. Those principles ensure that foreign services and service suppliers can enter a host-country market as currently structured and enjoy equality of competitive opportunities vis-a-vis their domestic counterparts. By contrast, second-pillar liberalization represents an effort to create maximum potential competitive opportunities in a host-country market. Achieving this could require major domestic structural reform. This would necessarily involve some degree of convergence of national regulatory systems, either de facto or through negotiated harmonization. A longstanding U. S. rohibition on affiliations between banks and insurance compani es in the United States, which was repealed in 1999, created a major second-pillar barrier for many years. 15 Indeed, the European Union had found it difficult to accept that a European financial conglomerate that included both a bank and an insurance company could engage in only one of these businesses in the United States. Regardless of whether this nondiscriminatory restriction was primarily anticompetitive or could have been justified as a prudential measure, it nonetheless constituted a barrier to trade in financial services. Significant second-pillar barriers are often associated with national regulatory regimes for asset-management services. 16 These include 6 THE DOHA ROUND AND FINANCIAL SERVICES NEGOTIATIONS across-the-board prohibitions on delegation of functions, such as portfolio management and administrative operations, by the host-country office to a foreign affiliate; extremely strict asset-allocation requirements for a domestic mutual fund or pension fund; and rules that prohibit such funds from investing in foreign securities. 17 While asset management activities raise legitimate prudential concerns about ensuring adequate protection of hostcountry customers, these types of measures often serve primarily to restrict competition, particularly competition from foreign firms (see chapter 5).Nondiscriminatory structural barriers to trade in financial services are not limited to financial sector regulation. Barriers in other areas that are particularly important for the effective functioning of the financial services sector, such as lack of adequate frameworks for corporate governance or insolvency, are part of the international work on strengthening domestic financial systems, which is discussed later in this chapter. Ineffective or nonexistent competition policy regimes, which could foster anticompetitive behavior by private parties, can also create major second-pillar barriers. Differences in national tax systems are yet another source of second -pillar barriers.Discriminatory treatment of foreign firms under national tax or competition rules, however, would be a first-pillar barrier. 18 Second-pillar barriers can also arise from a country’s administrative procedures—in particular, a lack of regulatory transparency and procedural â€Å"fairness. † For example, a country might fail to publish all of its laws, regulations, and administrative decisions; administer them in an impartial manner; establish a meaningful procedure for interested parties to comment on proposed regulations; act on applications for licenses within a reasonable period of time; or provide a mechanism for independent review of administrative decisions.Because regulatory transparency and procedural fairness can be extremely effective in ensuring that commitments to market access and national treatment are fully implemented, they constitute an important underpinning of first-pillar liberalization. The European Union’s single-mark et program represents the most far-reaching effort to date to remove nondiscriminatory structural barriers among a group of nations. Predicated on political agreement on goals for economic liberalization, that effort is being carried out in the context of LIBERALIZATION AND REGULATION 17 the unique supranational legislative, judicial, and administrative structure of the European Community. 9 Even within the European Union, however, important nondiscriminatory structural barriers to trade in financial services among the member states are still in place (see chapter 5). The GATS addresses certain types of second-pillar barriers. Article III (Transparency) imposes a general transparency obligation on WTO members to publish all measures â€Å"of general application† that are relevant to trade in services. 20 Article VI (Domestic Regulation) addresses, in fairly general terms, barriers created by domestic regulations. It requires countries to apply such regulations in a â€Å"rea sonable, objective and impartial manner† to avoid undermining commitments to market access and national treatment. 1 Moreover, countries must have appropriate legal procedures to review administrative decisions affecting trade in services. 22 Article VI also mandates further work to develop disciplines to ensure that licensing requirements or technical standards do not constitute unnecessary barriers to trade in services. Pending the completion of this work, countries must refrain from adopting licensing rules or technical standards that are so burdensome, restrictive of trade, or lacking in transparency that they undermine the benefits that could reasonably be expected from their commitments to national treatment and market access. 23 The GATS deals with additional second-pillar barriers for individual sectors in members’ schedules of commitments.The most far-reaching example is in basic telecommunications, where a substantial majority of the countries that have made c ommitments to national treatment and market access in that sector have incorporated into their schedules— using the â€Å"additional commitments† column—a reference paper setting forth â€Å"procompetitive† regulatory principles. 24 Designed for a sector where dominant suppliers often control essential host-country facilities, these principles seek to ensure that a country’s national treatment and market access commitments will not be undermined. Countries committing to the principles undertake, among other things, to maintain measures to ensure network interconnection on nondiscriminatory terms and to prevent certain anticompetitive practices. 25 In the financial services sector, most OECD countries addressed nondiscriminatory structural barriers in their 1997 schedules of commitments 18 THE DOHA ROUND AND FINANCIAL SERVICES NEGOTIATIONS imply by making a general â€Å"best efforts† commitment to remove or eliminate any significant adverse effects of such barriers. 26 In addition, the United States and the European Union used the additional commitments column of their schedules to make â€Å"best efforts† commitments to remove specified nondiscriminatory barriers. For example, the U. S. administration committed to try to work with the Congress to remove Glass-Steagall Act restrictions, a goal that was subsequently accomplished, while the European Union pledged that its member states would try to process applications for licenses for banking and insurance subsidiaries within specified periods of time.Japan, under great pressure from its trading partners, went further and made binding commitments regarding removal of certain second-pillar barriers—including restrictions on asset-management services and lack of regulatory transparency and limitations on lines of business in insurance—that were covered in its bilateral financial services agreements with the United States (see chapters 4 and 5). Freedo m of Capital Movements. The third pillar of liberalization involves achieving freedom of capital movements across national borders. Such movements comprise international capital transactions—that is, the creation, transfer of ownership, or liquidation of capital assets, including financial assets—and the payments and transfers associated with such transactions. 27 Restrictions on international capital movements are usually imposed on the underlying transactions as opposed to the related payments and transfers. 8 For example, if a country wished to restrict foreign direct investment in the banking sector, it could prohibit foreign financial firms from acquiring significant ownership interests in host-country banks: it would be unusual to try to achieve this result by permitting the acquisition of the ownership interests while using exchange controls to block payment for them. 29 Although the free movement of capital plays a critical role in allowing efficient allocation of resources on a global basis, the Asian financial crisis of 1997–98 revived a long-standing debate over the appropriateness and effectiveness of capital controls, particularly on short-term flows. 0 Nevertheless, all parties to the debate agree that capital controls can never be a substitute for sound macroeconomic policies and fundamental reforms of domestic financial and legal structures. Indeed, the Asian crisis itself emphasized that weaknesses in domestic financial systems can create significant vulnerabilities LIBERALIZATION AND REGULATION 19 as capital movements are liberalized. At present, conventional wisdom holds that, although imposition of new capital controls should, in general, be avoided, the imposition of limited, temporary capital controls to deal with massive temporary inflows or outflows of short-term debt might be useful in some cases. 1 Moreover, it is now widely recognized that removal of existing controls must be carried out with great care. Of parti cular importance are the pace and appropriate â€Å"sequencing† of liberalization of different types of capital flows and of liberalization of capital movements vis-a-vis structural reforms to strengthen domestic financial systems. 32 Freedom of capital movements per se is not within the purview of the GATS; international capital movements and international trade in financial services are, however, closely related. Establishment of a commercial presence in a host country by a foreign service supplier involves both trade in services under the GATS and international capital transactions.For example, a commitment in the GATS to liberalize financial services trade by allowing foreign financial firms to establish wholly owned subsidiaries is essentially a commitment to allow foreign direct investment that involves the acquisition of 100 percent of the shares of existing or de novo hostcountry financial firms. 33 In theory it is possible that, once established, the subsidiary could conduct its ongoing activities without engaging in additional international capital transactions; however, its activities would need to be limited to transactions with host-country residents involving domestic financial assets. 34 Establishment and operation of branches, which are not separately incorporated in the host country, virtually always involve international capital transactions between the bank’s head office and the branch. 5 These transactions include both foreign direct investment and portfolio investment. 36 For branches conducting a wholesale business, ongoing activities would typically also involve international capital transactions with unaffiliated parties. For cross-border financial services, international capital transactions are typically either integral to, or closely associated with, the provision of the service. For example, international capital transactions are an integral part of accepting deposits from or making loans to nonresidents. In addition, international capital transactions are usually, although not necessarily, associated 20 THE DOHA ROUND AND FINANCIAL SERVICES NEGOTIATIONS ith financial services such as securities trading or asset management on behalf of a customer residing in another country. 37 By contrast, certain crossborder financial services, such as investment advisory services and financial information services, can be provided without an associated international capital transaction. The usefulness of investment advice might be limited, however, if the customer were prohibited from investing in foreign assets. In general, it is difficult to realize fully the benefits of liberalization of trade in financial services without freedom of capital movements. Financial services trade absolutely requires, however, the liberalization of only those capital movements that are necessary for the trade transaction to occur.In recognition of this relationship, Article XI of the GATS (Payments and Transfers) prohibits WTO members from imposing restrictions on capital transactions or associated payments and transfers that would be inconsistent with their specific commitments to liberalization of trade in services. 38 A footnote to Article XVI (Market Access) provides greater detail—namely, a country that has made a specific commitment to market access must allow (a) capital movements that are â€Å"essential† for the provision of a service in mode 1 (cross-border supply); and (b) inward capital movements that are â€Å"related† to a service supplied through establishment of a commercial presence. 39 The bottom line is that if a country makes a commitment to liberalize trade with respect to a particular financial service in the GATS, it is also making a commitment to liberalize most capital movements associated with the trade liberalization commitment.The country is not, however, making an across-the-board commitment to freedom of capital movements. The GATS provisions dealing with capital movements, like GATS specific commitments to liberalize trade in services, are subject to a balance-of-payments safeguard. 40 Both the capital movements and balance-of-payments safeguard provisions of the GATS refer to and are consistent with the IMF’s responsibilities in these areas. 41 Strengthening Domestic Financial Systems The financial services sector has an elaborate and intensively used framework of international fora that are used, both separately and in combination, LIBERALIZATION AND REGULATION 21 o address overall financial and regulatory policy issues; to promote cooperation and coordination among supervisors; to set voluntary but widely accepted international minimum standards and codes of good practices; and, most recently, to provide â€Å"surveillance† of domestic financial systems. This surveillance includes monitoring and helping to build institutional capacity for implementation of the international standards and codes. The international fo ra dealing with these issues include the Group of Seven (G-7), the Group of Ten (G-10), the Group of Twenty (G-20), the Financial Stability Forum, the Basel Committee on Banking Supervision (Basel Committee), and the International Organization of Securities Commissions (IOSCO), as well as the IMF and the World Bank. 2 The international framework for the financial services sector, which has been constructed over the past quarter century and is still evolving, is a response to two major factors: the internationalization of banking and other financial activities; and the special characteristics of the financial sector, especially the phenomenon of â€Å"systemic risk. † Because of systemic risk, problems with one financial firm can be transmitted to unrelated financial firms, both within and beyond a single country. For example, a chain reaction of problems could be triggered through imitative runs on banks as depositors lose confidence in a banking system, through default on do mestic or international interbank obligations, or through domestic or international payment systems.Problems in a country’s financial sector can also affect the real economy, both domestically and internationally, through declines in output and shifts in trade flows. In addition, the existence of global financial firms, with activities falling within many different national jurisdictions, requires cooperation and coordination among home- and host-country authorities to prevent gaps in supervision. Increasingly, these global firms are financial conglomerates, which means that supervisory cooperation and coordination are necessary across financial subsectors as well as national borders. For these reasons, countries have a stake in the quality of each other’s regulation and supervision of the financial sector and also in ensuring cooperation and coordination among supervisors.In this regard it is useful to distinguish between prudential regulation, which includes, for exa mple, capital and other requirements designed to ensure the safety and 22 THE DOHA ROUND AND FINANCIAL SERVICES NEGOTIATIONS soundness of financial institutions, and supervision, which is aimed at making certain that financial firms adhere to such requirements. The importance of strong, effective supervision cannot be overemphasized; without it, the best prudential rules can be meaningless in practice. The extent to which both experience and good judgment are required for such supervision also needs to be emphasized. Indeed, the role and nature of supervision make it particularly difficult for supervisory authorities to reach recognition agreements based on the harmonization of prudential rules (see chapter 5).While regulation and supervision must be strong and effective, a further complication is that a poorly designed regulatory system—for example, an excessively generous deposit-insurance scheme—can create an unacceptable degree of moral hazard; that is, it may enco urage excessive risk-taking by regulated firms. Accordingly, national regulatory and supervisory systems must be designed to complement and support, but not to substitute for, market discipline. Thus, achieving widespread transparency in both the public and private sectors, including accurate and timely disclosure of financial information, is critical

Persuasive research paper Essay

Everyday as we commute down the road we see motorcyclist drive past us. What is the one thing that we can all agree individuals riding motorcycles have in common? It is not a trick question. The answer is very simple; they all share the commonality of riding a motorcycle. What is in fact is very distinct however, are the choices of attire when operating their motorcycle. Some individuals are brave enough to wear shorts, tank tops, and sandals. On the opposite end of the spectrum, you have some of the wiser ones that chose to wear a helmet, gloves, protective jacket, eye protection etc. Why the distinct difference? The fact is that a great percentage of riders refuse to wear the proper protective equipment. Due to an increase in motorcycle riders within the recent years, a national protocol requiring certain equipment, such as a helmet, to be worn when riding a motorcycle should be instituted. There are many contributing factors to motorcycle fatalities, however there can be a culture of change, specially with the proper knowledge on how each piece of safety equipment can help at preventing injury or death Every year that passes by, notice that more and more motorcycle share the road with our  automobile drivers. We might wonder why there has been a shift in choice of transportation. Is this a trend or fad that the population is going through? According to the Governors Highway Safety Association, â€Å"National data from 1976 to 2012 suggest that motorcyclist fatalities track motorcycle registrations quite closely and that registrations track inflation-adjusted gasoline prices. If the economy continues to improve and gasoline prices remain high, then motorcycle 1 Tenorio registrations, travel, and fatalities will continue to rise unless active measures are taken†. (Hedlund). Not only do we think there are more motorcycle riders on the road, they have proven this to be true. Motorcycles are generally more fuel-efficient than cars, making them a very good alternative mode of transportation when gas prices stay at a consistent high price. It is basic mathematics; if there are more motorcycles there is more individuals susceptible to accidents. Additionally, they have proven that motorcycles are more apt to be involved in a motor vehicle accident than any other vehicle. Data collected in 2007 proved that per vehicle mile driven,motorcyclist were approximately 37 times more apt to die in a motor vehicle accident and nine times more probable to be injured in an accident. They also researched the ability of a helmet to protect against fatal injuries in motorcycle accidents. NHTSA estimates that helmets saved the lives of 1,829 motorcyclists in 2008. If all motorcyclists had worn helmets, an additional 823 lives could have been saved. (Motorcycles: Traffic Safety Facts – 2008 Data). As motorcycles become more abundant, it is imperative that we reduce the probability of death as much as  possible. As proven above, helmet wear can be a life or death-determining factor. You can force motorcycle operators to wear helmets by implementing laws, but the combination of alcohol and motorcycle operation can have a devastating impact despite helmet wear. When operating a motorcycle an operator needs all of their senses at full capacity. Alcohol is central nervous system suppressant substance, causing you body to have a reduced reaction time when the situation arises. The reported helmet use rate for motorcycle riders with BAC levels higher than  the legal limit killed in traffic crashes was 46 percent, compared with 66 percent for those with no alcohol (Motorcycles: Traffic Safety Facts – 2008 Data). Not only does alcohol reduce reaction times, it also has an impact on your ability to make rational decisions. It makes individuals push the limits of their motorcycle and their riding ability to levels they normally 2 Tenorio would not, and the majority of the time while not wearing the equipment they should. In 2011, the NHTSA calculated 4,323 motorcyclists were killed, and 33% (1426) of the riders were under  the influence of alcohol (Watson). How can the country as a whole help reduce the amount of fatalities we currently have due to motorcycle accidents? It is not a very simple answer. It would require involvement from both the people and the government to make this happen. One way the government can aid in the reduction of motorcycle fatalities is through the implementation of regulations, which require and enforce the wear or motorcycle protective equipment. Dating back to 1966 the government tried to impose the requirement of helmet wear by the states. They tried to do this by threatening with the reduction of federal-aid highway construction funds for the states that did not comply with the implementation of universal helmet use law by 1967. By 1975 all but 3 states had adopted and implemented such laws. Unfortunately the Supreme Court deemed this law unconstitutional. Shortly after revoking the Act, states gradually began to weaken helmet wear laws, since it was no longer a federal requirement (Helmet Laws). Much like seat belt laws have been implemented across the majority of the states due to increased survivability rate when  involved in an accident, the wear of helmets when operating a motorcycle should be mandated. The responsibility should not only be weighted only on the federal and state governments, individuals should take responsibility also. Many non-profit organizations work diligently to tray and raise motorcycle safety awareness with thinks like bumper stickers, fund-raising rides, and bike meets. Additionally insurance companies have aided in the increased awareness by handing out information pamphlets at locations like Bike Week in Daytona Beach. Another factor that  aids in the reduction of motorcycle fatalities is proper operation education. Florida is one of many states that require the operator to take a Motorcycle Basic Riders course in order to be able 3 Tenorio to receive the motorcycle endorsement on their licenses. Without this endorsement you cannot legally operate a motorcycle. With this course even people that have never been on a motorcycle can learn the basic in order to operate it on the roads. The Motorcycle Safety Foundation (MSF) offers motorcycle rider education and training programs and courses, and supports governmental  programs by participating in research and public awareness campaigns and providing technical assistance to state training and licensing programs (Morris). The Department of Defense, more specifically the United States Air Force, uses courses from the Motorcycle Safety Foundation to teach the military riders how to operate a motorcycle. In order for an individual to operate a motorcycle they have to complete the basic riders course. Within one year of the completion of the initial course they are required to complete an intermediate course such as the basic riders  course 2, advanced riders course, or the sport bikes handling course. Once these two requirements are complete, they are required to do refresher training every five years. In addition to the training, the department of defense requires all members, military and civilian, to wear protective equipment while driving on any DOD installation. That protective equipment consists of: helmet, gloves, durable over the ankle footwear, long sleeve shirt or jacket, long durable pants, and eye protection. If not properly equipped, individuals are not allowed to enter the installation. If the DOD is doing this to help keep the members of the military community safe, why shouldn’t the rest of the country follow in those footsteps? When we think motorcycle safety, 90 percent of the time the first image that comes to mind is a helmet, as it should. The helmet is the single-handedly the most important piece of safety equipment that a motorcycle rider shouldn’t go without. However, there are many other rider protective equipment components that play a vital role in the safety of the person. Between 2001 and 2008, more than 34,000 motorcyclists were killed and an estimated 1,222,000 persons. 4 Tenorio were treated in a U. S. emergency department for a non-fatal motorcycle-related injury (Motorcycle Crash-Related Data). This data supports the thought process that even though helmets are crucial at protecting against head injuries, there are many other portions of the body that are at harms way if not properly covered. 75 percent of the non-fatal emergency room visits involved parts other than the head. The other attire that might contribute to a safer ride includes, but not limited to, long durable pants, durable top, gloves, durable over-the-ankle footwear, and reflective equipment. Despite that it will probably never be deemed mandatory to wear these items, it is important for riders everywhere to understand the devastating effects an accident can have on their bodies when choosing not to wear the proper gear. There is a common misconception that the gear makes the ride more uncomfortable and, it is believed that it makes it more difficult to operate and maneuver the motorcycle. That is a myth! Properly fitted helmets of decent quality not only will it protect your head, but also a full-faced helmet will make for a more comfortable ride. The helmet does this by preventing foreign objects and debris from  constantly hitting the riders face, and most importantly from landing in the eye. Gloves that fit snug the hand will protect it from road rash in the event that you make contact with the pavement and it also improves handgrip with the handlebars aiding with better handling. There are gloves out on the market that have additional padding in the palm of the hand, to help with comfort and provide support and a barrier in the event of a fall. The same concept can be applied to footwear. It is unbelievable that there are people out there that would ride a bike in flip-flops and think it is comfortable. Not only does it not protect the appendages, but also it makes it harder to control the bike. When choosing footwear you have to find a medium between protection and comfort. Wear something that provides the proper amount of protection but does not hinder your ability to control or maneuver the motorcycle. 5 Tenorio Choosing comfort over safety should never be an option. More specifically when you are talking about the portion of your body that controls all bodily functions. With the implementation and enforcement of a universal helmet law, the fatality rate of motorcycle accidents would  decrease. In the past the universal helmet law failed. With that in mind, we can learn from our mistakes and see trough an effective and legal legislation. The ultimate goal is not to interfere with he rights of individuals, but to help protect the citizens so they can continue to enjoy the freedoms we have in the United States. The amount of information revolving around motorcycle safety out for public access is almost overwhelming. Therefore, there shouldn’t be an excuse why people refuse to wear gear that will only help protect them and their bodies from the dangers of riding a motorcycle. Works Cited 6 Tenorio Hedlund, James. â€Å"Spotlight on Highway Safety. † Motorcyclist Traffic Fatalities by State: 2012 Preliminary Data. Governors Highway Safety Association, 1 Apr. 2013. Web. 09 July 2014. â€Å"Helmet Laws. † State Motorcycle and Bicycle. Governors Highway Safety Association, 1 July 2014. Web. 06 July 2014. Morris, C. C. , Ph. D. â€Å"Motorcycle Trends in the United States | Bureau of Transportation Statistics. † Motorcycle Trends in the United States | Bureau of Transportation Statistics. Bureau If Transportation Statistics, 14 May 2009. Web. 07 July 2014. â€Å"Motorcycle Crash-Related Data. † Centers for Disease Control and Prevention. Centers for Disease Control and Prevention, 14 June 2012. Web. 06 July 2014. National Highway Traffic Safety Administration. Motorcycles: Traffic Safety Facts – 2008 Data (2008): 1-6. National Highway Traffic Safety Administration. NHTSA’s National Center for Statistics and Analysis, 1 Dec. 2008. Web. 22 June 2014. Watson, Tim. â€Å"What The Latest NHTSA Fatality Stats Reveal About Motorcycle Safety. † Ride Apart RSS2. Ride Apart, 29 May 2013. Web. 09 July 2014. Workman, Danny. â€Å"Deadly Motorcycle Accident Statistics. † Examiner. com. The Examiner, 28 May 2009. Web. 09 July 2014. 7.

Analysis and interpretation of ”Elephant”

When all hopes and dreams are abandoned from our lives, the only thing we can do is taking advantage of others lives and make it our own. A life well planned can cost us our freedom and our ability to make decisions which are radically different from our previous ones. When desire, lust and romance have been deselected and †the normal life† has taken its place. These obstacles are what William meets and sooner confronts in the short story by Polly Clark called †Elephant†. The story begins in media res, so as soon as the story begins we get engulfed. We are meeting William sitting at his desk surrounded by notes and facts, where his Muse has left him and he has trouble finding inspiration writing biographies of pop singers as Christine, who he finds most adorable and attracted to (l. 46 – 51). The character Christine can be interpreted as Christina Aguilera, who, with her voice and her sexual behaviour, usually is very appealing for average men. William is the typical American man, who has settled down with his wife and currently is trying to start a family. Their marriage is not filled with romance and love as one could expect, but more with expectations and compromises and it furthermore seems like William does not want a baby as much as his wife does. His mind is filled with thoughts of his biographies and how Christine must have wanted him to write about her (l. 71-72 and 76). He easily gets distracted from his thoughts and one could imagine that they are filled with his lost childhood and the things he had never been able to do in life. His flash-back to the moment when his mother gives him the blue elephant (l. 9-66) could easily be interpreted as the childhood his mother tries to give him. However, at first he could not remember the blue elephant from his childhood. It had vanished from his memory. The only thoughts that go through his mind are how he can revenge his lost childhood and regain consciousness of his identity. The narrator tells us at line 21-22: †William would have preferred the film stars (male, golden age of cinema) but those had been claimed by someone quicker of the mark †¦Ã¢â‚¬ . This specific passage shows that William was needed to give up his dream because someone got in his way. By writing about male actors it would have been possible for him to get famous and his life would thereby be complete. Happiness and celebrity goes hand in hand in his mind, but ever since he had to choose another career, his dreams fell apart and he was, in his own eyes, nothing but an ordinary man. That is why he is writing about the female pop singers so in that way he partly can fulfil his dreams through the women. Nevertheless, this solution does not satisfy his desires, since he cannot relate to these women. He can relate to the male actors because of their sex, but the difference between men and women in this context becomes a huge factor for him and that gives him reason to change the stories about the women. Christine gives him trouble because of her pure mind due to her relationship with Christianity (l. 49), and his urge to make her life as miserable as his becomes even stronger. Therefore he synchronizes his life with hers and mixes the blue elephant into her childhood. For him the elephant is a symbol of regret and grief and therefore he tries even harder to make the life of Christine miserable in the eyes of the readers. As he says at line 146-147: †He wanted to give Christine something she had never had, something important of himself. † – the aspects of life he wants to give Christine are defeat and loss because she, to him, never have had a change to experience it in her famous Christian life. But because the negative symbolism of the elephant only exists for him, his made up story about the life of Christine does not become a bad experience for the readers. His attempt to make Christine a bad person is not successful (l. 135-142). That is when he realizes that his profession is not what he wants to do. The name Christine has not been chosen by coincidence and it was solely that choice of name, which gave Christine power over him. The relationship Christine has with God has been transferred to William and through it he is able to confront his obstacles and by typing the untruth about her he learns that, that is not the person he wants to be, and by this realization he becomes complete. Even though he knows that someday he is going to be †vanished from the face of the earth† (l. 148), he feels ready to start living his life again, because he finally has triumphed over his lost childhood and he definitively has found himself. His last falsity gives him the strength to stop telling lies about others, stop living trough others and gives him power to live his own life (l. 142-144). Therefore, the truth is the main theme of this text. As a subcategory comes the blue elephant being a symbol of how important the childhood is for humans. If the blue elephant vanish from the life of a child, pain and regret will come later. Therefore, the story is a form of a aide-memoire in life to parents to teach them how to raise their children. Polly Clark has written this text to tell us how important it is to keep believing in something that helps us maintain our dreams in life pure.

Democratic Theory Essay Example | Topics and Well Written Essays - 1250 words

Democratic Theory - Essay Example It takes care of subjects related with political pluralism, equality in the wake of law and the right to submit petition for the elected officials. (Young, 2000) It also brings to light different matters pertaining to human rights, civil liberties, a number of varied elements of the civil society and the different institutions working under the auspices of the government of the state. The origin of democracy has come about from the Ancient Greek times. The Ancient Greek political and philosophical thoughts made use of democracy and its different undertakings in their day to day affairs and practice. Plato called democracy as the system of rule by the governed, which summed the whole essence of democracy in its truest sense. The Republics of Ancient India had some instances and traces of civilizations of democracy within their ranks. This was way before the birth of the Buddha. Thus the origins of democracy stretch quite back in time and a number of nations can hold themselves in line with the original basis that was brought forward by this system of government, ruling and indeed legislation. (Przeworski) In its truest meaning, democratic theory is a political philosophy more than anything else. It is a form of government which exists for the people and brought in essence by the people. Democracy calls for competitive elections which are mandatory within such a form of government. What this does is to elect people or office bearers who get the most votes in such an election exercise. These elections bring to light the aspects of freedom of speech, freedom for the press and television and radio as well as a general exercise of law within the very state in which elections are being carried out. (Gabardi, 2001) In the name of democracy, it is significant that the civilian control of the military is kept away as much as possible since this gives rise to military dictatorship regimes and thus intervenes in the smooth political affairs and their

Maritime Manegement 2 Essay Example | Topics and Well Written Essays - 1500 words

Maritime Manegement 2 - Essay Example The strength of the economy, its location, resources, population size and political influence contribute to its power. During the establishment of the China’s economy that is in 1949, the economy was modeled on Soviet model as suggested by Wang and Chin-Keong (2004). This was after the communist revolution. As a result, China ended up its connection with the capitalist world. China’s economic model involved the formation of state controlled heavy industries which were financed by capital acquired from agriculture. China substituted its imports with domestic goods so as to acquire foreign exchange to buy goods and technology. China’s economy has contributed a lot to the development of the shipping operations which are part of their economy. China is one of the countries with the most ample shipping resources. The China’s coastal areas offer the highest percentage of the countries imports and exports value. This is an advantage as it creates a good environme nt for fast and healthy development of the countries maritime industry. With the development of the maritime industries, the economy of China has experienced continuous and strong growth momentum. This has led to an increase in both trans-regional and multinational trading systems. China’s maritime industry has been growing rapidly to meet the expanding requirements for foreign exchange. Since the adoption of its reforms and the open policies, the international shipping industry is now increasing while promoting healthy development of the industry. China’s economy has steadily grown since 1990. The steady growth in economic demands has brought a great opportunity for Chinese shipping industry development. China is currently one of the world’s largest countries capable of offering comprehensive package of shipping activities in the ocean. It fleets cover a greater range including traditional bulk and more value added tonnages. The China’s growing economy h as effects on transport routes between China and Europe. The economy has also contributed to the opening of the Arctic Ocean summer route for both countries according to Liu (2009). To provide healthy transportation of containers, there are number of challenges shipping industry should deal with. One of the challenges is how to survive the Arctic’s harsh climate. The development strategy behind this is enhancing the coordination between the two countries towards improving the condition of the Arctic Ocean. Secondly is the issue of occurring changes in the Arctic Ocean and its commercial implications. The growing Chinese economy is partnering with the Europe to counter the challenge. In Europe, china is the second major partner in trading activities after the US. For both countries that is China and Europe, maritime transport makes a vital contribution to their energy strategies. This has been through establishing more shipping routes and energy diversification. China and Euro pe have economic interest aimed at developing their routes of transport along the coast of northern Russia. To ensure safety in the Arctic region, Europe and China should improve their corporation in research activities. Should also enhance information exchange and add on the formation of reliable systems of monitoring and forecasting. Both countries should also provide safe and effective maritime operations in the Arctic Ocean. China’s political activities have developed with the expansion on the countries

Explain Marx's general law of capitalist accumulation and discuss it's Essay

Explain Marx's general law of capitalist accumulation and discuss it's contemporary relevance - Essay Example Though Marx does not agree with the means by which capital accumulation takes place, the identifiers that he exhibits with regards to how such a system takes place and is perpetuated is difficult to argue against regardless of the political/economic ideology that the individual may have. As a function of understanding Marx’s identification and theory of capital accumulation, this analysis will approach this topic from a historical and economic standpoint. Moreover, after seeking to define and understand the nuances of capital accumulation, as Marx describes it, the analysis will then move on to attempting to define whether or not this particular definition and understanding is applicable currently or has any contemporary relevance whatsoever. Finally, it is the hope of this author that such a discussion will not only integrate a further understanding with regards to Marx’s original intent and the means by which the Communist definition of capital accumulation was theori zed/enunciated but that this realization an understanding will seek to elaborate upon the means by which such a definition/theory continues to be relevant or is entirely irrelevant within the current era. As with so many of Karl Marx’s economic theories, it is of course first necessary to integrate with an interpretation and understanding of how Marx defined human psychology and base nature as a means of better understanding this theory and definition of capitalist accumulation. Ultimately, the writings and philosophy of Karl Marx were concentric upon an understanding that human nature as necessarily developed as a means of ensuring that humans are able to derive all of the necessary requirements for life that they may have. Not distinct from the evolutionary standpoint, Marx theory of human nature specifies that the individual, and the group for that matter, will likely seek to enrich themselves in all manners possible at all times possible (Hein, 2012). According to Marx, t his is something of an innate drive that is engaged from the moment that an individual self-actualizes until the time that they die. This primary interpretation of the motivation degree provides is a primal means by which the capital accumulation theory is defined within the Marxist worldview. Delving directly into the definition itself, Marx understood capitalism to be locked in something of a self induced death spiral. This was ultimately the result of the fact that Marx understanding of capital was a situation in which humans invariably seek after wealth and self-enrichment as a means to define their own reality. Although this in and of itself represents and unethical approach, far more unethical, according to Marx, is the reality of fact this reality invariably takes place on the backs of others. This enrichment at the expense of others has profound and severe consequences due to the fact that brutal treatment of the producers is oftentimes affected as a means of capital accrual /accumulation. In short, Marx’s concept of capital accumulation can be understood with regards to the illustration and so many economists oftentimes make with regards to t

Analysis and Application of Clinical Practice Guidelines & Scoring Essay

Analysis and Application of Clinical Practice Guidelines & Scoring Rubric - Essay Example lines are a sequence of recommendations on clinical care aided by the best present indication in a clinical literature (Castellani, Girlanda, & Barbu, 2014). For a long time, Clinical Practice Guidelines on several occasions have been used and abused. Although position statements on the best care were meant to be unbiased, the documents were problematic. The process of development did not meet transparency requirements, and the experts involved in the development made the material beneficial to themselves. Patients and practicing physicians usually felt cheated in cases where decisions on health care were focused on guidelines concerned with economic and not quality goals. Through application of evidence-based medicine techniques in development of guidelines, opinion and biases are remarkably minimized and the elevation of rich scientific literature is witnessed and assessed in a systematic fashion to offer transparency and reduce imbalance in evidence-based Clinical Practice Guidelines. Evidence-based Clinical Practice Guidelines are greater than non-evidence-based Clinical Practice Guidelines and are right tools of better quality patient care. The structured, transparent process used in developing Clinical Practice Procedures makes them difficult to abuse and easy to use. Evidence-based Clinical Practice Procedures are being used to create quality measures as well as used to aid referrals when insurance companies question them. In addition to that Clinical Practice Procedures act as patient’s education tools. Evidence-based Clinical Practice Procedures on a national level are a direct means of improvement of quality and play a big role in the making of measures of performance for pay-for-performance repayment programs. Practicing orthopedists are given a voice by the evidence-based clinical practice guidelines. Society based Clinical Practice Guidelines on a local level are used to influence and inform hospital guidelines in order to enhance best practices.

Stock Market efficiency (Marks and Spencer) Essay

Stock Market efficiency (Marks and Spencer) - Essay Example Proponents of the efficient market hypothesis suggest that the market has a large number of players out to maximize profits. Each of these players logically analyzes the market information available so as to make an informed investment decision. This ensures that the market quickly and fairly represents all the available market in the prices of securities. There are three types of market efficiency; allocation efficiency, operation efficiency and pricing efficiency (Kraakman, 2003, p.11). Operational efficiency refers to the transactional costs involved in the selling and buying of securities. The operation of the London stock exchange is streamlined and well aligned to ensure operational efficiency. Allocation efficiency follows the premise that there are limited financial resources and therefore the existing resources are invested in the most productive way (Cassedy, 2004, p.6). This suggests that the investors are rational and that available capital is directed to the most profitable stock. Pricing efficiency is based on the premise that the stock fairly and instantly reflects information available in the stock market. Most of the theories developed in the area of market efficiency revolve around pricing efficiency. Pricing efficiency suggests that a security’s price reflects all the available information. Market efficiency can be said to exist in three distinct levels. These are Weak-form efficiency, Semi-strong efficiency and Strong-form efficiency (Banks, 2011, p.3).   The weak-form efficiency suggests a market that reflects all the past market information. The past information is fully and instantly reflected in the price of securities. This view therefore suggests that the past market information cannot be used to predict future prices of securities. This is because listed financial securities already reflect all past market data. Semi strong

Project management Essay Example | Topics and Well Written Essays - 250 words - 1

Project management - Essay Example There will also be constraints if sponsor has not described all the details required for the development of the system. It will therefore mean that more rework will be done which will cause further delay to the project. Constraints will be experienced if key-decision makers will be difficult to contact when issues arise in the project. This will cause time wastage in the project execution. It is expected that these decision-makers will be reachable at any time and in all the development phases of the project. Another constraint that might arise is if the project members will be new to the environment and may take time to learn the new developing environment. This will cause the delay to be experienced in the project execution. Project management services. (2009). Project management process inputs, tools and techniques, amd outputs organized by process groups. Retrieved Febuaryr 25, 2012, from Project management services:

Technology in Hotels Essay Example for Free

Technology in Hotels Essay With the rapid pace of technological advancements and the fast rate of implementing it into everyday life, people need the latest IT facilities. They demand this from hotels as well. But the industry has always been lagging behind the needs, not being able to offer the latest advances in technology. Now management has started to take note of the guest’s needs and is aware that technology is a very competitive advantage and is starting to adjust their strategies in consequence. Boutique hotels offering sci-fi levels of technology are starting to emerge and may be prefiguring the future of hospitality as a whole. I Introduction With technology advancing now faster than ever before, everyone needs and demands using the latest technological means just to survive. Such is the case in the hotel industry too, especially in the upper-class and boutiques hotels area of the market. With hotels always lagging behind other sectors in adopting new IT systems ( PLUGGED IN, 2009; Buick, 2003), keeping the pace with customers’ demands becomes a pressing issue to hospitality providers. This problem is acknowledged by the players in the industry, being debated in trade-specific publications, conferences and academic literature. There are two sides of the use of technology in hotels: â€Å"back of house† systems (property management systems, revenue management systems, internal control instruments etc.) and technology that is used directly and mainly by the consumers. The following review aims to put the current technological state, future trends and most pressing issues of the hotel and hospitality industry i nto perspective. II Literature review The newest trends in the hospitality industry show an emphasis on the experience delivered to the customer and not so much on the tangible aspect of the product. With the service sector beginning to dominate the world’s economies, there is a growing concern on delivering meaningful, memorable customer experiences (Meyer and Schwager, 2007). This can be seen from a practitioner’s point of view with The Ritz-Carlton Hotels Company, which prides its self with becoming an â€Å"experience and memory creator† (Nixon and Rieple, 2010). The next generation of clients demands continual technological updates for every business and personal user and hotels often can’t keep up the pace. Property owners are understandably reluctant to renovate as often as needed to support the latest technology, meaning major renovations never happen often enough to keep the tech-crazy guests satisfied (Russ, 2008). No longer are people going to hotels to experience something new, but hoteliers are looking at guests as technology consumers and supply little more than the average customer demands (Freed, 2010). The use of modern technology can help hotel employees deliver a service of better quality and also enhance the stay for guests by satisfying their needs, thus creating a better all-round experience. This view, however, is not unanimous across the whole of the industry. Even though 82.4% of managers believe that IT is important for increasing customer satisfaction (Brewer et al, 2008), they also worry that the benefits provided by investments in technology are not as high as expected (ITGI, 2007). Research shows that companies around the world are losing out on their investments because they can’t derive sufficient value from these investments in IT (Bowen, Cheung and Rhode, 2007; ITGI, 2007). Value from IT can be defined as a function whose primary focus is delivering the promised benefits (Mathe, 2009) and as a provider of strategic, informational and transactional benefits (Gregor et al, 2006). Therefore, all definitions show that value added by IT leads to successfully achieving business goals and strategies. So a contradiction appears between managers’ beliefs and actions. The majority is certain IT helps their organization but has failed to fully take its benefits yet. Customer satisfaction with the hotel begins shaping before the service is provided, with the process of making the reservation preceding it. The new trends using of mobile platforms such as smart phones, tablets and laptops for shopping (Gupta, 2012) dictate that these means of communication should be targeted by hoteliers. The number of mobile users researching travel options on their mobile devices is expected to grow by 51% in 2012 and another 15% by 2013 (Saio, 2012). A market study by Reuters Synovate Global (plugged in) shows that 47% of potential clients demand the latest technology from the hotels they choose. Also, one third of guests assess a hotel by its website and 50% do research and comparisons online, before making their choice. The same report found that seven out of ten consumers would rather stay in a less expensive hotel and that hi-tech facilities are the top criteria in choosing a hotel. The latest study conducted by Motorola Solution, Inc. (2011) concludes that information technology (IT) spending in the hospitality industry is expected to have increased in 2011, with guest experience being the primary driver for investments. And yet, 57% of the industry’s leaders admit they don’t know how to launch, track and achieve mobile platform success (Eyefortravel, 2012), proving the same contradicting views towards technology. This proves one of the critical challenges for hotel technology managers is convincing upper management to approve investing in the latest technology (Petiza, 2011). According to Gregor et, al. (2006) the failure to measure the value added by IT is due to measurement errors, management practices and time lags between the investment and ROI. The alignment of IT with business strategy and its use may allow competitive advantage to be achieved (Levy and Powell, 2005; Peppard and Ward, 2004). The same opinion is presented in a study conducted by Amadeus (2011), which states that if hotels are to secure growth in the next three years they must align strategy and IT priorities. Peppard and Ward (2004) suggest that IT has become pivotal to the existence of most organisations and that should the technology used by organisations come to a halt, they would cease to function. Now that the importance of using technology is recognized unanimously there are two schools of thought emerging: the first believes that IT should be present to aid the guests inconspicuously from the shadows and the other approach that puts technology in the forefront of the operations and makes it the core theme. Choosing one or the other dictates the whole strategy of the hotel or company. Some guests are not comfortable with technological changes in the lobby, in the room or when trying to make a booking (Withiam, 2007). Others, as shown above, need and demand hi-tech facilities from their hotels. After choosing the market you target, the strategy should be adjusted in consequence. A tool for creating market segments based on consumers’ opinion on technology is a so-called Techno logy Readiness Index (TRI) (Verma et al., 2007). This is a 10 question survey that guests should fill in (Appendix 1). This measures their view of technology on four dimensions: optimism, innovativeness, discomfort and insecurity. Tech-focused individuals are usually thought of in terms of their willingness to innovate, but the research behind TRI measures the extent to which people think IT helps improve their life (optimism), or if they feel overwhelmed by technology (discomfort) or whether they don’t trust devices to operate correctly (insecurity). The over-technologic approach can be best seen in boutique hotels. Taking the forefront in this arms race is somewhat easier with smaller, non-chain, exclusive hotels because they don’t have to maintain the same standards in thousands of rooms across hundreds of hotels around the world. An article by Myers (2011) showcases the latest boutique hotels that offer now desk-free check-in aided by tablet PCs, hybrid cars with Wi-Fi for the guest, 42 inch LCD TVs (The Upper House Hotel, Hong Kong), retina scans just to enter the room (Nine Zero Hotel, New York), touch-screen room controls and bedside iPads (Establishment Hotel, Sydney) or Wii exercise rooms where guest can play virtual tennis (Le Parker Meridian, New York). The latest trends in hotel technological development include converging technologies that complement each other to reach the common goal of customer satisfaction. The hotel room would automatically set itself up to the guest’s unique tastes, based on the pervious information provided through guest profile forms. When the front desk clerk checks-in the guest or the guest checks-in using the self service kiosk in the lobby, the lights in the room automatically turn on and the thermostat sets itself to the users preferred temperature. The entertainment system turns on, playing the guest’s favorite music, TV program or radio station. These services would please the guest but also reduce energy costs by keeping everything turned off when the guest is not using the room. The list of computer operated can include such luxurious services like automatically drawing a bath to be ready at a certain time or automatically open the drapes in the morning in order to wake the guest with natural light and not the old fashioned wakeup call. (Russ, 2008) In order to offer a variety of payment options, some hotel managers have adopted cashless payment systems via the use of radio frequency identification (RFID). RFID utilizes computer chips and antennas, allowing the chips to wirelessly communicate with a receiver. In the hotel industry RFID systems are being integrated with POS systems to process credit card and debit account transactions (Kasavana, 2005). Some hospitality companies even accept biometrics, such as fingerprints, iris scans, facial scans or hand geometry analysis systems to increase physical or data security. III Conclusion Customers are more demanding from hotels in terms of technology than ever. They need it for entertainment, business, communication and socialization. And with technology advancing in a rampant pace, people more aware of the latest gadgets and devices and techno-fear decreasing as new generations come along using technology from infancy, hotels are being pressed into making monumental investments more often just to cater to the technological needs of the guests. Added to these there are the other investments to be made in â€Å"old fashioned† hotel operation, property management systems etc. Studies show that even though customers demand it and managers recognize its importance the hotel industry is still lagging behind in offering the latest IT facilities. However, there are innovative boutique hotels that have reached an almost sci-fi level of technology. These hotels are shaking the position of the big hotel chains and are attracting more tech-crazy guests. On the other side there are hotels that focus more on the environment, nature with a more traditional approach. Both have their own well established market segments that usually don’t overlap because of being on different ends of the spectrum. Only the future can say of this arms race to demand and provide more and more technological means will prove effective. It is commonly known that too much of something can become harmful.