Chapter Fourteen

                            Financial Services



Article 1401: Scope

1.   This Chapter shall apply to measures adopted or maintained
by a Party relating to:

     (a) financial institutions of another Party;

     (b) investors of another Party, and investments of such
 investors, in financial institutions in the Party's
 territory; and 

     (c) cross-border trade in financial services.

2.   Only Articles 1109 (Transfers), 1110 (Expropriation and
Compensation), 1111 (Special Formalities and Information
Requirements), 1113 (Denial of Benefits), 1114 (Environmental
Measures) and Articles 1115 to 1136 (Settlement of Disputes
Between a Party and an Investor of Another Party) of Chapter
Eleven (Investment) and Article 1211 (Denial of Benefits) of
Chapter Twelve (Cross-Border Trade in Services) shall apply to
this Chapter.  Article 1802(2) (Publication) shall not apply to
this Chapter.
 
3.   In the event of any inconsistency between a provision of
this Chapter and any other provision of this Agreement, the
former shall prevail to the extent of the inconsistency.  This
paragraph does not apply to Article 2103 (Taxation).

4.   Nothing in this Chapter shall prevent a Party from being the
exclusive service provider in its territory with respect to the
following:

     (a) activities forming part of a public retirement plan or
 statutory system of social security; and

     (b) activities conducted by a public entity for the account
 or with the guarantee or using the financial resources
 of the government or of any other public entity.

5.   Article 1407 shall not apply to the granting by a Party to a
financial service provider of an exclusive right to provide a
financial service referred to in paragraph 4(a).

6.   Each Party shall comply with Annex 1401.6.


Article 1402: Self-Regulatory Organizations

     Where a Party requires financial service providers of
another Party to be members of, participate in, or have access
to, a self-regulatory organization to provide a financial service
in the territory of that Party, the Party shall ensure observance
by such organization of this Chapter.


Article 1403: Regulatory Measures

1.   Nothing in this Part shall be construed to prevent a Party
from adopting or maintaining reasonable measures for prudential
reasons, such as:

     (a) the protection of investors, depositors, financial
 market participants, policy-holders, policy-claimants
 or persons to whom a fiduciary duty is owed by a
 financial service provider or financial institution;

     (b) the maintenance of the safety, soundness, integrity or
 financial responsibility of financial service providers
 or financial institutions; and

     (c) ensuring the integrity and stability of a Party's
 financial system.

2.   Nothing in this Part applies to non-discriminatory measures
of general application taken by any public entity in pursuit of
monetary and related credit policies or exchange rate policies. 
This paragraph shall not affect a Party's obligations under
Article 1106 (Performance Requirements), Article 1109 (Transfers)
and Article 2104 (Balance of Payments).

Article 1404: Establishment

1.   The Parties recognize the principle that financial service
providers of a Party should be permitted to establish financial
institutions in the territory of another Party in the juridical
form determined by the provider.

2.   The Parties also recognize the principle that financial
service providers of a Party should be permitted to participate
widely in the market of another Party through the ability:

     (a) to provide in that other Party's territory a range of
 financial services through separate financial
 institutions as may be required by that Party; 

     (b) to expand geographically within that territory; and

     (c) to own financial institutions without the application
 of ownership requirements specific to foreign financial
 institutions. 

3.   Each Party shall permit financial service providers of
another Party that are not already established in its territory
to establish financial institutions in the Party's territory.  A
Party may: 

     (a) require such financial service providers to incorporate
 such financial institutions under its laws; or

     (b) impose other terms, conditions and procedures on
 establishment that are consistent with Article 1407.

4.   At such time as the United States liberalizes its existing
measures to permit commercial banks of another Party located in
its territory to expand throughout significantly all the United
States market either through subsidiaries or direct branches, the
Parties shall review and assess market access in each Party,
subject to Annex 1404.4, with respect to the principles in
paragraphs 1 and 2 with a view to adopting arrangements
permitting investor choice as to juridical form of establishment
by commercial banks.

5.   Each Party shall permit financial institutions of another
Party to transfer and process information outside the territory
of the Party in electronic or other form as is necessary for the
conduct of ordinary business of such institutions.


Article 1405: Cross-Border Trade

1.   No Party may adopt any measure restricting any type of
cross-border trade in financial services by financial service
providers of another Party that is permitted on the date of entry
into force of this Agreement, except to the extent set out in
Part B of the Party's Schedule to Annex VII.

2.   Each Party shall permit persons located in its territory,
and its nationals wherever located, to purchase financial
services from financial service providers of another Party
located in the territory of that other Party or another Party,
provided that the Party is not required, in order to fulfill this
obligation, to permit such providers to do business or solicit in
its territory.  Subject to paragraph 1, each Party may, for this
purpose, define "doing business" and "solicitation."

3.   Without prejudice to prudential regulation by other means, a
Party may require registration of financial service providers of
another Party and financial instruments. 

4.   The Parties shall consult on future liberalization of cross-
border trade in financial services, as set out in Annex 1405.4.


Article 1406: New Financial Services

1.   Each Party shall permit a financial institution of another
Party to provide any new financial service of a type similar to
those that the Party permits its financial institutions, in like
circumstances, to provide under its domestic law.  A Party may
determine the institutional and juridical form through which such
service may be provided. 

2.   A Party may require authorization for the provision in its
territory of a financial service referred to in paragraph 1. 
Where such authorization is required, a decision shall be made
within a reasonable period of time and may only be refused for
prudential reasons.


Article 1407: National Treatment

1.   Each Party shall accord to investors of another Party and
financial service providers of another Party national treatment
with respect to the establishment, acquisition, expansion,
management, conduct, operation and sale or other disposition of
investments in financial institutions in its territory.

2.   Each Party shall accord to the financial institutions of
another Party national treatment.

3.   Where a Party permits the cross-border provision of a
financial service, it shall accord national treatment to
financial service providers of another Party in the provision of
such cross-border service.  

4.   "National treatment" means treatment no less favorable than
that accorded by a Party to its own investors, financial service
providers and financial institutions in like circumstances.

5.   A measure of a Party, whether it accords to financial
service providers or financial institutions of another Party
different or identical treatment compared to that it accords to
its own providers or institutions in like circumstances, shall be
deemed to be consistent with paragraph 4, if it accords equal
competitive opportunities.

6.   A measure accords equal competitive opportunities if it does
not disadvantage financial service providers of another Party in
their ability to provide financial services as compared with the
ability of domestic financial service providers in like
circumstances to provide financial services.

7.   Differences in market share, profitability or size shall not
by themselves constitute denial of equal competitive
opportunities, but shall not be precluded from being used as
evidence regarding the issue of whether a Party's measure accords
equal competitive opportunities.

8.   With respect to measures of a province or state, paragraph 4
means:   

     (a) treatment no less favorable than the most favorable
 treatment accorded in like circumstances by such
 province or state to financial service providers of the
 Party of which it forms a part, including that province
 or state; or

     (b) in the case of a financial service provider of another
 Party established in another province or state of the
 Party, treatment no less favorable than it  accords in
 like circumstances to a financial service provider of
 the Party established in such other province or state.


Article 1408: Most-Favored-Nation Treatment

1.   Each Party shall accord to investors of another Party,
investments of such investors and financial service providers of
another Party treatment no less favorable than that it accords to
investors, investments of investors and financial service
providers of any other Party or non-Party in like circumstances.

2.   Each Party may recognize prudential measures of another
Party or non-Party in determining how the Party's measures
relating to financial services shall be applied.  Such
recognition, which may be achieved through harmonization or
otherwise, may be based upon an agreement or arrangement with the
Party concerned or may be accorded unilaterally.

3.   A Party recognizing measures by means of an agreement or
arrangement referred to in paragraph 2 shall afford adequate
opportunity for another Party to negotiate its accession to such
an agreement or arrangement, or to negotiate a comparable one
under circumstances in which there would be equivalent
regulation, oversight, implementation of such regulation, and, if
appropriate, procedures concerning the sharing of information
between the Parties.  Where a Party accords recognition
unilaterally, it shall afford adequate opportunity for another
Party to demonstrate that such circumstances exist.


Article 1409: Staffing

1.   No Party may require financial institutions of another Party
to engage, as top managerial or other essential personnel,
individuals of any particular nationality.

2.   No Party may require that more than a simple majority of the
board of directors of a financial institution of another Party be
composed of nationals of the Party, persons residing in the
territory of the Party, or a combination thereof.


Article 1410: Transparency

1.   Each Party shall, to the extent practicable, provide in
advance to all interested persons any measure of general
application that the Party proposes to adopt in order to allow an
opportunity for such persons to comment upon the measure.  Such
measure shall be provided:

     (a) by means of official publication;

     (b) in other written form; or

     (c) in such other form as permits an interested person to
 make informed comments on the proposed measure.

2.   Each Party shall make available to interested persons the
information that applications affecting the provision of
financial services must contain.

3.   At the request of an applicant, the competent regulatory
authority shall provide information concerning the status of an
application.  If such authority requires additional information
from the applicant, it shall notify the applicant without undue
delay.

4.   Each Party shall make an administrative decision on a
completed application of a financial service provider of another
Party within 120 days, and shall promptly notify the  applicant
of the decision.  An application shall not be considered complete
until all relevant hearings are held and all necessary
information is received.  Where it is not practicable for a
decision to be made within 120 days, the competent authority
shall notify the applicant without undue delay and shall endeavor
to make the decision within a reasonable time thereafter.

5.   Nothing in this Agreement requires a Party to disclose
information related to the affairs and accounts of individual
customers or any confidential or proprietary information the
disclosure of which would impede law enforcement or otherwise be
contrary to the public interest, or prejudice legitimate
commercial interests. 

6.   Each Party shall ensure that inquiry points exist, at the
latest 180 days after the date of entry into force of this
Agreement, to which all reasonable inquiries from interested
persons may be directed regarding any measures of general
application taken by that Party with respect to this Chapter. 
Responses shall be provided in writing as soon as practicable.


Article 1411: Transfers

     Without prejudice to other provisions of this Agreement that
would permit such actions to be taken, a Party may prevent or
limit transfers by a financial service provider or a financial
institution to, or for the benefit of, an affiliate of or person
related to such provider or institution, through the equitable,
non-discriminatory and good faith application of its measures
relating to maintenance of the safety and soundness of its
financial institutions.


Article 1412: Schedules

1.   Articles 1404 through 1409 do not apply to: 

     (a) any existing non-conforming measure that is maintained
 by:

     (i) a Party at the federal level, as set out in Part A
 of its Schedule to Annex VII;

     (ii) a state or province, as set out by a Party in Part
 A of its Schedule to Annex VII within the period
 referred to in that Part; or 

     (iii) a local government;

     (b) the continuation or prompt renewal of any non-
 conforming measure referred to in subparagraph (a); or

     (c) an amendment to any non-conforming measure referred to
 in subparagraph (a) to the extent that the amendment
 does not decrease the conformity of the measure, as it
 existed immediately before the amendment, with Articles
 1404  through 1409.

2.   A Party shall set out any non-conforming measure maintained
at the state or provincial level in Part A of its Schedule to
Annex VII within the periods provided therein.

3.   Articles 1404 through 1409 do not apply to any measure
adopted or maintained by a Party that is consistent with the
terms set out by the Party in Part B of its Schedule to Annex
VII.

4.   A Party shall describe in Part C of its Schedule to Annex
VII any specific commitment it is making to any other Party.

5.   For the purposes of Article 1413(2), each Party shall
specify in Part D of its Schedule to Annex VII its governmental
agency responsible for financial services.

6.   A Party shall describe in Part E of its Schedule to Annex
VII any terms and conditions that an enterprise of another Party
must meet to be considered an enterprise of such other Party for
the purposes of restrictions specified in that Part.

7.   Any reservation or exception set out by a Party in Annexes I
through VI under this Part shall be deemed to constitute
reservations or exceptions for purposes of Articles 1404 through
1409.


Article 1413: Consultations

1.    Any Party may request consultations with another Party at
any time regarding any matter arising under this Agreement that
affects financial services.  The other Party shall give
sympathetic consideration to such a request.  The results of
consultations under this Article shall be reported during the
annual meeting of the Committee provided for in Article 1414.

2.    Consultations under this Article shall be conducted by
officials of the governmental agencies responsible for financial
services specified in Part D of each Party's Schedule to Annex
VII. 

3.   A Party may request that regulatory authorities of another
Party participate in consultations under this Article to discuss
that other Party's measures of general application that may
affect the operations of financial service providers in the
requesting Party's territory.

4.    Such regulatory authorities shall not be required to
disclose information or take any action that would interfere with
individual regulatory, supervisory, administrative or enforcement
matters.

5.    Where a Party requires information for supervisory purposes
concerning a financial service provider in another Party's
territory, it may approach the competent regulatory authority in
the other Party's territory to seek the information.

6.   Each Party shall comply with Annex 1413.6.


Article 1414: Financial Services Committee

1.   The Parties hereby establish the Financial Services
Committee.  The principal representative of each Party shall be
the officials referred to in Article 1413(2).

2.   Subject to Article 2001(2)(d) (The Free Trade Commission),
the Committee shall:

     (a) supervise the implementation of this Chapter and its
 further elaboration;

     (b) consider issues regarding financial services that are
 referred to it by a Party;

     (c) participate in the dispute settlement procedure
 pursuant to Article 1416; and

     (d) examine technical issues under this Chapter, including
 interpretation of this Chapter. 

3.   The Committee shall meet annually to assess the functioning
of this Agreement as it applies to financial services.  The
Committee shall inform the Commission of the results of each
annual meeting.


Article 1415: Dispute Settlement

1.   Disputes arising under this Chapter shall be resolved in
accordance with the procedures of Chapter 20 (Institutional
Arrangements and Dispute Settlement Procedures) and this Article.


2.   In addition to the roster established under Article 2009
(Roster), the Parties shall establish and maintain a roster of up
to 15 individuals who are willing and able to serve as financial
services panelists.  Financial services roster members shall be
appointed by consensus for terms of three years and may be
reappointed.

3.   Financial services roster members shall have expertise or
experience in financial services law or practice, which may
include the regulation of financial institutions, and shall be
chosen strictly on the basis of objectivity, reliability and
sound judgment.  Such members shall also meet the qualifications
set out in Article 2009(2)(b) and (c).

4.   Where a Party alleges that a dispute arises under this
Chapter, Article 2011 (Panel Selection) applies to the selection
of panelists, except that:

     (a) the panel shall be composed entirely of panelists
 meeting the qualifications in paragraph 3, where the
 disputing Parties agree;

     (b) in any case other than that set out in subparagraph (a)

     (i) each disputing Party may select panelists meeting
 the qualifications of Article 2010(1)
 (Qualifications of Panelists) or paragraph 3 of
 this Article, as the Party deems appropriate, and

     (ii) if the Party complained against alleges Article
 1403 as a defense in the dispute, the chair of the
 panel must meet the qualifications of paragraph 3
 of this Article.

5.   Notwithstanding Article 2019(2) (Non-Implementation -
Suspension of Benefits), in any dispute where a panel finds a
measure to be inconsistent with the obligations of this Agreement
and the measure affects:

     (a) only the financial services sector, the complaining
 Party may suspend benefits only in the financial
 services sector;

     (b) the financial services sector and any other sector, the
 complaining Party may suspend benefits in the financial
 services sector that have an equivalent effect as the
 measure or matter complained of has in the financial
 services sector; or

     (c) only a sector other than the financial services sector,
 the complaining Party may not suspend benefits in the
 financial services sector.


Article 1416: Investment Disputes in Financial Services

1.   Where an investor of another Party submits a claim under
Articles 1116 or 1117 to arbitration under Section B of Chapter
Eleven (Settlement of Disputes Between a Party and an Investor of
Another Party) against a Party and the disputing Party alleges
Article 1403 as a defense, on request of the disputing Party, the
Tribunal shall refer the matter to the Committee for a decision. 
The Tribunal may not proceed pending receipt of a decision or
report under this Article.

2.   The Committee shall decide the issue of whether and to what
extent Article 1403 is a valid defense to the claim of the
investor.  The Committee shall transmit a copy of its decision to
the Tribunal and to the Commission.  The decision shall be
binding on the Tribunal.

3.   If the Committee has not decided the issue within 60 days of
the receipt of the referral under paragraph 1, the disputing
Party or the Party of the disputing investor may request the
establishment of a panel pursuant to Article 2008(1) to decide
the issue.  The matter shall proceed as a dispute under Article
1415.  The panel shall transmit its final report to the Committee
and to the Tribunal.  The report shall be binding on the
Tribunal.

4.   If no request for the establishment of a panel pursuant to
paragraph 3 has been made within 10 days following the expiration
of the 60-day period referred to in paragraph 3, the Tribunal may
proceed to decide the matter.


Article 1417: Definitions

For purposes of this Chapter:

cross-border trade in services and cross-border provision of a
service means "cross-border trade in services" and "cross-border
provision of a service" as defined in Article 1213 (Definitions);

financial institution means any financial intermediary or other
enterprise that is authorized to do business and regulated or
supervised as a financial institution under the laws of the Party
in whose territory it is located; 

financial institution of another Party means a financial
institution in the territory of a Party that is controlled by
nationals or enterprises of another Party;

financial service means any service of a financial nature,
including insurance, and any service incidental or auxiliary to a
service of a financial nature;

financial service provider of another Party means any national or
enterprise of a Party that is engaged in the business of
providing financial services in the territory of a Party and that
is providing or intends to provide financial services through an
investment in the territory of another Party or through cross-
border provision into the territory of another Party;

investment means "investment" as defined in Article 1138
(Definitions), except that:

     (a) where the loan is extended to a financial institution,
 regardless of the original maturity of the loan, it
 shall only be an investment to the extent it is treated
 as regulatory capital; or

     (b) where the loan is granted by a financial service
 provider or a financial institution, the loan shall
 only be an investment if it is made on a cross-border
 basis and it has an original maturity of at least three
 years (other than a loan to a Party or state enterprise
 thereof);

new financial service means a service of a financial nature,
including a service related to an existing service or the manner
in which a product is delivered, that is not provided by any
financial service provider in the territory of a Party but which
is provided a financial service provider in the territory of
another Party;

public entity means a Party, a central bank or monetary authority
of a Party, or any financial institution owned or controlled by a
Party;

service provider of a Party means "service provider of a Party"
as defined in Chapter 12 (Cross-Border Trade in Services); and

self-regulatory organization means any non-governmental body
including any securities or futures exchange or market, clearing
agency, or other organization or association, that exercises
regulatory or supervisory authority over financial service
providers or financial institutions that are members or
participants thereof, or that have access thereto.

=============================================================================

                               ANNEX 1401.6
                       Country Specific Commitments

     Articles 1702(1) and (2) of the Canada - United States Free
Trade Agreement are incorporated into this Agreement and Canada
and the United States agree to act in accordance with and be
governed by those Articles.

=============================================================================

                               ANNEX 1404.4
                          Review of Market Access

     The review of market access referred to in Article 1404(4)
shall not include the market access limitations specified in Part
B of the Schedule of Mexico to Annex VII.

=============================================================================

                               ANNEX 1405.4
           Consultations on Liberalization of Cross-Border Trade
                                     
     By January 1, 2000, the Parties shall consult on further
liberalization of cross-border trade in financial services.  Such
consultations shall include the possibility of allowing a wider
range of insurance services to be provided on a cross-border
basis in the territory of each Party.  With respect to Mexico,
such consultations on cross-border insurance services shall
determine whether the limitations on cross-border insurance
services specified in Part A of the Schedule of Mexico to Annex
VII shall be maintained, modified, or eliminated.

=============================================================================

                               ANNEX 1413.6
                   Future Consultations and Arrangements


Section A - Limited Scope Financial Institutions

     Three years after the date of entry into force of this
Agreement, the Parties shall consult on the aggregate limit on
limited scope financial institutions described in paragraph 8  
of Part B of the Schedule of Mexico to Annex VII.


Section B - Payments System Protection

1.   If the sum of the authorized capital of Foreign Commercial
Bank Affiliates (as such term is defined in Part B of the
Schedule of Mexico to Annex VII), measured as a percentage of the
aggregate capital of all commercial banks in Mexico, reaches 25
percent, then Mexico may request consultations with the other
Parties on the potential adverse effects arising from the
presence of commercial banks of the other Parties in the Mexican
market and the possible need for remedial action, including
further temporary limitations on market participation.

2.   In considering the potential adverse effects, the Parties
shall take into account:  

     (a)  the threat that the Mexican payments system may be
 controlled by non-Mexican persons; 

     (b)  the effects foreign commercial banks established in
 Mexico may have on Mexico's ability to conduct monetary
 and exchange-rate policy effectively; and 
     (c)  the adequacy of various provisions agreed under this
 Chapter to protect the Mexican payments system.

3.   If no consensus is achieved through consultations, which
shall be completed in an expeditious time frame, a panel shall be
convened under the procedures of Article 2008 (Request for an
Arbitral Panel) of the Agreement to render a non-binding
recommendation to the Parties no later than 60 days after the
panel is convened.