European Community: U.S. Financial Services' Competitiveness Under the Single Market Program

GAO discussed its assessment of how the European Community's (EC) Single Market Program might affect U.S. financial firms. GAO noted that the Single Market Program will create more opportunities for U.S. financial firms to expand their already considerable EC business. GAO found that: (1) it appeared that U.S. financial firms would face relatively few EC-imposed restrictions; (2) insurance has been the most difficult financial sector to liberalize under the Single Market Program; and (3) many of the most troublesome issues still remain unresolved. GAO believes that: (1) U.S.-owned financial firms will directly benefit from new powers, market access, and the ability to profit from the increased demand for financial services as a result of economic expansion and restructuring under the Single Market Program; (2) despite these new opportunities, many U.S. financial firms will not expand beyond their existing wholesale operations in Europe, due to limited investment capital, fears of increased competition, and certain U.S. laws and regulations that limit their overseas competitiveness; (3) the Single Market Program's directive allowing freedom of establishment for EC non-life insurance companies will benefit U.S. insurers, but they are still subject to official authorization and national laws and cannot offer cross-border services.