"regulation as they can under the MFN treatment or market access before entering into agreementwith the other members. In the UAE the proLIBERALIZATION OF SERVICES UNDER THE GATSPart IV, Articles XIX to XXI of the GATS text deals with liberalization and particularlyliberalization of the financial service that is opening the markets to foreign nations to bring inservices and service providers into the nation. Every country has the liberty to decide whichsector it likes to liberalize and or make commitments in, by adding them to the GATSlists/schedules. For example, a country is free to decide how much percentage of its financialsector it would like to liberalize. The GATS agreement of the country provides the lists of subsector of the financial sector and for which modes have been liberalized. The list also can containthe exemptions the country has opted for while entering the GATS agreement. The country canalso make a commitment of not liberalizing the financial sector by not including the financialsector in the GAT schedule. The most important part of the GATS negotiation is the country?sdecision to either open up or not a set of services to the open market. In the process of the GATSagreement the country received request from the other members of the WTO with the list ofservices they request for market opening and the host country should provide a list of servicesthat it is planning to open market in form of offer. The end result of this bilateral agreementresults in each nation including a set of services for which it grants a new market opening that is50 valid and provides equal opportunities to all the nations.50Stichele Vander, “CRITICIAL ISSUES IN THE FINANCIAL SECTOR,” “Chapter 6Trade in financial services:liberalization in the GATS Agreement and insufficient assessment of the risks,” SOMO sector report, 2004The GATS is a very unusual agreement that takes a wider view of what actually constitutestrade and defines “trade in services,” under four different modes as supply of service. WhileMode 1 deals with cross-border service supply, the mode 2 deals with consumption abroad thatinclude the movements of the customers purchase the trade to the supplier?s territory. Mode 3, isnoted to be of crucial significance because it deals with rule of commercial presence of thesupplier of one Member in the jurisdiction of the other member. By defining trade under thismode to include sales made through the fore of commercial presence, the GATS Agreement isincluding in its domain foreign direct investment that would constitute to a large share of all theservice transactions and in particular the banking sector. Mode 4 requires presence of the naturalperson for supplying services.Based on the liberalization of content of commitments and based on the numerical estimatesdisplayed in the table below, the liberalization index average value of the transitional anddeveloping countries is not very high but a little above the one-half in comparison with theaverage of the developed nations around 0.75. The below table provides a detail on theliberalization indices for the banking sector of the WTO members. From our dissertationperspective it can be observed that the acceptance of deposits and lending in the UAE was 0.1551 and 0.25 in 1998.51Same as note 16 52 The reason for discussing these indices and also in comparison with the other WTO memberswill help the readers in understanding that the liberalization index average value of the UAEduring 1998, just 2 years of its membership in the WTO and little less than the average incomparison to the developed nations as provided above.The significant commitment count on the first two mode of the trade in service was considerablyhigher than those in the insurance. More than half of the Asia countries including the UAEamong other nations have been committed to liberalization abroad. Further, the numbers of fullyliberal commitments of the nation?s for foreign investor in the banking sector only under Modewere more in comparison to those that have participated in the insurance. Asian countries were52Mattoo Aaditya, “Liberalization Commitments of the Developing and Transition Economies,” Financial Services and the World TradeOrganization some of the fewer countries that have guaranteed full openness particularly under Mode 3 thanunder the first two modes. Even though the value of index for banking is slightly more in certain53 Members but the difference does not have much of the statistical significance. The number ofthe nations that participate in the free market access of the banking sector is more in LatinAmerica in comparison to other Asia and the Pacific jurisdictions. One of the significant reasonlimitation in the frequency of the Asian jurisdictions including the UAE is the numericalrestrictions to the foreign investors on the number of branches a foreign bank can open in theirjurisdiction in addition to the limitation of foreign equity, equity restrictions imposed in Bahrain54 and entry limitations imposed by the UAE. Through the second Trade Policy Review of the UAE has provided better understanding oftrading and the trade related policies of the nation. This review also includes trade policies andpractices along with the emphasis on the future challenges the nation will face. The WTOMembers opined that the bold step taken by the UAE to diversify its economy away from the oiland gas sector is very commendable. According to the review the UAE?s highest export earningsand open trade system has enabled the nation to significantly weather the global crisis withoutthe backsliding from the liberalization with just a simple MFN average of 4.9% applied during2011. The WTO members have encouraged the UAE to continue its reforms such that the nationwould achieve its goal set under the UAE’s vision 2021 that is to transform the economy of thenation into a knowledge-based, competitive and productive. The key challenge faced by theUAE? financial sector is limitations of the expansion of the foreign investments in outside tradefree zones. Currently, the expansion of the foreign investment is limited to 49% and the WTO53Same as note 1654 Same as note 16 members encourage the UAE to overcome this obstacle. They also have invited the UAE toadopt full-blown competition legislation. The UAE participates in two regional trade agreements such as the GCC and the GAFTA. TheWTO members have requested the UAE to work effectively with its GCC partners in order toconsolidate the complete GCC?s customs union and also for ensuring that the WTO transparencymechanism reviews the custom union as soon as possible.The Trade Policy Review of the UAE in 2012 has voiced out various numerous questions,statements and replies highlighting the areas that require further action and improvement. TheChairperson of the Trade Policy Review body noted that from the UAE?s statements that thenation has already put into action reforms for certain sectors such as the banking and financialsector. The WTO Members have requested the UAE to relax on the restrictions imposed on thenew licenses for the foreign banks and also the number of branches the foreign banks may openin the nation. In short, the review report confirmed significant role played by the UAE in themultilateral trading system and on the benefits of open economy.The financial sector of the UAE experienced a amazing growth prior to the global financial crisisin the 2008; with Dubai as the financial hub of the Gulf region. The financial services are ofconsiderable important to the nation?s economical development, particularly in Dubai. Thefinancial services represent 6.8% of the Dubai?s GDP in 2010. However, the global crisis had adrastic impact over the many UAE banks. Most of the banks suffered liquidity shortages and thestock market especially the Dubai Financial Market and the Abu Dhabi Securities Exchangeplunged to68.5% and 46.4% respectively in November 2008. This effect of global crisis over theeconomy in general and the financial services in particular was substantial particularly in Dubai. "