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This article examines the recent dispute between the United States and the Republic of Korea over the opening of Korea's insurance market to U.S. companies. The article assesses the interests and motivations of both countries that lay behind the formal arguments presented during the negotiation process. It also analyzes whether the longrun interests of both developing and industrial countries would be well served by the approach to the opening of the market adopted in this case-sharing the rent while continuing to regulate the insurance market. The analysis suggests that the opening of a developing country's insurance market (or the wider financial services market) would serve the long-run interests of both developing and industrial countries only if it were accomplished in the context of overall domestic liberalization of the finance industry. "Opening" of the market, if this means only the sharing of the rents that were generated by regulation of the market, is unlikely to be beneficial to developing countries. This examination of the recent United States-Korea trade dispute over the limitations placed on the access of U.S. firms to the Korean insurance market provides an opportunity to investigate the interests and motivations of industrial and developing countries with respect to international transactions in financial services. The article also derives some policy lessons for other developing countries that may face a similar trade negotiation environment. Section I of the article briefly discusses the policies of the government of the Republic of Korea with respect to the insurance market, describes the structure and size of the market, and suggests some reasons for the strong interest of U.S. firms in entering the market. Section II introduces the trade dispute, and describes the issues between the two countries and their respective positions on these issues during the negotiations pursued under Section 301 of the U.S. Trade Act (see appendix). It also investigates the motivations underlying the formal arguments during negotiations and describes the bargaining counters The author is an economist in the Technical Department of the Asia Region of the World Bank. This article was prepared for the World Bank Conference on Developing Countries' Interests and International Transactions in Services, Washington, D.C., July 15-16, 1987. The author is grateful to J. Michael Finger and Brian Hindley for their valuable suggestions, to Jagdish Bhagwati and Andrej Olechowski for helpful comments, and to Peter Bocock for editorial assistance.

Literature on non-tariff distortions of international competition has burgeoned and encompassed the study of both explicit trade policy instruments and trade-influencing instruments of domestic policy. The study reported on in these pages was limited to the latter category and, specifically, to the potential effects on trade of public subsidies to private enterprise in the manufacturing industry of the United Kingdom.