An Overview
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under both NAFTA-type and GATS-type agreements. It requires that parties to the agreement grant immediately and unconditionally to financial services suppliers from another party the most favorable treatment accorded to any of their trading partners. Because national treatment and MFN treatment are of general application in NAFTA-type agreements, the better of the two treatments needs to be granted to financial services and services suppliers from the other party. The MFN provision in most NAFTA-type agreements also guarantees that any additional advantage flowing from an agreement subsequently entered into by a member with a third country is fully and automatically extended to all other members. Market access—Market-access provisions refer to the conditions under which a foreign financial services supplier is allowed to enter and operate within a domestic market, and these provisions typically list a set of specific measures that parties cannot maintain or adopt without reserving them. Under GATS-type agreements, countries undertake specific market-access commitments in relation to the four modes of supply. By contrast, NAFTA-type agreements often do not contain a provision on market access per se but have a general provision on the right of establishment applicable to cross-border trade and investment, together with disciplines on nondiscriminatory quantitative restrictions as well as the right to nonestablishment (local presence), which is meant to encourage the cross-border supply of services. However, more recent agreements entered into by the United States include a market-access provision applicable to trade and investment in financial services along GATS lines. NAFTA-type agreements, in common with the GATS Understanding on Commitments in Financial Services, sometimes include a standstill rule on existing nonconforming measures, which prohibits parties from adopting any law or regulation that would increase the level of nonconformity of its listed measures. The importance of the standstill rule relates to the depth of commitments undertaken by parties because it involves freezing the existing regulatory regime by undertaking a commitment not to make measures more nonconforming in the future. The existence of a standstill provision may have motivated countries in recent PTAs to bind their commitments at the level of the regulatory status quo. In addition, these agreements typically go a step further than the standstill rule by adding a “ratcheting� clause under which, when a party unilaterally amends a listed nonconforming measure, it automatically locks in the new liberalization and is prohibited from backsliding toward the original nonconforming measure.