An Overview
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foreign investors of a stable business environment by committing to increasingly liberalized (and costly to reverse) policy regimes.35 Possibly, the regulatory status quo in financial services might not be the most appropriate level for countries to bind. The right answer might depend on countries’ level of financial development, but little research or empirical analysis has been done on this topic.36
Negotiating Financial Services Liberalization Preparing for financial services negotiations is no different from preparing for negotiations in other sectors. As previously mentioned, trade agreements are essentially mercantilistic exercises in which demandeurs strive to enhance market-access opportunities for their services providers rather than to promote mutual recognition or the harmonization of prudential standards. Thus, developing a strategy for the negotiation process that allows classification of offensive and defensive interests, identification of “red lines,” anticipation of requests, and avoidance of surprises, as well as resolution of any internal inconsistencies that could weaken the negotiating stance, is important. Some good practices adopted by other countries to achieve this objective, specifically in the case of financial services, are summarized in the following section and described in greater detail in other chapters of this volume.
Negotiating Financial Services in PTAs: International Experience The structure of the financial services negotiations team tends to be similar across countries, although its leadership tends to be country specific. In particular, the financial services negotiating team typically includes, or relies on, financial sector officials—from the ministry of finance, central bank, and deposit insurance and supervisory agencies—in addition to trade specialists. This composition is an inevitable consequence of the heavy regulation the financial sector, which requires a high level of technical expertise. Cultural and institutional factors—historical involvement, degree of trust and knowledge, relative political powers, and the like—are important determinants of whether financial or trade officials lead negotiations in the sector.37 Leadership of the negotiating process will sometimes (though not always) determine the negotiating template, with ministries of finance and central banks typically opting for a dedicated financial services chapter to isolate the negotiations from other chapters and to keep them among financial sector specialists. However, even in