Study On Financial Services Trade Rules In New-Generation FTAs

The GATS-based multilateral trade rules on financial services are ill-equiped,on the one hand,to respond to the dynamic growth of liberalization of financial services in the 21st century,and on the other,to deal with the ever-increasing complexity of financial stability and security.In the face ofmultilateral negotiationsimpasse,some WTO members hae turned to"new generation FTAs" in order to reshape the international trade rules governingfinancial services trade."Next generation FTAs"share the characteristics of high-level of liberalization,high standards of trade rules,and comprehensive agenda.FTAs with these traits,including those in the process of negotiations,could complement or even surpass the existing WTO system and provide guidance for the future development of the international trade governance system.Financial services trade rules are one of the core issues for the new-generation FTAs to seek a breakthrough.On the one hand,the general characteristics of the new-generation FTAs such as liberalization,high standards and wide issues are mapped into specific rules of financial services trade.On the other hand,the evolution of financial services trade rules also reflects their own characteristics,Such as prudential supervision of financial services,settlement of investment disputes in financial services,the role of financial services self-regulatory organizations,the opening up of new financial services and cross-border data transmission of financial services.In this regard,the key issues to be explored and responded to in this paper are:How the Financial Services Rules in the new-generation FTAs treat the finance,trade,investment compared with the WTO's multilateral Financial Services Rules in the WTO Multilateral Trade Agreements and Regional Trade Agreements The overall structure of the three-dimensional relationship,the prudential regulation of finance,the electronicization of financial services and the state-owned financial issues.For these issues,what are the pros and cons and potential implications of the different handling modes and trends in the new-generation FTAs?On the basis of studying the changes of the new generation of financial service rules of FTAs,we should further explore how China should implement the principle of "autonomous,gradual and controlled" financial liberalization at both the international and domestic levels.The rules of trade in financial services in the "new generation FTAs" are essentially the intersection among international trade law,international investment law and international financial law.Two transformative changes in "new generation FTAs" re-calibratesuch intersection:the first change is that FTAs gradually incorporate the international trade law and international investment law in a more consistent manner.The second change refers to reforms undertaken both in domestic financial regulation and international regulatory.In terms of this intersection,U.S FTAs and EU FTAs respectivelydevelop into their own models:The US FTAs,which largely adapted from its traditional "Treaty of Friendship Commerce Navigation",treat trade and investment of financial services in highly integrated manner,contains a relatively self-contained chapter of the financial the United States in the financial crisis,including the establishment of the Dodd Frank Act,including a series of strict financial regulatory measures and the corresponding agencies to prevent a new generation of FTA financial services liberalization erode the United States domestic financial regulatory reform As a result,the United States passed a wide range of free trade agreements Except for the application and exceptions,a separate negative list of financial services should be combined to ensure the legitimacy and self-determination of contracting parties' financial regulations.The rules for financial services trade in the EU FTAs are based on the GATS financial services trading rules system and reflect the limited absorption of the traditional BITs.The structure of the EU FTAs is the regulation of financial services under the"General Trade in Services and Investment Rules" Therefore,the rules of financial services trade are more subordinate.Starting from the experience of EU market integration,the EU pays more attention to strengthening the cooperation mechanism of international financial regulations after the financial crisis.Therefore,the rules of its financial services trade are particularly focused on the establishment of bilateral Or regional financial regulatory cooperation framework to promote cooperation and coordination among financial supervisory authorities among contracting parties and to strengthen the guidance and authority of soft law in international financial organizations by invoking specialized international financial organizations and their standards in free trade agreements.Prudential regulation works as a safety valve in the liberalization of financial services trade.The controersy about the WTO-consistency of a handful of financial bail-outs and other emergency measures taken by WTO members during the 2008 financial crisis has triggered a cautious review of the GATS financial prudential regulation mechanism."New generation FTAs" improve prudential regulation mechanism from three aspects:prudential exception clauses,the mechanism of mutual recognition of prudential regulation and the special dispute settlement mechanism of prudential exception.Specifically,US FTAs clarified and expanded the scope of the defense of financial cautious exceptions,while the EU FTAs paid more attention to advancing mutual recognition of prudential regulations.Meanwhile,regarding the dispute settlement mechanism involving prudentialclauses,the US FTAs and the EU FTAs adopt"filter" mechanism and guiding principles for prudential measures to enhance financial regulators' role in explaining and using prudential exceptions in the dispute settlement mechanism.Compared with other service sectors,financial services have more widespread and in-depth application of technology.Digitalization of financial services poses three challenges to the current rules of GATS financial services trade:the blurred line between the two modes of "cross-border supply" and "consumption abroad",the liberalization and regulation of cross-border electronic payment services,the management of cross-border financial data flow.In response to the modes of supply challenges,the new-generation FTAs mainly combine "cross-border supply" and"consumption abroad" into "cross-border trade inservice " in order to unify the level of openness and to ensure the ability of the home country to regulate foreign financial service providers for the purspose offinancial services consumers proctection.In terms of electronic payment services,after the WTO China-Electronic Payment services case.The United States turned to FTAs to push "cross-border electronic payment services".Cross-border data flow is a hot topic under the new-generation FTAs and is usually regulated as an integral part of "e-commerce." However,the special nature of cross-border data flows of financial services,both in terms of liberalization of financial services and financial rules,enables new-generation FTAs to specifically regulate cross-border data flows of financial services,generally outside of e-commerce rules,generally to Contracting Parties Financial regulatory departments more regulatory space.The latest proposal by the United States on the regulation of cross-border data flow in financial services in FTAs may have a major conflict with other countries such as the EU.This issue may become the crux of the negotiations on the new-generation FTAs financial services including TiSA in the futureState-owned financial enterprises is an important part of the financial system in many countries.The new generation of financial services trade rules,competition regulations and state-owned enterprises rules of FTAs exert constraints and norms on state-owned finance in varying degrees.In view of the special status of state-owned financial enterprises in maintaining national financial security and implementing national public policies,the new-generation FTAs first excludes the activities of state-owned financial enterprises that are authorized to provide government services.In the meantime,the fiscal relief measures of state-owned financial enterprises under economic crisis.The overall exclusion should be made to ensure that all countries establish and maintain the basic capabilities of state-owned financial enterprises.In the meantime,the new-generation of FTAs has strengthened the transparency requirements for the general state-owned financial enterprises and stepped up the distinction between "non-competitive" and "non-commercial" activities of state-owned financial enterprises by invoking relevant OECD standards.For the particular state-owned financial enterprises,the United States and the European Union have imposed strict "competition neutrality"requirements on the provision of insurance services to postal enterprises in their new-generation FTAs in response to the traditional advantages of providing insurance services to state postal enterprises in Asian countries.In addition,US FTAs require that sovereign wealth funds comply with relevant international principles.