The preferential liberalization of trade in financial services : lessons from RTAs for GATS

Abstract

The current multilateral financial services rules failed to respond to the challenges in the remote and electronic supply of financial services, and the countries have turned to the regional channel. The purpose of this thesis is to conduct a systematic study on financial services rules in the regional context, finding a theoretical framework and providing an empirical examination of a series of potential rule-making patterns and diffusion mechanisms of regional trade agreements in the financial service. Meanwhile, this thesis also explores the possibility of the WTO-plus financial service rules to further incorporate into the upgraded multilateral financial services legal system. This thesis expands the Competitive Regionalism theory in explaining the proliferation of bilateral FTAs in the Pacific Rim region to explain the dissemination of financial service rules across RTAs, especially mega RTAs worldwide, and their implications on future multilateralization. To reveal the hidden structure of financial service rules in the RTA complex stacking universe, this research introduces the latest advances of computational analysis methods as the primary research methodology. By constructing a dataset on RTA containing financial services rules and employing multiple text analysis techniques such as text similarity and text clustering analysis combined with case analysis, this thesis provides systematic empirical evidence for examining the diffusion mechanism of financial service rules in RTAs and their interrelationship with multilateral financial service legal system. Through the analysis of rule-making of financial service rules in the regional context, firstly, it is found that RTAs with financial service rules are divided by region or inter-regional cluster combining with national clusters through text clustering analysis. Second, wealthy developed countries dominate the formulation of regional financial service rules, but there is no inevitable positive correlation between economic strength and the consistency of the financial services rules in a country's RTA network. Not only that, the experience of extensive participation in RTA practices and the continuous and consistent use of rule templates are probably also important factors that affect these negotiations and the conclusion of the final text. In respect of rule diffusion mechanism analysis, this thesis argues that financial service rules present diverse diffusion mechanisms in different regions. The Asia-Pacific region presents a competitive diffusion; whereas Europe, North and South America are dominated by emulation diffusion. Regarding the implications of regionalism, the proliferation of regional financial service rules has promoted convergence while also widening differences in some areas. In particular, the mega RTA case studies represented by USMCA, CETA, and RCEP illustrates that since mega RTAs involve complex and diverse negotiation factors, it even creates difficulties for some developed countries to maintain their consistency of rule paradigm selection ultimately. Therefore, the emergence of mega RTAs to some extent not only failed to solve the problem of unification of rules but increased the diversity and complexity of rules in the financial service sector. Hence, this thesis argues that regional rule-making has both advantages and disadvantages for multilateralism. While regionalism contributes new and upgraded rules to the multilateral level, it may also increase the diversity and complexity of rules in the financial services sector, which may adversely affect multilateral rule-making as well as the coherence and consistency of the regional treaty network.