of LCR FTAs shows (see Appendix I), the scope and frequency of consultations depend on the perceived importance and sensitivity of financial services in the overall PTA negotiations. The consultation process with the financial industry is typically extensive, and consists of measures ranging from information sessions with financial institutions and relevant associations to “side room” participation by those actors during the negotiations and their feedback/commissioning of reports on negotiating positions. The process often includes, at least in the early stages, training on trade law concepts and principles to enhance the understanding of the private sector on the full scope and business implications of the negotiations. The consultation process with civil society varies more widely across countries, and tends to also reflect the country’s state-civil society traditions<sup>33</sup> .

**Use of a trade-related regulatory audit in financial services can facilitate the negotiations and potentially generate positive spillovers in the consultation process and in domestic regulatory conduct and design**<sup>34</sup> . Use of this audit was pioneered in the context of preparing the negative lists of non-conforming measures under the NAFTA<sup>35</sup> . Conducting such an audit is a useful means of preparing for services negotiations (to master the sectoral intricacies), ensuring that key regulatory objectives are met in the most efficient manner, identifying antiquated or inefficient regulations (which can then yield useful negotiating currency), encouraging the adoption of procompetitive regulation (where feasible), and deepening the dialogue and building trust within the government (trade negotiators, line ministries and sectoral regulators) as well as with key stakeholders. Therefore, the process of preparing an inventory of discriminatory and trade- and investment-impairing measures may help not only to anticipate partner country negotiating requests, but serve as an exercise in regulatory transparency and generate positive spillovers in the way that domestic regulation is developed and implemented. However, it is worth noting that the preparation of the list of non-conforming measures is a useful starting point in financial services but it is usually not sufficient given the presence of non-discriminatory measures, including measures of a prudential nature, which may nonetheless be unduly burdensome or possible disguised restrictions to trade.

# **_Implications for China_**

**Securing the active collaboration of financial sector officials in financial services negotiations would be of great benefit to Chinese trade negotiators** . As previously mentioned, negotiators need to be aware of important nuances in financial services disciplines and commitments in order to avoid unintended consequences or limit policy space beyond what is desired. Given prevailing regulatory complexities and policy

> 33 For example, in the case of the Chile, there were no financial services-specific consultations due to perceived lack of interest and the technical nature of the discussions, while in the case of Costa Rica they included public presentations following each negotiating round as well as a broad communications strategy. 34 See Sauvé (May 2008) for details.

> 35 This corresponds to a negative list of measures that, absent their inscription in reservation lists, would be found in breach of the key liberalizing provisions found in trade agreements – national treatment, market access (quantitative restrictions), local presence requirements, and most favored nation (MFN) treatment.

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