it introduces a strong element of regulatory transparency and a potentially higher level of commitments to the extent that it typically locks in the regulatory _status quo_ , except in those sectors where Members are explicitly allowed to retain the power to introduce new non-conforming measures. The detailed inventories of non-conforming measures that are appended to PTAs following a negative list approach, while technically more onerous to prepare, allow foreign investors and trade negotiators alike to obtain a comprehensive picture of a country’s regulatory landscape. By contrast, only the measures that apply to the sectors, sub-sectors and modes of supply entered in a country’s schedule are listed under the hybrid approach, which often differ from the regulatory _status quo_ prevailing at the time that the commitment is scheduled. While neither of the two approaches inhibits the ability of host countries to preserve ‘policy space’, the hybrid approach has the advantage of affording greater latitude in determining the overall level of commitments and related regulatory conditions that might differ from actual practice, allegedly making it more flexible or “development-friendly” than the negative list approach. However, as Fink and Molinuevo (June 2007) note in their empirical analysis of 25 East Asian PTAs, the actual approach to scheduling commitments matters less than is commonly thought because the direction of causality between scheduling approaches and liberalization outcomes often runs both ways.

# **_The architecture of financial services in PTAs – international experience_**

**The architectural approach towards liberalization and regulatory disciplines in financial services is linked to the overall architecture found in PTAs and, in particular, their services and investment chapters** . Countries that have followed the GATS approach for their general trade in services chapters have found it natural – and more familiar – to adopt such an approach towards financial services or to introduce a special chapter expanding on the GATS Annex on Financial Services. Similarly, countries that have previously relied on a NAFTA-like approach may have felt more at ease with a financial services chapter modelled after the latter agreement’s separate disciplines on financial services (including for investment). Interestingly, some countries have adopted a range of architectural approaches in their PTA coverage of financial services, which can be attributed to different trading partners (particularly if these are large OECD countries), changes in policy priorities, timing issues, preference for preserving greater policy space in some market segments/modes in financial services etc.

**There is a broad variety of approaches used by countries to cover financial services in their PTAs** . These range from a general chapter on trade in services at one extreme to a self-contained financial services chapter at the other extreme<sup>26</sup> . As Table 2 shows, each of these approaches has its own characteristics, benefits and potential weaknesses. Of course, all competing architectural approaches can theoretically generate

> 26 The analysis excludes those PTAs that have explicitly carved out financial services. A less radical form of a carve-out is found in the Japan-Mexico FTA where, despite the presence of a chapter dedicated to financial services, the Parties agreed to be merely bound by their respective commitments under the OECD Codes of Liberalisation and Capital Movements and the GATS. See Sauvé and Molinuevo (May 2008) for a discussion of the different approaches.

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