1. Barriers to entry and financial integration in Asia and RCEP countries
Alex Erskine, Erskinomics Consulting Pty Ltd
10 – 11 July 2017
Some highlights from ACFS paper Barriers to entry and financial integration in Asia and RCEP countries, 5 July 2017

2. Presentation outline ACFS paper compiled mainly by mid-2016
Background on the RCEP negotiations and trade in financial services
Focus on barriers to trade in financial services and on the “prudential carve-out”, broadly interpreted to include policy choices for the exchange rate, consumer protection and financial stability
Review effectiveness of frameworks for promoting financial integration
Suggest implications for RCEP negotiations

3. Countries negotiating the RCEP
APEC
RCEP
Hong Kong, China
China
Chinese Taipei
Korea
Russia
TPP
India
Australia
Canada
Japan
Chile
New Zealand
Mexico
ASEAN
Peru
Brunei Darussalam
United States of America
Malaysia
Singapore
Viet Nam
Cambodia
Indonesia
Lao P.D.R.
Philippines
Myanmar
Thailand
Timor-Leste and 20+ Pacific Islands
Papua New Guinea
The 10 ASEAN countries
and the “Plus Six”
Focus on barriers to trade in financial services

4. RCEP countries have a wide range of incomes and generally above- average financial development

5. Modes of Supply for trade in services
Mode 3 and Mode 4 are the most important for trade in financial services
These don’t fit easily with Balance of Payments and trade data (which anyway is poor)
Especially need more surveys of operations of foreign affiliates

6. Measures of barriers to trade in financial services
World Bank (WB) – Services Trade Restrictions Index (STRI)*
OECD – Services Trade Restrictiveness Index (STRI)*
Also Economic Research Institute for ASEAN and East Asia (ERIA) for trade negotiation/agreement coverage and degree of ambition
* The WB and OECD STRIs differ in coverage and can differ in interpretations of laws and regulations

7. WB STRIs are lower for countries with higher GDP pc and financial development

8. WB STRIs differ with exchange rate regimes

9. Ambiguous association between WB STRIs and consumer protection regimes

10. Association of WB STRIs and financial stability regimes unclear: Goldilocks or anti-liberalisation?

11. Case studies of frameworks that promote financial integration (plus FTAs & other means to boost cooperation)
Asia Region Funds Passport (ARFP)
ASEAN initiatives on financial integration
Pilot scheme to facilitate cross- border sales of retail funds in Asia region
“Competing” with EU Undertakings for Collective Investment in Transferable Securities (UCITS) scheme, China-HK Mutual Recognition of Funds (MRF) and ASEAN Collective Investment Scheme (CIS) Framework
ASEAN 1967
AFAS 1995 and AEC 2007/2015/2025
ABIF 2014 and QABs (2 by or before 2025) based on bilateral agreements
Joint Review 2015 by ASEAN Secretariat and WB

12. Conclusions
To most effectively promote financial integration
To most effectively lower barriers to trade in financial services
Build into RCEP mechanisms that involve negotiators, regulators and the private sector in structured follow-up of reviews of barriers to trade in financial services, with accountability and processes
[Plus suggestions to use RCEP to advance ARFP, FinTech, financial inclusion & data improvements]
Negotiators be cognisant of exchange rate regime relevance
Focus on countries that have “unnecessarily high” barriers to trade in view of their exchange rate regime
Especially as countries transition from relatively fixed to more flexible/floating exchange rates