FTAs have become a major conduit for developing and organising a legal framework for capital movements across borders. While FTAs contemplate the liberalisation of signatories’ capital account and the facilitation of payments and transfers as a means to foster trade in goods and trade in financial services between countries, the agreements do more than simply require the free flow of capital. Indeed, FTAs also provide a variety of exceptions and carve-outs aimed at providing regulatory policy space. The amount and degree of policy space differs between and among agreements, but the trend is for treaties to include more and stronger protections. This chapter analyses typical provisions relating to financial services found in FTAs before turning to common FTA exclusions and exceptions. In so doing, four modern agreements are extensively referred to as examples – CPTPP, USMCA, RCEP and CETA. While many obligations and exceptions are based on and resemble the GATS, the provisions contained in FTAs can be deeper and more comprehensive than those of the multilateral trading system. Properly drafted, such FTAs should provide comfort to governments seeking to make use of targeted CFMs that they will be able to do so without violating their bilateral and regional trade agreements.

The framework for the legal regulation of cross-border capital flows is critically important yet remains vastly unexplored and undeveloped. The preface introduces the background on the issue and explains how the book aims to fill the void and contribute detailed legal analysis to the ongoing discussion and debate. In contrast with existing literature, this book does not focus on the utility of capital flow management measures (CFMs) but on legal issues of fragmentation and associated problems. Much of the existing literature starts with the premise that members should have an absolute right to maintain CFMs – as a result, over-reading and misinterpreting of provisions is rife. This book has no pre-conceived ideological viewpoint but instead seeks to provide solid analysis on the consistency of CFMs with the trade and investment regimes and to develop a framework to manage and avoid regime conflict in existing and future treaties.

Having clarified how capital movements are regulated at the multilateral level and explained how the multilateral framework translates to the bilateral or regional levels through FTAs, we now turn to the third level of regulation made available in an international law context – international investment agreements (IIAs). IIAs are critical to capital movements and capital flows in that they create a specific legal framework with substantive provisions aimed at protecting and promoting cross-border investors and investment. Like the previous chapter, this chapter refers extensively to the four representative comprehensive treaties – CPTPP, USMCA, RCEP and CETA. Where applicable, reference is made to other agreements, and in particular agreements negotiated by developing countries. The main conclusion of the chapter is that modern IIAs contain a wide range of safeguards and limitations which effectively allow host governments to put CFMs into place in circumstances of financial instability and financial duress. Moreover, the chapter also details how arbitral tribunals have narrowly interpreted state obligations and given substantial deference to host states when applying exceptions. That being said, treaties are drafted differently and the language, terms and choices made in drafting a treaty can significantly affect obligations and outcomes.

The analysis in the substantive chapters of the book have led to the following six observations and concluding remarks: (1) the IMF has regulatory authority over capital controls; (2) The WTO is not an impediment to the implementation of CFMs; (3) modern FTAs and IIAs are not an impediment to the implementation of CFMs; (4) Investment Tribunals and WTO Dispute Settlement Panels have interpreted the prudential exception broadly, fairly and reasonably; (5) a CFM taken in accordance with IMF recommendations or guidance is unlikely to conflict with modern trade and investment agreements; and (6) there is a potential convergence between WTO and international investment law. A recurring theme is that the risk of IEL instruments constraining governments has been overstated. The main risk lies not so much in IEL agreements per se but in those agreements that do not incorporate modern drafting techniques which limit or condition State obligations or provide for a wide range of safeguards to ensure that legitimate CFMs do not run afoul of treaty obligations.

With cracks in the liberalisation approach to capital flows appearing during the Asian Financial Crisis and subsequent crises in the early 2000s, policymakers and commentators began to understand that unregulated finance and cross-border flows could generate extreme financial instability. Capital controls have become widespread. For some, the controls are limited in nature and duration, but for others the controls are widespread and remain in place for an extended period. This shift has occurred at the same time the IMF has been more accepting of CFMs and in particular shifted its position on the extent to which they can be a source of instability in emerging markets. This chapter focuses on the role and legitimacy of CFMs. The chapter first provides a definition of CFMs and explains their role and impact in terms of capital flow management. Next, the chapter explains why CFMs are so controversial and elaborates on their operational aspects and overall desirability. The chapter concludes with a discussion on why CFMs remain difficult to manage from a macro level in the absence of a global regulatory framework.

Macroeconomic stabilization in emerging economies calls for managing both internal and external balance within a policy space constrained by global capital flows and debt sustainability pressures. Emerging East Asia has crafted an approach to meeting this challenge that involves the exchange rate as policy instrument. But while the economics of the system have proven effective, the politics can run afoul of US strictures on "currency manipulation". This is a source of ongoing tension. Viewing East Asian exchange rate policy through the framework of this text, the macroeconomic motivation for the policy behavior is clear. And motivation is determinative for establishing "currency manipulation" under IMF rules. Advantaging exports through a depressed currency is a side effect of, not the motivation for, accumulating foreign reserves to back exchange rate stabilization. A broad pattern of leaning against currency volatility through both buying and selling of foreign exchange is evident in Emerging East Asia. Countries elsewhere would do well to learn from this model.

Crises typically originate in financial overshoot as mounting debt becomes unsustainable. Despite centuries of catastrophic experience with this phenomenon, policymakers have not figured out how to consistently avoid it. A strong human tendency to rationalize excess seems to impede recognition of a problem until it’s too late, in a "this time is different" mentality. Crisis situations put monetary and fiscal policy to their ultimate test. The Asian Financial crisis rolled across the region in 1997. As the epicenter, Thailand offers a window into the incubation and eruption of a financial crisis and lessons learned about policy response. From 2020, a crisis of a different sort has unfolded in the form of a shock to the real economy from a pandemic. The policy response to this crisis has differed greatly among Emerging East Asian economies with constraints on policy bearing on options.

This chapter provides a summary of the key arguments made in this book. Crucially, the regulatory theory of patent law, which adopts a socio-centric approach to patent law, permits the incorporation of a model of human rights into a country’s patent law system. The model of human rights demands that any regulatory instrument implemented by a state must not constitute a breach of its international human rights obligations. The incorporation of a model of human rights into the design, implementation, interpretation, and enforcement of their national patent laws will help developing countries to preserve their patent policy space and secure access to affordable medicines for poor patients in their countries.

This chapter begins by introducing the problem of access to affordable medicines in developing countries. It describes the patent policy space available to states prior to the adoption of the TRIPS Agreement and the attempts made by developing countries to reclaim their patent policy space after the adoption of the TRIPS Agreement via the Doha Declaration on the TRIPS Agreement and Public Health. It notes that the Doha Declaration only yielded marginal gains in the form of the confirmation of the flexibilities that are already contained in the TRIPS Agreement and the introduction of a waiver system that is more burdensome and less beneficial. Nevertheless, the chapter contends that paragraph 4 of the Doha Declaration provides a linchpin that developing countries can use to preserve their patent policy space as it sanctions the incorporation of a right to health perspective, and invariably the incorporation of a model of human rights, into the design, implementation, interpretation, and enforcement of their national patent laws. The chapter also presents a roadmap for the rest of the book.