RESTRICTED  
WORLD TRADE  WT/REG39/M/1  
 4 December 1997  
ORGANIZATION  
 (97-5325)  
 
Committee on Regional Trade Agreements  
 
 
 
 EXAMINATION OF THE TREATIES ESTABLISHING  
 THE EUROPEAN UNION, SERVICES  
 
 Note on the Meeting of 4 November 1997  
 
 Chairman:  H.E. Mr. John Weekes (Canada)  
 
 
1. The Committee on Regional Trade Agreements took up the examination of the Treaties 
Establishing the European Union, Services under Agenda Item B.VI of its Fourteenth Session, as found in 
Airgram WT O/AIR/707.  The following topics were discussed:  
 
A.General Remarks  
B.Provisions Relevant to the Scope of the GATS  
C.Compatibility of Provisions with GATS Article V  
D.The Context of Wider Economic Integration  
E.Follow -Up 
 
2. The Chairman  said that Mr. Stuart Harbinson, the Vice -Chairman originally scheduled to preside 
over the examination, was unable to be present and had asked him (Mr. Weekes) to chair the meeting.  
 
 
A.Gener al Remarks  
 
3. The Chairman  recalled that in November 1995 the EC and its Member States had notified the 
economic integration agreement instituted by the Treaty of Rome (S/C/N/6), which had subsequently been 
enlarged and modified, m ost recently by the Treaty on the European Union.  This notification reflected 
the state of play prior to the latest EC enlargement to Austria, Finland and Sweden, which had been subject 
to a separate examination in the Committee.  The provisions relevant to trade in services had been 
identified in the notification, and the texts of the relevant Treaties had been available from the WTO 
Secretariat and from the EC.  The Council for Trade in Services had agreed in September  1996 that, 
"pursuant to paragraph 7  of Article V of the GATS", these treaties would be examined in the CRTA 
(S/C/M/13).  The information in the notification document would be the basis for the examination; 
information had not been submitted in the form of the Standard Format for Information  on Economic 
Integration Agreements on Services.  
 
4. The representative of the European Communities  said that on the EC -12, the EC and its Member 
States had made a detailed notification which explained the "four freedoms" on which t he EC was built and 
which were the foundations of the internal market with respect to trade in services.  In the notification, 
reference had been made to the relevant articles of the Treaty of Rome, and reference had also been made 
to the implementing legi slation putting into effect the freedom to supply services and the right of 
establishment among Member States.  There were more than 2,000 pieces of legislation.  In these 
circumstances, it was felt impossible to communicate all the information or summariz e it in the Standard 
Format with questions and answers.  Accordingly, the EC delegation had not prepared the Standard 
Format, the use of which was optional in any case.  Moreover, it was the view of the EC delegation that the 
trade regime on services for t he EC and its Member States was well -known to all WTO Members.  Indeed, WT/REG39/M/1  
Page 2 
 
the EC had negotiated as one Member during the Uruguay Round, and with the adoption of the Uruguay 
Round results at Marrakesh, Morocco, it had been accepted that the EC and its Member States would 
operate as one Member.  The EC was prepared to provide information requested and to respond to 
questions on the EC -12, in light of the criteria and the conditions stipulated in GATS Article V.  It would 
do so in a cooperative spirit and with t he aim of concluding the examination of the EC -12 in a positive way.  
Indeed, the EC -12, and the EC -15, presumably represented the most far -reaching integration that could be 
achieved.  
 
5. The representative of the United States  said that, because documentation had not been submitted 
in advance, his delegation would not have any substantive comments regarding the Treaty of Rome during 
the day's examination.  He would, however, take note of the statements made by the EC delegation and  by 
other delegations and report them back to his capital.  The Committee should consider having a thorough 
examination of the Agreement at a future meeting.  
 
6. The representative of Japan  said that his delegation had expected to r eceive detailed information 
prior to the day's meeting.  Since this documentation was lacking, his delegation, like that of the 
United  States, was not prepared to engage in detailed questioning that day.  He would, however, pose a 
few questions during the day's examination.  
 
7. The representative of Canada  supported the statements by the delegates of the United States and 
Japan, saying it was difficult for the Committee to carry out its task pursuant to GATS Article  V if it did not 
have the appropriate documentation with which to frame the examination.  His delegation took note of the 
point that the EC delegation had made regarding the fact that perhaps the information was too voluminous 
to summarize in the Standard Format; however, t here was an issue as to how the Committee could conduct 
an examination pursuant to Article V if the information basis was not there or was so dispersed that it made 
the task virtually impossible.  His delegation wished to reserve its right to comment until  such time as it had 
appropriate information.  
 
8. The representative of Korea  said his delegation shared the concern over documentation for this 
examination.  His delegation took note of the difficulty of collecting the information for the use of the 
Committee, as expressed by the EC delegation; still, some basic, compressed information should be 
provided so that the Committee might have a meaningful examination of the relevant Agreements.  Also, 
his delegation was concerned about a poor precedent which the lack of relevant information in this case 
might present.  
 
9. The representative of Australia  said that her delegation, too, supported the comments of the 
previous speakers.  Her delegation would not have substantive comments during the day's examination and 
reserved its right to comment later when information on an appropriate basis would be avai lable.  While 
noting the EC's statement about the difficulties of putting together the voluminous information available, her 
delegation considered it difficult for delegations to frame questions as to the Agreement when the 
information was so dispersed.  
 
10. The Chairman  said that the EC delegation had indicated that it was prepared to have the 
examination carry over to another meeting.  They had also said they did not intend to submit information 
in the Standard Format.  In response to the comments that the documentary base for the examination of 
the Agreement was insufficient, he recalled that the submission of information in the Standard Format was 
voluntary; Members might consider whether they wished to engage in a question -and-answer procedure, 
which had been the standard way of approaching the matter in the past.  He proposed that the Committee 
conduct that part of the examination which it was able to at the present time.  He suggested that the 
Committee follow the layout of the n otification to the Council for Trade in Services of 10 November 1995 
(S/C/N/6).  
 
 
B.Provisions Relevant to the Scope of the GATS  
          WT/REG39/M/1  
         Page 3 
 
11. The representative of Japan  said that under the heading "Description of the measures" there was a 
reference to Article  113, common commercial policy.  It was his delegation's understanding that the 
113 Committee had full competence in the area of goods, but that it had mixed competence regarding 
services, i.e. the Commission and Member States shared com petence for services.  His delegation would 
appreciate further information on what the conditions of mixed competence were.  
 
12. The representative of the European Communities  responded to the question posed by the Japanese 
delegatio n on Article 113, saying that, indeed, in the services area there was mixed competence between the 
Community and the Member States.  This had been determined by a European Court of Justice ruling, 
which had held that there was a level of mixed competence f or services but which had not specified where 
competence lay for any particular issue.  There effectively was a sliding scale of competence, depending on 
how harmonized the internal legislation was within the Community.  For instance, in financial services  there 
was a high degree of integration, thus giving a high degree of Community competence.  At the other end of 
the scale, in an area such as the movement of natural persons, where national governments remained 
responsible for matters such as visas, many aspects had not been dealt with at the Community level; but even 
there, there was a level of integration.  So, while it was difficult to give a simple answer, her delegation could 
respond that there had never been an issue referred to the Court in pursuanc e of its original decision to 
determine where competence lay.  Her delegation also could confirm that the Schedule applied by the 
Community and its Member States applied to every WTO Member; if any Member encountered problems, 
the first step was to discuss  the matter with the Community, and, to the extent there was a need, the individual 
Member States would be involved.  
 
 
C.Compatibility of Provisions with GATS Article V  
 
13. The representative of Canada  said perhaps the Agreement's p rovisions calling for the free 
movement of trade in services had a modest impact in practice since Member States seemed to be permitted 
to maintain existing regulatory regimes in a number of areas.  It would be useful if the EC  delegation could 
provide add itional information to show how the regulatory regimes had been dealt with to provide for the 
elimination of discrimination between domestic service providers and service providers of other Member 
States.  This was a critical element to obtain in order to ascertain whether in fact the Agreement had led to 
the elimination of all discriminatory measures as required under Article  V:1. 
 
14. The representative of Japan  said that the first indent under paragraph 5(b) of the notification dea lt 
with universal sectoral coverage, with the explanation reading:  "subject only to the exceptions provided for 
under Articles 55 and 56..." and asserting that these were "fully consistent" with the exceptions under GATS.  
More information in this respect  was needed for an assessment of GATS conformity.  Also, the third indent 
in this same section said that Member States "providing for the elimination of substantially all discrimination 
according to the EC Treaty, by the Community as such and/or by the Mem ber States on the basis of national 
legislation, may result in more favourable treatment to service suppliers of all members of the European 
Community as compared to non -member service suppliers."  More detailed information was needed in this 
regard as wel l.  Finally, with respect to GATS Article V:6, his delegation asked if there was assurance of 
national treatment for "substantive business operations" in the territory of the Parties.  
 
15.  Another representative of the European Comm unities  responded to the question posed by the 
Canadian delegation regarding the separate regulatory regimes existing within the Community.  His 
delegation had been requested to provide more information on how the separate regulatory regimes fit with 
vario us measures on non -discrimination; in fact, there was a high degree to which laws had been established 
within the Community on aspects such as mutual recognition of qualifications and standards, and 
harmonization of legislation, which provided for the harm onization of regulatory standards as agreed across 
different services sectors.  So, while it might appear that some separate regulatory regimes still existed, very 
often there was a degree of mutual recognition between these different regimes.  For example , in the area 
of professional services, there was a high degree to which qualifications obtained in different Member States 
were recognized across the Community as a whole.  Similarly, on the harmonization of legislation, to a large WT/REG39/M/1  
Page 4 
 
extent the various stan dards and regulations which had been set up for different services sectors had been 
harmonized and were common across the Community.  
 
16. The other representative of the European Communities  then responded to the Japanese question 
regarding the exemptions mentioned in the first indent of paragraph 5 (b), noting that these were in 
accordance with GATS Article I:3(b).  This related to services supplied in the exercise of governmental 
authority.  Essentially what had been excluded here c oncerned utilities.  There had been a level of 
harmonization since the Treaty had originally been introduced, so this sector was no longer excluded to the 
extent it had been.  Obviously, as integration continued within the Community, things became more 
harmonized and liberalized.  This did not affect other WTO Members since these were services not 
currently covered by the GATS.  Regarding the question relating to more favourable treatment being given 
to services suppliers of Member States as compared to non -member service suppliers, she said there were 
a couple relevant issues to note.  First, GATS Article V referred to not raising barriers to other Members; 
not only did the EC not raise barriers to other Members, but also it treated other Members establishi ng 
companies within the EC as being Members of the EC as such, in that they received exactly the same 
treatment under Article 58 as any company established within any EC Member State.  To that extent, the 
favourable treatment applied to all.  There was one  area in the EC Member States' Schedules where, if a 
company was not establishing a head office but was instead establishing a branch within a Member State, 
specific rules might be applied or there might be some additional discretion applied.  That was in the nature 
of a prudential requirement.  Within the EC there was a high level of harmonization, and where that 
harmonization had not taken place, there was an obvious need to ensure that consumers would be protected, 
etc. and that there would be no particu lar difficulties posed by the form of establishment chosen by the 
company coming into the Community.  That, again, was reflected in her delegation's Schedule.  
 
17. Referring back to his question on GATS Article V:6, the representativ e of Japan  clarified that he 
had asked whether any foreign company engaged in substantive business operations in the Community 
would receive the same treatment as EC companies.  How had this GATS Article been implemented and 
how was adherence to it ensured ?  His delegation would appreciate a detailed written reply.  
 
18. The representative of the European Communities  said she had been referring to the matter of 
substantive business operations when she had explained the workings of dire ct branching without formal 
establishment within the Community.  Regarding other forms of establishment, once a company were 
incorporated within a Member State, it had exactly the same rights as any other service supplier of a Member 
State.  To that extent , the EC went well beyond its obligations under GATS Article  V:6.  She would 
provide copies of the relevant legislation.  
 
 
D.The Context of Wider Economic Integration  
 
19. The Chairman  recalled that at issue today were the effects of the Treaties Establishing the European 
Communities, Services for EC -12; concerns with respect to EC Enlargement were being treated in that 
separate examination.  
 
20. The representativ e of Japan  said that the EC delegation had asserted in the document that no 
Members were specifically affected, but that they also had said:  "Since the entry into force of the WTO, 
no substantial modification or amendment has intervened."  Had the EC had any formal modification or 
amendment?  If so, a list of those formal modifications or amendments would be appreciated.  
 
21. The representative of the European Communities  said that there had been no substantial 
modifications.  As men tioned, there had been the accession of Austria, Finland and Sweden; while that was 
clearly a substantial modification to the Schedule in that it increased the area within which the Members 
might act, this was subject to a separate examination procedure.  
 
 
E.Follow -Up          WT/REG39/M/1  
         Page 5 
 
 
22. The Chairman  said that there was a sense in the Committee that further examination was needed.  
He proposed that he conduct informal consultations later in the day.  
 
23. The Committee took not e of the comments made.  
 
24. Later in the Session, the Chairman  reported on the informal consultations regarding the 
continuation of the examination of the services aspects of the Treaties Establishing the European Union, 
Services.  The EC representatives had indicated that they would endeavour to prepare material using the 
approach of the Standard Format, to be ready by the end of the third week in January.  They had noted, 
however, that following the Standard Format would be a chall enge, given the volume of information, and 
other delegations had said that it would be helpful to the extent they could follow it.