RESTRICTED  WORLD TRADE  
ORGANIZATION  S/FIN/M/44 
21 April 2004 
 
 (04-1807) 
Committee on Trade in Financial Services  
  
 
REPORT OF THE MEETING HELD ON 23 MARCH 2004 
 
Note by the Secretariat
1 
  
1. The Committee on Trade in Financial Services he ld a meeting on 23 March 2004, under the 
chairmanship of Mr. David Usher (Canada). Th e proposed agenda is contained in airgram 
WTO/AIR/2270.  
2. Before proceeding with the adoption of the agenda, the Chairman
 explained why the item on 
the proposal by Antigua and Barbuda and other Me mbers (S/FIN/W/29/Rev.1) had not been included 
in the agenda for the meeting. He said that the Co mmittee had agreed to revert to this item at this 
meeting or at a future meeting, depending on the availability of the delegations sponsoring the 
proposal, who are non-residents in Geneva.  Before issuing the airgram, the representative of Antigua 
and Barbuda had informed the Secretariat that neith er he nor the other proponents would be able to 
attend the meeting. The representative of Antigua a nd Barbuda also requested that the item be placed 
on the agenda of the next Committee meeting. The Chairman therefore suggested that the Committee 
revert to this item at the next meeting or at a future meeting, depending on the availability of the 
delegations sponsoring the proposal.  
3. The Committee adopted  the agenda, and agreed  to the suggestion made by the Chairman.  
A. ACCEPTANCE  OF THE  FIFTH  PROTOCOL  TO THE  GENERAL  AGREEMENT  ON 
 TRADE  IN SERVICES  EMBODYING  THE  RESULTS  OF THE  FINANCIAL  SERVICES  
 NEGOTIATIONS 4. The Chairman
 recalled that three Members had yet to accept the Fifth Protocol, namely:  
Brazil, Jamaica, and the Philippines.  He invited those three Members to provide information on the 
status of their domestic processes.  
5. The representative of Brazil  said that, although he had conveyed to his authorities the requests 
for further information made by some delegations at the previous meeting, he had not received any 
detailed information on this matte r yet. He added that the Fifth Protocol was still following due 
legislative process in his country. 
6. The representative of the Philippines  said that he was hoping that after the general elections to 
be held in May this year, the work could be r esumed at the Senate, which was the body responsible 
for the acceptance of the Protocol. He added that th e Senate was in recess until after the elections and 
was supposed to resume its activities in July. Perhap s more information on the status of the process 
might be provided in the meeting after next.  
                                                      
1  This document has been prepared  under the Secretariat's own responsibility and without prejudice to 
the positions of Members and to their rights and obligations under the WTO. S/FIN/M/44 
Page 2  
 
 7. The representative of Japan
 said that it was not normal that some Members had still to ratify 
their commitments under the Fifth Protocol when all Members were negotiating new commitments in 
the framework of the Doha Development Agenda. He  requested more detailed information from the 
three Members concerned on the status of their domestic processes.  He urged those Members to finalize the acceptance procedures as soon as possible. 
8. The representative of Canada
 said that it was important fo r the Committee to have updated 
information on the status of the acceptance proce dures in these Members. He  asked the Philippines 
and Brazil where precisely the legislative process was at this stage.  
9. The representative of the United States  said she was also looking for detailed reports and 
positive news from these Members. She added that it w ould be interesting to hear also from Jamaica 
who had not provided information.  
10. The representative of Switzerland  said that his country attached great importance to this issue 
and requested further detail on the precise status of  the ratification procedures in these three Members. 
11. The representative of the Philippines  provided some explanation about the legislative process 
in his country. Once the Executive Branch had prepared the request for ratification by Congress, a 
sponsoring member of the Senate would then table that request. The Senate would then proceed to a 
first reading of the Protocol. After that first reading,  the draft resolution would then be referred to the 
Senate's Committee on Foreign Relations. A series of  meetings and public c onsultations were then 
held by the chairperson of that Committee. Afte r those consultations, and once approved by that 
Committee, the draft resolution was then referred to the Senate, which would then proceed to a second 
reading. If the draft resolution passed that second r eading, there would be a third reading, where a 
vote would be taken. When general elections came  up, the Senate was dissolved and the process of 
ratification had to be restarted.  
12. The representative of Brazil  said that he would convey to his authorities the requests for 
further details on the status of the ratification procedure.  
13. The Chairman  noted the desire of some Members to obtain further details on the status of the 
relevant domestic procedures in the three Members concerned.  He encouraged those three Members 
to accelerate their domestic procedures to allow for the acceptance of the Protocol. He also 
encouraged his successor to stay in close contact  with these three Members to keep updated of any 
progress in this matter.  
14. The Committee took note  of the statements made and decided  to revert to this agenda item at 
the next meeting. 
B. TECHNICAL  ISSUES 
15. There were no interventions under this agenda item.  
16. Before closing the item, the Chairman  said that he found the lack of interest in this item 
surprising. In his view, the Committee had an important  role to play in the identification and analysis 
of technical issues, particularly at this stage of  the negotiations. The Chairman hoped that Members 
would note his plea for engagement under this agenda item.  
17. The Committee decided  to revert to this agenda item at the next meeting.  S/FIN/M/44 
 Page 3 
 
 
 C. RECENT  DEVELOPMENTS  IN FINANCIAL  SERVICES  TRADE 
18. The Chairman  recalled that there was no discussion under this agenda item at the last 
meeting, on any of the two sub-items identified fo r that occasion;  namely, e-finance, and the 
communication from Malaysia entitled "Challenges in the Financial Services Sector" (S/FIN/W/28). 
19. The Chairman added that the issue of e-finance wa s of particular relevance and interest for the 
Committee, and it was important to consider ways to c ontinue with the analysis of this issue. It would 
be particularly useful if delegations coul d emulate the examples of Hong Kong, China and 
Switzerland, and provide additional inputs on thei r domestic regulatory frameworks.  Experiences 
from developing country Members would be particul arly welcome.  A better understanding of the e-
finance reality might help Members in their bilatera l negotiations.  The submis sions made to date had 
largely focused on e-banking. The Committee should l ook also into the area of e-insurance, to see 
whether and how particular lines of insurance, such  as MAT and reinsurance, were currently provided 
electronically.  
20. On Malaysia's submission, the Chairman reca lled that there were some pending questions, 
including some sent to the Malaysian delegation pr ior to the previous meeting, which – he hoped – 
could be clarified today. 
21. The representative of Malaysia  said she would give a general response to the questions raised 
by a number of delegations on the document S/FIN/ W/28. Individual points raised in the document 
must be read in the context of the whole paper a nd particularly in relation to the challenges that 
Malaysia faced in liberalizing the financial sector. As laid out in its financial sector master plan, 
Malaysia had adopted a 10-year strategy for the deve lopment of the financial sector. The first phase, 
in which the country was at the moment, related to the development of the financial infrastructure and 
financial markets, the enhancement of capacity a nd institutional development. Efforts in the banking 
sector continued to shift towards addressing more cr itical issues, to enhance institutional capacity and 
effectiveness and to ensure long-term competitiven ess. The attention was focused on putting in place 
the preconditions for moving forward to a more liber alized and competitive environment. This also 
included providing an enabling environment to pr omote mergers of commercial banks and finance 
companies, which had proceeded rather well. Malays ia's strategy was steady, with gradualism as the 
cornerstone to avoid disruptive and unstable conditio ns. The aim was to develop a more diversified, 
efficient, innovative and resilient financial system . She said that Malaysia would welcome further 
discussions of this issue in bilateral meetings.  
22. The representative of the European Communities  thanked Malaysia for this general response, 
which helped understand better the comments made in the conclusion to the paper, which seemed 
somewhat at variance with earlier parts of the document.  
23. The representative of Japan  appreciated Malaysia's statement. He said that given the 
impressive economic growth registered by the Mala ysian economy since the financial crisis, Japan 
expected that Malaysia could develop further by carrying out the financial sector and capital market 
master plans. Japan was also looking forward to  the Malaysian offer, which should include the 
liberalization measures benefiting fore ign suppliers contained in the master plans, to the utmost extent 
possible. Generally speaking, Japan emphasized that it should be possi ble to inscribe such 
commitments with a time-frame for future libera lization as additional commitments in Malaysia's 
schedule.  
24. As suggested by the Chairman, the Committee took note  of the statements made and decided  
to revert to this agenda item - recent developments  in financial services trade - at the next meeting. S/FIN/M/44 
Page 4  
 
 D. PRESENTATION
 FROM  THE  OECD  ENTITLED  "MANAGING  REQUEST-OFFER  
NEGOTIATIONS  UNDER  THE  GATS  –THE  CASE  OF INSURANCE  SERVICES." 
25. The Chairman recalled that at the previous meeting th e Committee agreed to invite the OECD 
Secretariat to present and discuss the outcome of  a joint OECD-UNCTAD project to produce sector-
specific checklists to help Members in their request -offer negotiations. In the context of that project, 
the OECD recently concluded a document entitled "Managing request-offer negotiations under the 
GATS: the case of Insurance Services" (OECD document TD/TC/WP(2003)17/FINAL). Insurance 
was in fact one of the four sectors identified so far by OECD and UNCTAD, the others being legal, 
energy and construction services. Having said that , he invited the OECD representative, Mr Jun 
Kazeki, to present the document.  
26. The representative of the OECD  explained that the document was developed by the OECD 
Trade Directorate in the framework of the jo int OECD/UNCTAD project, as explained by the 
Chairman. It was discussed at the OECD Trade Co mmittee and also presented to the OECD Insurance 
Committee. It was declassified under the res ponsibility of the OECD Secretary General. 
27. The OECD-UNCTAD project to develop nego tiating checklists for specific service sectors 
had been developed since June 2002. Its objectiv e was to assist WTO Members, particularly 
developing countries, to conduct request-offer negotiations. Four sectors were selected in October 
2002: insurance; legal, energy; and construction ser vices. The first two were taken up by the OECD. 
The documents on insurance and energy services we re concluded and publishe d in 2003, and were 
also available on the OECD web-site. Work was s till on-going for legal and construction services. The 
OECD picked up environmental services as the fi fth sector, in response to the demand of OECD 
Member countries. 
28. Turning to the document under consideration, he  said that it was composed of three parts: 
background (part I); insurance services and GATS (part II); and negotiating checklists (part III). 
Part III addressed the following: benefits and conc erns raised by insurance liberalization; required 
regulatory framework; GATS questions; a nd other questions beyond the GATS.  
29. He explained that insurance contributed to  economic development by facilitating business; 
reducing uncertainty; promoting a more efficient al location of resources; providing risk management 
services for businesses and individuals; and mobilizing national savings. The main benefits associated 
with insurance liberalization were the improvement in customer services; the provision of additional 
external financial capital; increased domestic savings  and tax revenue; the transfer of technological 
and managerial know-how; and the im provement in the quality of insura nce regulation.  Concerns had 
also been raised with regard to liberalization, including social reasons; potential cream-skimming and 
anti-competitive practices; risk of market concentra tion; infant industry arguments; and balance of 
payments concerns. The document contained counte r-arguments regarding those concerns. In his 
view, many of those concerns could be addressed  through the establishment of an appropriate 
regulatory framework, which was also addressed in the document. He noted, however, that there was 
no general prescription or one-size-fits-all appro ach to regulation. The appropriate regulatory 
framework depended on each country's situation. He  added that there was a tension between setting 
adequate supervisory laws and ensu ring prudential supervision in a least trade restrictive manner.  He 
stressed that there was a need for trade negotiators and insurance regulators to maintain dialogue. 
International co-operation among regulatory agenci es, for example in the context of the OECD 
Insurance Committee and the Intern ational Association of Insurance Supervisors (IAIS), was also 
necessary.  
30. The checklists were intended to assist countri es, particularly developing ones, in the 
preparation of their own offers and in the assessment of offers made by trading partners. In terms of 
commitments, the main options faced by WTO Memb ers were to commit to new market opening; to  S/FIN/M/44 
 Page 5 
 
 
 bind the status quo; to commit to less than the status quo; to pre-commit to further liberalization; or to 
undertake no commitments at all.  The document contained 75 GATS-related questions, which were 
of course without prejudice to how those measures should be scheduled, either as market access or 
national treatment limitations. The questions addressed the following: cross-border supply; 
consumption abroad; commercial presence; regulat ory measures; licensing regimes; movement of 
natural persons; preferential regimes and mutual  recognition agreements; and universal service 
obligations.  
31. The document also contained other questions ( 25 in total) addressing issues that went beyond 
GATS disciplines, in recognition of the fact that many policy measures that were not normally subject 
to specific commitments under the GATS might still affect  the value of bound libe ralization.  Here the 
objective was to provide a broader prospective, wit hout prejudging the legal interpretation of many of 
the issues raised.  
32. The Chairman  found that the document was very inter esting, and containe d enough substance 
to be of interest to all WTO Membership. He th en opened the floor for comments and discussion.   
33. The representative of Brazil  also considered that the document  was interesting. He made four 
comments, not only related to the document, but al so to show other Members where Brazil stood in 
these negotiations on financial services and what Brazil's concerns were. First, at the end of 
paragraph 19 (page 9 of the document), the following statement could be read: "It is noted that if a WTO Member allows these activities to be conducted by its financial service suppliers in competition 
with a public entity or a financial service supp lier, these activities will fall under the GATS." The 
point Brazil wanted to highlight was that there w as a grey area in the GATS regarding public services 
and specifically about what constituted competition between government service  suppliers and private 
service suppliers. That was a grey area in which his delegation was seeking clarification.  The issue was certainly important not only for insurance but also  for other sectors. Some of the initial offers and 
even the specific commitments submitted by acceding countries contained carve-outs with regard to 
specific sub-sectors or public utilities. For example, some offers or schedules clearly indicated that 
commitments on education services did not apply to public-funded education. He reiterated that this 
was an area in which further clarification was n ecessary.  Second, at the end of paragraph 24 (on 
page 13) the following statement could be read:  "WTO Members have and will continue to table 
offers as a basis for negotiating improvements,  including for insurance services." However, 
paragraph 25 noted that one of the options left  to Members was to "undertake no commitments on 
insurance services".  In that regard , based on the concerns discussed in the document, he was not so 
sure that Members would make further commitment s on financial services. They might instead take a 
more cautious approach to this issue. Third, paragr aph 30 (on page 16) highlights some concerns that 
countries might have in undertaking further commit ments on insurance and other financial services. 
He noted in that regard that the OECD tried to gi ve some comfort to Members by indicating that those 
concerns might be addressed by means of othe r less trade restrictive measures. Although he 
acknowledged that, the underlying assumption was th at Members would have some measures or 
regulatory frameworks in place before liberalizing. The issue of cream-skimming was a case in point, 
because the assumption was that a Member would have a competition policy framework in place. 
Therefore, in his view, Members should be careful  in undertaking commitments if they were not 
really prepared to deal with the new scenario that might arise from those commitments. Finally, he 
addressed the issues of supervisory authority and tran sparency, which were raised in page 19 of the 
document. The document contained the notion that a supervisory authority should be established. In 
his view, that was in any case only a best endeavour el ement. He was not sure that that was a premise 
that should be taken into for granted in these negotia tions. Brazil reserved its right to have or not to 
have supervisory authorities in certain sectors as it deemed appropriate. The same reasoning applied 
to the issue of transparency, as depicted in the document.  S/FIN/M/44 
Page 6  
 
 34. The representative of Chinese Taipei
  said that the document by the OECD served as a very 
useful basis for the on-going GATS negotiations.  Th e insurance sector was of great importance for 
economic development.  First and foremost, insura nce provided the indispensable function of risk 
management, reducing uncertainty in  the conduct of business.  It also served to mobilise capitals and 
allocate them efficiently.  Most Members would admit the potential benef its of opening domestic 
financial markets to foreign competition.  Neverthe less, policy makers and regulators from developing 
Members were always confronted with various co ncerns, such as protecting national industries, or 
others already highlighted by Brazil. In his view, th ese concerns would continue to be the subject of 
on-going debates.  Most developing countries were like ly to be importers of insurance and insurance 
related services.  To some extent, that explai ned why developing countries were often more 
conservative in scheduling their co mmitments, especially in the more complicated area of Mode 1, 
where the electronic supply could be one of the form s. Capacity building and technical assistance for 
trade negotiators and regulators alike should help in  that regard.  This paper by the OECD and the 
presentation itself was a good starting point. 
35. The representative of Hong Kong, China  welcomed the initiative by the OECD and 
UNCTAD to prepare this kind of documents to assist WTO Members in the on-going services 
negotiations. Hong Kong, China would like to see this  initiative extended to other service sectors as 
well. He made two comments. The first one concer ned the cross-border supply of insurance services, 
broadly understood as covering both modes 1 and 2. One of the main questions regulators must consider was the establishment of the necessary regulat ory framework. He noticed in that regard that 
the document already provided quite a comprehensive list of questions to be addressed with respect to 
the supply of services on a cross-border basis and through commercial presence. He asked the OECD 
representative if he had further t houghts on how the concerns of re gulators over regulatory standards 
in respect of cross-border supply of insurance ser vices could be tackled. He asked also whether 
mutual recognition or co-operation arrangement s might be used to address these concerns. 
36. Regarding transactions by electronic means, the representative of Hong Kong, China recalled 
that although the issue had been discussed by the Committee in the past, it remain unsettled. In other 
words, it was still unsettled where to draw the lin e between modes 1 and 2 in the case of electronic 
transactions of financial services. This was perhap s an issue worthy to be considered by this 
Committee in the future. 
37. The second issue he wanted to raise followed from the first question on cross-border supply. 
He noted that the document raised the same questi on on the existence of discriminatory taxes with 
respect to both cross-border supply and commerc ial presence. However, the question about the 
existence of discriminatory subsidies against fo reign business was raised only in respect of 
commercial presence. He wondered what the rationale was for such a distinction, taking into account 
that the other side of the coin of a discriminato ry tax was perhaps a discriminatory subsidy. As a 
follow-up question, he wondered whether the discrimi natory effect to be considered was only in 
respect of the modes of supply that were being addr essed (e.g. discriminatory subsidies in Mode 3 or  
discrimination against foreign businesses commercia lly present in the territory of the Member 
concerned), or whether the discriminatory effect of such subsidies might be considered in respect of 
services and service suppliers in general, irrespectiv e of the mode of supply. He asked whether that 
point could be clarified.  
38. Finally, regarding the comments made by Br azil on public services and the definition of 
services in the Agreement, the representative of Hong Kong, China noted that paragraph 1.b) and c) of 
the Annex on Financial Services seemed to be differe nt from the provision in Ar ticle 1.3.b) and c) of 
the GATS. Although his delegation was still reflecti ng on this issue, his initial view was that the 
treatment of the issue in the case of financial ser vices seemed to be different from what was provided 
for the other service sectors.  S/FIN/M/44 
 Page 7 
 
 
 39. The representative of the Republic of Korea  believed that the joint work of OECD and 
UNCTAD would help developing countries in the pr eparation of their initial offers. As a general 
remark, she noted that the paper highlighted the ro le of domestic regulation, and how the success of 
any liberalization process depended on the establishm ent of a sound domestic regulatory framework. 
She expressed the hope that in the future th e Committee would discuss further how domestic 
regulation might help the liberalization process.  Another important question was the relationship 
between mode 3 and modes 1 and 2 in the insurance sector. The document pointed out that in the case 
of insurance services, mode 3 was more important  than the supply through modes 1 and 2; while 
Korea's regulators continued to wonder whether modes 1 and 2 on the one hand and mode 3 on the 
other were complementary or substitutable. She sai d it would be very helpful to hear the OECD's 
views in that regard.  
40. Although she did not comment on the Malaysian submission under the previous agenda item, 
she noted that although paragraph 2 of that paper indicat ed that there seemed to be more restrictions to 
the entry of foreign companies in th e insurance sector than in the other financial sectors, according to 
paragraph 5 of the paper foreign par ticipation was in fact more promin ent in the insurance sector than 
in the other sectors. She wondered what the rationale  might be for that situation, and suggested that 
that might be another topic for further discussion.  
41. The representative of the OECD  replied to the various questions and comments made. On the 
questions raised by Korea, he said that transacti ons through mode 3 on the one hand and transactions 
through modes 1 and 2 on the other were rather co mplementary. With respect to Hong Kong, China's 
questions on regulatory standards, he fully shared th e view that regulatory standards constituted a very 
important issue, due to the difficulties in supervisin g suppliers operating outside their jurisdictions.  In 
that sense, regulatory cooperation and mutual r ecognition agreements provided important tools. 
Regarding the questions on subsidies, he did not ex clude the possibility that subsidies might have an 
impact in the case of cross-border supply. He agreed with Chinese Taipei in that developing countries 
were mainly importers of insurance services and tende d therefore to be more conservative. That was 
why technical assistance and capacity building was of the utmost importance.   
42. On Brazil's comments, he said that he would rath er leave matters of legal interpretation in the 
hands of WTO Members, particularly on the issue of public services. Turning to the issue of domestic 
regulatory frameworks, he agreed that an appropr iate sequencing of refo rms was important. With 
respect to the reference contained in the documen t to the possibility of not undertaking commitments 
in this sector, he said that although the OECD a dvocated further liberalization underpinned by sound 
regulation, at the same time the OECD wanted  to provided an objective view of the GATS 
framework. And the fact was that WTO Members had of course the option not to undertake commitments in a particular field. Regarding othe r issues, such as the establishment of supervisory 
authorities or regulatory transparency, the intention was not to be prescriptive or to prejudge, since 
individual situations might differ depending on the regulatory environment of each jurisdiction.  
43. The representative of Australia
 noted that there was still much more room for further 
liberalization of insurance and improvement of co mmitments in the current round of negotiations.  
Australia supported insurance market liberalizati on and considered that the OECD document provided 
a good framework for liberalization. The document c ontained principles to which Australia adhered, 
and to which it would urge adherence by other Me mbers.  Australia would welcome the adoption of 
these principles for greater liberalization by other Memb ers, recognizing at the same time that genuine 
prudential-related measures should be accommodated.  In Australia's  case, any barriers on foreign 
participation in the market were only related to pr udential requirements, with a view to protect policy 
holders and investors. Australia supported capacity building and technical assistance in relation to 
insurance services, and had provided training to in surance regulators and supervisors from the Asian 
region in the APEC context.  The OECD paper was a good additional resource for those activities. S/FIN/M/44 
Page 8  
 
 44. The representative of the United States
 considered that the OECD document would be of 
great help for Members in their work to develop in itial or improved offers and requests.  In the United 
States' view, the paper highlighted important i ssues, namely that insurance enabled businesses to 
operate with less volatility and risk of failu re and provided greater stability in commercial 
transactions; and that insurance was also important to individual consumers in areas such as life and 
pension and property insurance.  The presence of fo reign insurers brought great benefits to domestic 
economies. Foreign participation provided great er choice for business consumers and individuals, 
including key business demands such as transport in surance and reinsurance.  Insurance activity 
helped increase domestic savings, which were ofte n reinvested in the local economy.  Foreign 
insurance companies brought with them foreign k now-how and technology, contributing to skills 
training in the recipient country.  Last but not l east, foreign insurance companies also created jobs 
both directly and indirectly, in related support fields  such as accounting, computer and legal services.   
45. She also made a few comments on other interv entions.  She said that the United States 
recognized the importance of strong regulatory regimes to ensure financial stability.  That said, the 
United States believed that countries could provide fo r further liberalization and, at the same time, 
work domestically to make any necessary improvement s to their regulatory regimes.  She asked the 
representative from Hong Kong, China whether he could elaborate further on the point made 
regarding the distinction between mode 1 and mode 2 in the case of  financial transactions conducted 
electronically.  With respect to Article I.3.b) of the GATS, and its relationship with Articles 1.b), c) 
and d) of the Annex on Financial Services, sh e asked whether Hong Kong, China was suggesting 
something in particular, or whether he was just i ndicating that perhaps the document prepared by the 
OECD could have included more information on those provisions.  
46. The representative of Canada  considered that the OECD document provided a good 
illustration of the structural environment that was ne eded to provide further liberalization, identifying 
at the same time the barriers that still remained. Th e paper was also balanced in that it outlined the 
benefits of a liberalized insurance sector to de veloping countries, while acknowledging the legitimate 
concerns.  The paper referred to a tension between adequate supervision and prudential considerations 
on the one hand and opening of markets on the other.  Liberalization was predicated on the basis of a 
sound and robust regulatory framework.  So while a dialogue between trade officials and regulators 
was crucial, an informed discussion among regulator s was equally important, since they might all 
learn form different experiences.  
47. Regarding how the paper might be used to furt her shape discussions in the area of insurance 
liberalization, in Canada's view, this initiative might  be taken a step further, by using it as a starting 
point to extend the work on a sub-sector basis, an d therefore more narrowly focused.  By way of 
example, further possible analysis in the future c ould focus on the reinsurance sector.  Using a similar 
template to this paper, such an analysis could outline the benefits of liberalization and the most 
common concerns amongst developing economies with re gard to the particular sub-sector.  It could 
also identify very pragmatic ways of addressing these concerns by pointing to specific built-in 
mechanisms in the GATS, as well as regulatory prac tices and relevant case studies in the context of 
liberalization.   
48. Regarding paragraph 16 (page 9) of the paper, where reference was made to recent progress 
in electronic transactions which might enhance oppo rtunities for supply via Modes 1 and 2, he asked 
the OECD representative whether he could elaborate fu rther on the supervisory and regulatory issues 
that might arise in that context, including those re lated to consumer protecti on, this elaboration could 
be done either right away or by way of written comment. 
49. The representative of Japan  said that it was important to keep the balance between 
liberalization of insurance activities and prudential regulation for the protection of policy holders and  S/FIN/M/44 
 Page 9 
 
 
 investors.  From this point of view, it would be  useful to deepen Members' understanding regarding 
the balance between these two policy objectives. 
50. The representative of Indonesia  sought further information on matters related to the 
establishment of an independent regulatory body, particularly on the need for such a body, its role and objectives, and the extent of its authority. Additi onally, he said that the issue of infant industry 
protection, as raised in page 16 of the document, was not necessarily an issue of protectionism in a 
narrow sense. Rather, it was more related to the st rengthening of the domestic industry in order to 
allow it to face increased competition in the future.  
51. The representative of the People's Republic of China
 said that insurance was very important 
for economic and social development. And that was why China had always been positive and taken 
measures to promote the development of this sector, by introducing competition among domestic 
providers and also between domestic and foreig n providers.  But as the document pointed out, 
prudential regulation and s upervision was very important to ensure that insurance could play a very 
positive role in the development of a country's economic  and social life. She suggested in that regard 
that the points raised the second, third, and sixth bullet of paragraph 34 of the paper (pages 18 and 19) 
might be added to the part of the checklist deali ng with regulatory measures in Table 2. That would 
help Members focus on those regulatory issues on reviewing offers and requests. The items on regulatory measures contained in that table did no t sufficiently reflect the importance of having a 
regulatory framework in place when embarking in a process of liberalization of the insurance sector. 
52. The representative of the OECD
 said, in reply to the question raised by China, that the 
checklist on regulatory issues was meant to be descrip tive, so some issues might overlap with others. 
It might be sometimes difficult to find certain quest ions in the column on regulatory issues, but they 
might be found in some other place in the checklis t. Ha added that pages 18 and 19 were themselves 
checklists of regulatory issues. 
53. Concerning the comments and questions by Indonesia, he said that while the document did 
not prejudge any institutional arrangement, it onl y emphasised the importance of the regulator's 
independence from business and industry.  On the sec ond question, on infant industry arguments, he 
said that the document simply stated that sometimes those arguments were  used to protect domestic 
inefficient industries. He agreed with Japan on th e need to preserve a balance between liberalization 
and prudential measures.  He also took note of  the comments and suggestions made by Canada 
regarding future work.  
54. The representative of Hong Kong, China  replied to the questions posed by the United States. 
He said that in the case of electronic transactions, it was not always clear whether they fell under 
mode 1 or mode 2. He noted that although the ques tion had been discussed in the past, there was no 
definite answer to the question. Different parameters  could be used to draw the line between modes 1 
and 2 in the case of electronic transactions, includin g for example the location of the consumer, the 
location of the supplier, or the location of the en tity or the company holding the server through which 
the transaction was handled, to name just a few. The intention was not to bring into the Committee 
any discussion of issues related to jurisdiction over th e cyberspace. The intentio n was just to highlight 
this technical question regarding the distincti on between modes 1 and 2 in the case of electronic 
transactions of financial services, which had been  discussed before, and which might be further 
discussed if Members so wished. The question was relevant for Members that were considering 
making commitments with respect to these two m odes of supply for the cross border supply of 
insurance services. He noted also th at suggestions had been made in the past to merge modes 1 and 2 
or to harmonize commitments in modes 1 and 2. H ong Kong, China was pretty open-minded to those 
ideas, and he thought that it would be useful to further discuss those technical issues, when Members 
were ready. S/FIN/M/44 
Page 10  
 
 55. Turning to the second question raised by the United States, he said that the point he was 
trying to make was that the question regarding the scope of services in the case of financial services might be different than for other service sectors, due  to  the dichotomy between Article I.3 of the 
GATS and paragraph 1 of the Anne x on Financial Services. Perhaps financial services should be 
considered on its own merit based on the provisions which he referred to. 
56. The representative of Hong Kong, China join ed previous speakers in emphasizing the 
importance of a sound regulatory regime as a basis for liberalization of financial services. The question he wanted to put forward for further reflect ion was to what extent the issue of the regulatory 
framework could be adequately addressed thr ough the request-offer process, which was primarily 
bilateral, or whether there were other tasks that  Members might usefully undertake either in this 
Committee or in any other forum in order to contribute to  this issue.  In that regard, he agreed with the 
Korean representative that further discussions in  this Committee on how domestic regulations could 
help financial services liberalization would be useful. 
57. The representative of the European Communities
 said that the OECD document provided a 
good overview of the issues involved in the liberalization of insurance services. She took note also of 
the comment made by the OECD representative th at the paper was not intended to be a legal 
interpretation of the GATS, so in case of different views, it would be up to Members to work through 
to come up with a common interpretation if that were to be considered useful or necessary. In addition, a number of the questions raised thus  far overlapped with questions which Members had 
already considered in, for example the Working Party on Domestic Regulation or the Working Party on GATS Rules. It would be good to  follow up on these, so there might be a synergy between the 
technical work and it would be good to therefore to follow these.  The Communities would continue 
to study the paper, and reserved their rights to come  back with further comments at a future meeting.  
58. The representative of Switzerland
 said that the document was very useful, since the insurance 
sector was fundamental for any economy. The docum ent highlighted adequately the many ways in 
which insurance contributed to day-to-day econo mic activities. Besides, the document outlined not 
only the clear benefits but also the challenges invol ved in liberalizing insurance services, putting also 
the emphasis on the need for a sound prudential re gulatory framework.  For Switzerland, such a 
document was a very useful tool for the current request-offer process.  Switzerland believed that the 
concerns that might arise with regard to the liber alization of insurance services could be overcome by 
adequate sequencing and a good regulatory framework . He hoped that the paper would help Members 
come up with offers in this field. He reserved hi s rights to come back with further comments on the 
paper at a later stage.  
59. The representative of Colombia  said that the document was very useful. She noted that the 
document mentioned the possibility of undertaking additional commitments relating to measures other 
than those subject to scheduling as market access a nd national treatment, for instance in areas such as 
licensing or technical standards. She wondered however  to what extent it would be possible to deepen 
the dialogue through bilateral negotiations or whet her it would be better to pursue it within the 
framework of the mandate on Article VI.4 of the GATS. Regarding reference to transparency in 
paragraph 34 of the document, in pa rticular the issue of prior consultation, she said that administrative 
and constitutional constraints must be taken into account. The fact that the constitutions of many 
developing countries did not contemplate such mechanisms made the establishment of binding disciplines in this area rather difficult. She supporte d also the suggestions made by the representative 
of China. She added that the checklist might also  benefit from additional questions on measures that 
might affect the movement of natural persons in the sector. For example, questions on the existence of pre-requisites to be complied with by natural pe rsons before being allowe d to provide services.   S/FIN/M/44 
 Page 11 
 
 
 60. The representative of the United States  clarified that her intention was simply to seek some 
clarification on the ideas put forward by Hong Kong, China. She did not however made any suggestion about undertaking the analysis that Hong Kong, China had referred to.  
61. The representative of the OECD
 thanked Members for all the comments and suggestions 
made. On the question raised by Colombia, he agr eed that the document did not elaborate very much 
on the issue of additional commitments, but that w as something that Members might usefully address 
at the WTO. On the issue of transparency, it was tr ue that there were administrative constraints, but 
the document's intention was to emph asize the importance of transparency vis-à-vis  domestic 
constituencies. Those interested in the subject might want to further consult the analytical work done 
by the OECD on this particular topic. Finally, m ode 4 was an extremely broad issue, that was the 
subject of another work programme conducted at the OECD.  
62. The Chairman  thanked the OECD for the presenta tion. Both the document and the 
presentation stirred up a very interesting debate among Members. It was clear that Members had different views on the policy issues raised in th e paper. There was a general acknowledgment of the 
importance of regulation in this sector. In his view, Members believed that issues raised in the OECD 
document and in the subsequent discussion were worthy  of further examination in this Committee. He 
encouraged Members to come forward with specifi c ideas on how to further the discussion of these 
issues. Some of the issues raised by delegations included, among others, the concerns and challenges 
involved in liberalizing insurance services; the dis tinction between modes 1 and 2; and the possibility 
of sharing information through presentation of case studies. He would welcome Members' views on 
the many issues raised at subsequent meetings.  
E. DATE
 OF THE  NEXT  MEETING 
63. The Chairman  suggested that the Committee hold its next meeting during the next cluster of 
services meetings.  The exact date would be anno unced in due course.  The Committee so decided . 
F. OTHER  BUSINESS 
64. There was no issue raised under this agenda item. 
G. APPOINTMENT OF THE CHAIRPERSON 
65. The Committee elected  Ms. Mi-yon LEE, from the Republic of Korea, as the chairperson of 
the Committee for this year.  
 
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