RESTRICTEDWORLD TRADE
ORGANIZATIONWT/REG40/W/1
28 September 2000
(00-3928)
Committee on Regional Trade Agreements
DRAFT REPORT ON THE EXAMINATION OF THE PROTOCOL
ON TRADE IN SERVICES OF THE AUSTRALIA NEW ZEALAND
CLOSER ECONOMIC RELATIONS TRADE AGREEMENT
Note by the Chairman
Following extensive consultations among interested Members, I am submitting below a draft
report on the examination of the Protocol on Trade in Services to the Australia New Zealand Closer
Economic Relations Trade Agreement, for consideration by the Committee on Regional Trade
Agreements and transmission to the Council for Trade in Services for approval.
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DRAFT REPORT ON THE EXAMINATION OF THE PROTOCOL
ON TRADE IN SERVICES OF THE AUSTRALIA NEW ZEALAND
CLOSER ECONOMIC RELATIONS TRADE AGREEMENT
The Committee on Regional Trade Agreements (hereinafter the CRTA or the Committee), in
pursuance of item 1(a) of its Terms of Reference1, presents its Report on the examination of the
Protocol on Trade in Services to the Australi a New Zealand Closer Economic Relations Trade
Agreement to the Council for Trade in Services, as agreed at the CRTA 2..th Session, on … 2000.
This Report does not affect the rights and obligations provided for in the WTO Agreements.
I. BACKGROUND
1. The Protocol on Trade in Services (hereinafter the Protocol) is one of three protocols to the
Australia New Zealand Closer Economic Relatio ns Trade Agreement (hereinafter ANZCERTA or
CER), which is the main instrument governing economic relations between Australia and
New Zealand.2  The Protocol, which contains substantive rules governing trade in services, was
signed on 18 August 1988, as an extension of the 1983 ANZCERTA on trade in goods, and entered
into force on 1 January 1989.
                                                     
1 Document WT/L/127.
2 The Protocol on Trade in Goods was notified to the GATT under Article XXIV on 14 April 1983.
The Working Party Report on its examination can be found in BISD 31st Supplement, page 170.WT/REG40/W/1
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II. EXAMINATION PROCESS
A. NOTIFICATION AND PROVISION OF WRITTEN INFORMATION
2. The Protocol was notified to the Council for Trade in Services as an economic integration
agreement on 22 November 1995, under the provisions of paragraph 7(a) of Article V of the GATS.
3. The following documentation was provided to the Committee:
MTN.GNS/W/47 Text of the Protocol
WT/REG40/2 Notification of the Arrangement (Recital B) - removal of
barriers to the movement of goods and service providers
S/C/N/7 NotificationWT/REG40/1 Standard FormatWT/REG40/3 Questions and Replies
WT/REG40/4 Coverage of the Air Services Inscription in the Annex to the
CER Protocol on Trade in Services
B. E
XAMINATION
4. At its meeting of 30 October 1996, the Council on Trade in Services referred the Protocol to
the CRTA with the following terms of reference (document S/C/M/14):
"To examine, pursuant to paragraph 7(a) of Article V of the GATS, the Protocol on
Trade in Services to the Australia-New Zealand Closer Economic Relations Trade
Agreement and to report to the Council for Trade in Services on its consistency."
5. The Committee examined the Protocol on its own merits.  The examination was conducted on
the basis of the Standard Format for Information on Economic Integration Agreements on Services.
The proceedings of the meeting devoted to the examination (3 November 1997), contained in the
attached document WT/REG40/M/1, are to be considered as an integral part of this Report.
III. FACTUAL RECORD OF THE EXAMINATION IN ACCORDANCE WITH THE
TERMS OF REFERENCE
6. Article V:7(a) of the GATS requires that Me mbers which are parties to economic integration
agreements "shall promptly notify any such agreem ent … to the Council for Trade in Services.  They
shall also make available to the Council such relevant information as may be requested by it".  The
Committee observed that the Protocol predated the GATS and that the Parties had notified it ten
months after the entry into force of the GATS.
7. The Parties provided Members with information of a general nature, and supplemented it with
detailed information on specific aspects of the Protocol in response to the written and oral questions
made, including the complete list of inscriptions entered into by each of them. The Committee
welcomed the Parties' timely submission of the up-to-date information.
8. Article V:1(a) requires that agreements liberalizing trade in services within the meaning of
Article V have "substantial sectoral coverage".  Footnote 1 to this Article indicates that "this condition
is understood in terms of number of sectors, volume of trade affected and modes of supply" and that
"[i]n order to meet this condition, agreements should not provide for the a priori  exclusion of any
mode of supply".WT/REG40/W/1
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9. In this context, the Committee considered the different legal frameworks used by the Protocol
and the GATS, and was informed by the Parties:
(a) that the Agreement used a "negative list" approach, whereby the disciplines shall apply
to all services unless specifically excluded or subjected to reservations;
(b) that all sub-central limitations were encompassed in the negative list contained in the
Annex, and that, as of March 1999, the remaining inscriptions annexed to the Protocolwere: for Australia, air services, aspects of coastal shipping, broadcasting and
television, third-party insurance, as well as specific aspects of postal services; and for
New Zealand, airways services and aspects of coastal shipping;
(c) that for many of the services listed in the Annex to the Protocol only very specific
activities had been inscribed (e.g., cabotage policy in Australia's inscription relating to
coastal shipping or the monopoly of Airways Corporation for the provision of area and
approach control, and flight information, in New Zealand's aviation inscription);
(d) that, under the Protocol, the Parties, either unilaterally or upon request of the other
Party, may remove, in whole or in part, services inscribed by it from the Annex:  since
the Protocol had been signed, the Parties had conducted regular reviews and had
reduced the number of inscriptions and their scope; this review process continued; and
there could be no unilateral re-inscription of exceptions.
10. Some Members welcomed the "negative list" approach as a contribution to transparency in
the coverage of regional agreements in the area of services.
11. The Parties explained that, although the Protocol had been negotiated prior to the
development of the GATS architecture of the four modes, it provided for all modes of supply; no
mode was a priori  excluded.  In response to questions raised about the continued operation of non-
preferential foreign investment laws between the two Parties, the Parties informed the Committee that
these requirements were not of such a nature as to lead to the a priori  exclusion of Mode 3
(commercial presence).  Mode 3 was specifically catered for by Article 3(b)(ii) of the ANZCERTA
Protocol, which included "rights of establishment" within the definition of "provision of services", as
well as in Article 7, which accorded the right to service suppliers to select their own form ofcommercial presence. Investment approval procedures applied only to very narrow categories of
investment, mostly of above a certain monetary value threshold.  These thresholds had been
liberalized by both Parties in 1999, with New Zealand raising the threshold at which consent for non-
land foreign investment is required from NZ$10 million to NZ$50 million.  Australia similarly
increased its foreign investment business acquisi tion threshold from A$5 million to A$50 million.
The Parties noted that this would further reduce the possibility of commercial establishment in
services being in any way affected by the application of investment laws.  In addition, the Parties
noted that their investment approval requirements did not pose any practical impediment to the
establishment of services between the two Partie s.  For example, in the period between 1994 and
1998, no applications concerning investment by inve stors of either Party related to services were
declined by the respective investment authorities.
12. The Committee was also informed that further safeguards aimed at ensuring that
discriminatory or restrictive measures were not introduced that would undermine Mode 3 treatment
were contained in Article 8 of the Protocol, which, in accordance with GATS Article V:1(b), provided
that “neither Member State shall introduce any measure, including a measure requiring the
establishment or commercial presence by a person of the other member state in its territory as a
condition for the provision of a service that constitutes a means of arbitrary or unjustifiablediscrimination against persons of the other Member State or a disguised restriction on trade between
them in services.”  Delivery of Mode 3 and Mode 4 benefits were further supported through the
arrangements in place that allowed citizens and residents of one Party to travel to and work in theWT/REG40/W/1
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other country,  and the Trans-Tasman Mutual Recognition Arrangement that provided that a person
registered to practise an occupation in Australia or New Zealand would be recognised as entitled to
practice the equivalent occupation in the other country.  It was noted that these aspects that greatly
facilitated the provision of services trade between the two countries were part of a wider process of
economic integration that needed to be taken into account in evaluating the fulfilment of the
conditions set out in GATS Article V:1(b).
13. In response to requests for information on the volume of trade covered by the Agreement, the
Parties explained the difficulty in deriving meaningful statistics for trade in services.  The Committee
remarked that the assessment of consistency of regional trade agreements with the GATS could be
facilitated if such statistics were available.
14. Article V:1(b) requires that an agreement libera lizing trade in services within the meaning of
Article V "provides for the absence or elimination of substantially all discrimination, in the sense of
Article XVII, … in the sectors covered …, through:  (i) elimination of existing discriminatorymeasures, and/or (ii) prohibition of new or more discriminatory measures, either at the entry into force
of that agreement or on the basis of a reasonable timeframe …".
15. The Committee acknowledged that the Protocol prohibited the Parties from introducing
measures that constituted a means of arbitrary or unjustifiable discrimination against persons of the
other Party or that constituted a disguised restriction on trade in services between the Parties.  TheCommittee also took note that the Protocol required each Party to accord national treatment to persons
of the other Party and to services provided by them, though this requirement did not apply to services
inscribed in the Annex to the Protocol.
16. In relation to the fact that no specific timet able existed for the elimination of remaining
barriers, the Parties informed the Committee that se nior officials held annual meetings, the latest of
them in July 2000, during which remaining inscriptions were reviewed with a view to reducing further
the scope of such inscriptions.
17. In evaluating whether the conditions of Article V:1(b) were met, the Committee took into
consideration, as provided for in Article V:2, the fact that the Protocol was an element in "a wider
process of economic integration or trade liberalization among the countries concerned".
18. Article V:4 stipulates that the agreement "shall be designed to facilitate trade between the
parties … and shall not in respect to any member outside the agreement raise the overall level of
barriers to trade in services within the respec tive sectors or sub-sectors compared to the level
applicable prior to such an agreement".  The Committee was informed that the Protocol did not
require any change to the treatment accorded by any of  the Parties to its trade in services with third
countries, and took note of the Parties' confirmation that no such modification had taken place.
19. Article V:6 indicates that, in relation to a regional integration agreement in services, a
Member may deny benefits to a juridical person that is not engaged in "substantive business
operations in the territory of parties to such agreement".  The Committee observed that Article 14 of
the Protocol stated that one Party could only deny benefits to persons of the other Party if it
established that the service was indirectly provided by a person who was not a natural or juridical
person of either Party.  In particular, a third-party service supplier that was a juridical personconstituted under the laws of either Party was entitled to benefits under the Protocol without the
further qualification of being engaged in "substantive business operations in the territory of parties to
such agreement".  The Committee recognized that , in this regard, the Protocol went beyond
Article V:6 requirements in its treatment of services suppliers of other WTO Members.WT/REG40/W/1
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IV. CONCLUSIONS
20. In the light of the discussions reflected in Part C of this Report, the Committee found the
ANZCERTA Protocol in compliance with Article V of the GATS.
21. In concluding its review of the Agreement, the Committee underlined the importance of the
periodic reporting provisions contained in the relevant transparency provisions of Article V of the
GATS.
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