RESTRICTEDWORLD TRADE
ORGANIZATIONS/CSS/M/9
22 June 2001
(01-3186)
Council for Trade in Services
Special Session
REPORT OF THE MEETING HELD ON 14 TO 17 MAY 2001
Note by the Secretariat
1. The Council for Trade in Services held a Special Session from 14 to 17 May 2001.  The
agenda for the meeting is contained in document WTO/AIR/1550.  Under Other Business, therepresentative of Paraguay made a statement concerning an outline of the Chairman's report to the
General Council.
2. The Chairman proposed that the Council adopt the agenda as circulated, with the addition of
the item raised under Other Business.
3. The Council so agreed.
A. MODALITIES FOR THE TREATMENT OF AUTONOMOUS LIBERALIZATION
4. The Chairman recalled that, at the meeting held on 28 to 30 March 2001, Members had
continued their discussion on modalities for the treatment of autonomous liberalization, which the
Council was mandated to establish by Article XIX:3 of the GATS.  He also recalled that thenegotiating guidelines and procedures adopted in March 2001 also contained a reference to
autonomous liberalization, stating that "… Based on multilaterally agreed criteria, account shall be
taken and credit shall be given in the negotiations for autonomous liberalization undertaken by
Members since previous negotiations.  Members shall endeavour to develop such criteria prior to the
start of negotiation of specific commitments."  At the end of the previous meeting, it had been agreed
that the Secretariat would prepare an annotated checklist of the issues raised by delegations, in both
written and oral submissions, on the treatment of autonomous liberalization;  the note is contained indocument JOB(01)/65.
5. A representative of the WTO Secretariat explained that the paper had been prepared in
response to Members' request at the previous meeting and was only meant to assist their discussion.  It
identified the main issues raised, provided a description of those issues, offered some historical
background and raised possible questions that Member might wish to address.
6. The representative of the European Communities said that the note was a helpful tool to
structure the discussion and offered preliminary comments.  With respect to the questions raised after
paragraph 6, she said that, liberalization measures were measures susceptible of being scheduled, i.e.
measures which were not necessarily scheduled but might be;  they were not only market access and
national treatment limitations, but also measures falling under Article XVIII and relating to domesticregulation.  Second, she said that it was possible to distinguish between sector-specific measures and
measures of general application, but that how such a distinction would be applied in practice
depended on whether the value of liberalizing measures of general application was greater or smaller
than that of sector-specific ones.  Third, MFN liberal ization appeared to be the appropriate route;  she
noted that in some regional integration agreements certain liberalization measures were applied on anS/CSS/M/9
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MFN basis.  Turning to the questions after paragraph 8, as concerned the first one she tended to agree
with the definition in that paragraph.  Second, she concurred that a distinction should be made
between liberalization bound and not bound under the GATS;  where credit had to be given, it was
necessary to have predictability with respect to the measure concerned, and this implied binding in the
GATS context.  Third, she agreed that there was a need to consider cases in which Members had
liberalized on their own initiative and bound such liberalization outside a negotiating context, as itwas important to encourage Members to move forward.  She then said that her delegation was still
examining the question which followed paragraph 9.  As concerned the question after paragraph 10,
she said that there was not much difference between modalities and criteria;  she recalled that the term
"criteria" had been suggested by the group of 74 developing countries during the discussion of the
negotiating guidelines, and suggested that they might be in a better position to explain if "criteria" and
"modalities" were different concepts or were the sa me concept behind different words.  Turning to the
questions after paragraph 16, as concerned the differ ence between credit and recognition she said that
her delegation was still studying the papers referred to in the Secretariat note, but added that where
credit was linked to binding there could be a distinction between credit and recognition.  As for the
questions which followed paragraph 24, she said, first, that the negotiations and autonomous
liberalization were intimately linked in terms of bindings at the end of the process;  in this regard, if
Members had indeed agreed that no formula approaches would be used in the negotiations, shewondered against what ceilings Members would be looking for credit.  Such issues needed to be
looked at in more detail but it was appropriate that recognition and credit be given where the binding
was taking place even in the absence of formulas.  Second, she said that the notion of progressive
liberalization was enshrined within the GATS and that it was up to Members to decide what they
wished to liberalize, but added that the negotiating process might show the advantages which accruedto trading partners.  Third, she indicated that the measures for which credit was being granted should
be bound at the end of the negotiations but, presumably, provided that the credit itself was also being
bound.  Turning to the questions after paragraph 31, she noted that the paper by the Republic of Korea
had proposed an objective yardstick to assess the value of autonomous liberalization, but expressed
her delegation's perplexity with respect to an ob jective tool for such assessment;  in addition to
measurement problems, autonomous liberalization might have a different value for different
Members.  There had been some improvements in the collection of statistics on services trade, but
these were not sufficient to allow for the development of objective criteria.  Her delegation's view was
that it was desirable and more feasible to have a qualitative assessment worked out by the Members
concerned in bilateral negotiations.  With regard to the questions which followed paragraph 35, shestressed the importance of transparency for the granting of credit but said that, as Members were still
working on modalities for autonomous liberalization, it was up to individual Members to decide to
whom and which measures they would be notifying and that no notification requirement was
necessary in the Services Council;  she added that there was no need for a collective discussion of the
nature of the measures and of their value in terms of liberalization.  Finally, as concerned the
questions at the end of the document, she said that Article XIX provided for the establishment of
multilaterally agreed modalities, but that the fact that modalities would be agreed multilaterally didnot mean that they should not be used on a bilateral basis;  it was actually easier to provide
recognition and credit on a bilateral basis.
7. By way of preliminary comments, the representative of Pakistan recalled paragraph 13 of the
negotiating guidelines addressing autonomous liberalization.  Developing country Members attributed
great value to the guidelines, as these gave adequa te consideration to the special needs of developing
countries and therefore promised to truly promote a mutually satisfactory and beneficial outcome of
the negotiations.  He stressed the utmost importance of autonomous liberalization for developing
countries, as many had undertaken considerable measures of autonomous liberalization.  The
guidelines reflected the value and importance of autonomous liberalization;  he indicated that
Members needed to consider the scope of the notion of "credit".  Before focusing on technicaldebates, Members needed to contemplate different ways and means to positively reward autonomous
liberalization;  developing countries were committed to pro-actively shaping the debate and would beS/CSS/M/9
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making more substantive contributions.  He underscored that autonomous liberalization was different
from binding commitments in negotiations and that it should not be confused with international
commitments in the WTO;  taking account of autonomous liberalization should not result in Members
being asked to bind such liberalization.  Binding or not binding liberalization made an important
difference for a developing country, especially when it was undergoing structural and regulatory
reforms in a services sector because there was greater flexibility to adjust or modify an unboundmeasure.  Autonomous liberalization could be an valuable way of achieving the objectives of the
GATS without undertaking a commitment in a schedule;  it met the objectives of the GATS, should
be appreciate;  and be given additional recognition, to encourage Members to continue the
liberalization process.  He indicated that asking a Member to bind liberalization undertaken
autonomously in order to get credit was not an appropriate solution, because it would prejudice the
negotiating position of that Member.
8. The representative of Thailand said that at that stage her delegation had only examined
definitional issues, which required substantial additional discussion.  While noting that Article XVIII
allowed a lot of scope to schedule almost any measure, she sought clarification on the reference, in
paragraph 6 of the Secretariat note, to measures susceptible of being scheduled and wondered what
the other measures were.  She drew Members' attention to document MTN.GNG/MA/W/10/Rev.2 of
1993, which contained a list liberalization measures taken and notified by participants in the
Uruguay Round, presumably in order to obtain credit.  She referred to measures notified by Chile,namely a law stating that "any person may freely carry out international trade operations", byEgypt, namely "the unification of exchange rates", by El Salvador, where "markets have beenderegulated through the elimination of controls, monopolies, subsidies and other measures", and byJapan, with "a special package of Emergency Measures which it adopted on 29 May 1987, to
improve market access by continuing to promote the Action Program for Improved Market Access";these were very general measures, but for which Members were expecting to get credit.  She
wondered whether similar measures would be susceptible of scheduling and eligible for credit, or
whether either the notification or the measures were too general.  Turning to paragraph 9, she said that
the question raised therein was a complex one;  she wondered about the reference to "treaty-based"
negotiations and about the difference with "treaty-bound" negotiations, which was the original term
used in the submission by Hong Kong, China, where the issue was mentioned.  With regard to the
results of the extended negotiations on the movement of natural persons, financial services and basictelecommunications, she had examined the relevant decisions and noted that they all contained
different language;  with regard to mode 4, the decision was that the negotiations would "…continue
beyond the conclusion of the Uruguay Round...";  in the case of financial services, the decision was
that "…Members shall be free to improve, modify or  withdraw all or part of their commitments in this
sector without offering compensation…" and that "…the Committee on Trade in Financial Servicesshall monitor the progress of any negotiations…";  and for basic telecommunications Members had
decided that "…negotiations shall be entered into on a voluntary basis…".  She wondered whether
they all had equal status.  Her view was that the negotiations on the movement of natural persons were
part of the Uruguay Round;  that the ones on financ ial services allowed Members to "improve, modify
and withdraw all or part of their commitments", hence suggesting that they had already finished;  andthat the negotiations on basic telecommunications were entered into on a voluntary basis.  Her
delegation was therefore still analysing whether the extended negotiations could be considered alike.
As concerned the proposal for a dedicated session on autonomous liberalization, her delegation was
flexible on dates and looked forward to discussing the Secretariat note then, in an informal setting.
9. By way of preliminary comments, the representative of the Republic of Korea referred to
paragraph 22 of the Secretariat note, which discussed the question of whether bindings were a
necessary condition to obtain negotiating credit or an eventual second step in the process, once the
appropriate negotiating credit had been granted.  In his delegation's view, the concept of binding
appeared linked to the question of a bilateral or multilateral approach to autonomous liberalization.  IfS/CSS/M/9
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Members could agree on multilateral modalities for the granting of credit based on some sort of
formula, in terms of end result it might not make a difference if the binding took place before or after
credit had been granted, as such modalities would give the same outcome irrespective of when credit
was granted.  If a bilateral approach was agreed upon, he expressed concern that, were binding to be a
pre-requisite for obtaining credit, this might impinge on the negotiating position of the Member
seeking credit, especially if it had undertaken autonomous liberalization measures within a shortperiod of time.  He stressed that no autonomous liberalization measures needed to be bound in
principle and that notification was up to each indi vidual Member.  He sought other Members' views
on whether binding and agreeing on a bilateral or multilateral approach to autonomous liberalization
were inter-related questions.
10. The representative of India said that developing countries had undertaken massive
autonomous liberalization and that the issue was of great importance to them;  it was natural that they
were seeking to obtain credit.  He acknowledged that difficulties existed, because of the lack ofstatistical information, and stressed the need for further discussion before the dedicated session on the
issue could be held.  He said that the starting-point was that the treatment of autonomous
liberalization could not imply either a bilateral appr oach or credit being granted only if binding took
place, as the reference in Article XIX of the GATS was clear in this regard.  Therefore, Members
could not ask that autonomous liberalization be bound or that it be dealt with in a bilateral setting.  Byway of general comment, he also pointed to the disconnect between developing countries' compliance
with the GATS and developed countries' complia nce with, for example, the textile agreement.
Differently from the goods case, where it was easier to modify tariffs, services liberalization was
difficult to reverse.  While acknowledging that developing countries had undertaken autonomous
liberalization in their own interest, he observed that  this had expanded their disadvantage;  the overall
balance of benefits might have widened and this might have implications for the achievement of the
objectives of Article IV of the GATS.  As for the Secretariat paper and the observation by Thailand
with respect to measures not susceptible of being scheduled, his guess was that some regulatory
measures might not be inscribed in Members' schedules.  With regard to the question in paragraph 7,
he said that Members generally did not bind liberalization outside a negotiating context when theywere not getting anything in return.  As for the m eaning of "since previous negotiations" in paragraph
9, he was inclined to think that this related to Members' Uruguay Round schedules.  With reference to
the difference between criteria and modalities, he felt that his was only an academic distinction;  while
bilateral discussions were up to delegations, multilateral modalities still needed to be developed, on
the basis of which criteria would be agreed.  As for the difference between "account" and "credit", hestressed that the two concepts were indeed differen t;  while "taking account" might be equivalent to a
pat on the back, "giving credit" was stronger, much more important and was linked to assessing the
value of autonomous liberalization.  With regard to paragraph 21, he would give further consideration
to the idea of binding "at least in part", as something that Members could build on.  It was important
to be clear that those Members having undertaken autonomous liberalization should not be penalized
and that autonomous liberalization had to be encouraged.  He stressed the significance of assessing
the value of autonomous liberalization.  An obvious criterion to be taken into account was theduration of such liberalization;  if one measure had been in force for 3 years, then market access had
been effectively granted for 3 years.  The problem in gauging the value of such a measure was the
lack of adequate data.  However, in some sectors and modes it was possible to arrive at multilaterally
agreed criteria, for example on the basis of the global exports of the Member concerned in the given
sector.  He concluded by stressing that autonomous liberalization had taken place, that credit had to begiven on the basis of multilateral modalities, and that any forward movements in this area would
enable progress in other areas.
11. The representative of Singapore said that modalities needed to be established and credit given
for autonomous liberalization.  Credit had to be granted not only for MFN liberalization but also for
other forms of liberalization, with the only difference concerning the form of the value of such credit.He wondered how the assessment of whether and when  credit would be granted, including the criteriaS/CSS/M/9
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for autonomous liberalization, would be carried out;  problems existed in elaborating objective criteria
because of the absence of a numerical yardstick, such as tariff levels in goods, so that it would not be
possible to measure autonomous liberalization with the same level of precision.  He noted that the use
of model schedules had been suggested; his delegation was open to further discussing the suggestion,
and wondered about the feasibility of building a model based on the criteria of Article V of the GATS,
namely the number of sectors, volume of trade affected and modes of supply.  As for the form of thecredit, he wondered if this could be established across services sectors or across goods and services.
He said that his delegation would revert to the issue with additional comments.
12. The Chairman suggested that the Secretariat note might represent a good outline to structure
the discussion at the dedicated meeting and invited delegations' comments in this regard.
13. The representative of Japan said that it was important to arrive at a good understanding of
issues such as credit and binding, which could not be separated.  He concurred that the Secretariat
paper was a good basis to structure the discussion.
14. By way of preliminary comments, the representative of Brazil stressed the importance of
achieving clarity with respect to terms such as autonomous liberalization;  measures, and whether
these included those taken during previous negotiation;  binding, and the likeliness of a Member
binding its liberalization without knowing what it would get in return; value of credit;  and how such
credit should be used.  He said that binding existing liberalization was different for a developing and adeveloped country, given the different level of regulatory development, and that this needed to be
given appropriate recognition.  As for the difference between "credit" and "account", he felt that no
great difference existed between the two concepts, since the guidelines themselves referred to account
and to credit, which had to be given anyway.  With  respect to the distinction between a bilateral and
multilateral approach, he had taken note of the comment by the Republic of Korea  about the possible
reduction of the negotiating power of the Member seeking credit.  He agreed with the Chairman's
suggestion that the Secretariat note be used as a basis to structure the discussion.
15. The representative of Venezuela said that her delegation was still analysing the issue, which
was of paramount importance, and at that stage wished to respond in a preliminary manner to some of
the questions raised in the Secretariat note.  With respect to the questions on paragraphs 4 to 6, herdelegation was agreeable to the approach that the liberalization measures to be considered for the
purposes of the discussion be only those susceptible of being scheduled, and that MFN autonomous
liberalization be the one eligible for credit;  liberalization undertaken in regional settings was usually
entered into under the aegis of regional integration agreements, which would suggest that such
liberalization fell under Article V of the GATS.  Her delegation also shared the view in paragraph 8 ofthe note, where it was stated that "the expression "liberalization undertaken autonomously" means
liberalization undertaken by individual Members unilaterally outside a negotiating context."  Her
delegation was also in favour of having an in-depth discussion of autonomous liberalization during
the special meeting devoted to the issue, and supported the Chairman's suggestion that the Secretariat
note be used as a basis for the discussion, without prejudice to Members' including or eliminating
relevant elements of the note from the discussion.
16. The representative of Ecuador said that his delegation was still analysing the issue and looked
forward to receiving the Spanish translation of the Secretariat note.  He stressed the importance of
autonomous liberalization.  Autonomous liberalization was a unilateral decision adopted by a Member
which offered other Members access to its market without any need for binding;  it was de facto
liberalization of a market and its recognition did not require binding.  He added that such
liberalization should be notified but not necessarily bound in order for recognition and credit to begranted.S/CSS/M/9
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17. The representative of Australia said that her delegation had detailed answers to the questions
posed in the Secretariat note, but that she would offer only general responses at that stage and save the
more detailed questions for the meeting devoted to  the issue.  She stressed that a realistic and
pragmatic approach would be the most feasible way to proceed.  She agreed that a common
understanding would be vital for concepts such as "credit", "value", "criteria" and "modalities".  Her
delegation had expressed the view that credit was what a Member would receive in exchange forbinding a particular liberalising measure.  In that sense, credit would reflect the relative cost-benefit
value, to each side, of binding the measure concerned.  Credit should be calculated from the last time
a Member had made bound commitments in its schedules, and Members should be able to trade-off
measures undertaken as part of IMF or free-trade agreements.  Like many other countries, Australia's
domestic liberalization programmes since the Uruguay Round had not necessarily been related to
multilateral trade negotiations.  Australia had wanted to be able to trade-off such liberalization
measures in the on-going round of negotiations, as they had done for the financial servicesnegotiations.  She encouraged other Members that had improved access to their domestic market to
bind their reforms in the negotiations with interested parties.  Her delegation would consider
horizontal solutions, but would only agree to grant credit if the proposed package had clear-cut
commercial benefits for Australian companies.  Her delegation also supported credit for autonomous
liberalization in agriculture and industrial tariff negotiations, to allow recognition of tradeliberalization measures taken outside the context of a Round.  The starting-point was, similarly,
Members' schedules of bound commitments.
18. Commenting on the Secretariat note, the representative of Argentina said that paragraphs 1 to
16 were of educational value.  He sought additional clarification on the first part of the third question
after paragraph 8.  He considered paragraphs 17 to 24 as the main part of the paper, and stated thatArticle XIX of the GATS only referred to "liberalization undertaken autonomously by Members since
previous negotiations".  The difficulty was measuring autonomous liberalization undertaken in a
given sector, at a given time by a given Member;  there was no point in arriving at common
definitions, as discussed in the first part of the paper, if these could then not be translated into
effective practical modalities.  The key issue was measuring autonomous liberalization, which wasdifferent from binding it.  Members needed to wo rk having two situations in mind:  multilateral
disciplines or criteria, which would be the minimum common denominator, and credit which would
end up being negotiated bilaterally.  He stressed the importance of having multilateral criteria;  these
would then probably be discussed bilaterally.  He  wondered whether the Secretariat could draw up a
checklist of issues to guide the discussion, which would not be exclusive with regard to the issues thatcould be raised.  The Chairman said that the Secretariat note in document JOB (01)/65 was in itself an
annotated checklist, and felt that could be used as such.
19. The representative of Mexico said that autonomous liberalization was a positive contribution
to the multilateral trading system;  whether credit required that such liberalization be bound was a
totally different issue.  He said that the Secretariat note addressed all issues, and that sections 2 and 5
would provide useful guidance on how to proceed;  section 2 contained the main issues, and section 5
was useful to assess the value of autonomous liberalization.  He added that such value depended onthe bilateral evaluation of Members.  As for transparen cy, he said that this was in the interest of the
Member seeking credit and that it was also a matter for a bilateral setting.  He added that some criteria
could be developed multilaterally on the basis of sections 2 and 5 and that he would revert with more
detailed comments.
20. The representative of Uruguay said that the Secretariat paper was helpful to structure the
discussion and that he could support the Chairman's suggestion that it be used as an outline for the
special meeting devoted to autonomous liberalization, with the understanding that it was only
illustrative and non-exhaustive.  He indicated that autonomous liberalization was what had been
undertaken between now and the past, and did not concern the future, as was clearly stated in
Article XIX.  This was important with respect to  the notion of binding.  When delegations talkedS/CSS/M/9
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about future bindings, they were already talking about the on-going negotiations, when they would be
looking for concessions, and not for credit.  He stressed that credit was for something done in the past,
between now and the Uruguay Round.  With respect to  the issue of "since previous negotiations" in
paragraph 9 and the comment by Thailand, he raised two questions.  First, he noted that there were
Members who had undertaken commitments unilaterally, beyond a negotiation, in the basic
telecommunications and financial services sectors.  Should this be considered as autonomousliberalization, given that it had been bound beyond a negotiation?  Second, if the negotiations on
mode 4, basic telecommunications and financial serv ices were extensions of the Uruguay Round, two
differences existed;  first, not all Members had participated in such negotiations and their results did
not concern all Members, so that an additional effort had been exerted by those participating
Members;  second, he noted that new ratification procedures had been followed, different from those
of the Uruguay Round, and wondered whether those negotiations should be considered as part of the
Uruguay Round or whether a surplus existed which needed to be taken into account.
21. The representative of the United States expressed his delegation's support for a meeting
dedicated to autonomous liberalization and for the Secretariat note being used as a reference for that
discussion.  His delegation was still reviewing the Secretariat paper and would revert to it in the
course of the special meeting.  By way of reaction to some of the comments made, he noted, first, that
it appeared that some Members were questioning the role of bindings for autonomous liberalizationand stressed that this was a different starting-point  from the one taken by his delegation;  and, second,
that Article XIX did not single out any category of Members with respect to autonomous
liberalization and that the issue applied to all Members.
22. The representative of Panama supported the suggestion that the Secretariat note be used as a
starting-point for the discussion at the meeting de dicated to autonomous liberalization.  He stressed
that criteria had to be established before the start of the market access negotiations.  In a preliminary
manner, he said that credit was strictly linked to the fact that the starting-point of negotiations was
what was bound in Members' schedules.  In such a situation, credit given for autonomous
liberalization was relevant only in order not to prejudice the negotiating position of Members who had
bound their liberalization since previous negotiati ons.  He had taken note of India's comment on
autonomous liberalization in services being different from goods and of services liberalization being
more difficult to reverse, but noted that any unbound measure could be withdrawn and that this would
not prejudice the position of the Member concerned.  If a Member had bound liberalization and had
already obtained credit in exchange, it was still necessary to determine whether this was indeed a fact.
If credit had been granted, it could be used as a criterion to evaluate the value given to the boundliberalization.  For example, he mentioned the nego tiations on financial services, where credit might
have been obtained only from some Members and not from others who the liberalising country would
be negotiating with now in the on-going negotiations.  He was of the view that credit had to be given
only for measures which were susceptible of being bound and not for other, different measures.  With
respect to modalities as opposed to criteria, he felt that the difference was that modalities concerned
whether or not there was credit or recognition, whereas criteria were necessary to quantify
autonomous liberalization measures, for example whether the liberalization was of a horizontal orsectoral nature, whether any value had been obtained at the time of the binding, or whether it had been
undertaken by a developing country.  He observed that a number of concepts still needed to be
clarified and hoped for an in-depth discussion at the dedicated meeting.
23. The representative of Bolivia said that his delegation was still examining the Secretariat note,
which was only available in English;  he called for the documents of the Special Session to be made
available in all the three official languages before the relevant meetings.  He stressed the importance
of autonomous liberalization for his delegation;  Bolivia had undertaken substantial autonomous
liberalization measures, which had transformed it into one of the most open countries.  He called on
Members to avoid academic discussions and said that the dedicated meeting had to address the issues
contained in the Secretariat note, which could form a useful basis to structure the discussion, in orderS/CSS/M/9
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to arrive at a pragmatic and flexible solution.  He shared India's comment on the importance that
Members who had liberalized autonomously, and especially developing countries, should not be
penalized.  He noted the contradiction between the significant trade barriers that existed in goods
trade and the services negotiations, where Members were being asked to bind their autonomous
liberalization in order to obtain some doubtful credit.  Autonomous liberalization did benefit the
Member having undertaken it, but also the Member's trading partners;  hence, modalities had topromote such liberalization.
24. The representative of the Dominican Republic agreed that the Secretariat note be used to
structure the discussion at the dedicated meetin g on autonomous liberalization.  He underscored the
importance of answering the questions raised in that note, and suggested that the Secretariat might
possibly produce a compilation of Members' answers;  this would show that Members were close to a
consensus.  He said that both sector-specific measures and measures of general application needed to
be considered;  with respect to the latter, he mentioned the dollarization of certain economies, whichhad eliminated foreign exchange transactions and benefitted the suppliers with a commercial presence
or who were supplying services through other modes.  He indicated that liberalization measures taken
in the context of economic integration agreements were covered by Article V;  he felt that it was MFN
liberalization which had to be taken into account, but added that liberalization coming from the
OECD Invisibles Code also needed to be looked at.  He was of the view that autonomousliberalization included liberalization measures undertaken in specific sectors since the last time that
Members had negotiated on those sectors.  He stressed the importance of quantifying the value of
autonomous liberalization;  the criteria to be used were closely related to the duration of such
liberalization, and should address not only flows of  products but also of foreign direct investment in
the sense of mode 3.  Credit would be given on the basis of such an evaluation.
25. The Chairman appealed for brevity and invited Members to reserve detailed comments for the
dedicated meeting.  The representative of New Zealand said that he would save his comments for that
meeting.
26. The representative of the Philippines offered preliminary comments.  First, he said that
criteria needed to be multilaterally agreed and that there was no dichotomy between criteria and
modalities.  Second, recognition and credit had to be given also by Members who had not benefitted
from given autonomous liberalization measures, as such liberalization applied on an MFN basis;  for
example, credit could be claimed by a Member who had opened its market with respect to mode 3
even from Members who had not invested in its market.  Third, a Member might consider binding
autonomous liberalization measures only after the relevant credit had been obtained and the measurehad either been used as a shield or corresponding commitments had been made by the interested
trading partner in a sector or mode of significant export interest to the binding Member.  Otherwise,
Members should bind voluntarily and only at the conclusion of the negotiations.  Fourth, if a Member
were to backtrack on any liberalization for which it had received credit, the credit should be revoked.
This assumed that an interested trading partner had not bound its liberalization prior to the credit-
invoking Member's own binding and that an offer to bind had to be on a quid pro quo basis.  He said
that his delegation's comments were not final or comprehensive but hoped that they would contributeto the discussion.  He noted the importance of the dedicated meeting, but stressed that this should not
be the last opportunity to address autonomous liberalization and that discussions needed to gradually
lead to the establishment of modalities.  He agreed that the Secretariat note be used to structure the
discussion at the dedicated meeting.
27. The representative of Switzerland said that he would revert to the Secretariat note, which
could be used to organize the discussion at the dedicated meeting.
28. Commenting on the Secretariat note, the representative of Canada highlighted some points
that had not been mentioned until then.  With respect to paragraph 27, she said that Members wereS/CSS/M/9
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sailing in uncharted territory in the area of services;  non-tariff measures in the goods case were the
closest to the issues Members were confronted with in services trade, and she noted that no credit had
been calculated with respect to the liberalization of such non-tariff measures.  In addition, the
practical use of the mechanism developed during the Uruguay Round for measures of a quantitative
nature was unknown;  footnote 13 indicated no clear evidence of whether or how such guidelines had
actually served the purposes for which they had been envisaged.  She felt this to be an example of thepractical difficulties which had been encountered with the issue of autonomous liberalization.  She
stressed the need to focus on such elements, which required substantial discussion.
29. The representative of Turkey said that he would provide detailed comments at the dedicated
meeting.  He agreed that the Secretariat note be used as a basis to structure the discussion at that
meeting, but called on a simpler text when it came to the actual modalities.
30. The representative of Malaysia agreed to holding a dedicated meeting, but stressed that
concrete results were necessary.  He could agree to using the Secretariat note to organize the
discussion at that meeting, but observed that additional proposals might be tabled by Members and
that their examination should not be prejudged.  He asked the Secretariat for information about what
had happened in the Uruguay Round with regard to autonomous liberalization:  had credit been
granted and, if not, why?  As for how the issue s hould be addressed, he had until than detected two
distinct approaches:  the first was that credit would be granted for autonomous liberalization;  thesecond required that such liberalization be bound in order for credit to be given.  He said that the latter
approach would make it very difficult to arrive at a solution, and urged those delegations that
supported such an approach to have a more open attitude.  He offered the example of a Member who
had undertaken autonomous liberalization measures in 15 sectors since the Uruguay Round;  if
obtaining credit implied binding the whole liberalization, this would prove very difficult.  Hetherefore suggested that partial bindings could be an option worth exploring;  in the example given,
this could mean that measures in 2 out of those 15 sectors would be bound, and that some credit
would also be given for the remaining 13 sectors.
31. The representative of Indonesia said that his delegation was still examining the Secretariat
note and would revert to the issue, but could agree that it be used as a reference for the dedicated
meeting.
32. The representative of Thailand asked the Secretariat if information could be provided about
any work on autonomous liberalization which had been carried out by other international
organizations.
33. The representative of Chile concurred that the Secretariat note be used as a basis for the
dedicated meeting on autonomous liberalization.  She said that multilateral criteria needed to be
agreed and that credit had to be given for bindings.  Credit was a function of binding, or else unbound
autonomous liberalization could be withdrawn, while the corresponding credit already awarded would
be difficult to revoke.  She then sought clarification from the Secretariat about the difference between
credit and recognition;  while she was clear about the practical implications of credit, she was not sure
about what these were in the case of recognition.
34. A representative of the WTO Secretariat responded to some of the questions raised.  With
respect to the reference to "measures susceptible of being scheduled", he explained that the expression
attempted to place the concept of autonomous liberalization in the context of Article XIX, which was
entitled "Negotiation of Specific Commitments", and which in turn referred to part III of the GATS,
entitled "Specific Commitments";  measures falling under Articles XVI, XVII and XVIII were, by
definition, measures susceptible of being scheduled.  The question in this respect was whetherMembers would agree to define autonomous liberalization along such lines.  As concerned the
binding of commitments outside a negotiation, he indicated that, in certain cases, schedules ofS/CSS/M/9
Page 10
commitments had been submitted for certification outside the context of the Uruguay Round and the
Protocols negotiated subsequently.  Finally, with regard to the treatment of autonomous liberalization
during the Uruguay Round, he drew Members' attent ion to footnote 13 and to the information
contained in the document mentioned therein;  he added that the Secretariat was not informed of how
such guidelines had been applied in bilateral request-offer processes.
35. The Chairman said that the Council would take note of the statements made.  By way of
concluding summary, he said that all Members agreed about the usefulness of the meeting dedicated
to autonomous liberalization.  Some Members had suggested that it be conducted in informal mode, at
least in part, and he suggested that it be held in both formal and informal setting.  Members also
concurred that the Secretariat Note in document JOB(01)/65 would be used as an annotated checklist
to structure the discussion at that meeting, without prejudice to any Member bringing any other issue
forward.  He encouraged Members, on a voluntary ba sis, to submit their comments and answers to the
questions in the Note in writing;  the Secretariat might then organize them in a compilation.  Several
delegations had stressed that the discussion was not an academic exercise, but a negotiating one which
had to be useful to the negotiations themselves.  There were many questions raised, but perhaps the
most important ones related to whether credit was linked to binding or not, and he noted the
importance of Members addressing that crucial issue.  He finally proposed that the dedicated meeting
on autonomous liberalization be held around the services cluster of meetings in July.
36. It was so agreed.
B. ASSESSMENT OF TRADE IN SERVICES
37. The Chairman recalled that the assessment of trade in services was a standing item on the
Council's agenda.  At the previous meeting, the Secretariat had been asked to produce a short note
providing an update on the work of the Inter-Agency Task Force on Statistics of International Trade
in Services.  The note was contained in document S/CSS/W/81, dated 9 May 2001.
38. A representative of the WTO Secretariat said that the paper was self-explanatory.  It reported
on the adoption of the Manual on Statistics of International Trade in Services, and discussed the
outlook for future work.
39. The Chairman then drew delegations' attention to the communication that had recently been
submitted by the delegation of Norway, contained in JOB(01)/71 and titled "Diffusion of Information
Technology, SADC and International Production".
40. The representative of Norway introduced the paper presented by his delegation.  The paper
discussed the impact of services trade liberalization on developing countries.  The Norwegian Foreign
Ministry had commissioned two studies on the issue, which had been carried out by research fellows
of the University of Cape Town and the Chr. Michelsen Institute in Norway.  The first paper, which
had been presented in 2000, had focused on producer services, such as telecommunications, financial
services and transport services.  The paper in JOB( 01)/71 was a follow-up to that one and focused on
the SADC area, diffusion of information technol ogy and opening up to trade and investment in
telecommunications.  He highlighted the main points.  First, advanced in information technology had
greatly reduced the cost of transactions and changed the way in which business was conducted insubstantial ways.  Production had become more time-sensitive and supply chain management
involving just-in-time delivery and quality control at source had become part of local as well as
international production networks.  The paper analysed the impact of liberalizing trade in
telecommunication services in the SADC area, focu sing on the prospects and conditions for entering
international production networks beyond raw materials supply.  It started with a brief review ofrelevant theory and continued with an analysis of recent data on the quality and cost of transport
services, production networks and international tran sactions within the SADC area.  Evidence ofS/CSS/M/9
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emerging regional supply chains in the textile and clothing industry was found, and the South African
automotive industry showed signs of getting integrated into the global industry.  It argued that, while
liberalization of the telecommunications sector had led to an unprecedented growth in the penetration
of mobile telephones and access to the Internet, inadequate and expensive transport services and
infrastructure were obstacles to further integra tion of SADC companies in international production
networks.  Comprehensive reforms within individual countries in all network industries, co-ordinated
reforms within the SADC area, particularly in the transport sectors, and comprehensive international
agreements in all network industries were necessary in order to reap the benefits of new information
technologies.  Finally, it argued that swift liberalization with short periods of adjustment, once
domestic regulation was in place, yielded most benefits to the SADC countries.  He hoped that the
joint research paper could be seen as a useful input to a very important aspect of liberalization of trade
in services.
41. The representative of Pakistan said that the assessment of trade was an important tool for
developing countries to determine whether the Uruguay Round had delivered the promised benefits,
both in quantitative and qualitative terms.  Second, in the context of the on-going negotiations, it was
vital that Members gain a sound understanding of the effects and implications of existing GATS
disciplines and levels of commitments before continuing with further liberalization.  This required a
two-fold approach:  on the one hand, a stock-taking exercise of the legal and policy frameworkcreated by five years of GATS implementation and its effect on national economies;  on the other
hand, an analysis of the broader implications of services liberalization on national economies and
social systems in general.  Third, and particularly from a developing country perspective, a thorough
assessment could serve as a valuable input for the design of developing countries' individual
negotiating positions.  Overall, a careful analysis of the existing legal and socio-economicenvironment laid the basis for an ex-ante assessm ent of a possible future GATS regime.  Only if
negotiators were able to draw upon a thorough assess ment would they be able to ensure that their
overall approach to services liberalization led to economic growth for all Members.
42. He noted that the Council had extensively discussed the limitations and constraints relating to
an assessment of trade in services.  Lack of data, analytical and methodological problems, amongothers, made it difficult to conduct a detailed empirical assessment of services trade.  However, those
difficulties should not delay the assessment discussion and process in the WTO context.  Rather,
Members might wish to engage in a broader discussion relating to the appropriate nature of the GATS
assessment.
43. He stated that paragraph 14 of the guidelines established that Members conduct the
assessment "with reference to the objectives of the GATS and of Article IV in particular".  Based on
this, Members might wish to consider different as pects of the assessment, key questions and issues,
such as the ones that he was highlighting.  Until then, the assessment had focused on quantitative,
economic and trade-flow related data.  However, when analysing existing data, it was important to
focus on those economic objectives of the GATS which particularly related to developing countries.
These included:  the promotion of economic growth of all trading partners;  increased participation of
developing country Members in services trade; and liberalization in sectors and modes of supplyinterest to developing countries.  According to its Preamble and Article IV, the GATS aimed to
strengthen developing countries' domestic services sectors, their efficiency and competitiveness.  This
was important to increase developing countries' partic ipation in services trade, but also to ensure that
they be able to serve their domestic needs and markets.  As a means to achieve this goal, the GATS
required that developing countries' access to technology and to distribution channels and informationnetworks be improved.  When analysing whether the GATS had strengthened developing countries'
domestic services sectors, Members needed to give special emphasis to the varying impact foreign
direct investment might have on developing countries' domestic service providers.S/CSS/M/9
Page 12
44. WTO Members and Secretariat also needed to assess whether the GATS had achieved its
broader goals, namely those set out in the Preamble of both the GATS and the WTO Agreement.  As
part of the multilateral trading system, the GAT S aimed to promote the development of developing
countries, raise standards of living and allow for the optimal use of the world's resources in
accordance with the objective of development.  To adequately analyse whether the GATS had
fulfilled those goals, Members needed to complement their quantitative assessment of economic andtrade flow data with qualitative analyses incorporating development aspects.  For example, Members
might wish to:  identify relevant social, economic and environmental indicators, such as access to and
quality of water, access to basic education, access to health services, access to telecommunications,
which provided information on the broader goals described earlier;  ask the Secretariat to identify
information sources and collect relevant data;  analyse whether the GATS had had an impact on those
indicators, and particularly whether it had improved  or deteriorated a Member's performance in those
aspects.  Such broader assessment was important because the GATS covered all services sectors,including many basic services such as the ones he had referred to.  Improving provision of essential
services was crucial for raising living standards and for promoting the overall development of a
country.  Consequently, when conduction such a broa der assessment, Members needed to give special
consideration to a country's level of economic development and related national policy objectives.
45. The GATS suggested expansion and progressive liberalization of services trade as a means to
promote the goals he had previously mentioned.  However, the GATS also recognized that, in order to
achieve those goals, efforts to liberalize trade in services needed to be balanced with an adequate
regulatory framework.  In its Preamble, the GATS specifically stated that due respect had to be given
to national policy objectives, and recognized the right to regulate and to introduce new regulations to
meet national policy objectives.  The GATS also acknowledged the particular need of developingcountries to exercise their right to regulate.  Consequently, Members might wish to assess whether the
GATS had allowed developing countries to fully exercise their right to determine their national policy
objectives;  whether it had granted developing countries the flexibility to achieve those objectives
through the type and means of regulation they considered appropriate;  and whether it had weakened
or strengthened domestic regulatory frameworks fo r foreign investment, which were crucial to ensure
that developing countries truly benefitted from increasing foreign investment.  When analysing such
questions, Members should give particular emphasis to developing countries which were going
through structural changes in their economic, social and other policy environment.
46. The representative of the European Communities concurred with Pakistan that the assessment
had to be of a qualitative nature.  As concerned the Secretariat paper, she welcomed the fact that the
quality and comparability of services statistics had improved.  She noted that work still needed to be
done and that the Manual on Statistics of International Trade in Services would be available in
English by the end of 2001, and hoped that it would be translated soon, as its implementation  would
still take time.  She encouraged the Task Force to produce a users' manual and expressed interest in
regular updates on the work of the Task Force and on UNCTAD's pilot projects.
47. The representative of New Zealand sought a clarification from the Secretariat on its note.  He
had noted that paragraph 4 of Appendix 1 of Annex I stated that "except for the treatment of
construction services, the recommendations contained in the manual are consistent with BPM5" and
wondered what the reason behind this was, in light of his delegation's interest in this sector.  A
representative of the WTO Secretariat said that they would look into the matter and provide an
answer.
48. Summing up the discussion on this item, the Chairman said that the Council would take note
of the statements made and revert to this standing item at its next meeting.S/CSS/M/9
Page 13
C. WORK OF THE SUBSIDIARY BODIES – REPORTS BY CHAIRPERSONS
49. In keeping with what had been agreed concerning the regular reporting from the subsidiary
bodies to the Special Session, the Chairman invited the Chairpersons of those bodies to present their
oral reports.  He thanked the outgoing Chairpersons for their work and congratulated the incomingones on their appointment.
50. The Chairperson of the Committee on Specific Commitments, Ms. Pimchanok Vonkhorporn
of Thailand, reported that, since the previous report in March, the Committee had held one formal
meeting on 9 May 2001, and its discussions had addressed two items:  possible amendments to the
existing services sectoral classification; and organization of future work.
51. As far as sectoral classification was concerned, the Committee had had a very brief exchange
of views in relation to the sectors under discussion and the status of production on a fee or contract
basis.  As to the latter, it decided to conclude for the time being its deliberations on this horizontalissue without drawing any specific conclusion.
  In the sectoral discussions, Members requested
clarification of some aspects of the proposal by the European Communities on environmental
services.  The European Communities indicated the possibility of presenting a revised version of their
proposal by the following meeting as well as its interest, shared by others, in concluding work on this
sector in the Committee.  On energy services, a couple of Members pointed to the need to take intoaccount the different regulatory systems, to exclude any non-services activity from any possible
classification of the sector, as well as to clarify the presence of the energy activities in the current
classification.  With respect to postal and courier services, a couple of delegations reiterated the
inadequacies of the W/120 classification in this sector and referred to negotiating proposals on this
matter submitted to the Special Session.  On construction services, delegations continued to reflect onthe proposal by New Zealand for clarification of the classification of multistage construction projects
and examination of the merits of introducing an integrated construction services item in the W/120
classification.  However, a couple of Members indicated that it was not obvious that a revision of
W/120 was necessary in this sector, and that, if a change were necessary, it should consist of
disaggregating rather than aggregating activities, wh ich seemed to be the direction of the proposal on
this sector.
52. As far as the organization of work was concerned, discussions covered how to proceed with
the ongoing classification work and possible new items for the Committee’s agenda.  As to
classification, delegations deemed necessary to continue to reflect on how to proceed, partly due to
the link between classification discussions in the Committee and classification issues incorporated inthe negotiating proposals recently submitted to the Special Session.  It seemed to her that the general
feeling was that discussion of those proposals in the Special Session could contribute to the ongoing
work in the Committee and possibly help the Committee decide how to move the classification
discussions forward.  As to possible new items for the Committee's consideration, her consultations
had revealed a couple of areas of interest, namely the development of a procedure for the
incorporation of new commitments resulting from current negotiations in Members' schedules, an
issue which had been raised in the Committee in 2000, and procedural aspects of the listing of MFNexemptions.  The Committee welcomed these suggestions and was reflecting on them.  She
announced that she would be conducting informal consultations on those questions before the
following formal meeting of the Committee.
53. The Chairperson of the Committee on Trade in Financial Services, Mr. Jan Peter Mout of the
Netherlands, reported that the Committee had held two formal meetings in 2001, on 2 April and 9
May 2001.  It had addressed the following issues:  acceptance of the Fifth Protocol to the GATS;
sectoral classification of financial services;  a proposal for requesting information from international
standard-setting organizations;  recent developments in financial services trade;  and organization of
future work.S/CSS/M/9
Page 14
54. On the acceptance of the Fifth Protocol, the Committee heard updates on the status of
domestic procedures from the delegations of Brazil, Jamaica, the Philippines, Poland, and Uruguay.
In most cases, delays in the ratification process seemed to be due to procedural matters.  However,
Jamaica informed the Committee that it had decided to delay ratification of the Protocol against the
background of the difficulties that emerged in the financial sector in the mid 1990s, which warranted
that priority be given to correcting existing weak nesses in the sector by strengthening and improving
the regulatory framework.
55. Regarding the sectoral classification of financial services, at the meeting held in May Japan
indicated that, even though it still considered that the classification of certain activities that relied
heavily on new communications technologies, such as the Internet, would merit further analysis, it
had no intention of sticking to the original proposal put forward last October if, as it appeared to be
the case, most Members were not interested in pursuing the discussion any further at that stage.
However, some delegations said that they were still reflecting on the questions raised by Japan andindicated the possibility of coming back to them in the future.  Finally, some delegations still
considered that the broad definitions contained in the Annex on Financial Services already covered
the services activities identified by Japan.
56. Under the item on "Other Issues for Future Discussion", the Committee agreed to organize an
informal briefing session to be given by the most relevant international standard-setting organizations,namely the Basel Committee on Banking Supervisi on, the International Organization of Securities
Commissions, and the International Association of Insurance Supervisors.  The purpose of the
informal briefing session would be to provide an  opportunity for those organizations to inform and
update delegations about their activities in this field.  It was worth highlighting that consensus was
reached on the basis of the following conditions:  that the session would be a one-off, stand-aloneevent;  that there would be no reporting to the Committee or to the Council on the session's
proceedings;  that the briefing session would not touch upon the scope of paragraph 2(a) of the Annex
on Financial Services;  and that, if necessary, national experiences would be referred to only in
general terms and would not identify country-specific situations.  He said that the event would take
place in October.  He thanked all delegations for the flexibility shown in relation to that proposal, inspite of the sensitivities surrounding some of the issues under discussion.
57. Regarding "Recent Developments in Financial Services Trade", no information was received
from any delegation.  However, a couple of delegations encouraged Members to take advantage of the
opportunity provided by this agenda item to exch ange information regarding national experiences on
financial services liberalization and regulatory reform.  This seemed a fair point to him, and hehimself encouraged Members to make full use of this agenda item.
58. At the meeting held on 2 April 2001, Members addressed the organization of future work.  As
a result of the discussion, it became clear to him that discussions in the Special Session of the Council
as regarded the negotiating proposals would inform the activities of the Committee.  A fruitful
exchange of views and information in the Council would certainly help delegations reinvigorate and
give a sense of direction to the current Committee's activities.  He pointed out, for the sake of clarity,
that Members could still raise issues in the Comm ittee in conformity with its terms of reference.
Finally, it was decided that in principle the Committee would meet again in October.
59. The Chairman of the Working Party on GATS Rules, Mr. Hugo Cayrus of Uruguay, reported
that, since the last Special Session, the Working Party on GATS Rules had held one formal meeting
on 10 May, when it discussed the three issues on its agenda:  safeguards;  subsidies;  and government
procurement.  The Working Party also met informally on 23 April to discuss issues related toemergency safeguard measures.S/CSS/M/9
Page 15
60. Intensive work was taking place on the issue of emergency safeguard measures.  Discussions
were based, in particular, on the Chairperson's List of issues, and on the ASEAN "Draft Agreement on
Emergency Safeguard Measures for Trade in Services".  At the informal meeting on 23 April, two
Members submitted informal communications:  the delegation of Venezuela, on "Indicators and
Criteria for the Determination of Serious Injury or Threat Thereof", in document JOB(01)/48, and the
delegation of Brazil, on "Compensation", in docume nt JOB(01)/50.  At the previous week's meeting,
the delegation of Mexico had presented a non-paper addressing various issues related to emergency
safeguard measures, contained in document JOB(01)/67.
61. The Working Party agreed to hold an informal meeting at the end of June.  As it had been
proposed in the formal meeting of the Working Party in March, in the last informal meeting in April,
and in the last formal meeting, the first part of the June meeting would allow for an open-ended
debate on all topics listed in the Chairperson's List of issues in Job No.1979/Rev.1.  In this regard, he
strongly encouraged delegations to submit written contributions.  The second part of the meetingwould be a process discussion, to assess what had been achieved since April 2000 and to determine
what the next steps should be, including whether it might be useful to work on a text.  The meeting
would also help to prepare the formal meeting in July.  He intended to conduct informal consultations
with delegations in the following weeks, so as to get an idea of the range of options reasonably
available, taking into account the Working Party's deadline of 15 March 2002.
62. With respect to subsidies, Members continued their consideration of the Chairperson's
Checklist on Subsidies in Job No. 4519/Rev.1.  At the previous meeting, they had addressed the
fourth item contained in the Checklist, i.e. the wider role of subsidies, including to pursue public
policy objectives, the role of subsidies in relation to development, and the needs of developing
country Members for flexibility, including special and differential treatment.  He said that theexamination of the five items listed on the Checklist would be completed at the next formal meeting
in July:  on that occasion, Members would also have a discussion on how to continue work under this
agenda item in order to move forward.
63. On government procurement, one delegation indicated its intention to raise some issues at the
next meeting.
64. The Chairman of the Working Party on Domestic Regulation, Mr. Scott Gallacher of New
Zealand, report reported that, since his previous report to the Special Session, the Working Party had
held one formal meeting, on 11 May.  Discussion at the meeting had focused primarily on the
organization of future work, based on a Chairperson’s Note.
65. Following an introduction by the Chairperson, Members intensively discussed, in informal
mode, the issues raised in the Chairperson’s Note regarding the organization of work of the Working
Party.  Some of the main themes raised were:  recognition of the parameters of the Working Party’s
mandate, which was contained in Article VI:4 and complemented by the Decision on Domestic
Regulation;  recognition of the importance of Members’ right to regulate, as confirmed by the GATS
Preamble;  recognition that the Working Party’s work on professional services and the creation of
horizontal disciplines were not mutually exclusive, but complementary;  and, lastly,
acknowledgement that, until specific guidance was received by the Special Session in respect of workon domestic regulation in the context of the current negotiations, the Working Party would continue to
follow its existing mandate.
66. After conclusion of these discussions, Members agreed to revise the informal "Checklist of
Issues for WPDR", under the authority of the Chairp erson, to include questions related to equivalency
and international standards, and to better reflect the Working Party’s most recent discussions.S/CSS/M/9
Page 16
67. As for discussion of concepts relating to the development of regulatory disciplines, in order to
accommodate the proposals made regarding the organization of work, Members, at the suggestion of
the Chairperson, agreed not to engage in detailed discussions of the specific items under consideration
until the following Working Party meeting, when the revised Checklist would be available.  Three
delegations, the European Communities, Japan and Australia did, however, present papers related
primarily to the issues of necessity and transparency, followed by extensive comments anddiscussions by Members.   The Secretariat also presented an informal paper, "Examples of Measures
to be Addressed by Disciplines under GATS Article VI:4".
68. With respect to development of general disciplines for professional services, Members
commented on two informal Secretariat papers, the s econd draft of the "Synthesis of Results to Date
of the Domestic Consultations in Professional Services", and the fourth draft of "International
Organizations in Professional Services".  The Chairperson also recognized the contributions from
Mexico and Canada, concerning their domestic consultations with professional organizations inrespect to the applicability of the accountancy disciplines to other professions.  No other reports of
Members’ consultations were received at the meeting.
69. Members agreed to hold the next meeting of the Working Party in the first week of July.
70. The Council took note of the reports.
D. PROPOSALS RELATING TO THE NEGOTIATIONS UNDER ARTICLE XIX OF
THE GATS
71. The Chairman recalled that, at the previous meeting, Members had held an initial discussion
of the negotiating proposals submitted by delegations on a number of services sectors, modes of
supply and other horizontal issues.  At the March meeting, the Council had agreed on a workprogramme until March 2002.  As part of this work programme, it was decided that all negotiating
proposals, existing ones as well as any new ones, would be addressed at the present meeting of the
Special Session and that the discussion would be st ructured according to sectors, modes of supply and
the horizontal issues identified.  It was also agreed that sectors would be taken up in the order in
which they appeared in the W/120 sectoral classification, while placing sectors not listed in thatclassification, such as energy services, in alphabetical order.  Accordingly, that agenda item had been
organized so that Members would take up the discus sion of proposals relating to the movement of
natural persons first, followed by those dealing wi th other horizontal issues and then by the ones
addressing specific services sectors.
72. The Chairman drew the attention of Members to recent submissions.  Since the previous
meeting, new proposals had been submitted by Switzerland, in documents S/CSS/W/70 to 79;  the
Mercosur members, in document S/CSS/W/80;  the Republic of Korea, in documents S/CSS/W/82 to
87;  Japan, in document S/CSS/W/42/Suppl.1;  by  Chile, in document S/CSS/W/88;  and by the
members of the Andean Community, in document S/CSS/W/89.  Under the relevant sub-items, he
said that he would first offer the floor to these dele gations to introduce their proposals.  With regard to
proposals already introduced at the meeting in March, he suggested that the delegations concerned
first respond to questions raised at the previous meeting;  he would thereafter open the floor generallyfor comments.  He urged these delegations not to re-introduce their proposals.  He also indicated that
the allocation of proposals to the various sub-items did not preclude delegations from referring to
them also under different sub-items.
73. He then recalled that the Secretariat had been  asked to prepare a paper identifying the main
elements of the negotiating proposals.  It had been stressed that the Secretariat note would serve as anaid to the discussion, would be factual, non-exhaustive and regularly updated.  He stressed that the
Secretariat note did in no way substitute for the proposals themselves, which delegations needed toS/CSS/M/9
Page 17
continue to refer to.  The paper had to be viewed  as on-going work that would develop over time in
light of Members' discussions;  it was contained in JOB (01)/63.
74. A representative of the WTO Secretariat explained that the note did not contain original work
by the Secretariat.  It was organized by sector and mode to apply and presented the content of
different proposals according to a common set of headings.  In some instances it had been difficult to
precisely fit different elements under those headings.  Therefore, the placement of material underparticular headings should not be seen to imply any judgment on the part of the Secretariat.  He
stressed that the document did not comprehensively cover the content of proposals and that it should
not be considered a substitute for them.
75. Given that the proposals submitted by the delegations of Switzerland, the Republic of Korea
and Chile covered a number of services sectors, the Chairman invited those delegations to briefly
introduce their proposals, which would then be taken up in more detail under the relevant sectors thatthey addressed.
76. The representative of Switzerland informed Members that his delegation had submitted
proposals on professional services, telecommunication services, postal and courier services,
audiovisual services, distribution services, environmental services, financial services, tourism and
services auxiliary to all modes of transport.  He would introduce them under the relevant sub-
headings.
77. The representative of the Republic of Korea explained that his delegation's proposals needed
to be read in conjunction with document S/CSS/W/82, which was the cover note for all their
proposals.  He stressed that the submission was a preliminary reflection of his delegation's interests at
the current stage of the negotiations.  His delegation reserved its right to supplement its submission
with additional ones during the negotiations.  Their submission was also without prejudice to their
final position in the negotiations.
78. The representative of Chile explained that their proposals, which covered professional
services, telecommunication services, construction se rvices, distribution services, energy services and
transport services, represented a first approximation of Chile's main sectors of interest, which did not
mean that additional proposals or more specific ones might not be submitted in due course.
79. Commenting on the Secretariat note in JOB(01)/63, the representative of the United States
stated that the document had been discussed at the March meeting and that it had been agreed that its
release would wait;  he had therefore been surprised that it had been issued.  He concurred that it
could serve as a useful tool, especially for smaller delegations, but said that the time was not ripe to
detract attention from the proposals themselves.  The proposals needed to be the focus of thediscussion, rather than the summaries.
80. The Chairman said that any changes that Members wished to make to the Secretariat note
should be communicated to the Secretariat, w ho would introduce them.  While acknowledging the
usefulness of the Secretariat note for smaller delegations, he too reiterated that the focus of the
discussion needed to be the proposals themselves.
81. The representative of Japan said that, in spite of his not being a small delegation, he had
found the Secretariat note quite useful.  He recalled that it would be amended and updated as
necessary.  He asked that horizontal issues, such as autonomous liberalization, modalities for the
negotiations, special consideration for developing countries, MFN exemptions, be also included in the
note.S/CSS/M/9
Page 18
82. The representative of Norway said that the Se cretariat note was a good starting-point and a
helpful tool, particularly for smaller delegations with limited capacity.  However, he felt that there
should be options for improvements and additional suggestions.  He had noted in particular that the
Secretariat document concentrated on negotiating proposals according to a strict definition, but added
that his delegation had practical suggestions in their own submission, for example on GATS rules,
which could be reflected.  In addition, given that some delegations had worked hard to indicate themain objectives which they saw as guiding the negotiations, he felt that a survey of delegations'
thinking on the objectives of the negotiations would be worthwhile.
83. The Chairman said that the Secretariat note in JOB(01)/63 could be revised following the
discussion of the proposals.  It was only meant as a working tool, and he invited delegations to reserve
any comments on the methodology until after the discussion of the proposals had been completed.
(a) Movement of natural persons
Communications from:  India (S/CSS/W/12 and Corr.1);  the United States
(S/CSS/W/29);  the European Communities (S/CSS/W/45);  Canada (S/CSS/W/48)
84. The representative of the United States explained that the submission by his delegation
proposed that Members start by addressing regulatory and transparency issues with respect to the
movement of natural persons.  These issues might be more important for mode 4 than for any of the
other modes, given that services suppliers entered the market only temporarily and faced the same
obstacles anew each time and that mode 4 concerned individuals, which had greater difficulties and
less resources than companies.  It was therefor e important to look at access to information and
procedural transparency.
85. The representative of the European Communities welcomed the number and variety of
negotiating proposals tabled and said that they were useful to understand the different interests of
trading partners.  He underscored, first, that proposals provided an indication of where Members'
interests lay and he encouraged more Members to come forward with new proposals;  second, that
there should be no attempt to either harmonize the different proposals or to agree on negotiatingformulas, as this was not the objective of the proposals;  and, third, that the provisions of Article IV of
the GATS needed to be borne in mind in reviewing the proposals, and that it was important to hear
where the export interests of developing countries lay and to take into account the need for capacity
building.
86. Turning to the proposals by his delegation, he indicated that all the European Communities
sectoral proposals contained a suggestion that Members further discuss how to facilitate mode 4 trade,
particularly for intra-corporate transferees (ICTs) and contract suppliers.  Their submission in
document S/CSS/W/45 was not a negotiating proposal  as such, but contained suggestions on how the
discussion could proceed.  He highlighted a number of those suggestions.  First, harmonisation of the
definitions and/or description of the mode 4 categories, including in the context of ICTs.  A
discussion could be launched on the opportunity to ensure that Members agree on common terms and
definitions for ICTs, executives, managers, specialists and contractual service providers.  Theharmonisation effort could take into account, as far as relevant, the work already carried out by other
international organisations.  Second, the specification of unspecified labour market tests from future
commitments.  The elaboration of a common code of practice for economic needs tests with the
objective to render them more specific and transparent, define their application criteria, make them
non-discriminatory and impose a due process procedure could be highly desirable.  Third, building onGATS Article III:4, with a view to achieving greater transparency, the conditions under which service
providers might temporarily enter and stay in the territory of Members should be regulated
appropriately and clearly, setting out their rights and obligations and ensuring that they had access to
this information and that there were mechanisms in place to see that it was applied fairly.  He addedS/CSS/M/9
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that the submission explained how his delegation envisaged the discussion of the mode 4 elements of
the sectoral proposals.
87. The representative of India welcomed the three other proposals on the movement of natural
persons.  He was particularly pleased with the s ubmission by Canada, which was broadly in line with
his delegation's submission.  With regard to the submissions by the European Communities and the
United States, he observed some disconnect between what they were seeking in terms ofcommitments on mode 4 and what they expected in other areas.  With respect to future work, he said
that there was both groundwork to be carried out, in terms of arriving at a common understanding of
definitions and categories, which essentially was a technical exercise, and work on economic needs
tests, which were more frequent in mode 4 than in other areas, and in respect to which his delegation
was open to all suggestions.  He said that such work needed to be undertaken before the request-offer
phase could start.  He suggested that the Council carry out a more detailed discussion, either in July or
in October, when Members could outline what they wished to see undertaken in terms of groundwork.Commenting on the other three proposals, he was pleased to note Members' willingness to engage in
discussions.
88. As for the proposal by the United States, he had noted the emphasis on horizontal
commitments;  these were important, but his delegation was also interested in looking at sector-
specific commitment for mode 4, particularly in health services, software and computer-relatedservices, accountancy, construction and engineering services.  With regard to the European
Communities submission, he had taken note of the reference to the benefits of a sectoral approach in
paragraph 6, even if the European Communities considered it logical first to build and improve on the
horizontal approach, and stressed the need to look at specific sectors.  He concurred with the analysis
of the definitional issues in paragraph 8 and of labour market tests in paragraph 9, the latter being ofcritical importance.  Generally, he was pleased with the interest shown and noted that no element in
the three proposals conflicted with his delegation's overall approach;  there were just different levels
of ambitions, which was understandable.
89. By way of preliminary comments, the representative of New Zealand said that the
submissions were positive contributions which clarified several issues.  He highlighted the limited
number of commitments in mode 4 and had taken note of India's comments about the significance of
mode 4, as opposed to mode 3, for developing countries.  Turning to the proposals, he said that a
number of issues in the submission by India merited further consideration.  He mentioned the
reference paper on economic needs tests, to ensure that their application be based on multilaterally
agreed principles, and to increase the transparency and consistency in commitments;  a more market-oriented category of professionals, even if he wondered about the workability of the superimposition
of the ILO ISCO-88 on the W/120 classification;  th e strengthening of GATS recognition provisions,
particularly on mutual recognition agreements.  As for the three other proposals, he said that the
submissions by the European Communities and by Canada complemented the submission by India in
that they referred to a code of practice or to multilateral norms for economic needs tests.  He had
taken note of the suggestion for additional regulatory disciplines in the submission by the United
States, and sought further elaboration, in particular on whether these would be limited to transparencyand access to information or would also cover other areas.
90. The representative of Hong Kong, China stressed  the importance of the issue;  with over 98
per cent of Hong Kong, China's businesses being small and medium-sized enterprises, which might
not necessarily be able to establish commercial presence abroad, her delegation had a strong interest
in mode 4.  She observed that the submissions tabled shared some important elements.  Theseincluded:  criteria for determination of eligibility, limitations, criteria for the various test, which could
be grouped under the heading of transparency;  uniform criteria, definitions on the various important
concepts and elements, clear and easy renewal procedures, which could be grouped under the headingS/CSS/M/9
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of predictability.  Her delegation fully supported discussion of the proposals in this regard, which
were generally in line with Hong Kong, China's regime for business and employment entry.
91. As for the submission by India, she said that it raised some interesting and important elements
for serious further consideration.  As a preliminary view, she found the elements in the proposed
reference paper agreeable.  With respect to the proposal regarding a GATS visas system, as a member
economy of APEC, she noted that something similar existed in the APEC context and believed that
the Council could look into the feasibility of a GATS visas system in greater detail.  However, she
believed that the issue of GATS visas to employees of selected companies deputed abroad temporarily
needed to be considered with caution, as it could give rise to allegations of the system being
discriminatory against certain companies.  With regard to the submission by Canada, she sought
further elaboration on the reference to the need for rules to allow for the duty-free temporary
admission of "portable tools of the trade" in paragraph 4.
92. The representative of Norway said that he shar ed the goals, highlighted in the proposals, for
greater openness and more simple procedures with respect to mode 4.  Commenting on the proposal
by India, he recognized the importance attached by that delegation to mode 4.  He had noted the
reference in paragraph 8 to wage parity being another restrictive eligibility condition which negated
the cost-based advantage of developing countries in exporting labour-intensive services;  he said that
this was an important issue, but stressed that fo reign nationals working in Norway needed to follow
Norwegian laws, regulations and agreements made by social partners, including minimum wage
requirements.  With regard to the suggestion th at the structure of commitments be improved by
expanding the scope of categories covered to include middle and lower-level professionals, he said
that this was a valid suggestion which coincided with the recent liberalization of Norwegian
immigration law, where the definition of specialists was extended to cover also professionals withlower formal professional skills or with informal skills if a special competence was recognized  As for
the proposal to adopt the ILO ISCO-88, he indicated that this classification was used by the
Norwegian statistical office and by the public employment services and he welcomed the use of one
single international standard.  With respect to the suggestion that certain categories be excluded from
the applicability of economic needs tests, he expressed his delegation's willingness to discuss furthersimilar arrangements;  as a general observation, he pointed out that it was employers who decided
which employees they needed.  As concerned the distinction between procedures for temporary and
permanent immigration, he indicated that these were identical in Norway, but that they were working
on reforms to make immigration authorities more efficient.  In this regard, he had noted that the
United States had proposed measures to improve the access to information on laws, regulations and toenhance procedural transparency, which he supported;  he also supported the European Communities
proposal for improved transparency of the conditions  under which service suppliers could temporarily
enter and stay in Members' territory.  He also agreed with the proposal by Canada that Members
explore ways to strengthen the transparency obligations of the GATS to benefit in particular service
suppliers, SMEs and the service suppliers from all countries.  He expressed his delegation's
willingness to work constructively on the movement of natural persons, while taking national policy
objectives into account.
93. The representative of Switzerland welcomed the proposals generally, and expressed particular
interest in discussing efforts to harmonise definitions, improve procedural transparency and access to
information.
94. By way of preliminary comments on the subm ission by Canada, the representative of
Uruguay sought clarification on the proposal for duty-free temporary admission of "portable tools of
the trade" in paragraph 4, which was also present in their submission in document S/CSS/W/52.  He
also expressed interest in discussing the options  on how Members might move forward with mode 4
discussions which were presented in paragraph 6.S/CSS/M/9
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95. Commenting solely on the submission by India at that juncture, the representative of the
Republic of Korea wondered about their suggestion for the adoption of the ILO ISCO-88.  He
concurred that it was a more detailed classification, but doubted that it would improve theclassification.  He noted that those countries that already employed ISCO-88 to classify their domestic
job market had done so after considerably altering that classification to adapt it to the unique situation
of their domestic job market.  He therefore suggested that Members should first try to achieveuniformity and clarity of definitions of mode 4 terms such as intra-corporate transferees, managers,
executives, specialists and contractual suppliers.  Second, with respect to the proposal for multilateral
norms to facilitate mutual recognition agreements, while he saw the merit of the suggestion as a
whole, he doubted whether the situation was ripe for such a work solely with respect to the movement
of natural persons, since labour market situations in different Members were very different and
sensitive.  The same was true of the proposal for multilateral norms for economic needs tests;  again,
these were of relevance to all modes, and not only mode 4.  He saw merit in undertaking groundwork,but said that priority needed to be given to de finitional issues rather than to groundwork on economic
needs tests.
96. The representative of Chile indicated that mode 4 was of interest to many delegations,
including her own.  She said that the submission by India was a good and complete analysis;  she
highlighted in particular the suggestion on Ar ticle VII of the GATS, which her delegation was
interested in discussing further.  She was agreeabl e to the suggestion in the submission by Canada that
a seminar be held on the movement of natural persons.  As for the submission by the United States,
she concurred that access to information and procedural transparency were essential tools, in line with
work in other fora, but said than, while these were important first steps, they were not sufficient by
themselves and that more was necessary.  With regard to the submission by the EuropeanCommunities, she indicated that her delegation's interest went beyond intra-corporate transferees and
included also independent professionals.
97. Commenting on the submission by India, the representative of Australia said that it was a
comprehensive and thought-provoking paper;  she observed that services delivery often required the
interaction of suppliers and consumers and that the movement of natural persons was therefore ofcritical importance.  She shared the thrust of paragraph 4 of the paper;  she said that independent
professionals were in high demand, for example in sectors like accounting or financial services, and
had taken note that only 12 Members had made commitments on independent professionals.  Whilst
commitments had been undertaken in professional services sub-sectors, she agreed that the situation
could be improved.  She sought further explanation with respect to the statement in paragraph 6, as inAustralia professionals, regardless of nationality, found access easy.  In 2000, more than 10.000
Indians had entered Australia on short-term business visas which typically took only two working
days to process, and India was also one of the larger users of longer-term business visas, which
allowed workers to work for up to four years.  As concerned the proposal in paragraph 14 on mutual
recognition agreements, she said that the key issue was to establish substantial equivalence of
qualifications on a sector-by-sector basis, which required intensive examination of the qualifications,
training standards and procedures of the two countries, and was best conducted on a sectoral basis.Establishing profession-by-profession procedures would be more feasible than multilateral norms for
broad-based equivalence, as suggested in paragraph 19.  With regard to paragraph 18, she pointed out
that the right to control entry was an essential and fundamental right of all countries.  However, her
delegation strongly supported the argument that entry procedures should be implemented in an
efficient, expeditious and transparent manner, in order to reduce entry costs.  All of her delegation'snegotiating proposals on professional services highlighted this issue, of great importance to Australia.
Overcoming administrative barriers was also a two-way street;  meeting entry requirements was a
significant problem for professionals and business visitors from countries where there were issues of
travel documents credibility, proof of identity and a pattern of high over-stay rates.  Therefore,
significant efficiency gains could be obtained if such problems were addressed through capacity-building programmes in the countries of origin, and she indicated that Australia was involved in aS/CSS/M/9
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number of programmes of such nature and would be happy to share its experience.  As for the
identification of a GATS visa as a possible solution to separate temporary and permanent movement,
she said that before such visas could be introduced it would be necessary to overcome problems of
credibility of documents and similar problems, and that there were probably other administrative
options that could be examined.  Turning to the remaining three proposals, she strongly supported
their thrust, particularly on the need for greater tr ansparency.  She also agreed that Members needed
to be prepared to improve their mode 4 commitments, including through the examination of the
possibility of de-linking mode 4 from mode 3 commitments.  She was of the view that the possibility
of re-defining mode 4 as temporary business entry might be helpful in that regard.  She sought
additional clarification on the suggestion for "porta ble tools of the trade" in paragraph 4 of the
submission by Canada.
98. The representative of Argentina said that he had commented on the submission by India at a
previous meeting;  it was a valuable reference, particularly in respect to the proposals on economic
needs tests.  However, he noted that a number of issues went beyond the scope and objectives of the
Council's discussion, particularly as concerned social security questions.  Commenting on the
proposal by Canada, his impression was that it had the greatest value-added.  He stated that mode 4
covered independent service suppliers, as well as employees, and said that it was important to take
into account the differences which existed in different types of services, some of which could besupplied by individual suppliers present for short periods of time.  In this regard, he drew attention to
the lack of commitments on individual services suppliers, as highlighted also in the submission by
India.  He indicated his delegation's special interest in software, engineering, architectural and
auditing services, which often required a short and quick contract-based supply, without the need for a
commercial presence.
99. The representative of Canada sought clarifications on a number of elements in the proposals
by India and the European Communities.  With respect to document S/CSS/W/12, she wondered, first,
what limitations India was referring to in paragrap h 4, where it stated that the effectiveness of the
limited mode 4 commitments was further reduced through a host of limitations and administrative
hurdles.  Second, she was interested to know which were the sectors, mentioned in paragraph 5, where
professional movement was important.  Third, she said that one of the difficulties in relation to mode
4 was that it was linked to immigration and labour market development policies;  she indicated that
Canada did not differentiate between the two and wondered whether it was realistic and feasible to
separate the two policies.  Fourth, she wondered whether there was a difference between agreeing on
a category and on the criteria for eligibility for a category.  Turning to the submission by the EuropeanCommunities, she raised three points.  First, although desirable, she wondered whether it was possible
to agree on common definitions for mode 4 categories and whether guidelines would not be preferable
in this regard.  Second, she had noted the statement that mode 4 liberalization had predominantly been
based on a horizontal approach and that the European Communities recognized some benefit to a
sectoral approach based on more specific categories of skilled personnel activities, and wondered
whether they were thinking of the ILO ISCO-88 and whether they had particular sectors in mind.
Third, she was interested in having more detail on the proposed code of practice for economic needstests.  She said that additional questions would be forthcoming.
100. The representative of Japan expressed his delegation's interest in increasing procedural
transparency, as suggested in the proposals by the United States, European Communities and Canada.
Also in light of the comment in the submission by the European Communities that the movement of
natural persons was a very delicate issue, his delegation was still carefully studying the proposals andwould revert to them.
101. The representative of Mexico noted that the main difference amongst the proposals was their
level of ambition.  He would revert for more detailed comments but wished to highlight some
elements.  With regard to the submission by India, he noted the completeness of the proposal andS/CSS/M/9
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shared the suggestion that Members look at criteria for economic needs tests, which were a significant
barrier to mode 4 trade, even if he was unsure whether a reference paper could be established or
which instrument might be the most appropriate one.  He also concurred with the proposal for
establishing norms to facilitate mutual recognition agreements for professions;  qualifications and
recognition were amongst the key elements for effective mode 4 access and it was important to
develop such rules.  As for the submission by the European Communities, he agreed with theimportance of improving horizontal commitments.  He wondered about the possibility of arriving at
common definitions of mode 4 categories in view of  the possible implications these might have within
each Member's legal framework and whether it would not be more appropriate to establish a
classification which, inasmuch as possible, would be adapted to each Member's legislations and which
could contribute to transparency for business people.  Within such a classification, consideration
needed to be given to both independent service suppliers and employees.  With respect to the
submission by the United States, he concurred with the need for additional regulatory disciplines, butsought further details, in particular as concerned access to information and procedural transparency.
With regard to the submission by Canada, he echoed in particular the last sentence of paragraph 6
about possible fora for discussion.
102. By way of preliminary comments, the representative of the Philippines expressed the keen
interest of his delegation in the movement of natural persons.  He said that priority consideration
should be given to the submission by India.  He shared their statement about the existence of an
asymmetry in commitments across modes, and noted the particularly low levels of commitments for
mode 4, their mainly horizontal nature, the existence of many limitations and the fact that they were
bound only for a small subset of service personnel related to commercial presence and very rarely for
independent movement.  He echoed the comment that temporary movement was not separated frompermanent movement and therefore came under the purview of immigration legislation, with strict
eligibility criteria and limitations on the length of stay.  In this regard, he had taken note of the
practicability issue raised by Canada, but stressed th at the issue could be solved if the political will
existed.  As concerned economic needs tests, he noted that, along with qualifications and licencing
requirements, these acted as articifial barriers preventing access for mode 4 suppliers, either throughrejection of the applications for work permits or visas or by limiting the scope of activities of the
service supplier in the market.  He called for serious consideration of the proposal that horizontal
commitments include categories of individual professionals, to de-link mode 4 from mode 3.  He had
found the suggestion that the ILO ISCO-88 be superimposed to the W/120 classification thought-
provoking and looked with interest at the suggestion that a GATS visa be established, which was anovel proposal similar to the one that was evolving in APEC.  Turning to the submission by Canada,
he said that the paper was closely linked to developing countries' objectives in mode 4;  he shared
their proposals in paragraph 4 and noted the similarity of the suggestions in paragraph 5 to those
contained in the submission by the United States , which he could support, but for which he sought
additional elaboration.  As for the proposal by the European Communities, he echoed Canada's
concerns about the workability of clarified and harmonized definitions, but said that he would revert
to the matter.
103. By way of preliminary comments, the representative of Brazil stated that paragraph 1 of the
Annex to the Movement of Natural Persons referred to independent service suppliers and to
employees of service suppliers, but that the emphasis in the submissions by the United States and the
European Communities lay mainly on the latter category.  Although he recognized that the proposals
by the United States and the European Communities were important contributions, he noted theirlower level of ambition in comparison to their sectoral proposals.  With regard to the submission by
the United States, he sought further clarification on the scope and reach of their proposed additional
regulatory disciplines on access to information and procedural transparency.  As for the submission by
the European Communities, he had taken note of their proposal to harmonize definitions and mode 4
categories, but wondered about the compatibility of common definitions and internal regulations,given their diversity.  He sought additional information about their reference to contractual serviceS/CSS/M/9
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providers and their economic activity.  With respect to the suggested common code of practice for
economic needs tests, he said that economic needs tests were an important barrier, which had served
to a great extent as emergency safeguards, and noted in this regard the proposal for a reference paper
in the submission by India.  While looking at the issue from the perspective suggested by the
European Communities and by India could be useful, his delegation was still considering which
instrument would be the most appropriate one.  As for the submission by India, he said that itcontained a detailed account of barriers to mode 4 as well as suggestions for possible solutions which
were of particular interest to developing countries.  He indicated that Brazil's interests lay in
computer-related, engineering, architectural, construction and accounting services, amongst others.
As for the submission by Canada, he sought further elaboration of their suggestion on duty-free access
for "portable tools of the trade" in paragraph 4, and wondered how such an issue would be addressed
under the GATS.
104. The representative of Thailand indicated her delegation's interests in mode 4: first,
independent professionals, rather than horizontal categories;  second, the sectors which had been
mentioned by the representatives of India, Mexico and Brazil, such as construction, health,
engineering and tourism services;  third, mutual recognition agreements and further work on
classification issues, where her delegation was still analysing the appropriateness of the different
approaches which had been suggested.  Her dele gation was ambivalent and was still considering
proposals for a reference paper or common code of practice on economic needs tests and for
harmonization of definitions.  She said that they would revert to the proposals.
105. The representative of Turkey offered preliminary comments and reserved his delegation's
right to revert to the issue.  He underscored the importance of mode 4 and welcomed the submissions
tabled, and the one by India in particular.  He said that the proposals were complementary and offereda good starting-point for discussion s;  he had appreciated other Members' comments.  He concurred
with the need for greater precision in definitions , clarity of commitments, and improved transparency
in mode 4;  the proposal to harmonise definitions was important, but he was aware of the problems
involved and shared the comment in the submission by the European Communities about the
sensitivity of the issue.  He was of the view that transparency and precision were means to facilitatemode 4 trade and should not be separated.  As for economic needs tests, he said that, because of the
nature of services trade, greater clarity and precision were required and called for careful examination
of the issue.
106. The representative of the United States said that the submission by India contained a broad
approach.  He shared the objective to obtain new commitments, but also noted the existence of the
Annex on the Movement of Natural Persons, which recognized the difference between temporary and
permanent employment, and said that his delegation's approach reflected that difference.  As for the
suggestion about the ILO ISCO-88, he said that that classification contained broad definitions for
skills and education and wondered whether using national classifications would not be more
appropriate and more closely related to professional titles.  With regard to the suggestion for clear
criteria for economic needs tests, he wondered if this was limited to mode 4 or applicable also to
mode 3, and what types of norms they were envisaging beyond transparency.  He shared the objectiveof increasing transparency with respect to work permits and visas.  As for the proposal for a GATS
visa, he was not convinced that visa provisions per se  were within the scope of the GATS, and
wondered what the suggestion for visas for select companies would entail.  He was also doubtful
about how Bilateral Totalisation Agreements woul d be within the scope of the GATS or the WTO.
He supported the objective to improve notification and transparency of mutual recognition agreementsunder Article VII, but said that the development of multilateral norms appeared to contradict the
approach in Article VII, which acknowledged that different WTO Members might be able to adopt
common approaches in advance of all WTO Members doing so.  He wondered what kind of criteria
should be developed and approved for non-accredited  professions;  who would develop them and how
would they be adopted and approved;  what would be their legal standing as criteria for admission;S/CSS/M/9
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what types of norms should be developed for on-the-job experience;  and whether India had specific
examples in mind for such criteria.  As concerned suggestions for modalities and administrative
procedures, he agreed that mode 4 should be discussed in the Special Session and had no objections
that, consistent with the terms of reference of the Committee on Specific Commitments, the
Committee "oversee the implementation of specific commitments in all modes of supply, including
specific commitments relating to movement of natural persons, contained in Members' schedules", butwondered whether India had more specific pro posals for how such an examination should be
structured.  He questioned three assertions made in the paper.  First, paragraph 6 stated that
administrative and procedural problems effectively ruled out market access for developing country
professionals;  he indicated that this was not the case in the United States and wondered if India might
be thinking of other markets.  Second, with reference to the third bullet of section 2(d)(ii), he
wondered what bridging mechanisms in case of divergence of requirements and existing standards
between host and home countries they were thinking of.  As for the assertion in the first sentence ofparagraph 14, he wondered whether it was India's view that developed countries had taken steps to
avoid entering into mutual recognition agreements with developing countries, which did not seem to
be an accurate statement.
107. Turning to the submission by the European Communities, he supported its general approach.
He believed that WTO Members should give consideration to how to improve commitments in mode4;  this could include both adding to commitments and removing limitations in schedules, as well as
developing new GATS provisions related to mode 4.  He indicated that the United States approach
had been focused first on the regulatory aspects identified in their submission, which to a great extent
overlapped with the one taken by the European Communities in paragraphs 12 and 13.  He agreed that
the categories of intra-corporate transferees and contractual workers were important and wonderedwhether there were any other categories of importance to the European Communities.  He concurred
that the movement of natural persons was a delicate subject and, in this regard, stressed the
importance of the Annex.  With respect to the reference to a sectoral approach, he asked what specific
services sectors were of interest to the European Communities.  As concerned their suggestion for
harmonising definitions, he wondered how Members' existing definitions related to the GATS onesand which other international organizations had worked on mode 4 issues.  With regard to economic
needs tests, he sought additional information on the criteria which could be applied and on how a "due
process procedure" would operate;  he also wondered whether the criteria would apply only to
economic needs tests in mode 4 or in mode 3 as well.
108. Referring to the submission by Canada next, he agreed that a focus on transparency and
predictability was an important first step.  His delegation was interested in Canada's approach to take
up improved market-access commitments both horizontally and sectorally and sought additional
information on what sectors where of particular interest to Canada.  He also expressed his delegation's
interest in further discussing the options outlines in paragraph 6.
109. He then responded to some of the questions posed on the United States proposal.  With
respect to New Zealand's question on whether their proposal covered regulatory issues beyond those
outlined in the paper, he responded that those were the initial ones and wondered whether they hadany specific ideas in mind.  As for those delegations which had requested additional information on
their approach, he referred them to the two bullet points in paragraph 5, which provided some detail
on the first steps contemplated;  he would be looking at giving additional details.  In response to the
assertion that their proposal only focused on one of the two categories in the Annex, namely
employees, he pointed out that this was unintended and not an accurate assumption.
110. By way of preliminary reaction, the representative of India said that, amongst the developed
countries, Norway had always exhibited a constructive approach and that he appreciated their attitude.
Reacting to their comment about wage parity, he said that his delegation was not suggesting that
minimum wage legislation should not be observed, even if he noted that in some cases mode 4S/CSS/M/9
Page 26
suppliers were paid by Indian companies, but that requiring that Indian suppliers be paid as
Norwegian ones meant negating their comparative advantage.  With respect to the comments by
Australia and the United States on paragraph 6, he explained that the section that followed illustrated
the meaning of that paragraph.  The statement was perhaps too blunt but, by way of example, he said
that a visa that required 6 to 8 weeks to process was an effective barrier to access, similarly to lack of
recognition of qualifications.  With respect to the comment by Canada on the distinction aboutpermanent and temporary immigration regimes, he indicated that his delegation understood and
respected the distinction made in the Annex:  it was clear that immigration policies were excluded
from the coverage of the GATS.  The point was that if the same criteria were applied to temporary
and permanent movement, all natural persons would be viewed in the same manner, essentially as
long-term migrants, which was not what mode 4 suppliers under the GATS were.  He appreciated the
practical problems involved but encouraged Members to discuss the issue and felt that the APEC
example might be useful in that respect.  With regard to the sectors of interest to his delegation, hereferred to health, software, construction, engine ering and accountancy services, amongst others.  He
would revert to the other questions raised by the delegation of Canada.
111. Turning to the comments by the delegation of the United States, he reiterated that his
delegation had no problem with the distinction made  in the Annex between temporary and permanent
movement.  While recognizing the high level of ambition of his delegation's proposal, he stressed thatdeveloping countries had been criticised for not participating in the negotiations and noted that Article
IV of the GATS referred to increasing their participation through negotiated commitments;  therefore,
while their proposal was ambitious, it was a reflection of the fact that mode 4 was the main area of
India's competitive advantage.  As for comments about the ILO ISCO-88 being too broad and that
using national classifications might be preferable, he explained that the problem rested with theabsence of correspondence in schedules and the lack of clarity of commitments;  achieving greater
clarity on mode 4 categories was important and he encouraged Members to try to arrive at a common
understanding.  With respect to criteria on economic needs tests being applicable to mode 3, he
indicated that his delegation's paper was only concerned with mode 4 and that he would reflect further
on the issue.  As for the proposal for a GATS visa, he agreed that the Annex stated that the sole fact ofrequiring a visa for natural persons of certain Members and not for those of others was not to be
regarded as nullifying or impairing benefits under a specific commitment, but noted that a procedure
to obtain a visa which took a long time represented a major problem.  Hence, the suggestion that visa
procedures be simplified, which would help alleviate fears of permanent immigration and put into
practice the Annex distinction between temporary a nd permanent movement.  He would revert to the
comment about Bilateral Totalisation Agreements, but noted that the question of the scope of the
GATS had not been settled and that no common interpretation existed on such issues.  He was unclear
on the question about multilateral norms and asked for further elucidation.  With respect to the
suggested modalities and administrative procedures  in section V of his delegation's submission, he
had taken note of the United States support and added that the proposal for work in the Committee on
Specific Commitments had not been completely thought through yet and that he would revert to the
issue.
112. The representative of the European Communities responded to some of the questions raised
and said that he would revert to the others.  First, on the distinction between sectoral and horizontal
approach, he explained that Members should first focus on improving transparency and definitions of
existing commitments.  He said that his delegation was interested in a sectoral approach, but that the
horizontal one should be pursued first, or else GATS schedules would become increasingly complex.He indicated that they had no specific sector in mind at that stage.  Second, on harmonized
definitions, they had no clear suggestion but felt that looking at work undertaken in other international
organizations, in bilateral settings or in the context of free trade agreements, might be useful, as
clarifying and agreeing on a common set of definitions was important for the readability of Members'
schedules.  Third, he said that focusing on individual professionals was not the only way of de-linkingmode 4 from mode 3;  he believed that the category of contractual service suppliers was a means ofS/CSS/M/9
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doing so potentially for all professions and not only for professionals.  Fourth, he echoed the United
States view on the scope of the GATS with respect to mode 4 and had found the clarification by of
India on their approach to the Annex useful.  As for a common code of conduct for economic needs
tests applying also to mode 3, he said that it was an interesting idea which merited further reflection
and that he would revert to it.  He then asked the United States to elaborate further on the reference in
paragraph 5 of their paper to "interested parties".  The representative of the United States explained
that the mention referred to United States procedures and the Federal Registrar, where any individual
or group with an interest at hand could provide comments.
113. The representative of Canada sought other Members' views on their organizational suggestion
that a specific session on mode 4 be organized to discuss the substance of the proposals.  She also
indicated that she would be responding to the questions raised by several delegations on their proposal
for duty-free access for "portable tools of the trade" in the course of the discussion of proposals on
professional services.  She would also revert to the remaining questions.
114. The Chairman concluded the discussion on this heading saying that it had been an interesting
and thorough debate which had elicited many questions to which Members would, in many instances,
revert.
(b) Horizontal issues
Communications from:  Canada (S/CSS /W/46, 47, 49);  Japan (S/CSS/W/42 and
Suppl.1);  the European Communities (S/CSS/W/32);  Members of the Andean
Community (Bolivia, Colombia, Ecuador,  Peru and Venezuela) (S/CSS/W/89)
115. The representative of Japan said that his delegation attached considerable importance to
horizontal issues.  He introduced the paper by his delegation and explained that their analysis of MFN
exemptions had excluded those exemptions listed for maritime transport services and those related to
the accounting rates in basic telecommunications.  Their analysis covered about 330 exemptions out
of a total of around 400.  Part II of the paper illustrated that 13% of the Membership, corresponding to
about 17 Members, had listed 51% of all exempti ons.  Part III showed that developed countries,
accounting for about 36% of the number of Memb ers, had registered 47% of exemptions, whereas
developing countries, which represented around 53% of Members, had listed 45% of all exemptions.
Part IV examined the sectoral distribution of the exemptions:  75 were cross-sectoral and related
mainly to modes 3 and 4;  with respect to the sector-specific ones, most related to audiovisual
services, financial services and road transport services.  Finally, part V called for the elimination of allexemptions by the end of 2004 or at the conclusion of the on-going negotiations, whichever was
earlier.  It also called on developed countries to eliminate by the end of 2001 all their exemptions that
only had a nominal significance and had never been applied in reality.  Furthermore, developed
countries should endeavour to eliminate as early as possible those MFN exemptions which had real
implications and which were in use, preferably by the end of 2002.  He indicated that this was the
main jest of their submission and invited Members to provide thorough comments.
116. The representative of Colombia, spoke on behalf of the members of the Andean Community,
namely Bolivia, Colombia, Ecuador, Peru and Venezuela.  His intervention is reflected in document
S/CSS/W/89.
117. The representative of New Zealand said that the papers presented under item D of the agenda
offered an overview of Members' objectives.  He noted that several proposals mentioned the
possibility of developing additional reference papers or annexes;  this had horizontal consequences,the implications of which on the structure of GATS needed to be carefully considered.  For example,
he mentioned the danger that plurilateral proliferation of reference papers and annexes could
compromise the multilateral nature of the GATS and possibly create confusion as to the scope ofS/CSS/M/9
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Members' commitments.  His delegation would be submitting a horizontal paper highlighting their
interests and objectives in the negotiations, to complement the negotiating guidelines and procedures,
which would reflect New Zealand's distinctive interests in the negotiations as a small, geographically
isolated country which had significant trading interests in a number of services sectors.
118. Commenting on the submission by the Andean Community, the representative of Australia
said that his delegation had always thought that work on classification was necessary, but felt that it
might be best carried out after the negotiating proposals had been examined.  His delegation was not
in favour of a overhaul of the W/120 classification, but did not object to carrying out some
restructuring of the W/120 classification.  He sought clarification on how setting the W/120 to the side
and working on something anew would fit with Members' existing commitments.
119. By way of preliminary comments, the representative of Uruguay said that only a few
proposals referred to the implementation of Article IV and to increasing the participation of
developing countries in services trade;  he guessed that the message was that it was up to developingcountries to submit proposals in order to effectively implement Article IV.  As for classification, he
noted that work was on-going in the Committee on Specific Commitments, but also that many of the
proposals under discussion in the Special Session touched upon classification issues;  it was important
to discuss how Members should be dealing with classification issues.  With respect to the barriers
identified, he indicated that many proposals mentioned barriers which referred both to market access,national treatment and regulatory issues;  he felt that there might be some lack of clarity in identifying
such barriers and in his delegation's view they were different in nature.  With respect to domestic
regulation, he noted the work on-going in the Working Party on Domestic Regulation as well as the
mention in many of the proposals to the work on domestic regulation;  again, he wondered how to
best proceed on such issues.  He invited Members' reactions to the issues that he had raised.
120. The representative of Norway noted that both the submission by Canada in document
S/CSS/W/46 and by the European Communities in document S/CSS/W/32 contained references to
environmental aspects.  This was a valid reference;  it was set out in the Preamble of the WTO
Agreement as one of the objectives of the WTO.  He recalled that the WTO,  in negotiations and in its
regular work, needed to take into account environmental as well as developmental concerns.  Hewelcomed the announcement that certain Members would be carrying out an environmental
assessment of services trade liberalization in thei r own country.  Norway was doing the same, for
example with respect to transport services, in order to improve their basis for undertaking decisions
and in order to integrate environmental concerns into the trading system.
121. The representative of Brazil offered some general comments.  First, with respect to many of
the proposals containing suggestions to develop regulatory disciplines and reference papers, he
recalled the mandate for the development of disciplines under Article VI:4 of the GATS, echoed the
concerns expressed by New Zealand, and expressed preoccupation about the proliferation of sectoral
disciplines and the implications this might have on the work in the Working Party on Domestic
Regulation.  His delegation's view was that the mandate of the Working Party to develop horizontal
disciplines was not limited to transparency and also included necessity, which was contained in
Article VI:4.  He also underscored that, for his delegation, disciplines on domestic regulation wouldonly apply to those sectors where Members had undertaken specific commitments.  Second, with
respect to classification, he had taken note of the proposal by the Andean Community.  He said that
classification was an issue which pervaded many proposals and called for caution in departing from
the W/120 classification.  He saw merit in revising the W/120, but only to the extent that it was
strictly necessary, so as not to affect the legal certainty of commitments.  For example, he said thatmany Members, including Brazil, had used the W/120 classification and the CPC to structure their
commitments, and he saw merit in considering the idea of having criteria for discussion on new
classifications or modifications of existing classification.  In that regard, the mutually exclusive nature
of the services considered was an important criterion, which was already reflected in the structure ofS/CSS/M/9
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the W/120.  As for disaggregation, he said that this was an issue which needed to be looked at with
great attention, as the correlation between the W/ 120 and the CPC functioned in a way similar to the
Harmonised System, whereby there was no need to commit to a 3-digit sector of the W/120 and
Members could go to the CPC and choose a more disa ggregated level, going down to the 6 digit level.
Third, as for the list of barriers, he echoed the comments made by Uruguay, and noted that some
proposals mixed market access, national treatment and domestic regulation barriers, and others whichdid not fall under the scope of the GATS.  As fo r the proposal by Canada on small and medium-sized
enterprises, he agreed with paragraph 3 on the importance of SMEs, particularly in developing
countries, as reflected in paragraph 3 of the negotiating guidelines.  He asked the delegation of
Canada how SMEs were defined in their internal regulation.
122. The representative of the Republic of Korea commented on the paper submitted by Japan in
document S/CSS/W/42.  He shared the statement in paragraph 12 that the central negotiating modality
was the request-offer method, but that other possibilities should not be foreclosed;  he mentionedmaritime transport services, where a model schedule was a useful negotiating modality.  As for the
second sentence of paragraph 15, he found the idea interesting;  he noted that it seemed to imply a
formula approach as the sectoral coverage of the commitments would be decided upon on the basis of
parameters such as the scale of the economy.  However, he noted that Members with similar levels of
GDP could exhibit different levels of development and different interests in different sectors;  he wascurious to see the study by Japan on the issue.  As for document S/CSS/W/42/Suppl.1, he shared the
view that MFN exemptions should be eliminated by the end of 2004 or at the latest by the conclusion
of the negotiations and that it was up to developed country Members to take the lead.
123. Responding to the question by the Republic of Korea on paragraph 15, the representative of
Japan said that their proposal was explained in paragraph 6 and that they would be submitting a paper
on some analytical research which had been carried out on the relationship between Members' level of
commitments and level of development;  however, he was not sure that this was a formula approach.
As for the submission by Canada in document S/CSS/W/47, he agreed with the importance of
transparency but wondered whether they had any specific idea in mind, and in particular whether they
were thinking about any specific Article and about how the Article in question should bestrengthened.  He had noted the reference to the work on-going in the Working Party on Domestic
Regulation, and stressed the importance of avoiding the duplication of work, but was interested to
hear about the principles which Members would like to discuss during the course of the negotiations.
As for the submission in document S/CSS/W/49, he concurred with the important role played by
small and medium-sized enterprises, but had difficulties in understanding why specific disciplineswould be needed for SMEs.  He added that mutual recognition agreements, transparency and
commercial presence requirements were not only relevant to SMEs but also to other types of
enterprises.  He would welcome greater clarification in this regard.
124. The representative of the United States said that he would revert to the proposal by the
Andean Community and to the submission by Japan in document S/CSS/W/42/Suppl.1, but with
regard to the latter he said that one element which had clearly emerged from the review of MFN
exemptions was that exemptions were taken for a variety of reasons, not all related to the GATS, andwondered whether the approach proposed by Japan wa s realistic.  As for the comment by Norway, he
indicated that his delegation would also be conducting an environmental review of the negotiations on
services and agriculture.  As for the submission by Japan in document S/CSS/W/42, he sought further
clarification on the reference in paragraph 14 to cross-cutting approaches to complement request-
offer, and asked for additional information on how they intended to pursue this approach.  With
regard to the submission by Norway in document S/CSS/W/59, which had also horizontal
implications, he wondered about the practical implications of the statement, in paragraph 6, that
Norway took as a point of departure that all Members respected the importance of cultural identity,
and that this was duly considered in the relevant areas of the negotiations;  he wondered in particular
how this would affect Norway's participation in the negotiations.  Turning to the submission byS/CSS/M/9
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Canada in document S/CSS/W/46, he supported the comment in paragraph 4 on public services,
privatization and de-regulation and the role of the GATS.  He then sought clarification on the
reference in paragraph 9 to cultural policy objectives, and in particular on which sectors, if any, would
not be part of the negotiations from Canada's perspective;  he also wondered when they expected the
"new international instrument" to be completed and in which forum it would be negotiated.  As for the
proposal in document S/CSS/W/47, he concurred that transparency and predictability were prioritiesfor the negotiations and agreed that smaller market participants could benefit disproportionately from
improvements in this area, since they typically had less resources to obtain information.  He saw some
merit in a best practices approach, but sought more specifics on how they intended to pursue it.  With
regard to the proposal in document S/CSS/W/49, he agr eed that clear and effective trade rules, both in
the WTO and domestically, would benefit domestic participants with less resources to obtain
information on government regulation  He sought additional clarification on the approach proposed
for small and medium-sized enterprises and on how the negotiations on mutual recognitionagreements would be facilitated;  in particular, he wondered what role the WTO would play as
opposed to individual Members.
125. The representative of Argentina echoed New Zealand's comment on the risk of proliferation
of initiatives that took the process out of the reach of smaller delegations.  He noted that several
proposals addressed issues already covered in the subsidiary bodies;  whilst delegations could submitproposals on any issue, he stressed the importance of respecting the structure of the GATS.  He had
noted that many proposals dealt with the work of  the Working Party on Domestic Regulation on the
establishment of disciplines under Article VI:4, to which his delegation attached great importance as it
applied to issues of a horizontal nature.  With respect to classification issues, he said that the W/120
was an evolutionary list, but that the structure of the GATS and the W/120 offered great flexibility.He noted that any lack of clarity was not due to th e fact that the instruments were unclear, but rather
to the fact that what was in the commitments was unclear.   As for the submission in document
S/CSS/W/89, he asked whether the proponents wanted their initiative to feed into the work of the
Committee on Specific Commitments or whether the issues were meant to be addressed on two
different tracks.  As for the submission by Japan in document S/CSS/W/42/Suppl.1, he said that thiswas a useful instrument but echoed the United States comment on why exemptions had been listed.
126. The representative of the European Communities commented first on the submission by
Canada dealing with small and medium-sized enterprises.  He welcomed the proposal, as it
encouraged consideration of issues related to SMEs, which in the European Communities accounted
for a large share of employment and had an important role in the domestic economy, particularly inspecific sectors;  he added that small and medium-sized enterprises possibly played an even more
important role in developing countries.  However, he said that SMEs' participation in services trade
was less pronounced, possibly because of their size, competitive advantage and also because of the
barriers they faced.  It was with respect to the la tter consideration that he particularly welcomed the
submission by Canada and called for attention to be given in the negotiations to the barriers faced by
SMEs.  As for the submission by Canada addressing transparency, he noted that it outlined the
principles on the basis of which domestic authorities regulated services sectors;  similar procedureswere in place in the European Communities to ensure  that regulations were transparent, proportionate
and did not create unnecessary barriers to trade.  He had found the suggestion to explore best practices
useful and noted a link with the work underway in the Working Party on Domestic Regulation.  He
had two questions for the delegation of Canada:  first, whether Canada considered it necessary to
work also on a necessity test in the Working Party on Domestic Regulation;  and, second, how theysaw their own experience as contributing to the work of the Working Party.  Turning to the
submission by the United States addressing the ac countancy disciplines, he again wondered how their
proposal related to the horizontal work in the Working Party on Domestic Regulation.  With regard to
the submission by Norway, he sought clarification on their statement that, although work on
disciplines for domestic regulation was to proceed horizontally, it might be complemented withdisciplines on a sectoral basis, wondering for which sectors they envisaged this might be necessary.S/CSS/M/9
Page 31
127. The representative of Thailand commented solely on the submission by Canada on small and
medium-sized enterprises on that occasion.  She soug ht two clarifications:  first, she wondered how
SMEs were defined in Canada;  and, second, she asked for further elaboration of the suggestion for
mutual recognition agreements.  She expressed her delegation's concern and alarm about the number
of suggestions for establishing reference papers in several sectors.  She noted that some proposals
called for the removal of market access and national treatment barriers, whereas others addressedregulatory concerns by proposing the establishment of multilateral regulatory disciplines;  she
indicated that her delegation was not in favour of the latter approach at that juncture and said that a
reference paper could be introduced only if strictly necessary and specific.  She recalled the Preamble
to the GATS, which recognized not only Members' right to regulate, but also, given asymmetries
existing with respect to the degree of development of services regulations in different countries, the
particular need of developing countries to exercise this right.
128. Answering to some of the questions raised, the representative of Norway said that the
reference to "cultural identity" in paragraph 6 of their submission reflected a general consideration,
which applied to sectors such as education services or audiovisual services, but which did not prevent
Norway's active participation in the negotiations  on those issues.  He added that Norway had
undertaken commitments in education services, on higher education, adult education and training
services.  However, he stressed that universities and colleges were amongst Norway's most importantcultural institutions, essential in the promotion of ethic and social values, cross-cultural
understanding, national language and history, which in turn contributed to other goals, such as social
distribution, gender equality and democracy.  They had a multi-function purpose, and that was what
was meant by their statement.  With respect to a udiovisual services, Norway was interested in the
sector.  It had listed MFN exemptions, like many other Members in Europe.  Apart from the existenceof interesting commercial activities, also for this sector there was a need to promote cultural identity
and to have measures aimed at the preservation of the national language.  As to the question on the
domestic regulation elements of their proposal, he said that his delegation saw some merit in looking
at sectoral reference papers in some sectors, those with a high degree of regulatory complexity, and
mentioned possible safety questions in energy services.
129. The representative of Singapore welcomed the submission by Canada on small and medium-
sized enterprises and expressed his delegation's interest in facilitating the participation of SMEs in
services trade, which was of particular importance to developing countries.  He concurred that SMEs
faced particular barriers and that they could benefit from the removal of barriers with respect to
mutual recognition agreements and commercial presence.  He had taken note of the comment byJapan that such barriers did not solely concern small and medium-sized enterprises, but stressed that
they had a particular impact on SMEs.  He asked the delegation of Canada how they intended to take
their proposal forward.  As for electronic commerce being the preferred choice of services delivery
for small and medium-sized enterprises, he note d that electronic commerce and the Internet also
helped with other aspects of trade in services for SMEs, and was interested in working with other
Members on how foster greater development and growth of e-commerce.
130. The representative of Cuba said that the number of proposals submitted represented a
challenge for her delegation;  she called on the Secretariat to favour swift translation of those
proposals.  She referred to paragraphs 20 and 21 in the submission by Japan in document S/CSS/W/42
and to paragraph 18(f) in the submission by Canada in document S/CSS/W/46 and expressed concern
with regard to the references to special and differe ntial treatment for developing countries;  she said
that, while least-developed countries merited priority in special and differential treatment, alldeveloping countries should benefit from this.  She sought further clarification on those references.
131. The representative of India noted that none of the horizontal proposals touched upon securing
appropriate flexibility for developing countries, but said that all suggestions had to be seen in the
context of Article XIX of the GATS, which guaranteed such flexibility.  He echoed all the positiveS/CSS/M/9
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suggestions that had been made about small and medium-sized enterprises.  With regard to sustainable
development, he recalled that the Preamble of the GATS recognized Members' right to pursue their
national policy objectives, and said that sustainable development could be a Member's objective.  The
GATS did not stand in the way of pursuing this objective, with its general exceptions in Article XIV
and the flexibility implicit in its structure.  Alon g the same lines, he had no objections to Members'
conducting their own environmental assessment of the negotiations.  However, he would be seriouslyworried if some Members sought to introduce such an assessment as a way of evaluating, other
Members' commitments in relation to sustainable development.  He stressed that Members'
prerogative of setting their own national policy objectives should in no way be impinged on.
132. The representative of Venezuela said that clas sification issues had emerged both in horizontal
and sectoral proposals.  The Committee on Specific Commitments had been working on the issue with
little success, with the exception of preparing the negotiating ground for some services sectors.  She
noted that during the previous week's meeting of the Committee, several Members had expressed theirinterest in having the Special Session provide guidance to the work of the Committee with respect to
classification.  She sought other Members' opinion on which forum they considered to be the most
appropriate one for continuing discussion on classification issues.
133. The representative of Pakistan echoed the conc ern expressed by New Zealand and Brazil with
respect to the proliferation of reference papers.  It was not clear that all problems could be addressed
through such an instrument and he therefore sought additional clarification in this regard from the
proponents.
134. The representative of Canada noted that thei r submissions on horizontal issues addressed
three quite different themes.  The first, in document S/CSS/W/46, outlined Canada's principles and
objectives in the negotiations;  some principles were in certain cases stated explicitly in their sectoral
papers, but not in all cases.  As an example, she mentioned their interest in the situation of developing
countries as an important objective which would be guiding her delegation's participation in the
negotiations in the specific and in general.  Another issue was the search for the commonality of
interest, and their initial proposals on transparency and on small and medium-sized enterprises went
specifically along those lines.  As concerned the questions raised about document S/CSS/W/46, sheexplained that the environmental analysis of the negotiations was a domestic process which had been
mentioned only in the interests of transparency.  As for the issue of cultural policy, she explained that
their proposal was an expression of Canada's long-standing policy to seek maximum flexibility to
pursue Canada's cultural policy objectives.  It communicated their interested in eventually developing
an international instrument to deal with cultural diversity, as a new approach to managing, amongother things, the interface between cultural policy and trade policy.  The statement communicated, in
the interest of transparency, her delegation's intention of taking full advantage of the GATS
flexibility.  Canada would not be taking any commitments which restricted its ability to pursue its
cultural policy objectives, but did not any deny the opportunity of any other Members to submit
proposals on this area.  With respect to the question posed by the United States on which sectors they
had in mind, she echoed comments by Norway in that regard.  In those areas of cultural policy where
there was potentially an interest or an impact, her delegation would be evaluating any new rules ormarket access requests to determine the potential limits it might have on their flexibility to pursue
their cultural policy objectives.  As for the question on the new international instrument, she explained
that her delegation was pursuing that idea in a variety of fora;  it was very premature to speculate on
the timing or on where such an instrument would be housed.  Her delegation had seen a international
resonance with the discussion on cultural diversity, especially in the International Network of Cultural
Policy, which was an informal network of cultural Ministers that met on an annual basis to explore
new ways of preserving cultural diversity in all areas.  As for Cuba's question on the SMEs elements
of the paper, she echoed some of the comments made, as by the delegation of Uruguay, in
encouraging developing countries to express where their interests lay.  For example, the submission
by India was useful in identifying issues of mutual interest and her delegation would be looking forS/CSS/M/9
Page 33
ways to solicit greater expression of those interests and for a mutually interesting way to proceed on
them.
135. As concerned the questions raised on their submission in document S/CSS/W/47, she
indicated that at that stage it would be useful to use a best practices approach.  Having submitted their
proposal in the Special Session allowed to reach a maximum number of delegations and to have a
substantial discussion;  eventually, the work would probably be carried out by the Working Party onDomestic Regulation, as that was where the work on transparency was taking place, but she
encouraged delegations to provide comments and said that her delegation was open to those
comments.  With respect to work on the necessity test, she said that, as outlined in document
S/CSS/W/46, her delegation would be contributing to it as with the rest of the work of the Working
Party on Domestic Regulation.
136. Turning to their submission on small and medium-sized enterprises in document
S/CSS/W/49, she said that her delegation hoped to submit a paper to further explore services tradeissues for small and medium-sized enterprises, including the question of their definition.  Her
delegation wished to encourage further discussions and was looking at these as questions for sectoral
application;  they were not suggesting the establishment of a reference paper.  As concerned the
questions raised on mutual recognition agreements, she just emphasised that the lack of such
recognition had a disproportionate effect on SMEs, given their size.
137. The representative of Colombia said that she would revert to the questions raised about the
submission in document S/CSS/W/89.  She explained that the intention behind the paper was to raise
awareness about the need for criteria for classification to be able to guide the discussion of the
sectoral proposals, which all contained classificati on issues.  The submission provided examples of
criteria, and there could be additional ones.  She explained that the idea was that the work in theCommittee on Specific Commitments and the one which was evolving in the Special Session would
be illuminated by common criteria.  Turning to the question by Australia about how the coherence
with previous commitments would be assured if the W/120 classification were to be changed, she
indicated that her delegation had confronted the same issue, which needed to be taken into account.
That was why they were proposing a homogeneous, universally known list, based on the CPC as wellas on other references, such as the ILO classification, which would work as a reference list on the
basis of which Members would undertake commitments;  it was also why they were proposing that
classification criteria be adopted before the sectoral discussions.  Turning to the other submissions,
she welcomed the proposal by Canada on small and medium-sized enterprises, but, like other
Members, was concerned about how SMEs woul d be defined.  She stressed the importance of
defining clear criteria and of deciding how to deal with issues related to SMEs.  As for the submission
by Japan on MFN exemptions, she said that her delegation would further reflect on the issue.
138. The representative of Hong Kong, China expressed support for the submission by Canada
dealing with small and medium-sized enterprises.   As for their answer to the question posed on
paragraph 9 of the submission in document S/CSS/W/46, she was still puzzled by the scope of the
intended exclusion, and noted that some of the sectoral proposals tabled by Canada did cover sectors
which might be relevant to culture, such as distribution, telecommunications, computer-relatedservices, and welcomed further clarification in this regard.
139. Concluding the discussion on this heading, the Ch airman said that horizontal issues were very
diverse and appeared to cover anything which was not of a sectoral nature;  some were part of the on-
going work, others related to MFN exemptions, ot hers concerned technical work, and so on.  He
advised against trying to distillate what was horizontal and cautioned against making all aspectshorizontal issues.  He suggested that, when those issues were next taken up for discussion, Members
try to categorise the issues while bearing in mind the developments in other bodies.S/CSS/M/9
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(c) Business services
Communications from:  the United Stat es (S/CSS/W/20, 28, 30);  the European
Communities (S/CSS/W/33, 34);  Japan (S/C SS/W/42);  Canada (S/CSS/W/52, 55, 56);
Norway (S/CSS/W/59);  Austra lia (S/CSS/W/62, 63, 65, 67);  Switzerland (S/CSS/W/75);
Chile (S/CSS/W/88)
Business services
(except for accountancy, legal services, and computer and related services)
140. The representative of Switzerland introduced his delegation’s proposal on professional
services, stating that this sector was particularly important for Switzerland, and featured a high
density of SMEs.  While there were many existing business services commitments, there were also
remaining restrictions, often linked to local characteristics.  Obstacles included nationality, residency,
investment and mode 4 restrictions.  Such restrictions should either be eliminated or replaced withless discriminatory measures.  The work of the Working Party on Domestic Regulation (WPDR)
showed the importance of domestic regulatory barriers in this sector.
141. The representative of Chile introduced their proposal, noting that the professional services
sector had some of the highest levels of regulation.  Protectionist practices included nationality,
residency, and licensing requirements.  Chile was concerned about the low level of recognitionarrangements (MRAs) under Article VII:2, and the lack of information on the number of MRA
applications and requests.  The WPDR work was important, the representative noted, as were the
Article VII issues.
142. The delegation of Australia noted they had submitted four separate professional services
proposals.  These highlighted the various barriers that were faced, including nationality and
citizenship requirements, restrictions on the form of establishment.  Members needed to revisit the
accountancy disciplines, facilitate temporary entry procedures amongst others.  On MRAs, the
delegation stated that profession-by-profession work on qualification and equivalence requirements
was more likely to be effective.
143. The representative of Canada, responding to questions on their proposals from the previous
Special Session, stated that Canada regarded MRAs as an important tool for gaining market access,
and that they were currently negotiating MRAs with both developed and developing countries.
Canada had consulted with a wide variety of professions in preparing its proposal, but not all were
interested in the current negotiations.  Canada supported consideration of VI:4 work at the sectoral
level, e.g. in financial services.  On tools of the trade, Canada had attempted to introduce this issue inthe Uruguay Round, e.g. not imposing duties on portable equipment required for supplying
professional services.  Members needed to reflect on the appropriate mechanism and location for such
an agreement, the representative stated.
144. The delegation of the United States expressed general support for the European Communities
proposal on professional services, and asked for further elaboration on the category of “related
scientific and technical consulting services”.  Regarding Japan’s proposal, the delegation also
expressed general support with respect to professional services, and asked if Japan would considernegotiating on professions other than those listed.  On Australia’s proposals, the United States
believed application the concept of “least trade restrictive regulation” raised practical problems when
several similar options were involved.  Regarding para 31 of Japan’s proposal, the delegation asked
for information on procurement objectives.  On Norway’s proposal, para 19, the delegation asked for
additional information on whether international standards existed for business services other thanprofessional services.S/CSS/M/9
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145. The representative of Brazil, regarding Japan’s proposal, asked what was meant in respect to
barriers to local acquisition.
146. The representative of the European Communities said that their proposals on business and
professional services shared many of the views expressed in other proposals, including emphasis on
the importance of business services.  The aim was to reduce unnecessary trade barriers without
affecting the quality of the service.  The heavily regulated nature of professional services meant thatthe WPDR work was especially important.  Regarding the European Communities business services
proposal, he noted that this sector was more liberal than professional services, but that restrictions
were nonetheless still applied.  The European Communities proposal specified the types of measures
they wished to see abolished.  Regarding the question on related scientific and technical consulting
services, he said that a reply would be forthcoming, but noted the importance the European
Communities attached to this service.  On Japan’s proposal, the representative asked if they would be
submitting proposals on more sectors, and whether the issue of reciprocity of qualifications might bebetter discussed under Article VII on recognition. On Norway’s proposal, he asked what were the
specific barriers that should be removed in professional services.
147. The representative of Japan said that the listing in their proposal was only illustrative, and the
scope for negotiations was not fixed.  Concerning the reciprocity of qualifications, he stated that their
submission included issues applicable to a numbe r of GATS Articles.  The question on procurement
would be answered in a paper to be distributed to Members.
148. The representative of Australia welcomed the other proposals on business services, and said
that trade liberalization in this sector offered an opportunity for Members to increased the range of
these services available in their economies.  He concurred with the European Communities statement
that nationality requirements were an inappropriate tool to ensure competence, and that residencyrequirements, where possible, should be replaced by less restrictive measures.
Accountancy services
149. The representative of Canada asked why the United States proposal wished to delete
references in the accountancy disciplines to measures not subject to scheduling under Articles XVI
and XVII.  On Australia’s proposal, he asked for an explanation of how Australia envisaged that thedisciplines could be extended to scheduled measures.
150. The delegation of the United States said the objective of their proposal was to make it easier
for firms to provide services, especially through the removal of citizenship and residency
requirements, eliminating restrictions on establishment, and endorsing the accountancy disciplines.
Regarding the European Communities question on reconciling the sectoral approach of the
accountancy disciplines with the creation of horizontal disciplines, the delegation observed that, after
the accountancy disciplines were completed, most Members had wished to work on a horizontal basis,
as the sector-by-sector approach was considered too time-consuming.  The result was the Decision on
Domestic Regulation  (S/L/70, dated 28 April 1999), creation of the WPDR, and the current two-track
approach of creating general disciplines and disciplines for professional services.  It was observed that
the accountancy disciplines would not be put into effect until the end of the current round of services
negotiations.  The delegation noted that attempts were made in the previous Working Party onProfessional Services to address market access an d national treatment measures, but these were found
to be beyond its mandate.  The United States now wanted to strengthen the disciplines, e.g. para 6,
and that, on further examination, the accountancy disciplines now looked quite good.  Regarding
Canada’s question on deleting references to measures not subject to scheduling under Articles XVI
and XVII, the reason was simply that the United States wanted to stress that it was looking for broadnegotiations, including on scheduled measures, and wanted to encourage countries to makeS/CSS/M/9
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commitments.  The United States would have no objection to restoring the deleted references if
market access and national treatment measures were addressed in the current negotiations.
151. The representative of Brazil said, regarding the United States proposal, that his delegation
was still unclear about why the United States deleted references to mesures not subject to scheduling
under Articles XVI and XVII.  Brazil understood that the Article VI:4 negotiations were intended to
address non-discriminatory measures not subject to scheduling regarding licensing, qualifications andtechnical standards.  The representative asked whether the United States believed the necessity test
should now be applied to scheduled measures.  He agreed with the United States that the accountancy
disciplines looked good.  On Australia’s accountancy proposal, he asked what was meant by the
intended extension of the accountancy disciplines to scheduled measures.
152. The representative of the European Communities said they supported the accountancy
disciplines, and asked for the United States view on their link to the current work of the WPDR and
the extension to other professional services.
153. The representative of Argentina, regarding the United States proposal, asked for additional
information on the inclusion of restrictions on electronic transmissions in the listing of identifiable
obstacles.  He also asked why the United States had replaced the term “measures” with the term
“regulations”.
154. The representative of Uruguay, on the United St ates proposal, said he had the same questions
as Brazil, Canada and the EC.  He concurred with the United States that the accountancy disciplines
were an agreed text, and observed that the disciplines were the result of a delicately negotiated
balance between Members.  He stated that the proposed United States modifications had already been
discussed and rejected by the WPPS.
155. The representative of India said he agreed with the concerns of Brazil, Canada and the
European Communities regarding the United States proposal.  The representative of Australia said
Australia’s view was that the necessity test could apply to GATS Articles XVI and XVII, and that
further work on the accountancy disciplines could strengthen them.  Australia’s version of the
necessity test was carefully balanced, and Members could therefore justify reasonable regulation.
Regarding the United States question on least trade restrictive measures, Australia would like to seethis concept, together with Australia’s version of the necessity test, applied to WTO disputes.  While
acknowledging that it was a difficult issue requirin g further discussion, Australia’s view was that VI:4
disciplines could apply to Article XVI and XVII measures. The representative supported the United
States proposal for strengthening the accountancy disciplines.
156. The delegation of the Philippines said they also had concerns about the United States
proposal, especially the implied extension of the accountancy disciplines to scheduled measures.
Such measures would no longer be subject to negotiations with trading partners, but would instead be
subject to the accountancy disciplines.  Ownership, residency and nationality requirements, under
paragraph 5 of the United States version, would need to be justified under a legitimate objective.
Deletion of the term “measures” in para 6 appeared to be unnecessary, while removal of the best
endeavours clause in the same paragraph would cause undue administrative burden, especially for
developing countries.  The change to para 11 was also not supported by the delegation.
157. The representative of Malaysia agreed with th e Philippines and other delegations with respect
to the United States proposal.  While the United States view was to strengthen the disciplines, he said,
others might wish to weaken them.  The United States proposal made applicability of the accountancy
disciplines to other sectors more difficult, he stated.S/CSS/M/9
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158. The delegation of the United States replied that the reason for the deletion of the reference to
measures not subject to scheduling under Articles XVI and XVII was to draw attention to the United
States desire to include scheduled measures in the current negotiations on accountancy.  The United
States did not intend to expand the necessity test to other GATS Articles, he stated.
Legal services
159. The representative of the United States stated that his delegation's proposal on legal services
in document S/CSS/W/28 was designed to facilitate for lawyers and law firms to provide services to
clients involved in transnational business.  The proposal was seeking commitments in market access,
national treatment and addressed barriers such as citizenship or residence requirements and other
restrictions on establishment.  Further, recognition of foreign legal consultants was a good means of
addressing licensing issues.  Such consultants could be allowed to practice the law which they were
permitted to practice in their home countries, including third-country and international law, but nothost-country law.  Recognition could be accomplished through a reference paper by WTO Members.
As concerned classification issues, his delegations had mentioned in the Committee on Specific
Commitments that foreign legal consultants could be involved in business transactions including
governance of business organizations, mediation,  arbitration, non-judicial resolution services, public
advocacy and lobbying. This would not preclude non-lawyers from performing the same functions.
160. The representative of Thailand sought clarification on the proposal on legal services by
Australia. Australia had identified in paragraph 6 of its proposal a set of guiding principles that it
thought to be relevant to achieving liberalization of trade in legal services.  He wondered whether
Australia wanted to establish those principles on a multilaterally agreed basis or whether it sought to
incorporate them in their bilateral negotiations.  On paragraph 5 of the proposal by the United Statesconcerning classification, she wondered whether the United States wanted Members to include the
mentioned services under legal services, or alternatively, whether it sought the understanding of
Members that these services were already covered.
161. The representative of the European Communities requested clarification on the value-added
the United States perceived in the establishment of a reference paper on legal services in light of the
ongoing work of the Working Party on Domestic Regulation on professional services. He also
requested the delegation of Australia to elaborate on the concept of "limited licensing."
162. The representative of the Republic of Korea stated that the Australian concept of limited
licensing was reminiscent of the "limited" versus "full" licensing approach that appeared in the
International Bar Association Resolution on General Principles for Establishment and Regulation ofForeign Lawyers of June 1998.  The most feasible solution that could embody the concept of limited
licensing appeared to introduce the foreign legal consultancy category into the legal services
classification entry.
163. The representative of Australia, on the questions raised on the concept of limited licensing,
stated that in Australia, the International Legal Services Advisory Committee had been looking inter
alia at market access questions.  Internationally, the idea of limited licenses was  one way to address
the problem of legal practice in foreign jurisdiction.  Significant barriers still existed on three levels,first nationality requirements;  second, qualification requirements;  and third often concerned
registration.  The latter problem related to the re quirement to practice the domestic law of the country
concerned.  As most trade in legal services was not related to the practice of host country law, limited
licenses would allow lawyers to establish in other jurisdictions without being forced to enter into
joint-ventures to form the necessary local legal framework.  Regarding the question raised byThailand, he stated that the identified guiding principles were part of the sectoral proposal, but it was
conceivable that at some future juncture a sectoral or sub-sectoral annex on legal services could beS/CSS/M/9
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established; in such a case, the guiding principles would be important elements of such an annex.  He
requested the United States to further elaborate on the idea of a reference paper.
164. The representative of the Philippines stated that his delegation had serious reservations to the
idea that the services mentioned in paragraph 5 of the proposal of the United States should be
understood to be covered by "legal services" in the WTO services classification list in document
MTN.GNS/W/120.  In addition, as there were citizenship requirements for lawyers in the Philippines,he had reservations on paragraph 6 of the United States proposal.
Computer and related services
165. The representative of India said that his delegation was very interested in this area because
computer and related services figured in the business services sector.  He echoed the comments of
Australia that there were aspects of mode 4 whic h would be of enormous importance to India.  He
further noted that Article VI was aimed at ensuring that measures relating to qualification
requirements did not constitute unnecessary barriers to trade, which was important for that particularsector.  Article VII was the flip side of the same issue:  on the one hand it was essential to ensure that
qualification requirements did not act as unnecessary barriers to trade, while on the other hand
recognition of qualifications had to be facilitated.
166. The representative of Uruguay said that the computer and related services sector was a sector
of interest to his delegation.  Regarding Canada's proposal, he supported the statement in the first
sentence of paragraph 10 encouraging all Members to make new commitments on computer and
related services.  He sought clarification on the third sentence of paragraph 10, proposing further
examination of how trade rules reflected the current nature of business activity in the sector, and in
particular what trade rules Canada was alluding to.
167. The representative of India also welcomed th e Canadian proposal, with the proviso that mode
4 was extremely important in this area and wished to see that proposal in that light.
168. The representative of Canada responded to the question raised by Uruguay about the last
point of its proposal indicating that, in light of the development of the Internet and electronic modes
of delivery of computer and related services, WT O Members should clarify how the classification
system applied in this sector.
Concluding remarks on business services
169. The Chairman concluded by stating that he hoped written replies to the remaining questions
could be circulated before the next meeting. Me mbers needed to consider how discussions could be
organized in the future, in order to accommodate the large number of proposals and their varied
sectoral coverage.  Many of the negotiating proposals included regulatory issues now addressed in theWorking Party on Domestic Regulation, he noted, and therefore Members needed to reflect on where
this work should be pursued.S/CSS/M/9
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(d) Communication services
Communications from:  Australia (S/CSS/W/ 17);  the United States (S/CSS/W/21, 26,
30);  the European Communities (S/CSS/ W/35, 61);  Japan (S/CSS/W/42);  Canada
(S/CSS/W/53);  Norway (S/CSS/W/59);  Swit zerland (S/CSS/W/72, 73, 74);  the Republic
of Korea (S/CSS/W/83);  Chile (S/CSS/W/88)
Postal and courier services
170. The representative of the United States said that the world market for express delivery was a
multibillion-dollar market and played an important role in supply changes.  More than 100,000
packages per day were delivered employing 100,000 people around the world.  Given the industry's
dimension, it merited its own classification.  The United States proposal suggested including the
following six categories under communication services: postal, courier, express delivery,telecommunications, audio-visual and other.  The proposed definition for express delivery services
had three elements inspired by the characteristics of the services: time sensitively, utilisation of
advanced technology, and controlling process from end-to-end.  While recognising that this was not a
perfect definition, the United States remained open to suggestions on how to treat this industry and
how to work on the definition.  The representative said that the advantage of this definition was that itcovered all express delivery services regardless of the entity that performed them, including postal
administrations.  The proposal did not apply to services reserved to postal monopolies.  In addition,
the definition was not intended to cover services to which the Annex on Air Transport services
applied, services provided in the area of government authority as in GATS Article I:3 or maritime
transport services.  The proposal was intended to stimulate discussion.  The adoption of a definitionwould be accompanied by negotiation on commitments for market access and national treatment and
of disciplines to address sector specific regulatory issues, transparency and fairness of administration.
Consistent with relevant provisions of the GATS, governments would retain rights to regulate for
domestic policy objectives.
171. Regarding the European Communities proposal, the United States representative said it would
like to know what UPU provisions the European Communities wanted to see transcribed into
schedules of commitments, as suggested in paragraph 5.  Moreover, given the volume of the UPU
conventions, he wondered how broad the European Communities proposal intended to be.  He also
enquired whether the European Communities were seeking a narrow inclusion or whether their
proposal included more than terminal dues.  Regarding the proposal of Hong Kong, China, he notedwith interest the idea of combining express deliver y with transport services while treating them as
business services and transportation services in terms of services classifications.  He asked Hong
Kong, China if it sought to establish a separate classification for logistics and related services or
wished to see these dealt with as elements of existing classifications.
172. Regarding the United States proposal, the representative of Japan said he saw difficulty with
separating out express services because it was logically in the UN CPC classification for courier
services.  The current definition included express services, while the United States proposal wouldseparate express services and require re-classification.  The representative did not see the necessity of
separating express delivery services, since the obstacles the United States had listed in its proposal
applied to other services as well.  This made it difficult to understand why express services needed be
separate from courier services.  With respect to the European Communities proposal, Japan had no
problem with continued discussion on the UN CPC and the classification of postal courier services.Nevertheless, he noted that in many countries postal services were provided by public entities and
thus whether these provided express delivery depended on each system for each service in the
country.  This social reality could not be ignored but would have to be taken into consideration when
discussing classification.  Regarding the European Communities proposal concerning burdensomeS/CSS/M/9
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bureaucratic practices and hold services, he asked the European Communities to provide concrete
details on the types of problems concerned.
173. The representative of Mexico said that in regard to classification, the various proposals
demonstrated that there could be different viewpoints regarding the same activity.  The proposals,
while all referring to a similar scope of activities, contained definitions, which varied substantially.
He noted that the United States proposal included  aspects regarding denial of radio frequencies for
express delivery and suggested that this was an aspect which was not confined to the ambit of postal
or courier services.  He sought clarification on the European Communities proposal as to what was
meant by the objective to achieve access to market s and MFN in a way compatible with maintaining
universal service and also requested a more complete explanation of what the European Communities
meant by universal service.  He also asked the European Communities what it would intend as the
scope of its proposed reference document on courier and postal services.
174. The representative of the European Communities noted that with respect to postal services the
European Communities position was similar to that of Switzerland.  Both envisioned full market
access and national treatment commitments as compatible with universal service obligations.  His
delegation's proposal on postal, and more specifically on classification, sought to adapt the current
W/120 classification to the realities of the market.  He realised that, although the W/120 had been
drafted on the assumption that postal services were provided by national postal services and courierservices by private companies, the current reality was more complex and these traditional borderlines
were no longer clear.  The proposal had recognised universal service so as to indicate to those
Members with monopolies that they not need disband them;  the liberalisation would be sought on
non-reserved sectors.  The European Communities had suggested a reference paper that would clarify
what was meant by universal service and non-reserved/ reserved sectors.  Regarding the United Statesproposal, he noted that while United States was interested in pushing express delivery services, it
wished to exclude to all services to which the Annex to Air Transport applied.  The European
Communities emphasised that express delivery depended on physical delivery capabilities, which
naturally included air transport services.  With reference to the classification proposed by United
States, he asked why it did not address the classification of postal services as such, but ratherproposed a definition of only express delivery services.  In his delegation's view, the two were inter-
linked.
175. In response to a question from the United States delegate, the representative of Hong Kong,
China noted that, at that stage, logistics was not a sector under the W/120 but that many of its
components were already listed in the W/120.  He said that Hong Kong, China's overall intention was
to propose the development of a cluster of services under a logistics category as the best way to
proceed, since express delivery played an important role in logistics and inventory matters.  Since
maritime transport services were a core element in ensuring smooth delivery of services, Hong Kong,
China believed that logistics, related services and maritime services should be grouped together in this
category.
176. Commenting on the United States proposal, the representative of the Philippines said that it
was novel and worthy of serious consideration.  He welcomed the openness and flexibility of the
approach, particularly with respect to the definition of express delivery services.  He requested
clarification on the definition and scope of "customs facilitation" with a view to building a common
understanding.  Commenting on the proposals by the European Communities and Switzerland, he
noted that they revolved around more familiar notions.  Both proposals alluded to the obsolescence of
the current distinctions between postal services and courier services.  He wondered the extent towhich the European Communities reference to barriers experienced by express delivery services
might be reflected in the list of barriers cited in the United States proposal.  He noted that that the
proposal of the United States and European Communities regarding classification might be
reintegrated into work of the subsidiary bodie s.  Noting the European Communities suggestion toS/CSS/M/9
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transmit current UPU rules as far as necessary into the GATS schedules, he requested the European
Communities to clarify the scope of what it wanted to be transmitted.  Regarding Switzerland's
suggestion to bring air transport services into th e GATS framework in view of their importance to
postal services, he said that this issue should be addressed through the air transport review.
177. The representative of India said that he shared Japan's scepticism regarding the need to create
a separate sector for express delivery services.  Regarding the United States suggestion that express
delivery services did not include services supplied in the exercise of governmental authority as
defined by GATS Article I:3, he observed that GATS does not apply anyway to services supplied in
the exercise of governmental authority.  However, he questioned how clear the application of this
Article could be given that it applied to services provided neither on a commercial basis nor in
competition with one or more suppliers.  He said that it might be helpful if countries would express
their interest or opposition on this point with a view to helping to structure the July and October
meetings.
178. The representative of Switzerland responded to comments regarding his delegation's
suggestion to bring air transport services more comprehensively into the GATS framework.  He
clarified that Switzerland's objective was simply to stress that there was an important link between
postal and air transport services, and that this link needed to be taken into account during next session
of the review of the Annex on Air Transport.
179. The representative of the United States commented on scope and coverage of express delivery
services.  Couriers, if thought of as messengers, were individuals who carried packages on bicycles or
on airplanes.  Those were old-fashioned couriers.  The United States, rather, was thinking of courier
services as high-tech suppliers.  This difference should help distinguish between what was at present
classified as courier services and what was being proposed as express delivery services.  The UnitedStates proposal did not cover postal services, whereas the European Communities proposal did cover
them.  However, the United States proposal would cover them to the extent that postal administrations
offered express delivery services.  Express delivery was where competition existed.  The European
Communities postal service proposal covered far more than express delivery;  it included hybrid mail
and all other services that the postal administrations were engaged in.
Telecommunication services
180. The representative of Chile called for the liberalization of telecom based on non-
discrimination and  guarantees for improved access to markets.  He noted that there was no
discrimination on access to telecom in Chile, but only certain formal requirements for public servicetelecommunications.  He suggested that it might be useful to define more precisely what was
understood by value-added services and basic telecom services and mentioned examples from the
proposal by the European Communities in this regard.  He noted that Chile’s legislation did not
distinguish between value-added and basic services.  He suggested that it would help improve
development of this sector if governments adopte d a voluntary rather than regulatory approach.
Regarding the proposal by the United States to fully privatise operations and telecom networks, he
suggested that this decision should be made according to the legal context of each Member, andshould not be made a priority for negotiation.
181. The representative of the Republic of Korea said that his delegation had submitted a proposal
outlining the  rapid growth in telecom and key infrastructures as a means of sharing its experience of
liberalization with other Members.  Having fully implemented and now fully opened the sector, he
noted that the result had been growth in the tele com market and, in particular, increased competition
in high speed data services.  He said that the Republic of Korea hoped to see greater commitments
from other Members as a result of the negotiations.  In a manner consistent with national policy andS/CSS/M/9
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economic development objectives, he urged Members to expand trade in telecommunications through
higher levels of liberalization.
182. The representative of Thailand asked Australia to elaborate on how it would wish to seek
clarification of pro-competitive principles in the Reference Paper.  She noted that Thailand was in
agreement with Australia on APEC principles on interconnection and that Thailand was in compliance
with the APEC interconnection and Internet chargi ng arrangement.  However, her delegation would
not want to see the accounting rate system covered in the WTO at that stage.  Rather, she said, the
matter should be dealt with in the ITU and settled there before the WTO considered it.  She expressed
reservations on Australia’s proposals regarding technical neutrality and classification of delivery
services, adding that her delegation was reflecting further on this.  She also noted that services
negotiators might want to await the results of related discussions on-going in other fora before
reviewing the implication of these issues.
183. The representative of Brazil offered preliminary comments and questions on the proposals by
the European Communities and the United States.  He noted that in paragraph 9 of their proposal, the
European Communities had mentioned that Members should reduce restrictions to the minimum
necessary to ensure the quality of the service, incl uding universal service, and to address issues of
scarce resources.  He sought clarification as to what was intended by the reference to universal service
in the context of reducing restrictions and scarce resources.  Regarding the United States proposal, hesuggested that it appeared to be more an e-commerce proposal than a telecom market access proposal.
With respect to the United States observation in paragraph 4 about converging trends in telecom
markets and its idea in paragraph 13 concerning an absence of regulation for value-added services, he
asked if the United States considered any distinction between basic and value-added services as still
relevant given the convergence taking place in, for example, Internet protocol telephony.Paragraph 13 of the United States document stated that value-added services did not require
regulation except in the case of major suppliers of telecom expanding into value-added sectors.  Given
this situation, he wondered if the United States felt  that the distinction between basic and value-added
remained relevant.  Regarding the United States proposal with respect to full privatisation of telecom
operators, he shared the views expressed by Chile that  full privatisation should not be an objective of
the GATS and sought further clarification.
184. The representative of the United States said that the United States believed that the WTO
could play a role in a globally networked economy, wherein WTO rules would encourage an
environment conducive to use of telecom networks.  To achieve this goal, it would be desirable to
conduct sector-specific negotiations and also empl oy a framework that w ould elicit commitments in
the basic and value-added services and the complimenta ry services that would be integrated into any
network transaction. He said that the sectors involved included distribution services, express delivery
services, computer services, advertising services and some financial services.  In reference to the
proposal by Australia, his delegation supported adoption of the Reference Paper, but would not
support opening it for further clarification.  Regarding international Internet charging, he noted that
there was no evidence of a dominant player or that non-competitive behaviour was occurring.  He
noted further that the APEC telecom working group, the ITU, CITA and OECD were all are
examining aspects of the issue, but that no common understanding or consensus had yet emerged.  As
a result, he suggested that it was not clear whether Internet charging should be considered a trade
issue at all or was ripe for consideration in the WTO.
185. The representative of New Zealand said that his delegation had little difficulty with any of the
telecom proposals tabled. In particular, it supported those elements of proposals that favoured the
enhancement of market access and national treatment commitments.
186. Commenting on the United States proposal, the representative of Argentina sought
clarification on a number of issues.  For instance, he wondered whether the United States submissionS/CSS/M/9
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sought to define the scope of further negotiations or represented a descriptive outline of the new
reality in the sector.  Read as a proposal, the document seemed to be oriented mostly towards e-
commerce.  He asked about the hierarchy of the proposals on complementary services in relation to
other proposals for these service sectors.  He noted that the objective for market access for
complementary services appeared linked to the integr ation of these services into the Internet, although
the extent of this was not completely clear.
187. The representative of Australia said that, since telecommunication services provided a
backbone for international commerce, the liberaliza tion of the sector would enhance competitiveness
of business inputs.  Access to competitively priced telecom services was also important for e-
commerce.  The barriers identified were consistent  with the experience of Australian companies.  He
agreed that all Members should adopt the Reference Paper.  Regarding the United States proposal,
particularly paragraphs 12 to 14, he suggested that the term "Internet based services" was unclear and
potentially ambiguous and asked the United States to define the term and what it comprised. Aconsensus on a definition was necessary early in the negotiations in order to know what was to be
negotiated later on.  Regarding the distinction between delivery and Internet content, he noted that
content, which could include educational material , or financial services, was covered under GATS
sectoral classifications dealing with those subjects.  Members could make commitments in a
technically neutral fashion for these sectors.  Internet delivery was properly classified as a packetswitched data service and should be considered as basic services and subject to safeguards the of the
Reference Paper.  He said these elements would have important consequences.
188. Regarding the proposal of the United States, the representative of Uruguay noted that it was
connected to e-commerce because it focussed on network transactions and complimentary sectors
such as distribution, express delivery and so on.  He said it would be interesting to have additionalinformation on these elements of the proposal.
189. The representative of Japan supported the notion that the Reference Paper was an important
element of basic telecom.  However, with respect to the suggestion by Australia for clarification of
some elements of the Reference Paper, he cautioned that it was the output of the telecom negotiations
and subject to a number of sensitivities, so that Members had to be very careful about reopening it;  heasked for further elaboration on their suggestion.  He  agreed that WTO Members could play a role in
competitive Internet charging arrangements.  He asked Australia to explain further exactly what was
an Internet delivery service, e.g. what was covered and what was the logic behind classifying it as
packet-switched data transmission.  Regarding domestic regulation, rules regarding licencing
requirements and technical standards should be developed.  As for the United States proposal, heindicated that privatisation was a domestic matter.  Although it was the right direction to achieve
market liberalization, he questioned the emphasis on the word "full" or "full liberalization", as each
Member needed to take into account its own situation in that respect.  Regarding the list in section VII
of the United States proposal, he noted that it was related to e-commerce and wondered how such a
list would be used in negotiations.  As concerned the European Communities proposal, Japan
supported the view that MFN exemptions on satellite services should be eliminated, as they not only
allowed unfair discrimination, but also prevented more efficient cross-border telecommunications.
190. The representative of the Republic of Korea generally endorsed the proposals and the idea
that market opening for basic and value-added telecom services was necessary.  He emphasized the
need for full adherence to the Reference Paper.  Competitive safeguards against anti-competitive
practices were a pre-requisite to ensure the appl icability of market access commitments in telecom.
However, in the negotiations, it was important to pay consideration to the level of development ofMembers.  Due respect also needed to be given to national policy objectives, as stated in
Article XIX:3 of the GATS.  Also, commitments had to be based on Article II for Members to enjoy
the benefits of market opening, since MFN exemptions undermined the multilateral trading system.
He also agreed with the importance of removing MFN exemptions in relation to accounting rates, asS/CSS/M/9
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this would take into account the liberalization of the market.  He asked Japan to further clarify its
suggestion regarding different regulations in sub-central governments and domestic procurement
requirements, while acknowledging that such measures could become trade barriers.
191. The representative of European Communities said that the objective of their proposal was to
complete the opening of markets by lifting all restrictions on the supply of services.  Adoption of the
Reference Paper would ensure that opening was coupled with an adequate regulatory framework inline with the positions of other Members.  In resp onse to Brazil’s question regarding the reference to
universal service and scarce resources in paragraph 9, he indicated that the negotiations should
recognize that scope existed for Members to ensure the provision of universal service and manage
scarce resources in a manner consistent with the principles embodied in the Reference Paper.
Regarding Australia’s proposal to clarify provisions of the Reference Paper, more detail was sought
on those provisions Australia wished to see clarified.  As concerned the United States point on
seeking full privatisation, he said that what mattered most was the introduction of competition andimplementation of an adequate regulatory framework by an independent authority.  Privatisation
alone, without an adequate regulatory framework,  would not necessarily lead to competition, but
could even lead to the opposite result.  He sought clarification from the United States about why it
considered privatisation to be an important first step, while throughout the 1997 negotiations and in
the Reference Paper it was implicitly accepted that  promotion of competition was to be accomplished
through an independent regulator and a pro-competitive framework.  In view of the United States
observation that it was increasingly difficult to distinguish between basic and value-added services, he
asked how the United States would address the competition issues raised in paragraph 13, in which it
noted concerns about basic telecom operators extending their activities into value-added services.  He
further requested that Japan provide clarification on what concerns it intended to address whenreferring to regulation by sub-central governments and domestic procurement requirements.
192. The representative of Hong Kong, China supported full adoption of the Reference Paper, yet
cautioned that it was not a good idea to reopen it for clarification as suggested by Australia.  He
sought elaboration of points raised by Australia on international delivery services, and in particular,
on how it envisioned the removal of restrictions through the use of rules on domestic regulation.
193. The representative of Singapore agreed with the thrust of the proposals, namely, that there
should be further commitments by Members in the sector, particularly in basic telecom, given that it
was the backbone of the network economy.  Furt her liberalization would enhance growth.  He
expressed uncertainty about whether there was scope for improving the basic telecom Reference
Paper by being more specific in its approach and covering new basic services, such as the Internet,which had become more widespread since 1997.  Singapore could go along with a complimentary
services approach, but it was still studying the lists of complimentary services included in the paper.
While endorsing the United States idea that regulation for value-added services should be minimal, he
suggested that it might nevertheless be more acceptable in a mature market, whereas in developing
markets some form of asymmetrical regulation could be useful to the development of markets.
194. The representative of India noted that in the preceding interventions questions were raised
regarding privatisation which he shared.
195. The representative of Australia offered some preliminary responses, noting that experts would
be present in July to provide additional details.  Regarding questions about the definition of Internet
delivery, its classification as packet-switched data services followed from an analysis of the nature of
the Internet delivery process, which involved 3 st eps:  first, dividing digitised information into
packets;  second, addressing and routing them at the sending end of the line and as per Internetprotocols;  and, third, reassembling the packets at the receiving end as per the transmission protocol.
Internet services could be distinguished from voice telephony, which was commonly regarded as a
circuit switched service.  Internet delivery services were a transport or carriage issue in Australia'sS/CSS/M/9
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view and that was why it should be classified as basic, rather than as value-added.  Regarding the
reopening of the Reference Paper, it was not appropriate to renegotiate the Reference Paper at that
stage;  however, certain principles and provisions of needed to be applied more fully.  This would
require a better understanding of certain provisions which were unclear, such as section 1 regarding
pro-competitive principles, section 5 on the independence of regulators, sections 2 and 4 on
transparency, interconnection and licencing, and section 6 regarding how principles such as non-discrimination could apply to issues like access to spectrum.
196. Regarding questions raised on telecom and complementary services, the representative of the
United States  noted that  increasingly consumers and suppliers did not deal with these sectors
individually.  To them, it was not important whether these activities fell into one section of the W/120
or another; they were seeking access to most or all of these activities in a single location.  Telecom
was much less isolated from other aspects of the GATS classification scheme than it might have been
in the Uruguay Round or even in the extended negoti ations on basic telecom.  Regarding its relation
to other sectoral proposals, paragraph 2 of the United States proposal stated that their approach should
be viewed as a framework for conducting sector specific discussions.
Audiovisual services
197. The representative of Switzerland said that the communication presented by his delegation in
document S/CSS/W/74 was an invitation to Member s to discuss a way forward.  The so-called
convergence blurred the boundary between the telecommunication and the audiovisual sectors.  The
latter had undergone important structural changes over recent years, mainly induced by technological
changes.  Due to its social, cultural and economic importance, this sector had traditionally been
heavily regulated in most countries.  During the Uruguay Round, the audiovisual sector had beendebated as an "all-or-nothing" issue.  According to one view, audiovisual services were to be
considered as entertainment products that were in no way different from any other commercial
product.  The opposite view considered audiovisual products as cultural products, which were vectors
of the fundamental values and ideas of a society.  These two opposite views had to be reconciled.
Switzerland was of the view that a possible multilateral solution could be developed and proposed anon-exhaustive list of questions to be debated, including:  role of public services, competition
dimension, subsidy rules, notion of cultural diversity, scope of Article XIV with respect to content
regulation, market access and national treatment restrictions.  Discussions should take place within the
Special Session and should be without prejudice to the format that any multilaterally agreed solution
might take.  A possible solution, however, might be an Annex to the GATS, or any other suitableinstrument, depending on the nature of the solutions.
198. The representative of Brazil took note of the comments made at the last meeting and at this
meeting regarding the particular concerns this sector raised.  In Brazil's view, however, no sector
should be excluded from the negotiations.  He wondered why the United States and Switzerland
raised the issue of subsidies only in relation to the audiovisual sector.  GATS Article XV was of a
general nature.  The issue of anti-competitive practices, which Switzerland proposed to address,
should also be linked to subsidies.  He suggested that the audiovisual sector could provide anopportunity to address the issue of anti-dumping, on which the GATS was silent.  He noted that two
Members had listed MFN exemptions explicitly aime d at addressing unfair pricing practices in the
audiovisual sector.  As in the case of subsidies, it needed not be circumscribed to this particular
sector.
199. The representative of the United States welcomed the communications presented by Japan
and Switzerland on the audiovisual sector, as well as Hong Kong, China's expression of interest in
negotiating in this sector, as expressed in its September 2000 proposal on "Negotiating Guidelines".
The United States was still considering these proposals.  She supported the proposal by Switzerland
that these issues should be discussed in the Special  Session, with a view to clarifying the situationS/CSS/M/9
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and, possibly, to identifying common views and solutions.  She said that the United States proposal on
audiovisual services in document S/CSS/W/21 was intended to provide a framework for future work
in the WTO that would contribute to the continued growth of this sector by ensuring an open and
predictable environment that recognized public concern for the preservation and promotion of cultural
values and identity.  The audiovisual sector today differed significantly from the audiovisual sector of
the Uruguay Round period, which focused primarily on film production and distribution, andterrestrial broadcasting of audiovisual goods and services.  This sector included an international array
of content producers and programme packagers using not only traditional single channel broadcasting,
but new media, such as cable, Direct-to-Home satellite, and digital networks to distribute content
locally and internationally.  The United States proposal described, in Annex B, the various activities
included in the sector such as computer animators, dubbers, laboratories printing film negatives and
duplicate film prints and provided an illustrative listing of the many countries represented by service
providers engaged in these activities.  The debate over the audiovisual sector should no longer beframed as an "all-or-nothing" game.  The United States communication proposed various intermediate
steps that took into account commercial aspirations and cultural sensitivities.  Creating audiovisual
content was costly and commercial success uncertain.  Predictable and clearly defined trade rules
would provide the creators of audiovisual content the commercial benefit and the international
audience they needed to continue their artistic endeavours.  The United States communication pointedto the flexibility that existing trade rules provided to accommodate legitimate control concerns.  These
included the ability to make full or partial mark et access or national treatment commitments, to
continue to regulate domestically and to take exceptions to preserve public morality.  In its current
form, the GATS did not prevent governments from funding audiovisual services.  For this reason, the
United States suggested that Members might want to consider how the GATS could ensure subsidiesthat would respect each nation's need to foster its  cultural identity by creating an environment to
nurture local culture.  While the GATS provided for future negotiations to develop disciplines on
trade-distortive subsidies, there was no presupposit ion as to what those provisions would contain.
200. With respect to audiovisual services, the representative of  Venezuela was of the view that the
negotiation of a possible understanding on subsidies, proposed by the United States, should not be
separated from Article XV negotiations.  Subsidies should be circumscribed to specific aims to avoid
any possible distortions.
201. The representative of New Zealand noted that the use of subsidies to accommodate cultural
sensitivities was available only to those Members which were able to provide such financial aid.
202. The representative of Argentina noted that Annex A of the United States communication
referred to advertising services and wondered whether these services were the same as, or different
from, those advertising services referred to in paragraph 17 of the United States proposal on
telecommunication and complementary services, contained in document S/CSS/W/30.  He further
enquired about the scope of section 4 in Annex A of  S/C/W/21, in particular in the light of the
exclusion of broadcasting services, as implicitly included in the Annex on Telecommunication
services.  Argentina agreed with the United States and Switzerland that the "all-or-nothing" approach
had to be abandoned.  Argentina had a pragmatic stance on these issues.  No activities should beexcluded a priori  from the scope of the Agreement.  The GATS provided sufficient flexibility to
allow policies to be implemented in the interest of culture.  The communication by Switzerland
offered an innovative approach.  Argentina was c oncerned, however, by some of the proposals made
by Switzerland, such as those contained in paragraph 11 cultural diversity safeguard and 13 on public
service.  With respect to the proposal to address subsidies in the audiovisual sector, he considered thatit was premature to exclude certain activities from possible subsidy disciplines which were currently
negotiated in the Working Party on GATS Rules.
203. The representative of Japan agreed with the pragmatic approach proposed by the United
States, to look for practical solutions to reconcile markets and cultural identity.  Japan was interestedS/CSS/M/9
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in examining classification issues if this could help to reach a common understanding on this sector.
Japan was also in favour of negotiating commitments while taking into account sectoral sensitivities.
Japan agreed that cultural diversity should be taken into account, but considered that paragraph 11 of
the communication by Switzerland should be looked at carefully.
204. The representative of Mexico agreed with some of the aspects proposed in Annex A of the
United States proposal on audiovisual services, because they reflected technological changes having
an impact on this sector.  On the other hand, Mexico also had some concerns.  For instance, some
services appearing in sections 1 and 3 of Annex A were not strictly speaking audiovisual services, but
were related to transport or distribution.  He enquired what the relationship was between section 4 of
Annex A of S/CSS/W/21 and the explicit exclus ion contained in the Annex on Telecommunications.
Direct-to-Home satellite services included activities which went beyond transmission services.
Mexico considered therefore that Members should be cautious when undertaking any classification
work in this sector.
205. Commenting on the United States proposal on audiovisual services, the representative of the
Republic of Korea said that, as a general rule, the classification in W/120 should be maintained so as
to avoid possible confusions at the end of the market access negotiations.  The statement made by theUnited States in paragraph 10(i) of its proposal, that "… Members need to respect the principle of
technological neutrality, which is a fundamental tenet of the WTO, and must refrain from pursuingreclassifications that could erode existing commitments" was important.  On the issue of subsidies, he
noted that the United States referred to the possibility to fund audiovisual services in order to support
cultural identity and mentioned a precedent in WTO for special subsidy rules.  The Republic of Korea
wondered whether the United States was in favour of facilitating the availability of subsidies for the
promotion of cultural values or of  circumscri bing their use.  Concerning the communication by
Japan, he noted the statement that liberalization of audiovisual services was important "for respecting
the right of the citizens of each Member to free access to a variety of cultures and information" in
paragraph 36.  The Republic of Korea was of the view that the audiovisual sector was highly sensitive
as it related to cultural identity of Member countr ies.  The Republic of Korea believed, therefore, that
Members should give consideration to the possibility of safeguarding their own culture.  The Republicof Korea was still examining the proposal by Sw itzerland.  As a preliminary comment, however, he
considered that the proposal for a possible Annex on audiovisual services was premature.
206. The representative of Hong Kong, China said that her delegation had a continued interest in
addressing audiovisual services.  As pointed ou t by some other delegations, the GATS was equipped
to take care of cultural concerns.  Undertaking commitments would not necessarily conflict with theobjective of cultural diversity.  With respect to subsidies, the proposal contained in the United States
paper appeared to be attractive, but Members should not forget that subsidy disciplines were being
contemplated in the Working Party on GATS Rules.
207. The representative of India said that his delegation wished to have an indication from major
trading partners about the interests and/or oppositi on they might have with respect to some services
sectors.  He stated that India had a strong interest in audiovisual services.
208. Addressing the questions raised with resp ect to the communication presented by his
delegation, the representative of Switzerland said that, while the mandate of the Working Party on
GATS Rules was to address trade-distortive subsid ies, their proposal on audiovisual services was
looking for a multilateral approach to overcome the "all-or-nothing" debate.  The same consideration
prevailed for the proposal to consider competition issues. However, Switzerland was ready for an
horizontal discussion on these issues.  His delegation considered that market mechanisms alone could
not serve social, democratic and cultural objectives.  In broadcasting, for instance, the market
produced very similar, low-quality products.  A broad discussion on the concept of public service was
needed, in parallel with the ongoing discussion on cultural diversity.  In the case of broadcasting,S/CSS/M/9
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public services had a long tradition in Europe.  It meant, in particular, special funding, the need for
organizations independent from the governme nt and room for private broadcasters.
209. The representative of the United States said that, with respect to paragraph 10(iii) of
S/CSS/W/21, the United States stance was to recognize that the audiovisual sector contained the
special issue of cultural identity and, therefore, subsidy-related questions should be addressed in the
context of audiovisual discussions.  Governments should be able to use subsidies which had littlepotential for trade-distortive effects, to address legitimate concerns regarding cultural identity.  She
pointed out that the "summary list of audiovisual and audiovisual related service activities" was not to
pretend that all the activities listed should be considered audiovisual services.  It merely attempted to
show that many activities could be either audiovisual or audiovisual-related and that this should be
addressed in a discussion on classification.
(e) Construction services
Communications from:  the European  Communities (S/CSS/W/36);  Japan
(S/CSS/W/42);  Australia (S/CSS/W/64);  the Republic of Korea (S/CSS/W/84);  Chile
(S/CSS/W/88)
210. The representative of the Republic of Korea made four points by way of introduction to his
proposal on construction services.  Firstly, the proposal emphasized the importance of construction
services in the global economy.  For the Republic of Korea, the construction industry had always
played a key role in its process of economic development since the 1960s;  in 2000 it accounted for
14.5 per cent of GDP, which was much higher than the same figure for most industrialized countries.
Secondly, the negotiations on this sector should  focus on the following subsectors:  general
construction works for building; general construction work for civil engineering; installation andassembly work; building, finishing and completion work; and others.  Thirdly, negotiations should
deal with, among others, discriminatory regulation on commercial; discriminatory treatment for
foreign companies in building procedures;  loca l content or use requirement in contracts; and
discriminatory treatment for foreign companies regard ing taxation and remittance of earnings.  Lastly,
the Republic of Korea believed that by addressing these important issues Members could contributegreatly to the progressive liberalization of trade in services and the development of infrastructure.
211. The representative of Chile hoped that the outcome of the ongoing negotiations would result
in new opportunities for Chilean construction companies and associated professional services,
particularly engineering services.  For more than 20 years, engineering and construction services in
Chile had been exposed to an open market, with no barriers or subsidies.  In this context, Chile haddeveloped comparative advantages in various construction and engineering services, including in
particular:  engineering for mining projects;  seismic engineering;  structural engineering,  housing
construction engineering;  engineering for pulp and paper projects;  engineering for electricity
generation and transmission;  and harbour project engineering.
212. The delegation of Chile hoped that the negotiations would lead to the elimination, both for
professionals and engineering and construction companies, of residency and nationality requirements;
to the prompt recognition of the possibility of temporary professional employment in the engineeringand construction fields;  to the elimination of the special registration requirements for firms to operate
in individual countries;  and to the prompt recognition of the qualifications of engineering and
construction professionals and firms.  In addition, Chile would seek the elimination of quotas or
numerical restrictions on professionals entitled to provide services in the different countries, and on
the number of national professionals which a firm could employ in its subsidiary in another country,as well as elimination of the requirement of a local partner as a general condition for the provision of
engineering and/or construction services.S/CSS/M/9
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213. He also took the opportunity to make some general comments on other proposals.  Regarding
the submission by the European Communities, Chile considered positively the statement in
paragraph 4, according to which effective market access for construction firms would depend to a
large extent on whether it was possible to compete with the public procurement of construction
projects in foreign markets.  He also agreed with the statements contained in bullets 4, 5 and 6 of
paragraph 5 of the submission made by Australia, where reference was made to impediments tofurther liberalization of engineering and construction services, including the lack of recognition of
professionally qualified project team members; unduly onerous licensing requirements for
construction firms and subcontractors; and unduly onerous visa procedures.
214. The representative of New Zealand said his country was very interested in this sector.  He
believed there was sufficient scope for Members to increase the number and quality of commitments
for construction and related engineering services during the course of the ongoing negotiations.  It
was important in that regard to ensure results that were of clear commercial significance for servicesuppliers.  He announced New Zealand's intention to submit its own proposal on construction services
in the near future.
215. The representative of the European Communitie s said their commitments in the sector were
liberal, covering all subsectors and with only a limited number of restrictions in some modes of
supply.  He agreed with Chile that effective market access in this sector depended on the possibility tocompete for the public procurement in foreign markets, and this needed to be taken into account when
discussing construction and related engineering services.  The European Communities proposal aimed
at reducing unnecessary trade distorting barriers to the minimum necessary to ensure the quality of the
service and public safety.  The European Communities did not see any justification for restrictions on
the form of establishment, which should be removed.  He also encouraged Members, who had notdone so, to make commitments on mode 4.  His delegation hoped that in that regard that the interest
expressed by many developing countries in the construction sector would not be limited only to this
mode of supply, but would also extend to all other areas of construction and related engineering
services.
216. He then requested a clarification from the delegation of Japan on whether it considered that an
improvement in commitments in mode 1 was a priority in this sector.  Additionally, he also asked the
delegation of Japan what was meant by the reference in paragraph 39 of their submission to
"administration management lacking rationality, objectivity and impartiality".  He also asked the
delegation of Australia whether it considered that the negotiations provided a suitable forum for
Members to examine rules regarding en try procedures in their territories.
217. The representative of the Philippines saw merits in participating in discussions on how trade
flows in construction services could be facilitated.  Most particularly, he expressed interest in
improving the temporary movement of natural persons for the provision of these services.  He drew
attention in that regard to paragraph 9(d) of th e submission by the European Communities, and to of
paragraph 6 the last bullet point of the submission of Australia, where it was proposed that Members
examine "rules relating to the movement of natural persons to ensure that processes to facilitate the
entry of employees and contractors of firms who have approval to operate in another Member countryare carried out efficiently and expeditiously".  He saw merit in continuing discussions along those
lines.
218. He asked the European Communities whether they could give examples of the situations
described in paragraph 10 of their submission, where reference was made to various aspects of
domestic regulation, including building regulations and technical requirements, building permits andinspection, which were found to be applied more onerously to foreign suppliers.S/CSS/M/9
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219. The representative of Australia considered that since construction services required
commercial presence, mode 3 issues were of major importance.  He also emphasized the importance
of issues relating to mode 4.  Regarding the submission by Japan, he also expressed interest in
learning what was meant in paragraph 39 by "administration management lacking rationality,
objectivity and impartiality".  In reply to the question posed by the representative of the European
Communities, he said that the purpose of the negotiations was to address issues related to marketaccess.
220. The representative of Japan replied to some of the questions raised by other Members.  First,
on the question from the European Communities regarding whether Japan was interested in the
liberalization of mode 1, he found it difficult to think of an example of construction services that
could be supplied under mode 1, even taking into account technological advances.  In that regard, he
asked the European Communities what type of construction services they had in mind.  Second,
regarding the questions raised by delegations on the meaning of "administrative management lackingrationality, objectivity, and impartiality", he said that the submission by Japan was based on
conversations with a large number of service suppli ers, who had related their own experiences.  He
added that the proposal intended to address those experiences, although it was not their intention to
address any specific examples regarding specific Members or suppliers.  The said expression had been
used to refer to various regulatory practices la cking transparency;  some examples might include
licensing requirements or visa procedures.
221. Finally, he took the opportunity to make some initial comments on the submission by the
European Communities.  In that regard, he shared the views expressed by the European Communities
that substantial barriers still existed in this sector, including inter alia  limitations on the type of legal
entity and limitations on the participation of foreign cap ital.  He also agreed that the absence of rules
for government procurement was crucial for this particular sector.  In this respect, Japan believed that
discussions should take into account the work of the Working Group on Transparency in Government
Procurement.
222. The representative of Brazil supported further liberalization and deepening of commitments
on market access and national treatment in this sector, since it was of export interest to his country.
223. The representative of India reiterated the importance his delegation attached to this sector,
since it was one of the areas in which India would seek further commitments on mode 4 from its
major trading partners.  He also supported the submission made by Australia in document
S/CSS/W/64, particularly the points on the need to implement Article VII of the GATS on mutual
recognition of qualifications, and also on the n eed to examine rules relating to the temporary
movement of natural persons.
224. The representative of Turkey said that co nstruction was important to his country, and
expressed his support to initiate discussions on this sector.  He was also pleased to see that some
emphasis was put on the issue of movement of natural persons, which was of particular importance
for the sector.
225. The representative of Venezuela expressed her country's interest in this sector.  On paragraph
9(b) of the submission by the European Communities, regarding the provision of construction services
under mode 2, she asked the European Communities whether examples could be given, and what was
exactly meant by the said-paragraph.  On paragraph 12 of the submission by Chile, regarding "the
elimination of quotas or numerical restrictions on professionals entitled to provide services in the
different countries", she expressed a note of caution in that certain restrictions should be allowed in
keeping with the Agreement, and in the light of countries' development objectives.S/CSS/M/9
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226. The representative of Paraguay expressed his country's interest in this sector.  He supported
Australia regarding the need to implement paragraph 3 of Article VII of the GATS.  He then asked the
European Communities, with reference to paragraph 9 of their proposal, which of the subsectors
mentioned in paragraph 6 could be the object of commitments under mode 1, and whether the
proposal that "Members should consider whether commitments can now be made in certain sub-
sectors" also applied to the related subsector mentioned in paragraph 7.
227. The representative of Argentina drew attention to paragraph 9 of the submission of the
European Communities, where mention was made of the existence of subsidies in this sector.  In his
view, this was a clear example of a sector where unfortunately some Members had lost competitivity
due to subsidy practices that caused the deviation of trade flows.  He added that there was empirical
evidence in that regard, and that this sector should be seriously reviewed in order to find specific
precedents.
228. The representative of Pakistan said his country had a substantial interest in this sector,
especially with regard to modes 3 and 4.  He supported the general thrust of the submission by
Australia, particularly the proposals made in paragraph 6 thereof.
229. The representative of the European Communities said that they would reply to questions in
greater detail at the next meeting.  He nevertheless clarified that the scope of their proposal was
contained in paragraph 6, but that in their view, as  stated in paragraph 7 of the submission, dredging
services were also covered by construction and related engineering services and would encourage
Members to take commitments on that subsector.  On the questions regarding mode 1, he said that in
light of technological advances consideration should be given to whether there was scope for making
further commitments.  He said in that regard that  the European Communities were thinking about the
possibility of including consulting services related to the activities mentioned in paragraph 6 of thesubmission as part of the scope of the proposal.
230. The Chairman said that this sector did not seem to present the same complexities as the
sectors previously discussed.  He noted the interest expressed by some developing countries in this
sector, and encouraged them to follow Ch ile's example and make their own proposals.
(f) Distribution services
Communications from:  the United States (S/CSS/W/22);  the European Communities
(S/CSS/W/37);  Japan (S/CSS/W/42);  Canada (S/CSS/W/57);  Switzerland
(S/CSS/W/77);  MERCOSUR (Argentina, Brazil, Paraguay and Uruguay)
(S/CSS/W/80);  the Republic of Korea (S/CSS/W/85);  Chile (S/CSS/W/88)
231. The representative of Switzerland noted the importance of the sector, which assured the link
between producers and consumers.  Distribution services performed an essential macro-economic
function, but many barriers still existed in the sector.  Few commitments had been undertaken on
distribution services, and he encouraged Members to assume greater commitments;  he indicated that
wholesale distribution and franchising were of priority interest to his delegation.  Many limitations
had been inscribed in commitments on distribution services, mainly for mode 3, in the form ofeconomic needs tests;  commercial presence was of great importance for distribution, and particular
attention needed to be given to restrictions on this mode of supply.  A more precise application of
domestic regulation was also key for distribution services, and he stressed the importance of a
transparent, equitable and non-discriminatory application of domestic regulation.
232. The representative of Paraguay, speaking on behalf of the Mercosur members, namely
Argentina, Brazil, Paraguay and Uruguay, said th at their paper in document S/CSS/W/80 was self-S/CSS/M/9
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explanatory.  Distribution services were the essential link between suppliers and consumers.  The
realization that greater competition could result in increased efficiency and promote the better
functioning of markets had led to greater deregulation and liberalization of the sector over the last
decade.  International trade in distribution services had also considerably increased, thanks to greater
foreign investment and the development of new te chnology and distribution channels.  However, the
Uruguay Round negotiations were only a first attempt towards consolidating the opening of marketsworld-wide, and trade barriers still existed.  Some, such as obstacles to the distribution of agricultural
and textile products, affected developing countries in particular.  Prohibitions on the establishment of
a commercial presence by intermediaries or distributors of agricultural and textile products prevented
developing countries from implementing comprehensive export strategies for products and services of
interest to them, from promoting their exports adequa tely, from establishing alliances and networks to
gain access to external markets, and from applying the capacity and know-how they had acquired in
producing and exporting such products to the export of related services.  Developing countries weredenied free access to distribution services for some products of vital export interest to them, either
because items were expressly excluded from schedules of commitment or because of a total absence
of commitments in certain sectors.  There were no economic reasons why a product which met all
import requirements should not be distributed as efficiently as possible.  Many Members had excluded
the distribution of certain products from the scope of their commitments or made certain productssubject to import permits or licences;  it was a well-known fact that agricultural products were usually
subject to import licensing, particularly in high-income countries which had highly protectionist
agricultural policies.  Similarly, textile products were subject to quotas any other restrictions.  He
added that liberalization of the sectors contained in their proposal would contribute to the
implementation in Article IV(c) of the GATS.  He therefore encouraged Members' comments andquestions on their proposal;  they would take note  and reply in writing at the following meeting.
233. The representative of Chile stressed the importance of the sector in the economy, not only in
terms of its direct contribution to output and employment, but also and for its crucial role in trade.
However, many obstacles still existed to the full development of this activity, in the form of economic
needs tests for service providers, discriminatory tr eatment in respect of licensing requirements and
discriminatory taxation regimes.  He indicated that his delegation would revert to the other
submissions with detailed comments.
234. The representative of the Republic of Korea said that distribution services assured the link
between producers and consumers, thereby increasing the competitiveness of the former and the
welfare of the latter.  Distribution services accounted for a significant share of the economy and ofemployment, being the second largest employer after the manufacturing sector, were growing rapidly
and had been significantly influenced by the developments in information technology.  Yet, only few
commitments had been undertaken in the sector;  the negotiations had to aim at greater liberalization
through greater commitments, a reduction of market access and national treatment restrictions and an
improvement in the transparency of domestic regulation.  When autonomous liberalization measures
had been undertaken beyond what was included in the schedules, credit should be granted.  As for
mode 1 trade, this was closely linked to electronic commerce and the discussion on the issue neededto proceed along the lines of the debate on-going in the General Council on electronic commerce.  His
delegation's suggestion was therefore that Members focus on mode 3 and address the restrictions on
market access and national treatment and the regulatory obstacles identified in paragraph 10 of their
proposal.  As for the submission by the United States , he wondered about its scope;  he had noted and
concurred with the importance of supply chains, but did not consider it proper to apply it to thenegotiations and stressed the importance of focusing on the distribution sector as in the W/120
classification for negotiating purposes.
235. The representative of the United States echoed previous statements about the important role
of distribution services in getting goods to consumers and with respect to employment creation.  He
also noted that many restrictions applied to the sector, some of which affected market access andS/CSS/M/9
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national treatment and others which affected what could be sold, by whom, where and how it could be
sold.  His delegation was encouraging full examination of the applicable restrictions and of how they
might be dealt with in the negotiations.  Their proposal contained a list of about 28 restrictions, and he
called attention to three of those:  first, lack of  transparency of domestic laws and regulations and
fairness of administration, including lack of pre-determined, objective criteria for licensing
requirements;  second, lack of readily available information on zoning and lack of an opportunity forservice suppliers to meet with local officials and community representatives to discuss location of
facilities;  and, third, overly burdensome regulation of telephone and electronic media marketing.  He
added that the first two were crucial in retailing, where the key factor was location;  the third affected
retailers who were involved in electronic commerce.  Distribution generally applied to the distribution
of goods, and the distribution of services was generally covered in the GATS classification of the
particular service;  however, in some cases problems might exist in the classification of some goods
and services, particularly where they might be transmitted electronically.  The distribution servicesarea begun once imported goods had entered the country, had cleared customs and complied with all
the requirements applicable to the good in question.
236. Turning to the proposal by the European Co mmunities, he sought additional information on
the suggested product exclusion and on whether the European Communities believed that there might
be some general principles which might still apply even if they were seeking exclusion of a particularcategory of goods.  On the exclusion of economic needs tests, he called for caution, as economic
needs tests were one of the measures specified in Article XVI as a practice which should not be
maintained.  With respect to mode 4, he sought clarification as to whether the European Communities
favoured horizontal discussion on intra-corporate transferees  and contractual suppliers or whether
they preferred mode 4-type of discussions within the distribution sector.  He also asked about themeaning of the statement, in the second indent of paragraph 12, that commitments should apply both
to distributors and to foreign-invested manufacturers as regarded the goods they produced, and
wondered why the distinction was made.  As for footnote 8 on product exclusions, he stated that the
premise that any product supplied electronically consisted of services was not generally agreed and
was still subject to on-going discussion in the WTO.  He also sought clarification on whether theproposed exclusion of "written correspondence" was intended to exclude all postal service or only
letters.  Turning to the submission by Japan, he wondered what was intended to be covered by after-
sale services.
237. The representative of Canada sought a number of clarifications on some of the proposals
tabled.  On the proposal by the Republic of Korea , she wondered whether the statement in paragraph
9, that the discussion on cross-border supply s hould proceed alongside the discussion on electronic
commerce in the General Council, was advocating that distribution services be raised in the General
Council's e-commerce discussion or that they remain in the Services Council.  With regard to the
proposal by Japan, she sought clarification about the reference to after-sale services and the possible
link with distribution services, and asked whether Japan was focusing on any particular mode or on all
modes.  As for the submission by Switzerland, she asked for elaboration of the last paragraph;  she
wondered why the Special Session was needed to explain the relevance of Article VI to distributionservices and asked for more explanation on the term "sophisticated clientele" and on why commission
agents' services and wholesale trade services should be largely exempted from regulatory restrictions.
With regard to the submission by the European Communities, she sought additional elaboration on the
reference to foreign-invested manufactures;  she wondered whether this was not already a given and
why it had been specified in such a way, or whether the European Communities considered it a newissue.  As concerned the submission by the United States she asked if the list in paragraph 6 was
meant as a negotiating checklist.
238. The representative of the European Communities highlighted the main points of his
delegation's submission.  He reiterated that the distribution sector was the crucial link between
producers and consumers, that its performance had a strong influence on consumer welfare and that itS/CSS/M/9
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played an important role in domestic economic activity and employment.  Yet, in spite of the
importance of the sector, very few commitments had been made and his delegation was seeking to
extend the coverage and extent of commitments, as set out in their submission.  Their proposal
covered all sub-sectors and goods classified for distribution services.  For modes 1, 2 and 3, they
proposed that no restrictions be scheduled, with some very limited exceptions, and that the
specificities of certain products be taken into account;  for mode 4, their approach was as highlightedin their general proposal for this mode.  Responding to some of the questions posed by Members, he
stated that, with respect to the comment on footnote 8 stating that electronic deliveries were services,
the opposite premise was not accepted either;  this footnote made the point that in his delegation's
view these were services.  As for the term "written correspondence", he explained that this covered
only letters, and not all postal services.  With regard to foreign-invested manufacturers, he indicated
that their suggestion referred to distribution services which were carried out by manufacturers
themselves.
239. He then turned to some of the other proposals tabled.  With regard to the submission by the
United States, he sought clarification about how they intended to deal with the obstacles identified in
paragraph 6 which went beyond the scope of the GATS, such as taxation on profit repatriation, with
those which fell under other services sectors, such as lack of consumer choice in selection or postal or
other delivery services, and with those which feel under domestic regulation, such as approval
procedures where no information was provided on the reason for denial, and in particular whether for
the latter group they were thinking in terms of additional commitments in the distribution sector or of
a horizontal solution in the Working Party on Domestic Regulation.  As for sectoral coverage, the
United States proposal referred to the W/120 classification and he wondered whether the coverage of
the sub-sector was that of the CPC codes for the di stribution sector.  He then sought clarification on
how they intended to tackle access to distributors to the additional activities listed.  Turning to the
submission by Japan, he asked whether the list of obstacles they had identified was exhaustive or
illustrative and how they intended to tackle after-sale services.  With regard to the submission by
Canada, he again asked whether the list of obstacles identified was exhaustive or illustrative.  As
concerned the proposal by MERCOSUR, he said that it was a welcome and interesting proposal.  Itreflected the interests of a goods exporter, rather than necessarily those of a distributor, and showed
the relevance of the distribution sector even for those Members who did not have an offensive interest
in distribution services and illustrated that it could be of direct relevance for the distribution of goods.
He noted that the proposal did not refer to related services, such as testing and analysis, market
research and advertising, which were usually ne cessary for distributors and wondered if MERCOSUR
had any specific views of those services.
240. The representative of Mexico said that distribution was a sector of interest to his delegation
and that he would revert to the proposals with more detailed comments.  He highlighted the
submission by MERCOSUR, which illustrated the interest in distribution services from the
perspective of developing countries.  He underscored paragraph 1, which recalled the obligation upon
all Members to facilitate the participation of developing countries in services trade.  The proposal
illustrated what the distribution sector consisted of, identified the problems faced by developingcountries and analyzed existing commitments and barriers.  The MERCOSUR proposal did not
require new classification, reference papers, annexes or formulas;  it only focused on market access
and on specific commitments, an approach which his delegation was carefully looking at.  He sought
a elaboration of the statement in paragraph 13, and wondered whether this reflected MERCOSUR's
experience with economic needs tests.  With respect to paragraph 14, he asked for additional detail ontax discrimination, noting the exceptions in Article XIV of the GATS;  he asked a similar question of
the delegation of Chile.
241. The representative of Argentina reiterated that their submission in document S/CSS/W/80 was
a proposal from the perspective of developing countries which had a high degree of applicability also
in the goods areas.  He had a few questions on some of the other submissions tabled.  With regard toS/CSS/M/9
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the submission by the European Communities, he sought clarification on the goods exclusion in
paragraph 7 with respect to electricity and gas through mains;  he wondered what was the relationship
with the European Communities proposal on energy services in document S/CSS/W/60, in particular
for services related to networks such as operation of  transportation/transmission and distribution.  As
concerned the submission by the United States, he wondered about the obstacle identified as "denial
of access to, and use of, services essential to this sector (e.g., highways, airports, railroads) onreasonable and nondiscriminatory terms and conditions" and sought additional clarification and more
specific details on the reason behind this general restriction.
242. Responding to some of the questions raised on their submission, the representative of
Switzerland explained that, as concerned the last sentence of paragraph 13, his delegation considered
that commission agents' services and wholesale trade services could be more easily exempt fromregulatory restrictions because they were directed at a sophisticated, specialized clientele, who knew
the sector well and did not require the same level of protection as general consumers.
243. The representative of the Republic of Korea addressed the question posed by Canada.  He
explained that their proposal indicated that the discussion on cross-border supply of services needed
to proceed alongside or in connection with the discussion in the General Council;  discussions in the
two fora should be mutually supportive and proceed in parallel.
244. Commenting first on the paper by the European Communities, the representative of Japan
concurred that it was difficult to see any justification for restrictions other than for a very limited
number of extremely sensitive products, but did not share the view that, for mode 3 in retailing
services, clearly defined and non-discriminatory economic needs tests would also be justified.  As for
questions raised on his delegation's submission as concerned after-sales services, he said that
manufacturers were often engaged in distribution activities, such as after-sale services, and that thebusiness community had indicated that they encountered obstacles in this regard.  He also said that the
list of obstacles in their submission was only illustrative.
245. The Chairman concluded that delegations had indicated that some of the questions raised
would be replied to at the July meeting.  He invited delegations to try to circulate their questions in
writing.
(g) Education services
Communication from the United States (S/CSS/W/23)
246. The representative of the United States noted the importance of education services and the
fact that the sector had the smallest number of commitments for any of the service sectors within
GATS.  The purpose of his delegation's proposal was to stimulate discussion among WTO Members
of the market-oriented segment of the education sector.  The intent of the proposal was not to displace
publicly-provided education and training but to allow other suppliers to supplement it.  A survey
made by the United States State Department of Embassies in 140 countries, with replies from 115
embassies, had revealed that nearly all of those countries had private education co-existing with
public education.  There were new types of providers and combination of providers of education
services, using modern technology and new forms of delivery, that provided access to education,much of which was employment related.  For example, education institutions and publishers were
teaming up with information technology companies and other experts to design courses of instruction
on a variety of subjects.  Large companies were also developing courses and training to improve the
skills of their employees and to keep them up to date on their latest products.  Such services
constituted a growing international business supplementing the public education system.  Theiravailability could help develop a more efficient workforce, leading companies to an improved
competitive position in the world's economy.S/CSS/M/9
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247. He stressed that the proposal was limited to higher education, adult education and other
education, as well as training services and educational testing services.  It did not include primary and
secondary education, which were more likely to be government-supplied services.  Nothing in the
proposal was intended to interfere with the tax- exempt or state-funded status of educational
institutions or policies regarding admissions, scholarships, grants or curricula.  Its objective was to
provide assurance of market access and national treatment for providers of education and  training ona commercial basis, as well as for co-operative ventures which met regulatory requirements in the
host country.  With respect to questions that might arise on consumer protection, quality assurances
was a responsibility not only of the receiving countries but of the supplying countries as well, thus
efforts to achieve excellence in education should be intensified by all.  Members might need to work
together to share information and to provide techni cal assistance to Members that lacked resources to
review and assess the quality of particular education programmes.
248. The representative of New Zealand welcomed the clarifications by the United States as they
emphasised that the proposal focused on higher education, adult education and training services and
that it would only relate to those Members that permitted private education.  The education sector was
vitally important to all Members given the critical role of education in economic and social
development terms, while trade in the sector was of increasing international significance.
Unfortunately, education was one of the least committed services sectors.  That was, in a large part,understandable given the sensitivities that surrounded it due to its public good element and the high
degree of government involvement in the provision of those services.  Such sensitivities
notwithstanding, international trade in education services continued to expand and there were
opportunities for further growth in such trade through the services negotiations.  Such growth needed
to be balanced with domestic regulation priorities and national policy objectives.  Given theincreasing importance of education services to New Zealand's services profile, his delegation hoped to
be able to submit a paper including a range of issues relevant to the sector soon.
249. The representative of India also welcomed the clarification on the exclusion of the primary
and secondary education from the scope of the United States proposal and on its purpose not being to
displace the governmental supply in those services .  His delegation would be examining the proposal
in the forthcoming meetings from a mode 4 and an electronic commerce perspective.
250. The representative of Australia posed a question to the United States relating to the issue of
state-provided education services against private education services, an issue of enormous interest at
the moment amongst communities.  The specific question was whether the provision of primary and
secondary education by governments was a separate sector or whether those services could beconstrued as being in competition with education services at the same level provided by private
suppliers.  That was to say, in respect of Articl e I:3(c) of the GATS, was there a distinction between
private and public education or were they in fact in competition with one another?
251. The representative of the Philippines noted with interest and appreciation the focused scope
and purpose, i.e. not impinging on public education systems, of the United States proposal.   There
were possible mutual benefits for both the service-exporting Member as well as the recipient Member
country, not the least of which for the latter was the potential for upgrading to, or being introduced to,other effective modes of imparting knowledge, and more importantly access to knowledge or
technology which might not otherwise be conveniently available.  There might be a need for further
refining the scope of the United States proposal, which in paragraph 4 stated that the scope of
coverage of particular types of education (e.g. liberal arts, business, professional) was not specified
and that further clarification of the coverage was needed.  He noted that the representative of theUnited States had emphasised the importance of retaining the regulatory prerogative of the local
authorities to ensure that adequate safeguards we re afforded to consumers of this service.  He
wondered how the United States intended to addr ess in its proposal the element of movement of
natural persons as service providers in that sector.  If the proposal did evolve into some provision itS/CSS/M/9
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would entail the provision of such services across  borders, not just through electronic means, but
through physical means.  Of equal, if not more, relevance to his delegation, though perhaps outside
the scope of the United States proposal, was how the United States intended to facilitate movement of
educators and education-related personnel acting as independent service providers into its own
market.  He noted the United States' willingness to  consider undertaking additional commitments for
higher education and training, however his query was not limited to the scope of tertiary and adulteducation and training, and would extend to the provision of such services to primary and secondary
levels of education as well.
252. The representative of Norway  said that his delegation was examining the proposal by the
United States in all of its aspects and would provide substantial comments during the more detailed
sectoral examination.  That proposal recognized that education to a large extent was a government
function.  It  underlined also that private education and training would continue to supplement, not
displace, public education systems.  Knowledge was a good that increased when shared, thus a clearbenefit of trade in education was the exchange of ideas and knowledge across boundaries.  Thus,
taking part in global exchange of education services was positive and important.  Students that
undertook education abroad not only learnt their chosen field of study but also learnt another
language, another culture and got competence needed in an inter-connected world.  Norway was
among the relatively few countries that already had made commitments in the sector.  Thosecommitments underlined that primary schools and secondary education were a government function
and that private schools could be established under special conditions.  Higher education, adult
education and training services were included in the Norwegian schedule.  However, universities and
colleges were among Norway's most important cultural institutions.  They were essential in the
promotion of ethic and social values, cross-cultural understanding, languages and history.  They alsocontributed to other goals, like social redistribution, gender equality and democracy.  Therefore, his
government attached great importance to due respect for national policy objectives and the right of
Members to regulate in order to meet those objectives.  Therefore, a balanced approach was needed as
Members carried on negotiations.
253. The representative of Turkey said that national approaches to social and cultural policies and
some other concerns of governments should be taken into account while discussing the sector.
Education services had different functions in society and thus their particularities should be given due
respect and the sector should not be subject to merely market-oriented trade concerns.
254. The representative of United States provided some preliminary answers to preliminary
questions.  As to the question posed by Australia, i.e. public versus private education in primary and
secondary levels and how that related to Article I:3(c), that issue was precisely why the United States
had excluded primary and secondary education from its proposal.  His delegation wanted to avoid that
debate, which might be a sensitive issue not just for Australia but also for the United States and
others.  As to the question by the Philippines on mode 4, the United States would have to see how the
negotiations proceeded.  If Members decided to address mode 4 horizontally, the United States would
use a sort of checklist to make sure that education and other services were covered individually.
Alternatively, should mode 4 be dealt with on a sector-by-sector basis, the United States wouldaddress it in that way.
255. The Chairman observed that Members had had an interesting, though preliminary, exchange
of views.S/CSS/M/9
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(h) Energy services
Communications from:  the United States (S/CSS/W/24);  Canada (S/CSS/W/58);
Norway (S/CSS/W/59);  the European Communities (S/CSS/W/60);  Venezuela
(S/CSS/W/69);  Chile (S/CSS/W/88)
256. In introducing the proposal by his delegation, the representative of Chile said that their main
interest in energy services focused on services rela ted to the generation, transformation, transport and
distribution of electrical energy.  It was necessary to examine in greater depth the relation between
distribution and transport services and energy services.  Additionally, the latter was highly subsidized,
which limited the margin for an open and competitive ma rket.  Therefore, the issue of subsidies in the
sector needed to be looked into.
257.  The representative of United States noted that energy services was the only sector where
proposals had been submitted to the Special Session of the Services Council which had no formal
heading or separate division within the Services Sectoral Classification List in document
MTN.GNS/W/120.  The fact that six proposals had been tabled for a sector not yet listed, provided
support to the suggestion that a new classification for such a commercially-important sector be
created.  As Venezuela stated in its proposal, for example, the adoption of a classification of energy
services was of key importance to any negotiations of commitments.  The services sectoralclassification contained in document MTN.GNS/W/ 120 did not reflect the current reality of the
market in energy services.  The availability of a classification with greater disaggregation for energy
which took into account the current market, regula tory and technological situations was something
that could facilitate the undertaking of commitments.
258. There were important similarities on a number of key substantive points in the various
proposals, which appeared to establish a solid basis for entering into negotiations to liberalize the
energy services sector.  For example, all proposals underscored that liberalization or competition did
not mean an unregulated energy sector.  Governments would continue to regulate to ensure
performance and quality controls, to preserve the environment, and protect consumers.  The proposals
also reiterated that negotiation on energy services did not intend to address ownership of naturalresources.  They also pointed to the benefi ts for national economies that would result from
introducing competition into the energy service market , as for example in the proposal by the EC.  In
discussing barriers to the provision of energy services, three proposals mentioned that restrictions for
the entry of equipment constituted a major barrier to energy services trade.  Five proposals referred to
the importance of environmental concerns.  Although the proposals included different suggestions forproceeding with energy services negotiations, they appeared to be compatible with each other.  For
example, the European Communities noted that a more detailed discussion of the scope of energy
services, possibly in a separate classification exercise, would be required.  Alternatively, the European
Communities suggested that the Council initiate a debate, whether in the Council or a subsidiary
body, on broad negotiating aims for the energy sector.  Should the latter course be chosen, some
classification issues might be addressed in that context.  In its proposal, Norway suggested developing
a checklist for energy services which could serve as a useful negotiating tool to encourage countries tomake market-access commitments for the entire chain of energy services.
259. The representative of Venezuela said that her delegation attached considerable importance to
the energy services sector being on the agenda for the negotiations.  Regarding the criteria for a
possible classification of the sector, her delegation had reiterated that there had to be a differentiation
on the basis of the source of energy.  From a preliminary reading of the proposals, it seemed thatCanada recognized that distinction while its proposal was focused on petroleum and gas-related
services.  Chile referred to covering the entire spectrum of energy services, including electricity.
Therefore, it could be assumed that there was a tendency to draw a distinction as to the type of energy
being covered.  Paragraph 2 of the proposal by the European Communities stated that "Because of theS/CSS/M/9
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specific characteristics of the various energy sources, the opening to competition of the energy sector
in the European Communities has been realised in several steps and with the establishment of precise
and clear rules."  In that same paragraph it was stated that "The physical characteristics of these
energy sources and the level of industrial concentration have led to the establishment of an
appropriate regulatory framework,… ".  Additionally, when the European Communities referred to a
distinction of nuclear energy in paragraph 5 of their proposal, it stated that "this energy source issubject to specific rules for safety, physical protection and other reasons."  That was likewise
applicable to any type of energy as there were for each source of energy differences in the level of
development, regulatory framework, and technological requirements.  Despite the assertions made by
the European Communities in its proposal indicating their conviction as to the distinction by source of
energy, the list of activities related to energy included in paragraph 6 of the European Communities
proposal applied regardless of the source of energy in question.  She requested clarification as to
whether the European Communities would favour a classification that distinguished the source or typeof energy or, instead, one that followed an energy-neutral approach.
260. Regarding the respect for domestic policy objectives, the rights to regulate the ownership,
access to and use of, natural resources, her delegation shared the views that the negotiations should be
conducted on the basis of respect for domestic policy objectives and the need to increase the
participation of developing countries in the energy services trade.  She also supported all proposalsthat referred to the right to regulate.  Public ownership of natural resources was outside the scope of
the services negotiations, and it would be appropriate to clarify that the right of access to and use of
resources would also remain outside of the negotiations.  Regarding the suggestion for a reference
paper in the sector, her delegation wanted to learn from the proponent any additional considerations
they might have in that respect.  Venezuela would be assessing the effects that the adoption of areference paper had in the telecommunications sector.
261. In order to have significant commitments in the sector it was necessary to have a
classification that reflected the reality of markets.   There were very few commitments in the energy
services sector, essentially due, inter alia , to a lack of a comprehensive coverage of those services in
MTN.GNS/W/120.  It was necessary to continue exploring the most appropriate way to deal with thatapparent gap.  She requested clarification on the classification aspect of the proposal by the United
States.  Paragraph 10 of that proposal referred to "the Index of Energy Activities".  Additionally, at
the end of the proposal there was an Annex A, entitled "Index of Classification of Energy Services".
In the text of the proposal there was not reference to the said Annex A;  She wondered whether
Annex A was the Index referred to in paragraph 10.  A second question for the United States wasabout the meaning of the phrase "energy activities id entified as not falling within the GATS" in that
same paragraph.  Regarding the proposal by Chile, specifically the last part of paragraph 35 of
S/CSS/W/88, she referred to paragraph 13(b) of their proposal, which stated that "The strategic
character of energy services makes it essential that such negotiations should take special care to
advance in coordination with negotiations related to other aspects of the GATS, particularly
emergency safeguard measures, government procurement and subsidies (Articles X, XIII and XV
respectively)".  She requested clarification as to the meaning of the statement by Chile contained inparagraph 34 which said that "there has been a gradual trend towards internalisation of the
environmental costs of energy products…".
262. The representative of Australia supported the views that the negotiations should include
efforts to reduce barriers to trade and to improve regulatory frameworks to enhance clarity and
certainty for investors.  His delegation also supported the view that ownership of resources should notbe addressed as part of the negotiations.  In relation to the definition of energy services, his delegation
would like to remain in touch with those delegations considering that issue to share with them, or
obtain from them, more detailed information on sub-activities.  He had noted the proposal by
Venezuela to separate core and non-core activities, and said that that might be difficult to achieve, in
practice.S/CSS/M/9
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263. The representative of Japan referred to the issue of classification of energy services  and the
scope of the proposals.  He requested clarification as to whether the proposals by the United States
and by Norway included generation in their scope.  He said that whether the production of energy,
such as generation, should be dealt with under GATS, as a service, or under GATT, as a good, was
still an important matter that needed to be discussed by Members.  He requested the views of the
United States, Norway, the European Communities, and Canada on that matter.  Regarding Annex Aof the proposal by the United States, he wondered about the basis for such a classification.  He also
requested clarification as to the checklist include d in the proposal by Norway.  He wondered how the
United States, Norway and the European Communities intended to deal with nuclear power in the
negotiations.  In that regard, the proposal by the European Communities stated, that subject to specific
conditions, nuclear power might be considered included in the list of activities in paragraph 6, and
requested clarification on that.  Regarding the objectives of regulations, his delegation felt that some
policy objective should be recognized, for instance, regulation for environmental protection,conservation of natural resources and stable development, regulation to ensure performance and
quality control to protect consumers, and regulation to  keep energy security or ensure stability of the
supply.  Regarding the suggestion for a reference paper, the classification of energy services and the
scope of the negotiations in relation to the sector should be discussed by Members before any
discussion on a reference paper could take place.
264. The representative of Mexico stated that in his country this sector was mostly publicly owned
and  practically a monopoly.  That fact would limit his delegation's efforts to liberalize and
participation in the negotiation would be subject to the margin of manoeuvre available.  Regarding the
issue of classification, the fact that various proposals had raised the question was of interest and
concern to Mexico.  Classification was more of a horizontal issue, of great importance in varioussectors.  Therefore, he reserved the right to express their position on that matter in the Services
Council or other forum.  He wondered how the delegation of the United States intended to use a
reference paper in this sector.  In fact, that mean t applying the approach used in relation to basic
telecommunication services to energy services, two totally separate sectors;  with very specific
characteristic of their own.  Regarding the proposal by Venezuela, its section C stated that "Theoutcome of these negotiations should be instruments, commitments and measures… ", and he
wondered what that meant, given that the negotiations were about specific commitments in schedules
or in other words, what instruments and measures  Venezuela was referring to as distinct from the
specific commitments.
265. The representative of Canada observed that her delegations' views on the classification of the
sector had been already expressed in the Committee on Specific Commitments.  The issue was a
complex one that required further discussion at a later stage.  Regarding the possibility of a reference
paper for energy, she wondered how the United States  and Norway intended to tackle that and what
they would be looking at.  As to the proposal by the United States, the first sentence of
paragraph I:B:3, the first sentence stated that "Competitive provision of energy services helps ensure
that energy consumers have access to efficiently produced, market-priced, reliable energy";  she
wondered how the United States intended to tackle the issue of access to energy services.  Similarly,
the proposal by Venezuela also referred to access to energy services, and the same question on how
that delegation intended to tackle the issue of access to energy services applied.  She also wondered
how they differentiated between access to energy service and access to energy good.  Additionally,
the proposal by the United States, in paragraph I:A:10, referred to "those energy activities identified
as not falling within the GATS", and she wondered  what those were.  Her delegation recognized the
importance of dealing with the issue of temporary en try of equipment/tools for the provision of energy
services; that was an issue that needed discussion in the Special Session of the Services Council or in
other fora, as Members decided.  She also wonder ed how developing country Members, particularly
Venezuela, would view the integration of the development angle in the energy sector negotiations.S/CSS/M/9
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266. The representative of Chile expressed appreciation for the comments made and questions
posed on the proposal by his delegation.  He would be providing answers at the next meeting
addressing the sector.
267. The representative of Norway noted the importance of energy services to the world economy
and also to his country, as a trading nation.  His delegation saw liberalization in the sector as holding
an enormous potential for improvement in cost-effectiveness globally, which should be in the interestof global trade.  He observed that, even though the proposals by the US, European Communities,
Canada and Venezuela varied, both with respect to scope and overall ambition, they shared some
fundamental elements.  For example, the need to specifically include trade in energy services in the
negotiations; the aim of the negotiations being to increase commitments of market access and national
treatment; strong emphasis on governments' right to regulate;  liberalization of energy services not
meaning an unregulated regime; need for clearl y defined and transparent government rules and
regulations; questions regarding ownership of natural resources falling outside the competence ofGATS and thus not relevant to the negotiations.  Those were important statements not only because
they guided Members in a common approach but because those that observed the negotiations had an
interest in such crucial issues and thereby learnt what the approach would be.  In many countries there
was a lively debate on the services negotiations and more would probably follow.  Those many
common features were very encouraging for the prospects for reducing trade barriers in that fieldduring the negotiations.
268. Regarding the questions posed concerning the scope of the proposal by Norway, the basic
idea was that energy services encompassed all services involved, such as, those in exploration,
development, extraction, production, generation, transportation, transmission, distribution, marketing
and consumption of energy products and fuels.  Given that many of those activities were closely inter-related, it was essential to take a broad approach when defining energy services.  As for the checklist,
the lack of a comprehensive approach, to the classification of energy services needed to be tackled in
one way or another.  Norway did not, at that stage, have a fixed position and would consider several
approaches, as long as they provided a basis for making unambiguous commitments.  There was merit
in establishing a new category for energy services in document MTN.GNS/W/120.  To assist in suchtask Norway had proposed the establishment of a model schedule or checklist for energy services,
which could also be a useful tool in assisting pa rties when defining what commitments they would
accept in the energy sector.  The approach followed in the proposal by the United States could also be
a useful tool in the negotiations.  However, that proposal did not fully reflect the fact that a significant
share of the world's production of oil and gas took place offshore.  For the purpose of offshoreoperations, highly specialized equipment and services provided in different phases of offshore oil and
gas activities had been developed, some of which were not included in the United States proposed
classification.  His delegation had great sympathy for the objectives in the proposal by Venezuela to
the effect that negotiations should lead to improve results for industries in developing countries.
Members had an obligation to try to subscribe towards that goal in accordance with the  negotiating
guidelines.  He requested more information from the delegation of Venezuela in relation to how the
negotiations should be approached to strengthen developing countries' domestic entrepreneurcapacity, technical development and protection of the environment, as suggested in paragraph  7 of
their proposal.
269. The representative of the European Communities referred to two specific issues concerning
the proposal by his delegation.  The first one was that the European Communities did not support
deregulation of the sector and recognized that Members would organize and regulate the energy sectorin accordance with their specific situation.  The second point related to the issue of classification, as
there was no specific energy chapter in MTN.GNS/W/120.  It would be important to continue work
on that front on the basis of the submissions in the Special Session of the Services Council but also
those in the Committee on Specific Commitments, so that Members would have a better
understanding of the scope of the negotiations.  The European Communities proposal listed a numberS/CSS/M/9
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of activities to give an idea of the way they understood the classification for the sector.  Regarding
questions posed to the EC, the classification approach suggested was a neutral one and not organized
by energy source.  Such a neutral approach for the energy sector did not in any way preclude or
prevent the possibility for Members to include specificities by sources of energy.
270. In relation to the United States proposal, he noted that there was no longer any mention of
decommissioning in the classification contained in that proposal, as there was in the classificationpreviously included in the United States submission to the Committee on Specific Commitments.  He
wondered whether the United States still considered  decommissioning to be covered by its proposal.
As for the proposal by Norway, on sectoral coverage, the annex on energy activities covered non-
energy specific activities, for example the leasing of energy equipment;  he wondered whether
Norway considered them as energy-specific activities or whether that list was to be considered as a
model schedule.  As for the proposal by Canada, he wondered why that delegation was only
addressing oil and gas and whether that implied that Canada favoured a classification approach basedon energy source.  As for the proposal by Venezuela, he requested clarification on the distinction
between core and non-core activities and wondered whether Venezuela was intending to submit a
classification proposal for energy services.
271. The representative of United States referred to questions posed on paragraph 10 of their
proposal.  She clarified that the "Index of Energy Activities" was the correct title for Attachment A.
That listing of energy activities included services that could be found within MTN.GNS/W/120, some
that might not be clearly included in W/120, and some which, on the basis of further discussion, might
not fall within the scope of the GATS, but instead be a GATT activity.  As noted in paragraph 10, the
deliberations on which of those activities included in the Index of Energy Activities was a service or a
good was an ongoing discussion.  Her delegation di d not have a firm position on the classification of
those activities at that stage, as it believed that a clearer understanding of the issue would emerge as
discussions of the negotiating objectives were conducted within the Special Session of the Services
Council.
272. The representative of Venezuela observed that questions posed to her delegation referred to
the development angle introduced in the proposal and how it could be implemented for the energy
services sector, the distinction between core and non-core activities, and the meaning of "instruments
and measures".  Answers to those questions would be provided at the next meeting where the sector
would be discussed.
273. Regarding the classification issue, the Chairman noted that there was an overlap between
technical subjects and subjects of a negotiating nature.  In the report of the Chairperson of the
Committee on Specific Commitments there was a reference to the fact that there had been some
discussion on the need to clarify the presence of the energy activities in the present classification.  He
suggested that an in-depth discussion might take place in that Committee.  Such a discussion would
not be necessarily conclusive but it could help avoid some repetition.  He noted doubts as to certain
aspects being goods or services, which was a rather complex issues.  The Special Session of the
Services Council might benefit from some groundwork made at a more technical level.
(j) Environmental services
Communications from:  the United States (S/CSS/W/25);  the European Communities
(S/CSS/W/38);  Canada (S/CSS/W/51);  Switzerland (S/CSS/W/76)
274. The representative of Switzerland said that environmental services occupied a special place
among economic activities.  They directly affected not only the environment itself, but also the
standard of health and the general well-being of the population.  As economic growth often had
adverse implications for the environment, envi ronmental services were becoming increasinglyS/CSS/M/9
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important.  The environment industry had developed significantly in countries where environmental
standards were particularly stringent.  Such countries had acquired a high level of technical and
practical know-how and, to some extent, were gradually shifting from an "end-of-line" approach to
one of prevention.  At the same time, countries with less stringent environmental standards were
facing major environmental problems, particularly in the areas of waste disposal, water treatment,
greenhouse gas emissions and biodiversity.  However, their awareness of environmental issues wasalso growing and more and more frequently environmental standards were universally adopted.
Consequently, from the standpoint of both exporting and importing countries, appropriate opening-up
of the environmental services market was a necessity.  Environmental problems being often global,
the transfer of technology and know-how was particularly important in the case of environmental
services, because it led to higher standards of public health and well-being worldwide.
275. The Committee on Specific Commitments had addressed the issue of the classification of
environmental services several times over the previous two years.  Its discussions had been mostuseful.  Clearly, the classification in MTN.GNS/W/120 was no longer adapted to present
circumstances.  It had been drawn up at a time when the focus was on end-of-line pollution control
rather than on prevention.  Environmental services should therefore include not only pollution clean-
up activities but also activities that involved in tegrating environmental concerns into production
processes.  New areas of activity had also emerged in environmental services.  In  order to enableMembers to make commitments better suited to the current situation, Switzerland was of the view that
the items under environmental services needed to be adapted.  Work should be continued in the
Committee.  Furthermore, in order to accommodate the gradual integration of environmental services
with other service activities, a suitable system had to be set up, enabling Members to make specific
commitments in related fields of activity.  He noted that nearly 50 Members had made specificcommitments in the environmental services sector.  Almost all of them had included in their schedules
of commitments sewage services, refuse disposal services, and sanitation and other services.  Slightly
fewer Member States had made commitments in the areas of air pollution and noise abatement and
nature protection.
276. The most important barriers to trade in environmental services were those which placed
horizontal limitations on the establishment of a commercial presence and the employment of nationals
of a company's home country.  The general investment scheme therefore had a considerable incidence
on market access conditions.  Members' schedules of commitments often contained restrictions on
foreign investment, form of establishment or ownership of landfills and treatment systems, as well as
requirements of joint training with local firms.  Economic needs tests were also frequent.  It was a factthat many countries with less stringent environmental standards had not made specific commitments
in the area of environmental services.  However, such countries might well face serious environmental
problems in the years to come.  By opening their borders to environmental services, they and their
inhabitants would be able to benefit from the cons iderable technical and practical know-how available
in other countries, particularly in the area of prevention.  Greater demand for those services would
lower prices.  As an objective for the current negotiations, Switzerland sought considerably less
stringent commercial presence requirements for environmental service suppliers.  Broader specificcommitments taken by more Members in respect of market access and national treatment mainly
under mode 3, but also under modes 1 where technically feasible and 2, would facilitate trade in
environmental services.  Finally, the need for mode 4 commitments had increased, as the focus on
prevention increased the importance of consultancy and engineering services.
277. The representative of the European Communities said that the proposals presented,
respectively, by the United States, Canada and Switzerland shared a lot of common ground.  The
primary objective of the European Communities communication, which was based on a previous
proposal presented in the Committee on Specific Commitments, was to eliminate unnecessary barriers
to trade and to increase country coverage.  This could result in potential gains for both trade
liberalization, environmental protection and sustainable development.  His delegation proposed a newS/CSS/M/9
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classification consisting of 7 sub-sectors of core environmental services, which would increase the
opportunities for commitments.  In addition, related services which were classified elsewhere but
were nevertheless important for the supply of core environmental services such as design,
engineering, consulting services, should be listed in a cluster or checklist, which could be used during
the negotiations for possible commitments.
278. The representative of the United States said that environmental services offered a potential for
commercial gains as well as the diffusion of technologies to improve environmental quality.  The
United States submission focused on several areas for future work, including transparency disciplines
and the importance of access to business services.  At that point, however, the key issue for the sector
was the lack of good classification.  The work in the Committee on Specific Commitments, which
followed from the work undertaken in APEC on a re vised classification, was an important step.  The
provision of environmental services required the use of a variety of services that were not traditionally
seen as being environmentally-related and were classified separately in W/120.  For instance, thevalue of a commitment on sewage treatment services diminished if there was not corresponding
access in construction, engineering and consultancy services.  Work on environmental services should
not impair governments' ability to impose performance and quality controls on environmental services
and to otherwise ensure that service providers were fully qualified to carry out their tasks in an
environmentally-sound manner.  He noted similarities by the European Communities and the proposalby Canada, such as the potential for win-win situations, the understanding that the current
classification was not satisfactory, and the proposal for a core and cluster approach.  His delegation
was still examining the proposal by Switzerland.
279. The representative of Canada noted that the Committee on Specific Commitments had made
good progress on classification issues.  In Canada's view, however, a few issues remained to be
resolved.  In relation with the last sentence of paragraph 6 of the United States proposal, she asked
whether the United States intended to propose a checklist or would endorse the list proposed by the
European Communities.  She sought further clarification regarding paragraph 14 of the European
Communities proposal, which referred to tax and subsidy measures as being horizontal issues having
an effect on the environmental sector.
280. The representative of Argentina noted that the proposals by Canada and the European
Communities contained similar concepts.  He enquired what the relationship was between the
activities described in paragraph 8 of the European Communities proposal which was also contained
in paragraph 6 of the proposal by Switzerland, with other activities which were not directly
environment-related.
281. The representative of Mexico said that the GATS could promote win- win situations in two
ways:  by facilitating access to technology and by favouring investment.  Transfer of technology was
to be preferred over trade sanctions in order to promote environmental protection.  He noted that,
according to Article XIV, the protection of the en vironment could justify exceptions to the rules.
Noting that Switzerland and Canada advocated opening up markets as a way to solve environmental
problems, he said that each country should be free to decide to what extent it was ready to open its
market, depending in particular on its level of development.  Opening markets was not the onlysolution.  Mexico did not share the view that the classification currently contained in W/120 was
obsolete.  His delegation was still analyzing the proposal made by the EC.  Mexico supported the
approach proposed by Canada on clusters.  It was of the view that related services should be
negotiated for their own merits.
282. The representative of the Czech Republic said that his delegation was in favour of improved
market access and national treatment commitments in the sector.  Clear and transparent classification,
in accordance with economic reality, was a necessary basis for negotiations.  The definition ofS/CSS/M/9
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environmental services was closely linked to eco-industry.  The Czech Republic could support the
European Communities proposal and was ready to discuss obstacles to environmental services.
283. The representative of the Republic of Korea said that the classification of environmental
services carried out in the Committee on Specific Commitments should be completed before the start
of the market access negotiations.  He noted that the United States proposal attempted to strike a
balance between trade liberalization and the right for governments to regulate.  Government controlshould be conducted in a transparent and arbitrary manner and should not serve protectionist
purposes.  The checklist proposed by the European Communities was a reasonable approach but care
should be taken to avoid possible inconsistencies in the negotiations.
284. The representative of Australia indicated that his delegation intended to submit a proposal in
this sector.  His environmental authorities could support in principle the European Communities
proposal.  The core environmental services proposed by the European Communities followed closely
the OECD/Eurostat classification, and would capture a large proportion of the industry.  Australia
could also support the European Communities suggestions made in relation to mode 4.
285. The representative of Brazil said that the United States proposal appeared to be more
consistent with the structure and principles of the GATS.  Referring to the first sentence of
paragraph 6 of the United States paper, he sought clarification on the United States position regarding
any new classification.  In the same paragraph, he asked which submissions the United States wassupportive of.  Brazil concurred with the statement in the last sentence of paragraph 7, which was true
for other service sectors as well.  With respect to the reference to "win-win" situations made in
paragraph 4 of the European Communities proposal, he pointed out that liberalization in agricultural
goods could also benefit the environment.  The approach, outlined in paragraph 7 of the European
Communities paper, of a core list complemented with a cluster or aide-mémoire,  was interesting
because it provided flexibility for scheduling co mmitments.  With respect to paragraph 13(a), he
asked what the European Communities had in mind when referring to the "specificities of how the
provision of these services is organised".  On paragraph 14, further clarification was needed
concerning the reference to tax and subsidy measures.  Turning to the proposal by Canada, he
enquired what was meant by "… improving the current framework of rules…" paragraph 4.  Heenquired whether Canada considered that the classification in W/120 should be revised.  With respect
to the proposal by Switzerland, he asked whether the classification proposed was similar to the one
presented by the EC.
286. The representative of Cuba said that the Kyoto Protocol should be adhered to.
287. The representative of Switzerland said that the existing classification had been drawn up at a
time when the focus was on end-of-the-pipe technology while it had now shifted to pollution control.
Since prevention-related services were not currently covered, there was a need to adapt the
classification.  He agreed that opening up markets was not the only way to solve environmental
problems, but noted that it could contribute to that objective.  The classification proposed by
Switzerland was similar to that presented by the EC , except for the reference to "water for human
use", which Switzerland had not included.S/CSS/M/9
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(k) Financial services
Communications from:  the United States (S/CSS/W/27);  the European Communities
(S/CSS/W/39);  Japan (S/CSS/W/42);  Ca nada (S/CSS/W/50);  Norway (S/CSS/W/59);
Australia (S/CSS/W/66);  Switzerland (S/CSS/W/71);  the Republic of Korea
(S/CSS/W/86)
288. The representative of Switzerland said that liberalization of financial services conveyed
benefits to the consumers, the financial sector itself and the overall economy.  Financial services
liberalization should not be confused with deregulation.  Liberalization of financial flows should be
done in the context of a strict framework in order to protect consumers, preserve financial stability
and mitigate systemic risks.
289. Turning to the details of the submission made by Switzerland, he said that the current
classification contained in the Annex on Financial Services enabled flexibility.  However, he notedthat in some schedules of specific commitments Members had found it difficult to integrate their own
regulatory structure into that classification, making the reading of commitments difficult and not
transparent.  He added that there were new products, particularly electronic products, which had
difficulty in finding a place in the current classification.  Also, the convergence between banking and
insurance activities made the classification of the Annex somewhat obsolete.  He therefore urged theCommittee on Trade in Financial Services to discuss these issues and see whether these problems
could be overcome in the future.  Noting that about 30 Members had made commitments on the basis
of the Understanding on Commitments in Financial Services, he encouraged Members who had not
done so to undertake commitments according to that Understanding, using it as a minimum standard
for liberalization.
290. In his view, restrictions on commercial presence should be relaxed.  Additionally, he
considered that the distinction between modes 1 and 2 was somewhat blurred, particularly due to the
use of new electronic financial products.  He therefore encouraged Members to examine their
schedules with a view to ensuring greater consis tency between these two modes, and hoped that the
Committee on Trade in Financial Services would examine the relevance of bringing these two modesof supply together in the case of financial services.
291. He considered that the insurance sector deserved particular attention in the current
negotiations.  This sector had experienced numerous disruptions since the 1990s, when Members had
made commitments in this area.  However, he believed that consolidation in the sector had ended and
Members could now take commitments, particularly wi th respect to life insurance, intermediation and
auxiliary services.  In the case of banking, although many commitments had already been made, many
of them were subject to important reservations, particularly in the areas of brokerage, asset
management, settlement and clearing services, and supply and transfer of information.  He therefore
encouraged Members to take commitments in these banking subsectors.
292. He then said that it was necessary to ensure th at liberalization of trade in financial services be
accompanied by a solid prudential regulation and supervision.  However, it was important to give
Members plenty of room of manoeuvre so that they could take the necessary steps when problemsarose.  The complexity of prudential regulation had increased over the last years.  He considered that
the Committee on Trade in Financial Services should undertake work to identify the situations which
could be invoked under the prudential regulation exception.  The Committee should also seek to
collaborate more closely with international standard-setting organizations.
293. Finally, he said that financial services was the sector that stood to benefit the most from new
IT and telecommunications technologies.  He encouraged Members to undertake specific
commitments under modes 1 and 2, which were the modes having a greater bearing on e-commerce.S/CSS/M/9
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He encouraged the Committee on Trade in Financial Services to look into the consequences of the
increasing role of e-commerce in the area of financial services.
294. The representative of the Republic of Korea said that his country's proposal consisted of three
main parts, namely perspectives on financial services liberalization, modalities of negotiation, and
expectations from the negotiations.  First, the Republic of Korea recognized the importance and
necessity of further liberalization of financial services.  However, it also expressed concern that animprudent financial services liberalization without the establishment of sound financial systems could
have a negative effect not only on the financial sector but also on the economy as a whole.  He
therefore emphasized the importance for each country to establish a sound financial infrastructure and
a strong supervisory system in preparation for further liberalization.  Secondly, in the section on the
modalities for negotiations, the Republic of Korea recognized that the adoption of horizontal
commitments could enhance the level of liberalization of financial services.  However, he also
expressed concern about the proposals favoring the adoption by all Members of the Understanding onCommitments in Financial Services.  Also, he emphasized that credit must be given to autonomous
liberalization in the financial services area, in a ccordance with the modalities and criteria to be
developed by the Council.  Lastly, in the section d ealing with the expectations for the negotiations, the
Republic of Korea stated its position with respect to the liberalization of mode 3, MFN exemptions,
limitations at the sub-federal level, and cross-border trade, as well as on transparency in prudentialregulation.  The Republic of Korea believed that barriers to mode 3 needed to be gradually eliminated,
that MFN exemptions should be abolished, and that deeper regulation applied by sub-central
governments needed to be discussed.  Regarding modes 1 and 2, the Republic of Korea was of the
view that liberalization should be limited to those se rvices that assisted other economic activities, and
not related to large scale capital movements.  With regard to prudential regulations, the Republic ofthe Republic of Korea believed that negotiations should not erode the right of financial authorities to
implement prudential regulations as described in the Annex on Financial Services.  However, the
Republic of Korea also believed that prudential regulations should be applied in a more transparent
and objective manner.
295. The representative of Japan limited his comments to the submissions by the United States and
by the European Communities.  Regarding the submission by the United States, he wondered what
part of the attachment on "Transparency and Other Principles for the Regulation of Financial
Services" was considered to be sector-specific, since most of the provisions in the attachment seemed
relevant to all service sectors.  He also sought the United States' views on the division of labour
between the Working Party on Domestic Regulation and the Committee on Trade in FinancialServices in developing rules on domestic regulation applicable to the financial sector.  Finally, he
considered that the attachment to the submission by the United States included some provisions
related to the necessity aspect of domestic regulation on financial services.  Specifically, he drew
attention to the provisions on product approval in  the insurance sector.  In that regard, he was
interested to know how the United States saw the relationship between these particular provisions and
the so-called "prudential carve-out clause" contained in the Annex on Financial Services.
296. Turning to the submission by the European Comm unities, he confirmed that Japan shared the
European Communities proposal that Members schedu le their commitments in accordance with the
Understanding on Commitments in Financial Services.  He also shared their views regarding the need
to eliminate MFN exemptions taken for the purpose of reciprocity.  Lastly, he asked the European
Communities to confirm whether they favoured the applicability of the necessity test to prudential
regulations.  Also, he asked the European Communities to give some indications on how theapplication of the necessity test would affect the prudential "carve-out" or the conduct of the
regulatory and supervisory activities by financial authorities.
297. The representative of the United States said  that the WTO financial services negotiation
concluded in 1997 was a significant step towards opening global financial markets.  However, theS/CSS/M/9
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United States believed that there were benefits for all economies in further liberalization of trade in
financial services, including for insurance, banking, securities, asset management, pension funds,
financial information, financial advisory, and other financial services.  He said that liberalization of
trade in financial services, when undertaken in conjunction with transparent and strong regulatory
regimes, benefited countries in many ways, some specific to the financial services sector and others
related to the overall health of their economies.  A strong and vibrant financial sector was particularlyimportant for emerging economies to provide the needed infrastructure for trade in a diverse range of
goods and services, for example, in the tourism and computer services sectors, or for trade in
agricultural goods.
298. He said that the initial proposal by the United States contained general benchmarks for
financial services liberalization, recognizing that WTO Members may require certain flexibility on a
sector-specific and mode-specific basis.  The proposal contained two complementary elements:  first,
common commitments constituting fundamental liberalization of market access; and, second,transparency in developing regulations, transparency in applying regulations, and other principles for
regulation of the sector.  The United States believed that all the elements in these two areas needed to
be considered by all WTO Members, to ensure that their economies fully benefit from financial
services.  He emphasized that the benchmarks discussed in the proposal were without prejudice to
provisions such as paragraphs 2 and 3 of the Annex on Financial Services.
299. He then commented on the submissions made by the European Communities, Japan, the
Republic of Korea and Australia.  He welcomed the comprehensive and technically detailed
submission by the European Communities, but he requested further elaboration on its intention to
"tackle regulatory issues in this sector", and whether this would include transparency as well as other
regulatory framework issues.  On the submission by Japan, he requested further elaboration on themechanisms by which improvements in the identified key areas would be envisioned.  He also
wondered whether Japan could elaborate on its intentions with regard to the improvement of
"arbitrary and opaque administration."
300. Regarding the submission by the Republic of Korea, he welcomed the call for removal of all
barriers to commercial presence by foreign affiliated  financial services providers, but considered that
the suggested gradualism was generally not warranted.  Indeed, the benefits of foreign commercial
presence, which included capital infusion, risk diversification, new products, and enhanced
competition, were only deferred by gradualism.  With respect to the submission by Australia, he
associated himself with the proposal that all Members review restrictions in the priority areas
Australia had identified and looked forward to working with Australia to develop appropriate
negotiating mechanisms.
301. He replied to one aspect raised by Japan, on the relevance of the attachment to the submission
by the United States to all sectors.  In that regard, he said that, while similar principles might be
applied in sectors other than financial services, the United States had developed this specific proposal
for this sector because it was a highly regulate d area, meaning that there were potentially more
benefits from transparency, and because existing provisions, such as on prudential measures, should
reassure regulators of their ability to  fulfil their fundamental responsibilities.
302. The representative of India supported the use of the definitions contained in the Annex on
Financial Services to schedule commitments.  Noting that many submissions had as their objective the
removal of restrictions between domestic and foreign suppliers in the application of laws, regulations,
and practices, i.e. full national treatment, he indicated that India was willing to look at this.  He
thanked Canada for recognizing the needs of developing countries.  In particular, he welcomed thesubmission by the Republic of Korea;  he found that  a lot of issues were worthy of consideration,
especially from a developing country perspective.  He agreed with their approach that the objective of
negotiations on this sector should be the gradual removal of various obstacles and barriers.  He alsoS/CSS/M/9
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subscribed to the proposal of granting credit for autonomous liberalization in this sector.  In addition,
he shared the Republic of Korea's view in paragraph 14 of its proposal that cross-border transactions
should be limited to those which assisted economic activities, since India was particularly concerned
that cross-border transactions could lead to volatility.
303. The representative of Thailand shared the comments made by India on the submission by the
Republic of Korea.  She said that Thailand had already made extensive commitments on financial
services and that in the present situation there was little else they could be requested to commit on in
this sector.  Against that background, she considered that the submissions by the United States and the
European Communities were very ambitious.  She was open to consider some issues, such as the use
of the definitions contained in the Annex on Financial Services.  However, she considered that some
other issues raised by the United States, such as those contained in paragraphs 13 and 14 of their
proposal, were matters subject to negotiation.  Talking about "grandfathering", she wondered what
were the acquired rights for commercial presence th at the United States wanted to protect in this
sector.  Additionally, she said that Thailand ha d some reservations on the attachment to the
submission by the United States on "Transpare ncy and Other Principles for the Regulation of
Financial Services", although she had taken note of the statement made by the United States
representative at this meeting.
304. On paragraph 12 of the submission by the European Communities, she said that Thailand was
not ready at that stage to consider undertaking commitments on the basis of the Understanding on
Commitments in Financial Services, for the reasons expressed earlier.  Additionally, she said that the
goals set out in paragraphs 15 and 16 were ambitious, and constituted a matter for negotiations.  On
paragraph 17, she asked the European Communities what grandfathering or safeguarding of existing
investments meant.  Finally, she took note with appreciation of the statement contained inparagraph 21 with reference to the "prudential carve-out".
305. She considered that the submissions by Australia and Canada were pragmatic.  In that regard,
she took note of Canada's mentioning the needs of developing countries, and was interested in hearing
further about Canada's suggestion to have phased-in commitments.
306. The representative of Norway said that all proposals submitted highlighted that liberalisation
of financial services could benefit countries, which was in line with his delegation's proposal.  He
agreed with those delegations that stressed the importance of regulatory standards and practices, and
looked forward to discussing this more thoroughly.  He took note of the work carried out in the
Working Party on Domestic Regulation about transparency and other regulatory issues.  Although he
had not had time to look at the submission by the Republic of Korea in detail, he nevertheless agreedthat massive movement of capital could have negative effects on both the financial system and the
stability of emerging markets' economies.  He added that transparent and strong regulatory systems
were important aspects, particularly when liberalization was undertaken in conjuncture with the
abolition of controls to capital movements.  Liberalization should also optimally take place in an
environment of macroeconomic stability and, preferably, in a climate that fostered foreign direct
investment.  Commercial presence of foreign financial institutions might in itself increase the
financial system stability, by promoting the adoption of advanced financial practices and know-how.
307. He said that in its submission, Norway encouraged all Members to adhere fully to the broad
definitions set out in the Annex on Financial Services, and the Understanding on Commitments in
Financial Services.  In his view, the Understanding offered a comprehensive and transparent basis for
scheduling commitments, while the Annex on Financial Services clearly allowed for prudential
regulation.
308. The representative of the European Communitie s highlighted three key elements in their
proposal.  First, they suggested that commitments be  scheduled in accordance with the UnderstandingS/CSS/M/9
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on Commitments in Financial Services, because it was the best way to introduce more consistency
and clarity in the schedules of commitments.  For modes 1 and 2, they proposed that commitments
allow for the cross-border provision of transport insurance, reinsurance, auxiliary services, and the
transfer of financial information, as well as allow residents to purchase a wide range of financial
services abroad.  Commitments on mode 1 should be consistent with those on mode 2, and any
restriction maintained under the latter should be duly justified.  In the case of mode 3, the EuropeanCommunities proposed the gradual granting of full fo reign ownership rights, the abolition of any form
of discrimination with regard to the form of legal establishment, and the grandfathering of existing
investments.
309. He replied to some of the questions raised by Japan about regulatory issues.  He said that
work on domestic regulation should first progress horizontally in the Working Party on Domestic
Regulation, although that did not preclude the possibility of developing specific disciplines for
individual sectors if it turned out to be necessary.
310. The representative of Mexico made a few preliminary comments on some of the proposals.
He first asked the United States representative how his country intended to use the attachment to its
proposal on "Transparency and Other Principles for the Regulation of Financial Services", and
whether it was planning to incorporate it as part of the Annex on Financial Services.
311. He then asked the European Communities what was meant by "more coherent sets of
commitments" in paragraph 12 of their proposal.  Regarding the submission by Switzerland, he
wondered what was meant by a review of current prudential regulations, and whether that would lead
to a change in the provisions contained in the Annex on Financial Services.
312. Finally, he agreed that one of the objectives for the negotiations on financial services was the
elimination of all MFN exemptions.
313. The representative of Australia found the United States approach of setting out general
benchmarks for financial services liberalization and of proposing the development of transparency
and other principles for regulation very interesting.  She agreed with the United States and others that
greater transparency disciplines could make a major contribution to the process of trade liberalization
in this sector, and she expressed an interest in exploring this issue further.
314. On the submissions by Canada and the United States, she agreed that the definitions contained
in the Annex on Financial Services were still relevant, but requested more information on their
proposals regarding further commitments under mode 2.  Regarding the submission by Japan, she
joined others in requesting further information about the meaning of "opaque administration of
regulation".
315. She found the submission by the Republic of Korea very interesting, and agreed with it that
transparent and objective prudential regulations were important to avoid their use for protectionist
purposes.  She asked the Republic of Korea whether more information could be provided on its
proposal regarding infrastructure development.
316. On paragraph 4 of the submission by Switzerland she agreed that a number of issues were
relevant for the work of the Committee on Trade in Financial Services, and that an important part of
the pre-negotiations phase would be technical work.  In that regard, she suggested that the Secretariatkeep a listing of such issues raised in all the proposals during that and the following two special
sessions of the Council for Trade in Services in order to see if, at the end of the October meeting, the
Council could decide how to deal with those technical issues in the most efficient manner.S/CSS/M/9
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317. The representative of Malaysia shared the views about the importance of this sector for all
Members;  that was why Malaysia was cautious in it s consideration.  He asked those arguing in favour
of further liberalization of financial services as being positive for consumers and exporters of
financial services what would happen to the domestic industries in countries like his.  He said that at a
certain point in time in the development process, countries like his would need to have capable and
strong domestic industries, able to compete domestically and also export their financial services.
318. He fully supported the approach by the Republic of Korea in terms of gradualism, because
liberalization in the GATS was meant to be progressive.  In his view, that was a point that should be
factored in, not only with regard to the liberalization in this sector but in others as well.  In terms of
flexibility provisions, he noted that his approach differed from that contained in the submissions by
Canada and the United States.  In the latter, flexibility was understood as phasing-in liberalization
over time; while in his view, Article XIX:2 of the GATS meant that developing countries were
allowed not to open sectors if they were not able to.  In this context, he said that liberalizationundertaken as a result of the financial services negotiations concluded in 1997 was what the
Malaysian market could bear, and that liberalization had been done in a manner that fitted his
country's economic development plans.  Therefore, he did not see that Malaysia could move beyond
that stage in the current negotiations.  He added that further consolidating and strengthening of the
financial sector was a prerequisite before his country could undertake further commitments.
319. Regarding the proposal made by the United States on transparency, which in his view looked
at the issue with a high level of ambition, he agreed that this was important but also that provisions
should be of such a nature that Members could live up to their commitments.  He did not believe that
transparency should be used to undermine or to question prudential measures applied by countries.
He agreed with paragraph 5 of the submission made by Canada that countries should have the abilityto take measures for prudential reasons and that this would not be restricted.  Regarding paragraph 20
of the submission made by Switzerland suggesting work on a definition of the exceptions contained in
the Annex on Financial Services, Malaysia did not believe that to be the appropriate way to proceed,
given the sovereign rights of Members to undertake prudential measures to ensure the stability of the
financial system.
320. Turning to the issue of electronic commerce, he said that in the event of a problem stemming
from the actions of a particular foreign financial institution with no commercial presence in the
market, the authorities of the country concerned would not be able to control that particular
institution, and therefore financial instability would arise because of lack of financial responsibility.
He put a note of caution in that respect.
321. The representative of Uruguay made some comments and questions on the submissions tabled
by Canada, the United States and the European Communities.  Firstly, with respect to Canada's
proposal that Members implement gradually their commitments or phase them in, he said that special
and differential treatment for developing countries went beyond just phasing-in commitments.  That
was expressly recognized in Article XIX:2 of the GATS, and in paragraph 12 of the negotiating
guidelines and procedures adopted by the Council.  Secondly, he requested further information on the
issue of grandfathering, which had been raised in the submissions by the United States and theEuropean Communities.  Finally, on the proposal by the United States on domestic regulation, in
particular the issue of transparency, he wondered how that delegation intended to proceed given that
the Working Party on Domestic Regulation was already working at the horizontal level on this issue.
322. The Chairman said that some overlap between issues raised in the proposals and issues
discussed in the subsidiary bodies was unavoidable.  But he also considered that it would be desirable
if as a result of this meeting, the subsidiary bodies could deepen their technical groundwork so as to
help the special session of the Council.S/CSS/M/9
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323. The representative of Venezuela understood from  the submissions by Canada and the United
States that the incorporation of additional disciplines on transparency would take account of the
special needs of the financial sector.  In that regard, she said that articles 26 and 62 of the Constitution
of the Bolivarian Republic of Venezuela contained participation mechanisms and provisions allowing
for the access to documents of any character containi ng information of interest to the community.  She
added that Venezuela had signed treaties that promoted transparency, such as the Treaty of the Groupof Three. Her country's legislation had mechanisms of participation which were consistent with those
proposals, including provisions in Article III of th e GATS to set up enquiry points for the provision of
information to Members on request.  She said that the submission by Canada did reflect Venezuela's
needs as a developing country, and was in line with the provisions in the GATS and the negotiating
guidelines and procedures.  Furthermore, with re spect to paragraph 10 of the submission by the
United States, she asked for further information as to what was meant by greater flexibility on a
sector-specific and mode-specific basis.  Also, sh e asked what was meant by broader application of
the MFN principle.  Regarding the proposal in paragraph 15 of the submission by the United States to
eliminate quantitative limitations on the number of service suppliers, she said that according to
paragraph 2 of Article XVI of the GATS, Members could maintain or adopt this kind of measures as
long as they had been specified in their schedules.  For this reason, it would be impossible to accept
that particular proposal from the United States.
324. The representative of Indonesia made some preliminary comments on certain issues.  She
sought further clarification from the United States  on how their proposal on Transparency and Other
Principles for the Regulation of Financial Services would be discussed, in light of the work carried out
in the Working Party on Domestic Regulation.  Regarding the submission by Canada, Indonesia could
subscribe to the objectives as cited in paragraph 9 of the proposal, particularly its fourth bullet.  Onthe submission by the Republic of Korea, she welcomed its approach on autonomous liberalization,
and looked forward to discussing this issue further.
325. The representative of Argentina said that the opening up of the sector carried out in the 1990s
had been bound in their schedule of commitments, which practically did not contain any restrictions
on market access and national treatment.  He acknowledged the importance of financial servicesliberalization at the national and international level, but at the same time pointed out the importance of
proceeding gradually.  On the submission by the United States, particularly the attachment on
Transparency and Other Principles for the Regulation of Financial Services, where a reference was
made to regulations instead of measures, he said that could imply a double standard of disciplines.
Also, since the same attachment dealt with matters of a horizontal nature, he wondered which of itsprovisions were meant to be specific to financial services.  Finally, he asked whether those proposed
initiatives could be channelled through Article XVIII of the GATS on Additional Commitments.
326. The representative of Brazil subscribed to the statements by the delegations of Argentina and
Uruguay.  Although he acknowledged the importance of financial services liberalization, he said that
the flexibility allowed for developing countries under Article XIX of the GATS was particularly
important in this sector.  This was an aspect highlighted in the submissions by Canada and the
Republic of Korea.  On the regulatory principles and transparency, he subscribed again to thecomments made by Argentina and Uruguay, and added that the standard-setting organizations had a
limited membership, and the observance of standards set by them was voluntary.  With regard to the
proposals made regarding the adoption of specific commitments in line with the Understanding on
Commitments in Financial Services, he said that only 31 WTO Members, none of them developing
countries, had adopted such an approach.
327. The representative of Jamaica agreed with the comments made by the Republic of Korea,
Malaysia, and others, in stressing the importance of putting in place strong regulatory and supervisory
systems as a critical component to provide a stable domestic financial sector and before undertakingS/CSS/M/9
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further liberalization measures.  She also stressed the importance of proceeding gradually, respecting
the level of development of financial markets, especially in developing countries.
328. The representative of the Philippines recalled the principle of progressive liberalization and
flexibility for developing countries.  In his view, these principles translated first in the gradual
removal of barriers and restrictions; and, second, in flexibility for opening fewer sectors, liberalizing
fewer types of transactions and progressively opening market access.  Given the particularsensitivities of this sector, it was particularly important for developing countries to look at the
proposals in this light.
329. Commenting on the proposals submitted, he said that the Philippines did not foresee any
problems in using the definitions contained in the Annex on Financial Services for scheduling specific
commitments.  However, on the submission by the United States, he took careful note of the proposals
in paragraphs 13 and 14.  He said that several developing countries had liberalized to the extent that
could be accommodated by their domestic markets, and trying to go further could compromise thedelicate balance that these countries had sought to achieve after the financial crisis in the second half
of the 1990s.  Similarly, he looked with interest as to what the United States and the European
Communities in their proposals would consider as the appropriate definition and scope of acquired
rights.  He said he was aware of reference made in other bodies stating that the concept of acquired
rights had not been defined in any international agreement or forum.  It was therefore important tohave a clear understanding of what was covered by that concept.  He added that the Philippines was
still reviewing the attachment to the submission by th e United States and that they would revert to it at
a later stage.  He noted the reference contained in paragraph 21 of the submission by the European
Communities on the importance of prudential measures.  Finally, on the submission by the Republic
of the Republic of Korea, he agreed with the statement made by India in subscribing to the approachtaken by that country.
330. The representative of Switzerland said that his country strongly believed that governments
needed important room for manoeuvre in the field of prudential regulation in order to react quickly
and efficiently in case of financial difficulties.  This was a concern for all WTO Members, not only
for some of them.
331. The Chairman suggested that delegations having made proposals could supplement them,
with a view to clarifying some of the issues ra ised.  Such supplements could then be circulated.
(l) Tourism services
Communications from:  the Dominican Republic, El Salvador and Honduras
(S/C/W/127 and Corr.1);  the Dominican Republic, El Salvador, Honduras, Nicaragua
and Panama (S/CSS/W/19);  the United States (S/CSS/W/31);  the European
Communities (S/CSS/W/40);  Japan (S/CSS/W/42);  Canada (S/CSS/W/54/Rev.1);
Switzerland (S/CSS/W/79);  Chile (S/CSS/W/88)
332. The representative of Switzerland introduced his delegation’s proposal, noting that tourism
was the world’s largest industry, and had very high growth rates.  The sector was of great importance
for developing countries, which had a comparative advantage due to the high labour intensity.  Someobstacles still remained, and therefore greater opening would be beneficial.  Regarding classification
issues, the sector was difficult to define;  Switzerland’s proposal was based on the MTN.GNS/W/120
classification.  Results from discussions of the proposal from the Dominican Republic, El Salvador
and Honduras in document S/C/W/127 should be integrated into the current discussion, while
recognizing that air transport was essentially excluded from the GATS.  The level of existingcommitments was high, he noted, while the most frequent barriers were restrictions on establishment
of small-scale hotels and new bars and restaurants, citizenship requirements for tourist guides and forS/CSS/M/9
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liquor licenses, etc.  Switzerland proposed that commitments be improved, including in the “Other”
tourism category, which .  Mode 4 restrictions also had to be re-evaluated.  The “Other ” category
offered flexibility for scheduling tourism-related services as mentioned in S/C/W/127;  Members, for
example, had already scheduled tourism management services and convention services under this
category.  He added that commitments must not be  made at the expense of sustainable development
and protection of the environment.
333. The representative of the Dominican Republic, also speaking on behalf of El Salvador and
Honduras, welcomed the other proposals, and noted that their proposal included provisions on anti-
competitive practices, consumer protection, access to information, cooperative mechanisms, etc.  The
tourism “cluster” in their proposal was not intended as a checklist, but instead for regulatory purposes.
They were convinced that a deficiency existed in the Uruguay Round agreements with respect to
competition policy.  He was surprised that Switzerland’s proposal wished to address competition
issues in audiovisual services, but not in tourism.  However, he agreed with Switzerland with respectto the importance of sustainable development, protection of the environment, etc.  On paragraph 10 of
the proposal by the European Communities, he asked the reasons for the suggested exceptions on
commercial presence.
334. The representative of Japan welcomed all the tourism proposals, and the recommendations for
further liberalization.  The level of existing commitments was high, he noted, but many restrictions
still remained.  The representative of Thailand also expressed appreciation for the proposals, and
noted the importance of tourism exports for Thailand and other developing countries.  She stated thatThailand had some reservations regarding the creation of a tourism reference paper or annex, and
would provide specific comments at a later stage.
335. The representative of Cuba observed that international tourism had special significance for a
large number of countries, and urged Members to look at Article IV in this respect.  On document
S/C/W/127, Cuba was particularly interested in the issue of anti-competitive behaviour, and the
representative highlighted point 8 of the proposal.  He noted that other proposals also addressed
aspects of the problems faced by tourism destination countries.
336. The delegation of the Czech Republic agreed with other delegations that classification issues
should not be an obstacle to addressing tourism in a comprehensive manner.  They were not
convinced that it was the right moment to create disciplines on anti-competitive practices, and
preferred the approach of the proposal by the European Communities.
337. The representative of the United States welcomed the other proposals, and thanked the
Secretariat for organizing the Tourism Symposium held in February.  His delegation's proposal built
upon S/C/W/127 with respect to hotels, and focused on ways to generate investment by reducing
barriers.  At the same time, the United States also recognized the importance of sustainable
development.  The United States encouraged new tourism commitments, and had listed remaining
barriers in their proposal.  Creation of a reference paper was proposed with respect to conference
organization.  Regarding the other proposals, his delegation preferred to focus on core activities, and
favoured a checklist approach with respect to tour ism-related activities.  The United States agreed
with other delegations that it was not the right place and time to address competition issues.  Onconsumer safeguards, his delegation questioned the need to address this matter, as Members already
had the right to regulate for such purpose without creating specific GATS provisions.  On access to
information, it was not clear that international rules were required, as individual countries already had
such provisions.  On GDS, he had questions with respect to commercial arrangements, costs, etc.  He
would also add a provision to S/C/W/127 that consumer access to Internet, and other, reservationsystems should not be restricted.  He noted that air transport had a separate review.  Para 7.3 of
S/C/W/127 was not clear as concerned the requirements for technical information, while the quality
standards in para 7.5 were not defined, and appeared to be overly broad.  Concerning the EuropeanS/CSS/M/9
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Communities proposal, he questioned the reasons for the exclusions, and asked who would make such
determinations.  His delegation agreed on the European Communities mode 4-reference, he stated.
On Norway’s proposal, he agreed with the need to respect sustainable development and protection of
the environment.
338. The representative of Australia also welcomed the proposals, stating that the sector was of
importance to Australia, especially in respect to modes 2 and 3, and that Australia looked forward to
negotiations with trading partners.
339. The representative of Canada noted that many of the barriers listed in the United States
proposal concerned mode 4 issues, and asked how the suggested tourism reference paper related to the
United States proposal on movement of natural persons.  She also asked Switzerland to give
information on how their suggestions for the “O ther” tourism category would avoid overlaps with
existing W/120 classifications for other sectors.
340. The representative of Turkey observed that tourism was a very successful sector for Turkey,
and that the government provided assistance to investors and conducted promotional activities.  He
gave full support to the proposal of the Dominican Republic, El Salvador and Honduras, including the
creation of an annex, as well as to negotiations on market access.
341. The representative of Argentina welcomed the proposals.  He noted that the existence of a
large number of commitments seemed to be contradicted somewhat by the many barriers listed.
Perhaps some barriers were actually connected with other sectors, he stated.  If so, this needed to be
clarified.  He suggested that Members create an illustrative list of potential commitments under
Article XVIII, with respect to the barriers listed.  His delegation would prefer this to an annex or a
reference paper.  The Chairman asked if Argentina could provide the Special Session with any listing
they had developed.  The representative of Argentina replied that they had nothing yet on paper, but
would work with the Secretariat.
342. The representative of the European Communities noted that tourism was one of the most
important and fastest growing sectors, with very  positive impacts on employment and growth. The
European Communities commitments were already quite comprehensive.  He urged Members to
remove remaining restrictions, including on FDI.  Despite the problems with classification, hisdelegation did not consider this a major obstacle.  As a tool for negotiators, a cluster approach could
be sufficient.  On the United States proposal, he asked if the barriers listed could be tackled under a
traditional market access approach, why a reference paper was necessary and what were the
regulatory and competition issues concerned.  He shared Canada's interest in a checklist, but asked
what was meant by “tailor-made” checklists.  On S/C/W/127, he had doubts on the suitability ofannex, as the proposed cluster was too wide and some issues were outside the GATS.  Members might
need, however, to consider competition policy in the WTO.   He asked if the Dominican Republic, El
Salvador and Honduras were planning any proposals regarding market access.  Air transport issues
should be referred to the air transport annex review, he stated.
343. The representative of Brazil concurred on the large number and breadth of existing
commitments, and noted that liberalization, especially in mode 3, was primarily in the interest of the
country of destination.  The removal of mode 2 restrictions in origin countries was also sought.  Hisdelegation was still analyzing the specific problems raised in S/C/W/127 and other proposals.  More
concrete examples of barriers and how they woul d be addressed under the GATS, would be useful, he
stated.  Brazil was still not convinced of the need for an annex.  At the Tourism Symposium, the
competition problems identified seemed to be most prevalent in the air transport sector.  Those issues,
he stated, should be addressed in the annex review.S/CSS/M/9
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344. The representative of Uruguay said tourism was a “win-win” situation for Members, and that
they needed to identify the best ways to promote further liberalization.  He agreed there were many
commitments, but still much room for improvement, and urged a pragmatic approach.
345. The representative of St. Lucia stated that a comprehensive approach to negotiations was
useful, including the development of pro-competitive principles and measures regarding access to
distribution systems.  Small and medium-sized enterprises could be disproportionately impacted byanti-competitive practices, which resulted in increased revenue leakage.  GATS Article IX provided
an opportunity for further discussion.  The lack of disciplines on air and maritime transport, she
stated, might have a greater negative impact on St. Lucia than the barriers listed in the proposals.
Taxation and real estate issues were also important.  She agreed with the EC question on the United
States proposal, and said that St. Lucia was asking its domestic providers to provide a listing of the
obstacles they encountered.
346. The representative of Norway noted the importance of tourism, and said that obstacles faced
by incoming and outgoing tourists, currency restrictions, and barriers to establishment were among
the issues that needed to be addressed.  Her delegation was not convinced the annex proposal
approach was productive.
347. The representative of Switzerland, with respect to classification issues, said his delegation
believed that expanded use of the existing categories could be useful.  The current structure of W/120
must be preserved, he stated.
348. The representative of the United States, with respect to Canada’s question, said that the
proposed United States reference paper essentially referred to problems under mode 2 faced by
outgoing travellers leaving their country.  The United States did, however, favour discussion of
mode 4 issues.  On the European Communities question, his delegation believed that the obstacleslisted in the United States proposal probably could be dealt with in the existing negotiating structure.
Regarding conference organization, while many of the problems faced actually concerned goods, the
United States proposal focused on the information-related aspects on the services side.
349. The Chairman concluded by noting that several delegations had stated that they would be
circulating written questions, and urged that these be given to the Secretariat for general circulation,
together with any written responses.  While developing countries appeared to have a competitive
advantage in tourism, he observed that the negotiating proposals focused more on business
opportunities.  Claims that certain issues fell outside of the GATS did not help developing countries to
deal with them, he noted.
(m) Transport services
Communications from:  the European  Communities (S/CSS/W/41),  Japan
(S/CSS/W/42),  Norway (S/CSS/W/59);  Hong Kong, China (S/CSS/W/68);  Switzerland
(S/CSS/W/78);  the Republic of Korea (S/CSS/W/87);  Chile (S/CSS/W/88)
Maritime transport services
350. The Chairman recalled that, at the previous meeting, following a request by the delegation of
the Republic of Korea, it had been agreed that the Secretariat would prepare a compilation of
Members' commitments in maritime transport services, as well as update its background paper on
maritime transport services (S/C/W/62).  He had been informed by the Secretariat that those two
papers would be ready for the meeting at which the proposals related to transport services would be
taken up for the second detailed discussion, either in July or in October.  He also recalled that therepresentative of Panama had requested that Members reflect on how best the Council shouldS/CSS/M/9
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approach its mandate to review the effects of the continued suspension of Article II in international
shipping, auxiliary services and access to and use of port facilities, as required by paragraph 4 of the
1996 Decision on Maritime Transport Services contained in document S/L/24.  He suggested that
delegations give some thought to how this revi ew should be taken up, whether in the regular or
special sessions of the Council, and when it should be conducted.
351. The representative of the Republic of Korea introduced his delegation's submission by
underlining that maritime transport was an essential infrastructural service accounting for 80 per cent
of the transport of goods worldwide and even for 99 per cent in the case of the Republic of Korea.  He
remarked that there remained numerous barriers to  trade in this area which should be addressed;
negotiations should resume promptly on the basis of the decision contained in document S/L/24 and
all Members should participate.  He said that the negotiations should not discard the results already
obtained in the Uruguay Round and in subsequent negotiations.  They should also be comprehensive
in scope and should include multimodal transport, in ternational maritime transport, auxiliary services
and access to the use of port facilities.  His delegation supported the model scheduled and he hoped
that the Council for Trade in Services would soon establish a basic framework for the negotiations,
including negotiating structure, scope and timeframe.  Among the limitations that should be addressed
were limitations on equity holdings by a foreign company;  restrictions on the establishment of branch
offices by foreign carriers;  discriminatory treatment of foreign flag carriers or vessels in the cargoreservation system or cargo sharing schemes;  restrictions on the use of shipping agents;
discriminatory taxation measures, port dues and discrimination against foreign carriers in the use of
port services.  His delegation welcomed the work undertaken by the Secretariat on the compilation
and on the background paper and expressed a wish that this documentation would be circulated
sufficiently in advance of the meeting.
352. The representative of Chile introduced the maritime part of their submission by indicating that
90 per cent of its external trade was seaborne.  Negotiations would have to based on the three pillars.
Her delegation supported the objectives contained in the European Communities proposal, such as the
elimination of foreign ownership restrictions, of lim itations on establishment, of governmental cargo
restrictions and of restrictions to the access to/use of port services.
353. The representative of Japan introduced the maritime part of their submission by  indicating
that the negotiations should be based on the model schedule and its three pillars, that cabotage was an
issue needing careful consideration and that multimodal transport was an important issue.
Commenting on the proposal by Norway, he indicated its agreement on the use of the model schedule
and of its three pillars, as well as the accent on multimodal transport.  He also appreciated their idea ofa checklist, agreed that there should be few, or no MFN exemptions, and that MFN exemptions could
not cover countermeasures.  He also agreed on the maritime part of the proposal by the delegation of
Hong Kong, China on logistics services.
354. The representative of the European Community introduced the maritime part of their transport
proposal by indicating that it covered the four modes of delivery and was based on the three-pillar
approach plus the multimodal aspects.  The delegation of the European Community thought that the
movement of empty containers and the feedering in cabotage traffic could be considered if they werefollowing or preceding an international sea leg.  There was a clear link there with multimodal and
door-to-door services and this corresponded with the recent evolutions of the industry.  They were
looking for the binding of existing practices and substantial liberalization;  port services should not be
forgotten in that respect.
355. The representative of Norway found the debate on maritime transport encouraging and
introduced his delegation's proposal by indicating that Norwegian shipping companies alone were
employing 75,000 people of 50 different nationalities.  He indicated that it considered the European
Communities proposal as being close to its own, in particular with regard to the use of the modelS/CSS/M/9
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schedule, the accent on multimodal transport and the use of the three pillars.  Their proposal contained
in its "checklist" new and alternative ways of scheduling multimodal commitments, including
cabotage.  On MFN exemptions, their proposal wa s self-explanatory.  Commenting on the proposal by
Japan, he indicated his agreement with the use of the model schedule, with the MFN issue and with
the use of document S/L/24 as a starting-point.  He expressed interest in the logistic aspect of the
proposal by Hong Kong, China and marked its agreement to the multimodal aspects contained in theproposal by the Republic of Korea.  He underlined that multimodal transport and cabotage should not
be limited to containers.  In that respect, too, their "checklist" contained interesting suggestions.  As
far as the negotiations were concerned, he wanted them to take place in the Special Sessions of the
Council.
356. The representative of Hong Kong, China intr oduced the maritime aspects of his delegation's
proposal by underlining the great degree of convergence between the proposals tabled until then, in
particular on the three pillars, the model scheduled and S/L/24 as a starting-point.  He also expressedhis agreement on the position by the delegation of Norway on MFN exemptions. His delegation had a
strong interest in logistic services and on harbour services.  The aim was for harbours to become hubs
and to generate value-added.  Commitments woul d help these developments since they would
encourage foreign investments by predictable rules.  A critical mass was needed in that respect.
357. The representative of Singapore indicated his general agreement with the maritime proposals
tabled until then and underlined their commonalties:  model scheduled, three pillars, multimodal
transport, the reference to the decision on maritime transport and, thereby to existing or improved
offers as a starting-point.  His delegation was interested in the definition of multimodal transport
contained in the proposal by the Republic of Korea as well as in the "checklist" contained in the
proposal by Norway.
358. The representative of New Zealand expressed his agreement with the maritime proposal
tabled by the representatives of Hong Kong, China, the European Communities, Japan and Norway.
359. The representative of the United States considered that some of the proposals addressed issues
outside the scope of the GATS.  That was the case for maritime cabotage.  Commenting on the
proposal by Norway, he wondered if the suggestions  on MFN exemptions contained in paragraph 42
were only for maritime transport and how Norway reconciled those suggestions with existing MFN
exemptions in other sectors, which in many instan ces seemed to contradict the ideas put forward by
Norway.
360. The representative of Norway answered the question posed by the delegation of the United
States by indicating that MFN exemptions should only cover preferential situations and not situations
less favourable than the MFN standard.  He suggested further discussion on that issue to take place at
a later stage.  He also indicated his agreement with the proposal of the European Community and
stressed his delegation's  attachment to safety considerations and to the work of the International
Maritime Organization in that regard.
361. The representative of Australia indicated that the model schedule, complemented by
multimodal aspects, was a good basis for work but that if it did not prove effective his delegation
would support a more flexible approach.  He indicated that his delegation would soon be making aproposal relating purely to maritime aspects.
Air transport services
362. The representative of Chile introduced the air transport part of her delegation's proposal by
indicating that Chile had always followed, in recent years, an open sky policy, be it nationally,
bilaterally, regionally or multilaterally.  She thought that the air transport review process should beS/CSS/M/9
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intensified with a view to enlarging the scope of th e GATS.  In particular, a clarification was urgently
needed on what constituted services not directly related to traffic rights.
363. The representative of Japan drew the attention of the Members to the air transport annex
review process and considered that any proposals regarding air transport should first be examined
there in the presence of experts from capitals.  The Chicago regime was functioning properly and
ICAO was playing an important role, not only for safe ty measures, but also for trade issues, and this
should be taken into account.
364. The representative of the European Communitie s introduced the air transport part of their
proposal by indicating that, without prejudging th e air transport annex review, negotiations should
take place to improve commitments on the three items already covered, namely:  aircraft repair and
maintenance;  computer reservations systems;  and selling and marketing of air transport services.  In
addition, consideration should be given to how to undertake commitments in a series of supporting
services such as ground handling services, airport services, rental and leasing services, servicesauxiliary to all modes of transport when delivered in an air transport context.  There were also
services already covered elsewhere in the CPC, such as rental and leasing, catering, franchising and
crew training.  Transit was also a subject of interest.
365. The representative of New Zealand welcomed the proposals by the delegations of the
European Communities, Norway and Chile and indicated that they would soon table a proposal on air
transport.  The proposal would not prejudge the review process.  The GATS was already covering
certain aspects of air transport and the future proposal from New Zealand would be centered on the
exiting scope and its extension.
366. Commenting on the European Communities' proposal, the representative of the United States
welcomed the acknowledgement by the European Communities of the limited scope of the GATS to
three items, but saw some contradictions with the reference, in paragraphs 40 and 41 of their proposal,
to services not covered, in the United States  view, by the Annex.  Commenting on the proposal by
Norway, he made the same remark about the activities listed in paragraph 56 of the proposal.  The
representative of the United States also asked the delegation of Norway whether they intended to cut
short the review process and, if that were the case , the United States questioned the basis for such as
approach.
367. The representative of Australia considered that no opinion should be expressed in the Council
on the coverage of the air transport Annex since this would prejudge the outcome of the review.
Finally, the representative of Norway expressed his support for the proposal from the European
Communities and insisted on his delegation's attachment to safety standards.  The delegation of
Norway was ready to take commitments on any extended scope of the Annex resulting from the
review.
Land transport services
368. The representative of the European Communities indicated that their proposal was covering
also land transport services, which was an important element of multimodal transport.  As far as road
transport was concerned, the proposal covered international transport of passenger and freight andmaintenance.  Some duly justified exceptions might have to be accepted for mode 3.  With regard to
rail transport, the proposal covered maintenance and repair.
Services auxiliary to all modes of transport / Logistics services
369. The representative of Switzerland introduced his delegation's proposal by underlining the
central role of auxiliary services in a modern "just in time" economy where door-to-door services hadS/CSS/M/9
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become a common practice and where the mastering of not only transport aspects, but also insurance,
customs, fiscal and administrative aspects had become essential.  The importance of those services
was clearly going to expand in the future.  The "jus t in time" delivery principle was generating a lot of
empty movements which freight exchange could alleviate;  however, in order to accomplish this,
freight exchanges should be opened to foreigners on a non-discriminatory basis.  The proposal by
Switzerland was covering all the services listed in MTN.GNS/W/120 under auxiliary services.  Thoseservices were extremely heterogeneous and even more so were the scarce commitments undertaken
until then. Freight forwarders had to use intermediari es or were forced into joint ventures.  Excessive
bonding requirements, which were a common practice, imposed a particular burden on small and
medium-sized enterprises.  Preferential tariffs could act in a similar manner. Small road transport
companies had difficulties finding multimodal partners to terminate the trip.  The development of
freight exchanges should be encouraged to help the development of combined transport, to which
Switzerland was particularly attached.  Importers, exporters and consumers would benefit form suchcommitments.  Hence, they were proposing a drastic improvement of commitments by Members in
this sector.
370. The representative of the European Communities indicated that his delegation's transport
proposal also addressed auxiliary services and asked the delegation of Hong Kong, China on how its
logistics proposal would be incorporated in the negotiations.  He asked a similar question of thedelegation of the United States regarding their proposal on express delivery services.
371. The representative of Hong Kong, China indicated its wish that Members undertake as many
commitments as possible on the subsectors mentioned in the consolidated list.
372. The representative of the United States aske d the delegation of the European Communities to
define exactly what they meant by "other servic es" since those services were not followed in the
proposal by a CPC code.
Concluding remarks on Item D
373. Concluding the discussion on the complete agenda item, the Chairman said that Members
needed to decide on how the proposals would be  divided into two groups for a more detailed
discussion at the meetings in July and in October.  On the basis of the number of subjects and theintensity of the debate, he suggested that at the July session Members address proposals relating to
mode 4, other horizontal issues and sectors up to and including distribution services.  Proposals
addressing sectors listed after distribution services would be taken up in October.
374. It was so agreed.
375. The Chairman also invited delegations to submit their questions in writing, both to the
proponents and to the Secretariat for circulation to all Members.  Answers could also be circulated in
written form.  He then suggested that it might be  useful to focus the discussion at the following
meetings and suggested that the Secretariat might highlight some issues as background reference, in a
non-exhaustive manner and while not preventing the raising of any other aspect.
376. The representative of the European Communities said that, while the objective of the
Chairman's proposal was clear, he was hesitant, as Members were still at the initial stages of
discussion, proposals were still being reviewed and additional ones were forthcoming.  He wasconcerned that a Secretariat paper might preclude the debate.  He suggested that, in order to better
structure the discussion, the Secretariat might produce, instead of the usual detailed minutes of the
meeting, a simpler record focusing on the questions raised.S/CSS/M/9
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377. The representative of Argentina said that the Chairman's proposal was useful, as a list of the
main elements raised might be helpful for capital-bas ed experts.  He also recognized the point by the
European Communities and suggested that a list of issues by the Secretariat might possibly be
produced after the second detailed discussion at the meetings in July and October.
378. The representative of Canada said that the European Communities suggestion for a record of
the meeting focusing on the questions raised was useful, added that questions could be submitted also
in writing and suggested that consolidating them in  a compilation might be helpful.  She could also
support the Chairman's suggestion, on the understanding that there would be flexibility for raising any
other issues;  she added that delegations would naturally be free to ignore the proposed list.
379. The Chairman proposed that the minutes be produced in the usual way and that he would
prepare, under his own responsibility, a summary of the discussion.  While he understood the spirit of
the Chairman's suggestion, the representative of the European Communities felt that the debate was
still very open and that it would be difficult to identify more and less important issues.
380. The Chairman concluded that the Secretariat would not be preparing any list of issues;  it
would only produce a report of the meeting in its us ual form and it would introduce any corrections it
received to the synopsis of proposals in document JOB(01)/63 and update it with respect to new
proposals.  He stressed that the proposals themselves continued to be the reference for the discussion.
As for the work of the subsidiary bodies, he did not call for a decision at that stage, but noted that theChairpersons of the subsidiary bodies were all present and could take up issues in their respective
bodies if they so wished.  The representative of Australia asked whether the Chairman was suggesting
that the Chairpersons of the subsidiary bodies ta ke guidance from the discussion and draw their own
conclusions.  The Chairman explained that his suggestion was that the Chairpersons promote the
discussion and test Members' interventions at the Special Session in their respective subsidiary body;
he noted that delegations could always object to given issues being raised.
381. The representative of Venezuela noted the low participation of developing countries to the
discussion, which was a result of their limited capacity and of the volume of work.  She called for the
minutes of the meeting to be made available as early as possible, and said that the synopsis in
document JOB(01)/63 was a useful resource.  She echoed Australia's comment on the guidance to thesubsidiary bodies from the Special Session;  she stressed that no guidance could be drawn from the
meeting, as issues had been proposed for discussion in the subsidiary bodies on which no agreement
had been reached.
382. The representative of Paraguay, speaking on behalf of the Mercosur members, reiterated that
the synopsis of proposals in document JOB(01)/63 was a useful document.
383. The representative of the United States called for a predictable schedule of meetings in terms
of when given sectors would be taken up.  The representative of Norway sympathized with the
capacity problems of developing countries and in that regard concurred with the United States that a
more precise schedule of meetings might be helpful.
384. The Chairman said that he would try to prepare a more detailed schedule of meetings in terms
of sectoral discussion, but stressed that such a schedule could only be indicative.
E. OTHER BUSINESS
385. The representative of Paraguay, speaking on behalf of the Mercosur members, recalled that,
in its submission in document S/CSS/W/11, the delegation of Uruguay had requested that a standing
item on the outline of the Chairman's report to the General Council be added to the agenda of the
Special Session.  The item, which also appeared on the agenda of the Special Session of theS/CSS/M/9
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Committee on Agriculture, would provide a more complete idea of the content of the report which the
Chairman would submit to the General Council.  Uruguay had also asked that the report be submitted
to the General Council in writing and as an official document for circulation to delegations
sufficiently in advance of the corresponding meetin g of the General Council.  He indicated that, while
the latter suggestion had been taken on board, nothing had happened with respect to the former
request.  He therefore asked that an item on the outline of the Chairman's report to the GeneralCouncil be inscribed in the agenda of the Special Session of the Council for Trade in Services as a
permanent feature, in order to have equal treatment between the negotiations on services and on
agriculture.
386. The Chairman concluded that a standing item on the outline of the Chairman's report to the
General Council would be inscribed in the agenda of the Special Session.
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