RESTRICTEDWORLD TRADE
ORGANIZATIONS/FIN/W/29/Rev.1
17 September 2003
(03-4981)
Committee on Trade in Financial Services Original:  English
COMMUNICATION FROM ANTIGUA AND BARBUDA, BELIZE, FIJI ISLANDS,
 GUYANA, PAPUA NEW GUINEA, THE MALDIVES, SOLOMON ISLANDS
AND ST KITTS AND NEVIS
The GATS and the Annex on Financial Services
International Regulations and Financial Services
Revision
The attached communication has been received from the delegation of Antigua and Barbuda
on behalf of the above-mentioned delegations with the request that it be circulated to the Members ofthe Committee on Trade in Financial Services.  It contains a revised version of the document
originally circulated as S/FIN/W/29.
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This paper sets out some proposals to address certain specific concerns of small vulnerable economies
as it relates to the GATS and the Annex on Financial Services, international regulations and financial
services.  The multilateral trading system needs to  identify and implement responses to the issues
identified in this submission to overcome the inherent economic disadvantages faced by small
vulnerable economies.
I. THE PROBLEM
The sponsors of this proposal are small developing economies with limited administrative,
financial and human resource capacity to participate in the formulation and implementation of the
international standards relating to financing of activities that result in acts of terror, money laundering,capital adequacy requirements and harmful tax competition that are emerging from plurilateral fora
such as the Financial Action Task Force (FATF), the Basel Committee and the OECD. These
standards and codes do not comply with the WTO definition of standards created by relevant
international organisations. They are invariably formulated by developed WTO Members and
sometimes include several large developing countries that usually have adequate administrative
capacity to implement such norms and standards. Once determined, these plurilateral codes and
standards either become a condition of trade in the relevant sector or are imposed through threats ofsanctions and coercion on small developing states. Yet the participation of small developing countries,
which are frequently financial services suppliers and exporters, is required for a legitimate and
effective international regime to emerge in any of these areas.
The specific elements of the problem facing small developing countries in relation to
standards emerging from these fora are threefold.S/FIN/W/29/Rev.1
Page 2
1. The process of formulation of international financial standards
The interests of developing countries are not being considered in the formulation of these
standards which are created in international organisations which are not multilateral in nature.  Small
developing countries are not members of standard setting bodies. The OECD, the FATF and the Basel
Committee have limited membership. Small developing countries in general have not been givenadequate opportunities to participate in the formulation of these standards. The lack of resources and
in some cases technical expertise of small developi ng countries to identify the relevant issues of
concern to their interests constitutes a significant barrier in this regard. These standards are,
nonetheless, of crucial importance to the viability of a number of small vulnerable developing
countries since they threaten the removal of a major source of foreign exchange derived by the
exporters of financial services.
The content of these standards may in time be adopted by WTO dispute settlement panels and
the Appellate Body as evidence of international st andards in the area of financial services for the
purposes of the scope of States’ obligations under the GATS and the Annex on Financial Services. In
relation to the latter, there has already been a call by some WTO Members for greater usage of these
standards within the WTO context.
However, in the area of the formulation of standards the WTO is arguably clear: that all States
must have a right to participate in the formulation of a standard for it to be considered ‘international’
and thus applicable to all WTO Members. This is certainly the approach adopted by the WTO
Agreement on Technical Barriers to Trade. Although this Agreement only applies to standardsrelating to trade in goods, there are no valid reasons why its object and purpose should not also apply
to trade in services including in our case trade in financial services.
2. The effective implementation of these standards
In many cases developing countries with small administrations have found the
implementation of standards developed in plurilateral fora, which are increasingly imposed under
threat of sanction, requires WTO Members to adopt complex and onerous regulatory and
administrative machinery that detract from the ability of developing countries to evolve financial
institutions appropriate to their size and development status. For example, compliance with the
Harmful Tax Initiative of the OECD countries required developing countries that have no domestic or
off-shore  direct income tax regime to provide information on tax related transactions. No domestic
capacity to implement these imposed standards exists in such small developing countries.
3. The perceived failure of developing countries to implement  standards
The perceived failure of developing countries to implement standards established by these
standard-setting bodies (e.g. the FATF and the OECD) provides the basis for the application of
‘countermeasures’ or economic sanctions against these countries by members of the standard settingbody.  The compatibility of certain of these economic sanctions with the GATS commitments of
WTO Members may be questioned, but even beyond this there is a serious concern that relates to the
further marginalization of small vulnerable developing countries from meaningful participation in the
construction of the international trading system.S/FIN/W/29/Rev.1
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II. RELEVANT WTO PROVISIONS:
1. General Agreement on Trade in Services
- Article VI , paragraph 1
- footnote 3
- Article VI, paragraph 5
- Article XIV, paragraph (c)(i)
- Article XIV, paragraph (d)
- Article XXV
2. Annex on Financial Services
- paragraph 2
III. SPECIFIC PROPOSALS TO ADDRESS THE PROBLEM1
1. GATS
(i) Article VI, paragraph 1
- Existing Article VI paragraph reads:
In sectors where specific commitments are undertaken, each Member shall ensure 
that all measures of general application affecting trade in services are administered in a reasonable, objective and impartial manner.
- New Article VI paragraph shall read:
In sectors where specific commitments are undertaken, each Member shall ensure 
that all measures of general application affecting trade in services are administered
in a reasonable, objective and impartial manner. Members may delegate any aspect
of the administration of measures of general application to an appropriate regional
body.
(ii) Footnote 3 of Article VI(5)(b)
- Existing footnote 3 reads:
The term "relevant international organizations" refers to international bodies whose 
membership is open to the relevant bodies of at least all Members of the WTO.
                                                     
1 Proposed wording appears in italics and bold.S/FIN/W/29/Rev.1
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- New footnote 3 shall read:
The term "relevant international organis ations" refers to international bodies 
whose membership is open to the relevant bodies of at least all Members of the 
WTO. International bodies shall be deemed to be open to at least all Members of 
the WTO if:
(a) the terms of accession to that body are not dependent in fact or law on the 
level of development of the applicant and,
(b) the international body provides a programme of technical assistance to 
assure the full participation of all effected developing countries in the 
standard setting body.
(iii) Article VI  paragraph 5
- Insert new paragraph 5(c) to read:
(c) In determining whether a Member is in conformity with the obligations 
under paragraph 5(a) and where a standard is created by Members or a limited 
group of WTO Members in a manner not in conformity with obligations under 
paragraph 5(b), account shall be taken of whether appropriate consultation and 
notification* (insert new footnote 4) with other WTO Members can be deemed to 
have occurred.
- Insert new footnote 4:
4 "Appropriate consultation and notification" of standards pursuant of Article VI, 
paragraph 5(c) shall be deemed to have occurred when a WTO Member or group of
members establishing a standard:
(A) publishes a work programme containing its name and address, the 
standards it is currently preparing and the standards which it has adopted 
in the preceding period. A standard is under preparation from the moment 
a decision has been taken to devel op a standard until that standard has 
been adopted. A notice of the existence of the work programme shall be 
published in a national or, as the case may be, regional or international 
publication pertaining to such activities, and a copy of the work programmeshall be transmitted to the WTO Committee on Trade in Financial Services 
within 30 days from the publication of the notice.
(B) allows a period:
1) of at least 60 days for the submission of a written expression of 
interest to participate in the drafting of the standard; and
2) another 120 days thereafter, for the submission of comments on the
draft standard by interested parties within the territory of a Member of the 
WTO.S/FIN/W/29/Rev.1
Page 5
This period may, however, be shortened in cases where urgent problems of
national security arise. No later than at the start of the comment period, the
WTO Member or group of Members shall notify the WTO Committee on
Trade in Financial Services announcing the period for commenting in the
publication referred to in paragraph A. Such notification shall include,where relevant, a description whether the draft standard deviates from
existing international standards. The WTO Committee on Trade in
Financial Services shall ensure the dissemination of the notification to all
WTO Members.
(C) provides, or arrange to provide, a copy of a draft standard which it has 
submitted for comments free of charge, with the exception of the real cost of delivery, to WTO developing country Members.
(D) take into account and reflect, in th e further development of the standard, 
the comments received during the period for commenting.
"Appropriate consultation and notification" of standards pursuant of
Article VI, paragraph 5(c) shall not be deemed to have occurred when a
WTO Member or group of Members establishing a standard:
(a) applies sanctions or measures or threatens to apply sanctions or
measures against a WTO Member where that Member is unable to apply
the standard or measure due to a lack of technical capacity.
(iv) Article XIV, paragraph (c)(i)
- Insert new footnote at the end of the existing sub-paragraph (c) (i):
Subject to the requirement that such measures are not applied in a manner which
would constitute a means of arbitrary or unjustifiable discrimination betweencountries where like conditions prevail, or a disguised restriction on trade in services,
nothing in this Agreement shall be construed to prevent the adoption or enforcement
by any Member of measures:
(a) necessary to protect public morals or to maintain public 
order;
(b) necessary to protect human, animal or plant life or health;
(c) necessary to secure compliance with laws or regulations which are not 
consistent with the provisions of this Agreement including those relating to:
 (i) the prevention of deceptive and fraudulent practices or to deal with 
the effects of a default or services contracts* (insert new footnote) ;
*New footnote shall read: Measures invoked pursuant to this provision shall be
applied in a manner consistent with the definition of "appropriate consultation and
notification" in Article VI(5)(c).S/FIN/W/29/Rev.1
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(v) Article XIV, paragraph (d)
- Existing Article XIV paragraph (d):
(d) inconsistent with Article XVII, provided that the difference in treatment is
aimed at ensuring the equitable or effective imposition or collection of direct taxes in 
respect of services or service suppliers of other Members.
- New Article XIV, paragraph (d) will read:
(d) inconsistent with Article XVII, provided that the difference in treatment is 
aimed at ensuring the equitable or effective imposition or collection of direct taxes in 
respect of services or service suppliers of other Members.  Measures invoked 
pursuant to this provision shall be applied in a manner consistent with the 
definition of "appropriate consultation and notification" in Article VI (5)(c).
(vi) Article XXV
- Insert new paragraph 3, to read:
3. Where standards are developed pursuant to Article VI(5), technical 
assistance on a bilateral or multilateral level shall be provided to developing 
countries to implement the resulting standards or measures of general application 
within their economies.
2. Annex on Financial Services
(i) Article 2
- Insert new paragraph 2(c)
(c) When undertaking measures and introducing domestic regulations for 
prudential reasons pursuant to this Agreement a Member shall apply these measures and regulations in a manner consistent with the definition of 
"appropriate consultation and notification" in Article VI(5) of the GATS.
IV. FINAL REMARK
This proposal is without prejudice to individual country positions and to the rights of small
economies to submit additional proposals in future dedicated sessions or, otherwise, in other WTO
bodies on any issues contained in this paper and/or on any other issues not included here.
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