RESTRICTEDWORLD TRADE
ORGANIZATIONS/FIN/M/31
1 June 2001
(01-2754)
Committee on Trade in Financial Services
REPORT OF THE MEETING HELD ON 9 MAY 2001
Note by the Secretariat
1. The Committee on Trade in Financial Services held a meeting on 9 May 2001.  The agenda is
contained in airgram WTO/AIR/1546.  No ma tters were raised under Other Business.
A. ACCEPTANCE OF THE FIFTH PROTOCOL TO THE GENERAL AGREEMENT ON TRADE IN
SERVICES EMBODYING THE RESULTS OF THE FINANCIAL SERVICES NEGOTIATIONS
2. The Chairman recalled that at the last meeting the delegations of Poland and Uruguay had
provided information on the status of ratification procedures in their countries.
3. The representative of the Philippines informed the Committee that the Fifth Protocol was
scheduled to be deliberated upon in Plenary Session by the Philippine Senate on 30 June. He added
that it was a matter of time before the Protocol was successfully passed by the Senate.
4. The representative of Uruguay said that the situation he had reported at the previous meeting
had not changed. He added that the Ministry of Foreign Affairs was in contact with the Commission
on Foreign Affairs of the Chamber of Representatives in order to facilitate the conclusion of the
process.
5. The representative of Jamaica indicated that in her last update to the Committee, she had
informed Members that the Jamaican Ministry of Finance and Planning had been in receipt of the
letter from the WTO Director-General and was in the process of replying. The response indicated that
Jamaica was not opposed in principle to ratifying the Fifth Protocol. However, Jamaica decided to
delay ratification of the Protocol against the background of the difficulties which emerged in thefinancial sector in the mid 1990's which required a strengthening of the legislative and administrative
framework of the sector. Priority had been given to correcting existing weaknesses in the sector by
overhauling existing laws and regulations and strengthening and improving the supervisory and
monitoring capabilities. She noted that the costs to the citizens and Government of Jamaica to restore
stability to the financial sector had been 100 billion Jamaican Dollars, (over 2 billion US$) andtherefore, her government was taking very seriously the process of rebuilding the financial sector, and
of putting in place a more efficient regulatory system. She said that progress had been made thus far
in terms of improving the regulatory regime for de posit taking institution and work was in progress to
deal with the supervision of non-deposit taking inst itutions such as insurance companies, private
pension funds and security dealers. Legislation addressing non-deposit taking entities and insurancecompanies was being examined by Parliament. The adjudication and enforcement mechanism was
also being enhanced to deal with complex commercial litigation. She expressed the belief that upon
completion of these reforms, Jamaica would be in a position to meet its obligations under the
Protocol.  She was confident that the Committee as a whole would appreciate that time was needed
for Jamaica to put in place the necessary regulatory infrastructure, which in long term would bebeneficial to both consumers and providers of financial services in Jamaica.S/FIN/M/31
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6. The representative of Brazil said that the text of the Fifth Protocol was sent to the National
Congress in July 99. It had been approved by the Commission on Economics, Industry and Commerce
in February 2000, and by the Commission on Constitution and Justice in April 2000. In June last year,
it had been approved by the Commission on Finance and Taxation, and since August last year, it was
awaiting the setting of a date for vote at the Plenary of the Chamber of Deputies. However, that datehad not yet been set by that legislative body. It was expected to take place soon. He reiterated that the
length of procedures for the ratification of the Protocol was not related to any substantive difficulties
but to normal internal procedures.
7. The Chairman reminded delegations of the importance attached to the acceptance of the Fifth
Protocol by all participants, and encouraged Members concerned to accelerate their internal
procedures for acceptance.
8. The Committee took note of the comments made and decided to revert to this item at the
following meeting.
B. TECHNICAL ISSUES – SECTORAL CLASSIFICATION OF FINANCIAL SERVICES
9. The Chairman recalled that at the previous meeting, the Committee had a brief discussion of
this item, on the basis of a statement by Japan regarding the classification of Electronic
Communication Networks and other activities that rely heavily on new communications technologies,such as the Internet. At that time, a few delegations expressed interest in this issue, and indicated that
it was under study in their capitals; while others considered that the broad definitions contained in the
Annex on Financial Services already covered the service activities identified by Japan.
10. The representative of Japan took the opportunity to clarify his delegation's current position on
the classification issue in the area of financial se rvices. He said that Members should make their
specific commitments based on the definitions contained in the Annex on Financial Services. Japan
was basically satisfied with the existing definitions in that Annex. However, among the new types of
financial transactions that had emerged as the result of the recent developments in electronic
commerce, there appeared to be services that were not clearly classifiable using the existing
definitions. From that perspective, Japan had put forward its ideas on classification issues at lastOctober's Committee meeting, believing that further consideration of the matter might be useful for
the conducting the forthcoming negotiations on financial services. However, from the recent debate
on the issue, it appeared to Japan that most Members would not favour discussing the issue further.
Therefore, although Japan's basic position had not changed - that is, that the classification of certain
financial services would perhaps need to be more clearly defined - if other Members did not wish to
conduct such an exercise, Japan had no intention at all of insisting on its original proposal.
11. The representative of India said that although its capital was in the process of examining the
issue of technological neutrality vis-à-vis  financial services, India's preliminary view was that given
the bottom-up approach of the GATS, the commitments for new services delivered through new
technologies would have to be taken afresh and existing commitments would not apply to them. He
reserved his delegations position until the next meeting.
12. The representative of Thailand said that her Capital had began a study on this issue, but that
so far she was not ready to share with Members the initial conclusions reached. More time was
needed to do an in-depth study. She took note of the statement by Japan, but said that Thailand might
want to revisit this issue in the future.
13. The representative of the United States appreciated the flexibility by Japan in discussing this
agenda item. He reiterated the United States's position, according to which the definitions in the
Annex were comprehensive in terms of covering activities that might have been newly developedS/FIN/M/31
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since the previous negotiations, and consequently he did not believe that there was a need to revisit
these definitions. However, he took note that several delegations were still studying the issue, and
would look forward to hearing reactions from them at future meetings.
14. The Chairman said that the issue seemed to continue to be under study in several capitals and
acknowledged at the same time that some delegations considered that the Annex on Financial
Services already covered the services mentioned in the initial paper by Japan. He also encouraged
delegations interested in these technical issues to provide, if possible, their inputs in writing in order
to facilitate a substantive exchange of views.
15. The Committee agreed to revert to this item at the next meeting.
C. OTHER ISSUES FOR FUTURE DISCUSSION
16. The Chairman recalled that at the previous meeting the discussion under this item
concentrated on an oral proposal by Japan to invite the three main international standard-setting
organizations (the Basel Committee on Banking Supervision, the International Association of
Insurance Supervisors, and the International Organization of Securities Commissions) to give a
briefing on their activities in their respective area s of competence. In light of the support for this
proposal, he had thought it helpful to present, on his own responsibility, a draft outline for such an
event. The objective being also to provide additional elements for consideration by Members,particularly those that expressed some reservations or requested more time to reflect on the matter.
This outline, circulated as document Job(01)56, dated 1 May 2001, contained the basic elements of
the proposal as understood by the Chairman.
17. The paper had two substantive sections: one on modalities, and another on the agenda. The
section on modalities was meant to address concerns which had been raised by several delegations,inter alia  that the briefing session would not touch up on the interpretation of paragraph 2, concerning
prudential measures, under the Annex on Financial Services, and that no reference would be made to
individual countries. It had been the Chairman's understanding that there was agreement among
delegations on these points.
18. The section on modalities also raised three practical points on which the Committee had not
yet developed a common view: timing, duration, and collection of information in advance.
19. On timing, having considered several alternatives, the Chairman finally proposed that the
seminar be held back-to-back with the Special Session of the Council in which the negotiation
proposals on financial services would be discussed, most probably in October, in order to benefit from
the participation of capital-based experts. Regarding duration, the Chairman considered that a
maximum duration of one day would suffice.
20. On information gathering, although he believed that having information in advance would be
useful for delegates, it was not his intention to embark on a complex official information exchange
procedure. Therefore, he proposed to leave it up to the organizations to submit any appropriate
information to Members through the WTO Secretariat. In any case, those organizations would be
requested to take account of the agenda and modalities set out in the Chairman's note when selecting
the information to be circulated among Members.
21. Regarding the event's agenda, the Chairman had suggested that the sessions be divided
according to sub-sectors: Insurance, Banking and Securities. The presentations could be based on the
themes identified in paragraph 8 of the Chairman's note, which should be regarded as a checklist for
the speakers at the briefing session.S/FIN/M/31
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22. The representatives of Japan, Canada  and Chile  lent their full support to the Chairman's Note.
23. The representative of the European Communities agreed in general with the Chairman's Note.
Looking at the agenda, she suggested that the item on "applicability of standards to non-members of
the organization" be rephrased to express " by non-members of the organization". In reply, the
Chairman concurred with the suggestion from the European Communities.
24. The representative of Hong Kong, China agreed with the modalities contained in the
Chairman's note. Regarding the agenda, however, she proposed to add an item on "whether and how
these international organizations had taken liberalization into account in devising their regulatory
regimes".
25. The representative of Australia also agreed with the modalities set out in the Chairman's note.
On the agenda, he took note of the suggestion made  by Hong Kong, China and suggested also that an
item be added on "the development in the financial services industry since 1995, in the context ofstandard setting", to provide more focus to the discussion.
26. The representative of Uruguay supported the Chairman's note. However, regarding the
information to be requested from the organizations in advance of the meeting, he suggested that the
invitation should clarify that that information s hould be within the framework provided in the
modalities and the agenda contained in the Chairman's note.
27. The Chairman said that the organizations would be requested to submit information in relation
to the agenda and taking into account the modalities set out in his note.
28. The representative of Korea considered that the Chairman's note accommodated his country's
concerns, and that therefore he could support it. He suggested that the Committee should consider
changing the agenda item 8(f), on "any consideration for developing countries" to "any considerationfor the situation of developing countries", since in  his view the current drafting was not clear enough.
29. The representative of Malaysia, referred to th e report of the previous meeting contained in
document S/FIN/M/30, in particular paragraph 28, where Malaysia's statement had been reflected. He
considered that the said-paragraph did not seem to reflect what his delegation had stated at the
previous meeting. He then clarified that, although he had said that the new proposal by Japan did meetsome of his concerns, he had also pointed out that  there should have been no direct linkage with the
work of this Committee, that the seminar would not touch up on the prudential carve-out, that it would
be a one-off event, and that there would be no reporting to the Committee.
30. Turning then to the Chairman's note, he said that in principle he found it acceptable, however,
he had some comments. According to paragraph 2, th e objective of this exercise, was to provide for
an opportunity for those organizations to provide Members with information about their activities.  In
doing so, the organizations should refer to the agenda in paragraph 8, which was acceptable to him asit was drafted.  Also, in relation to the fourth bullet point in paragraph 3 of the Chairman's note, he
cautioned against the possibility that these organizations might come up with references to national
experiences in their papers and presentations. He said that that was a crucial point for his delegation.
In his view, it was not up to those international organizations to pass judgement on certain national
experiences. He therefore thanked the Chairman for mentioning, as part of the modalities, thatcountry-specific situations would not be identified and that the question of the prudential carve-out
would not be touched upon.
31. He shared Uruguay's views regarding the question of information gathering, but also took
note of the Chairman's statement that that info rmation would have to be provided taking intoS/FIN/M/31
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consideration the modalities and agenda set out in the paper under discussion. On the various
proposals made regarding the agenda, he expressed a preference for keeping the text as it was.
32. The Chairman confirmed that the event's objective was contained in the introduction to the
note. He also agreed with the representative of Malaysia concerning country specific situations, in the
sense that the latter would not be identified at the briefing session.
33. The representative of India said that he had no problems with the modalities and the agenda
for the briefing session set out in the Chairman's proposal.  He agreed that when requesting
information from international organisations, it would be useful to make reference to the agenda so
that information would be supplied in that context.   He suggested that the modalities listed in the
Chairman's proposal could be indicated in the form of a covering letter while circulating the agenda
for the briefing session, and to clearly set out in the latter that this was a one-off event, separated from
the activities of the Committee, and that the issue of the prudential carve-out would not be discussed.
34. The Chairman said that something along those lines could be done.
35. The representative of the Philippines found the Chairman's note useful in setting the
appropriate parameters within which this session would be conducted. He suggested however, that
reference to the one-off nature of this event be incor porated in the chairman's note.  He said he did not
find any strong rationale for objecting to the proposal of incorporating this note in the agenda in orderto guide the submissions to be provided by the inte rnational organizations.  He said he would have no
objection against the Australian proposal, since it would in fact provide more focus to the discussion.
On the Hong Kong, China proposal, he agreed that there was some merit to it, although he failed to
comprehend its implications fully.
36. The representative of the United States considered that the outline proposed by the Chairman
very adequately reflected the discussions and responded to a number of sensitivities raised.  In that
light, he was somewhat hesitant to consider changes to the document.  He said the points raised by
Hong Kong, China could be addressed by item 8(d) in the Chairman's note, on the "accomplishments
and problems in the process" of implementing the standards.  The word accomplishments would
certainly reflect the degree to which the standards had promoted liberalization.  He also wondered ifthe Australian proposal, regarding developments in the industry, might be covered by item 8(a) on the
purpose of standard-setting.  Obviously, developments  in the industry would provide the context for
the objective of standard-setting. He preferred to reach agreement on the basis of the current text. One
exception was the reference to the "one-off" nature  of this event, which was certainly his own
understanding of the discussion at the last meeting.  He suggested therefore to introduce a reference to
a "one-off stand-alone" event.
37. The representative of  Thailand said, regarding both the fourth bullet point of paragraph 3 and
item 8(d), that Members should be careful not to refer to problems encountered in particular countries
with the implementation of  some standards.  Like the United States, she hesitated to consider the new
proposals by Australia and Hong Kong, China.
38. The representative of Malaysia supported the US suggestion to introduce the expression "one-
off" event, since it was something he had asked for. Secondly, if the Australian and Hong Kong,
China's additions were to be introduced, then he would need to consult again with his authorities.
Therefore, he hoped Members could agree on that agenda which, in his view, covered what Australia
and Hong Kong, China mentioned.
39. The Chairman said that the expression "one-off stand-alone" would be incorporated.S/FIN/M/31
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40. The representative of Brazil said he could accept that change as long as it was the only one,
since he would also hesitate to make amendments to the document.  He also cautioned against trying
to accommodate the topics suggested by Australia and Hong Kong, China in the agenda.
41. The representative of Mexico said that, even though he was not asking for a review of the text
itself, he would like to indicate his understanding about three specific points. First, that this was a
unique event that would have no impact from the work of the Committee. Likewise, any result of this
exercise was completely independent from the work of the Committee.  Regarding the fourth bullet in
paragraph 3, although this was related to the experience of these organizations in establishing
standards, he considered it would be difficult fo r them to refer to countries specifically.  As he
understood it, the organizations established the rules horizontally, and countries adopted them to the
extent they agreed on them.
42. Secondly, regarding item 8(g) of the agenda, he expressed some doubts as to what was meant
by "present and future programme of work". He wondered whose programme the paper was referring
to.  He suggested to drop this or to clarify it by saying "present and future work of the Organizations
presenting information".  In addition, the information to be requested should only refer to the
establishment of standards as pointed out in  item 8 of the agenda.
43. Finally, he said that after the briefing there should not be any recommendations and that it
would be up to each country to judge the event by itself.
44. The Chairman clarified that item 8(g) referred to the current and future work programme of
the organizations.  He added that it was not the intention of the meeting to make recommendations to
countries. Delegations could draw their own conclusions, as this was a session for information only.
45. The representative of the European Communities said that she would accept the agenda as it
was.  Since the points mentioned by Hong Kong, China and Australia seemed to create problems for
Members, she suggested the adoption of the agenda as it stood.
46. The representative of Indonesia said he supported the outline, including the agenda, as it was
drafted, without the inclusion of the propos als made by Australia and Hong Kong, China.
47. The representative of Canada wondered whether the agenda could be adopted as it was. The
points made by Australia and Hong Kong, China could be addressed in the subsequent discussion,
after the presentations.
48. The representative of Panama said that the Chairman's note reflected very well what happened
at the previous meeting. He added that he was in agreement with the text.
49. The representative of Switzerland agreed with the Chairman's outline. Although he was
interested in the suggestion by Australia and Hong Kong, China, he agreed with Canada that these
could be addressed as questions during the seminar.
50. The representative of Turkey also gave his support to the text.
51. The Chairman concluded by saying that there was broad support for his paper. He also noted
that many delegations pointed out that they preferred to adopt the paper as it stood, with the inclusion
of reference to "one-off event" and the point made by the European Communities that item 8(e) of the
agenda read "applicability of standards by non members of the organization".
52. Taking into account also that the paper reflected, in the view of many delegations, a delicate
balance, the Chairman asked Australia and Hong Kong, China whether they would not insist on theirS/FIN/M/31
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suggestions. Since none of these two delegations objected, the Chairman invited the Committee to
take note of the statements made, to adopt the paper with the two changes suggested, and to request
the Secretariat to organize the briefing session in accordance with that outline.
53. The Committee so agreed. He then added that the revised outline for the seminar would be
circulated in the coming days.
D. RECENT DEVELOPMENTS IN FINANCIAL SERVICES TRADE
54. The Chairman invited Members to update the Committee on regulatory or economic
developments affecting trade in financial services.
55. The representative of the United States referred to the minutes of the last meeting, contained
in document S/FIN/M/30, to clarify that they had omitte d to mention that at the last meeting he had an
exchange of views with the delegation of Panama about the question of contributions regarding
national experiences. He recalled that during that discussion, both the US and Panama agreed that thisagenda item was a good opportunity for delegations to provide information on national experiences
with regulatory reform processes.
56. The representative of Panama agreed with the representative of the United States.
57. The Chairman suggested that the Committee take note of the statements and revert to this
agenda item at the next meeting. It was so decided.
E. DATE OF THE NEXT MEETING
58. The Chairman recalled that at the last meeting, the Committee decided to leave it to the
discretion of the Chair to decide whether or not to call a meeting at every cluster of services meetings.
59. He then proposed the deadline of 31 May for delegations to assess whether there was a need
to convene a meeting in the July "services cluster".  If Members wished to raise any substantive issue
in July, they should indicate that to the Chairman before 31 May.  If no indication was received by the
deadline, then the next meeting would be held in the October "services cluster".
60. The Committee so agreed.
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