RESTRICTEDWORLD TRADE
ORGANIZATIONS/CSS/W/6
29 September 2000
(00-3962)
Council for Trade in Services
Special SessionOriginal:  English
COMMUNICATION FROM HONG KONG, CHINA
Scope and Coverage of the Services Negotiations
and their Guidelines
The attached communication has been received from the delegation of Hong Kong, China
with the request that it be circulated to Members of the Council for Trade in Services.
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This paper is submitted in accordance with paragraph 2 of the “Roadmap” document agreed
by the CTS on 26 May 2000 and issued on 9 June as Job No. 3573.  The paper puts forward proposals
from Hong Kong, China both for the negotiations and the negotiating guidelines.
I. INTRODUCTION
2. The mandated services negotiations are now well under way and significant work is being
undertaken in the CTS – in both normal and Special Sessions – as well as the subsidiary bodies.  As
we delve deeper into the wide range of services issues that needs to be addressed, we have gained
useful knowledge both on what the negotiations should encompass and on how they should be guided.
And of course, in the run up to the Seattle Minister ial Conference and since then, there has been a lot
of sound thinking and proposals on what the negotiating guidelines should include.  Hong Kong,
China wishes to build on this work.
II. OBJECTIVES FOR THE NEGOTIATIONS
3. Hong Kong, China’s overall objectives for the negotiations remain:
(a) to achieve progressive trade liberalisation  in the whole range of services sectors by
broadening and deepening market access and national treatment commitments;
(b) to uphold the fundamental WTO principle of non-discrimination   by eliminating the
exemptions to the Most-Favoured Nation (MFN) treatment;
(c) to tackle vigorously barriers to trade in services arising from domestic regulations
and anti-competitive behaviour ;
(d) to ensure that the GATS rules  remain relevant and responsive to the needs of the
modern business world through developing new rules and disciplines, and clarifying
and if necessary, reviewing certain GATS provisions;S/CSS/W/6
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(e) to enhance the transparency and certainty  of the specific commitments and domestic
regulations; and
(f) to ensure that the package flowing from the above is wide enough in scope and
flexible enough in application,  to meet the aims and aspirations of all Members. A
balanced package is one most likely to achieve a successful result for thenegotiations.
III. NEGOTIATION OF SPECIFIC COMMITMENTS (ARTICLE XIX)
4. At the heart of the negotiations is the need to broaden and to deepen the specific
commitments of Members, by the reduction and elimination of the adverse effects on trade in services
of measures, as provided for under Article. XIX.  The Uruguay Round (and subsequent
telecommunications and financial services) commitm ents for market access and national treatment in
general did no more than bind what was the then legal regime of Members – and often less. Sincethen, actual liberalisation has proceeded apace, and many Members have felt the benefit of enhanced
competition, with improved services.  We must seek to achieve real and meaningful liberalisation and
commitments in this round of negotiations.
5. In approaching this aim, Hong Kong, China considers that the only logical starting point for
the negotiation of specific commitments is the current schedules .  This means we expect to
achieve significantly higher bound levels of commitments  by the conclusion of the negotiations.
6. In order to maintain the interest of all Members,  it is essential that the coverage of sectors and
modes be comprehensive.  That is: there must be no a priori  exclusion of any sector or mode of
supply.
7. Hong Kong, China considers that the main method by which specific commitments are
negotiated should be the traditional request-and–offer approach .  It is only through this bilateral,
focussed, approach that individual Members can achieve their goals.  However, Hong Kong, China isalso interested in developing other approaches, including clusters, model schedules and additional
commitments for regulatory principles , in the limited number of sectors where such would be
useful.  These ideas are developed in paragraphs 9 to 14 below.
8. The scheduling of Specific Commitments cannot be separated from attendant MFN
Exemptions that have been taken in many cases. MFN Exemptions are a fundamental derogation from
a key WTO principle.  All Members should be concerned at their number, their often broad andundefined coverage and the apparent lack of willingness to face up to their removal.  The ongoing
Review has highlighted that many Members have not yet started to consider the steps they will need
to take when the exemptions are to be removed before 2005, in accordance with the Annex.  It is
essential that the negotiations and the guidelines comprehensi vely cover:  the negotiation of the
elimination of the  MFN Exemptions;  a Review  of whether the conditions which created the
need for the Exemptions still prevail;  and the sy stemic issues that have arisen during the course
of the ongoing Review. Hong Kong, China aims for the total elimination of all MFN exemptions
by the conclusion of this round of negotiations or end 2004 whichever is the sooner.
IV. PRIORITIES FOR NEGOTIATION OF SPECIFIC COMMITMENTS
9. Bearing in mind paragraph 6 above, Hong Kong, China places a high priority on achieving
firm commitments, undertaken on a fully MFN basis, in the maritime and audio visual services
sectors.  In addition, Hong Kong, China would like to see a focus on three areas related to specific
commitments: our priorities on rule making are set out in paragraphs 15 to 19 below.S/CSS/W/6
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A. ECONOMICALLY RELATED SECTORS /MODES
10. Many current business activities are so structured that, for effective market access,
commitments in several sectors are necessary for service providers to operate effectively.  This is
particularly so in the key infrastructure services sectors of: finance; telecommunications; distribution;
transport; construction; and professional, computing and advertising under Business Services.  Withinthese, Mode 3 access is key. But so also is Mode 1 and Mode 4, and greater scope for frequent visits
by specialist personnel and intra corporate transfers.  Hong Kong, China views it as a priority to
obtain a comprehensive and balanced set of comm itments in these vital infrastructure sectors,
across all Members.
11. In addition, Hong Kong, China will encourage commitments covering several sectors (the
“clusters” approach) in areas where suppliers aim to offer a “one stop shop” approach and hence needwide ranging commitments.  Hong Kong, China’s priorities, inter alia , are: services relating to
logistics, distribution and delivery hub activities; project management and related activities;
and tourism. Hong Kong China will follow up with proposals in these areas.
B. N
ATIONAL TREATMENT
12. National Treatment (NT)  is very important, not only to provide fair access but also to
promote a healthy services sector.  Hong Kong, China will push for two goals in the area of NT:
(a) full NT  in mode 3, where mode 3 market access in provided;
(b) a clear agreement on the scope and reach of NT in modes 1 and 2  , so as to enable
Members to have confidence to make NT commitments in these modes.
C. ADDITIONAL COMMITMENTS
13. Hong Kong, China has noted the significant and highly beneficial impact of the basic
telecommunication reference paper, included by many Members as an additional commitment in1997.  We consider the reference paper approach is the most effective way to ensure that
effective market access is not impeded by restrictive business practices.   We believe that a similar
reference paper approach could be used to promote, inter alia , e-commerce as an activity
generally.
14. Hong Kong, China also believes that there may be scope for making additional
commitments in the area of transparency .  Transparency is a very important factor in achieving
genuine market access and a level playing field.  Clearly our work under Article VI:4 is highly
relevant here.  But Hong Kong, China sees merit in pursuing transparency in both the WPGR and in
the negotiations.
V. RULE MAKING WORK
15. Of equal importance to the  negotiation of Specific Commitments, is our work on GATS
Rules, primarily taking place in the Working Party on GATS Rules (WPGR) and the Working Party
on Domestic regulation (WPDR).  The negotiations of specific commitments and rule making
should proceed together and should aim for comparable levels of achievement.  The rule making
work should be concluded prior to the end of the current negotiations  and this should be spelt
out in the negotiating guidelines .  Hong Kong, China will focus as  a high priority on the following
areas.S/CSS/W/6
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A. SUBSIDIES
16. Subsidies can significantly distort trade and investment.  They are also an area where some
Members are able to offer incentives others cannot match.  Hong Kong, China  will seek to have
disciplines introduced, during the course of the negotiations,  to reduce or eliminate trade distortive
subsidies across a wide range of services sectors where they are prevalent.
B. ARTICLE VI:4
17. It is vital that domestic regulation does not act as a disguised barrier to trade.  The work under
Article VI:4 is thus very important to ensu re that MA/NT commitments are not thwarted.  Work on
Article VI:4 should be specifically hi ghlighted in the negotiating guidelines .  Hong Kong, China
considers that the accountancy disciplines made a good start in the area of professional services and
will seek, during the course of the negotiations, to have the principles therein applied to a wide rangeof professions. Hong Kong, China will also pursue a broad necessity test (to ensure that measures are
not more trade restrictive than necessary to fulfil broad, generic legitimate objectives), considerably
enhanced transparency, and clear and fair procedures where licensing and qualification issues are
concerned.
C. G
OVERNMENT PROCUREMENT (GP)
18. Hong Kong, China believes that GP should be brought within the ambit of the GATS
during the course of the current negotiations .  A suitable method of scheduling GP commitments
should be established early on, so that such commitments can be negotiated at the same time as the
others.  Such commitments should, inter alia , cover a high degree of NT and no MFN
exemptions .  Solid progress in GP should be a feature in the negotiating guidelines.
D. REVIEW OF THE GATS
19. Even after only five years of use, it is clear that the GATS is by no means a perfect legal
instrument. Hong Kong, China strongly believes that we must take the opportunity of the negotiationsto review certain GATS provisions.  This is to ensure that Members would have a clear understanding
on the scope and reach of the provisions concerned, without altering the basic structure of the GATS.
The negotiating guidelines should spec ially refer to a review of the GATS .  Hong Kong, China
would like in particular, to see Article V  (on preferential trading arrangements) and Article. XX:2
(on how to schedule commitments) reviewed.
VI. TIMING AND DURATION OF THE NEGOTIATIONS
20. The Roadmap has laid down the timetable for the initial phase of the negotiations up to
March 2001. The timing thereafter cannot be looked at in isolation from other built in agenda items of
the WTO and ongoing efforts to launch a Round.  However, it should be clear from the above catalog
of issues, that the issues in services are wide ranging and complex.  It is unrealistic to think that
substantive progress can be made on either the negotiation of specific commitments (with itsconcomitant need to consider scheduling matters) or the rule making work in a short period of time
21. Hong Kong, China proposes that by late 2001 Members should agree to table detail
requests and that this should launch  a period of intensive request-and-offer negotiations  on a
bilateral, plurilateral and multilateral basis, that should last up two years or until the end of the
New Round, whichever is later .
22. By late 2001  Hong Kong, China considers that substantial agreement should have been
reached on disciplines  in the rule making area .  Ideally the scope of new rules should be known byS/CSS/W/6
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the time serious requests-and-offer r nego tiations commence. And in any event, the new rules should
be finalised , ready for introduction, well before the conclusion of the negotiations.
VII. FLEXIBILITY FOR DEVELOPING COUNTRIES AND AUTONOMOUS
LIBERALISATION
23. Hong Kong, China fully subscribes to the provision of the GATS which provide for flexibility
for developing countries to undertake commitments in a progressive manner and with the objectives
of Article IV in mind.  We believe, however, that the liberalisation of services sectors, provided that
appropriate regulatory frameworks are in place, is in the overall benefit of all Members.  We thus
consider that the best approach to flexibility is to provide for realistic phasing in periods for
commitments for developing countries , rather than to consider the exclusion of sectors from
specific commitments.  We look forward to discussing with colleagues how to implement this aspectof Articles XIX and IV.
24. As regards autonomous liberalisation, it is in the interests of all Members that Members who
have undertaken autonomous liberalisation are encouraged to bind it fully (and more) in their
schedules.  But it is clear that such Members s eek to have their liberalisation acknowledged in some
way.  This is not an easy area where concrete steps can be taken to meet these aspirations. But Hong
Kong, China believes that the best way to tackle the issue is to have a dedicated session of the CTS
Special Session to discuss the issues involved .
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