RESTRICTED  WORLD TRADE  
ORGANIZATION  TN/RL/M/19 
26 October 2004 
 
 (04-4549) 
Negotiating Group on Rules  
 
 
SUMMARY REPORT OF THE MEETING 
HELD ON 21 SEPTEMBER 2004 
 
Note by the Secretariat  
  
1. The Negotiating Group on Rules ("the Group") held a formal meeting on 21 September 2004. 
A. 
ADOPTION OF THE AGENDA  
2. The Group adopted the following agenda: 
A. Adoption of the Agenda B. Regional Trade Agreements (RTAs) 
C.  Other Business 
 B. R
EGIONAL TRADE AGREEMENTS  
3. The Chairman indicated that the main issue fo r the formal meeting was the consideration of 
the submission by Chile distributed as document TN/RL/W/163 which raised a number of issues in connection with Article V of the GATS and for further discussion of the Chairman's Roadmap for 
Discussions on RTAs' "Systemic" Issues – Rev.1 .   
4. One participant proposed that discu ssions relating to the Chairman's Roadmap  be held in 
formal rather than informal mode as it would be  of interest to establish delegations' views on the 
record.  In response, the Chairman said that if par ticipants considered they c ould be as spontaneous in 
formal as in informal mode there was no reason not to record the entire discussion in formal mode.  
5. In introducing the submission by Chile, its sponsor said that it dealt with the determination of 
coverage in the sense of GATS Article V which was one  of the three areas iden tified by the Chairman 
in his Roadmap  paper.  GATS Article V permitted WTO Me mbers to conclude preferential economic 
integration agreements (EIAs) provided that three conditions were met:  subs tantial sectoral coverage; 
elimination of substantially all di scrimination among the parties;  and that they did not raise the level 
of barriers to Members not participating in such  agreements.  The first two conditions fell under 
Section I dealing with "Coverage" questions in the Chairman's Roadmap  paper and were the two 
aspects developed in this submission.  The first question that arose was how to assess "substantial 
sectoral coverage".  Footnote 1 to Article V:1(a) of the GATS defined the elements necessary to assess coverage in terms of the number of sectors cove red, the volume of trade affected and that there 
should be no a priori  exclusion of any mode of supply.  Th e submission raised a number of questions 
on each of these three elements which she hoped coul d be clarified through the Group's discussion.  
Regarding the number of sectors covered, questions ar ose similar to those in respect of goods, namely 
how to assess coverage in terms of sectors which we re included or excluded.  In services, unlike in 
goods, there was no harmonized system of tariff lines,  but there were classifications, some based on 
the Central Product Classification (CPC) and others based on national industrial classifications.  The 
majority of RTAs used these classifications as th e basis for establishing commitments made in TN/RL/M/19 
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services.  The issue here was at what level to assess  coverage:  at the sectoral, subsectoral, or activity 
level?  The second element concerned the volum e of trade affected, which again echoed the 
discussion held in the context of goods:  should Members consider only present trade or potential trade?  Services trade held an additional complexity due to the lack of statistics:  how could Members 
assess the volume of trade affected without having the necessary information?  She proposed that 
Members develop a series of indicators, an idea wh ich harked back to a concept developed by the 
European Communities (EC), to assess the concept of the affected volume of trade.  Her delegation 
was open to the discussion of the development of su ch indicators which might also include GDP.  The 
third element concerned the modes of supply.  In this context she said that many RTAs required local 
presence in order to provide a service that technical ly did not really require it, thereby effectively 
excluding the trans-border provision of that service.  This aspect should only be evaluated once 
substantial sectoral coverage had been assessed.   
6. The sponsor continued, saying that the sec ond aspect of coverage treated in Chile's 
submission concerned the evaluation of the eliminati on of substantially all di scrimination.  Two main 
principles had been raised in the submission.  Firs t, if an EIA party maintained a large number of 
discriminatory measures would such an EIA conform with the obligation to remove substantially all 
discrimination?  GATS Article V:1(b) provided for discrimination to be eliminated either through 
roll-back or standstill.  The second aspect con cerned how existing discrimination should be 
eliminated.  It was proposed in Chile's submission th at this could be done by amending legislation, 
signing mutual recognition agreements (MRAs), or by  harmonizing legislation.  She conceded that 
some ways might be better than others and it would be  interesting to discuss this further.  Finally, she 
mentioned other aspects in the submission connected  with the issue of coverage, namely how to 
address the partial exclusion of a sector:  should  such a sector be included in the assessment of 
coverage of not?  As regards the reasonable tim e frame mentioned in GATS Article V:1(b), should 
this be the same time frame as contemplated in the Understanding on the Interpretation of GATT 
Article XXIV or should it be different?   
7. Several participants agreed with many aspects of this submission.  Some provided detailed 
comments, while other expressed preliminary comments a nd a desire to revert to it at a later date. One 
participant had a few comments rega rding wording rather than substance.  Footnote 3 of Chile's 
submission stated that air transport was excl uded from the GATS though not all air transport was 
excluded.  The sponsor of the submission acknowle dged that footnote 3 could be more precise. 
8. One participant said that submissions made in 1999 by Hong Kong, China and the EC 
(documents WT/REG/W/34 and WT/REG/W/35, respec tively) provided a clear view of the issue and 
raised elements which should help focus the Group's  discussion.  In particular, it was necessary to 
determine whether there were any links between  GATT Article XXIV and GATS V, and what the 
nature of such links were.  A number of participan ts said that while such comparisons, particularly 
with regard to the discussion of "substantially a ll" in the context in GATT and the "reasonable time 
frame" of 10 years mentioned in the GATT Understa nding should be kept in mind, such discussions 
need not hold back any discussion under GATS.  One participant urged me mbers to exercise caution 
because Members' interpretation of goods concepts might not be applicable to GATS Article V.   
9. Several participants noted that GATS Article  V:1(a) and its footnote were fairly self 
explanatory, particularly with rega rd to the broad coverage of sectors
.  The point was made that the 
exclusion of sectors was not prohibited per se , especially bearing in mind the exclusion of certain 
services sectors from the GATS itself.   
10. One participant drew attention to GATS Article  V:3, which provides for flexibility in the 
application of GATS V:1(b) where developing countries are parties to such agreements.   
11. Another participant said that "substantial sectoral coverage" could be cons idered equivalent to 
the coverage of seven or eight sectors out of the 11 included in MTN.GNS/W/120.  No distinction  TN/RL/M/19 
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should be made between sectors and no sector should be considered more relevant than others.  A 
sector could be considered covered by an EIA when  a reasonable number of its subsectors, at least 50 
per cent, were subject to commitments with at le ast one mode economically viable.  Modes 1 and 2 
should not be considered if they were not tradable .  In evaluating coverage, modes inscribed as "none" 
should be given more importance than those limited by restrictions, especially where those restrictions 
responded to economic needs tests.  The analysis of EIAs should be based on a GATS modal 
approach, so that EIAs which followed other m odels of consolidation or negotiation should be 
transposed to the GATS approach of positive lists, for example.  In response, the sponsor of the 
submission expressed concern as it was her delegation's view that GATS Article V was clear:  it was ambitious and set high standards fo r substantial sectoral coverage. 
12. Some participants sought clarification of paragr aph 6 of Chile's submission which stated that 
while each of the three factors should be analysed  separately, it was the re lationship among all three 
that would allow Members to determine whether such  criteria had been met.  One participant argued 
that it was not only the relationship between the thr ee factors which mattered, but also the totality, 
which would imply some qualitative judgement.  In response, the sponsor of the submission 
explained, by way of example, that while an EIA might incorporate a large number of sectors it might 
exclude the sector with the greatest volume of bilateral trade or trade with the rest of the world.  Thus, 
an evaluation should be made not only of the number of sectors, but also the volume of trade of all 
sectors.  Likewise, given that for some modes of  supply some restrictions might exist, it was 
necessary to look at which sectors such restrictions a pplied to as it might be the sector or sectors of 
greatest interest to the RTA partner. 
13. In terms of the number of sectors, a number of pa rticipants supported the view that this meant 
that a majority of sectors in both trade and econom ic terms should be covered with no major sector, 
for instance financial services, telecommunications or transport, excluded.  Measurement of sectoral importance in terms of GDP would be relevant to  ensure that economically important sectors were 
covered.  However, questions were raised as to how the number of sectors should be counted, bearing 
in mind the different services classifications used by Members, not only in EIAs, but in GATS 
Schedules.  Taking the number of sectors on its ow n seemed quite meaningless as a measurement.  In 
the case of proprietary sectoral classifications, this might require looking at coverage at the activity 
level.   
14. One participant noted that Members had less e xperience assessing the coverage of EIAs than 
RTAs in the area of goods.  Another expressed doub ts about Members' ability to qualitatively assess 
whether one sector was more important than anothe r.  In response, the sponsor of the submission 
recognized that it was difficult to assess a priori  or in general which sector  was qualitatively better as 
it depended on each country and each bilateral rela tionship.  This was an area which should be 
explored further as the Group needed to find not onl y quantitative, but also qualitative, indicators. 
15. Several participants expressed concern about the lack of a common classification in services 
unlike the common classification which existed in the case of goods.  The assessment of sectoral 
coverage would differ depending on the classification used, especially at a subsectoral or activity 
level.  Another point to bear in mind, especially  given new technological developments, was that new 
activities might become possible and more commercially significant.  Ways therefore had to be found to factor these into the existing classifications.      
16. Several participants mentioned the difficulties posed  by the lack of statistics from the point of 
view of the subsectors and the modes of supply.  This represented a major challenge, particularly 
when measuring trade at a disaggregate level.  It was pointed out that MTN.GNS/W/120 was not the same as the CPC, and that the CPC was outdated.  Another issue mentioned concerned the divergence 
in the manner in which Members' commitments were consolidated. TN/RL/M/19 
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17. In terms of the volume of trade, it was sugg ested by one participant that the value of 
transactions would be a relevant and horizontally comparable measure.  It would be difficult to devise 
another measure that would allow comparis on across sectors and modes of supply.    
18. One participant supported the proposal in para graph 10 of Chile's submission that domestic 
production figures might be a useful indicator of whether it was appropriate to exclude a specific 
sector or mode of supply.  Other participants  expressed doubts as to whether domestic production 
figures existed with respect to the trade in services for all, or even the majority of, Members.  In 
particular, one participant foresaw problems calcu lating an average domestic production target in 
terms of GDP for EIAs among countries with very di fferent levels of development.  Statistics on 
bilateral services trade would most probably re flect the coverage of commercialized service 
production, while a figure on domestic service production would cover both non-traded services, 
including public services, and traded services.  Th ere was a clear mismatch between the two.  GATS 
Article I:3 stipulated that services supplied in th e exercise of government authority were not covered 
by the GATS Agreement, hence coverage for servi ces EIAs should only measure what fell under the 
GATS.  Using figures on domestic production seemed to  go beyond the reach of GATS.  The sponsor 
of the submission responded by saying that while the GDP indicator per se  was not of much value, it 
would provide an indication of the relative importanc e of a sector within a country as a whole, and if 
other indicators were taken into account (for exampl e, figures relating to balance of payments and 
qualitative sectoral analysis), then the whole would be  of more interest.  She noted that GDP was only 
one of a series of possible indicators that could be used on a case-by-case basis depending on the 
agreement and the information available.   
19. A number of participants expressed an interest in the indicative criteria mentioned in 
document WT/REG/W/35 and asked for an elaboration of this theme.  The view was expressed that 
the Secretariat might be able to provide assistance to  develop indicative criteria.  The sponsor of the 
submission expressed reservations about the latter po int, but suggested that the practical experience 
gathered by the Secretariat in the elaboration of  the mock presentation of the Canada-Chile FTA 
might provide some ideas. 
20. One participant expressed reservations about the suggestion made in paragraph 11 of Chile's 
submission that an evaluation of "substantially all trade" in the context of goods might serve as a 
model for the GATS context, particularly with  regard to the transferability of quantitative 
benchmarks.  A crude numerical percentage of CP C classifications covered in an EIA would not 
suffice as the modes of supply needed to be ta ken into account as well.  He acknowledged that 
attempts had been made to quantify the restrictivenes s of barriers to trade in services.  In particular, 
the Australian Productivity Commissi on had developed a restrictiveness index, but the use of such 
indices was controversial, particularly given the statis tical problems.  He added that it was particularly 
important in services to look at the horizontal restri ctions which often affect ed investment and mode 
4.  Most WTO Members maintained some type of  investment screening, or restrictions on the 
purchase on land, company structures, temporary entr y of workers, and the eligibility for domestic 
subsidies.  Many of these restrictions, which were replicated in EIAs, needed to be looked at in a 
qualitative manner in making an overall assessment as to whether the standard of eliminating 
substantially all discrimination had been met.   
21. In terms of modes of supply
, several participants agreed th at it was obvious that no mode 
could be excluded a priori , and that Article V should be interpreted in a comprehensive manner.  The 
importance of different modes of supply would diffe r both in trade and economic terms and according 
to sector, a factor that should be taken into account in any assessment of modal coverage.  The 
question was raised as to whether trade should be measured in terms of trade or economic importance 
for the mode concerned (as for sectors).    
22. One participant raised an issue of wording rath er than substance in paragraph 13 of Chile's 
submission, where mention was made of a possibl e comprehensive interpretation of Article V,  TN/RL/M/19 
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meaning that "all four modes of supply must be part of the RTA, but certain activities or subsectors may have restrictions or prohibiti ons for the supply of services in so me modes".  He agreed with the 
first part of the proposition, but not with the second as he failed to see the relevance of such 
prohibitions or restrictions for complying with the criteria for substantial sectoral coverage.  In his 
view, those restrictions would play a role in the assessment of the absence or elimination of 
substantially all discrimination.   
23. One participant said that certain activities or  subsectors may contain restrictions or 
prohibitions for some modes.  Another expressed the vi ew that not all modes needed to be covered in 
order to fulfil the requirements of GATS Article V.  Yet another participant pointed out that while 
mode 1, in particular, might be unbound due to tech nical infeasibility, this might change thanks to 
technological developments. 
24. One participant shared the view, expressed in paragraph 14 of Chile's submission, that the 
trade effect of services for mode 3 was hard to measu re.  The sponsor of the submission explained that 
her delegation had raised mode 3 because of its pa rticular nature.  Mode 3 was the provision of a 
service through commercial presence so it reflected th e quantity of trade of a company established in 
a country, but also represented the commitment that such an establishment or investment involved.   
So it was not just a question of measuring the actual trade of a foreign enterprise, but also what its 
establishment or investment represented in terms of commitment under a regional agreement.  One 
participant remarked that it might be appropriate to analyse mode 4 in the same manner, as it was not 
merely the service provided that counted, but what this service represented in terms of commitment in 
an agreement.  
25. As regards the absence or elimination of substantially all discrimination
, several participants 
shared the view that GATS Article V:1(b) referred to discrimination in the sense of GATS Article XVII only in those sectors covered by the services RT A.  One participant expressed the view that 
while Article V was explicitly linked to GATS Article XVII regarding national treatment, the 
inclusion of non-discriminatory measures, such as ma rket access restrictions or licences, might be 
beyond the disciplines contained in GATS Article V.  The sponsor of the submission replied that 
Article XVII was currently being discussed in the Council of Trade in Services and the outcome of 
those discussions would be of assistance to the Group. 
26. One participant noted, in reference to Article V: 1(b) that the central objective was to ensure 
that citizens of one party to a given RTA were tr eated as far as possible as nationals in another RTA 
party's home market.   
27. In terms of the interpretation of "substantially all", questions were raised by participants as to 
what benchmark should be used for measuring elimin ation of discrimination.  Should full national 
treatment be the yardstick for the elimination of all discrimination or should other issues, such as 
MRAs or the harmonization of regulations be ta ken into account?  Concerns were expressed by 
participants as to where to draw the line, especia lly if Members went beyond Article XVII into the 
realm of domestic regulation which may, or ma y not, be discriminatory in the first place.   
28. On the standstill versus roll-back approach, one interpretation was that Article V:1(b) set the 
standard for the absence or elimination of substan tially all discrimination.  Emphasis should not be 
placed on the distinction between standstill or roll-b ack which were merely means to implement the 
obligations in GATS V:1(b).  A number of participants  shared the view that if there were no existing 
discriminatory measures then standstill was sufficien t.  Several participants endorsed the view 
outlined in paragraph 16 of the submission that where there was existing discrimination a mere 
standstill commitment would not be sufficient; then bot h standstill and roll-back were necessary.  One 
participant expressed reservations as this needed to be looked at in context and on a case-by-case 
basis:  a standstill commitment could be a significan t concession in an EIA where one of the trading 
partners had vastly superior production and export capabilities a nd the discriminatory measures in TN/RL/M/19 
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question did not, in practice, prevent a flow of tr ade.  Another participant expressed reservations 
concerning the view that EIAs must contain rollback  commitments as the language of V:1(a) and (b) 
provided some flexibility to Members in how the standard could be met.  The sponsor of the 
submission reiterated her position that it was the ch apeau of Article V:1 which set the context and the 
obligation to eliminate substantially all discrimination.   
29. Several participants expressed doubts that MR As and the harmonization of regulations, 
mentioned in paragraph 17 of Chile's submissi on, should be taken into account in assessing the 
elimination of substantially all discrimination as they had more to do with the elimination of 
disparities between non-discriminatory legislation than with the elimination of discrimination as such.  
However, one participant expressed the view that ev en if the regulatory integration that could be 
achieved through MRAs and harmonization were not part of the requirements of GATS Article 
V:1(b), it could play a major role in assessing an RTA through the interpretation of Article V:2 which 
stated that in evaluating whether the conditions of  paragraph V:1(b) had b een met, consideration 
might be given to the relationship of the EIA to  a wider process of economic integration among the 
countries concerned.  The sponsor of the subm ission replied that MRAs and harmonization of 
regulations were real forms of non- discrimination in her view, but that this area might benefit from 
more discussion.   
30. One participant agreed with the view expressed in paragraph 18 of Chile's submission that the 
many "non-discriminatory" measures such as market  access restrictions and licensing arrangements 
which may in practice be trade ba rriers needed to be looked at.  Although the objective was to treat 
citizens of the trading partner as nationals in each other's home market, this did not remove the right 
of governments to regulate the provision of services and put a licensing regime in place (for example 
for public health and safety reasons) or to ensure c onsumer protection.  Some RTAs had put in place a 
necessity test to ensure that these types of domestic regulations and licensing requirements were not more trade restrictive th an necessary to achieve a legitimate polic y objective.  The existence of this 
kind of discipline in an RTA would be a useful indi cator that a genuine attempt at liberalization and 
the removal of substantially all di scrimination had been met, but it might be difficult to formalize such 
a requirement. 
31. One participant drew attention to an item, not addressed in Chile's submission, regarding 
whether the assessment of substantial sectoral  coverage and the absence or elimination of 
substantially all discrimination needed to be asse ssed in conjunction with the commitments which 
Members had already taken in the GATS context.  This was potentially contemplated by GATS 
Article V:2 which made reference to the fact that consideration be given to "the relationship of the 
agreement to a wider process of economic integr ation or trade liberalization among the Members 
concerned".  In particular, the question of wh ether a Member's EIA commitments went beyond its 
existing GATS commitments might be especially re levant in the case of developing and least-
developed countries which might only have commitment s in one or several sectors.  Members might 
also wish to consider whether th e assessment needed to account for th e fact that the existing level of 
GATS liberalization among parties to an EIA might influence the decision among parties to exclude a particular sector or mode from an agreement if no further liberalization was required beyond existing 
GATS commitments.    
32. Turning to the general debate on RTAs' "systemic" issues
, one participant reiterated her 
delegation's reservations regarding the rollback commi tments mentioned in Section 1.2(a)(i) of the 
Roadmap .  It was not clear that rollback was required since GATS Article V:1(b) provided the option 
of achieving elimination of subs tantially all discrimination thr ough the elimination of existing 
discriminatory measures and/or the prohibition of ne w or more discriminatory measures.  This seemed 
to provide for the parties to agree to a standstill and not require roll-back.   
33. In reference to Section 2.1(a) of the Roadmap, several participants agreed that "other 
regulations of commerce" (ORCs) should be given broad definition to include any regulation which  TN/RL/M/19 
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had an impact on trade, for example preferential rul es of origin (PROOs), technical barriers to trade 
(TBT) and sanitary and phyto-sanitary (SPS) measur es.  One participant expressed uncertainty about 
whether PROOs were part of "other regulations of commerce". 
34. Several participants remarked that it was neces sary to differentiate RTAs with PROOs which 
had a major trade diversionary effect from those whose trade diversionary effect was minimal.  
PROOs could be more or less restrictive depending on  their design, not their implementation.  Several 
participants agreed that it would be useful to set  out criteria to determine PROOs which resulted in 
higher trade barriers for third parties so that a comp rehensive picture could be obtained.  Such criteria 
could be exhaustive or non exhaustive, based on a positiv e or negative list.   
35. One participant expressed scepticism that the Group would be able to determine the scope or 
parameters of ORCs, but indicated his delegation's willingness to try and look at possible definitions.  
He noted that previous Panel and Appellate Body re ports had suggested that this term be given a 
broad definition and that the concept was evolving.  There were a number of specific trade measures 
which some Members regarded as ORCs.  An example was PROOs, which were a feature of all, or virtually all, RTAs.  If the Group concluded that PROOs  were part of ORCs, then it needed to bear in 
mind the fact that on formation of an RTA, the level of duties and other regulations of commerce 
should not be higher or more restrictive than before the formation of the RTA.  He expressed the view, supported by a few participants but opposed by several other, that PROOs were a neutral 
instrument provided that their application did not ra ise barriers to third count ries' trade in absolute 
terms.  In this case they should not be subject to the test of restrictiveness.  Obviously the use of 
PROOs in an RTA would have an impact on the rela tive levels of access of third country exporters, 
but not on the absolute levels.  Non preferentia l rules would remain unchanged.  The same concept 
applied to TBT and SPS regulations.   On the forma tion of an RTA or the enlargement of a customs 
union, a Member was entitled to modify SPS and TB T measures, for example through harmonization 
of such measures.  This should not be regarded as increasing the levels of restrictiveness to third 
country trade provided that TBT or SPS rules were  extended in conformity with the relevant 
agreement in the WTO.   
36. One participant expressed the view that rather th an attempting to find a definition of ORCs, it 
would be better to address regulations on a measure-by-measure basis to see if they had increased barriers to third parties.  TBT and SPS could be cons idered part of ORCs, but as long as they were in 
conformity with the relevant WTO agreements they  should not be considered as raising barriers to 
third parties.  They might confer an advantage to an RTA partner, but that was what RTAs were all 
about.   
37. On the issue on diagonal cumulation in PROOs, sev eral delegations expressed the view that 
such schemes could benefit some third parties wh ich were not members to the RTA while excluding 
others.  Thus they were outside the current sc ope of GATT and should not be allowed.  Another 
argued that diagonal cumulation was a breach of th e MFN principle as it involved giving preferences 
to parties outside of an RTA without the cover of GATT Article XXIV.  One participant remarked 
that PROOs and diagonal cumulation were benefici al for the parties and thus promoted trade among 
the parties.   
38. One participant stated that the purpose of an RT A was to facilitate trade and not erect barriers, 
but that there was no requirement for neutrality or proscription against trade diversion.  GATT XXIV:5(a) contained a requirement with respect to the overall duties and other regulations of 
commerce in the case of a customs union, but in general the two first subparagraphs of XXIV:5 were 
measure oriented.  In the discussion of ORCs Me mbers needed to distinguish between, on the one 
hand, ensuring that the direct benefits of an RTA flowed only to parties to that RTA, and on the other, that those mechanisms did not erect new barriers to third-party trade.  The Group needed more 
detailed and refined analysis to identify issues and propose solutions.  For example, any economic test 
would need to distinguish between changes in trade flows due to preferential treatment, trade TN/RL/M/19 
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restrictions, and exogenous economi c shocks.  Even if an RTA contained a 100 per cent local content 
requirement, this still liberalized trade and did not create a barrier.   
39. In reference to Section 2.2 of the Roadmap , concerning the determination of "neutrality" in 
services RTAs, one participant said that the key qu estion in GATS Article V:4 was how to assess the 
overall level of barriers to trade in services with third parties.  A number of questions could be raised.  
For instance, should actual trade be looked at to determine what had happened to the overall barriers 
to trade or should the overall conditions for trade be  considered in their totality?  Should such an 
assessment be qualitative or quantitativ e?  One scenario to be taken into account was where a Member 
modified its commitments under GATS, and it would be useful to look at the linkages between GATS 
Articles V and XXI and GATT Articles XXIV and XXVIII, since GATS Article XXI differed a bit 
from GATT Article XXVIII.  Given the fact that there was no completed precedent of modification of 
commitments under GATS Article XXI, some questions might be raised as to how the modification 
and withdrawal of commitments related to the rais ing of barriers to other Members.  GATS Article 
XXI:2(a) provided that negotiations for the purpose of the modification or withdrawal of specific 
commitments in the services context should endeavour  to maintain a general level of mutually 
advantageous commitments not less favourable to tr ade.  Similar provisions existed in GATT Article 
XXVIII.  A parallel could perhaps be drawn be tween the requirement for GATS Article XXI 
negotiations with the provisions of GATS Article V:4 that an EIA should not in respect of any 
Members outside the agreement raise the overall level of barriers of trade.  The suggestion was not, however, that there was an equals sign between the two.   
40. Another participant expressed the view that in  most cases EIAs in services would not increase 
the level of barriers and restrictions to trade with th ird countries.  This was di fferent in the case of a 
customs union.  Most EIAs would simply provide for better commitments betw een the parties without 
affecting the commitments undertaken in the WTO.  However, he pointed out two exceptions to this 
general rule:  one, explicitly allowed under th e GATS, concerned the situation in which as a 
consequence of an EIA, a Member reduced its WTO commitments by formally withdrawing or 
modifying them in conformity with GATS Article  V:5 following the procedures set out in Article 
XXI.  The second exception concerned a situation in  which a Member which had undertaken GATS 
specific commitments providing for a quota (for example, on the maximum number of service suppliers per year in mode 4), undertook under an EIA to reserve a portion of that quota for the other party to the EIA, but did not formally modify or withdraw its GATS commitment.  In the first situation, the Member modified commitments as  explicitly allowed for in GATS Article V:5 and 
therefore the criteria imposed under Article V:4 shou ld not apply with respect to the commitments 
withdrawn in conformity with Article XXI.  In the second situation the obligations under GATS 
Article V:4 would have to be fully applied.  The Member concerned would have to demonstrate that 
the overall level of barriers to trade in services w ithin the respective sectors or subsectors had not 
been raised by the de facto  reduction of the quota committed under the GATS.  A Member could 
always modify a quota in its GATS commitments in conformity with Articles V:5 and XXI, for 
example by lowering that quota in the GATS to take into account the portion reserved for its RTA partners.  One participant asked for clarificati on as to why the standards applied under GATS Article 
V:4 and V.5 should be different.  In his opinion Ar ticle V:5 provided an entry point to Article XXI:  
if, as a result of putting an EIA into effect a m odification or withdrawal of specific commitments 
under Article XXI was required, this indicated a linkage between Article V:5 and Article XXI.  
Another participant asked whether the situation wo uld be the same if the quota was increased, say 
from 100 foreign workers permitted entry under the GA TS to 120, with the 20 reserved for the RTA 
partner.  Should this be considered as raising the barriers to third parties or not?  The response was 
that this should be considered a new quota for RTA partners, but the quota under the GATS remained 
unchanged. 
41. The Chairman reported that as a result of the b ilateral consultations he  held in July with 
approximately 22 delegations on RTAs transparency issues
, and the informal discussions undertaken 
with the Group, he would ask the Chairman of the CRTA to analyse the proposal that the Secretariat  TN/RL/M/19 
 Page 9 
 
 
undertake formal presentations of RTAs on a voluntary and experimental basis.  Delegations had been 
broadly favourable to the proposal provided that certa in caveats were borne in mind:  that all elements 
of the "Transparency Package" would remain under c onsideration within the Group;  that the factual 
presentation by the Secretariat would only replace the St andard Format presented by the parties to an 
RTA;  that such a replacement would require agre ement by the RTA parties;  and that presentations 
would be limited for the moment to RTAs in trade in goods.  The option of preparation of the factual 
presentation by the Secretariat would be an  additional option to existing procedures. 
C. OTHER BUSINESS  
42. One participant pointed out that the minutes of  the meetings of the Group were somewhat 
unhelpful as delegations were not identified, unlik e the minutes of other negotiating bodies.  He 
proposed that the Group indicate the names of delegations in the minutes.  Another participant 
supported this proposal, noting that it would be help ful to have delegation's views on the record.   
43. The Group took note  of these suggestions.  The date of the next meeting of the NGR dealing 
with RTAs was set for 4 November 2004. 
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