. /.  WORLD TRADE  
ORGANIZATION  TN/S/W/24 
30 September 2004 
 (04-4111) 
Council for Trade in Services  
Special Session Original:   English 
 
 
 
COMMUNICATION FROM CANADA 
 
On the importance of Mode 3 Commitments  
  
The following communication, dated 29 Septem ber 2004, from the delegation of Canada is 
being circulated to the Members of the Council for Trade in Services. 
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I. ISSUE  
1. The recent publication of UNCTAD’s World Investment Report 2004 (WIR 2004) entitled 
“The Shift Towards Services” and one of its key fi ndings - that the composition of Foreign Direct 
Investment (FDI)  has shifted towards services in all regions - provides an important and timely message for negotiations under the General Agreem ent on Trade in Services (GATS).  Given the 
relationship of  GATS Mode 3 to investment in a ll economies, this, and other findings of the report, 
highlight the opportunity that all Members may have  to capitalize on an improved investment climate 
for services providers by focussing on the enhancem ent of Mode 3 commitments in the context of 
present GATS negotiations. 
II. BACKGROUND 
2. Among the WIR 2004 key findings are indications th at the composition of FDI has shifted to 
services in all regions and, that this trend is exp ected to continue.  In addition, the composition of 
service industries making up services FDI is becoming more and more diverse and all regions are 
expected to experience improvements in their FDI receipts in the coming months. 
3. Equally interesting is the finding that, while  developed countries will drive the renewed 
growth of world FDI flows, developing countries are becoming investors in their own right.  The report indicates that outward FDI from developing c ountries is becoming more and more important.  
Moreover, it is suggested that trans-national companies (TNCs) from developing countries are 
becoming “trans-nationalized” at a f aster rate than their developed c ountry counterparts – a trend that 
is also expected to continue. 
4. A third finding illustrates the importance of in ternational trade agreements – such as the 
GATS – that deal with investment.  The report find s that they can provide a stable, predictable and 
transparent enabling framework for attracting investme nt and benefiting from it.  At the same time, it 
is noted that the optimal realization of these potential benefits can remain a challenge.   
5. It is Canada’s view that the GATS is well pos itioned to address the challenge of striking an 
appropriate balance between using investment-related trade agreements as part of a strategy for 
attracting FDI and benefiting from it, on the one hand, and preserving the flexibility needed for the TN/S/W/24 
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pursuit of national development strategies in the ser vices sector on the other - an issue that may be 
particularly important for developing country Members. 
6. Given these findings it seems clear that advanc ing on Mode 3 issues and commitments during 
this round of GATS negotiations should be of in terest to a broad cross section of the WTO 
membership.  By giving more focus to their co mmercial presence interests in these negotiations, 
Members can facilitate the realization of the pot ential benefits of FDI by providing a conducive 
climate for this important private sector activity. 
III. PROPOSAL 
7. In light of the findings outlined in the WIR 2004 and, as an important step towards exploring 
the potential of Mode 3 commitments for all Members,  Canada suggests that an invitation be extended 
to UNCTAD to make a presentation on the World In vestment Report 2004 at the next meeting of the 
Council for Trade in Services Special Session.  
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