RESTRICTED  
WORLD TRADE  WT/REG40/M/1  
 4 December 1997  
ORGANIZATION  
 (97-5322)  
 
Committee on Regional Trade Agreements  
 
 
 
 EXAMINATION OF THE PROTOCOL ON TRADE IN SERVICES OF THE  
 AUSTRALIA -NEW ZEALAND CLOSER ECONOMIC RELATIONS TRADE AGREEMENT  
 
 Note on the Meeting of 3 November 1997  
 
 Chairman:  H.E. Mr. Jean -Marie Noirfalisse (Belgium)  
 
 
1. The meeting was convened in WT O/AIR/707.  
 
2. The Committee took up the examination of the Protocol on Trade in Services of the Australia -
New Zealand Closer Economic Relations Trade Agreement under Agenda Item B -V for the CRTA's 
Fourteenth Session.  The examination was conducted on the basis of the Standard Format for Informat ion 
on Economic Integration Agreements on Services and accordingly followed its layout.  The following topics 
were discussed:  
 
 A.General Statements  
 
 B.Section I - Background Information on the Agreement  
  -I.2 - Type of Agreement  
  -I.3 - Scope  
  -I.4 - Trade Data  
 
 C.Section II - Trade Provisions  
-II.4 - Standards  
 
D. Section III - General Provisions of the Agreement  
  - III.4 - Relation With Other Trade Agreements  
 
 E.Follow -Up 
 
 
A. General Statements  
 
3. The Chairman  began the examination of the ANZCERTA Services Agreement with a brief 
overview of background documentation.  The Agreement had been notified on 22 November 1995 as 
document S/C/N/7.  The text of the Agreement had been circulated as a Uruguay Round  document 
(MTN.GNS/W/47).  He recalled the terms of reference for the examination, as contained in document 
S/C/M/14:  "To examine, pursuant to paragraph 7(a) of Article V, the Protocol on Trade in Services to the 
Australia - New Zealand Closer Economic Re lations Trade Agreement."  In the same document, it was 
recorded that the Council for Trade in Services had decided to "refer this Agreement to the Committee on 
Regional Trade Agreements for examination pursuant to paragraph 7(a) of Article V of the GATS."   The 
day's discussion would be based on information on the ANZCERTA Agreement as provided in the 
Standard Format (WT/REG40/1).  
 WT/REG40/M/1  
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4. The representative of Australia , speaking for the Parties to the Agreement, introduced what they 
called the Closer Economic Relations (CER) Services Protocol.  The Parties welcomed the examination of 
the Protocol, which came into effect in 1988 for trade in services as an extension of the 1983 ANZCERTA 
agreement on trade in goods.  The CER partnership wa s a fundamental element in the Australia -New 
Zealand relationship.  It had been enormously beneficial to both economies, driving export growth and 
adding significantly to employment.  The central provision of the broader CER relationship was the 
creation o f a WTO -consistent free -trade area (FTA) comprising Australia and New Zealand.  Its objectives 
were to strengthen the relationship between the two countries, to develop closer economic relations through 
a mutually beneficial expansion of free trade, to eli minate barriers to trade in a gradual and progressive 
manner under an agreed timetable and with minimum disruption, and, finally, to develop trade between the 
two countries under conditions of fair competition.  At the time it was introduced, the Services Protocol 
was at the forefront of international efforts to provide agreed rules to liberalize trade in services.  The Parties 
believed that it remained a model of comprehensive and uncomplicated trade liberalization.  Like the 
original ANZCERTA Agreement, t he Services Protocol was a broad and inclusive agreement, with very few 
exclusions.  In successive reviews of ANZCERTA, the exclusions had been continually reduced, and the 
Parties were working on a complete elimination of the few remaining restrictions in  the services sectors.  
While services statistics were difficult to quantify, services trade between the Parties had become an integral 
part of the single market that had been developed between the two countries.  The practical emphasis of 
the Services Pro tocol was on progressive market liberalization.  Contrary to the positive list approach which 
had been adopted in some agreements, the Services Protocol, through its negative list approach, prevented 
the exclusion of new services as they became tradeable.  Furthermore, Australia and New Zealand were 
prevented from unilaterally adding to the list of services exempted from the obligations of the Protocol.  
Australia and New Zealand intended to press ahead with the further liberalization of annual bilateral tr ade 
in services, which had now reached $ 1.8 billion.  
 
 
B.Section I - Background Information on the Agreement  
 
-I.2 - Type of Agreement  
 
5. The representative of Japan  thanked the Parties for submitting information in the Standard F ormat.  
Under the ninth bullet on page 2 of that document, there was a statement that an objective of the Agreement 
was "to eliminate barriers to trade between Australia and New Zealand in a gradual and progressive manner 
under an agreed timetable..."; had  the Parties already set a specific timetable?  
 
6. The representative of Australia  said the agreed timetable referred to the Parties' Agreement to 
review the list of services sectors excepted from the Agreement on a regular basis.  So, every year when the 
trade ministers met, there was the opportunity to agree that some of those few services sectors not covered 
by the Agreement would be removed from the exceptions list.  
 
7. The representative of Japan  said tha t the written explanation had implied that the Parties would 
eliminate barriers at a set time.  But after this elaboration by the Parties, it was clear that "timetable" referred 
to a schedule of meetings to discuss what to do.  Did the Parties have a speci fic plan  - a timetable  - to 
eliminate these barriers?  
 
8. The representative of Australia  responded that there was no agreed endpoint, but that the 
elimination of barriers was kept under constant review by the two Parties.  
 
9. The representative of Japan  said that it would be preferable in the future for the Parties to have a 
specific plan to eliminate these barriers.  
          WT/REG40/M/1  
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-I.3 - Scope  
 
10. The representative of Switzerland  requested a statistical clarification, regarding the volume of trade 
not covered by the Protocol, i.e. those sectors on the Parties' exceptions lists.  Also, with respect to the 
evolution of the FTA, it was indicated at the bottom of page 2 that the CER A greement had undergone 
three major general reviews.  Did the Committee have at its disposal all relevant information on the results 
of those reviews?  The Parties had submitted a number of notifications updating information, part of which 
related to the go ods side of the Agreement.  For a complete picture it would be useful to have all pertinent 
documents together.  Perhaps the Parties could provide the references of existing documents or could 
provide those documents to the Secretariat for consultation by Members.  
 
11. The representative of United States  said he had an anecdotal comment about the services part of 
the CER.  He had been negotiating a services agreement with another country at about the time the Services 
Protocol was com pleted, and he had conceded that the ANZCERTA Agreement was better.  It was a clean 
agreement and served as a model of a trade agreement bringing about general liberalization.  He then said 
he had a question relating to the sectoral coverage.  It had been noted that the Agreement used the negative 
list approach, where all sectors were covered except those that were listed, and where new services were also 
incorporated.  What plans were there to remove the remaining sectors from the list?  Regarding the mode s 
of delivery, the third mode, commercial presence, was allowed, but with the qualification in Article 2 that 
this was "subject to the foreign investment policies of the member states".  How different was the national -
level policy review provided for the s ervices providers of the Parties from that provided for third parties; in 
other words, to what extent was there a preference granted in the process of investment review between the 
two Parties?  
 
12. The representative of Korea  thanke d the Parties for providing information in the Standard Format, 
as this had helped to provide an overall picture of the Agreement.  For the examination process, GATS 
Article  V said there were at least two criteria for allowing Members to enter into a regio nal trade agreement 
(RTA) covering services: first, there was the requirement for substantial sectoral coverage, and second, there 
was the requirement of the elimination or absence of substantially all discrimination in the sense of GATS 
Article XVII.  Wit h respect to the Annex, the negative list approach did seem advantageous.  National 
treatment did not apply to those services in the Annex, which the Parties referred to as "inscriptions".  
Regarding the relation between the Annex and GATS Article V, to wh at extent were the services inscribed 
in the Annex similar to the GATS Schedules of the Parties?  When the Committee had a clear idea of the 
extent of the exceptions, it might have a better understanding of how the Agreement met the second criteria, 
i.e. the elimination of substantially all discrimination in the sense of national treatment.  His delegation 
joined the Swiss delegation in its request for statistics on those services on the exceptions list, in terms of the 
overall trade volume for the Parties,  to the extent this information was available.  With respect to a point 
raised by the representative of the United States, regarding the modes of delivery for services, he said that, 
because this Agreement had been signed prior to the GATS, there were no d istinctions between different 
modes of delivery.  Could the Parties confirm that there was no a priori  exclusion of any mode of supply, 
as stipulated in footnote  1 of GATS Article V?  
 
13. The representative of Japan  said that, like t he delegation of Korea, his delegation placed emphasis 
on the GATS Article V tests of substantial sectoral coverage and the absence or elimination of substantially 
all discrimination in the sense of Article XVII; another important element was that the part ies to services 
RTAs were not supposed to raise barriers against third countries.  In this Agreement, some important 
sectors were excluded, raising doubts as to the consistency with GATS Article V:1.  For example, in the 
case of Australia, airport services , air services, coastal shipping, broadcasting and television and health 
insurance were excluded.  (He noted with reference to the document that the meaning of third party 
insurance and some other terms was unclear.)  New Zealand had excluded three sectors .  As his delegation 
had suggested in its non -paper circulated in March 1997, if a Party excluded an entire important sector, the 
consistency with GATS Article V:1 seemed doubtful.  Another question concerned telecommunications, 
which had been on the list of exclusions in S/C/N/7 but which was not on the exclusions list in the new 
document; during the process of the removal of the telecommunications sector from the Annex, had the 
Parties raised barriers in the sense of GATS Article  V:4 against third parties ? WT/REG40/M/1  
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14. The representative of Canada  thanked the Parties for providing information in the Standard Format 
several weeks in advance of the Committee's meeting.  He noted that the text of the Agreement was 
available on Australia's websi te.  His delegation welcomed the negative list approach, as this was a much 
more transparent and useful structure in terms of understanding the degree of liberalization.  As mentioned 
by another delegate, at the time this Agreement had been negotiated, his  country had also been in the process 
of negotiating a free trade agreement; the while his delegation and its partner had not used the negative list 
approach initially, they did so later, which suggested that a lesson had been drawn from ANZCERTA's use 
of the negative approach.  The negative list approach put in concise form the sectors that were not subject 
to a liberalization commitment.  One question regarding coverage was whether this meant that all 
restrictions were lifted from all the other sectors, i .e. that there had been no grandfathering of existing 
measures in the other sectors that were subject to the disciplines of the Agreement.  Similarly, was there a 
type of ratchet clause in the Agreement that would ensure that, when liberalization was enter ed into, there 
could not be any rollback at a future stage?  Also, was the application comprehensive at the sub -national 
level as well?  Especially in the services area, since a sub -national entity might have jurisdiction, it would be 
useful to note the ex tent of coverage at the sub -national level.  Finally, as mentioned by another speaker, 
there was a sort of horizontal limitation concerning foreign investment policies; it would be interesting to 
hear whether there were any preferences granted to the Parti es to the Agreement, whether this measure was 
applicable in all sectors or gave only partial coverage, and whether there was any plan to do away with this 
limitation on mode three, commercial presence.  
 
15. The representative of the European Communities  said that, under the first bullet at the top of page 
two of the Standard Format, there was mention of the prohibition of measures that constituted "a means of 
arbitrary or unjustifiable discrimination against persons of the other membe r state".  How was "arbitrary or 
unjustifiable discrimination" defined in practice?  This was of interest particularly as Members had been 
discussing similar issues with respect to GATS Article VI.  Regarding the question on excluding entire 
sectors or jus t parts of sectors, he noted that at the bottom of page three it specified that "for many of these 
sectors, only specific aspects or policies have been inscribed in the Annex to the Protocol", but the list above 
seemed to indicate wider sectors; for exampl e, there was mention of Australia's cabotage policy for coastal 
shipping, and yet coastal shipping was mentioned as a whole.  How did these two aspects inter -relate?  
 
16. The representative of New Zealand  responded to questions on se rvices statistics and the availability 
of relevant information, as well as to questions on the Agreement's coverage.  First, regarding the volume 
of trade covered in the inscriptions to the Services Protocol, she said that it was difficult to provide 
compr ehensive statistics for services, but that the Parties would aim to provide what material they could to 
supplement what had already been provided in the Standard Format.  Second, regarding the three general 
reviews of the ANZCERTA Agreement which had been undertaken since 1983, as far as the Parties were 
aware, they had provided the Committee with all relevant information on the services side; in respect of 
goods measures, the Parties' understanding was that this information had already been provided in the  
separate and much earlier context of the examination of the goods aspects of ANZCERTA.1  The Parties 
would provide any information found to be missing.  The delegations of the United States, Korea, Japan 
and the EC had asked questions related to the coverage of the Services Protocol, in particular with reference 
to the scope of exceptions in  the inscriptions section.  Detail on this had been provided in the original 
notification provided to the Council for Trade in Services  (S/C/N/7), which made clear the point raised by 
the EC delegate regarding aspects of certain sectors that had been inscr ibed.  For example, in the New 
Zealand case, the inscription on postal services related to a statutory monopoly that New Zealand Post 
maintained on the carriage of letters weighing 200  grams or less.  So, in a number of instances, at issue 
were narrow aspe cts of sectors, rather than sectors as a whole.  With this negative list approach and the 
narrow range of sectoral exceptions, in general there was a broad sweep of coverage, and the Parties viewed 
their Agreement as having substantial sectoral coverage.  
 
 
     1Working Party Examination Report of 2 October 1984, 31S/170 (L/5664); periodic reports L/6168 and L/6460.           WT/REG40/M/1  
         Page 5 
 
17. Another representative of New Zealand  responded to questions on the Agreement's coverage of 
investment, as raised by the delegations of the United States, Japan and Canada.  First, no modes of supply 
were a priori  excluded from t he Agreement.  The exception relating to foreign investment policies was of a 
horizontal nature, as in the GATS context.  There were no bilateral preferences applicable in the respective 
foreign investment regimes, confirming that no additional barriers we re created by the Agreement.  
 
18. The representative of New Zealand  responded to the question posed by the delegate of Japan 
regarding third -party insurance, and to the Canadian delegation's question regarding the application of the 
Agreement at the sub -national level.  In respect of third -party insurance, she said that in the case of 
Australia, a number of states maintained a government monopoly on third -party automotive insurance on 
prudential grounds to ensure that all citizens had  this insurance; this was the prerogative of the states, and it 
was outside of Commonwealth Government control.  It had been put on the exceptions list because it was 
a monopoly of state governments within the Commonwealth of Australia.  Regarding the cove rage of sub -
central measures, she said that only in the case of specific listings would there be any sub -central limitations; 
the example of third -party insurance was one of them.  If there were no listing in the negative list, then sub -
central authorities  were in the same position as the Commonwealth Government.  There had been no issue 
to date between the Parties with respect to any sub -central problem.  
 
19. A representative of New Zealand  responded to the EC question on what was meant by "arbitrary 
and unjustifiable discrimination" in Article 8.  This had never arisen as a problem, but the fact that it was 
included in the Agreement showed the intention of the Parties to ensure that any dis criminatory conduct 
should not escape the disciplines of the Agreement.  
 
20. In reply to the Japanese question on whether barriers to third parties had been raised in 
telecommunications, which was now no longer an excepted sector, th e representative of Australia  said that 
barriers to third parties had not been raised.  In fact, in both Australia and New Zealand 
telecommunications liberalization had been proceeding at pace, so conditions for third parties had become 
more liberal.  In r esponse to the Canadian question on whether any measures had been grandfathered as 
part of the Agreement, he said that, to the knowledge of the delegates present, there had been no 
grandfathering.  The United States delegation had asked if there were speci fic plans to remove certain 
sectors from the list of exceptions; as had been noted, there was regular consultation on the exceptions list 
to the Services Protocol, and the Parties would review the sectors excepted as part of that process.  Also, 
both Austr alia and New Zealand had accepted an obligation in the context of Asia Pacific Economic 
Cooperation (APEC) to move to free trade in services as part of the overall movement to free trade in 
investment by 2010.  
 
21. The representative  of Korea  asked for additional clarification concerning the relationship between 
investment policies and the modes of supply for services.  He then asked about the differences in the extent 
of exclusions under the Agreement and under the two Parties’ GATS Schedules.  
 
22. In response to the Canadian question on whether a ratchet clause existed in the Agreement, the 
representative of Australia  said that, because there could be no unilateral inscription of an exception, there 
was an effe ctive check against the re -inscription of an excepted sector.  
 
23. The representative of New Zealand  addressed the Korean question regarding the differences 
between the scope of excluded services in the Annex to the ANZCERTA Services  Protocol and the 
Members’ GATS Schedules.  It was necessary to bear in mind the different structures of the two 
Agreements, i.e. the fact that in the ANZCERTA Services Protocol there was a negative list approach, which 
quite narrowly defined exceptions in  certain sectors, whereas in GATS there was a positive list approach.  
The different structures of the two Agreements militated toward a much narrower list of exceptions and a 
much narrower range within those exceptions of the activities in the ANZCERTA Se rvices Protocol context 
than in the GATS context.  
 
24. Another representative of New Zealand  reiterated that there was no a priori  exclusion of a mode of 
supply.  The exception relating to foreign investment policies was of a horizon tal nature, and there were no WT/REG40/M/1  
Page 6 
 
bilateral preferences in the respective foreign investment regimes.  So, in effect, New  Zealand’s services 
related investments were not exempt from Australia’s investment policies, and vice versa.  In other words, 
the Parties applied the same treatment to investments between each other as they did to investments of all 
other WTO Members.  
 
-I.4 - Trade Data  
 
25. The representative of Korea  referred to the statistical table in the Standard Format, noting th at on 
pages 8 and 9 the table described Australian imports and exports of services by country.  Bilateral trade 
between Australia and New Zealand had shown negative growth in the most recent five -year period.  Over 
the last decade there had been 2.2 per ce nt growth in Australia’s exports to New Zealand and 3.0 per cent 
growth in its imports from New Zealand, whereas the global trend over the same period showed Australia’s 
exports to have grown at a rate of 12.1 per cent and its imports to have grown at a ra te of 8.0 per cent.  
Global services trade thus grew significantly faster than the Parties’ bilateral trade.  How did the Parties view 
these statistics, in particular with respect to the matter of trade creation versus trade diversion?  Also, he 
would be i nterested in knowing how the Parties accounted for the large fluctuations in trade with various 
countries in 1993 -94 and 1994 -95.  For example, the percentage growth figure for Australia’s services 
exports to Canada was negative 20, even though the overall  growth figure for the decade for Canada was 6.9 
per cent.  
 
26. The representative of Australia  said statistics for trade in services were notoriously difficult to collect, 
and services trade had a tendency to fluctuate greatly.  The  negative figures which Korea pointed to were of 
course only growth rates, and it was not surprising that at some points in services trade there was minus 
growth.  Perhaps the ANZCERTA Services Protocol should be presented as Australia’s favour to the worl d; 
far from the Protocol causing trade diversion in favour of the Parties, the Parties seemed to be providing 
economic benefit to third parties.  
 
27. The representative of Korea  said the statistics referred to Australia’s trade flows , but those for New 
Zealand would also be useful.  
 
28. The representative of Australia  responded that it was difficult to provide comprehensive statistics 
for services and noted that Australia’s exports to New Zealand were New Zealan d’s imports, and Australia’s 
imports from New Zealand were New Zealand’s exports, so the Parties’ two -way trade was reflected.  The 
Parties would try to provide additional information, particularly with respect to the amount of services trade 
in excluded s ectors.  
 
29. The representative of Korea  said his question had been geared toward finding out the relation 
between New Zealand and third countries.  
 
 
C.Section II - Trade Provisions  
 
30.  The representative of the United States  sought clarification on Article 14 of the 1988 Protocol, 
Denial of Benefits, which said that “a Member State may deny the benefits of this Protocol to persons of 
the other Member State providing a service if the Memb er State establishes that the service is indirectly 
provided by a person, not being a person of either Member State.”  Would the test for determining this be 
predicated on the substantive business operations provision under GATS Article V:6?  
 
31.  The representative of Australia  called attention to the Definitions section of the ANZCERTA 
Services Protocol in Article 3, which defined “(a) person of a Member State” as “a natural person who is a 
citizen of, or ordinarily resident in, that State; (b) a body corporate established unde r the law of that State; 
or (c) an association comprising or controlled by: (i) persons described in one or both of sub -paragraphs (a) 
or (b); or (ii) persons described in one or both of sub -paragraphs (a) or (b) and persons so described in 
relation to the  other Member State.”  The issue of interpretation had not yet arisen, but GATS Article V:6 
set out that:  “A service supplier of any other Member that is a juridical person constituted under the laws          WT/REG40/M/1  
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of a party to an agreement ... shall be entitled to tre atment granted under such an agreement, provided that 
it engages in substantive business operations in the territory of the parties to such an agreement.”  
 
-II.4 - Standards  
 
32. The representative of Canada  said that his delegation had taken note that the two Parties recently 
had submitted a notification to the Council for Trade in Services regarding a mutual recognition 
arrangement in the professional services sector.  His delegation would be interested in receiving more 
information  about this reciprocal recognition of registered occupation and the impact on the national 
treatment commitment of the two Parties.  For instance, he understood that national treatment for 
engineering services in New Zealand was limited by a requirement th at certification of certain work involving 
health and safety was restricted to registered engineers, and to become a registered engineer a person had 
to be a resident of New Zealand.  Had this requirement now been waived for Australian engineers, and was 
it possible to provide the services in a cross -border fashion?  
 
33. The representative of Australia  referred to information on page 5, paragraph 3 and said that, as the 
Canadian delegate had pointed out, the Trans -Tasman Mutual Recogn ition Arrangement had been notified 
to the Council for Trade in Services in a separate notification.  This matter was not the subject of the day’s 
examination, however.  Copies of the Arrangement were available through the Australia and New Zealand 
Governm ents. 
 
34. The representative of Canada  said that he took the point that this might relate to a different 
notification, but that on the face of it, this was also a measure pertaining to a particular services sector, namely 
profession al services.  He had asked whether there were any services sectors in addition to those on the 
exceptions list in respect of which measures had been grandfathered, and he had been told that there were 
no grandfathered measures.  He thus was perplexed as to  why there were still some restrictions that might 
be prevailing in the professional services area; had the professional services area been covered in the initial 
services list, or was it subject to a recent liberalization scheme?  Did this sector belong o n the list of excluded 
sectors?  There was some confusion as to whether there had been measures affecting professional services, 
and, if there had been, whether they had been liberalized and when.  
 
35. The representative of Australia  said the Parties would respond in writing to the specific question on 
engineering services.  The Canadian delegation had raised a valid point with broad systemic implications, 
i.e. what the relationship was between licensing requirements and services libe ralization.  Perhaps now was 
not the appropriate time to address this question.  It was precisely because of that question that for 
transparency purposes the Parties had provided information on the Trans -Tasman Mutual Recognition 
Arrangement.  That Arrange ment, which was a separate arrangement of less -than-treaty status, was not part 
of CER.  Involving standards and licensing in general, it covered more than services, but it had implications 
for the provision of professional services.  But as his colleague had pointed out, the purpose of the GATS 
Article V examination was not necessarily to cover issues of standards and licensing, although it would be 
foolish to argue that any discussion of the Services Protocol should put all issues of standards and licensi ng 
aside.  
 
 
D. Section III - General Provisions of the Agreement  
 
-III.4 - Relation with Other Trade Agreements  
 
36. The representative of Switzerland  asked if there were any relationship between the South Pacific 
Regional Trade and Economic Agreement (SPARTECA) and the ANZCERTA Services Protocol.  
 
37. The representative of Australia  said that SPARTECA involved Australia, New Zeal and and other 
South Pacific entities.  Since it covered only trade in goods, it was not related to the CER Services Protocol.  
 WT/REG40/M/1  
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38. The representative of Korea  requested further information on the comparison between the GATS 
Schedules  and the Protocol’s Annex.  His delegation was interested in this matter because it related to the 
criteria of GATS Article V:1(b), which concerned the absence or elimination of substantially all 
discrimination in the sense of the national treatment provis ion of GATS.  Had the restrictions relating to 
national treatment under the GATS Schedules as submitted by the Parties been removed by this Protocol 
between the two Parties, since none of the restrictions appearing in the GATS Schedule had been included 
in the Annex?  
 
 
E.Follow -Up 
 
39. The Chairman  said outstanding questions and replies would be treated through a written exchange.  
After that, the Committee could begin discussing draft conclusions for the examination.  He proposed tha t 
the Committee request the Secretariat to begin preparing the factual record of the examination.  
 
40. The Committee took note  of the comments made.