RESTRICTEDWORLD TRADE
ORGANIZATIONS/C/W/137
9 May 2000
(00-1882)
Council for Trade in Services Original:  English
COMMUNICATION FROM HONG KONG, CHINA
Review on Annex on Article II Exemptions
First Meeting on 29-30 May 2000
Questions from Hong Kong, China (up to Distribution Services)
The attached paper 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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1. The objectives of Hong Kong, China (HKC) for the review of MFN exemptions are four-fold:
(a) to improve the clarity  of the existing exemptions;
(b) to enhance their transparency ;
(c) to consider their necessity ; and
(d) to review their consistency with the WTO/GATS obligations .
I. GENERAL QUESTIONS
2. It is noted in the list compiled by the Secretariat (Job No.1551) that some Members have
listed MFN exemptions which appear to allow them to grant less favourable treatment,  and less
favourable  than those inscribed in their respective schedules of specific commitments.  It is our
understanding that this is not in accordance with the scheduling convention.  We would appreciate the
Members concerned to  apprise us of the rationale behind suchexemptions.  Such exemptions include:
- USA (horizontal section on taxation measures, page 30), Turkey (business services –
professional services, page 36), Australia (audio-visual, 2nd entry on page 45),
EC (audio-visual, 3rd entry on page 55).
3. It is noted that some Members have left the 5th column on "Conditions creating the need for
the exemption" blank.  For transparency sake, would appreciate if the Members concerned could
provide the necessary information.  Such exemptions include:
- Venezuela (professional services, page 37;  telecommunications, page 44;  audio
visual, page 71-73; and distribution, page 75).S/C/W/137
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II. QUESTIONS ON HORIZONTAL SECTION
A. GENERAL QUESTIONS
4. There are a number of MFN exemptions which are listed because of the need to implement
the provisions under certain agreements on the promotion and protection of foreign investments.   We
note that GATS Article II covers only "any measures covered by this Agreement".  We believemeasures that are purely for the promotion and protection of investment are outside the current ambit
of GATS.  We wonder if the exemptions in question require scheduling.  The following Members
maintain such exemptions:
- Canada (page 3), Chile (page 3), Costa Rica (page 3), Kuwait (page 14), Poland
(page 19), Singapore (page 20), Trinidad and Tobago (page 23) and Uruguay
(page 33)
5. Some Members maintain exemptions regarding the movement of natural persons  in order to
give effect to the agreement(s) they have reached with another countr(ies).  We would like to know if
such exemptions can be catered for under GATS Article V bis, and if not, would the Members
concerned consider an agreement which will meet the requirement under Article V bis.  Members
maintaining such labour mobility exemptions include:
- Austria (page 2), EC (page 9, 2nd entry) and Sweden (page 22)
6. We note that some Members have formed regional agreements with their neighbouring
countries under which MFN exempted measures are maintained.  We are interested to know whether
an RTA has been formed in such cases, and if so , whether the exemptions concerned can be covered
by GATS, Article V.  Exemptions under such agreements are maintained by the following Members:
- El Salvador (page 7), Panama (page 17, 2nd entry), Solomon Islands (page 21) and
UAE (page 26).
B. S
PECIFIC QUESTIONS
7. EC (page 8, 2nd entry):   Would EC confirm whether that all EC countries are similarly
caught by this provision regarding real estate.  Please explain why this is a desirable matter from a
policy point of view.
8. EC (page 10):   For clarity purpose, we are interested to know which Mediterranean Basin
countries are involved and the time table for their economic integration.
9. Guatemala (page 11-12):  It is noted that Guatemala has only provided the name of the
treaties/legislation under the 2nd column of the table.  For transparency purpose, we would like to
know the description of the measures that are purported to be MFN inconsistent.
10. Liechtenstein (page 15, 1st entry):   Would Liechtenstein explain the economic justification
for this provision.
11. Panama (page 17, 3rd entry):   With the reversion of ownership of the Panama Canal, does
the condition which created the need for this exemption still prevails?
12. Thailand (page 23):  We would like to know whether the actual position currently in
operation is that only US citizens and entities are granted national treatment, and why this measure
continues to be necessary.
13. Turkey (page 26, 2nd entry):  Would Turkey please explain what the measure of consulate
duties is intended to cover, and why it is necessary to have an exemption for it?S/C/W/137
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III. QUESTIONS ON SECTORS
1. Business Services
(a) Professional Services
14. Dominican Republic (page 35 and 36):   We would like to know whether there are no other
conditions affecting the exercise of the professions indicated (legal;  auditing and accounting;  dental,physiotherapy, medical, paramedical and nursing;  and architectural and engineering services) other
than reciprocity, such as professional qualifications etc.  Also, is the entry under legal services for
“architects and engineers”  in the wrong place?
(b) Other Business Services
15. New Zealand (page 39):  Please explain why the criteria for entry in the interpretation
services should be based on nationality but not ability to do the job.
2. Communication Services
(a) Telecommunication Services
16. Despite Members have adopted an understanding on accounting rates in telecommunications
in 1997, it is noted that several Members have listed exemptions to cater for the setting of different
accounting rates for different operators/countries under the respective agreements (e.g. Bangladesh,
India, Pakistan, Sri Lanka and Turkey, page 40-43).  We would like to know whether theseexemptions will be lifted as and when a satisfactory resolution to the accounting rates can be reached
in the review of accounting rates under CTS.
(b) Audio Visual Services
17. It is noted that some Members (mainly the EC) maintain exemptions under the arrangements
of certain conventions/agreements (e.g. MEDIA, EURIMAGES, EC Television Directive No. 89/552
and the Council of Europe Convention of Transfro ntier TV) which provide for preferences linked to
specific origin criteria.  For transparency purpose, would the Members concerned provide more
information on these specific origin criteria?
18. EC (page 57, 3rd entry): We would like to know whether all EC countries are similarly
caught by the 49 per cent cap on capital and voting rights as in the case of Italy.  Please explain whythis is desirable from a policy point of view.
3. Distribution Services
19. Liechtenstein, Switzerland (page 74 and 75):  We note that the two Members have listed
exemptions relating to the granting of work permits.  As the exemptions are to give effect to certain
provisions under the EFTA Agreement, we wonder if the exempted measures are already covered by
Article V and therefore require no listing.
20. Hong Kong, China would appreciate if written replies could be provided to the above
questions in advance of the MFN Review session, in order to facilitate discussion.
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