RESTRICTEDWORLD TRADE
ORGANIZATIONS/FIN/M/30
8 May 2001
(01-2393)
Committee on Trade in Financial Services
REPORT OF THE MEETING HELD ON 2 APRIL 2001
Note by the Secretariat
1. The Committee on Trade in Financial Services held a meeting on 2 April 2001.  The agenda
was contained in airgram WTO/AIR/1507.  No matters were raised under Other Business.
ITEM A: A PPOINTMENT OF THE NEW CHAIRPERSON FOR THE COMMITTEE
2. At the beginning of the meeting, the Committee elected Mr. Jan Peter Mout from the
Netherlands as the Chairperson for this year.
ITEM B: A CCEPTANCE OF THE FIFTH PROTOCOL TO THE GENERAL AGREEMENT ON TRADE IN
SERVICES EMBODYING THE RESULTS OF THE FINANCIAL SERVICES NEGOTIATIONS
3. The Chairman recalled that the Council for Trade in Services decided at its meeting on
1 December 2000 to reopen the Fifth Protocol on Financial Services to allow for the acceptance of
Kenya and Nigeria.  He informed the Committee that Kenya had accepted the Protocol on
1 December 2000, while Nigeria did the same on 7 December 2000.  He also recalled that at the last
meeting the delegations of Poland and Uruguay had provided information on the status of ratification
procedures in their countries.  He further reminded that as of the date of the meeting seven Members
had not yet accepted the Protocol, namely Bolivia, Brazil, the Dominican Republic, Jamaica, the
Philippines, Poland, and Uruguay.
4. The representative of Uruguay said that the Fifth Protocol was still under consideration by the
Commission of International Affairs of the Chamber of  Representatives.  He further explained that the
Protocol had to be approved by that Commission, by the Chamber of Representatives in plenary and
by the Senate.  He added that the Ministry of Foreign Affairs in Uruguay was in contact with the said
Commission in order to streamline the procedure and move forward all the correspondingparliamentarian processes as much as possible.
5. The representative of Poland said that the Law to which he referred to during the Committee's
meeting of 29 November 2000 (amending the law on public turnover in securities), had entered into
force at the beginning of this year.  Thus, the legal conditions for initiating the domestic proceduresfor the acceptance of the Protocol had been created, and preparatory activities among government
agencies were initiated with a view to expedite the procedures.  He expected to provide more precise
and detailed information at the next meeting.
6. The representative of the United States commended Uruguay and Poland for the information
provided and said that it would be useful for the other delegations having the Fifth Protocol
outstanding if they showed a similar spirit and could provide the Committee with regular updates.
7. The Chairman agreed with the comments made by the representative of the United States.
Before closing the discussion on the item, he reminded delegations of the importance of the FifthS/FIN/M/30
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Protocol, and encouraged those that had been unable to accept it to accelerate their internal procedures
for its acceptance.
8. The Committee took note of the comments made and agreed to revert to this item at the
following meeting.
ITEM C: T ECHNICAL ISSUES – SECTORAL CLASSIFICATION OF FINANCIAL SERVICES
9. The Chairman recalled that at the previous meeting the Committee had a brief discussion on
this item, based on a statement by Japan contained in document Job No.  7051, dated
7 November 2000.
10. The representative of Canada said that his delegation was still considering the issues raised by
Japan.
11. The representative of the European Communities said they were still examining the technical
issues raised by Japan, and had no final position on them as yet.  She also noted that classification
issues had been raised in the negotiating proposal s tabled before the Special Session of the Council
for Trade in Services.  She pointed out that in the future the Council might decide to refer some of that
work to the Committee.
12. The representative of the United States considered the definitions in the Annex on Financial
Services to be comprehensive and flexible enough to embrace the entire financial services sector and
therefore thought it unfruitful to ask the Secretariat for any work on the issue.  It would be preferable
to wait and see whether more information would be given by the Japanese delegation.
13. The representative of Hong Kong, China asked Japan whether it had experienced any
practical difficulties in the areas they had identified in the above-mentioned statement or any
problems relating to scheduling.
14. In response to the question by Hong Kong, China, the representative of Japan drew attention
to his intervention at the Committee meeting of 9 October 2000.  He said that it was not clear to his
delegation whether the classification contained in the Annex on Financial Services covered all the
transactions conducted electronically.
15. The Chairman observed that three delegations - Japan, Canada, and Thailand - were still
studying the issue, and that according to the US, these services were already covered by the
definitions in the Annex on Financial Services.  He also referred to the comments made by the EC,
and said that the Committee would have to wait until the issues on classification contained in the
negotiating proposals were delegated by the Council for Trade in Services to the Committee at a laterstage.  The Chairman also encouraged Members who were working on these issues to make
submissions in writing in order to assist other delegations to prepare for the next meeting.
16. The Committee took note of the statements and agreed to revert to this matter at the following
meeting.
I
TEM D: O THER ISSUES FOR FUTURE DISCUSSION
17. The Chairman recalled that at the previous meeting the discussion under this item had focused
on a proposal by Japan, requesting information from international organizations working on
regulatory issues in financial services, contained in document Job 5625, of 19 September 2000.  Headded that there was support for the proposal, and appreciation for the flexibility shown by the
Japanese delegation to meet the interests and concerns of Members.  Additionally, at the previousS/FIN/M/30
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meeting, Chile had suggested a two-step approach: firstly requesting written contributions from
international organizations about their activities; and secondly, after analysing these submissions,
inviting the international organizations for a debate with Members.  Some delegations supported that
approach, whilst others expressed some concerns or reservations.
18. The representative of Japan informed the Co mmittee that the proposal was for information
and educational purposes only and that it was flex ible about how the relevant information should be
collected.  He also clarified that it was not the proposal's intention to define the meaning of the so-
called prudential carve-out clause in the Financial Services Annex of the GATS.   He suggested that
WTO hold an informal briefing session on the basis of Japan's proposal in order to give the
representative from each relevant international organization an opportunity to explain their activities
in the field of financial supervision and regulation.  He added that the session should be limited to the
three major international organizations – the Basle Committee on Banking Supervision, IOSCO andIAIS.  The session should be held in an informal  setting, separate from the Council for Trade in
Services and its subsidiary bodies.
19. The representative of the EC supported the Japanese suggestion.  She agreed that it would be
useful to confine it to the three major standard sett ing bodies, in an informal setting separate from the
Committee per se.  She also considered it useful to have them back-to-back, so that experts attending
the Committee would also be able to participate.
20. The representative of Australia supported the idea of a seminar or an information sharing
exercise, be it informal or formal.  She supported  the EU's suggestion of organizing it back-to-back
with the Committee meeting.
21. The representative of Switzerland endorsed the Japanese proposal of organising an informal
seminar in order to exchange information on these issues.
22. The representative of Canada also supported the Japanese idea and limiting participation to
the tier one organizations.  He stressed that Canada's support was based on the firm understanding that
none of this touched on the prudential carve-out in any way and it would be clearly outside the scope
of this exercise.
23. The representative of Panama considered the proposal made by Chile as very sensible.  First
national entities from Members could be invited to pr esent information in written form, and then if it
was considered to be useful, Members could consider the possibility of having some kind of briefing
or meeting for an exchange of information of the type suggested by the Japanese delegation.  He
thought it would be more appropriate first of al l to see what information Members could provide,
although he would not oppose consensus around the idea of going directly to the kind of event Japan
had suggested.  He proposed that organizations su ch as the OECD and the World Bank could also be
invited.
24. The representative of Norway supported the idea of a briefing session back-to-back with a
normal meeting, inviting the three international bodies in this area.
25. The delegation of the United States said that when Japan first tabled its proposal he shared the
concerns of a number of delegations about creating the impression of formal links between the work
of the Committee and the work of those other international organizations and was sensitive to any
attempt to use the work of those other organizations in a way that would define the prudential carve-
out.  However, he was ready to go along with the suggestion from Chile which he understood a little
differently from the understanding of Panama, namely  that it would be a two-stage process with the
Secretariat first approaching those organizations and seeking information from them in writing
regarding their activities, and then a second stage inviting those organizations to appear before theS/FIN/M/30
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Committee to describe their work.  He understood the new Japanese proposal as being less than that -
a suggestion for a symposium or a workshop or some kind of meeting completely separate from a
meeting of the Committee.  The US could go along with the idea put forward by Japan.
26. The representative of Korea supported the Japanese proposal which could provide negotiators
with a better understanding on prudential regulation.  He thought it would be preferable to hold the
seminar after the summer break, perhaps October, and back-to-back with the Committee.  With
respect to the invited organizations, Korea could show flexibility.  Lastly, he believed the briefing
seminar must not try to touch on the issue of developing a definition of prudential measures.  In this
regard, he supported the idea that the seminar should be separate from the Committee.
27. The delegation of India said he had no guidance from his authorities on the issue at question,
but he did not intend to block any consensus.  Howeve r, he felt it would be useful to discuss the issue
in an informal setting before the date and contents of the seminar were decided.
28. The delegation of Malaysia said that the new Japanese proposal met his concerns, but he
would need some time to reflect.
29. The representative of Brazil said that he could go along with the proposal made by Japan
about having a briefing session outside the Committee and the Services Council.  His understanding
was that before the session, information would be gathered in writing.  He thought it was useful tohave the seminar back-to-back with the CTFS, but he cautioned against scheduling it after the summer
break because of the preparation of the Ministerial Conference in Doha.
30. The representative of Uruguay raised three issues.  Firstly, it was important to keep in mind
the purpose of a briefing session namely to collect information.  He added that it would be helpful to
get some indication from the Chairman as to the draf t outline of such an event.  Secondly, delegations
should have some background material before the session.  Thirdly, the briefing session should not
conflict with other meetings and should be held before the summer break.
31. The delegation of Canada said that consideration should be given to holding the seminar not
only back-to-back with the meeting of the Committee but also to have it back-to-back with a Special
Session week in which Financial Services were being discussed.
32. The delegation of Switzerland said that it might be useful to organise a seminar on a very
informal basis without any special linkage with the Committee and that prudential regulatory experts
could get together from capital to discuss the trade-related aspects of prudential regulation.
33. The delegations of the EU, the US and Indonesia agreed that it would be useful to have some
sort of draft outline agenda prepared before the next meeting.
34. After Panama's suggestion of discussing measures by countries, the Chairman said that that
was exactly one of the sensitive areas and in that respect it might be more helpful to discuss the work
of organizations at the overall level and not to go into the issue of discussing measures by individual
countries.
35. The Chairman concluded that on the whole there was a lot of support for the Japanese
proposal, although a few  delegations needed more time to consider and also more concrete
information in order to assess how to proceed with this idea.  He specified there was broad support forthe idea to organise a briefing session which was separate from the Committee and the Services
Council.  There was also strong support to limit the participation to only three organizations:  the
Basle Committee, IAIS and IOSCO.  There would be no reporting from the seminar.  Views differed
on the possible dates and the two-stage process.  A couple of delegations suggested that the ChairS/FIN/M/30
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make a concrete proposal covering the agenda and the modalities.  He would also make a proposal on
the dates and submit this proposal well before the next meeting of the Committee.  He asked Members
whether this was agreeable way to proceed with the issue.  No comments were made.  The Chair
confirmed then that he would prepare a proposal on the briefing session for the next meeting.
ITEM E: R ECENT DEVELOPMENTS IN FINANCIAL SERVICES TRADE
36. There were no interventions under this agenda item.
ITEM F: O RGANIZATION OF FUTURE WORK
37. The Chairman recalled that at the Special Sess ion of the Council for Trade in Services held
the previous week, under the item devoted to Stock-taking, delegations discussed the organization of
future work.  It was clear that the Council would face a heavy workload in the coming months, and
that sufficient time would need to be allocated to the Special Sessions in order to carry out the
analysis of the negotiating proposals.
38. The Chairman said that Members should consider how on-going work in the Committee
might be organized in the most efficient and productive way.  In that regard, he sought Members
views on two questions.  First and foremost, what role Members saw the Committee on Trade in
Financial Services having in the current year; and secondly, in light of the first question, whether
there was a need to change the current practice of aligning the meetings of the Committee with thoseof the Council.
39. The representative of Canada said that given the discussions thus far on the other agenda
items, there was activity and issues for the Committee to consider.  He added that he was not certain
about the connection between consideration of negotiating proposals in the Special Session and the
work in the Committee.  With respect to the second question he proposed to leave it to the Chairman's
discretion when the Committee meetings should be held.
40. The representative of the United States, like Canada, was not certain about the connection
between consideration of negotiating proposals in the Special Session and the work in the Committee.
He anticipated that the US might in some point in time want to raise certain questions or issues
contained in the proposal before the CTS for discussion in the Committee in a more technical degree.Regarding the question of scheduling meetings last year in the Services Council, Members established
a very important principle that to the extent feasible, Members should try to cluster meetings of
subsidiary bodies and the Special Session of the CTS.  He heard nothing in the work plan announced
on Friday, 30 March in the Special Session that contradicted that principle.  It was clear to him that
more time was going to be devoted to the Special Session and that might require less time in the
subsidiary bodies in future clusters.  He agreed with the notion of flexibility, but thought it was still
very important in principle to maintain that organizational structure of clusters, especially toencourage capital-based participation.  He requested that the Committee continue to schedule formal
sessions along with the cluster.
41. The representative of Uruguay agreed with the US delegate.  He added that it seemed logical
that the role of the Committee be raised, given its specific nature in respect to Financial Services.
However, he said that in February 2000, the General Council defined that the negotiations onagriculture and services would be carried out in Special Session.  Therefore it should be the Special
Session that dealt with this.  He added that, if in the future, Members decided on a consensus basis
that this procedure should be modified in part, then it was up to the CTS in Special Session to decide
and not to the Committee.S/FIN/M/30
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42. The representative of Australia said that, regarding the role of the Committee, there were
some issues still outstanding such as the seminar and the Fifth Protocol's acceptance.  She had thought
that the main role of the Committee was to deal with negotiations, and agreed with Uruguay that it
would be up to the Special Session to direct the Committee to deal further with any items concerning
the negotiating proposals. She said that Australia's negotiating proposal on financial servicessubmitted to the CTS in Special Session raised some issues that the Committee might be asked to deal
with in future. She added that meetings should not be scheduled unless deemed necessary, and that
delegations should try and focus more on substantial issues.
43. The representative of Hong Kong, China said he was also flexible about the need for and the
timing of meetings. He was not sure whether there was a need to have a meeting in the May, or
indeed, even in the July cluster.  But he would be content to leave it in the Chair's hands to work out
with the Secretariat where the balance of needs laid.
44. On the point made by the delegation of Uruguay and touched on by Australia, he asked the
Secretariat views on the terms of reference of the Committee.
45. At representative of the Secretariat said that the terms of reference of the Committee were to
be found in the Decision had been adopted in Marrakesh on Institutional Arrangements under the
General Agreement on Trade in Services.  The Decision actually described the terms of reference forany sectoral body to be established under the Services Council and then in its last paragraph it
established the Committee on Trade in Financial Services.  It was not entirely clear from that decision
what role the Committee had in the context of a negotiation.  There was no specific reference to the
negotiation, but the substantive nature of the elements there made it clear that the Committee would
have an important role to play.  The specific terms of that role would be up to Members to decide andsince the General Council had decided that the negotiations would take place primarily in the Special
Session of the Services Council, any role for the Committee would have to be seen in the context of
that basic negotiating structure decided by the General Council.
46. The Chairman agreed that the Committee should not have a meeting unless considered
necessary.  Having said that, he agreed that it was the Special Session of the Services council which
was going to refer negotiating proposals to the Committee and at that point it was very difficult to say
if and when that was going to happen.  He thought, however, that in view of the items on the agenda,
it was necessary to have a meeting in May.  He took note of the comments made by the US and
Uruguay on maintaining the practice of having the meeting within the cluster.  He proposed to them to
have a meeting in May within the cluster and for future meetings the Chairman would decide whether
or not the Committee should meet.  And that decisi on would depend on outstanding issues before the
Committee.
47. No objections were raised with regard to the Chairman's conclusion.  The Committee so
agreed.
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