RESTRICTEDWORLD TRADE
ORGANIZATIONWT/REG50/M/4
WT/REG51/M/4WT/REG52/M/4
27 July 1998
(98-2968)
Committee on Regional Trade Agreements
Eighteenth Session
EXAMINATION OFTHE EUROPEAN COMMUNITIES-HUNGARY EUROPE
AGREEMENT, SERVICES;THE EUROPEAN COMMUNITIES-POLAND EUROPE
AGREEMENT, SERVICES; ANDTHE EUROPEAN COMMUNITIES-SLOVAK REPUBLIC
EUROPE AGREEMENT, SERVICES
Note on the Meeting of 10 July 1998
Chairman:  Mr. Chul-Ki Ju (Korea)
1. Under Agenda Items D.III-V of its Eighteen th Session, as found in Airgram WTO/AIR/871,
the Committee on Regional Trade Agreements (CRTA) resumed the examinations of the European
Communities-Hungary Europe Agreement, Services;  the European Communities-Poland Europe
Agreement, Services;  and the European Communities-Slovak Republic Europe Agreement, Services.
2. The Chairman recalled that the Committee had previously held three rounds of examinations
for these three Agreements in November 1997, in February 1998 and in May 1998.  Summary records
of those meetings had been distributed as multi-symbol documents WT/REG50-51-52/M/1-3.  At the
end of the last Session, there had been a number of outstanding questions which Members said they
would submit in writing.  Questions posed by the Japanese delegation had been received in time for
the Parties to submit written replies, circulated in multi-symbol document WT/REG50-51-52/2/Add.1.
Some outstanding questions had not been received in time for replies to be distributed in written
format in advance of the meeting, so the Parties had indicated they would provide oral responsesduring the day's meeting.  Today's meeting would also provide an opportunity for Members to raise
any remaining questions or points.  In line with past practice, he proposed that the Committee
examine the three Europe Agreements together, while keeping in mind that they were separate
Agreements.  Discussion in this meeting would again be structured according to the layout of the
Standard Format for Information on Economic Integration Agreements on Services (for theEC-Hungary Europe Agreement, document WT/REG 50/1; for the EC-Poland Europe Agreement,
document WT/REG51/1; and for the EC-Slova k Republic Europe Agreement, document
WT/REG52/1).
Provisions Affecting Trade in Services
3. The representative of the United States said he would not be able to respond directly to oral
answers that the Parties would provide; instead, he would report them to services experts in his
capital.
4. The representative of Japan thanked the Parties for their written replies.  Concerning the term
"reasonable time-frame" as referred to in GATS Article V:1(b), she noted that the replies stated that,
because of the broad scope of the Agreements and the logistics of putting in place the necessarylegislation, it was unrealistic to set a short deadline.  Why were "5 years" not long enough, while
"10 years" was acceptable?  Her delegation desired a further explanation on this point.  It was
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the reading of "reasonable time-frame" as "10 years", which might undermine Article V:1.  Her
delegation was prepared to discuss this matter as a systemic issue as well.
5. The representative of the European Communities said there was not much she could add to
the written replies.  With respect to the Japanese delegation's concern over the ten-year transition
period, and its comment that it would like to discuss this in the systemic debate, she asked what this
would mean for the examination process and the prospects for reaching conclusions. The five-year
period of time referred to by the Japanese delegation seemed to have as its basis the time-frame set
out in the GATS with respect to future rounds of li beralization in the multilateral context.  Article
XIX called for the first such round to take place "not later than five years from the date of entry into
force of the WTO Agreement…" but did not say when the next round was to take place, as this wasafterward to be decided on an ad hoc  basis. Her delegation had put arguments for de-linking
liberalization periods within an RTA from those in multilateral liberalization.  Regardless of whether
ten years seemed a reasonable guideline from a systemic point of view, these Agreements had to be
considered on their own merits.  Ten years was a realistic deadline in this case.  It applied only to a
few sectors because most were liberalized already.  For those that the Parties had been unable toliberalize up front, the process was identified as being difficult, and the Parties had given themselves a
maximum period of ten years.  In the area of financial services, as a result of multilateral negotiations,
the Parties were now ahead of the ten-year transition period.  In other words, the ten-year mark was
not an end date in the sense of the Parties' holding off until the tenth year to liberalize, but rather it
was a continuous, dynamic process of further liberalization.  The Committee should examine theseAgreements on their own merits and not delay the examination process while Members discussed it in
a more systemic way.  She asked how the Japanese delegation viewed the merits of these Europe
Agreements, as to whether the ten-year transition period seemed contrary to the integration
Agreements' conformity with Article V criteria.  The Agreements included liberalization in everything
except certain sectors, and for anything that had not been liberalized, the Parties had set a realistictimetable, given this huge undertaking.  It was not that this liberalization would take place in the tenth
year, but rather it was that liberalization should have already taken place for the most part by the tenth
year.  Therefore, preparatory work and implementation were already underway.
6. The representative of Japan said her delegation took note of the Parties' view that ten years
was a reasonable time-frame for a transition period.  However, her delegation was nonetheless
concerned that this time period might become a be nchmark for future agreements examined; this was
why her delegation had mentioned the systemic implications.  In the conclusions of this examination,her delegation would like to see this point mentioned.
7. The representative of the European Communitie s said that the fact that each of these
Agreements had a ten-year period did not mean this time-frame would automatically become the rule.
It seemed that there was an acknowledgement that this period was reasonable in light of the
circumstances surrounding the Agreements being examined, and given that the transition periodapplied to only a few sectors and that there was already a liberalization plan attached to it.  If these
points were reflected as such, the Committee could qualify the reasonableness, thereby preventing the
ten-year period from becoming a standard measure.  It seemed acceptable to qualify the acceptance of
this period, as had been suggested by the representative of Japan, and later, when the Committee had
some jurisprudence, it could treat this matter in a systemic discussion.
8. The representative of Canada said that his delegation had also registered concerns that ten
years appeared to be a long transition period, given the context of these Agreements.  His delegation
had inquired as to whether there had been attempts to speed up the liberalization process.  It would be
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information could help the Committee understand the particular circumstances that might justify this
seemingly long transition period.
9. The representative of the European Communities said some further liberalization had already
taken place, for example in the sectors of financial services and basic telecommunications, and certain
contractual services.  Also, in the area of transport, some initiatives had been launched in the
Association Council to agree on legislation to liberalize the transport sector.  The association
countries were also involved in a parallel process of accession negotiations in which all legislation
and all sectors would be subject to further liberalization.  These pre-accession negotiations would
presumably overtake the transition periods.  The pre-accession negotiations were, however, not part of
this examination.  She would think that, in addition to pre-accession negotiations, the examples shecited should demonstrate that the Parties were moving toward further liberalization.
10. With respect to basic telecommunications and financial services, the representative of 
Canada asked if the subsequent liberalization were due to the Europe Agreements or to GATS
negotiations.
11. The representative of the European Communities responded that the liberalization was a
combination of autonomous liberalization, liberalization as a result of the bilateral association
Agreements and liberalization as a result of multilateral negotiations.
12. The representative of Australia asked if, irrespective of whether the liberalization had been
autonomous or as a result of multilateral liberalization, the liberalization in financial services and
basic telecommunications would mean a degree of liberalization, or free trade in those sectors.  Werethere any plans to delay the liberalization in any sectors until the end of the transition period?  In other
words, in what sectors would liberalization be held back as long as possible?
13. The representative of the European Communities said that, as the documentation had
indicated, a limited number of sectors referred to in the Annexes of the Agreements - for example
gambling, foreign legal consultants (in the case of one Agreement) and some activities in real estate -were not in this dynamic process of transitional liberalization.  But for all the other services activities
that were not in those Annexes, initiatives had been taken, either autonomously, as a result of
decisions in the Association Council or in parallel with the Parties' multilateral negotiations.
14. The representative of Australia asked in regard to financial services and basic
telecommunications if there were any remaining reservations, or, as a result of the liberalization that
had occurred, if there were now free trade between the Parties in those sectors.
15. The representative of the European Communities said the same reservations applied among
the EC and the association countries as those that applied on an m.f.n. basis as listed in the GATS
Schedules.  There were exactly the same reservations for the Agreements as for the m.f.n. Schedules.
16. The representative of Japan said that the replies explained that the decisions by the
Association Council were binding on the Parties, but that its recommendations were not directly
binding since the implementing measures were likely  to need further discussion and legislation.  For
the sake of transparency, her delegation would request the Parties to notify the WTO in the event of
the inclusion of a new services sector as a result of future decisions or recommendations.
17. Regarding the Association Council, the representa tive of the European Communities  said that
the point by the delegation of Japan, that any further liberalization under the Agreement should be
notified or provided as information, was fair.  Her delegation would look into what had becomeWT/REG50/M/4
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definite, but most initiatives were under discussion in the form of proposals in the Association
Council.  In particular, there were several proposals pending on transport.  What had been done on
financial services, ahead of schedule as a result of multilateral liberalization, had been notified as itwas in the GATS Schedules, so the Parties did not intend to do this separately.  But if there were any
other measures, the Parties would look into whether they should notify them.  She recalled that the
GATS required RTA parties to notify "any significant modification of that agreement".  She was not
going to debate what constituted "significant", but would note that the measures were all
implementing decisions.  Perhaps this could be cons idered in the conclusions part of the examination
report, as far as what information the WTO had already and what had been announced, so that
information might be updated.
18. The representative of Japan posed a question relating to safeguards.  In the written replies, the
Parties indicated that safeguards could be applied when industries were undergoing restructuring,
facing serious difficulties (particularly where those entailed serious social problems) or facing the
elimination or drastic reduction of the total market share held by domestic companies or nationals in a
given sector, and they could also be applied to protect newly emerging industries in the countryconcerned.  These criteria seemed general and vague.  Also, the paper stated that "the interpretation of
the criteria would be … a political question."  Her delegation wished to register concerns here, as such
vagueness could cause arbitrary uses of such measures.
19. The representative of the European Communities said she took note of the Japanese
delegation's question.  A safeguard was a last-resort safety valve; since the Parties had no practical
experience applying these measures, and since they did not anticipate applying any, she could not add
much to previous replies.
20. The representative of Japan said this aspect of services agreements was interesting and
important, just as it was in goods agreements.  Under the GATS, there were no safeguards disciplines.
Within the context of the RTAs under examination, a company based in the territory of one of theParties had no legal predictability as to what would happen if one of the Parties applied a safeguard,
since there were no clear conditions or criteria.  Was it true that safeguards would apply only to mode
3 supply of services, and not to modes 1, 2 or 4?  Could safeguards be applied to both bound and
unbound sectors?  If safeguards were applied to bound sectors, it seemed this would be against the
specific commitments of the GATS.  What were the Parties views on this?  He then asked if
third-country suppliers located in the territories of the Parties would face safeguards.
21. The representative of the European Communities said she could not add much to previous
replies on this point.  Under the terms of the EC-H ungary Europe Agreement, for example, a Japanese
company established in the EC would be considered an EC company.  If there were market
disruptions in Hungary as a result of the trade fl ow between Hungary and th e EC, and bilaterally the
Parties discussed this and decided that Hungary had to suspend for a short time all national treatment
obligations to EC suppliers, the Japanese company es tablished in the EC would also be subject to that.
This should not be viewed as unpredictable or uncertain, because a Japanese company establishing in
the EC would receive the benefits of the association between the EC and Hungary; then, when in that
territory there were difficulties because of bilateral trade flows, that company could not expect to be
able to continue to trade with Hungary, asserting that it was a Japanese company and not an EC
company.  The same would apply under the EC-Pol and Europe Agreement or the EC-Slovak Republic
Europe Agreement.  A company could not pick and choose – if it were established as a juridical
person, the establishment applied to all extents, and in that sense it was predictable.  If the company
were not established in the territory of the Party, then any safeguard action against it would be one
vis-à-vis  third countries, and this would have to be applied in conformity with WTO rules.  The
Parties were aware that there was no safeguards provision in the GATS, but this did not mean thatWT/REG50/M/4
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Members could not modify their Schedules.  So, for commercial presence, that established Japanese
company would be considered a national company, so if the Parties had to impose a safeguard
measure vis-à-vis  third countries, that company would no longer hold a status of third country.  If it
were on a cross-border basis, it would be in respect of WTO obligations, and the Parties fully realized
that, since there was no safeguards clause, they could not invoke vis-à-vis  Japan in the WTO
restrictions to trade on that basis.  Possibly the Parties could say they nevertheless had to modify their
Schedules and would invoke the disciplines of Article XXI.  But this was outside the scope of this
examination.
22. The representative of Japan said he understood the explanation to mean that a foreign
company located in Hungary, Poland or the Slovak Republic would face a safeguard if it had status as
a juridical person, but not if it did not have sufficient business contacts for that status.  The
representative of the European Communities confirmed this.
23. With respect to the written questions submitted by the Canadian delegation, the representative
of the European Communities said that the lack of written replies was not a sign of bad faith; rather,
intensive coordination had been required among the EC Member States and between the EC and the
respective partners, and, given the limited timeframe, it had not been possible to make written replies
available.  Regarding the Canadian question as to whether the Parties had already liberalized in areas
with the ten-year transition period, she replied that yes, the Parties had already started their
liberalization process for financial services and the degree of liberalization the Parties had between
them was that which was registered in each Party's Schedule of Specific Commitments.  The nextquestion was whether there were other sectors which had been subject to further liberalization since
the conclusion of the respective Europe Agreements; as had been indicated, this applied also to basic
telecommunications and movement of persons, and some initiatives had been taken on transport as
well.  Regarding the Canadian delegation's third question, i.e. how did the Europe Agreements deal
with basic telecommunications, she replied that the general provisions of the Agreements applied tobasic telecommunications, and there was no special treatment identified; basic telecommunications
was covered by the general terms requiring the Parties to accord national treatment on establishment
and operation and also to envision progressive liberalization on the supply of services.  In sum, basic
telecommunications was covered in the Parties GATS Schedules, and this liberalization was taken
further by this sector's being covered by the Agreements' normal disciplines since they did not have
reservations, exceptions or specific disciplines applying.
24. Turning to questions submitted in writing by the United States delegation, the representative
of the European Communities noted that the level of commitments would remain until such time as
Hungary, Poland and Slovak would accede to the EC, when there would be a consolidated Schedulewith changes identified.  The Parties did not have an inventory of where legislation in those three
countries was more liberal than in the EC, and where that might result in restrictions.  At present, it
was too early to provide this information because the Parties still had two years to negotiateaccession; the question would be relevant when this possible accession took place, when there would
be a new enlargement of the EC.  The question was at this time irrelevant and outside the scope of the
Europe Agreements.
25. The Chairman said a separate document containing the replies to the Canadian and
United States questions would be circulated.
26. The United States said he would not comment at this time but instead allow his delegation to
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27. The Chairman invited delegations to submit any additional questions in writing by the end of
July.  He would discuss the next steps for the examination with the Chairman of the Committee.
28. The representative of Switzerland said that his delegation was keen not to have unnecessary
meetings.  Perhaps a written exchange of questions and replies would be sufficient and another round
of examinations would not be necessary for these Agreements.
29. The representative of the United States said he could not agree not to have another round
before his delegation's services experts had had an opportunity to consider the additional information
to be provided.
30. The representative of the European Communitie s agreed that the right to come back with
further questions was always reserved.  If the United States delegation would not have new questions
but rather would have only follow-up questions, perhaps the process of drafting the examination
report could be started in September.
31. The representative of Hungary said he supp orted the interventions by the EC and Swiss
delegations regarding the acceleration of this examination.  As far as he could see, this factual
examination was de facto  finished; it seemed strange that there was support for the Chairman's
making a statement to the General Council  regarding the Committee's lack of progress, while at the
same time delegations could not agree to bring factual examinations to a close.
32. The Chairman said that the written exchange of questions and replies could take in the next
few weeks, and there would be consultations in early September to determine if Members considered
another round necessary.  The Committee would work toward the best means to accelerate the processwhile satisfying all the questions and requests for clarifications.
33. The Committee took note of the comments made.
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