RESTRICTEDWORLD TRADE
ORGANIZATIONS/C/M/30
12 November 1998
(98-4478)
Council for Trade in Services
REPORT OF THE MEETING HELD ON 14 OCTOBER 1998
Note by the Secretariat
1. The Council for Trade in Services held a meeting on 14 October 1998.  The agenda for the
meeting is contained in WTO/AIR/933.  Under other business, the Chairman inserted an item
regarding the derestriction of the sectoral papers prepared by the Secretariat for the purpose of the
information exchange exercise; the delegation of Peru raised a point concerning its legislation on
basic telecommunications; and the delegation of New Zealand requested to make a statement on
Article VI:4 of the GATS.
A. COOPERATION BETWEEN THE INTERNATIONAL TELECOMMUNICATION UNION
(ITU) AND THE WTO
2. The Chairman introduced two informal papers: an  Informal Note by the Secretariat, dated
6 October 1998 (Job No. 5340), which contained a revised draft of a cooperation agreement between
the ITU and the WTO, together with some explanat ory notes by the Secretariat on the meaning of the
various provisions; and a Note submitted by the ITU, setting out the background to their request for
an agreement (Job No. 5323), dated 5 October 1998.
3. The draft cooperation agreement was prepared by the Secretariat on the basis of the initial
draft by the ITU to reflect the views expressed by several Members that the ITU draft was far-
reaching in some aspects and that the agreement, if there were to be one, should essentially be limited
to exchange of information and to technical cooperation.  The draft also reflected the status of
consultations between the ITU and WTO Secretariats.
4. A number of delegations (European Communities, Japan, India, Mexico, Switzerland,
Indonesia) questioned the need for an agreement, and suggested that an alternative might be
represented by an exchange of letters.  Other delegations raised questions on the substance of the text.
Hong Kong, China suggested incorporating the expl anatory notes by the WTO Secretariat into the
final text, as “agreed commentary”.  The representatives of Canada, the European Communities,
Mexico, Brazil, United States and Argentina argued that Paragraph 4 needed to be changed to include
the DSB among the WTO bodies’ meetings to which the ITU Secretariat would not be invited as an
observer.  The United States representative pointed out that the same change would have to be made
to Paragraph 6.
5. The representatives of Japan questioned whether, with reference to paragraphs 7 and 8, it was
necessary to have cooperation outside areas of common interest and to provide technical cooperation
also to non-WTO Members.S/C/M/30
Page 2
6. The representatives of India and of Brazil  asked if the Secretariat could prepare a background
note on the benefits which are expected to accrue from an agreement with the ITU and whether the
same benefits could be achieved with an exchange of letters.  The representatives of the United States,
Argentina and Australia felt that the main benefit of the draft agreement would be in the field of
technical cooperation.
7. The Chairman said that the draft text would be revised.  The Secretariat would prepare a short
note highlighting that the main benefit of the agreement.  It was also pointed out that the ITU attached
symbolic importance to this agreement, and that th e cost of turning it down should be considered.  As
far as the form was concerned, the same results could be achieved with an exchange of letters, but this
would not make any difference to the degree of binding of the agreement.
B. TRADE FACILITATION
8. The Chairman informed participants that he had received a letter from the Chairman of the
Council for Trade in Goods sugges ting that the Members inscribe this item on the agenda of the
Services Council to address those aspects of trade facilitation which this Council considers related to
the GATS.  The letter also suggested that the results of discussions in the Services Council should be
introduced to the Council for Trade in Goods in March 1999.  The Chairman recalled that at an
informal meeting held on 6 October 1998 Members had a useful first discussion on this subject,
during which several delegations expressed the view that trade facilitation in services should not be
discussed in the Services Council as a separate item, but should rather be taken up as it relates to
individual services sectors in the context of the exchange of information exercise.  One delegation
suggested that issues relating to Electronic Data Interchange (EDI) be taken up in the context of the
Work Programme on Electronic Commerce.
9. The Chairman drew attention to an Informal Note by the Secretariat dated 24 September 1998
(Job No. 5156) containing a short paper on the GATS and Trade Facilitation, prepared as an input to
the WTO Symposium on Trade Facilitation in March 1998.  It was circulated to Members simply as a
background note.
C. STATUS OF ACCEPTANCES OF THE FIFTH PROTOCOL STATEMENT BY THE
CHAIRMAN
10. The Chairman informed the Council of the status of acceptances of the Fifth Protocol relating
to Financial Services.  Since the last meeting of the Council, the Netherlands and Turkey had accepted
the Protocol on 20 August, and on 22 September 1998 respectively, bringing the total number of
acceptances to 11.  Two more Members had signed subject to ratification.  He reminded participants
that the deadline for accepting the Fifth Protocol was 29 January 1999, which was not very far away
and that for those Members who had not yet started their ratification procedures, there could be adanger of not being able to meet the deadline.  He recalled the procedural difficulties that the Council
had faced with the entry into force of previous Protocols as a result of delays in concluding
acceptance procedures and urged those Members who had not yet accepted the Fifth Protocol to make
every effort to ensure that their acceptance procedures were concluded before the deadline.  He also
proposed that this matter become a standing item on the agenda of the Council and that at eachfollowing meeting Members concerned inform the Council of where they stood on their acceptance
procedures.S/C/M/30
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11. The representative of the United States said that his government had reached the last stages of
the internal ratification procedure and that his delegation would be formally accepting the protocol
shortly.  He also expressed support for the Chairman’s proposal that the status of acceptances of the
Fifth Protocol become a standing item on the agenda of the Council.  The representative of the
European Communities informed the Council that Sweden had passed new legislation allowing for the
removal of some restrictions in the Schedule of the European Communities.  The representative of
Australia said that her delegation should have been able to accept the Protocol within the following
two months.  The representative of Switzerland sa id that his government had completed the internal
ratification procedure and that formal acceptance would follow shortly.
D. ELECTRONIC COMMERCE – IMPLEMENTATION OF THE WORK PROGRAMME
12. The Chairman recalled that on 25 September 1998, the General Council adopted the Work
Programme on Electronic Commerce contained in document WT/L/274 and that this Work
Programme implied a substantial amount of work for the Services Council.  He said that during an
informal meeting held on 6 October 1998 Members had a useful exchange of views on this matter.  At
this informal meeting several delegations suggested that at least initially the work should be done in
the Council.  It was also suggested that the Counci l might ask subsidiary bodies to look into specific
issues.
13. At the informal meeting it was also agreed, in principle, that the Secretariat would prepare a
short note dealing with each of the elements contai ned in the Work Programme as it related to the
GATS, taking account of work in other international organizations and of the implications for
developing countries of electronic commerce.  There was also a suggestion that the Secretariat should
prepare a paper describing the work which has been undertaken by a large number of otherinternational organizations in this field.  On this point the Chairman suggested that, since the OECD
had recently produced a very comprehensive report on the same subject, the Council might start bycirculating the OECD paper before requesting the Se cretariat to undertake what could in essence be a
repetition of the same work.
14. The Chairman suggested that the Council might choose to convene one or more special
meetings, perhaps of half a day each, on electronic commerce, considering that the Council agenda for
the rest of the year was already very heavy.  He also suggested that the discussion of substantive
issues could start in an informal mode and that, as in the case of the information exchange
discussions, observers be invited to be present for the discussions on electronic commerce.
15. The representative of India said that, whilst it was agreed that discussion would take place in
the Services Council and would be informal, the summary of the discussion given by the Chairman, in
formal mode, should be factual and non-judgemental.  The representative of Egypt expressed a
preference for work on electronic commerce to be discussed in the Services Council and not in other
bodies.  Egypt also asked the Secretariat to supplement its existing paper (WT/GC/W/90) with other
development related issues concerning electronic commerce.
16. The representative of the European Community proposed that work on electronic commerce
could start on 23 November 1998, and that it coul d precede discussion of other items.  The
representative of Indonesia agreed, and supported the suggestion that the Secretariat assist the
discussion with a background note.  The delegate of Hong Kong, China argued that no other meetings
should take place when electronic commerce was being discussed.
17. The Council took note of the statements made by delegations and agreed that informal
discussion would take place at the meeting scheduled for 23 November, that the summary of the
informal discussion would be only factual and th at the Secretariat would prepare a background note.S/C/M/30
Page 4
E. PREPARATION FOR NEGOTIATIONS UNDER ARTICLE XIX - EXCHANGE OF
INFORMATION, SECTORAL DISCUSSIONS
18. The Chairman invited participants to refer back to the five main questions which Members
had agreed in order to structure the sectoral discussions: (1) What are the regulatory authorities,
governmental and/or non-governmental?; (2) Are there any special or common problems encountered
as regards transparency or the application of the most favoured national principle?; (3) What are the
most prevalent types of restriction on market access or national treatment?; (4) Are there other types
of regulation - for example in the areas of licensing, technical standards or qualification requirements
- which commonly restrict trade in the sector?; and (5) What are the main barriers exports face in the
market of other Members?
19. The discussion focused on the following five sectors: Education Services, Health and Social
Services, Tourism Services and Energy Services.  The Secretariat introduced the papers it had preparedon each of these sectors, in documents S/C/W/49 to 52.  The Chairman also invited participants to raise
points concerning sectors discussed at the last meeting of the Council.
20. The following informal papers were submitted by delegations on the services sectors under
discussion: (a) Education Services: Australia, Hong Kong China , Japan , New Zealand , Norway , and
Poland;  (b) Health and Social Services: Australia , Japan , and Norway;   (c) Tourism Services:
Australia, Canada , Japan , New Zealand  and Norway ;  (d) Energy Services: Australia , Japan , New
Zealand, and Norway  (electricity and pipeline).  The United States submitted formal papers on
education, health, tourism and energy services (S/C/W/55 to 58).
21. Regarding sectors discussed at the previous m eeting of the Council, the delegations of the
European Communities and Norway   submitted informal papers on Courier and Postal Services and the
delegation of Norway submitted an informal paper on Audiovisual Services.
22. The Council agreed to follow the same procedure as  at the last meeting.  It would conduct the
discussions in informal mode and back to formal mode at the end of the meeting.  In the formal session
the Chairman gave the following summary of the main points raised during the informal discussions on
each of the sectors:
(a) Education Services
Members noted the social and economic importance of Education Services.  Commonly regarded as a
social service, the sector involved substantial participation of governments as direct providers,
financial supporters and regulators.  Some delegations felt that this reality should be taken into
account in future negotiations.  It was suggested to examine ways in which it could be respected
without affecting the scope of activity in a growing market for a diverse range of educational servicesprovided by both public and private, domestic and foreign suppliers, and capable of being delivered
by various modes.  Given the ample participation of the public sector in education services, it was
suggested that Members should aim at identifying wh at segments of the sector were actually tradable
within their education systems.  It was also stressed that the sector is undergoing significant changes,
due primarily to new technologies and diversification of institutional approaches.  Most of the trade inthe sector has been traditionally conducted through modes 2 (consumption abroad) and 3 (commercial
presence); however, more recently trade through mode 1 (cross-border supply) has experience some
increase.  This suggested that cross-border trade in the sector could be an important area to focus on in
the next round of negotiations.  The interaction of the four modes in the supply of education services
should also be taken into account, as its importance is expected to increase as innovative effortscontinue to develop.S/C/M/30
Page 5
Some Members indicated the desirability of clarifying the coverage of certain activities, such as short-
term training courses and other non-instructional activities, referred to as "auxiliary education
services", under the Sectoral Classification List, document MTN.GNS/W/120.  It was also said that
the current CPC definitions covering education services did not adequately reflect the evolving nature
of education services trade.  It was suggested to consider developing a model definition that wouldtake into account, among others, the fact that education and training is being conducted for-profit and
outside of a traditional institutional setting, and that addresses the growth of distance learning and
training.  A few delegations pointed to the need to address the impact of domestic regulation on the
sector, such as qualification requirements, financial assistance policies, and the issue of recognition of
qualifications/degrees granted by foreign institutions.  In this regard, it was suggested that Articles VI
and VII of the GATS could be a starting point in dealing with these issues.
In noting the small number of existing commitments in education services, most of the delegations
that spoke stressed the need to secure an improved coverage of the sector in the next round of
negotiations.  It was also indicated that in some countries the great importance attached to education
and the resulting high level of regulation might explain the cautious approach to taking commitments
in the sector.  In this regard, an interest in expl oring the elements under Article IV of the GATS that
would allow for assistance to improve education capacities was expressed.
(b) Health and Social Services
Members drew attention to the variety of policy objectives governing the provision of health and
social services, including basic welfare and equity considerations.  Such considerations had led to a
very substantial degree of government involvement, both as a direct provider of such services and as a
regulator. However, this did not mean that the wh ole sector was outside the remit of the GATS;  the
exceptions provided in Article I:3 of the Agreement needed to be interpreted narrowly.
On the other hand, Members also noted increasing possibilities for private participation, whether
domestic or foreign, in various health and social-related activities.  Recent technical developments,
including in the area of tele-medicine, had created new possibilities for trade.  Given that all modes of
supply had been gaining in importance, several Members felt that there was significant scope for
widening and deepening commitments in this sector.
In addition, some Members pointed out classification problems which might need to be further
discussed, including the definitional coverage of newly emerging social services and the distinction in
the Sectoral Classification List between health and hospital services and between in-patient and out-
patient services.  One Member felt that questions surrounding the technical feasibility of trade under
certain modes of supply would merit further discussion, while another Member suggested that
subsidy-related issues be explored in more detail.
(c) Tourism Services
Delegations stressed the economic importance of tourism services, particularly for many developing
countries.  The sector had grown rapidly in recent years and there was potential for further growth.The importance of the sector in employment generation was noted by several delegations as was the
increasing significance of new technologies, e.g. Internet booking and reservations. One delegation
suggested that work on the risks and benefits for developing countries of technical change in tourism
services could be left to the UNCTAD.  Another delegation drew the Council's attention to an
UNCTAD paper on trade in tourism-related services and opportunities for developing countries (dated8 April 1998).  Among other issues, the paper discussed the special problems faced by developing
countries in accessing the Internet and Computer  Reservation and Global Distribution Systems (CRS
and GDS).S/C/M/30
Page 6
It was noted that more Members had made commitments  in the tourism sector than in any other, and
that these commitments served to improved the pred ictability of trade policy and to encourage trade.
Several delegations drew attention to the absence of significant restrictions in their own trade regimes
with respect to the first three modes.  A wide range of liberal commitments had been made with
respect to consumption abroad, probably the most important mode for trade in tourism services.Nevertheless, there remained restrictions on trade, some of which were horizontal rather than sector-
specific.  Several delegations stated that the rest rictions on the establishment of commercial presence,
such as limitations on foreign equity and economic needs tests, were inconsistent with the need to
attract foreign investment in the tourism sector.  One delegation advocated the liberalization of mode
4 trade for workers with special skills, such as fo reign language tourist guides.  One delegation asked
for a reassessment of commitments under mode 1 in the light of the increasing importance of on-line
reservations and booking.  It was noted that commitments under other sectors (such as transport,recreation and cultural services, distribution, etc.), could be of relevance to the tourism sector. One
delegation pointed out that tourism was not strictly an industry in itself, but comprised many other
sectors, and, therefore, regulation of tourism was in reality the combined result of the regulation of
other sectors.
There was some discussion of classification issues relevant to the tourism sector.  One delegation
called for a better understanding of the revisions suggested by the World Tourism Organisation to the
current GATS definition of tourism (mentioned in paragraph 9 of the Secretariat paper). Another
delegation suggested that it may be useful to begin by elaboration on the residual "other tourism
services" category.
(d) Energy Services
There were different views among Members on the distinction between commodities and services in
the energy sector and in the definition of energy services as distinct from other related services suchas transport and distribution.  Members agreed that substantial work on definitions was necessary in
order to define the scope of energy services subject to the GATS.
Members noted that in several countries the reform of energy markets and the unbundling of
previously vertically integrated utilities had created increasing opportunities for private sector
investment and competition.  Some delegations described in detail the process of reform which had
taken place in their countries and the new regulatory environments.  It was argued that, where theyhad been introduced, deregulation and liberalization in the energy sector were leading to more
efficient supply, lower prices for consumers, private sector investment, economic growth and
technology transfer.  In some countries the process of internal reform was paralleled by external
opening with new investment opportunities being created also for foreign suppliers of energy services.
Members agreed that liberalization in the energy sector should take account of important policyobjectives such as stability and universality of supply, energy security and environmental protection.
Although energy services per se  were not negotiated during the Uruguay Round some Members
suggested that the global trend towards reform and competition in the sector might create the
necessary preconditions for liberalization negotiations under the GATS.  It was suggested that suchnegotiations might take place either in negotiating groups devoted to energy services or by giving
greater prominence to energy services in negotiations on transport and business services.  It was also
noted that the network bound nature of many energy se rvices, in particular those relating to gas and
electricity, and the presence in the market of major suppliers with control over essential facilities
might signal the existence in these sectors of important barriers to trade beyond market access andnational treatment restrictions.  This situation might in turn require that negotiations on market access
and national treatment be complemented by work on pro-competitive regulatory principles, similar to
those developed for the telecommunications sector.S/C/M/30
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F. OTHER BUSINESS
23. The Chairman suggested that within the current rules on derestriction of documents, the
Council should consider the derestriction of the sectoral papers prepared by the Secretariat for the
exchange of information exercise.  This would help the Secretariat to meet the growing public
demand for GATS related information on the various services sectors.  No delegation opposed thederestriction of the Secretariat’s papers, however, some delegations expressed concern about the
possible implications of such a decision on the discussions being held in the General Council on the
review of the WTO rules on derestriction of documents.  The Chairman stressed that by deciding to
derestrict the Secretariat papers the Services Counc il would be taking an action under the current rules
and that this would not pre-empt the outcome of the discussion in the General Council.  He therefore
suggested that this item be inscribed on the agenda of the next Council meeting.
24. The representative of Peru informed the Council that his government had passed a new
telecommunication legislation opening the market from the first of August 1998 instead of 1999.
25. The representative of New Zealand reminded participants that the Singapore Ministerial
mandate for the Council included work on Article VI:4.  She informed the Council that her delegation
was preparing a paper on Article VI:4 and that it would like the Council to begin work in this area as
from the next meeting.  Also the delegations of Australia, Argentina  and the United States  expressed
interest in pursuing work under Article VI:4 and welcomed the forthcoming paper from New Zealand.
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