RESTRICTED  
WORLD TRADE  WT/REG3/M/5  
 12 August 1997  
ORGANIZATION  
 (97-3377)  
 
Committee on Regional Trade Agreements  
Twelfth Session  
 
 
 
 EXAMINATION OF THE ENLARGEMENT OF THE EUROPEAN COMMUNITIES:  
 ACCESSION OF AUSTRIA, FINLAND AND SWEDEN  
 
 Note on the Meeting of 14 July 1997  
 
 Chairman:  Mr. John Weekes (Canada)  
 
 
1. The agenda contained in Airgram WT O/AIR/633 was adopted.  
 
2. The Committee on Regional Trade Agreements continued the examination of the Treaty of 
Accession of Austria, Finland and Sweden to the European Communities (EC Enlargement) under agenda 
item B of its Twelfth Session.  The meeting covered the following topics:  
 
A. General Remarks  
B. Goods Aspects of EC Enlargement  
C. Services Aspects of EC Enlargement  
D. Calculation of General Incidence  
 
A. General Remarks  
 
3. The Chairman  recalled that the Committee had begun examining the EC Enlargement last July at 
its Third Sessi on, and continued the process at its Fifth, Eighth and Tenth Sessions.  Summary records of 
these meetings were contained in documents WT/REG3/M/1 -4.  The day's meeting represented the fifth 
phase of the examination of EC Enlargement.  The Secretariat had d istributed document 
WT/REG3/2/Add.2, which contained questions and replies relating to the goods aspects of the Agreement, 
as well as document WT/REG3/2/Add.3, which contained information with respect to the EC's 
consolidated list of MFN exemptions in serv ices.  These two documents would serve as the basis of the 
Committee's discussion.  
 
4. The representative of Japan  noted that since the day's meeting coincided with the financial services 
negotiations, his colleagues who specialized in services were not able to attend.  He asked that, in the future, 
the Committee try to arrange meetings so that specialists in services  might attend.  
 
5. The representative of Switzerland  said that the EC had not yet completed its negotiations with 
Switzerland on the EC Enlargement, in particular Article XXIV:6 compensation negotiations.  The Swiss 
delegation had c onsistently made reference to this matter in the CRTA, but unfortunately there had been 
little progress since the last meeting.  It was not possible to give an indication of when negotiations might be 
concluded.  His delegation had asked that this issue be  brought to the attention of the CRTA prior to the 
day's meeting, but this had not been done, and thus his delegation found it necessary to put this statement 
on record.  
 
6. The representative of Uruguay  wished to record the fact th at his delegation had not yet completed 
its Article XXIV:6 negotiations with the EC.  
 WT/REG3/M/5  
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B. Goods Aspects of EC Enlargement  
 
7. The representative of Australia  said that many of the EC delegation's replies to questions relating 
to mark et access and agriculture schedules indicated that points had been addressed in Article  XXIV:6 
negotiations and in the EC -15 Schedule.  It would have been appropriate for the EC delegation to have 
explained the methodology behind some of the courses of act ion it had adopted.  Given that not all 
Members had been involved in Article XXIV:6 negotiations, his delegation hoped that the EC would 
provide comprehensive, helpful and transparent answers to the questions.  He then asked when and how 
the EC would circu late its new Schedule incorporating the results of all of the Article  XXIV:6 negotiations.  
His delegation looked forward to receiving the information contained in that Schedule  
 
8. The representative of Japan  said that his delegati on was not convinced by the EC answer to the 
question on anti -dumping duties.  The acceding country should first investigate before applying anti -
dumping duties.  This was the principle outlined in  Article I of the Agreement on Implementation of 
Article V I of the General Agreement on Tariffs and Trade 1994, which stated that parties should take 
measures "pursuant to investigations" and "in accordance with the provisions of this Agreement".  The 
position of the Japanese delegation therefore remained unchang ed.  
 
9. The representative of the European Communities  replied to the comment made by the 
representative of Australia concerning the methodologies used by stressing that the benefit gained, from 
what would have amounted to a semina r expounding on a range of these issues, would have been 
disproportionately small in comparison to the resource commitment involved.  The replies were not 
intended to be lacking in comprehensiveness or unhelpful; but it seemed focus should instead be on th e 
results of the process.  That was where the test of transparency needed to be applied.  Responding to the 
second Australian question relating to the circulation of the new Schedule, he said that the work was in 
progress and the required information would  be provided in the near future, for the sake of transparency.  
 
10. The representative of the European Communities  then referred to the remark by the delegation of 
Japan on the application of anti -dumping duties, which he found understandable.  The EC answer had set 
out in some detail the reasoning behind the approach taken, and he thought that this approach was right .  
It was important to put this matter in context: it was essentially a transitional question arising from the growth 
of the former EC -12 to the larger EC -15, not a permanent change in the operation of anti -dumping rules.  
It applied only to the management  of the transitional process and needed to be kept in perspective.  
 
C. Services Aspects of EC Enlargement  
 
11. Turning attention to the services side of the examination, the Chairman  reminded the Committee 
that document WT/REG3/2/Add .3 contained answers to the questions received with respect to the EC's 
Consolidated List of MFN Exemptions.  The document followed the order of the Consolidated MFN List 
and contained replies to questions relating to MFN exemptions of Austria, Finland and  Sweden, 
respectively.  
 
12. The representative of the United States  noted that the referenced document contained replies to 
questions in two categories: the first, and more subjective element, related to GATS Article  V:4; the other 
was the MFN issue.  The first question (which had not yet been answered) raised the issue of market access 
and the addition of national treatment reservations.  The impact of this for such sectors as data processing, 
legal services and space transport had t o be considered in light of Article  V:4, namely if overall barriers to 
trade had resulted.  The other category was of a more fundamental legal nature.  When a Member took 
an MFN exemption, it had no choice but to seek a waiver under Article  IX of the Agree ment Establishing 
the WTO, as specified in the GATS Annex governing MFN exemptions.  This was the legal issue that 
needed to be confronted.  The EC answer to the second question was peculiar, in particular when stating 
that it was the same MFN exemption as  contained in the EC -12 list but "now possibly applicable to a larger 
geographic area".  This, in effect, constituted a sort of "blank cheque" approach by the EC and represented 
a problem for countries which were particularly sensitive to the issue of MFN.   He recalled that during the 
Uruguay Round, the EC delegation had been somewhat sanctimonious in encouraging the use of rigid           WT/REG3/M/5  
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provisions for MFN, emphasizing that this was probably the most important principle of the GATS.  Unless 
the change in MFN exempt ions was properly addressed and examined in the Article V:4 context, it would 
present a very fundamental problem.  He reiterated that the EC had a legal obligation to go through the 
waiver process; an ex -post MFN exemption clearly required a waiver and the  right precedent should be set.   
 
13. Turning to the quality of the exemptions on audiovisual services, the representative of the 
United  States  recalled that the three exemptions were associated with the right to take anti -competiti ve or 
unfair -trade -practice type measures.  The final paragraph of the EC answer stated that redressive duties 
were "not barriers as such" but "a form of commercial policy defence measure".  However, since there was 
no provision in the GATS to authorise su ch defence measures, or to take safeguard, anti -dumping or 
countervailing duty measures, the response was unsatisfactory.  The EC delegation should indicate how it 
intended to manage this situation as it was clearly in the wrong legal arena.  An issue whic h differed from 
that of MFN exemptions on audiovisual services (for which Austria had not previously taken exemptions) 
concerned Austria's transportation commitment.  At the time Austria acceded to the WTO, as a non -
member of the European Communities, it t ook MFN exemptions for the transportation sector which were 
revised somewhat in the context of accession.  The differences between these MFN exemptions needed to 
be examined, to decide on what basis it was sustainable under Article V of GATS.  
 
14. The representative of Canada  thanked the EC delegation for its long -awaited replies to the services 
enquiries posed last fall.  Though quite useful, the replies raised a fundamental question of principle.  The 
delegation of Canada did not ag ree with the EC argument that it was acceptable for an MFN exemption to 
be extended automatically to a larger geographic area as a result of economic integration.  GATS Article V 
did not provide for the addition of MFN exemptions to a Member's existing lis t.  Article  V specified that 
in modifying specific commitments of market access as a result of economic integration, Members had to 
follow the procedure laid out in Article XXI; however, Article V contained no reference to special 
procedures for the modifi cation of Members' MFN exemptions.  As mentioned by the representative of 
the United States, the only reference to the addition of MFN exemptions was in the GATS Annex on Article 
II Exemptions, which stipulated that a country wishing to extend an MFN exemp tion should go through the 
waiver process.  There was no other legal basis to proceed with the expansion of the MFN list.  His 
delegation would welcome any clarification from the EC as to the procedure it intended to follow.  
 
15. The representative of Australia  said that the MFN exemptions discussed in the document raised 
some important issues that would require further discussion in the Committee.  One question concerned 
the relationship between an MFN exemption and market access.  H e noted that, in some cases, the EC 
had stated that there were, in fact, no market access restrictions for the sectors involved.  Nevertheless, the 
MFN exemption had been extended to the new members.  If there were no market access restrictions 
resulting f rom the extension, how did the MFN exemption work?  He also agreed with the representatives 
of the United States and Canada that there was a fundamental question about the ability to take further MFN 
exemptions at this stage.  Finally, there was the issue - possibly systemic in nature - related to direct non -life 
insurance.  In this particular case, an MFN exemption had been extended to cover a mutual recognition 
agreement on financial standards and prudential measures leading to a right of establishment of  non-life 
insurance business.  He asked whether an MFN exemption was necessary to cover a mutual recognition 
agreement, as this was dealt with in GATS Article VII, which enjoined Members to ensure that other WTO 
Members were given an opportunity to take pa rt in negotiations for such an agreement.  He also asked for 
confirmation that the mutual recognition agreement in question had been notified under GATS Article 
VII:4(b).  
 
16. The representative of Japan  stated that his delegation wa s also of the view that, when an MFN 
exemption was changed, the waiver process should be used.  Automatic extension of MFN exemptions 
could not be accepted.  He also had some specific comments.  Firstly, regarding audiovisual services, the 
document referre d to "redressive duties which may be imposed in order to respond to unfair pricing 
practices, by certain third countries"  and "measures taken to prevent, correct or counterbalance adverse, 
unfair or unreasonable conditions" of third countries.  None of th e acceding countries had such measures 
against third countries before; the EC delegation argued that, as a result of the Enlargement, these countries 
were automatically allowed to take the measures.  If these unilateral measures were permitted, it would WT/REG3/M/5  
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leave room for discrimination and the possibility that barriers would be raised against third countries. 
Regarding mutual recognition and prudential measures, his delegation held a view similar to that of the 
delegation of Australia, namely that these measur es should be taken in accordance with GATS Article VII 
or the Annex on Financial Services 2(a), not through an MFN exemption.  Finally, regarding the measures 
based upon the government -to-government framework for audiovisual services,  he noted that, since  
Finland and Sweden had not taken MFN exemptions and had not had a government -to-government 
agreement, these countries should not enjoy an MFN exemption.  The same reasoning would apply to 
bilateral agreements between the EC and certain other countries reg arding the right of establishment for 
juridical and natural persons, the waiving of requirements of work permits for natural persons supplying 
services, and measures based on bilateral agreements between the EC and/or their Member States and 
Switzerland.  Any country in the EC -15 that had not had a bilateral government -to-government agreement 
should not enjoy an MFN exemption.  
 
17. The representative of Hong Kong, China  said that, like previous speakers, he wished to express 
concern a bout the extension of the EC's MFN exemptions in the context of the Enlargement.  Despite the 
EC delegation's argument developed in its answer to question 2(a), his delegation doubted whether such 
modifications met the requirements of Article V:4, in the s ense that they should not raise the overall level 
of barriers and therefore not affect the market access of third parties.  His delegation also had some 
reservations about the EC delegation's claim, in the same reply, that it was not contested that "as a r esult of 
an Economic Integration, the geographic scope of a measure may change".  He recalled that a similar matter 
had been discussed and debated at length on the goods side in the context of the extension of anti -dumping 
measures to the acceding countrie s.  He requested further elaboration from the EC delegation on this issue 
and looked forward to a timely answer to question 1, which had raised an important point.  
 
18. The representative of Mexico  said she shared the concerns of the  delegations which had already 
spoken.  She questioned the manner in which the EC delegation's listed its MFN exemptions and its 
commitments, since in the case of the MFN exemptions the EC did not indicate which Member States were 
individually taking this measure.  It would be very useful, for the sake of transparency, if the EC delegation 
would indicate these countries both for this Enlargement and for others in the future.  
 
19. The representative of New Zealand  said that his delegat ion shared the reservations expressed by 
other representatives concerning the consistency of the geographic extension of the scope of MFN 
exemptions with GATS Article V:4.  This raised an important systemic issue that required further 
investigation.  The E C response to questions 2(a) and (b) contained circular arguments, reiterating that it 
was an existing measure, whereas a number of delegations considered it to be a new measure.  His 
delegation was of the view that such action was covered by paragraph 2 o f the GATS Annex on Article  II 
Exemptions.  He looked forward to further clarification from the EC delegation in this regard.  
 
20. The representative of Korea  stated that his delegation wanted to focus on procedural aspects, 
althoug h, on the substantive side, it had found the EC explanation, that the MFN exemption was not a 
barrier but a commercial policy defence measure, difficult to understand.  Firstly, the EC had indicated that 
the MFN exemption had been modified only in terms of  its extension to a larger geographic area, but this 
explanation was unconvincing since the three acceding members remained Members of the WTO in their 
own right.  Had these countries disappeared from the list of Members, then the argument of extending the  
geographic area could have been used.  But this was not the case.  Therefore the issue was the modification 
of MFN exemptions as far as these three countries were concerned.  A second point was that the right 
procedure for the modification of MFN exemptio ns for the enlargement of a customs union should be 
through the waiver process, in accordance with the GATS Annex on Article II Exemptions.  In his 
delegation's view, this was a legal rather than a systemic issue, and the correct procedure would be to seek  a 
waiver.  
 
21. The representative of the European Communities  noted that the previous interventions had 
focused on the questions and answers with respect to the Consolidated List of MFN Exemptions.  In 
response to the statement by the representative of the United States concerning changes to the EC's 
Consolidated Li st of Commitments, she said that these concerns had not been forgotten, and some answers           WT/REG3/M/5  
            Page 5 
 
had been provided in the last meeting.  She would at present concentrate on the MFN exemptions.  She 
expressed disappointment that Members, with the exception of two m inor questions, had commented only 
on what they viewed as the "underlying question", bringing discussions under GATS Article V to what was 
now called "systemic" issues much faster than in the case of debates under GATT Article XXIV.  She was 
pleased, howev er, that Members had recognised that care needed to be taken in interpreting and applying 
rules in important areas such as regional integration.  Her delegation had provided answers, and these 
deserved more attention from the Committee.  There was too much  concentration on the so -called 
"underlying question", as Members had preferred to limit themselves to more generic questions.  
 
22. The representative of the European Communities  continued, noting that the representative of the 
United States had hinted that with integration into the EC, the MFN exemptions of Austria had remained 
the same in substance.  It was necessary to look at each MFN exemption and examine the facts before 
labelling something a "systemic" issue.  Her delegation's main argument was that no new MFN exemptions 
had been added, but that rather the same measures had now been applied to a larger geographic zone.  This 
did not constitute a "blank cheque" approach.  The  EC had undertaken to ensure consistency with GATS 
Article V:4, and Members were invited to determine whether this had been complied with or not.  The EC 
remained convinced that no barriers had been raised with the individual MFN exemptions as a result of the 
Enlargement and was concerned by the views expressed, which seemed to contest the very nature of an 
integration agreement.  Noting that the EC was unique and, therefore, that little precedent for this exercise 
could be found in the WTO, she reminded Me mbers that they had accepted the positive aspects of 
integration.  Third parties benefitted from the internal market.  They received better trade opportunities, 
in that access in one Member State automatically allowed them to benefit from Community treatme nt, 
especially with respect to trade in services, as provided for in Article 58 of the Treaty of Rome.  She stressed 
that the EC had one single List of Specific Commitments and one single List of MFN Exemptions, 
consolidated by integrating other countries.   If the Committee were to examine an expansion of the 
NAFTA, which had no single list, the exercise would be totally different.  Given the uniqueness of the EC, 
the argument relating to the expansion of the application of a measure as a result of Enlargem ent was 
perfectly valid.  
 
23. Referring to the question related to why the EC had taken an MFN exemption for non -life insurance 
since this was a prudential measure, the representative of the European Communities  noted that the matter  
had been discussed in 1993 when this MFN exemption was taken in the first place.  The bilateral agreement 
had recognised the prudential regulations of both parties and had provided explicitly for an automatic 
market access commitment as a result of mutual  recognition of prudential regulations.  Had such 
commitments with an automatic right of establishment not existed in 1993, the EC might have needed its 
MFN exemption due to the prolongation of the financial services negotiations.  Her delegation was 
curre ntly examining the need for this exemption, which would depend on the outcome of the financial 
services negotiations.  This same 1993 MFN exemption was now being applied to a larger geographic zone, 
with no effect on market access.  The EC might decide not  to maintain it, but only due to the merits of the 
MFN exemption itself.  
 
24. The representative of the European Communities  then responded to the views expressed on MFN 
exemptions taken for commercial policy defence reasons.  She re called that a similar debate had taken 
place in the goods context, some Members recognising that the action was valid and some contesting it.  It 
was now said that no basis existed in the GATS for such commercial policy defence measures, but this was 
not c orrect, since the EC had been allowed to take them in 1993.  Perhaps in some respects these were 
illegal MFN exemptions, but it had been agreed in 1993 that they could be taken, and the same instrument 
now needed to be extended to fifteen Member States.  L ikewise, the reasoning applied to the request that 
those countries taking MFN exemptions should be identified. In the Uruguay Round, the EC had taken 
specific MFN exemptions for bilateral agreements for specific Member States, but had not been asked to 
specify them, and it had not been the EC's policy to single out Member States' special regimes.  Since this 
had not been expected in 1993, there was no reason to require it now.  In summary, she noted that her 
replies had addressed three of the more concrete comments received.  The rest related to the underlying 
question of how to justify the MFN exemption in the context of the Enlargement, which her delegation was WT/REG3/M/5  
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still in the process of examining.  She hoped that the Committee would concentrate its efforts o n finishing 
the factual examination in its next meeting, before tackling systemic issues.  
 
25. The representative of the United States  said that the EC delegation seemed to be of the view that, 
whatever its legal obligations were, th e scope of the problem and the items requiring resolution had first to 
be identified.  Its position appeared to be based on the legal presumption that if an acceding country 
assumed institutional rights and obligations, the "blank cheque" existed and there  was therefore no obligation 
to go through the waiver process.  While the EC representative was correct in stating that the benefits and 
liabilities of Enlargement had to be measured, the legal framework also needed to be followed.  Until the 
EC delegation  acknowledged this necessity, it would be difficult to proceed.  The comments which had 
been addressed to the EC were not intended to be philosophical, but, rather, pointed to some fundamental 
legal issues.  Notwithstanding the fact that the EC was not a f ree trade agreement, it had the same obligations 
under Article XXIV and Article V to notify measures and seek waivers, if necessary, as it expanded.  
Though it was true that the MFN exemptions had differences in impact, the EC's call for more detailed and 
concrete discussions could not be accepted until it was clear how resolution of these particular issues might 
proceed.  If the EC delegation did not recognise the need to take a waiver under the GATS Annex on 
Article II Exemptions, then there was a fundame ntal problem.  The EC replies to some questions had been 
rather clear and revealing, in that Members had been asked simply to accept the fact that within the EC 
contract the expansion of rights and obligations was automatic under the WTO.  If that was the case, then 
there was a problem here that needed to be addressed.  But this was difficult to do in the absence of an 
acknowledgement by the EC delegation that certain actions would require a waiver.  
 
26. The representative of Japan  agreed with the comments made by the representative of the 
United  States.  He reiterated that the EC should abide by the legal requirements laid out in the GATS 
Annex for the extension of MFN exemptions.  Regarding specific exemptions, the representative of the EC 
had referred to the negotiations of 1993; his delegation would study this further.  Before the Enlargement, 
the three countries could not take redressive duties, but after Enlargement they could take these new 
measures.  Given that these three count ries had not registered MFN exemptions in  1993, this constituted 
a raising of barriers from the perspective of third countries.  
 
27. The representative of Australia  noted that the EC response to question 2(g), dealing with direct non -
life insurance, seemed to embody some of the issues recurring in the discussion.  The representative of the 
EC had argued that the Committee was engaged in a factual examination with a view to making a decision 
as to whether trade barriers had been raised , and that this should be distinct from a discussion of "systemic" 
issues.  He stressed that these matters were difficult to separate  and that the Committee should not put 
the "systemic" issues aside.  The EC had assured the Committee that there were no m arket access or 
national treatment limitations in either the EC -12 Schedule or in the Schedules of Austria, Finland and 
Sweden, with regard to the supply of direct non -life insurance, the argument being that, notwithstanding the 
extension of MFN exemptions , no trade barriers had been raised.  For the EC delegation this was the end 
of the question.  However, it was not so easy to reach this conclusion. The MFN exemption had been 
extended, and it seemed to allow, in terms of compliance with the standards, pre ferential access for a third 
country to the three acceding markets that others obviously did not enjoy.  This might or might not 
constitute a raising of trade barriers, but the question could not be put aside, just because, at least on the 
surface with reg ard to Schedule limitations, no trade barriers seemed to have been raised.  
 
28. The representative of European Communities  replied that she would pursue further the need to 
have the non -life insurance MFN exemption as this was an Art icle VII issue as well.  With respect to the 
comments by the representative of the United States, her delegation was of the view that acknowledgement 
of whether it was acting within a legal framework was irrelevant for the factual examination.  Was he 
suggesting that her delegation would have to seek a waiver with respect to all issues raised?  In most cases 
there was no larger geographic application, as many of the MFN exemptions had already been taken by the 
acceding countries.  If the proposition of appl ying the same measure to a larger geographic area was not 
accepted, then it called into question the very nature of the EC's single Schedule and single MFN Exemption 
List.  The argument that needed to be addressed before the Committee considered the legal solution was 
wether the same MFN exemption should be applied both before and after the Enlargement.  Her           WT/REG3/M/5  
            Page 7 
 
delegation would provide answers to outstanding questions on commitments and would offer further 
clarification on the MFN exemption on non -life insuran ce.  She welcomed the opportunity to provide 
further factual clarifications without prejudice to the legal position of the EC.   
 
29. The Chairman  said that most of the discussion had been in relation to the MFN exemptions, and 
noted  that there was the outstanding Article V:4 issue.  The EC delegation had indicated that it would 
provide further answers on the question of commitments.  The representative of the United States, in its 
initial intervention, had made a distinction between the situation when an MFN exemption had been taken 
by one of the three acceding countries when none had existed before, and the situation where the wording 
of the MFN exemption had been altered.  This raised the question of determining to what extent there  had 
been a change in the substantive commitment as compared with the wording of a commitment.  The 
response by the EC representative had been that the Committee should focus on the specifics of each altered 
MFN exemption before reaching a definitive decis ion on how it would deal with them.  He noted that there 
was really one generic issue at stake in each instance, although it might vary in terms of substantive effect for 
each of the cases mentioned.  He  encouraged delegations to consult among themselves to address this 
issue.  In addition, he would hold informal consultations to consider how the matter might be advanced.  
 
D. Calculation of General Incidence  
 
30. The Chairman  noted that one part of the examination of EC Enlargement, not yet completed, 
related to the general incidence assessment under Article XXIV:5(a), for which the Secretariat's calculations 
of weighted average tariff rates were to be made available.  On the basis of informal consultations with 
interested delegations , he had suggested in a fax dated 22 May 1997 to all delegations, that an ad hoc  
methodology be used to carry out the calculations.  It was not the calculation method itself that was at 
variance from what was provided for, but rather the periods to be comp ared and the tariff data to be used 
for the calculation.  The Secretariat needed the support of the Committee to proceed with its task.  There 
seemed to be a common understanding that the proposed solution had been developed with a unique 
situation in mind  and should not be taken as a precedent for similar calculations in the future.  While most 
delegations did not appear to have substantive difficulty with the proposed solution, some had pointed out 
that a more recent import weighting pattern would better suit the purpose.  He was glad to announce that 
the EC had supplied the Secretariat with the necessary data.   However, one delegation still had some 
problems with the proposed methodology.  To move forward with this part of the examination, it was his 
intention to pursue the issue informally until an agreement was reached that would allow the Secretariat to 
make the calculations and distribute them to Members.  Then the matter would be brought back to the full 
forum of the Committee to allow observations t o be made on these calculations and to incorporate the 
calculations and any comments into the official record of the Committee.  At that time he might express, 
as Chairman, the Committee's understanding of the reasons which led to the adoption of the ad ho c 
methodology in this particular case.  Obviously this would require some prior discussion about what exactly 
ought to be said.  
 
31. The representative of Japan  recalled that his delegation had objected to the use of bound rates in 
the calculation, because paragraph 2 of the Understanding on the Interpretation of Article  XXIV of GATT 
1994 provided that the applied rates of duty should be used.  His delegation needed a convincing 
explanation of why bound rates should be used for the EC  case despite this legal provision.  He appreciated 
that the difference in results would be very minor, but this was a matter of principle, and he needed a clear 
explanation of why it was so difficult to collect information on applied rates.  Given there w ere not many 
instances where bound rates differed from applied rates, he did not see why it should be difficult to use 
applied rates.  If such an explanation was offered, his delegation might give the go -ahead for this calculation, 
based on the understandi ng that this was an ad hoc  methodology and would not set a precedent in the future, 
and also on the understanding that that exercise differed from Article XXIV:6 compensatory negotiations.  
 
32. The representative of Korea  noted that,  on receipt of the fax, his delegation had expressed its 
acceptance of the ad hoc  methodology, with the condition that convincing explanations be given at the time 
of the presentation of the results of the calculation, as just proposed.  Thus his delegatio n had no objection 
to the proposed method of proceeding.  He asked to what exact period would relate import data used in WT/REG3/M/5  
Page 8 
 
the calculation.  The representative of the Secretariat  clarified that import data had been originally supplied 
for the period 1991 -1993, but the EC had now made data for 1994 available to the Secretariat.  This meant 
that the new three -year average to be used for the calculation would be 1992 -1994.  
 
33. The Chairman  noted that it appeared that, if a sufficiently convincing reason were advanced as to 
why bound rather than applied rates had been used, everyone could agree on the suggested ad hoc 
methodology.  There were two ways in which this argumentation could be put forward: either by the EC 
itself, or in an agreed upon statement made by the Chair at the time the information was formally introduced 
into the Committee.  Given that informal cons ultations on the services issue were still required, it seemed 
he should conduct further consultations on the best way of completing this process as well, since the 
Committee was close to completing this aspect of its work.   
 
34. The Chairman  then noted that there were compensation negotiations outstanding but that, apart 
from the general incidence question, the factual dimension of the discussion on the goods side of EC 
Enlargement was largely complete.  There would remain the task of drawing conclusions from the 
examination.  In respect of services, further formal discussion was needed.  The EC delegation had stated 
that it would provide additional  answers with respect to commitments, and the Committee needed to 
decide how to proce ed on the matter of MFN exemptions.  During the day's discussion a number of 
delegations had indicated that there was really only one way to deal with the legal issue involved, and that 
was by the EC seeking a waiver.  On the other hand, the representative  of the EC had made clear that 
before responding definitively in terms of how her delegation would address the matter, she wanted to have 
a specific discussion on each of the exemptions.  In her view the situation was different with respect to the 
differen t MFN exemptions.  This point was also acknowledged, at least in respect of certain aspects, by the 
delegation of the United States.    He urged delegations to consult amongst themselves to facilitate a more 
definitive discussion of this matter the next ti me it formally came before the Committee.  He intended to 
conduct informal consultations to move the discussion forward,  and there would be a formal meeting of 
the Committee addressing it in the fall.  The discussion had proved useful in identifying conce rns.  
Outstanding issues were important and complex, and this was the first time that the Committee was 
addressing such matters, since the incorporation of these new disciplines in the WTO.  
 
35. The Committee took note  of the comment s made.