RESTRICTEDWORLD TRADE
ORGANIZATIONS/C/M/45
18 August 2000
(00-3359)
Council for Trade in Services
COUNCIL REVIEW OF MFN EXEMPTIONS
REPORT OF THE MEETING HELD ON 5 JULY 2000
Note by the Secretariat
1. The Council for Trade in Services held a meeting on 5 July 2000.  The agenda for the meeting
is contained in document WTO/AIR/1342.  The Chairm an proposed that the agenda be adopted as
circulated.
2. The Council so agreed.
3. The Chairman recalled that at the previous session the Council had addressed MFN
exemptions listed in the Secretariat compilati on, Job No. 1551 and Addendum 1, up to and including
"Distribution services".  For the second sessio n, he suggested that the Council begin with the
examination of the remaining exemptions in th e Secretariat compilation and then address any
outstanding points arising from the discussion at the first session in May.  As indicated in the
Airgram, the second session would examine all exemptions listed for financial services, health related
and social services, tourism and travel related services, recreational, cultural and sporting services andfinally transport services.  He also recalled that it had been agreed that Members wishing to submit
written questions would address them to the Members concerned some three weeks prior to each
session, in the case of the second session by 15 June.  Those questions would also be submitted to the
Secretariat for circulation to the rest of the Membership and the responding Members would be free to
answer either in writing or orally at the meeting.  The Secretariat had received five such sets of
questions from the following delegations:  Hong Kong, China;  Korea;  Australia;  Chile;  and Japan.
In addition, the delegation of Mexico had submitted a set of questions circulated in documentS/C/W/139 which were not specific to a particular session of the Review and were, therefore,  also
relevant for the second session.  He suggested that the Council take each sector in turn and give the
floor to delegations who had received questions on th e exemptions listed in that particular sector.
Once all of the responding Members had taken the floor, the Chairperson would invite delegations
who might wish to ask additional questions or clarifications to take the floor.  In case of additionalquestions addressed to delegations who were not present at the meeting, he suggested that the
Secretariat forward such questions to the delegations concerned.
FINANCIAL SERVICES
4. The Chairman observed that there were 51 MFN inconsistent measures under this category.
He invited those delegations who had been addressed questions, to provide their replies.
5. In responding to the questions posed by Mexico, the representative of Venezuela said that the
exemption contained on page 92 of the compilation prepared by the Secretariat intended to cover
administrative actions that were provided for in legislation of special nature.  Therefore, the
exemption should remain for as long as no amendment was introduced to such legislation.  The
exemption was in any case to last for 10 years, whic h was the decision taken thus far.  She pointed out
that the clause had not been applied on any occasion as yet and that the financial authorities did not
intend to apply it in the near future.S/C/M/45
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6. The representative of Canada referred to the exemptions regarding a) insurance
intermediation  (page 77 of the job 1551) and b) financial services, including lending of all types and
trading for own account (page 78).  The exemption for insurance intermediation agency services for
the province of Ontario was maintained as part of a reciprocal arrangement with the United States.  It
applied to U.S. agents, because insurance laws and licencing requirements in the U.S. states weresimilar to those of Ontario.  Since Ontario agents might wish to do business in the U.S., it was
important that the province had reciprocal arrang ements with the U.S. State insurance regulators
covering licensing requirements and qualifications.  Japan had asked for a list of the preferential
measures.  The response was preferential access which meant unrestricted access for U.S. insurance
agents to the Ontario insurance market.  A supplementary question was "to what extent had Canada
concluded with each U.S. State a bilateral agreement that allowed for mutual provision of preferential
measures".  He did not yet have an answer and hoped to provide it both to the Japanese and to theSecretariat shortly.  The exemption covering financial services, including lending of all types and
trading for own account of certain securities by loan and investment companies, allowed for
preferential treatment in the province of Quebec for the allocation of licences to loan and investment
companies that were incorporated under the laws of the parliament of the United Kingdom and
Ireland.  That preferential treatment was a result of a historical preference reflected in legislation.Japan had asked whether Canada had concluded any kind of treatment or agreement with any other
countries in order to maintain "an existing historical preference" and what exactly was an "historical
preference".  He said that that was a restriction found in Section 1 of the Loi sur les Sociétés des Prêts
de Déplacements , Chapter S-30 of the Laws of Quebec, which stipulated that any loan or investment
corporation, institution or company duly constituted under the laws of the parliament of Great Britainand Ireland or of Canada, or  similar institutions incorporated in Quebec, may exercise the same rights
for the purpose of lending or investing funds, and authorized by corporate by-law, charter or Act to
lend money in Quebec may obtain a licence from the Minister to enable it to carry out its operations.
As to the supplementary question, i.e. what criteria does Canada use to choose its partner with which
it maintains an existing historical preference, the answer was that that Act had been adopted morethan a century ago when relations for obtaining capital were established essentially with the
corporations of Great Britain and Ireland.  Some of the companies originally covered by that
legislation were no longer covered as subsequent by other legislation had been adopted since then, or
were operating in new sectors of activity, for example trust and saving companies.  In both cases, the
conditions that required the MFN exemptions still prevailed.
7. The representative of Mauritius said that his delegation had received one question from Japan.
He was expecting the formal reply from capital, but in formally the answer to that question was in the
negative.  The same applied for the question posed by Australia; however, if Australia still wished a
more elaborate reply he would be glad to discuss that with the Australian delegation.
8. The representative of Israel indicated that two specific written questions had been received
from Japan and Korea.  In relation to the question from Japan No. 336, i.e. Have there been any cases
to date where Israel has actually not accorded, due to reciprocity, a licence for the establishment of aforeign service supplier?, he said that so far no foreign supplier had been denied a licence to supply
financial services in Israel on the basis of reciprocity as provided for in the MFN exemption.  As to
the question from Korea, No. 6, i.e. please clar ify the meaning of similar commercial presence in
column 2, particularly in relation to establishment and the scope of business activity, he said that a
licence may be granted in Israel for the establishment of a foreign supplier of banking services,regardless of whether it is an investment or a commer cial bank.  By introducing the concept of similar
commercial presence, Israel wanted to ensure the right of its banking services suppliers to establish in
the country of origin of the foreign supplier, that had been granted a license in Israel, to provide
services that did not have to be necessarily the same as those to be provided by the foreign supplier in
Israel.  For example, if a foreign entity was opening  an investment bank in his country, Israel would
like to reserve the right of its own suppliers to provide similar services, such as commercial banking
services, in the country of origin of that investment bank.S/C/M/45
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9. The representative of Peru said that his delegation had received question from Australia;
Chile; Hong Kong, China; and Japan on the exemptions scheduled by Peru in financial services
contained on pages 84 and 85 and the unofficial Secretariat compilation Job 1551.  He recalled that
Peru had participated actively in the financial services negotiations, making substantial commitments
in the sector which were included in the Fifth Pr otocol annexed to the GATS.  Those commitments in
the WTO included national treatment for foreign capital which was fully in line with the Peruvian
political constitution of 1993, the banking and insurance legislations.  The exemption regarding
financial services was of an exceptional nature.  It was against measures that might be taken by other
countries affecting Peruvian public national interest.  Should such measures be taken by other
countries, the treatment provided for by the MFN exemption would not apply automatically but
previously there would be an assessment of the negative impact on Peruvian public interests, that was
on the wellbeing  of consumers and businesses as well as on the proper functioning of the Peruvianfinancial system.  To date, Peru had not applied that prerogative the reason for which there were no
concrete example.  To the contrary, the financial services sector was one of the sectors that had
received considerable foreign investment in his country.  In that respect, he observed that the report
prepared by the WTO Secretariat for the recent Trade Policy Review of Peru, document
WT/TPR/S/69 stated on page 88 that "…towards the end of 1999 foreign investors were shareholders
in 16 of the 20 commercial banks in Peru and they had a majority control in 12 of those entities.
Foreign participation in financing entities was higher, or with a total control of assets of some 82 per
cent."  In view of the fact that the MFN exemption was based on provisions contained in the political
constitution, Peru had no plans for eliminating such provisions.
10. The representative of Pakistan said that his delegation had received three sets of questions
from Japan, Korea, and Australia.  His capital was still engaged in the process of preparing the replies,
so he was not in a position to provide answers at the meeting.  However, his delegations was
committed to responding to those questions and as soon as written instructions were received, his
delegation would be submitting the replies in written form to the Members that had been mentioned,
with copies to the Secretariat for circulation.
11. The representative of the Slovak Republic ad dressed questions posed by Hong Kong, China;
Australia; and Japan concerning the MFN exemption on financial services on page 87.  He said that
authorization to establish a commercial presence or to conduct new activities by the branches of
foreign banks based on conditions of reciprocity had been removed by an amendment on the Act on
Banks No. 58/96 which entered into force on 1 March 1996.  As the conditions requiring the MFN
exemption did not prevail any more, therefore, the Slovak Republic would remove that exemption
from its list.
12. The representative of Hungary referred to a question from Japan, i.e. Have there been any
cases to date where Hungary has actually not accorded, due to reciprocity, commitments undertaken
under mode 3 to foreign services suppliers.  He said that there had been no cases where, due to the
lack of reciprocity, Hungary had to resort to th e possibility provided for in the exemption. Hungary
had inscribed that MFN exemption with a view to ensuring that Hungarian financial services
providers enjoy similar treatment with respect to the establishment in other WTO countries on the
basis of Hungary's substantial commitments under mode 3.  He added that the conditions which had
created the need for the exemption still prevailed and, thus, the exemption should be maintained.
13. The representative of South Africa said that his delegation had received three questions, one
from Japan and two from Australia.  With regards to the question from Japan, i.e. The common
monetary area is aimed at sustained economic deve lopment of the area, "to what extent has economic
development been achieved so far?"  He indicated that economic development was an objective that
required broad based and ongoing efforts.  While the countries that were party to the Common
Monetary Area had made positive advances, more needed to be done.  The contribution of the
Common Monetary Area to the overall objectives was to create a basis for a more stable financialS/C/M/45
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arrangement for the parties, within which they could pursue economic development strategies.  Owing
to the volatility in the financial markets of emerging and developing countries since 1997, economic
growth rate in the Common Monetary Area had been adversely affected.  Exchange rate volatility had
been the primary contributor factor to the state of affairs.  Without the Common Monetary Area,
members of the arrangement had been exposed to greater volatility resulting in greater economicpressure within the area.  Preferential access to South Africa's capital and money markets had been
said to provide a stabilizing cushion resulting in a more stable financial environment.  With regards to
the first question from Australia, i.e. why is it that only two of the four members of the Common
Monetary Area have listed an MFN exemption for their arrangements?, he said that South Africa had
listed an MFN exemption because it was the one providing preferential access to its market by
members of the Common Monetary Area.  In his view other members of the Common Monetary Area
were not required to list the exemptions separate ly;  the listing of an exemption by another member
could be considered probably an over-notification, which in his view was not really necessary.  With
regard to the second question of Australia, i.e. could this be covered under GATS Article V? that was
the Common Monetary Area, he said that since access to the South African financial markets had
been granted on a preferential as opposed to a reciprocal basis, the provisions of Article V would not
be applicable for the purpose of the arrangement.  Further, Membership of the Common MonetaryArea did not correspond to the regional trading arrangement as envisioned in GATS Article V.
14. The presentative of the United States said that his delegation had received questions from
Japan; Korea; Hong Kong, China; and Australia with respect to financial services.  He recalled the
introductory statement made by his delegation at the previous session of the MFN exemptions review,
in that the views that were expressed there would apply to some of the questions directed at theUnited States for the second session.  With respect to questions posed by Japan, No. 357, he said that
the term "preferential treatment" did not in fact appear in the cited entry.  As to question 358, he
believed the question was misdirected as the criteria for obtaining a place of business in Canada
would be more properly explained by the Canadian authorities.  As to question 359, he said that as the
U.S. Securities Exchange Commission did not collect information on the location of reserve accounts,his delegation could not provide a figure on how many U.S. registered broker dealers maintained their
reserves in a Canadian bank.  With respect to the subsequent questions asked by Japan, his delegation
had no information as to why those banking measures were adopted by certain States and not by
others.  His delegation also did not have information as to the application or interpretation of those
measures by the relevant States; however, unless exceptions were specified those State measures
would apply potentially to all countries.  With respect to the question from Korea, on the first entry on
page 91, his delegation considered that those conditions were market access limitations and had listedthem as such.  In addition, such limitations could raise MFN issues under certain circumstances and
thus had been included on the exemptions list out of  caution.  For example, it was possible that two
banks that were otherwise identical could be treated differently by the two U.S. States, with the
difference based entirely on the home country in which the bank was located.  A bank of a particular
size might be one of the five largest banks in one country, while another bank of exactly the same sizemight fail to qualify as one of the five largest banks in another country.  With respect to Australia's
question No.2, none of the listed exemptions referred to a specific regional agreement and none of
them was based on such an agreement.  With respect to Australia's question No. 3, the reasons or the
conditions which had created the need for the MFN exemption still existed and, as stated in the MFN
exemption, it could apply to any WTO Member.  With respect to Hong Kong, China's question, hisdelegation did not agree with the characterization of the U.S. commitments in the insurance sector.
15. The representative of El Salvador said that his delegation had received questions from Japan
and Chile.  He said that while drawing up the li st of MFN exemptions El Salvador, Honduras, and
Nicaragua had signed on 27 August 1993 a convention on facilitating the financial integration of
countries of the Central American Isthmus.  The main objective of that convention was to support theCentral American process through the harmonization and openness of the financial systems.  The
convention provided as a first phase for the harmonization of macroeconomic policies as well as rulesS/C/M/45
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and regulations for operations of banks and other financial institutions in the signatories.  That
convention had not entered into force as up-to-date; it had only been ratified by El Salvador, and thus
his delegation could not give any examples of the benefits achieved through such a convention.  As to
Japan's  question No. 322, i.e. to what extent has the harmonization of the macroeconomic policy
been promoted up to now?, he said that as the convention had not entered into force yet,
harmonization of macroeconomic policy had been virtually null.  However, the region had advanced
significantly in opening its financial systems, both through internal reforms of its legal frameworks as
well as through the strengthening of regional bodies supporting economic and financial integration,
and through the harmonization of banking and securities markets prudential rules.  In the present
decade, the Central American countries had made considerable progress in reform and modernization
of the financial systems, applying a strategy basically focused on deregulation, opening of the
systems, liberalization and rationalization of the public sector.  Thus, it could be stated that basicconditions for trade in financial services in the region operate on criteria that are fairly similar in
terms of their openness and liberalization.  At the time the Central American countries were doing
more work on the harmonization of securities markets, through the relevant commissions.  Regarding
question 323 from Japan, as to whether there was any plan to notify that convention under GATS
Article V, he said that as it had not entered into force, it was not going to be notified it for the timebeing.  The region was working on a services convention which would be notified under Article V of
GATS when approved.  Turning to Chile's question, he said that only El Salvador had listed the
exemption regarding the Convention because it was in the process of drafting its MFN exemption list
when the convention was signed, that explained the differences with the exemptions listed by other
countries from the region.
16.  The representative of Brunei Darussalam  said that his delegation had received questions from
Japan and Australia.  As to Japan's question No. 314, she indicated that differentiated treatment and
favourable treatment refered to basically reciprocity.  For example, if one country gave a licence to
Brunei, thus Brunei Darussalam would give the same to that country.  The rationale behind that was
that as a very small economy Brunei Darussalam would need that kind of reciprocal arrangement.  Itwas a basic principle and applied to every Member country.  As for question No. 315, she said,
preliminarily, that for granting approval to establish off-shore banks there were specific procedures to
be followed according to the laws of the country.  However, her delegation would address to Japan the
full answer to that question in writing.
17. The representative of  Singapore  said that his delegation had  received questions from Japan,
Australia and Hong Kong, China.  His intervention w ould provide an answer to all of those questions.
The ASEAN Reinsurance Corporation (ARC), incor porated in 1989 was a private funded project to
enhance reinsurance cooperation and facilitate the exchange of reinsurance business amongst ASEAN
countries.  The pay-up capital of ARC was contributed equally by various insurance companies of 6
ASEAN countries, namely Brunei, Indonesia, Malaysia , Philippines, Thailand and Singapore.  There
was no public capital participation in the ARC.  The authorized capital of ARC was 30 million
Singapore dollars.  At its inception, ARC had create d 6 separate classes of shares, each of those
classes comprising 5 million shares of 1 million dollars each, would only be held by shareholders of a
particular ASEAN country, that was either Brunei, Indonesia, Malaysia, Philippines, Thailand or
Singapore.  Members from other countries were not admitted as shareholders.  Subsequently, in May
1999 ARC had amended its articles of association so that there would be only one general class of
shares, with 30 million shares of 1 Singapore dollar each.  The amendment had made it possible forMembers of other countries to be admitted as ARC' s shareholders.  Thereby injecting fresh capital to
meet the Monetary Authority of Singapore's (MAS) minimum pay-up capital requirement.  However,
to that date, ARC had not admitted any new non-ASEAN shareholder.   ARC underwrote reinsurance
business on purely commercial basis and Singapore's central bank or the MAS did not stipulate any
system of compulsory business for the company.  By virtue of shareholding in the ARC, the insurance
companies or shareholders contributed some portion of their business to ARC.  Contribution of
business by the shareholders or insurance companies was on a voluntary basis.  At the end of 1999,S/C/M/45
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the business volume of ARC had remained small, with gross and net premiums amounting to only 4
million Singapore dollars and 1.5 million Singapore dollars, respectively.  Singapore citizens were the
main source of business representing 76% of the company's total business in 1999.  ARC was
managed by Singapore Re-management Services Private Ltd., a wholly owned subsidiary of
Singapore Reinsurance Corporation which was one of ARC's shareholders.  MAS had, with effect
from 27 October 1997, raised the minimum pay-up capital requirement for direct insurers and
reinsurers to 25 million Singapore dollars.  Existing direct insurers and reinsurers had been given a
grace period of up to 1 January 2000 to comply with the new capital requirement.  In the case of
ARC, the company had been granted an extension of the grace period by one year, to 1 January 2001,
to comply with the requirement.  As at 30 May 2000, the pay-up capital of ARC remained at 6 million
Singapore dollars.  MAS had conveyed to ARC that it would not grant another grace period if the
latter failed to meet the capital requirement by January 2001.
18. The representative of Turkey referred to the questions posed by Hong Kong, China; Korea;
and Japan on the MFN exemption foreseeing stricter conditions for foreign banks as a measure based
on reciprocity.  He said informed that that exem ption had been abrogated; while in force, such
measure had never been applied.
19. The representative of the European Communities addressed all the questions regarding the
three MFN exemptions on financial services together.  Regarding the entry on page 75 concerning
Austria and the licencing of branches or subsidiaries of foreign financial service suppliers, he said
that the exemption had been taken due to the fact that it had not been possible to conclude the
financial services negotiations in 1993.  The orig inal intention had been to ensure competitive
opportunities for Austrian financial service providers equivalent to those offered to foreign suppliersby Austrian law using the concept of reciprocity.  He noted that the exemption had not been used.  As
to the second MFN exemption, on page 80, he said that it was an EC-wide exemption concerning
direct non-life insurance.  That exemption corres ponded to an agreement with Switzerland which had
entered into force in 1993, aiming at establishing freedom of establishment between the contracting
parties in the field of direct non-life insurance.  The objective of the agreement had been to lay down,
on reciprocal basis, the conditions necessary and sufficient to enable agencies and branches of
companies whose head offices were situated in the te rritory of one of the contracting parties to take up
or pursue self-employed activities in the non-life insurance sector.  The contracting parties had
undertaken to make the opening in their territory of agencies or branches of companies subject to the
authorization of a supervisory authority;  that authorization was subject to certain conditions which
were laid down in the agreement.  It was considered appropriate to maintain that MFN exemption.
The third MFN exemption, on page 81, concerning Italy had been taken because of an Italian law of9 January 1991 which provided for the creation of a financial and insurance service centre, located in
the Italian city of Trieste.  As of July 2000, that law had not been implemented yet, and thus no
company had benefited from tax facilitation granted by it.  The law covered the following sectors:
banking, specialized financial services, insura nce and reinsurance, services complementary to
international trade, and issuing and compensation of letters of credit.  He noted that only operationswith Central Europe, the Balkans and Former Soviet Union could benefit from that special treatment.
The law did not contain any list of countries which could be identified at the moment of
implementation.  In order to be allowed to operat e, an authorization from a governing committee was
needed, which was based on the same criteria governing the incorporation of new companies and the
institution of Italian branches of foreign companies.  He referred to an European Communities'Decision, No. 95/552 European Community of 12 April 1995, that had stated that the overall amount
of tax facilitation given to companies benefiting from that system should not exceed €18 million.
20. The representative of  Senegal said that his delegation had received questions from Japan (No.
348 and 349,), one question from Hong Kong, China (No. 4), and one question from Australia, which
had been listed under general questions but related to financial services.  As regards to the answers,S/C/M/45
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the experts in Capital were looking into them and the replies will be given in writing as soon as
possible.
21. The representative of Côte d'Ivoire indicated that her delegation had received a number of
questions from countries like Hong Kong, China; Australia; and Japan.  The replies were being
prepared by the authorities in Capital and would be communicated to Members as soon as possible.
22. The representative of Honduras said that her delegation had received questions from Japan,
Chile and Australia as to the MFN exemptions concerning the monetary and financial integration and
the opening up of branches or agencies of foreign banks which may be subject to reciprocity.
Regarding Japan's question as to the purpose of the Central American integration process, she said
that its purpose was to achieve the economic and social development, on sustainable and equitable
basis, of the Central American countries.  Such a process would translate into increased welfare of the
population and lead to the modernization of the infrastructure ensuring greater competitiveness and anefficient and dynamic insertion of Central America in the international economy, in particular, in the
area of financial services.  What was sought through the monetary and financial integration process
was to promote the harmonization of macroeconomic policies, particularly monetary and fiscal
policies, in order to achieve and maintain the stability of the Central American economies.  The
Central American countries pursued the integration in accordance with their national legislations andthrough specific activities.  In order to achieve such an objective, the Central American governments
had reformulated a monetary agreement which pursued, amongst other things, to ensure the regional
convergence of macroeconomic policies in the area of monetary, credit, exchange, and financial
policies emphasizing the domestic and external factors which had a repercussion on that process.  It
sought to facilitate the flow of capitals; ensure direct payments within the region and facilitate the useof different payment methods; facilitate the establishment and operations of banks, subsidiaries, and
other financial entities amongst Central American countries; and to promote the stock and insurance
markets.  Another objective was to harmonize the fi scal treatment of financial instruments within the
region.  Regarding the question from Australia, as to whether that exemption of the Central American
integration process could be covered by Article V of the Services Agreement, she indicated that sincethe agreement had not come into effect yet, it had not been notified under Article V of the GATS.
With regard to the questions raised by Chile, her delegation would submit the replies in writing.
23. The representative of Indonesia responded the question posed by Japan on S/C/W/140 Add.2,
question No. 335.  To date, there had been no case where Indonesia had not accorded, due to
reciprocity, licences for joint-venture banks to any foreign service supplier.
24. The representative of Philippines addressed the questions posed by Japan.  As to the first
question, i.e. have there been any cases to date where the Philippines has not provided authorization to
the establishment of commercial presence or expansion of existing operations in commercial banking
in the Philippines on account of reciprocity, up to then there had been no case where the Philippines
had not allowed an applicant, through authorization, to establish commercial presence in his country
simply on account of reciprocity.  Regarding the second question, on the meaning of the term
"reciprocity test", he said that under the Implementing Guidelines of Republic Act No. 7721
(otherwise known as the Act liberalizing the entry and scope of operations of foreign banks)
reciprocity should be deemed to exist when Philippine banks could qualify to do banking business in
the applicant bank's country in accordance with the requirements of general application set in the
applicant's country.  As to the third question, i.e. provide an explanation as to whether the reciprocity
test is conducted in a transparent manner, the Ce ntral Bank of the Philippines required that the
applicant bank to submit the certification from its own country indicating that Philippine banks would
be accorded the same privileges given to the applicant by the Philippine government should a
Philippine bank apply for a commercial banking licence in the applicant's  country.  With that simple
certification the test on reciprocity was deemed complied with.S/C/M/45
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25. The Chairperson invited additional questions or clarifications from delegations.
26. The representative of Mexico thanked the delegation of Venezuela for having responded to
the questions put by his delegation; in particular, the clarification on the time-frame for the
elimination of the exemption on the part of Venezuela.  As listed, that MFN exemption had the word
"indefinite" under intended duration in the respective column and one of Mexico's general concerns,directed in fact to all Members, was precisely that the intended duration be defined under that column
in accordance with the Annex.  When one spoke of indefinite duration, or unlimited, what applied was
what the Annex contained in that respect, th at was a maximum of 10 years, unless otherwise
specified.  He noted that there were very few cases where there was a specific date given and when
there was one it coincided with the 10-year period which was in any case provided for in the Annex.
27. The representative of  Japan thanked all the delegations which had answered questions and
those that would do so some time soon.  He requested that replies be submitted preferably in written
form to the Secretariat for circulation to Members.  He also noted and welcomed the statement by the
Slovak Republic expressing the intention to withdraw the existing exemption.  With respect to
questions posed to the U.S., question 357, there was an error in the question, rather than preferential
treatment Japan meant differential treatment.  He indicated that questions 361 to 372 had not been
addressed; his delegation would appreciate such re plies sometime soon.  With respect to the replies
from the European Communities concerning the exemption on page 75 listed by Austria, he
understood from the explanation given that day that the exemption listed by Austria had been a
legitimate exemption before the financial services  negotiation but perhaps not really so after the
conclusion of financial services negotiations.  Could that exemption be withdrawn sometime soon or
not?  He sought clarification on that matter.  Also with respect to the EC, question 324, the questionasked was with respect to the prudential carve-out in the Annex on financial services.  His delegation
requested more elaboration on the reply, particularly on those prudential measures.  He said that his
delegation shared the view expressed by Mexico with respect to the 10-year period and intended
duration.
28. The representative of Hong Kong, China thanked all the Members who provided replies on
that sector, particularly the Slovak Republic for the announcement that the exemption could be
removed and Turkey that it was abrogated.  His delegation had posed a general question relating to
MFN exemptions which purport to grant less favour able treatment than that set out in specific
commitments, and some replies had been given which had not wholly answered the question.  That
was an important systemic or general issue which needed to be tackled, therefore, it was a matter that
his delegation would like to revert to at another time.
29. The representative of Korea expressed appreciation for the replies.  He raised again the
questions posed to Indonesia and Singapore.
30.  The Chairperson invited delegations to address those supplementary questions or requests for
clarification.
31.  The representative of the United States referred to the two additional questions by Japan.  He
appreciated the clarification of what Japan had intended in its question 357, but he did not have an
answer.  Question 357 referred to the U.S. MFN exem ptions for banking and other financial services,
that on page 90, which did not contain the term differential treatment either.  With respect to the
second question, he clarified that his previous intervention had provided responses to three specific
questions, 357, 358 and 359, and then he had provided a response to subsequent questions, that
response had been intended to include questions 361 to 372 .
32. The representative of the European Communities referred to the oral questions by Japan.  On
the first question asking for clarification as to whether the exemption concerning Austria could beS/C/M/45
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deleted, he reiterated that that exemption had not been used.  As to the second question, i.e. what kind
of Swiss prudential measures the EU recognized fo r the direct non-life operations in the EU, he said
that the Swiss prudential measures that the EU recognized were in fact the authorization given by the
supervisory authority in Switzerland for the corresponding direct non-life insurance business in
Switzerland.
33. The presentative of Singapore referred to Korea's additional question.  He had addressed that
question when indicating the present level of pay-up capital of ASEAN Reinsurance Corporation, i.e.
6 million Singapore dollars.  As to the second question on the intended duration of the measures,
Singapore might review the MFN exemption, but fo r the time being the exemption should remain.
34. The  representative of Japan echoed the views expressed by Hong Kong, China as to the
relationship between commitments and MFN exemptions;  an issue contained in the draft guideline of
MFN exemptions.  His delegation would like to revert to that issue in the future as well.  With respectto the question to the U.S., he clarified that it referred to the MFN exemption contained on page 90 of
the compilation relating to "insurance", which read "measures according differential treatment…".
Japan wanted to know the meaning of differential treatment in the insurance sector.  He apologized
for errors in the question.  With respect to the questions 360 and 372, his delegation had asked more
than ten specific questions for each measure and thus a general reply to all did not really provide ananswer.  He reiterated the request for a more detailed answer.
35. The representative of the United States appreciated the clarification on the question on the
use of the term "differential treatment" in the U.S. MFN exemptions for insurance; he would try to get
a reply as soon as possible.  With respect to the second point, the U.S. response to the subsequent
questions posed by Japan stood and spoke for itself.
36. The representative of Korea clarified the question posed to Singapore.  Korea had two
questions, the second one relating to the agreements between the Central Banks of Singapore and
Brunei.  He wondered whether Singapore had been aware of that question.
37. The representative of Singapore apologized for having overlooked that question from Korea,
and requested to be able to revert to it at a later stage.
38. The Chairperson observed that financial services had been completed.  He thanked all
delegations for their contributions.
HEALTH-RELATED AND SOCIAL SERVICES; TOURISM AND TRAVEL RELATED
SERVICES; AND RECREATIONAL, CULTURAL AND SPORTING SERVICES
39. The Chairperson observed that there were only a few measures listed under the three sectors
that followed in the compilation, i.e. health-related and social services; tourism and travel-related
services; and recreational, cultural and sporting services.  He suggested to take them up together and
offered the floor to delegation responding to questions regarding those three sectors.
40.  The representative of Cyprus said that her delegation had received two questions from Japan,
and one from Korea for the MFN exemption listed on page 92, under the heading health-related and
social services.  She indicated that Cyprus had asked to be exempted from the MFN principle withregard to the provision of medical treatment to Cypriot nationals, by countries with which relevant
agreements had been or would be signed in th e future.  The government of Cyprus had signed
bilateral agreements on cooperation in the field of health with more than a dozen countries, such as
Greece, Israel, Malta, Syria, Iran, Romania, China, Federal Republic of Yugoslavia, Estonia and
others.  However, the Ministry of Health had also signed bilateral agreements with medical centres inS/C/M/45
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the UK, Greece and Israel for the referral of patients who could not be treated locally.  The purpose of
the exemptions had been to provide to Cypriot nationals medical treatment which was either not
adequately provided in Cyprus or all together not available.  Although the health services system had
reached comparatively high standards in recent years, the need for overseas treatment was still
present.  Consequently the need for preferential treatment in the provision of medical services wasexpected to continue in the future.  Regarding the specific question No. 374 by Japan on the meaning
of medical cooperation, she said that medical cooperation under bilateral agreements covered a wide
range of fields in health and medical services, such as, medical treatment of patients, exchange of
health information of mutual interest, exchange s of specialists for the purposes of study and
consultations, direct contacts between health institutions and organizations, exchange of information
on medical equipment, pharmaceutical products and technological developments related to public
health and medicine and training of health prof essionals.  Regarding Japan's question No. 375, as to
why Cyprus did not allow any country except for th ose with which bilateral agreements had or would
be signed, and Korea's question No. 12 on the nature of preferential treatment described in column 3,
she said that Cypriot citizens who needed medical treatment not available in Cyprus were sponsored
treatment in medical centres abroad with which the Ministry of Health had signed agreements.  Those
agreements regulated the prices and other terms and conditions under which treatment was provided.The fact that a country had not signed a bilateral agreement for cooperation with the Republic of
Cyprus in the field of health did not preclude a foreign medical centre from entering into such an
agreement with the Ministry of Health of Cyprus.  For example, the Ministry of Health sponsored
patients to a number of hospitals and medical centres in the UK under individual agreements with
each hospital or centre, although Cyprus and the UK had not yet signed a bilateral agreement oncooperation in the field of health.  The same applied to a lesser extent for the U.S.A. and other
countries.
41. The representative of  the European Commun ities referred to the two MFN exemptions on
page 93 which concerned recreational services.  He said that those MFN exemptions were not
EC-wide, they only concerned France.  Regarding the first entry on page 93, the exemption wasrelated to a French law, dated 1 August 1986, on the reform of the press legal framework in France.  It
established that without prejudice to international obligations subscribed by France, foreigners could
not acquire directly or indirectly more than 20 per cent of social capital or voting rights of the
company editing a publication in the French language .  That provision had in fact the objective to
preserve pluralism of information and to protect the company by controlling nationality of the
shareholders at the moment of session of press titles edited in French.  That restriction was not
general,  it was based on reciprocity, and it aimed at promoting a general opening of the press sector.The aforementioned law did not impose any limitation with regard to capital of companies editing
publications in a foreign language.  It was considered appropriate to maintain that measure as its
objectives still existed.  In response to a specific question from Hong Kong, China, he said that the
measure had the objective to grant reciprocity which was verified when a specific demand was
introduced; currently no demand had been introduced.  Regarding the second entry on page 93, thatMFN exemption related to a French law, Decree of 2 November 1945, concerning the general statute
of press agencies.  Article 8 of that Law established that foreign press agencies might only be
authorized to establish in France if the French pre ss agencies were allowed to establish in the country
of origin of those agencies.  Thus, the exemption was based on reciprocity.  With regard to the
importance of press agencies and with regard to pluralism, supply of information and contribution tothe democratic debate, France had decided to authorize only the establishment in its territory of press
agencies from countries where the press was liberalized enough that permitted the establishment of
French press agencies.  It was therefore considered appropriate to maintain that measure.
42. The representative of  Mexico said that his delegation received questions from Chile, Japan,
Australia, and Korea on the exemption on page 92.  The reply would be that the conditions that had
made such an exemption necessary continued to ex ist, regardless of the fact that the bilateral
agreement referred to in the exemption was in force or not.  Indeed, the negotiation of that bilateralS/C/M/45
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agreement mentioned in the exemption had not yet concluded.  The exemption referred to tax
deductions for people attending business conventions in the territories of the parties, in other words,
the United States of America and Mexico.  There were no concrete examples of how that provision
operated because negotiation of the bilateral agreement had not yet been completed.  The exemption
did exist - The bilateral agreement, however, did not yet exist.  He indicated that Mexico's exemption
had been listed prior to the entry into force of NAFTA and thus, it should not be so much a question
of how that was consistent with NAFTA.  Consistency with NAFTA was something for the parties of
that agreement to look at, not for the WTO.  In terms of the WTO, and particularly in the context of
that particular exercise, what was important and rele vant was that Mexico listed the exemption in time
and in the proper form, and that the conditions creating the need for such an exemption under Article
II continued to exist, which was the case.  Finally, the exemption was not related to footnote 6 since
that footnote fell under paragraph (d) of Article XIV of the GATS and referred to a general exemptionto Article XVII, as mentioned by subparagraph (d).  Article XVII referred to national treatment and
not to most-favoured-nation, and the exemption by Mexico was an exemption to Article II of the
GATS.
43. The representative of Peru acknowledged question No. 379 from Japan regarding recreational,
cultural and sporting services.  The answer was being prepared in Capital and would be submitted to
the Secretariat as soon as possible.
44. The representative of India referred to Japan's questions 378 and 379 in relation to the
bilateral relationship with Bhutan.  Regarding question 378, as to whether there was any plan to
launch any comprehensive bilateral agreement between India and Bhutan for an economic integration
as provided for in Article V of the GATS, he said that the question was not related to the subject-matter under review and his delegation was not in a position to answer that question.  Regarding
question 379, as to the reason for India registering only the sale of lottery tickets among all the items
included in the comprehensive bilateral agreement, he said that India and Bhutan had a special
traditional relationship which dated back to 1949.  The treaty had been signed between the two
countries in 1949 and the sale of Bhutan lottery tickets in India had been provided for in paragraph 5of the treaty as well as in paragraph 1 of the protocol for the 1995 Agreement on Trade and
Commerce between India and Bhutan.  The sale of lottery tickets by other countries was prohibited in
India but because of that special relationship with Bhutan, and the importance of the sale of lottery
tickets for Bhutan in India, that clause had been  included in that protocol and, accordingly, an MFN
exemption had been taken by India.
45. The Chairperson invited delegations to pose supplementary questions or seek further
clarification.
46.  The representative of Korea noted that one of the specific questions posed to the European
Community had not been answered, namely, the item no. 14, first paragraph, of document S/C/W/151.
The question was very specific because the same entry appeared in both the MFN exemption list and
the schedule of commitments except for the last phrase, which said "subject to condition of
reciprocity".  Korea requested clarification from the European Community that the commitment in the
national schedule still applied to all WTO Members.
47. The representative of Japan requested clarification from the EC with respect to news agency
services.  He understood that that the specific measure was introduced only through reciprocity.  Had
that measure been applied to specific countries?  With respect to India's reply to Japan's question, his
delegation disagree with the statement that the question relating to economic integration, as providedfor in Article V of the GATS, was irrelevant to the MFN review because if certain economic
integration treaty was considered to be consistent with Article V of the GATS, there was no need to
list an MFN exemption.  So if India's economic integration treaty with Bhutan was consistent withS/C/M/45
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Article V of the GATS that exemption was unnecessary.  In relation to Mexico's exemption for a
bilateral agreement with the U.S., he asked whether that agreement was related to the NAFTA.
48. The Chairperson invited delegation replies to the supplementary questions.
49. The representative of Mexico clarified that he had restricted his replies to the questions
received from Korea, which only referred to a possible relation, or lack thereof, of Mexico's
exemption with footnote 6 of Article XIV.  With respect to the additional question which had just
been put to him, he said that the fact that that provision might or might not be in NAFTA was entirely
irrelevant for the MFN review.  In terms of timing,  Mexico's exemptions had been listed before the
existence of NAFTA, which showed that it had its own existence.  If the question was whether or not
the measure was covered by NAFTA and, therefore, the MFN was unnecessary in terms of the WTO,
the answer was in the negative.  Both instruments were independent and might have a separate
existence in terms of time.
50. The representative of the European Communities said that his delegation had received two
questions, one from Korea and one from Japan.  Concerning the first question referring to the French
MFN exemption on the shareholding in French publications, he said that the restriction was only
applicable to France and not to the other European Union Members.  The level of commitments made
in the schedule was applied vis-à-vis  all WTO Members.  The measure had the objective to guarantee
reciprocity which was verified when a specific demand was introduced, and to that date no demand
had been introduced.  Regarding the question from Japan concerning the other MFN exemptions on
press agency services, he said that his delegation was satisfied that reciprocity had worked to the
benefit of the French agencies; if the reciprocity conditions were not respected, a company could not
take profit from the relevant legal framework and use the title of press agency in France.  Reciprocityhad helped eliminate obstacles in the establishment and activity of French press agencies in other
countries.
51.  The representative of India indicated that there was not an economic integration under way
between India and Bhutan;  his delegation therefore, considered that that was not a relevant subject.
However, his delegation would consider the Japanese question and would revert to it at a later stage.
TRANSPORT SERVICES
52. The Chairperson observed that exemptions listed under transport services concerned 8
subsectors as there were nearly 150 measures for consideration.  He suggested to split the discussion
into three parts and examine first "Maritime transport " and "Internal waterways transport" services;
then "Air transport" and "Space transport";  and finally "Rail transport", "Road transport", "Pipeline
transport" and "Services auxiliary to all modes of transport".  He drew the Council's attention to the
decision on maritime transport services, adopted by the Council for Trade in services on 3 July 1996and contained in document S/L/24.  Paragraph 4 of that decision suspended Article 2 exemptions until
the conclusion of the negotiations of maritime transport services.  However, paragraph 5 of that same
decision further specified that the suspension di d not apply to any specific commitment on maritime
transport services inscribed in Members' schedules.  He invited delegations to respond to questions on
these first two sub-sectors, namely, "Maritime transport " and "Internal waterways transport" services.
53. The representative of Cuba said that her delegation had received three questions from Japan,
No.  431 to 433; also from Chile, question 7 which was similar in nature to those of Japan, and
general questions by Australia.  In that regard she said that Cuba had bilateral maritime trade and
transport agreements with the following countries:  Romania,  Argentina,  Poland,  Russia,  Ghana,
Viet Nam,  Bulgaria,  the Ukraine,  Algeria,  Germany,  Namibia,  Jamaica,  Guatemala, and Cyprus.Those conventions were intended to facilitate maritime trade between Cuba and those countries with
bilateral agreements.  They contained, amongst other provisions, aspects regarding mutual recognitionS/C/M/45
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of national registration of ships and crew, national treatment in the ports of both countries,
cooperation between parties in the case where a ship of one party has an accident in jurisdictional
waters of the other party, exemption from taxes of ships of one party in the port of another, and
technical cooperation between parties.  In the case of Viet Nam and Argentina, the agreement
provides for splitting freight on a 50-50 basis, there was no restriction on maritime traffic and thesignatories had agreed to develop traffic between the countries through the use of those parties' ships
without limiting the right of third country flagships participating in such traffic.  Cuba would like to
maintain the commitments with those countries with  whom it had signed agreements in view of the
fact that such conventions facilitated maritime traffic between Cuba and those countries.  With
reciprocal advantages being granted, the duration of those agreements was determined by the timing
for denouncing them, as provided for in such agreements.
54. The representative of  New Zealand had received questions from Australia, Chile and Japan in
relation to the MFN exemption on maritime passenger  and freight services.  He took note of the
Chairperson's introductory remarks in relation to the decision on maritime transport services.  He
addressed the various questions together.  New Zealand's MFN exemption on maritime passenger and
freight services stemmed from New Zealand's stat us as a signatory of the British Commonwealth
Merchants' Shipping Agreement of 1931.  The provisions of the Agreement relating to ship's officersqualifications had been implemented in New Zealand legislation through Section 17(a) of the
Shipping and Seaman Act 1951 and the shipping recognition of certificates of competency regulations
1988.  The Act and regulations recognized the ship's officers qualifications awarded by the
governments of Ireland; Hong Kong, China; the United Kingdom; Canada; India; Malaysia;
Singapore; Pakistan; and South Africa as equivalent to ship's officer qualifications awarded by theGovernment of New Zealand under the Shipping and Seaman Act 1951.
55. The representative of Venezuela had received questions from Japan, Australia, and Mexico.
With regard to question 501 from Japan, she said that it was a commitment that had been taken within
the framework of the Andean integration process.  Regarding question 502, as to the countries that
were given the freedom of access, they were Bolivia, Ecuador, Peru, and Colombia,  members of theAndean integration system.  Regarding question 503, she said that the present reserved cargo system
was applied in practice only to imports of war equipment by the signatories, namely, the United States
and Venezuela.  That exemption was part of a law of the Republic and therefore could not be
eliminated.  Regarding question 504, as to why diplomatic notes had been exchanged with the United
States, she said that it was a sovereign decision based on the discretion of the countries involved.
Regarding the question from Australia, she said that the question should be put to the other members
of the Andean Community.  When the MFN lists ha d been drawn up, the countries had not  applied
the principle of Andean coordination.  Nonetheless,  that exemption was the result of a commitment
entered into within the framework of the subregional sc heme and was still in force.  With regard to the
question from Mexico, she did not have a precise answer at that time but the reply would be
distributed it in writing as soon as possible.
56. The representative of Singapore had received questions from Japan.  Singapore considered the
MFN exemption on maritime transport services to be necessary due to the fact that other countries did
not grant sufficient liberalization to satisfy Singapore, especially in the four services sectors indicated
in column 1, i.e. storage and warehousing, freight forwarding, in-land trucking and container, station
and depot services.  That exemption on shipping would be maintained until such time when maritime
negotiation reached successful conclusion covering those areas.  Singapore adopted a free shippingpolicy, satisfactory access meant allowing Singapore companies access in a country similar to that
which could be enjoyed by foreign companies in Singapore.
57. The representative of Tunisia said that at that time his delegation was considering the
possibility of revising the position with regard to the exemption in maritime services.  Regarding
question 492 from Japan, he said that international maritime transport encouraged all countries toS/C/M/45
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carry out the control services by the country's authorities themselves in port.  Regarding question 493,
the local authorities would also consider certain unilateral action taken by foreign operators.  Certain
measures were provided for in the maritime provisions.  Regarding question 494, the Tunisian fleet
had undergone abusive control on certain occasions since 1998.  Regarding question 495, the
agreements reached with Tunisian partners dealt with bilateral cooperation and excluded all forms ofprivileges.  Regarding question 496, the countries with which Tunisia had concluded bilateral
agreements were the following: Algeria, Libya, Morocco, Mauritania, South Africa, Egypt, Gabon,
Guinea, Guinée Bissau, Senegal, Argentina, Brazil, Cuba, Saudi Arabia, United Arab Emirates,
Jordan, Libya, Syria, Iran, Germany, Spain, France, Italy, Hungary, Malta, Norway, Poland, Portugal,
Russia, Turkey, Ukraine and Yugoslavia.  Regarding question 497 on the definition of cabotage,
cabotage was the maritime transport from one Tunisian port to another.  As to question 498 in relation
to commercial presence, that type of presence could be established through Tunisian enterprises, firmsor by joint-venture companies, or through the creation of firms with a major foreign capital holding.
Regarding question 499, there was no shared cargo since 1998.
58. The representative of Senegal had received questions from Japan, questions 468-479,  and
from Hong Kong, China; questions 10 to 12.  Those questions had been sent to capital for answers to
be supplied by the authorities and  written answers would  be sent to allow for the distribution throughthe Secretariat to all Members.  Those answers would be given in the light of the decision taken on 3
July 1996.
59. The representative of European Communities referred to the exemption on page 101
concerning Finland's maritime transport, cabotage traffic, and the exemption listed by Sweden on
page 107, the second entry on that page, together.  He said that agreements based on reciprocity andconcerning the rights to cabotage traffic had been concluded by Finland and Sweden as part of the
trade agreements with some of the EU members like Belgium, Denmark, France, Ireland, Portugal
and the UK, and also non-EU members such as Argentina, Iceland, Japan and Norway.  There was
also a specific agreement with the U.S. to regulate the right to transport empty containers and also to
regulate the transportation of goods in barges.  Sweden also had a specific agreement with Polandconcerning the right of coastal traffic with salvag ing ships.  As Sweden and Finland had joined the
EU in 1995, the agreements with other EU countri es were now transferred to the cabotage EU
legislation and ordinance.  Those were still in force and the exemptions needed to be maintained as it
was necessary to keep the long-established pref erences as agreed in reciprocity agreements.
Regarding Inland waterways transport, exemptions  on pages 114 (listed by Austria ) and 115 (EC-
wide ), he said that those exemptions corresponded to existing or future agreements on access to
inland waterways, including the agreements fo llowing the Rhine-Main-Danube link.  Those
agreements reserved traffic rights for operators based in the countries concerned and meeting
nationality criteria regarding ownership.  In practice it meant that certain traffic rights were reserved
for vessels of the countries specified and that the certificates and licences of the countries indicated
were mutually recognized.  The exemptions needed to be maintained because the conditions creating
the need prevailed until the overall harmonization of the European waterway-transport market wascompleted.  Regarding the second entry on page 115 related to the Mannheim Convention on Rhine
Shipping, he said that the exemption was relevant for some member states that were party to the
Mannheim Convention on Rhine Shipping.  However, by virtue of a protocol to that convention,
vessels of all EU member states benefited from the provisions of that convention.  For the time being
no member state of the European Union, other than the original contracting parties, had signed thatprotocol.  It was considered appropriate to maintain that MFN exemption.  Regarding the third entry
on page 115 concerning Germany, specifically the rental or the leasing of services without operators
relating to ships, he said that the exemption had been filed as a measure against possible reciprocity
for German ship owners in third countries.  It had taken into account the limited specific commitments
made for the sector by WTO Members, the right to  lease in Germany remained subject to possible
reservations on nationality requirements with respect to the registration of ships.  In other words, theS/C/M/45
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MFN exemption was needed to ensure effective and equivalent market access for German service
providers.
60. The representative of Switzerland addressed questions posed by Australia and Japan.  The
exemption on page 116 was rendered necessary by Article 4 of the Mannheim Convention which
granted national treatment to the signatory nations.  Concerning the coverage of Article V of theGATS, he said that the Mannheim Convention covered only the navigation on the Rhine, so
Switzerland did not consider that that Convention ha d substantial sectoral coverage as stipulated in
Article V of the GATS.  Regarding the question from Japan on statistical data, the Mannheim
Convention provided the regulatory framework for the use of the Rhine for maritime transport and
also made that navigation easier, for example with provisions on custom controls.  It was the
existence of the Mannheim Convention itself that perm itted to achieve the stated objective.  It could
not be said what the situation regarding transport activities on the Rhine would be without theMannheim Convention and, therefore, no comparison and hence statistical data on such a comparison
could be provided.
61. The representative of the Czech Republic addressed the question from Australia, i.e. No. b(8),
concerning the internal waterways.  The Czech Republic was situated geographically at the end of
navigation ways and for that reason it had been natural to adjust its law relating to in-land traffic tothe law of the European Union.
62. The representative of Thailand  referred to the question posed by Australia (question no. 6),
Chile (question no. 9), Japan (question no. 486 and 487).  He informed the Council that following the
VAT-system reform in 1998, all WTO Members enjoyed a zero VAT rate on the selling and
marketing of maritime services in Thailand.  Regarding question No. 488 by Japan, he said that inaddition to maritime transport services, airport services also had had VAT exempted on a reciprocal
basis.  He informed that at present a zero VAT ra te also applied to air transport services. As to
Question No. 489 of Japan regarding the treaty of amity and economic relations between Thailand and
the United States, he drew Members attention to Thailand's responses during the first review session.
As to Question No. 490 from Japan, he said that the cargo sharing as stated in Thailand's MFNexemption on page 109 no longer existed, both in the Agreement on maritime transport between
Thailand and Viet Nam, as well as between Thailand and China.
63.  The representative of India referred to questions No. 438, 439 and 450 from Japan.  The first
two were related to bilateral agreements and the th ird one was in line with the convention.  Regarding
question 438, India had a bilateral maritime agreement with some countries which guaranteed
shipping arrangements of bilateral cargo between the two parties of an agreement.  Those
arrangements were confined to the bilateral partners of the Agreement and were not applicable toother countries. Therefore, India had to take MFN exemptions as indicated in column 2 on page 102
of the compilation.  As long as the bilateral agreement remained valid, they imposed legal bindings on
India, necessitating MFN exemptions.  Regarding question No. 439, the bilateral agreements between
India and its partners provided for equality in freight lifting and equality in freight earnings, by
providing that the bilateral trade between the two countries would be carried only by the respectivemerchant fleet on the principle of parity in cargo lifting and freight earnings and equality in all other
aspects.  In case the shipping companies of one of the contracting parties were not able to undertake
the carriage, it would be offered to the vessels of the other contracting parties.  The concerned
designated commercial organizati ons of both the parties would meet annually for undertaking review
and effect adjustments and rectify imbalance, if any,  in the following year.  Thus it would be seen that
the bilateral agreement provided for the measures to achieve those objectives.  Regarding question
450, the percentage of cargo transported to and from India by ships under the provisions of land and
port convention should be in the ratio of 40:40:20 – that was 40 national, 40 trade partners and 20
third countries.  Since India was a party to the UN convention, it had a legal obligation to comply with
the provisions of that convention, hence India had taken the MFN exemption and efforts were still onS/C/M/45
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to achieve the target fixed by the land and port code of conduct.  The state of evaluation of the impact
of the convention had not arrived.
64. The representative of Chile had received questions in the area of maritime transport from
Japan.  His delegation had not received answers from capital in time for that meeting but as soon as
possible they would be distributed to Members.  The same situation applied in respect of landtransport services.
65. The representative of Turkey addressed the questions posed by Australia, Japan and
Hong Kong, China on transportation services.  He said that by Article 55.3 of Turkey's Custom Law,
the Council of Ministers was authorized to adopt prohibitions, restrictions, to apply different
procedures or tariffs, on a reciprocal basis for goods and transport service suppliers of foreign
countries which did not have an agreement with Turkey in the fields of trade, customs, transportation,
or had partially or totally suspended provisions of such agreements unilaterally or had adoptedprohibitions and restrictions for Turkish transport service suppliers, vessels or aircraft or apply
discriminate practices against Turkish nationals.  According to the Article, the mentioned provision
was to be applied on a reciprocal basis so it should never apply to the Members of the WTO who
signed the GATS.  That measure, which was forced by Turkish Customs Law, had never been applied
so far by the Council of Ministers in respect to the customs procedures.  The exemption which was tobe applied on a reciprocal basis was foreseen to protect Turkish nationals in case of discriminatory
practices against them.  Since such a measure was to be notified to the interested parties duly in
advance in case of its application, sufficient transparency was also ensured for that exemption.
66. The representative of Brazil had received questions from Japan.  With regard to question 385,
the MFN exemption had been listed by Brazil at the end of the Uruguay Round in order to ensure
effective participation of the Brazilian flag in the Brazilian liner cargo trade through bilateral
agreements concerning cargo sharing and cargo reservation, as well as measures providing for access
to cargo on a reciprocity basis.  Brazilian companies had a small participation of about five per cent in
ocean cargo shipping with its own vessels and th e MFN exemption was intended to help revert the
situation. Therefore, the conditions that had created the need for the exemption still prevailed.  Eventhough the MFN exemption obligation was suspended until the resumption of the negotiations on
maritime transport services, Brazil reserved its right to  keep that exemption as well as to consider the
possibility of listing new ones in the context of the negotiations for the maritime sector.  With regard
to question 386, Brazil had bilateral agreements with a reciprocity clause related to those measures
with Algeria, Argentina, Chile and Uruguay.  With regard to question 387, the term cargo sharing was
employed to refer to the equitable division of the transportation of cargo involved in the bilateral trade
between the two countries.  Cargo reservation refe rred to cargo that could only be transported by
national flag vessels.  It included, for example, cargo that was entitled to any sort of benefit according
to the legislation such as cargo relating to government procurement.  With regard to question 388, the
answer was in the negative, the existing agreements had been periodically renewed with no
amendments.
67. The Chairperson invited supplementary questions or requests for clarification.
68.  The representative of Japan thanked all delegations that responded to the many questions
raised by his delegation.  His delegation welcomed the indication by some Members, e.g. Tunisia and
Thailand, as to the normal existence of the cargo sharing.  His delegation shared the view expressed
by Hong Kong, China contained in its written que stions (page 3, question 10) that some African
Members widely listed  MFN exemptions.  His delegation sought further background informationabout the reasons for those exemptions of the African Members.
69. The Chairperson observed that a number of the Members that were yet to reply were African
countries, many of whom were not present in the room.S/C/M/45
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70. The representative of Korea observed that on page 95, Brazil had mentioned that the duration
of the measure would be indefinite.  His delegation asked whether there was any provision in the
bilateral agreements on the duration of the measure.  Additionally, Chile indicated in the second entry
on page 97 that the intended duration of the exemption inscribed was subject to the duration of the
convention.  Korea would like to know the specific period of that measure.
71. The representative of Chile indicated that the treaty with Brazil was intended for 10 years
with a tacit renewal for the same period of time.  He offered more detailed information in writing at a
later date.  The representative of Brazil confirmed the information provided by the delegation of
Chile, that there was a period at the end of which the Agreement was renewed tacitly unless one of theparties decides to denounce it.
72. In relation to the question posed to some African Members, the representative of Nigeria said
that he did not intend to hold brief for any other African country but to point out that some of them
did not even have resident representatives in Geneva.  It was only those countries which could
naturally respond to the questions posed on the exemption issues.
73. The Chairperson turn to the examination of  the exemptions grouped under "Air transport " and
"Space transport".  He invited Members to respond to questions raised with respect to those sub-
sectors.
74. The representative of Romania had received two questions from Japan on the exemptions
relating to sales and marketing services for air tran sport services.  Regarding the first question, i.e. "is
the right for sales and marketing services for air transport still granted on a reciprocal basis?",  he said
that according to Romanian legislation any foreign air carrier had a right to sell and market its air
transport services in Romania through agents registered as Romanian legal persons in accordance withrelevant Romanian legislation.  Those agents enjoyed the same treatment as all other Romanian
commercial agents.  However, the right of foreign air carriers to sell and market their air transport
services in Romania directly or through an agent was stipulated in the bilateral air services agreements
concluded at governmental level.  That right was often granted on reciprocal basis and in many cases
associated with the right of designated air carrier to  freely transfer all air carrier's revenues from the
sale of air transport services.  As to the second question, i.e. "please explain what kind of forum is
taken for reciprocity?  Does a bilateral agreement based on reciprocity exist?", he said that the forum
for reciprocity was the bilateral air services agreement which was usually concluded at governmental
level.  The majority of those air services agreements included clauses regarding the right of
designated  air carriers to sell and market air transport services on a reciprocal basis.  Romania had
concluded 85 such bilateral agreements, 23 of those after 1990.
75. The representative of Singapore referred to a question posed by Japan concerning the
exemption for computer reservation system services (CRS).  That particular MFN exemption was
necessary due to the fact that the conditions and level of market access for Singapore services
suppliers were very much governed by bilateral air services agreements and evolving multilateral
agreements.  At the 17th meeting of the APEC transportation working group held in April 2000, it had
been agreed, among others, to pursue further steps to liberalize air services.  One option raised forconsideration was the exploration of plurilateral agreements by like-minded APEC economies, while
another was the widening of areas like doing business matters which included CRS services.
Singapore would continue to maintain its MFN exemption on CRS services until such time when a
multilateral regime including CRS services came about.
76. The representative of Latvia had received two questions from Japan in relation to the
exemption on sales and marketing of air transport services and computer reservation systems.
Regarding the first question, i.e. do all bilateral ai r service agreements concluded bilaterally, contain
reciprocal provisions concerning sale and marketing of air transport services and computerS/C/M/45
Page 18
reservations systems?  She said that all concluded bilateral service agreements, in total 31, contained
reciprocal provisions sales and marketing of air transport services.  Reciprocal provisions concerning
computer reservations systems were included in the agreement between Latvia and the Netherlands.
As to the second question, i.e. an explanation in concrete terms of the content of preferential market
access, the standard agreement on air transport services gave references in terms of establishingrepresentation offices in both countries. In the absence of an agreement, the representation should be
established according to the provisions of national legislations.  However, the agreement contained
provisions that significantly simplified the procedures concerning sale and marketing of air transport
services and computer reservation systems.
77.  The representative of Switzerland answered questions raised by Japan.  As to question
No. 535, the exemption was based on the common system  the ECAC and the EC also belonged to that
system.  His delegation could not give any appreciation on the exemption by the EC.  Regardingquestion 536, the ECAC had 38 member states.  A list of ECAC member states could be found on the
official website of ECAC:  www.ecac-ceac.org.  All ECAC member states had adopted the ECAC
code of conduct.  Regarding question 537, for Switzerland fundamentally the provisions of Article 7
of the revised code of conduct of the ECAC were not in line with Article II of the GATS.  Therefore
Switzerland considered that an exemption was needed in that case, but his delegation was not in aposition to speak for other countries.  Regarding the first part of question 538, the answer was yes, the
code of conduct provided reciprocity; as to part two, "equivalent" meant that Switzerland had to
consider if the treatment that another country granted to it had the same value as the treatment
Switzerland granted to that country; as to the third part, that exemption applied to all third countries
and thus far   Swiss system vendors had not faced any problem to operate freely in a foreign country.Regarding the general question raised by Hong Kong, China; Switzerland had settled about 140
bilateral air services agreements.  The enumeration of those countries would not be appropriate.
78. The representative of Liechtenstein had received four questions from Japan.  Those questions
did not concern Liechtenstein for the following reasons:  the questions of Japan referred to the EU
regulations concerning the operation of CRS in the field of air transport in the EEA and thoseregulations did not apply to Liechtenstein, as in the EEA agreement Liechtenstein had a transition
period for air transport services until the end of the year 2001.  At the end of the year 2001, a review
of the transition period would take place.  Due to an agreement between Switzerland and
Liechtenstein, since 1950, the Swiss regime in the field of air transport services also applied to
Liechtenstein, therefore the MFN exemption in question had been scheduled in parallel with
Switzerland and thus the Swiss answers to the questions 535-538 were valid for Liechtenstein as well.
79. The representative of the European Communities referred to four exemptions on air transport
which were almost identical: by Austria on page 116 of the compilation, by EC-wide on page 118, by
Finland on page 118, and Sweden on page 123.  Those exemptions corresponded to the provision of
an EC regulation, EC No. 2229/89 which was ame nded by Regulation EC 3089/93.  According to that
Regulation, the obligation of CRS system vendors, or of airlines participating in those systems, should
not apply where equivalent treatment to that applied under the EC Regulation was not granted in thecountry of origin.  In other words, that MFN exem ption was based on reciprocity.  If reciprocity was
not awarded then discriminatory measures could be introduced.  It was considered necessary to
maintain those MFN exemptions as the development of multilateral agreed rules for the operation of
CRS was considered insufficient by his delegation.  In relation to a specific question from Japan
concerning the coverage of those MFN exemptions, he said that they applied in the same manner toall EU member states.
80. The representative of Korea referred to questions No. 521-523 from Japan.  Regarding the
first question asking for clarification on the expression "access to foreign CRS through the SITA
network", whether that meant that access was only limited to certain specified Korean travel agencies
which had access to the CRS designated by a US airline company, he said that the answer was yes.S/C/M/45
Page 19
He added that where it read "have access to the CRS" it should be changed, and read "which want or
which would like to have access" which was a more appropriate expression.  As for the second
question, No. 522, Korea was not sure what the first part of the question meant.  As to the second part
of the question, i.e. "has there been any changes as a result of the negotiations with the United
States?", Korea had recently revised its air transport agreement with the United States.  In that revisedagreement that provision still remained, so in th at sense the answer remained in the affirmative.
Regarding the last question No. 523,i.e. Does the term negotiation refer only to the U.S., he said that it
did not refer to the US only, it referred  to all other countries.
81. The representative of Poland addressed two questions from Japan.  Regarding question 529,
she said that only half of the 85 bilateral agreements concerning air transport services contained the
said reciprocal provisions on selling and marketing of air transport services.  A list of those
agreements would be submitted as soon as possible.  None of the bilateral agreement containedprovisions on computer reservation system serv ices.  Regarding question 530 on the meaning of
preferential market treatment, she said that under a bilateral air services agreement a specific air
carrier was designated to provide, on reciprocal basis and in compliance with Poland's domestic
regulation, air transportation services in Poland.  The selling of the services could be done either by
the air carrier office or by other agents, no other preferences were granted to the designated air carrier.Her delegation noticed the suggestion from Hong Kong, China that for transparency purpose,
Members should list in the third column the coun tries with which bilateral air services agreements
were concluded.  In that respect, she said that no separate agreement concerning computer reservation
system services or selling and marketing of air transport services had been concluded so far.  Specific
provisions on selling and marketing air transport services were to be found in more than half of 85bilateral agreements concerning air transport services.  None of the bilaterals contained provisions on
CRS services.  The proposition from Hong Kong, China would be considered by her delegation in the
near future.  The written answers would be provided soon.
82. The representative of Thailand referred to questions No. 539-541 from Japan.  Thailand had
granted special treatment to CRS operators in Amad eus system because at that time local operators,
most importantly Thai Airways International, had been only beginning to establish access to that
system.  In practice, CRS systems could at present be operated in Thailand but permission had to be
obtained from the government since regulations relevant to the restriction of the CRS system
remained in effect.  At present there were already a number of other CRS systems operated jointly
with the Communications Authority of Thailand.  Hi s delegation would review that restriction during
the course of the current round of negotiations.  In answering questions 542  of Japan and No. 18 of
Korea, he said that the reciprocal provisions of aircraft repair and maintenance were not contained inall bilateral air services agreements concluded by Thailand; only one bilateral agreement which
contained such provisions had been concluded, i.e. the agreement between Thailand and the United
States.  The Thai Air Transport Act (1936) stipulated that aircraft repair and maintenance service
providers had to have permission to operate in Thailand, such permission would be granted to the
designated airlines of any countries which had concluded relative agreement on air transport serviceswith Thailand on reciprocal basis.
83. The representative of the United States indicated that, despite his best efforts, he had been
unable to get the answers to the questions posed to his delegation regarding air transport, space
transport, road transport and pipeline transport.  He hoped to be able to get the replies from Capital
before the end of the meeting.
84. The representative of Canada referred to the three exemptions in the area of air transport
services.  If individual Members required further details, he could certainly share elements of the
income tax with them.  The first exemption related to tax on income and capital, on page 117 of
Secretariat Job No. 1551.  He said that there were provisions in the Canadian Income Tax Act that
were inconsistent with Article II of the GATS because of the availability of a tax exemption inS/C/M/45
Page 20
Canada for a given non-resident taxpayer who was involved in the operation of a ship or aircraft in
international traffic conditional upon the tax treatment of Canadian taxpayers under the tax laws of the
country of which given taxpayer was resident.  Specifically, the provision distinguished between non-
resident taxpayers whose country of residence did not impose tax on Canadian resident taxpayers
involved in the operation of a ship or aircraft in international traffic and non-resident taxpayers whosecountry's of residence imposed tax on Canadian resident taxpayers.  That provision prevented double
taxation where Canada and the foreign country were not bound by a double tax convention.  Tax
conventions generally provided for similar exemptions; the specific article of the Canadian Income
Tax Act was paragraph 81: 1(c) which was about a page long and he said that copies were available at
request.  The second exemption related to aircraft repair and maintenance services provided by service
suppliers located outside of Canada.  That exemption was applicable to all countries with response
provision under mode 2 for repair and maintenance of aircraft and related aeronautical products.  Thatlimitation reflected the existing Canadian regime, under which repair, overhaul and maintenance work
on Canadian registered aircraft and related aeronautical products had to be performed by Canadian
certified providers based in Canada.  Operations outside Canada were eligible only if they were sub-
organizations of approved maintenance organizations located in Canada.  Canada had concluded
agreements with certain other countries that recognized the certifications of those countries forproviders doing repair, overhaul and maintenance work; in that regard Canada had taken reservations
under various international agreements to prevent th e automatic extension of mutual recognition and
certification to third countries.  That MFN exemption with respect to repair, overhaul, and
maintenance, remained necessary in part to ensure the integrity of Canada's aircraft safety standards.
85. Korea had asked Canada to clarify the nature of preferential treatment accorded to the
countries in column 3.  In that regard he said that no foreign-based repair and maintenance services
provider might perform work on a Canadian aircraft or aeronautical product that was engaged in air
transport unless it was present in Canada and had been certified by Canadian authorities to provide
such services.  Under an agreement or technical arrangement, Canada accepted the certification by the
national regulators of the foreign countries involved with work conducted by repair and maintenanceproviders in that country.  That allowed such providers to maintain and certify Canadian registered
aircraft without the necessity of obtaining Canadian certification.  Korea also had asked to explain the
meaning of 'some foreign repair and maintenance service suppliers', he explained that the expression
meant that only those foreign repair and maintenance service providers in countries with which
Canada had an agreement or technical arrangement might perform and certify maintenance work
performed on Canadian registered aircraft and ot her aeronautical products without the need to be
present in Canada and to obtain a separate Canadian certification.
86. Japan and Korea had asked for information on the list of countries which had been accorded
such treatment.  The agreements might be between countries or between civil aviation authorities and
they varied in scope according to the circumstances and compatability between national systems.
Canada had some bilateral agreements with the United States, France and Israel, and some technical
arrangements between civil aviation authorities with Austria, Germany, Netherlands and the UK.Japan had asked whether that measure was based on a bilateral air services agreement or reciprocity,
the answer was neither.  Reciprocal recognition of repair and maintenance certifications was
accomplished by means of agreements or technical arrangements with specific countries or aviation
authorities that were solely concerned with air worthiness certification.  Japan had asked to explain
with concrete examples the preferential treatment, the answer to that unless they were certified byCanadian authorities they could not certify Canadian aircraft or aeronautical products.  Japan had
asked to explain in concrete terms what kind of criteria had been applied for deciding which countries
benefited from preferential treatment.  In deciding whether to conclude an air worthiness certification
agreement with a foreign country, Canada took into consideration the degree of congruence in the
certification procedures and the standards of enforcement of the counterparts regulatory system.  Inparticular, the parties had to consider the different regulatory methods employed and the degree to
which elements of the other system could be integrated into their own.S/C/M/45
Page 21
87. Japan had asked to specify what the air safety standards procedures were.  The answer was:
those dealt with the performance and certification of repair and maintenance work performed on
Canadian registered aircraft and other aeronautical products.  An example of aeronautical products
was aircraft engines.  Japan had asked for the names of countries with which Canada had concluded a
bilateral air services agreement. Canada had 67 bilateral air services agreements at the time and thelist of countries was available at request.  Regarding the last exemption, on page 117, dealing with the
selling and marketing of air transport services, he said that Canada had taken no commitments with
respect to sales and marketing of air transport services in the GATS.  The exemption had been taken
because bilateral air services agreements contained provisions that placed limitations on the
advertising, sale and marketing of specified air transport services.  International air transport was still
governed by the regime of bilateral agreements, consequently, the conditions that gave rise to that
exemption still applied.  Japan wanted to know whether all bilateral air services agreements thatCanada had concluded to date contained provisions that place limitations on the advertising, selling or
marketing of air transport services.  The answer to that was that all agreements contained provisions
governing sales and marketing activities.  The subsequent question from Japan was to explain exactly
what were the limitations mentioned in column 2.  In its bilateral air services agreements, Canada
sought to gain for Canada's designated airlines equally liberal provisions governing sales andrepatriation of funds in the foreign signatory as Ca nada extends automatically to any foreign business
operating in Canada.
88. The representative of  Kuwait said that his delegation had received three questions concerning
air transport services.  Unfortunately he was not ab le to answer those questions since they had been
referred to the competent authorities in capital and the responses had not arrived yet.  His delegationwould share the received information in the future with the concerned delegations.
89. The Chairperson invited complimentary que stions or requests for clarification.
90. The representative of Japan requested some clarifications.  Regarding the EC's intervention,
she was not sure it had included an answer to question 509 on the exemption on page 118, i.e. what is
the criteria for deciding whether the treatment is equivalent or not; and to question 510, i.e. explain inconcrete terms what is meant by multilaterally agreed rules for the operation on CRS in column 5.
Also according to the EC's explanations, if reciprocity had not been granted some discriminatory
measures could be introduced.  Japan wondered wh at kind of discriminatory measures could be
introduced and whether it could contain or include some kind of restrictions on market access for the
CRS system vendors of the third countries.  Could those measures result in less favourable treatment
that was indicated by the commitment?  Could discriminatory measures include some kind of
exemption from the obligations mentioned in Article 346 of EC rules?
91.  The representative of the European Communities said that there was no definition in the EC
regulation of what was meant by "equivalent".  There were many different options available to hinder
the provision of computer reservations services making it preferable to use a wording which was
broad.  On "reciprocity", action might only be und ertaken if no equivalent treatment was granted;
therefore, the identification given in the exemption was negative and not positive.  On the questionconcerning the multilaterally agreed rules for the operation of CRS, the rules referred to were those
agreed in the recognized UN body for standardization of aviation issues, ICAO.  Some ICAO rules
were developed in the area but implementation was slow.  There were no rules which were applicable
on a multilateral basis, only non-binding rules on regional basis.
92. The Chairperson invited delegations to respond to questions with respect to exemptions listed
for "Rail transport", "Road transport ", "Pipeline transport " and "Services auxiliary to all modes of
transport".S/C/M/45
Page 22
93. The representative of Hungary had received seven questions from Japan.  He stated that the
conditions which had created the need for the exemption still prevailed and his delegation wished to
maintain it.  The first question asked for the list of countries with bilateral agreements.  He said that
Hungary had bilateral agreements on passenger and freight, road transport with Albania, Belgium,
Bulgaria, Bosnia Herzegovina, Cyprus, Czechoslovakia, Denmark, Estonia, Belarus, Finland, France,Greece, the Netherlands, Croatia, Iraq, Ireland, Jordan, Kyrgyz Republic, Poland, Lesotho, Lithuania,
Macedonia, Morocco, Moldavia, Germany, Norway, Italy, Portugal, Romania, Spain, Switzerland,
Sweden, Syria, Slovakia, Slovenia, Soviet Union, Turkey, Tunisia and Ukraine; bilateral agreements
on passenger road transport with Austria and the United Kingdom; and agreements on freight road
transport with Afghanistan, Austria, United Kingdom, Yugoslavia, Kuwait and Luxembourg.  As to
the second question related to the word "measures" in the exemption, he said that it referred to, inter
alia, the type and the number of international road transport permits, the size of and payment for toll
charge for using the roads by foreign vehicles, to the establishment of conditions under which the use
of permits could be waived.
94.  As to the third question related to the term "ope rating conditions", he sa id that it referred to,
inter alia , the establishment of the terms and conditions of international passenger and freight road
transport and those of carrying out cabotage activities.  The fourth question asked to explain thestandard of criteria through which Hungary limited the provision of service as referred to in column 2.
Hungary reserved or limited the provision of service on the basis of mutual interests.  All cross-border
land transport into Hungary required permit; in rela tion to countries with which bilateral agreements
had been concluded such permits were usually exchanged on the basis of reciprocity.  The fifth
question was about transit permits and preferential road taxes.  The transit permit was the documentissued by the competent Hungarian authorities which invited the person presenting the document to
transit through the country without unloading or adding to the goods.  Preferential road taxes were by
definition lower than the normal road taxes.  Th e sixth question related to the integrity of road
infrastructures stated in column 2 and column 3.  The integrity of road infrastructure meant, among
other things, the maintenance of the state road infrastructure at a given time, the development ofnational road networks and the relationship of road tr ansport to other transport sectors.  Regarding the
last question, i.e. why an MFN exemption is necess ary for protecting the integrity of road transport
infrastructure and the environment, he said that the MFN exemption helped Hungary in preserving the
state of the national road network and in keeping the gr owth rate of road traffic, both in absolute terms
and in relation to rail and other transport, at a level which was economically rational, and ensured the
environment's sustainability.
95. The representative of Egypt had received four questions from Japan on road transport
services.  On question No. 604, he said that Egypt had bilateral, plurilateral and multilateral
agreements with Arab countries.  The Arab League Agreement regulated the transportation among
Arab countries.  Egypt had agreements with Jorda n, Iraq, Yemen, Saudi Arabia, Syria, Libya, Tunisia,
Morocco and other Arab League countries.  On question No. 605, i.e. to provide the duration period
of agreements referred to in column 2, they should  be maintained as long as the agreements remained
in force or were extended.  On question No. 606, i.e. why a limitation on road transport can facilitate
movement of Arab citizens into Egypt, he said th at the limitation was to allow vehicles registered in
the Arab League countries, with which Egypt is a party in bilateral, plurilateral or multilateral
agreements, to supply the road transport services ac ross the territory of Egypt with a view to promote
intra-Arab trade and to facilitate movement of Arab citizens into Egypt and stipulated in the ArabLeague Agreement.  On question No. 6 or 7, i.e. to provide standards or criteria through which Egypt
limits the supply of road transport services, he indi cated that as stated in column 2 of the list the
criterion was registration of vehicles in the countries indicated and for the reasons mentioned in
column 5 of this list.
96. The representative of Latvia had received four questions from Japan on the MFN exemption
on road transport relating to the system of road transport agreements which were basically the sourceS/C/M/45
Page 23
of MFN exemptions taken by Latvia.  Regarding the first question, i.e. the list of bilateral or
plurilateral agreements concluded by Latvia, she said that there were 35 countries in that list, which
was available on request.  As to the second question, i.e. explanations for the standard criteria by
which Latvia reserves to limit the provisions of transport services, the agreements concluded by
Latvia covered most countries where it was feasible to provide land transport from Latvia, basicallycountries in Europe and a few in Asia.  All cross-border land transport into Latvia required the
relevant permission.  Regarding countries with whom bilateral agreements had been signed, such
permissions were usually exchanged on a reciprocal basis.  The type, number and specific conditions
of the agreements varied from agreement to agreement.  Regarding the next question, i.e. explanation
on specific examples on the system of tax exemption, she said that her delegation had provided the
table with the specific examples in Latvia's written answer.  The last question was on concrete terms
of the regional characteristics and asked why an MFN exemption was a necessity for that objective.She said that bilateral agreements had been signed with most of the countries to which land transport
to and from Latvia was physically feasible and the general purpose of the agreements was to pursue
further issuing of transport permissions.
97. The representative of the Czech Republic had received questions from Japan and Australia.
He said that his delegation had to assess whether the conditions for maintaining the concerned
exemptions still existed.  There were two main reasons for that:  first, the on-going integration process
in Europe, a process based on the harmonization of  the legislation also in the transport sector;
second, for a historical reason, namely, land transport had a regional character with traditionally close
ties among neighbouring countries.  To that, environmental aspects as well as limited capacity of
infrastructure, especially in the road traffic, had to be added.  Turning to Japan's question 553, he saidthat the Czech Republic had concluded bilateral agreements with the following countries:  the Federal
Republic of Germany, Austria, Poland and Slovakia.  There were also 7 multilateral agreements in the
area of rail traffic.  On question No. 554, he said th at in view of the regional character of the railway
transport and with a view to its specific technica l condition, it was necessary to adapt measures in
order to secure safe operation of the railroad traffic.  For that reason, one of the most importantpreconditions for such an operation was the pres cribed technical competence requirement.  On
question 555, in view of the conditions of the transport infrastructure and also taking into
consideration new railway operators, the state authority by adopting the transport policy had taken the
responsibility for further development and financing of the railway transport.  On question 556, the
regional specificities were very much linked to the historical development and especially to technical
parameters of the operation of the railroad traffic.  On question 557, the response was that the required
railway infrastructure integrity, as mentioned in the reply to 555, was based on the transport policy ofthe Czech Republic because the State committed itself to developing the railroad traffic, thus the
authorities required the preservation of the integrity of the traffic network.
98. He turned to the questions concerning road traffic, i.e. No. 598 to 603.  As to question 598,
the Czech Republic had 41 bilateral agreements and 16 multilateral agreements in the area of road
traffic;  the list was available.  As to question 599, bilateral agreements were based on the reciprocityprinciple.  Those agreements defined the transport needs of both parties.  There were agreements
which treated only freight transport and others covered also persons transport.  The extent of each
agreement depended, among others, on the geographical position and proximity of the concerned
partner.  On question 600, the bilateral agreements were reciprocal.  The relevant permissions were
agreed.  Those permissions were needed mainly because of regional character of the road transport.On question 601, specific conditions for road traffic were described in detail in the individual bilateral
agreements, of course on the basis of reciprocity.  On question 602, bilateral agreements also
contained reciprocal provisions on the relief from taxes and fees granted to the other contracting
party.  That relief did not apply to the use of a selected network, bridges and tunnels.  On question
603, in view of the present insufficient capacity of the road structure and of the fact that many roads
of international importance went through cities, regulation by the State authorities was necessary for
maintaining acceptable living conditions for the population.S/C/M/45
Page 24
99. As to the question from Australia concerning the railway traffic, question d(9), he said the
Czech Republic had concluded agreements of cooperation in the area of railway traffic with
neighbouring countries, namely, Slovakia, Austria, Germany and Poland.  Those agreements
regulated the conditions for the operation of railroad traffic across frontiers, and in the conditions of
such agreements the railway operators set out further conditions in their contracts.
100. The representative of the Slovak Republic had received questions from Japan relating to rail
transport and road transport, and from Australia relating to rail transport.  He was not in a position to
answer those questions at the meeting since they were being considered by respective authorities in
capital.  Replies would be provided in writing soon.
101. The representative of Uruguay referred to question 707 from Japan and questions put by
Mexico.  The International Land Transport Convention was an agreement of partial scope of the Latin
American Integration Association (LAIA).  It was a framework agreement making possible the equalobjective treatment with an attempt to elimin ate any asymmetry in transportation between the
countries of the region having signed that convention.  It covered transport between countries that
were Members of LAIA and, in that framework, it was a sectoral exemption that had been taken as a
basis for the transport policy in MERCOSUR.  The conditions giving rise to the need for such an
exemption still prevailed.
102. The representative of Morocco referred to questions 531 to 533 by Japan on exemptions
relating to international road transport.  He stated that that exemption, which had a time-limit, was
consistent with the General Council Decision because it took account of the need to bring Moroccan
international road transport companies to level an d participate in international development efforts
through an increase in particular exports, which for Morocco constituted one of the main focuses toensure sustainable growth.  The first question concerned a list of bilateral and multilateral agreements
based on reciprocity between Morocco and other countries.  That list was annexed to the official
communication submitted by the Moroccan delegation to the Secretariat for circulation to delegations.
Those agreements had been reached with France, Spain, Sweden, Finland, Netherlands, Germany,
Switzerland, Liechtenstein, Portugal, the five Ar ab Maghreb union countries, the United Kingdom,
Romania, Belgium, Jordan, Luxembourg, Denmark, Latvia, the Czech Republic, Slovakia, Bulgaria,
Norway, Greece, Saudi Arabia and Iran.  As to the second question concerning the measures
contained in those agreements, the measures concerned international road transport for goods and
persons and, particularly, exempted from any taxes on goods transport.  Those agreements set down
annual quotas for the number of vehicles that were authorized for both parties with the possibility of
going beyond such limits if need be and with a possibility for annual readjustment.  It was possible to
return with or without freight depending on the authority's agreement.  Thus, those were very liberaltype of agreements making it possible for a constant flow of goods and persons.  The Moroccan
government also encouraged the creation of joint-ventures and partnership agreements between
Moroccan transport companies and those in countr ies that had agreements with Morocco.  For
transport of persons, the agreement provided for an open door regime in the case of a pooling of
companies that belonged to the two contracting countries, and a closed door regime making it possiblefor the free movement of coaches between the countr ies party to the agreement.  He said that the
exemption would be lifted in the time set by the WTO and thus international road transport for goods
would be liberalized by Morocco due to the adoption of Law No. 1699 by the Moroccan Parliament,
promulgated last March.  Domestic or international road transport companies under Moroccan law
would be open and without any discrimination what soever.  As to the third question concerning
bilateral cooperation amongst professionals, he said that that was to encourage the creation of joint
ventures between Morocco and foreign interests, in  order to promote vehicles returning with a full
load as well.S/C/M/45
Page 25
103.  The representative of South Africa had received four questions from Japan and one from
Australia.  His delegation was not in a position to provide the answers at the meeting; the replies
would be sent in writing to the delegations concerned and to the Secretariat once received.
104. The representative of Cyprus had received tw o questions from Japan.  Regarding question No.
797 requesting an explanation of the terms "tax exemption" mentioned in column 2 and "regional
specificity" mentioned in column 5, she said that Cyprus extended preferential treatment for passenger
and freight transportation to most European countries, Jordan and Syria, with which it had entered
into TIR agreements.  The MFN exemption for road transport services was necessary to facilitate road
haulage operations between Cyprus and those countries in order to cater for the increasing import and
export trade transported overland.  Cyprus, being a small and open island economy, was heavily
dependent on exports and imports for its development and due to its geographic position, had a
comparative advantage as a centre for transit trade with its neighbouring countries.  Cyprus needed tocontinue exercising its current policy until it became a full member of the EU.  The tax exemptions
referred to in column 2 were the taxes mentioned in the bilateral agreements that Cyprus had signed
with third countries regarding international road haulage and passenger transport, for example, the
fuel contained in the ordinary supply tanks of vehicles.  Concerning question No. 596 on the
European countries mentioned and on eventual future  agreements with other countries, she said that
the European countries were Armenia, Austria, Belarus, Belgium, Bulgaria, the Czech Republic,
Denmark, Estonia, France, Germany, Greece, Hungary, Italy, Latvia, Lithuania, the Netherlands,
Poland, Romania, the Russian Federation, the Slovak Republic, Slovenia, Spain, Ukraine, the UK and
Yugoslavia.  Cyprus was not at the time planning to conclude any more bilateral agreements on
international road transport.
105. The representative of Switzerland had received questions from Japan.  Regarding question
687, the Swiss transport policy was based on the freedom of traffic, there was no distinction drawn
between Swiss and foreign trucks.  The rules applied to all trucks on an ergo omnes  basis, whatever
the origin the vehicle might be, and thus the prohibition to drive at night on weekends applied to all,
on a national treatment basis.  However, for security of law, Switzerland had concluded a number ofbilateral agreements with certain countries.  In those agreements, Switzerland negotiated not only
market access but also issues relating to taxation and administrative procedures.  Those agreements
were intended to fill in the legal gaps and ensure security of law.  The number of countries with which
Switzerland  had such agreements had gone from some 30 countries, when the exemption had been
taken, up to 43 countries at present.  Countries involved were Western European countries, but also
countries from Central and Eastern Europe, from Nort h Africa, the Middle East and Asia.  The list of
countries was constantly evolving, generally there were two to three countries added each year.Regarding question 688 on the basis of freedom of traffic, a priori  any country would be welcome to
conclude such an agreement with Switzerland.  There was no country that was more desirable than
another.  However, in practice the volume of effective transport would have to be sufficient enough to
justify such an agreement.  On questions 689 and 690, the north-south route through Switzerland had
very heavy road transport.  There was a lot of tr affic and the ecological situation was very delicate in
the Alpine valleys, the population was already suffering considerably from pollution.  To that time,
there had been no discrimination applied for access to the Swiss road network to the detriment of
many foreign hauliers.  However, in view of the pr ecarious nature of the ecological situation and also
due to the infrastructure Switzerland could not entirely exclude the possibility of having recourse to
specific measures in  the future and that was why such an MFN exemption was necessary.  Theintegrity of the road infrastructure included both the operability of a highly sophisticated
infrastructure, (there were a number of bridges, tunnels and the many galleries that also had to be
built), and also included material integrity.  The integrity of the infrastructure could be seriously
impaired by abusive or inappropriate use and thus, bilateral transport agreements, in the light of that
had provisions particularly concerning characteristics of vehicles to allow access to the Swiss roadnetwork.  That would also relate to question 695 from Japan.  Concerning questions 691 and 692,
"capacity of combined transport" related to the capacity to carry trucks on trains across the country.S/C/M/45
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The transit quotas were based on an agreement, the Transit Agreement of 1992 between Switzerland
and the EU.  In that agreement, Switzerland had accepted transit of community trucks weighing more
than 28 tonnes on certain conditions: the rail combined transit must have been used up.  It only
concerned the north-south access Basel-Chiasso, and for only 15,000 vehicles per year maximum, and
in each direction 50 vehicles per day, and that only applied for the transport of perishable and urgentshipments and trucks meeting certain ecological criteria.  On question No. 692, those authorizations
could only be granted when the number of combined transport trains made available was not
sufficient for the traffic requirement.  On questions  693 and 694, the new bilateral agreement for land
transport between Switzerland and the EU, which sti ll needed to be ratified by the EU, had provided
that the system previously referred to would be done away with once that new agreement entered into
force.
106.  The representative of Norway had received four question from Japan.  On the first question
concerning countries with which Norway had concluded road transport agreements, such agreements
had been concluded with nearly all European countries, including Russia.  Negotiations had also been
started with African countries, i.e.  Tunisia and Morocco, but no agreements had yet been concluded.
On the question about the meaning of traffic rights , that concept incorporated authorization to carry
passenger and/or freight by road.  Foreign transport undertakings established in countries with whichNorway had not concluded the road transport agreemen t were not allowed to engage in road transport
to or from Norway.  On the question concerning who the specific countries were, road cabotage in
Norway was allowed for the countries within the European Economic Area.  On the last question
concerning the meaning of "regional specificity",  road transport was mostly used for regional
transportation and for Norway that region roughly comprised Europe.
107. The representative of Liechtenstein had received four questions from Japan.  Regarding
questions 636 and 637, she referred to the Swiss answer to questions 687 and 688 of Japan, as due to
the Customs Union Treaty between Switzerland an d Liechtenstein, the Swiss bilateral agreements
normally applied to Liechtenstein.  As to question 638, i.e. will Liechtenstein abolish the exemption if
the multilateral liberalization is achieved? the answer was in the positive if it took into accountregional specificity and environmental aspects of road transport.  The last question, i.e. to specify the
regional specificity and environmental aspects of road transport,  traffic from the heavily used traffic
route north-south, but also from the traffic routes east-west, passed through Liechtenstein.
Liechtenstein, which lied in the Alps, had an area of 160 square kilometres of which one third was
inhabitable and two-thirds were mountains.  The se nsitive ecological balance of the Alps could be
easily disturbed through noise and air pollution and em issions of traffic.  Furthermore, the population
in Liechtenstein was concentrated in the valley where the whole road transport passed through.  Thetraffic and infrastructure policy of Liechtenstein tried, without discrimination, to take care of the
sensitivities of the population as well as of the ecology, thus, the conditions for the MFN exemption
still prevailed.
108. The representative of Turkey had received one question about rail transport from Japan and
Australia, and one question about road transport from Japan.  As for the first question about rail
transport, almost all countries' railway administra tions were parties to the RIV Regulations Governing
the Reciprocal Use of Wagons in international traffic and RIC Regulations Governing the Reciprocal
Use of Carriages and Brake Vans in international traffic.  Those regulations allowed for Member
countries to make bilateral and multilateral agreements amongst themselves provided that no other
Member was negatively affected.  The exemptions stated below were thus in accordance with thementioned regulations.  He gave some details about the measures covered by the MFN exemptions.
For freight transport, thirty per cent reduction was pr ovided on export transport from Turkey to Syria,
Iran, Iraq and to the Lebanon.  Additionally, based on tonnage a 10 to 20 per cent return was
provided.  Thirty per cent reduction was provided on export transport from Turkey to Central Asian
Republics via Iran, and import transport from Central Asian Republics to Turkey via Iran.  The linewith Iraq was not operational at the moment.  Also in accordance with RIV and CMO, a MiddleS/C/M/45
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Eastern Conference on railways, renting fees on freight wagons used in international traffic were
exempted in certain conditions.  As to passenger tr ansport,  in axle/km calculations for the coaches in
Bosfor Express & Trakya Express, which ran between Istanbul and Bucharest, and Meric Express,
which ran between Istanbul and Sophia, RIC articles were applied.  The Bosfor Express had also
connections to Budapest.  However, as a result of decision of the railway administrations of Turkey,Bulgaria, Romania, and Hungary 50 per cent of th e RIC amount was charged.  In passenger transport
between Syria, Iraq, Iran and the Lebanon, in accordance with the CMO a 60 per cent of RIV amount
was charged (Iraq/Iran was not operational at the moment).  As to the question of Japan about road
transport concerning the meaning of privileges about the quotas and fees, the quotas were determined
by the bilateral international road transport agreements and protocols made between Turkey and other
countries.  Those quotas were mutually exchanged in order to be used by the international transporters
while they were performing transport activities on the territory of the other contracting party and feescollected by the host country.  An MFN exemption was considered to be necessary because of some
exclusive rights granted to some countries in accordance with bilateral road transport agreements.
109. The representative of Peru had received questions from Australia and Japan on land and
maritime transport exemptions contained in page 135 of the Secretariat compilation Job 1551.
Regarding Australia's question 2 requiring a clarif ication as to why only some Members which were
parties to regional agreements had taken up an exemption on that agreement, his delegation was
unable to explain what the negotiating position of other delegations had been.  Peru considered it
appropriate to take up the exemption to Article II to have a legal coverage within the WTO framework
of the rulings set down by the Andean group, which gave preferential treatment amongst its Members
in land, road, and sea transport.  One additional factor to be borne in mind was that when Peru listedits exemption at the end of the Uruguay Round, in the Andean group the valuation was still under way
as to whether or not this should be notified to the WTO.  Regarding Japan's question 650, the
signatories of the Andean group agreements were Bolivia, Colombia, Ecuador, Peru and Venezuela.
On question 653, the geographical range of the tour of the subregion indicated in column 2, referred to
the Andean subregion, which covered the five countries just mentioned.  Regarding question No. 654,i.e. the comment that the exemption listed was closely related to the development of the Andean
integration scheme, at present that integration process was still under way and was intended to
achieve a great degree of consolidation according to the conditions agreed to by the five member
countries.  Therefore, for the time being Peru was not able to further specify the duration of that
measure.
110. The representative of Thailand had received 6 questions from Australia; Hong Kong, China;
and Japan.  Regarding question No. 1 from Australia and No. 697 from Japan, Thailand had three
bilateral agreements relating to international road transport services, namely, a memorandum of
understanding between the government of the King dom of Thailand and the government of Malaysia
on the movement in transit of perishable goods by road through Malaysia to Singapore; an agreement
on goods in transit between the government of the Kingdom of Thailand and the government of the
Democratic Republic of Lao; and the agreement on the acceptance of driving licences issued byASEAN countries.  On question 15 of Hong Kong, China and 696 of Japan, i.e. what measures are
exempted, as stipulated in the land transport act of Thailand, foreign entities that wanted to operate in
international road transport services had to come from countries that have bilateral agreements with
Thailand; the measure that was exempted was that requirement to have prior bilateral agreements
under which Thailand had to receive similar treatment on a reciprocal basis.  As to question No. 13 ofAustralia, Thailand would review that exemption during the course of the new round of negotiations
under the WTO.  As to question 698 by Japan, i.e. why reciprocity is needed, reciprocity would
provide necessary guarantee for passengers and customers of freight transportation services, meaning
that passengers and goods transporters could enter the country.
111. The representative of Poland had received three questions from Japan.  As to question 655,
Poland had concluded 85 air transport bilateral agreements, 22 maritime transport bilateralS/C/M/45
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agreements, 6 for railway transport, 41 in road transport and 4 in waterways transport.  As to question
No. 656, in the given case the MFN exemption concerned the compulsory arbitration of investment
disputes between the Polish state and the foreig n investor of a country with which Poland had
concluded a bilateral agreement on the promotion and production of foreign investment.  Poland was
not liable to compulsory investment dispute arbitration with foreign investors from other countries.The idea of such agreements was that their scope be as general as possible.  Foreign investments did
happen in the transport services sector, for exampl e, establishing a transportation company with a
foreign capital participation, hence, there were no specific reasons for excluding from the purview of
foreign investment agreements.  As to question No. 657, in air transport, transportation quotas did not
occur in air transport express service.  However, the bilateral air services agreement contained
provisions on capacity share and flight frequency;  these two mentioned multiplied by each other
would result in a quota.  There were no transporta tion quotas applied in the inland waterways sector.
There were no transportation quotas applied in the maritime sector.  There were no effective
transportation quotas in the railways transport.  In road transport the transportation quotas, meant as a
total number of entry permits granted to foreign commercial vehicles, were applied in the
international bilateral and transit road transport.  No transportation quotas were applied in cabotage
transportation within Poland, where market access was reserved for Polish nationals or companies.There were two systems applied, multilateral and bilateral.  In both cases, limitations on market
access were necessary for the protection and adequate maintenance of road infrastructure.  The written
answers would be submitted in due course.
112. The representative of Tunisia had two questi ons from Japan. As to question 699 concerning
the list of the countries, they were France, Italy, Germany, UK, Belgium, Sweden, Switzerland, Spain,
Jordan, Hungary, Egypt, Libya, Portugal, Polan d, Finland, Austria, Mauritania, Turkey, Algeria,
Morocco, Greece, Lebanon, Iraq and Latvia.  As to question 700, Tunisia had introduced that MFN
exemption for land transport in order to protect the bilateral agreements already entered into, because
of the bilateral cooperation's goal to allow for the development of the sector.
113. The representative of Slovenia had received 6 questions from Japan.  As to question 558, the
countries with which Slovenia had concluded agreements were 32, the list was available in writing.
As to questions 559 to 561, i.e. to explain operating conditions, measures, criteria that reserves or
limits the provision of transport services, operating conditions in all concluded agreements, were more
or less the same.  The carriers might perform international carriage of passengers and goods by road
for hire, or on accounts to and from, or in transit to the territory of the other contracting party by using
vehicles registered in the home country.  Transpor t operators might perform international transport of
goods, with or without transport permits; that depended on each individual country.  Cabotage wasonly permitted with special authorization.  The agr eements did not affect the rights and obligations of
each contracting party resulting from the provisions of other international agreements in force for
other contracting parties.  If the regime of transport was based on permits, that is for transit, bilateral
transport and transport from and to third countries, they were usually not required in some specific
cases.  As to question 562,  i.e. explain the concrete terms the transit permits and preferential roadtaxes, transit permits were required for journeys across the territory of a country in which goods were
neither loaded or unloaded.  Road user charges meant payment of a special amount conferring  the
right for vehicles to use for a given period the infrastructures.  The amount was based on the distance
travelled and on the category of a vehicle, and they were set in the national Slovenian legislation, a
Public Road Act (Official Journal from 97) and the Decree on Annual Levies for the use of roadswhich were paid by users of motor and trailer vehicles, every year.  All those acts were harmonized
with EU Directive 1999262.  As to question 563, Slovenia meant that the integrity of road transport
infrastructure was a set of measures whose intentions were especially maintenance and construction of
roads.  They should be taken in order to avoid the deterioration of roads, sound inter-modal
competition  and protection of the environment.  The conditions that gave rise to the need for theexemption still prevailed, so the exemption would be maintained. Written replies would be submitted
to the Japanese delegation.S/C/M/45
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114. The representative of Costa Rica had received specific questions from Australia; Japan;
Hong Kong, China;  as well as general questions from Mexico. Those exemptions were based on
measures contained in Costa Rican domestic regu lation, Law No. 3503 of 10 May 1965, known as the
Regulatory Law covering the passenger transpor tation against payment in automotive vehicles, as
well as the regulation containing Executive D ecree No. 26 of 10 November 1975, known as the
International Passenger Regulation, which were in effect and established that the capital of the
enterprises which carry out international passenger transport services had to include a minimum of 60
per cent paid up by Central American nationals.  Fu rthermore, that provision indicated that in order to
grant permits for carrying out international pass enger services against payment, the principle of
reciprocity would be taken into consideration.  As regarded the cargo transport, the Executive Decree
No. 15624 MOPT, dated 22 August 1984, entitled Regulations covering Local Cargo Transport by
Automotive Vehicles was in effect and established that vehicles, trailers, containers and foreignchassis could only transport goods that had been imported or exported by Costa Rica from that area.
As to Australia's question inquiring why those exemptions had been included in that list and whether
they could not be covered by Article V of the GATS, although those preferences were granted to
suppliers from Central America, that was not based on inter-regional integration treaty but rather was
a result of a cooperation scheme amongst the countries of the region.  They related to measuresincluded in domestic regulation and was not based on any integration treaty, and would therefore not
be covered by Article V of the GATS.
115. Turning to the questions raised by Japan, question 593, he said that the Central American
region, of which Costa Rica was a member, included Guatemala, El Salvador, Honduras and
Nicaragua, which had been entered in column 3.  On question 594, requesting explanation in concreteterms on the framework of Central American integration, those preferences were not based on any
regional integration treaty, but rather they were based on a cooperation scheme amongst the countries
of the region.  That information had been made available to all Members of the WTO in document
WT/REG93/R/B /1, dated 27 March 2000, and entitled "General Treaty for Central American
Economic Integration, Report on the Operation of th e Agreement, Communication from the Parties".
On question 595, reciprocal treatment was granted in relation to those countries where national
suppliers might choose a permit enabling them to operate an international passenger services against
payment on a land base.  In other words, the permit was granted to national enterprises or those whose
capital included a minimum of 60 per cent capital paid up by Central American nationals.  That
permit could also be granted when reciprocal treatment was applied to Costa Rican nationals.
Hong Kong, China had requested information on the conditions which led to the need for the second
exemption described on page 130, the granting of permission to operate an international passengertransportation services against payment on land was based on the principle of reciprocity; domestic
legislation established that requirement as a way of guaranteeing similar conditions of access for
national suppliers and bearing in mind the cooperation system established with other countries of the
Central American region.  The conditions which had led to the entering of those exemptions still
prevailed.
116. The representative of Mexico referred to questions from Japan.  With regards to the first
question, when Mexico entered those exemptions the NAFTA did not exist, which did not mean that
also NAFTA did not cover the measure.  The reason for the exemption, as indicated in the appropriate
column, was to facilitate access of tourists from the United States of America to Mexico when such
tourism was carried out by road transport.  As to the second question, that provision was aimed atensuring that tourists coming from the United States of America to Mexico did not have to change
vehicles when they cross the border from one country to the other.  If that provision had not been
included then, according to Mexican legislation, the transportation of passengers would have to be
carried out with vehicles registered in Mexico.  As to the third question, Mexico believed that the
MFN was not necessary in order to facilitate the access of tourists from the United States, as it seemedto be termed in the question.  The exemption was ne cessary in order to grant that facility solely to
vehicles which had been registered in the United States of America.S/C/M/45
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117. The representative of the European Communities had received questions relating to the five
exemptions listed by Austria (page 127 to 129 of the compilation), the exemption listed by the EC
(page 132), the exemption registered by Finland (p age 133) and the exemption registered by Sweden
(page 138).  His reply would address all the questions together since the text of the exemptions by the
EC, Finland and Sweden were essentially the same; although the text for the five Austrian exemptionswas different, the concern was exactly the same and the content was access on a reciprocal basis to
undertake transport by road, goods and passengers.  Those MFN exemptions had been listed because
of existing and future agreements on internationa l road transport, including passenger transport
agreements which had been concluded between the EC and their member states and third countries.
The effect of those agreements was to reserve or limit the provision of transport service between the
contracting parties, or across the territory of the contracting parties, to vehicles which were registered
in each of the contracting parties, and to provide for tax exemption for such vehicles.  Thoseagreements were all based on reciprocity.  Regarding the scope of the agreements, they had been
concluded by Member States to cover most countries where it was feasible to provide land transport
from Europe, including most of the Euro-Asia land mass and some African countries.  The list in
column 3 indicated the extension.  The number of agreements concluded by each Member State
varied depending on the specific needs of the transport industry.  As the exemptions had been madeon grounds of regional characteristics of road transport services, which had not changed, the need for
the exemptions was still valid.
118. He turned to specific questions that had been raised by Japan concerning the Austrian
exemptions.  On the question regarding the meaning of the notion of "preservation of integrity of
infrastructure", he referred to the comments made by Hungary and Switzerland, which were self-
explanatory.  Regarding the question on the Austrian VAT exemption scheme, according to the
Austrian VAT code the passenger transport by vehicles registered in foreign countries was, in
principle, liable to VAT.  For the assessments of the VAT, border controls could not be avoided.  The
exemption concerned was the simplification measure, both for the foreign company and for the tax
administration.  On the request for explanation of the term "vehicle tax", that term meant tax payableon motor vehicles not registered under an Austrian registration procedure using public roads in
Austria.  The term "certain conditions" meant that certain requirements had to be fulfilled, i.e. in
respect of the period of use, which could be one year or 90 days, or with respect to the vehicle, only
for private use or use for international transport of passengers or goods.  Regarding the difference
between "Convention" and "Declaration", "Convention"  meant that Austria had concluded a bilateral
agreement with the state concerned, and "Declaration" meant that Austria and the state concerned had
reached a mutual agreement on the tax exemption by an exchange of letters.  Regarding the meaningof de facto  reciprocity, it referred to reciprocity of vehicle tax exemption with countries which did not
tax foreign vehicles according to their internal law.  Regarding the questions on the MFN exemption
listed on page 133 concerning Spain, it corresponded to a Spanish law 16/87.  That law provided that
authorization for the establishment of a commercia l presence in Spain may be refused to service
suppliers whose country of origin did not accord effective market access to Spanish service suppliers.The exemption was justified on the need to ensure effective market access and equivalent treatment
for Spanish service suppliers.  Therefore,  that MFN exemption would be maintained.
119. The representative of Estonia referred to four questions from Japan.  Regarding the list of
agreements, by that date Estonia had concluded agreements with more than 30 countries, mostly in
Europe.  The list would be provided in written form.  Regarding the issue of tax exemption forvehicles covered in those agreements, as a usual provision Estonia had taken an obligation to not
collect from the natural and legal persons covered by the agreements any taxes based on the
possession of the vehicles by those persons.  Regardin g the question on regional characteristics, those
agreements mostly reflected the historical cooperation patterns in Europe and they were solely based
on economic interests.  However, in the sector the general purpose of those agreements was toregulate in a mutual acceptable way the questions related to reciprocal exchange of transportation
permits between the parties to those agreements, and also to reduce the inconvenience stemming fromS/C/M/45
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differences between national taxation laws, so as to facilitate transportation services between the
signatories.  Regarding the criteria through which Estonia reserved or limited the provision of
transport services as referred to in column 2, as many countries Estonia used relevant transport
permissions which were generally granted on a reciprocal basis and the concrete conditions for that
were provided in each agreement.
120. The representative of Brazil referred to question No. 576 from Japan concerning land
transport services.  It was pointed out in the Secretariat's background notes on land transport services,
documents S/C/W/60 and W/61, that international traffic was generally regulated by bilateral
agreements which established tariffs and quantitative restrictions and divided traffic between the two
states concerned.  It was also said in those documents that "international land transport has begun to
be liberalized mostly at the regional level".  That was exactly the objective of Brazil's MFN
exemption to the extent that it allowed the adoption of measures to facilitate the rendering of landtransport services, as well as the liberalization of those services in the region under the institutional
framework of the agreement on international land transport.  The agreement had resulted in significant
improvements on the conditions for regional trade and land transport services, for example in the
following areas:  cooperation on the development of infrastructure;  elimination of transport quotas;
automatic recognition of authorizations;  adoption of harmonized freight and passenger insurancepolicies;  adoption of harmonized documentation fo r customs clearance; adoption of common regional
standards for examinations or professional qualific ations.  Brazil considered that the MFN exemption
played an important role in the promotion and liberalization of trade in the sector among the
signatories of the agreement.  The conditions that had created the need for the exemption still
prevailed.
121. The representative of Romania had received two questions on road transport services from
Japan.  Regarding question No. 658, the bilateral road transport agreements listed by Romania
referred to the freight and passenger transport across the country border and excluded cabotage.  As to
question 659, the term "regional specificity" should be interpreted from the geographical point of
view.  The most relevant element for that specificity consisted in physical feasibility to provide roadtransport services.  The necessity of the MFN exemption had been imposed by the fact that the
bilateral road transport agreements contained clause s regarding the issues of the cross-border relevant
permits on a reciprocal basis.  Such bilateral agreements had been concluded with most of the
countries to which land transport to and from Romania were physically and economically feasible.
122. The  Chairperson invited supplementary questions.
123. The representative of Japan observed that as the conditions creating the need for the MFN
exemptions many Members had indicated in column 5 "to protect the integrity of road infrastructure
and the environment".  She did not have any intention to deny those policy objectives, however, it was
difficult to understand how they could be realized by the means of the MFN exemptions.  They could
be an issue related to market access and be achieved through safety standard or environmental
standard.  She would appreciate further clarification on that question from any of the Members that
use those reasons.
124. The Chairperson observed that the Council had concluded the examination of the MFN
exemption listed in the Secretariat's compilation.  The Council had had a very useful discussion and
he complimented both delegations answering the questions as well as those posing them. As agreed,
the Secretariat would forward all the questions addressed to delegations not present in the room.
SECTORS COVERED AND GENERAL ISSUES RAISED DURING SESSION OF 29 MAY 2000
125. The Chairperson recalled that at the first session of 29 May it had been agreed that at the July
session Members could revert to either questions or answers relating to sectors which had alreadyS/C/M/45
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been covered.  Moreover, at that meeting issues of a more general nature had been raised by some
delegations, concerning the legal status of the MFN exemption lists and the procedures which would
need to be followed should Members wish to elim inate or reduce the scope of their exemptions.  No
agreement had been reached on whether such issues could be addressed in the review sessions or
whether they would need to be raised in the regula r sessions of the Council for Trade in Services.  He
drew the Council's attention to a communication from Poland, circulated as document S/C/W/155,
providing responses to questions addressed in the course of the review session in May, and a
communication from Japan, circulated as document S/C/W/156, containing additional questions with
regard to the responses provided by Members at the first review session.
126. The representative of Panama referred to the exemptions listed for All Sectors.  He indicated
that  amongst the main questions that had been put to Panama, there was one concerning the
preferential treatment granted to the United States under the Canal Agreement.  Those agreements hadexpired at the end of 1999, and what exactly would occur in that regard was a matter still under
consideration.  Thus, his delegation was not in a po sition to give a precise answer to those who had
raised questions on this point.  As to the other exemptions that Panama had listed, the majority of
them referred to preferences originating from regional agreements.  He did not have an answer to the
questions posed on those exemptions yet, as the replies required a certain amount of coordination withthe other member countries involved in those agreements.
127. The representative of Indonesia referred to exemptions concerning the movement of
personnel and construction services.  Regarding the exemption on movement of personnel, the policy
was based on the decree of the Ministry of Labour No. 291/MEN of 1991, which had the objective of
promoting the development of the Eastern part of Indonesia through, among others, attractinginvestors from neighbouring countries.  On that exemption questions had been posed by Japan
(S/C/W/140, No. 60), Australia (S /C/W/146, No. 6), and Korea (S/C/W/138, No. 13).  He said that
low level occupations, according to Indonesia's Department of Labour, referred to operational
positions of work which required certain types and appropriate levels of expertise, for example,
treasurers and mechanical supervisors and technicians.  Unlike middle or top level occupations, forexample directors and managers, low level jobs did not involve a company's management or policy
decisions.  That responded to the question pertaining to the difference between low level occupation
and other level of occupations.  Regarding Japan's question No. 61 and Korea's question No. 13,
limited access meant access given to citizens of foreign countries indicated in the list of MFN
exemptions.  There were no bilateral agreements concluded between Indonesia and the countries
referred to in that list concerning the special treatment of their labour.  However, there was a
development cooperation agreement covering a broader area, i.e. the so-called BIMP-EAGA (EastASEAN Growth Area), a growth-triangle development concept concluded by Brunei Darussalam,
Indonesia, Malaysia, and the Philippines.  The BIMP-EAGA aimed at supporting and promoting
development programmes in the respective Members' bordering areas.  Another cooperation
agreement formed for the same purpose, but covering a different corner of the region,  was the IMT-
GT or Indonesia, Malaysia, and Thailand Growth Triangle.  Regarding question No. 62 by Japan, thegovernment considered that that measure had in the past five years contributed positively to the
development of the Eastern part of Indonesia, especially the provinces of East Nusa Tenggara, West
Nusa Tenggara and West Papua.
128. Regarding construction services, he answered the questions posed by Australia (S/C/W/146
question No. 2); EC (S/C/W/141, No. 7); Kor ea (S/C/W/138, question No. 37); and by Japan
(S/C/W/140, No. 243 to 245).  Firstly, the specific  measure was motivated by the ASEAN spirit of
cooperation to accelerate the economic growth of the region.  It was expected that a preferential short
listing scheme for ASEAN contractors would enha nce the capacity of ASEAN members' civil works
and construction industries and, therefore, contribute to the region's economic development.  He
underlined that at the time of the inception of the measure there had been no specific ASEANagreement which referred to that measure and, therefore, no justification had been needed with respectS/C/M/45
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to GATS Article V.  Furthermore, that measure had never been extended to new Members of ASEAN.
Secondly, government funded project meant projects which were funded entirely by the government
through the State budget (the APBN), which was denominated entirely in Indonesian Rupiah or was
partly or entirely financed by a loan from foreign entities.  The government-funded projects were not
necessarily government procurement as defined by Article XIII:1 of the GATS.  The preference given
to ASEAN member countries participants to such projects, if any, was limited to their inclusion in the
short listing of competitive building of the ICB, which normally consisted of five qualified bidders.
The expectation had been that at least a company of ASEAN origin could be one of the five bidders in
the ICB.  In responding to the question by Japan, he said that no data on an annual basis for such
particular projects was available since the projects varied in many aspects depending on the
programme priorities set out in the five-year development plan.
129. The representative of Egypt said that his delegation had received an additional questions from
Japan on some of the responses provided by Egypt at the first session.  Regarding question No. 23
from Japan, i.e. how does Egypt evaluate the market  liberalization of those countries to which this
measure has been applied over the past five years, he said that his delegation had addressed that
question already, as reflected in the minutes of the first meeting.  Egypt believed that the issue of
evaluation of the market liberalization of other countries went beyond the scope of the process ofMFN exemptions review, as it was stat ed in paragraph 4 of the Annex .
130. The representative of Kuwait apologised for not having being able to participate in the first
meeting for reviewing the MFN exemptions.  He thanked those delegations that had submitted
enquiries about the attitude of the State of Kuwa it regarding the MFN principle and the framework of
the agreements that Kuwait concluded with ot her countries in the economic, investment, and
commercial fields.  He confirmed that the MFN principle had been a cornerstone in preparing and
establishing the WTO, as it was an important part of trade agreements in services.  In that framework
exemptions had been granted to Member countries depending upon their economic conditions,
development levels, continuos trials to restructure their economies and seek help from any possible
means.  The State of Kuwait viewed the positive effect deriving from the exemptions of the MFN
principle towards supporting the efforts of development and economic restructuring in the country.
He stated that the conditions creating the need for those exemptions still prevailed and, therefore, the
exemptions should be maintained.  Regarding the enquiries on the agreements concluded by Kuwait
with other countries that included the granting of preferential treatment, he said that there were
bilateral agreements in the field of promotion a nd protection of investment which included articles
dealing with MFN.  Those agreements included ma tters related to investments and related activities,
financial facilities, practising professional activities by citizens who were permitted to work in bothcountries.  In addition to the special terms of confirming the claims and the execution rights regarding
investments, they permitted the proprietor the right to  appear in front of different courts together with
other facilitating and encouraging provisions for investors and investments in general.  Those
agreements had a great role in the efforts that Kuwait was making to restructure its economy.  They
also included a provision regarding the granting of franchises from any of the two countries to a third
country through regional free-trade area, customs unions or common markets, and other different
economic arrangements such as international or regional agreements.
131. The representative of Israel stated that, as requested by Japan in its document S/C/W/156, her
delegation had submitted to the Japanese delegation, and to the Secretariat for circulation, the written
answers to the questions posed by Japan on audiovisual services.
132. The representative of Peru complemented the in formation provided at the previous meeting in
order to cover some pending aspects on the horizontal exemption listed by Peru (page 18 of Job No.
1551) on the presence of physical persons that were services suppliers.  At the previous meeting the
delegations of Australia, Chile and Japan had requested a list of agreements providing for reciprocity
on labour matters, agreements on dual nationality, and bilateral and multilateral agreements on foreignS/C/M/45
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workers.  As to reciprocal labour agreements,  in 1981 Peru had ratified the agreement with Argentina
setting out equal treatment principles for those affiliated to systems of social security in both
countries, endorsing the conservation of acquired rights and those deriving from the application of
local regimes in the case of movement of persons coming from the territory of one country to another.
Regarding agreements on dual nationality, Peru had an agreement with Spain on dual nationalitywhich had been signed on 16 May 1954 for reasons of cultural identity, customs and tradition.
Regarding international agreements on foreign workers, Peru had six bilateral agreements for labour
reciprocity with Argentina, Canada, Colombia, United States, United Kingdom and Venezuela.
Generally speaking, those agreements established that family members and dependents of diplomatic
staff, consular, and administrative and technical staff in diplomatic and consular missions that were
accredited might have remunerated work in the host country.
133. The representative of  Costa Rica said that in document S/C/W/156 of 4 July, the delegation
of Japan had indicated that Costa Rica had not given sufficient replies to some of Japan's questions.
That comment came as a surprise to his delegation because Costa Rica felt that a detailed reply to all
of the questions had been provided.  However, he would try to expand on the replies along the lines
requested.  Since his delegation had only received those concerns very recently and due to the late
arrival of the questions.  The request would be co mmunicated to capital and the reply would be given
as soon as possible.
134. The representative of Guatemala referred to the questions posed by Chile and Mexico at the
previous meeting.  Regarding Chile's question, th e Central American Integration Agreements would
be inconsistent with GATS Article II in that th e Central American clause for exception applied to
trade treaties with countries other than the contract ing countries.  That clause stated that no Central
American country should grant a better treatment to th ird parties than that granted to the parties to the
Central American Integration Treaty.  Regarding Mexico's questions on the conditions giving rise to
the exemption, the conditions that had given rise to each of the exemptions to Article II of the GATS
continued to prevail given that the international agreements giving rise to the exemptions continued in
force and had not been modified regarding most-fav oured-nation treatment.  Therefore, for the time
being, due to internal as well as international reasons, the exemptions would be maintained.  For
example, at present Central American countries were in the initial phase of creating a customs union
and as a prior step an evaluation of institutions as well as economic agents part of the productive
system had been made.  That entire process had been consolidated domestically through legislative
measures, i.e. through national decrees, and those could only be abrogated according to the laws in
force for such action.  The conditions that gave rise  to the need for the exemption continued to prevail
and therefore no change is expected.  Guatemala considered that the Council review did not intend tocondemn or negotiate such exemptions but just made them understood.  As to the question on the
need for the exemption, Mexico's questions went beyond the agreed objective of the review; however,
in the spirit of cooperation Guatemala had tried to give information to meet the concerns that had been
expressed by Mexico despite the fact that in some cases they were complex.  Guatemala had not
considered limiting the scope of its exemptions as they were not considered inconsistent with its
policy of trade openness.  Regarding the duration of the exemptions,  Guatemala, like other Members,
had indicated an indefinite duration and had not specified a date for their expiration.
135. The representative of Switzerland had received an additional question from Japan in
document S/C/W/156, point 6.  He recalled that in May he had indicated that the concept of traditional
recruiting areas was no longer exclusive nor exhaustive, and that the Swiss immigration policy wasclearly evolving towards broader criteria such as qualification, training or other specific reasons.  So it
was no longer true, as had been the case in the past, that the traditional recruiting areas like Canada,
New Zealand and Australia benefitted from special treatment.  Switzerland was at present looking
more closely at the qualifications and other specific factors relating to the person, rather than selecting
certain countries.S/C/M/45
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136. The representative of Singapore referred to the additional questions by Japan on the answers
provided by Singapore during the previous session in relation to investment guarantee agreements and
legal services.  He also intended to address the question concerning Singapore's MFN exemptions for
broadcasting, previously posed by Japan.  Regarding Japan's question on whether the level of
investment had been enhanced as a result of the investment guarantee agreements, the bilateralInvestment Guarantee Agreements (IGA) facilitated investments into Singapore and provided
investors with the legal certainty that the invest ment would not be unfairly expropriated and that,
should there be expropriations, a reasonable compensation would be provided to the investors.  The
IGAs had through providing greater certainty to in vestors, contributed to the increased investment
coming into Singapore.  With respect to Japan's additional questions on Singapore's MFN exemption
for legal services, the exact requirements and statutory procedures for registration of all foreign firms
and foreign lawyers practising foreign law in Singapore were contained in rules 10 and 11 of theLegal Profession International Services Rules 2000, which were applied to all WTO Members.  The
rule could be circulate to interested Members for reference.  As to the question previously posed by
Japan on Singapore's MFN exemption for broadcasting services, preferential rights granted would
include producing joint programmes, simultaneous and free transmissions of joint programmes during
primetime by partner countries' broadcasters.  As to the question on social, economic and culturalrelations that that exemption was designed to promote, partner countries would better understand each
others culture through joint-production since broadcasters, programme actors or participants travel on
a regular basis, at least once a year, to partner countries to produce those joint programmes.  The
home audiences in partner countries would also gain a better understanding of the culture, society and
economy in partner countries through joint programmes like variety shows and student debates.Economic ties were formed when broadcasters shared technical experience and discussed
collaborative projects, such as the production and distribution of joint programmes.
137. The representative of United States referred to questions posed in the May meeting by
Australia, the EC, and Chile, as well as to new questions from Japan contained in S/C/W/156.  With
respect to Australia's question 1 in S/C/W/146 (about entries on pages 27-33 in the Secretariatcompilation), as to the entries on page 27, contrary to Australia's question, those two entries did not
state "all countries".  They stated, respectively, "countries with whom the United States has a
friendship, commerce and navigation treaty, a bilateral investment treaty or certain countries as
described in Section 204 of the immigration act of 1990" and "countries that prohibit long-shore work
by crew members aboard U.S. vessels".  Regarding the first entry on page 33, with respect to the
arrangements allowing for tax cooperation and assistance with sub-federal entities, his delegation was
aware of two such arrangements, namely, those with Canada and Mexico.  The 1995 Protocol to theUS-Canada Tax Treaty provided that a contracting State might provide information received from the
other contracting State to its States, provinces or local authorities if it related to a tax imposed by that
State, province or local authority that was substantially similar to a national level tax covered by the
tax treaty.  Similar protocols to the U.S.-Mexic o Tax Treaty and the U.S.-Mexico Tax Information
Exchange Agreement (TIEA) had been entered into in 1995 to allow information exchange under theTIEA to apply to taxes imposed by a State, municipality or other political subdivision or local
authority of a contracting State, but not to taxes imposed by a possession of a contracting State.  The
1995 protocols with Canada and Mexico meant th at the information exchanged with those two
countries could be used to administer and enforce the sub-federal taxes.
138. With respect to the second entry on page 33, regarding land ownership in Wyoming, he
believed that answers had been provided at the May meeting, as well as to question No. 2 posed by
the EC in S/C/W/141.  As to the question posed by Chile in S/C/W/142, question No. 8, the response
would be in the negative, that MFN exemption reflected a long history of extending the provisions for
small business issuers to both U.S. and Canadian small businesses. The origin of the small business
registration and disclosure regulations under the Securities Act of 1933, dated back to 1953 and hadoccurred simultaneously with the amendment of a mu tual legal assistance treaty between the U.S. and
Canada to include fraud type of offences under Section 178 of the Securities Act of 1933.  WithS/C/M/45
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respect to question No. 1 posed by Japan, in S/C/W/156, the United States had provided a reaction to
those questions at the May meeting and those statements stood.
139. The representative of New Zealand  referred to the MFN exemption in relation to audiovisual
services on page 63 of the Secretariat compilation.  His delegation had provided a full response to the
questions that Japan and Mexico had asked in relation to that exemption; however,  Mexico and Japanhad enquired at the May meeting whether there was any additional information that could be
provided.  In the interests of demonstrating a constructive approach to the review process, he would
supplement the response provided at the previous meeting (contained in paragraph 100 of S/C/M/44).
The supplemental response was that the conditions creating the need for New Zealand's MFN
exemption under audiovisual services arose from a domestic policy decision in favour of the
negotiation of reciprocal film and television co-production agreements with like-minded countries.
The film co-production agreements permitted New Zealand to give preferential treatment in the formof access to finance, tax concessions, and simplified entry requirements for skilled personnel to films
and television programmes made under film co-production agreements or arrangements.  His
delegation had seriously considered whether it might be possible to reduce or refine that exemption,
but the conclusion was that the exemption would continue to be required in relation to the bilateral co-
production agreements that had been  negotiated.
140. The representative of Turkey had received additional questions from Japan, as indicated in
document S/C/W/156.  Due to lack of time he was unable to answer those additional questions at this
meeting.  He would provide the answers in written form as soon as possible.
141. The representative of Canada referred to an i ssue raised by Mexico at the May meeting, i.e.
information on the specific measure or agreement involved in Canada's programme for temporary
agricultural workers.  The measure was a series of bilateral memorandums of understanding with the
countries indicated in the list of exemptions; the Agreement with Mexico had been in place since
1974.  Regarding the additional questions from Japan in document S/C/W/156, paragraph 3 made a
reference to Japan believing that it had not received an adequate explanation at the May meeting.  In
Canada's view, some of the questions posed by Japan went beyond the scope of the review exercise.He acknowledged the considerable effort that had gone into the development of questions on the part
of Japan and other delegations in the process.  Regarding the investor-state provisions of Canada's
bilateral investment agreements, the reasons for th e Article II exemption had been indicated at the
previous meeting.  Those bilateral investment agreements were well established internationally and
many WTO Members had similar agreements.  There were approximately 16,000 such agreements in
places world-wide and their rational and objectives with regard to the protection and promotion of
foreign investment were well known. Canada was a party to 21 bilateral investment protectionagreements including investor-state arbitration procedures.  The exemption that Canada had registered
under GATS Annex II was applicable to investor-state s provisions in all current or future agreements
to which Canada was a party.  The exemption had been explicitly registered to avoid a
misinterpretation as to the scope of application of investor-state obligations within the bilateral and
regional investment agreements.  The considerations which had led Canada to taking that exemptionremained in place.  Regarding the temporary agricultural workers programme, Canada's need for
temporary agricultural workers at present, and for the foreseeable future, was fully met by the existing
countries with whom Canada had signed MOU agreements.  The existing agreements had been in
effect for a number of years, with Jamaica since 1966, with Trinidad and Tobago since 1967, with
Mexico since 1974 and with several OECS states since 1976.  There was no intention to consideradditional agreements with other countries.
142. The representative of Venezuela referred to the questions put to her delegation during the first
round of the review by Hong Kong, China; Japan; and Korea on the conditions creating the need for
the exemptions (column 5).  In that column Venezuela should have pointed out that the reason for the
exemption was a reciprocity requirement contained in the domestic legislation in force.  Regarding theS/C/M/45
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question by Mexico on the conditions which led to the exemption, they were internal legislation and
the need arose from the principles of reciprocity .  As to the duration of the exemption, there were no
progressive dismantling provisions for that measure, since all legislation concerning professional
services had not as yet been reviewed.  She indicated that her delegation had received also questions
in the area of telecommunications from Hong Kong, China; Australia; and Mexico; questions onaudiovisual services from Hong Kong, China; Japan; and Mexico; and questions relating to
distribution services from Hong Kong, China; Korea; Japan and Mexico, for which consultations in
capital were yet to be concluded.  The replies would therefore be provided in writing for subsequent
distribution to all Members.
143. The representative of Poland referred to Japan's communication S/C/W/156 where Japan said
that no adequate explanation had been given in relation to questions posed to Poland (questions 89 to
92).  She observed that the document contai ning Poland's replies S/C/W/155 and Japan's
communication S/C/W/156 were distributed at almost the same time.  She referred Japan to that
Communication and hoped the answers given there would be satisfactory.
144. The representative of the European Communities referred to the communication from Japan.
He noted that his delegation had tried to give the most adequate explanation given the time
constraints.  He pointed out that Members would be starting a process of sectoral negotiations shortly,
which would afford an opportunity to discuss more in detail with Japan the points relating to those
MFN exemptions.  There was a specific question concerning the MFN exemptions registered by Italy,
i.e. the reciprocity requirement for the purchase of re al estate in Italy.  The rationale for that MFN
exemption was simply that there was a large community of Italian citizens who were living abroad.
The intention behind that exemption was to make su re that when living abroad, Italians would enjoy
the same rights to purchase real estate as when they lived in Italy.  As to why the other Member states
of the EC did not apply that measure, he was not in a position to respond to that question.
145. The  Chairperson invited supplementary questions or comments.
146. The representative of Japan expressed appreciation for the many additional answers given that
day, especially those by the African countries.  He also thanked those countries who had given their
replies in written form.  He recalled that some delegations had not answered some of the questions as
they considered certain of them to be out of the sc ope of the review.  He emphasized that that process
had an educational purpose and therefore, for exam ple, questions or requests for evaluation were very
important information for his delegation.  He reiterated the call for answers to those pending
questions.  In relation to the reciprocity issue, he believed that there were two kinds of reciprocity,
namely, one based on bilateral or plurilateral agreements and the other based on national legislation.
Many countries had said that due to reciprocity provisions there were no applications on some of themeasures, which was a helpful piece of information.  His delegation would like to have a discussion,
not necessarily in the review session but in the CTS regular meeting, on procedural aspects or legal
status of the MFN exemption list, on the relationship between the MFN exemptions and Articles V
and VII of the GATS, and their relationship with development policy, cultural policy or international
telecommunications measures.
147. The representative of Mexico recalled that for the May meeting his delegation had put,
amongst many others, a question as to whether Members would understand from the reading of
paragraph 5 and 6 of the Annex on exemptions to Article II of the GATS, that if no specific date or
duration had been mentioned with regard to the exemptions, those exemptions should not exceed a
period of 10 years.  His delegation had intended to get a confirmation of that understanding ratherthan prompting a discussion.  The great majority of exemptions which the Council had reviewed did
not contain or reflect any specific duration; usually it was only indicated "indefinite" or "unlimited"
but there were no specific dates given for the duration.  Only a few delegations had confirmed that
some of those exemptions would have the stated  duration, as was the case by Venezuela when itS/C/M/45
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referred to financial services and said that although Venezuela had used the term "indefinite duration",
its duration would be a maximum of 10 years.  His delegation, therefore, wished to place on the
record of the meeting the following:  First, the fact that his delegation was unsatisfied with the lack of
replies to the questions posed by Mexico.  (A lack that concerned all Members of the WTO).  Second,
Mexico believed that exemptions to Article II should not exceed a period of 10 years unless, in theexemption itself, a date had been clearly stated which went beyond that period of 10 years.  For his
delegation words like "indefinite" or "unlimited" did not meet the requirement of stating a specific
period of time or duration.  There might be Members who did not share those views, but Mexico
wished to express its views in good time so that, if the discussion were to be continued beyond the
review, Mexico's understanding of paragraphs 5 a nd 6 of the Annex would be known.  Furthermore,
that understanding also applied to Mexico.
148. The representative of Hong Kong, China than ked all delegations for the great effort in
preparing the questions and giving detailed responses.  He noted that some Members had indicated
that they would come back with some written replies at a later date, others for whom there were
questions who were not present at the meeting or in Geneva, and also that there were some
outstanding questions/answers still from the May session.  His delegation hoped that Members would
be able to put the replies in writing and that delegations would have an opportunity to discuss them ata future date.  He observed, as Japan did, that some Members had preferred not to answer certain
questions using various argumentation.  He recalled what the Chairman had said when introducing the
matter at the May meeting, namely, that the arrang ements for the conduct of the review on which the
Council had decided, stated that the review should  be primarily of an educative nature designed to
provide more information in accordance with the Annex.  It was disappointing that some Membershad felt that even the provision of more information was inappropriate, but nevertheless the review
had been useful.  He fully supported the comments made by Japan on the broader issues that they felt
needed to be discussed.  A very important issue to tackle was that of  the MFN exemptions which
purported  to grant less favourable treatment than  given in specific commitments.  Additionally, it
would be useful to discuss in a multilateral foru m questions related to MFN exemptions which might
be covered under Article V, or under Article V bis, and might involve matters which did not fall under
the GATS, such as bilateral investment treaties.  His delegation believed that some of those matters
might be solvable under improved and agreed scheduling guidelines for MFN exemptions, while
others might clearly go beyond simply scheduling guideline matters.
149. The representative of Egypt reacted to the comment by Japan concerning the evaluation of the
market liberalization of other countries.  He clarified that when he said that the question went beyond
the process of the review, he had in mind the purpose and scope of the review as stated in the annex,i.e. to examine whether the conditions for the exemptions continued to prevail.  Additionally, it was
difficult to give information about the liberalization in the market of other countries, taking into
consideration the difficulty of collecting information in the services domain.  He reiterated that his
delegation had hoped to answer the question from Japan, but it was difficult to get that information.
At the same time, his delegation still believed that the questions was not inside the scope of thereview.
150. The representative of India referred to supplementary questions from Japan on the India-
Bhutan bilateral agreement, question No. 378.  He reiterated that the question was not relevant to the
review.  However, since it had been given in writing his delegation would forward it to capital.
151. The representative of Korea thanked all delegations for the answers provided.  The two
sessions of MFN Review had been quite extensive and very informative on the nature of the
exemptions.  His delegation was particularly interest ed in the legal status of the MFN exemptions, in
the relationship of those exemptions with regi onal trade agreements and investment protection
agreements, and the exemptions for less favourable treatment.  That enumeration was not anS/C/M/45
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exhaustive list.  He suggested that those issues be discussed in the future, possibly in a regular
Council session.
152. The representative of Australia thanked those Members who had responded to questions
posed during the review.  The review had been a valuable transparency exercise.  Her delegation had
gained a better understanding of the reasons underlying Members' MFN exemptions, although insome cases her delegation would have liked to see discussions focused more on justifying their
necessity.  The discussion had raised some issues that Australia would like to see explored further.
For example, the relationship between certain MFN ex emptions and Article V, as well as the fact that
some Members of a specific regional trade arrangement had listed an exemption but other Members of
the same regional trade agreement had not.  That might indicate that there was no need to list the
exemption, and in that respect the issue of consistency should be explored.  Also, it would appear that
some exemptions had in fact allowed Members to gr ant less, rather than more, favourable treatment,
contrary to the existing guidelines.  Given that, some Members had signalled their intention to
eliminate some exemptions, Australia would support Chile's suggestion at the May session that the
Council in Trade in Services take up the issue on how to proceed with modifications to/or deletions
from the exemptions list.  Her delegation would support placing that and other matters relating to the
review on the CTS regular session agenda.
153. The representative of Venezuela clarified, in relation to Mexico's intervention, that the
exemption for which Venezuela had indicated a 10-y ear period was only the one concerning financial
services.  Regarding the others, Venezuela maintained the term of "indefinite" in the light of what was
provided for in the Agreement, which stated that th e duration of the exemption should be in principle
10 years, and not a maximum of 10 years.
154. The Chairperson observed that under item B of the agenda the Council needed to decide
whether it would be necessary to schedule further meetings for the review or to bring it to a
conclusion.  However, given that a handful of delegations had suggested a number of issues for
further discussion, and that some had recommended to take up such a discussion in the CTS regular
session, he proposed to add an additional item to the October regular session of the Council for thatpurpose.  He also proposed to address agenda ite m B in October.  Additionally, he suggested that
delegations communicate to the Secretariat in writing the issues they would like to raise in the
October’s agenda.
155.  The representative of Mexico supported that proposal.  His delegation felt it appropriate to
have an additional item on the agenda for the regular CTS in October in order to delve deeper into
some of the aspects his delegation, as well as those of Japan; Hong Kong, China and others, had
pinpointed.  That was a way of extracting certain elements that had been detected in the replies givento the questions, which were perhaps more systemic in nature and not necessarily part of the review of
the exemptions.  Additionally, he drew attention to  the possibility of creating confusion between two
exercises, which were quite different in nature.  The Council was conducting a review required under
the Annex on Article II, whereas any general discussions in the Council for Trade in Services did not
necessarily derive from the Annex.  He wondered whether the Council should discuss item B of theagenda for the review, which was the determination of the date of any further review as required
under the Annex, in a regular Council session.  His pr eference would be that the review of the MFN
exemptions be kept separate from a more systemic discussion to be held in the Council for Trade in
Services.  Following the same line of thought, he would be inclined to suggest that the Council
continue the review as such, since he was not sure that the exercise had examined whether theconditions giving rise to the need for those exemptions still prevailed.  Certainly, delegations had not
reached any agreement regarding any exemption as to whether the conditions still prevailed and thus,
perhaps, it might be useful to hold another similar type of session.  However, if the general feeling
was that it was not useful to have further meetings of the same nature, then Mexico could agree on
determining a date of any further review as requested in subparagraph (b) of paragraph 4 of theS/C/M/45
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Annex.  He suggested that such an exercise could be held once again 6 months prior to the conclusion
of the mandated negotiations for services, or 6 months prior to 31 December 2004,  whichever date
came first.
156. The representative of Mauritius thanked the Chairman for the proposal, which followed
logically from the initial programme of work for the review.  He sought clarification as to whether the
review had been completed according to the mandate of the Annex.  If that was not the case, then a
third session was obviously very pertinent.  If it had been completed, then a new discussion arising
from the work that had been conducted should be taken up, either as an evaluation of what had been
done or as suggestions and comments of what had been reviewed.  He wondered whether the Council
would continue unfinished work under the mandate of the Annex or whether it would be embarking
on a new exercise of evaluation.  In any case the two exercises should be kept separate.
157. The Chairperson replied that given that there had been a number of delegations that had
sought an additional discussion on a number of issues that had evolved during the two sessions, the
review would not be concluded that  day.  His proposal had been to add an additional item in the
October regular Council session with a view to discussing those other issues put on the table by a
number of delegations.  Secondly, in relation to Mexico's comments, he was not suggesting that the
discussion on those issues under an item on the agenda of the October regular session would includeitem B of that day’s agenda.  He would certainly see the two issues as distinct and would have
separate items for them on the October agenda.  His point had been that if the Council were going to
continue the review in October, then it would foll ow logically that item B be also postponed until
October.
158. The representative of Japan supported the Chairman’s suggestion to continue the discussion
in October.
159. The representative of Hong Kong, China welcomed the proposal. Taking into account the
comment made by the Ambassador of Mexico, perhaps two items on the October’s agenda were
necessary.  One item which might be called "Special Session" to deal with the outstanding answers
and with the date, and another item dealing with the issues which some Members thought werebeyond the scope of the review mandated by the Annex, which could be part of the regular agenda.
160. The representative of the United States was not able to go along with the Chairman’s
suggestion for two reasons: the first was that the ideas floated by Members at both sessions were
certainly interesting, and might well be worthy of consideration, but they were not part of the review.
So if the CTS were to continue the discussion on those issues, the U.S. would suggest to interested
delegations that such issues be put on the agenda for the regular Council meeting in October.  Second,
and following from the first comment, his delegati on would not support changing the agenda for that
day's meeting.  He would support continuing into item B the following day as  originally foreseen, in
order that the Council could conclude the review and determine whether there should be a date for a
subsequent review.
161. The representative of Mexico  clarified that in his view the regular agenda of the CTS meeting
in October might contain an item called something like "systemic issues" arising from the Annex on
Article II, and that could be proposed by the Chai rman or by interested Members.  That would be
totally separate from the review exercise from the legal point of view.  Then he would suggest that,
given that the Council could not finish the review that  day, a third session be held back-to-back to the
meeting of the Council for Trade in Services.  Such a session had to be back-to-back with the regular
session because the review was a separate exercise.  In that third session of the review the Councilwould continue with agenda item B, which was about determining the date for further review as
mandated by the Annex and not about determining whether there should be a date.S/C/M/45
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162. The representative of the European Communities supported the Chairman's proposal to
discuss the outstanding systemic issues at the October meeting and to have the question of the date of
the next review in the session in October.  As far as his delegation was concerned, an item in the
October meeting should be included just to deal with the systemic issues concerning MFN
exemptions.  He considered that the review, as a question and answer exercise, was technicallycompleted at that stage, so the EC would like to see only the systemic issues addressed in October.
163. The representatives of New Zealand, Australia
 and Chile  also supported the Chairman's
proposal.
164. The Chairperson observed that, except for the U. S. delegation, the sense of the room would be
to have the systemic issues as a separate item in the regular CTS meeting in October and revert to a
back-to-back MFN review session to consider issues pending and item B.  He appealed to the U.S. to
join that broad consensus that had emerged.
165. The representative of the United States said that he was not going to stand in the way of
consensus.  His assumption was that in October the Council would conclude the review, and he
requested a confirmation from the Chairman in that respect.  Additionally, his delegation had no
objection to discussing other issues related to MFN exemptions on the agenda of the regular session
of the Council; however, the term systemic issues seemed to be a little bit prejudicial.
166. The Chairperson replied that it was not for hi m to decide whether the MFN review would be
completed in October.  As long as delegations had questions or concerns to raise, the Chairperson had
to abide by that.  He stated that the proposal was that systemic issues be a separate item in the regular
CTS  October meeting. In October also there woul d be a back-to-back session of the MFN review to
consider outstanding questions and item B of the agenda.  He suggested that interested delegationssubmit in writing to the Secretariat the systemic issues to be included in the regular session.
167. The Council agreed to the Chairman’s proposal.
__________