RESTRICTEDWORLD TRADE
ORGANIZATIONS/C/M/44
21 June 2000
(00-2520)
Council for Trade in Services
COUNCIL REVIEW OF MFN EXEMPTIONS
REPORT OF THE MEETING HELD ON 29 MAY 2000
Note by the Secretariat
1. The Council for Trade in Services held a meeting on 29 May 2000.  The agenda for the
meeting is contained in document WTO/AIR/1310.  The Chairman proposed that the agenda be
adopted as circulated.
2. The Council so agreed.
3. The Chairman stated that this was the fi rst session of the Council's Review of MFN
Exemptions, mandated by paragraph 3 of the Annex on Article II Exemptions.  He recalled the
arrangement for the conduct of the review on which the Council had decided.  First, the review should
be primarily of an educative nature, designed to provide more information on Members' MFN
exemptions and, in particular, as paragraph 4 of the Annex stated, on whether the conditions that had
created the need for the exemption continued to prevail.  It had also been decided that the reviewwould be conducted along sectoral lines.  Accordingly, the Secretariat had produced a compilation of
all MFN exemptions by sector, which was contained in document Job No. 1551 and Addendum 1.
Those documents did not replace in any way the content of final Exemption Lists.  In addition, no
inference about the legal status of the exemptions could be drawn from their inclusion in the
compilation.  Second, it had been agreed that the Council would hold two sessions before the summer
break, and that all MFN exemptions would be divide d between these two sessions on the basis of the
order of the Secretariat sectoral compilation.  The first session, would address all exemptions up toand including distribution services, and therefore covered, as indicated in the Airgram, exemptions
listed for all sectors, business services, communication services, construction and related engineering
services and distribution services.  Third, it had been that Members wishing to submit written
questions would address them to the Members concerned three weeks prior to each session, i.e
indicatively by 8 May for the first session.  Those questions would also be submitted to theSecretariat, for circulation to the rest of the Membership.  The responding Members would be free to
answer either in writing or orally at the meeting.  The Secretariat had received 7 such sets of questions
by 8 May, from the following delegations:  H ong Kong, China (S/C/W/137); Korea (S/C/W138);
Mexico (S/C/W/139); Japan (S/C/W/140 and Add.1); the European Communities and their Member
States (S/C/W/141); Chile (S/C/W/141); and Australia (S/C/W/146).  In that respect, the possibility oforal questions being addressed at the meeting had also been agreed.  Additionally, the understanding
that discussions would be conducted in the formal  mode, with the possibil ity of switching to an
informal setting if Members so desired, had been reached.  Finally, it had been decided that for the
formal discussions reports would be prepared by the Secretariat in the form of the usual minutes.
4. The Chairman drew delegations' attention to a communication from the delegation of Japan
on the "State of Play of MFN Exemptions", circulated as document S/C/W/136.  The document  was a
compilation of information on MFN exemptions extracted from the Background Notes the Secretariat
had prepared for the Information Exchange Programme.  As the delegation of Japan had requestedS/C/M/44
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that the document, which is based on publicly available information, be circulated as unrestricted, a
corrigendum to that effect had been issued, and circulated as document S/C/W/136/Corr.1.
5. Given the considerable number of questions that had been tabled and the interest for an
orderly and efficient discussion, the Chairman suggested to take each sector in turn, opening the floor
for delegations who had received questions on the exemptions listed in that particular sector to
respond.  He also suggested that responding Members structure their interventions as much as
possible on the basis of the questions that had been addressed to them.  Once all responding Members
had taken the floor, he would invite delegations wishing to ask additional questions or clarifications to
take the floor.  In case of questions addressed to delegations who were not represented in Geneva, or
who could just not be present at the meeting, he suggested that the Secretariat be asked to forward
such questions to the delegations concerned.  The Council so agreed.
6. Before initiating the discussion on exemptions  for "All sectors, The Chairman invited
delegations to take the floor on issues of a more general nature.
7. The representative of Costa Rica stressed his delegation's interest in the review of MFN
exemptions.  He was convinced that the review would be conducted in full compliance with what was
provided for in the annex on MFN exemptions, particularly paragraph 4, which stated that the Council
should review whether the conditions that gave rise to the need for the exemptions still prevailed and
should determine, where necessary, the date for a new review.  Costa Rica considered that the results
of that exercise should take the shape of a report which would sum up those deliberations and the
outcome and, whenever possible, it should indicate the conclusions reached.  Costa Rica was
confident in the multilateral trading system and, therefore, in the MFN principle which was the
cornerstone of the WTO.  This principle ensured that all WTO Members, particularly developingcountries, benefited from market access commitments made by all Members.  Therefore, Costa Rica
believed that exemptions to this principle should be properly justified because they did limit the
access of service suppliers from other Members, subjecting them to conditions counter to what had
been agreed to in the framework of the WTO.  Costa Rica, as other Members of the Organization, had
in place some MFN exemptions, however, in the full conviction that those were measures necessaryfor its development and fully justified by its legal system and the provisions of the Annex on MFN
exemptions.  His delegation approached the review with an open mind, willing to cooperate and
hoping to reply to any concerns that other Memb ers may have.  Likewise, he hoped others would
provide information based on questions made by other delegations.
8. The representative of Chile also reiterated that the MFN principle was one of the cornerstones
of the system and a key part of all WTO agreements.  The unconditional acceptance of this principle
was perceived as the best protection against undue use of economic and political pressure betweencountries and accepted as the most efficient and speedy way to extend to all Members the results of
granted concessions.  Although the GATS made it pos sible to establish temporary exemptions to this
principle, the exceptional nature of the Annex to Article II of the Agreement required the
establishment of the obligation for the Council to revi ew any such exemptions that were granted for a
period of more than five years.  The objective stated was to review whether the conditions whichcreated the need for the exemptions still prevailed and determine, where necessary, the date for any
further review.  Chile considered the review as a fact finding process as to whether the conditions that
gave rise to the need for the initial exemption still prevailed and that it would involve an interactive
process where interested Members may consult with a given Member.  In no case should the exercise
be a negotiating process to eliminate or reduce th e effects of an exemption; such eliminations or
reductions should take place within the framework of a negotiating process under Article XIX or
within the framework of autonomous liberalizati on in each Member.  The review was also an
educational process in that it would make it possible to understand the rationale and the policy
objectives which may lie behind the establishment and the maintenance of any such exemptions.  The
questions Chile had posed in the first phase were precisely oriented towards those aims.  Additionally,S/C/M/44
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his delegation proposed to Members that the Council discuss other issues which may arise in the
process.  It would be very important, for instance, to  be able to discuss the legal nature of the list of
exemptions which were provided for in Article II.  Was the MFN List part of the schedule of
commitments of each Member?  Apparently this was not the case, because the exemptions may refer
to areas which were not necessarily even in the commitments.  So then, would it be an integral part ofthe General Agreement on Trade in Services?  This idea seemed more feasible given that the list has
its origin in a specific provision and an annex of the Agreement, indicating the conditions necessary
for a Member to be exempted from the obligations contained in Article II:1.  This idea could be seen
reaffirmed in paragraph 2 of the Annex, where it states that any new exemption applied for after the
date of entry into force of the WTO Agreement shall be dealt with under paragraph 3 of Article IX of
that Agreement.  Finally, could the list of exemptions to Article II be considered as a sui generis
instrument which has an independent existence, although regulated by the GATS in its respectiveannex, allowing Members to fully or partially dismantle such measures at any time.  This issue was
interesting because it would determine the possibility, and the procedure that Members must follow,
to reduce the scope of application of those reservations or to correct errors in the case of reservations
which should not have been made.  If the list of MFN exemptions were part of specific commitment,
could the procedures of Article XXI:5 be applicable to them as a reduction in an exemption's scopecould be considered an improvement of the schedule of specific commitments?  If the list was part of
the GATS, would that mean that such modifications would have to be adopted by consensus because
they would be a modification of the Agreement itself?  In addition to answering any specific questions
that had been put to Members, Chile hoped that there would be enough time to reflect on some of the
issues of a more general nature which could even be important in the negotiations.
9. The representative of Hong Kong, China supported the intervention by Chile and added a
question: how one would be able to amend the MFN exemptions, as opposed to straight removal.  In
his view it was conceivable that some Members may be interested in further circumscribing the
circumstances of the MFN exemption and therefore in the possibility of amendment, while of course
having in mind paragraph 6 of the Annex that stated that in principle all exemptions should not exceeda period of 10 years.  The representative of Japan shared the views expressed by Chile and
Hong Kong, China in saying that the process related to a very important principle of the WTO andhoped it to be constructive, serious and substantive.  He also felt it necessary to address the question
of legal status posed by Chile.
10. The representative of the United States welcomed the formal start of the review of MFN
exemptions pursuant to the GATS Annex, and the opportunity to respond to questions relevant to the
review that had been presented by Members.  The purpose and scope of the review was clearly statedin the Annex, namely "to examine whether the cond itions which created the need for the exemptions
still prevail".  In addition, in the review the Council had to set a date for any subsequent reviews.  His
delegation was concerned that some Members had taken a different and, in the view of the U.S.,
inappropriate approach to the review.  In the view of the U.S., in the review Members were not to
assess the effectiveness of MFN exemptions or their economic rationale; Members were not toprovide explanations of the conditions creating th e need for MFN exemptions and were not to assess
the necessity of MFN exemptions.  Moreover, some Members seemed to place the GATS, and its
disciplines, above all other international relationship s.  The U.S. regarded the GATS as an important
element of economic and trade policy.  It was not, however, suitable for all cases which created the
need for other types of measures that warranted exemptions of MFN obligations.  He expressedconcern as to Members having posed questions that implicitly, or explicitly, asserted that all MFN
exemptions must disappear and that all international exchanges must be conducted on the basis of
GATS disciplines.  There was a third relevant part  of the Annex that was worth mentioning at that
point:  the provision in paragraph 6 that MFN exemptions shall be "subject to negotiations in future
trade liberalizing rounds".  He stressed that for th e category of MFN exemptions that were relevant to
the GATS and its disciplines, the U.S. reserved the right to discuss those exemptions with tradingS/C/M/44
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partners in the current negotiations.  In conclusion, the U.S. was prepared to provide responses to
questions that in the view of the U.S. were relevant to the review.
11. The representative of Canada supported the statement by the U.S. that the purpose of the
review was to examine whether the conditions wh ich created the need for the exemptions still
prevailed and that Members would also need to determine the date of any future review.  Canada waspleased to participate in that process, and would respond to questions in line with the obligations of
the Annex and to the extent that additional information could be provided, her delegation would do
so.
ALL SECTORS
12. The Chairman said that the first set of exemptions to be reviewed that day were those listed
for all sectors.  That was quite a large group as there were 73 MFN-inconsistent measures which had
been grouped under that category.  He invited delegations who had been addressed questions torespond.
13. The representative of Costa Rica referred to the questions that had been put to his delegation
regarding the general exemptions.  Costa Rica main tained only one general exemption to the MFN
principle that applied to all sectors.  It refered to measures contained in bilateral agreements for
investment promotion and protection.  His country had been applying an investment attraction policyfor quite some time reflected in the negotation of bilateral agreements for reciprocal investment
promotion and protection.  Through those agreements  Costa Rica was seeking to promote investments
from some countries – those which are covered by those agreements.  His country considered it
important to maintain the exemption as those were policies intended to ensure preferential treatment
for investors from countries with which Costa Rica had bilateral and reciprocal investmentagreements.  In order to meet the interest expressed by several delegations, and also for transparency's
sake, Costa Rica had signed such agreements with 14 countries, not all of them in force.  The
countries were Switzerland, United Kingdom, France, Germany, Chile, Spain, Paraguay, Canada, the
Czech Republic, Venezuela, Argentina, Paraguay, Taiwan and the Netherlands.  This information was
available and given in detail on the Internet site www.comex.go.cr.  The basic terms of thoseagreements provided for a series of procedural and substantive guarantees in order to promote a
positive environment for investments.  They included rules and provisions related with the promotion,
protection and acceptance of investments, expropriat ions and indemnity, indemnity for loss, transfers
and dispute settlement.  In response to the concern expressed by one delegation regarding the need to
list such exemptions, Costa Rica considered that although the GATS was not an agreement on
investment per se , it did have a number of provisions relevant to investment, particularly the third
mode of supply or commercial presence which cove red foreign direct investment.  Given that the
GATS covered an important part of the substance contained in bilateral agreements for reciprocal
promotion and protection of investment, Costa Rica felt it necessary to have this exemption.
14. The representative of Chile thanked the delegations of Japan and Hong Kong, China for their
questions on investment promotion and protection.  His country maintained an exemption for an
indefinite period of time regarding dispute settleme nt procedures for investment matters.  As known
by many of the Members that had signed them, Promotion and Protection Agreements for investment
had a system for the settlement of disputes between investors and the host country of the investment.
Chile had taken the initiative of listing the agreements on dispute settlement in its exemptions due to
the fact that the MFN treatment obligation under the GATS covered services and service suppliers,
which in the case of mode 3 included foreign investment.  The services suppliers covered by theAgreements aforementioned would have a better treatment than those suppliers from WTO Members
that had not signed such agreements with Chile.  Under Chilean legislation not any foreign investor
could have recourse to international jurisdiction in case of an investment dispute with the Chilean
State, but rather only in the cases where an investment agreement had been signed.  In the latter caseS/C/M/44
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the parties could opt to use domestic jurisdiction or international jurisdiction.  His country had signed
47 bilateral investment agreements; negotiations were in process with 19 countries; and 2 free trade
agreements with provisions covering investment had been concluded.  Further information regarding
the countries with whom such agreements exis ted could be found at website – www.direcon.cl –
where in addition to the listing of the agreements one could see the agreements themselves.Regarding the question posed by Hong Kong, China as to the number of cases involving those
procedures, there was only one case in which Chile had been brought to dispute settlement by a
foreign investor, currently in process at the International Centre for Settlement of Investment
Disputes, ICSID.  For more information about the case, the website cited above could be consulted.
15. The representative of Norway said that his country considered the MFN principle to be a main
pillar of the trade system and it would strongly supported in the coming negotiations.  At the same
time, every country's policy rested on national goals and priorities.  Sometimes those goals andpriorities fell outside the scope of GATS, and warranted exemptions from it.  Regarding the questions
posed by Japan on Norway's horizontal exemptio ns regarding measures for promoting Nordic
cooperation, in 1993, when the MFN list was prepared, the institutions covering the Nordic measures
were the Nordic Investment Bank, The Nordic Industrial Fund, The Nordic Fund for Project Export
and The Nordic Environment Finance Cooperation.  No  further measures that were relevant had been
introduced.  The purpose of the measures was to promote regional identity and networks in an area
with exceptionally long historical traditions and close cultural, language, social, and political links.
There was a strong will to preserve the Nordic identity, and to promote economic cooperation to that
end.  The conditions, therefore, that had formed the basis for the exemptions still prevailed.  Japan
also wanted to know whether any achievements had been made for promoting Nordic cooperationthrough the measures exempted in the list.  In this regard, the Nordic Financial Institutions each year
issue substantive annual reports, but an example regarding the environment field could provide an
answer.  The Nordic Environment Finance Cooperation by the end of 1999 had 17active projects in
the pipeline for the Nordic Environmental Development Fund of which 8 were in progress and 9
projects were under negotiations.  Two projects had been completed.  Further, NEFCO had 55 activeprojects in the pipeline for the Investment Fund, of which 16 were in progress and 39 under
negotiation.  Eight projects had been completed since 1995, of which 2 in 1999.  He indicated that in
the coming negotiations Norway would work constr uctively with all delegations, with a view of
strengthening the MFN principle.
16. The representative of Iceland had received from Japan the same question that had just been
answered by Norway, regarding measures for prom oting Nordic cooperation.  In 1993, when the MFN
list was prepared, the institutions covering the Nordic measures were the Nordic Investment Bank,The Nordic Industrial Fund, The Nordic Fund for Project Export and The Nordic Environment
Finance Cooperation.  No further measures that were relevant had been introduced.  The purpose of
the measures was to promote regional identity and networks in an area with exceptionally long
historical traditions and close cultural, language, social, and political links.  There was a strong will to
preserve the Nordic identity, and to promote economic cooperation to that end.  The conditions,therefore, that had formed the basis for the exemp tions still prevailed.  Japan also wanted to know
whether any achievements had been made for promoting Nordic cooperation through the measures
exempted in the list.  In this regard, the Nordic Financial Institutions each year issue substantive
annual reports, but an example regarding the environment field could provide an answer.  The Nordic
Environment Finance Cooperation by the end of 1999 had 17active projects in the pipeline for theNordic Environmental Development Fund of which 8 were in progress and 9 projects were under
negotiations.  Two projects had been completed.  Further, NEFCO had 55 active projects in the
pipeline for the Investment Fund, of which 16 were in progress and 39 under negotiation.  Eight
projects had been completed since 1995, of which 2 in 1999.
17. The representative of Estonia thanked Chile and Japan for the questions posed.  Estonia had
inscribed in the MFN Exemption list that the nationals of countries other than Estonia were givenS/C/M/44
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preferential treatment when granting permits for entry, stay, and work in Estonia to natural persons
providing services (other than essential persons as defined in I Horizontal Commitments in the
Schedule of Specific Commitments of Estonia on Trade in Services) on the basis of reciprocity
established by agreements between Estonia and these countries.  In this regard Chile, in its question
No. 2, inquired why Estonia thought those meas ures would not be covered by GATS Article V.
According to Estonia's understanding, Article V bi s required that a Member who was a party to an
agreement establishing full integration of the labour markets between or among the parties to such an
agreement, exempted citizens of parties to the agreement from requirements concerning residency and
work permits.  However, Estonia wished to reserve the right to apply the system of work and
residency permits under relevant agreements.  Therefore, his delegation believed that the issue could
not be fully covered by Article V bis, and had to be inscribed in the MFN Exemption List.  As for
additional information, he indicated that the rational e of that MFN exemption also lied in the need to
consider both the political and demographic implications of the issue, as well as the economic realities
of a small labour market.  In response to the question of Japan, i.e. with which countries does Estonia
think labour market integration may be mutually beneficial? Please also explain why in each case, he
indicated that the range of countries with whom such agreements could be desirable constituted the
countries who had an association agreement with the EU.  Estonia had been discussing the possibilityof such an agreement only with Latvia but, for the time being, those discussions between Estonia and
Latvia had been postponed.
18. The representative of New Zealand indicated that his delegation's approach to the review
exercise was guided by the language of paragraph 4 of the Annex on Article II exemptions, namely,
an examination as to whether the conditions which had created the need for New Zealand'sexemptions still prevailed and, also the ancillary question as to the date of any further review.  In
looking at the MFN exemptions, his delegation had also had a particular focus on the possible
reduction or refinement of MFN exemptions.  He then turned to the 2 questions that had been asked
by Japan.  As Members could see from the Secretariat compilation, Job No. 1551, New Zealand had 2
MFN exemptions for all sectors, those were in re lation to Kiribati and Tuvalu encompassing  more
favourable entry conditions possible for up to a certain amount of nationals from each country, each
year for employment purposes.  At the time of th eir inscription at the Uruguay Round the conditions
creating the need for the exemptions had been listed as New Zealand's development assistance
policies aimed at providing income, job skills, on-the-job training and work experience.  In relation to
those exemptions, Japan had asked questions contained on page 6 of Japan's questionnaire
S/C/W/140.  The first two questions were in relation to the Kiribati, first –Was this measure based on
the bilateral agreement between New Zealand and Kiribati? the simple answer to it is yes, they werebased on a bilateral agreement between these two countries.  In relation to Japan's question as to how
many nationals had been granted favourable entry into New Zealand over the past five years, the most
recent figures encompassed the past three years: for 1997-98 there had been 11 nationals from
Kiribati, in 1998-99 there had been one, and in 1999-2000 there had been 20.  In relation to Tuvalu,
the MFN exemption was grounded in a bilateral agreement between New Zealand and Tuvalu; in1997-98 period 10 Tuvalu nationals had been granted favourable entry, in 1998-99 there had been 9,
and in 1999-2000 there had been 6.
19. The representative of Switzerland supported the position outlined by the United States and
Canada at the outset with regard to the objectives and goals of the review exercise.  As regards the
two questions from Japan, first of all question 130 concerning specific examples of traditionalrecruiting areas in column two of the exemptions, he  said that for several years the Swiss immigration
policy had been based on a pattern which had emphasized the origin of the immigrants.  However,
nowadays this concept of traditional recruiting areas for immigrants (from Canada, New Zealand and
Australia) was no longer exclusive nor exhausti ve.  The Swiss immigration policy was clearly
evolving towards a broader criteria, such as qualification and training, or other specific reasons, ratherthan simply origin.  The origin of immigrants was th erefore not an exclusive criterion.  As regards the
second question from Japan (no. 286), on the fact that the measure concerning permanent residencyS/C/M/44
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was not covered under the GATS provisions on th e movement of natural persons and whether
Switzerland had a particular reason to have this in the list, in his delegation's view what had been
excluded from GATS concerned residency policies in general, whereas GATS Article XVI may also
cover residency as a condition for market access and in this regard, residents could also become the
subject for preferential treatment.  Finally, concerning the question from Korea, i.e. how were thoseMFN exemptions applied to new Members of the EU – Austria, Finland and Sweden, as those
exemptions involved the Member countries of the EU as well as EFTA, there had been no changes in
particular areas.
20. The representative of Liechtenstein indicated th at Hong Kong, China had asked to explain the
economic specifications for the provision of the preferential treatment accorded to nationals of
countries other than Liechtenstein belonging to traditional recruiting areas according to Liechtenstein
legislation on immigration when granting permits for entry to stay and work in Liechtenstein.  In1993, when those MFN exemptions had been scheduled it had not been clear whether Liechtenstein
would become a Member of the EU economic area or not; thus the exemption had been scheduled
according to its immigration policy  managed at that time.  On the 1 May 1995, Liechtenstein had
become a Member of the EU economic area (EEA) which also covered free movement of persons.
The EEA had been notified in 1996 to the Council for Trade in Services, pursuant to Article V of theGATS, therefore Liechtenstein thought that that MFN exemption was no more necessary.  The
Administration was looking at present into that  question and depending on the outcome of that
analysis, it could be that Liechtenstein would notify the deletion of that MFN exemption.
21. The representative of the United States said that his delegation had responses for questions
posed by the European Communities; Hong Kong, China; Japan and Korea.  Questions from other
Members had been only received the previous week and responses would be prepared for the session
in July.  First, he would provide answers to  the two questions on the 2 temporary entry MFN
exemptions, to respond to Japan and the EC; second, he would proceed to respond to other questions
posed by Japan, although not all of those questions because his delegation had not considered all of
them as relevant- questions that were not going to be addressed were 137, 149, 154, 156, 158, 161,162, 167, 169, 170, 171, 172, and 173; and finally, the two questions from Korea and the question
from Hong Kong, China would be addressed.
22. With respect to the MFN exemptions for tr eaty-trader and treaty-investor non-immigrant
admissions, the U.S. maintained an exception that granted temporary admission for persons holding
"treaty-trader" and "treaty-investor" status under U.S. national laws.  That status was related to certain
bilateral treaties that continued in effect between the U.S. and the foreign government signatories.
Nationals of over 100 signatory countries must engage in activities related to substantial amounts oftrade or investment of substantial capital.  U.S. nationals may be granted similar terms for temporary
admission in each treaty country.  A list of those countries that had received E-visa status was
publicly available and could be furnished to interested countries for temporary admission categories
for specific bilateral relationships between the U.S. and its treaty partners, it was not suitable for
applications on a multilateral basis.  There were no statistics available concerning the amount of tradethat had been facilitated by this class of non-immigrant visa.   His delegation believed that that type of
access was valuable for those who applied for that type of temporary admission.  The U.S. continued
to issue about 31,000 visas annually to treaty traders and investors.  With respect to the MFN
exemptions under the GATS for performance of longshore work, the U.S. maintained an exemption
that restricted performance of  longshore work by crews of foreign vessels when making U.S. portcalls.  The exemption was based on reciprocal treatment given U.S. flag vessels, both in the flag
country of the foreign ship and the country where the majority of the owners were located.  Section
258 of the immigration and nationality act, cite fo r which was 8 USC 1288, defined longshore work as
"…any activity relating to the loading or unloading of cargo.  The operation of cargo-related
equipment, whether or not integral to the vessel, and the handling of mooring lines on the dock whenthe vessels are made fast or let go, in the U.S. or the coastal waters thereof."  That exemptionS/C/M/44
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continued to be part of the U.S. immigration law.  Determinations concerning prevailing practice for
longshore work in foreign countries were updated to reflect new information as appropriate, and
published in the U.S. Government Federal Register.  A copy of the latest determination was available
for interested parties, the cite was FR vol.61, No. 115, pages 29942-29949, June 13 1996.  The
information indicated that most countries restricted performance of longshore work by crews offoreign flagged vessels.
23. He continued with the responses to questions posed by Japan regarding MFN exemptions
taken for tax purposes.  In the interest of time, he would provide the answer without stating the
question.  Question 142: a major benefit of the rules allowing certain companies organized in
continuous countries to consolidate with U.S. companies for tax purposes was that they facilitated the
creation of a single-holding company structure fo r all of the North American operations of the
corporate group.  It also facilitated efficient tax administration by taxing such companies on a currentbasis in the U.S. rather than making their operati ons subject to the more complicated rules of subpart
F and other anti-deferral regimes.  A large number of commuters from Canada and Mexico would
likely create 1000s of cases of dual residence for tax purposes that would have to be resolved under
the tax treaties with those two countries, but for special rules regarding residents found in Section
7701(b7).  Question 143: no, those measures were included in the Internal Revenue Code.  Question144: no, they had been included in the Internal Revenue Code for many years.  Question 145: no, as
described above the provision did not relate to NAFTA.   Question 146: the countries that  qualified at
the time for those benefits were Barbados, Bermuda, Costa Rica, Dominica, Domincan Republic,
Grenada, Guyana, Honduras, Jamaica, Saint Lucia and Trinidad and Tobago.  Question 147:
providing these benefits to CBI countries was consistent with general U.S. development policyregarding the Caribbean Basin countries.  In addition, the availability of convention benefits only with
respect to countries that had entered into tax info rmation exchange agreements with the U.S. provided
an incentive for those countries to enter into such ag reements.  The U.S. was particularly interested in
entering into such agreements with CBI countries given that they otherwise would provide a
convenient location for tax evasion for U.S. persons.  Question 148: at the time, the only benefits werewith respect to so-called “convention benefits" under Section 274.  Tax payers may generally not
deduct expenses with respect to conventions that took place outside the North American area.  A CBI
country, or Bermuda, would be considered part of North America if it had entered into a tax
information exchange agreement with the U.S. th at met the requirements set out in the Internal
Revenue Code.
24. Question 150: the principle of reciprocal exemption of transportation income had been
incorporated into the U.S. internal revenue code in 1921 and had been an essential aspect ofinternational taxation principles since the development of modern tax agreements.  It appeared for
example, that the U.S. entered into such an agreem ent with Japan in an exchange of notes that took
place in 1926.  The reason that income from the operation of ships or aircraft in international traffic
was generally taxed only in the residence country was that international shipping and airline
companies, as a general rule, served many countries and it would be very difficult for them to besubject to tax systems of this large number of countries.  In addition, double taxation easily could
arise due to differences in expense allocation and other rules; also enforcement of a tax on
international transportation income by countries other than the residence country of the shipping
corporation had proven to be extremely difficult, cumbersome and restrictive of the free flow of
goods.  Question 151: any country could qualify so long as it provided for a reciprocal exemption forU.S. resident countries.  Question 152: as with international transportation income, taxation only in
the country of residence of the participant in Intels at eliminated the need to determine the income and
the deductions attributable to each of the countries in which the consortium was operating.  Question
153: Intelsat had 143 member countries and signat ories.  Question 155: the Treasury Department's
notice of 23 March 2000 listed the following countries as those that required, or may require,participation in an international boycott: Bahrain, Iraq, Saudi Arabia, Syria, United Arab Emirates, the
Republic of Yemen, Oman, Qatar, Kuwait, Lebanon and Libya.  The U.S. also generally deniedS/C/M/44
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foreign tax credits with respect to taxes paid to coun tries the U.S. did not recognize, or with which the
U.S. had severed diplomatic relations, or did no t conduct diplomatic relations, and those designated
under the Export Administration Act of 1979 as repeatedly providing support for acts of international
terrorism.  Question 157: no case in which that provision had been used was known.  Question 159:
the legislative history, from 1984, indicated that Canada was the only country known to have had sucha measure.  Question 160: yes, the determination by the Secretary of the Treasury depended on
whether the particular country in which the person had been residing actually was experiencing civil
unrest, war or similar adverse conditions.  Question 163: the answer to this question would depend on
the facts and circumstances presented by a particular situation.  Question 164: the differences were
described in the relevant section of the U.S. list of MFN exemptions.  Question 165: the U.S.
maintained a federal system of government  Accordingly, there were 1000s of individual taxing
authorities in the U.S..  Question 166: many sub-federal governments used the tax base as defined inthe Internal Revenue Code as the starting-point for their own tax measures because it simplified tax
collection and administration.  Taxpayers could file state and local returns that were substantially the
same as their federal returns, rather than starting the calculation of taxable income de novo .   From the
standpoint of administration, the States and localities could cut back on their audit resources since an
adjustment at the federal level would adjust the taxable income at the state and local level.  States thathad substantially different revenue codes generally must expend substantially more resources
litigating disputes arising under those codes.  Question 168: such a list was not available at the time.
He also indicated that despite the fact that the questions posed by Japan regarding the All Sectors
exemption in the GATS for Canadian small busine sses were outside the scope of the review, that
MFN exemption reflected a long history of extending provisions for small business issues to both U.S.
and Canadian small businesses.
25. Regarding Korea's question 19: yes, nothing in Article II restricted "measures" to any
particular point in time.  Question 21: the answer to the first indent of the question would depend on
the particular facts and circumstances of the situation presented.  The answer to the second indent
would be perhaps, but not necessarily; that exemption and others might be applicable depending onthe situation.  Finally, Hong Kong, China's question as to the rationale behind the U.S. exemption
referenced in the question, the answer would be deterrence of discriminatory tax practices against
U.S. corporations and individuals.  The potential fo r conditions creating the need for that exemption
persisted.
26. The representative of Canada said that it was clear from the previous interventions that
Members had spent a lot of time and effort in developing a list of MFN exemption, Canada was no
exception to that.  Canada had tried to be complete in its listing of measures that resulted indifferential treatment and, as a result, it had liste d measures in areas that had not been universally
listed by other Members.  That might not be surprising given the lack of guidance provided for
Members in scheduling MFN exemptions, and it was perhaps understandable that there were different
approaches to the listing of exemptions amongst the membership.  She recognized and acknowledged
the different views among parties to the scheduling approaches, and noted that Canada had drafted itsspecific MFN exemptions list based on its domestic regime and  understanding of the scope of the
Article II obligations.  Regarding the specific exemption for all sectors, Canada had an MFN
exemption for the acceptance of compulsory arbitra tion of investor-state investment disputes brought
by, or in respect to, service suppliers of countries with which Canada may have agreements providing
for such a procedure.  This exemption had been list ed to avoid any misinterpretation as to the scope of
the application of investor-state obligations within bilateral investment agreements.  Her country was
a party to 21 bilateral investment protection agreements which included investor-state arbitration
procedures.  Those agreements had been signed with the following countries: Poland, Argentina,
Czech and Slovak Federal Republic, the former USSR , Hungary, Ukraine, the Philippines, Barbados,
Venezuela, Egypt, Armenia, Uruguay, Costa Rica , Latvia, Trinidad and Tobago, Ecuador, Panama,
Thailand, Romania and Lebanon.  She emphasized the fact that the considerations which had led
Canada to taking this exemption remained in place.S/C/M/44
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27. The representative of Malta thanked the delegation of Japan for the question posed (question
276).  Malta was in the process of negotiating its accession to the E.U. and would therefore eventually
adopt the acts of the E.U. in its entirety.  Malta considered that the examination of the results of the
economic integration process, consequent upon its accession to the E.U., fell under the competence of
the regional trade and should be discussed within that body.
28. The representative of Uruguay expressed appreciation for the questions posed by
Hong Kong, China (question 4, relating to the exemption for bilateral agreements on promotion and
protection of foreign investments) and Mexico (gen eral questions for all Members with exemptions).
To that date, Uruguay had signed more than 20 bilateral agreements on the promotion and protection
for investments.  A list of those agreements signed by Uruguay could be seen in UNCTAD's
publication entitled World Investment Report, dated  July 1999,  and also in the 2000 version which
would be available shortly.  He pointed out that the Uruguayan government had decided to take that
MFN exemption in light of certain conditions which still prevailed.  The measure concerned, as well
as its duration, were very clearly explained as set out by Uruguay in its respective list.
29. The representative of Cyprus indicated that her delegation had received questions from Japan
and Korea initially, and from Australia and Japan later.  She would be addressing the former only,
although her answers would cover a large part of th e latter, which would be forwarded to capital for
proper reaction.  Cyprus had taken an MFN exemption with regard to the employment of E.U.
nationals in order to strengthen the economic and social ties and prepare for E.U. membership.  While
negotiating full membership, Cyprus and the E.U. had a custom union agreement.  Upon accession,
expected by 2003, Cyprus would have to implement E. U. Policy in the field of employment regarding
the treatment of foreign nationals.  Hence, it was her government's view that the need for the MFNexemption continued to exist .  Regarding Japan's question on the future prospect as well as the
process for Cyprus to accomplish integration into the E.U. in relation to relevant provisions of GATS
Article V,  her country would proceed according to the commitments undertaken vis-à-vis the E.U. to
a gradual safeguarding of the fundamental freedom to provide services so that by the time of
accession no restriction on the provision of services would exist between Cyprus and the E.U..Regarding the question about commercial presence, Cyprus was granting preferential treatment to
nationals of the E.U. and EFTA States for commercial presence, including movement of capital.  The
need for the exemption stemmed from the belief that measures of that nature would deepen
cooperation, and lead to gradual harmonization by Cy prus with the acquis communautaire  of the E.U.
before accession.  The preference for the EFTA States was warranted by the advanced relationship
those countries had with the E.U., which upon accession would constitute part of the acquis of the
Community.  At the time Cyprus was negotiating a free trade agreement with the EFTA States whichwould remain valid until full membership in the E. U..  Hence, the original conditions warranting the
exemption continued to prevailed.  Regarding the question from Korea as to coverage by GATS
Article V of the custom union agreement with the E.U., that agreement provided for the gradual
dismantling of tariffs for goods and the adoption of accompanying policies.  It did not cover services.
However, in the accession process Cyprus would gradually implement the acquis communautaire ofthe E.U. which, among other things, implies the freedom to provide services.  Hence, the reference in
Cyprus' commitments to possible preferential treatment to E.U. citizens related to the process of
accession to the E.U.
30. The representative of Singapore said that his delegation had received questions from Japan,
Korea and Australia on Singapore's MFN exemption regarding the presence of unskilled, semi-skilled
and skilled natural persons.  Those questions would be addressed together.  Singapore maintained a
preference for unskilled, semi-skilled and skilled workers from traditional sources of supply.  That
measure had been taken in light of domestic policy considerations, in particular land constraints and
the need for social cohesion among Singapore's multi-racial population.  The Government needed to
regulate the flow of foreign workers, both to ensure that Singapore was not overpopulated and thatforeigners who could potentially disrupt social order were not admitted.  As such, Singapore grantedS/C/M/44
Page 11
preference to workers from countries that had cl ose ties and similar social and cultural ethos,
countries that were regarded as traditional sources of supply.  Given that the policy considerations
were beyond merely controlling the number of workers, Japan's suggestion of an entry quota on MFN
basis would not be feasible.  In addition, imposing quotas by source country would also restrict the
ability of employers to decide from which country they would like to recruit the workers.  Singaporereviewed the policy from time to time as necessitated by prevailing circumstances.  There was,
however, no intention to shift from the current polic y.   Japan had asked about the difference between
"unskilled", "semi-skilled" and "skilled" workers.  The difference was the following:  "skilled"
workers were generally those with professional/trade qualifications working in a managerial,
executive or specialist position;  "semi-skilled" workers were generally those with trade certificates
for specific technical skills (for example, Nati onal Trade Certificate issued by the Institute of
Technical Education);  "unskilled" workers refered to those without recognised qualifications.Regarding the MFN for Investment Guarantee Agreem ents (IGAs), questions had been received from
Japan; Hong Kong, China; and Korea. IGAs were bilateral instruments, under which the obligations to
protect foreign investments from unforeseen contingencies were governed by the provisions
established.  The IGAs also helped to provide the economic and political safeguards for the promotion
of bilateral relations.  Singapore also pursued economic and political safeguards where there wereappropriate international platforms.  One such platforms was the Multilateral Investment Guarantee
Agency (MIGA) where Singapore had become a member in 1998.   On whether the IGAs had helped
to provide economic and political guarantees for the promotion of bilateral relations, the answer was
in the affirmative.  This was evidenced by many countries similarly embarking on the IGA strategy.
The promotion of bilateral relations was largely in the confidence given to investors to invest in eachother's countries.  Since 1995, Singapore had witne ssed an increase in the investment commitments
averaging $8 billion per year and the key investors included those from co-signatory IGA countries.
Also, since 1995, Singapore had six additional co-s ignatories to the bilateral IGAs and those were
Cambodia, Egypt, Hungary, Laos, Latvia and Maurit ius.  Lastly, Singapore had reviewed the IGAs in
view of international trends in the developments  of bilateral investments treaties.  The reviews
included refining the IGA wording to keep pace with developments in investment treaties and
exploring the possibility of investment treaties with potential IGA co-signatories.  The measure,
however, had not been changed as a result of the reviews and Singapore had no intention to abolish
the exemption.  Regarding the MFN for the Comm onwealth Tax Credit Scheme, questions had been
received from Japan.  Section 48 of the Singapore Income Tax Act provided for the granting of relief
against Singapore tax payable on income derived from a Commonwealth country.  There had been a
few cases where the measure had been applied.  He i ndicated that a copy of the provisions of Section
48 of the Act could be provided to any interested delegation if requested.  Japan had asked why other
Commonwealth countries, which granted reciprocal relief, had not listed the same measure as a MFN
exemption.  Unfortunately, Singapore was not in a position to speculate about the reasons why other
Commonwealth countries had chosen not to do so.  His delegation had no information on the list of
Commonwealth countries that applied the same measure.  As with all other tax administrations andtreasuries, Singapore conducted reviews of its tax laws , including Section 48, as part and parcel of its
fiscal and tax administration process.  The policy measure had not been changed as a result of the
reviews.  Given the traditional links and coopera tion with other Commonwealth members, Singapore
had no intention to abolish the exemption.
31. The representative of Egypt raised three general points before introducing some responses to
questions posed to his delegation.  First, Egypt shared the view that the MFN review was of an
educative nature to provide more information; the exercise should be limited to the purpose and scope
as stated in the annex, namely, to examine whether the conditions which had created the need for the
exemption continued to prevail and to determine the date of any further review; and finally, the
review process would have to take into consid eration the developmental aspects for developing
countries, as agreed by the General Council.  Turning to the questions posed by Korea, Australia, and
Japan, he indicated that the responses may be supplemented by more information at a later stage.
Regarding the request for clarification by Korea on what other countries were possible in addition toS/C/M/44
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the ones already listed under column 3 as the countries to which the measure applied,  when the list of
countries covered by the exemption had been made during the Uruguay Round negotiations it had not
been possible to clearly determine the future ag reements or arrangements between Egypt and other
countries.  The phrase "possibly other countries" had been inscribed in the MFN List to allow the
flexibility of adding other countries with which bilateral or plurilateral agreements might take place inthe future.  Australia requested to clarify "the major trading partners do not accord the Egyptian
nationals satisfactory opportunities", and to which other countries the exemption applied as stated in
column 5.  The same clarification had been sought by Japan, asking if "major trade partners" referred
to in column 5 correspond to those countries in column 3.  The preliminary answer was no, however
his delegation was still consulting with capital to provide more information.  Japan had requested the
names of all arrangements relating to the MFN exemption, given the large number of bilateral and
plurilateral agreements with different countries it was difficult to list them at that stage; however, hisdelegation may be able, at a later stage, to provide such information.  Japan had also asked how
Egypt evaluated the market liberalization of those countries to which the measure had been applied
over the last 5 years.  In Egypt's' view that question went beyond the scope of the MFN review as
state in paragraph 4 of the Annex.
32. The representative of the European Communities supported Canada, the United States and
Switzerland in their initial statements.  His delegation's replies had been based on the requirements of
the annex, which meant that in producing the replies his delegation had examined whether the
conditions for the MFN exemption prevailed.  The EC had tried to reply to all of the questions,
however, one or another specific point might be omitted.  He reserved the right to revert to those
questions and answers during the second part of the discussion.  Turning to the MFN exemptions, onpage 2 of document Job no. 1551, he indicated that the EU MFN exemption on that page for Austria
was not going to be addressed specifically; the re ply would be collectively for Austria, the EC and
Sweden as far as their bilateral agreements with Switzerland were concerned.  That MFN exemption
was based on long-standing links and possible progressive integration of Switzerland in the EC.  The
conditions creating the need for that exemption prevailed.  According to the existing bilateralagreements between the EC and Switzerland, the Swiss citizens enjoyed certain privileges with
respect to visas, commercial presence and access to employment.  In the meantime, a new agreement
introducing free movement of persons had been negotiated which also provided for cross-border
provision of services for up to 90 working days.  That agreement could enter into force the following
year. Further agreements on service liberalization might be negotiated and Switzerland might decide
to join the EU; therefore his delegation found it advisable to maintain that exemption.  A specific
question from Hong Kong, China on the relation between that MFN exemption and Article V bis ofthe GATS had been posed.  In the EC's view Article V bis of the GATS provided for the possibility to
conclude agreements establishing full integration of the labour markets between the parties concerned,
which included free entry to the employment market of the parties concerned and some measures on
conditions of stay, employment and social benefits.  At that stage his delegation did not consider that
the existing arrangements or agreements between the EC and Switzerland fell within that category.
33. Turning to page 8 of the same document, he in dicated that his reply would cover all the MFN
exemptions relating to Nordic cooperation.  The first one was the first entry on page 8 which
concerned Denmark, and there were similar ones on pages 11 and 21 for Finland and Sweden,
respectively.  The rationale behind those MFN exemptions was the need to maintain and develop
cooperation between Nordic countries; that cooper ation was organized through funds which had been
specifically designed to provide financial support to projects which were recognized to promote the
Nordic identity.  It should be noted that the Nordic cooperation covered a very broad area: political,
educational, and legal. The focus of the measures were not to discriminate service providers from
other WTO countries but to promote and develop the historically strong social and economic ties
between Nordic countries, and to support projects of Nordic interest and cooperation between Nordic
companies.  The institutions concerned provided support and financing that were in compliance with
internationally agreed principles and standards.  These exemptions needed to be maintained.S/C/M/44
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Regarding the second entry on page 8, that MFN exemption concerning the purchase of real estate in
Italy by foreign persons and bodies created a reciprocity test.  That reciprocity test allowed foreign
citizens in Italy the right to purchase real estate on the same terms as Italian citizens were allowed in
the foreigners' country of origin.  The regulation concerning reciprocity for the purchase of real estate
did not imply a formal verification of the existence of bilateral agreements between Italy and othercountries, but only required an evaluation for factual conditions.  Since the evaluation may vary
according to changes in actual conditions, such a test could be a means to promote less restrictive
measures in those countries which did not allow foreign citizens to purchase real estate or limit the
exercise of such a right.  That MFN exemption would be maintained.  Regarding the third entry on
page 8 which concerned Portugal, that MFN exemption was justified by the historical links between
Portugal and the designated countries of Portuguese official language.  Those links were reflected in
cooperation and other agreements between Portugal and other designated countries that may grant tocitizens of those countries rights which were not otherwise afforded to others.  Therefore, the
exemption must be maintained because the conditions prevailed.  It should be noted in particular that
the situation aimed at reinforcing cooperation between the countries of Portuguese official language,
that it took into account strong cultural and political links, and that it was characterized by the
importance and representativity in Portugal of the Portuguese-speaking communities concerned.Regarding the fourth entry concerning an exemption fo r the exercise of certain services activities and
professions, France had specified in the GATS Agreement that nationals of a number of non-
European countries, namely, French speaking African countries, Algeria, Switzerland and Romania,
may benefit from more favourable measures regarding access to certain professions.  Those
exemptions had an initial validity of 10 years and resulted from the fact that France had concludedwith those countries certain bilateral agreements regarding residence and stay, covering the exercise
of commercial, agricultural or craftsmen activities, be they salaried or non-salaried.  This also applied
to access to liberal professions.  Those bilateral agreements were the result of long-standing privileged
relations.  The first convention had been reached with Switzerland in 1882, the Romanian Agreement
went back to 1930, in some occasions those were agreements that were signed at the time ofindependence of territories which were previously under French sovereignty.  Switzerland and
Romania had a connection with the EU, and obviously the competence to sign any future bilateral
agreements would fall under the EC.  Additionally, since the beginning of the 1990s France had
begun the renegotiation of circulation and establishment agreements that had been concluded with
most of the African countries previously under French sovereignty.  Therefore, there was a desire to
maintain such MFN exemptions.
34. The first entry on page 9 concerned the United Kingdom and Commonwealth.   The UK's sole
MFN exemption reflected the historical links betw een the U.K. and the countries of the British
Commonwealth of Nations, those included: Australia; Canada; half of the countries in Africa,
including South Africa; Singapore; Malaysia and the countries of the Indian sub-continent.  The U.K.
ancestry rules had been formulated in 1972 in recognition of the UK's connection with the
Commonwealth and to ensure that following th e U.K. joining the EC, citizens of the whole
Commonwealth were put in no less favourable position than that provided to Members in the EC.  In
1990 it had been recognized that many of those coming to the U.K. under that provision had not been
actively seeking the settlement status that had been automatically given.  That provision had been
therefore replaced by a provision for settlement after a four-year qualifying period, however those
admitted under that category had retained the right to take up employment of any nature in the U.K.
without the need to obtain a work permit if they could prove that they had a grandparent who was
born in the U.K. or colonies.  Hence the need for continuing the MFN exemption.  The third entry on
the same page concerned a number of principalities, in particular San Marino, Monaco, Andorra and
the Vatican City State.  He noted that the rationale for that MFN exemptions was the very particular
historical and political situation of those entities.  They were, in most cases, landlocked in the EU,highly integrated in the EC but had a specific relationship with Member States which needed to be
maintained.  The fourth entry on that page covered measures based on the bilateral agreements
between Italy and third countries for work permits for seasonal workers.  That MFN exemptionS/C/M/44
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reflected historical links between Italy and neighbouring countries, covering for traditional manpower
flows for temporary periods between Italy and neighbour ing countries.  It should be noted that at the
time there was only one agreement of that kind in force, i.e. the 1997 agreement between Italy and
Albania.  Finally, the MFN exemption concerning a number of countries in the Central Eastern and
South Eastern Europe, including Russia, Ukraine, Belarus and Georgia.  The background for thatMFN exemption was the fact that the countries concerned had all signed an association agreement
with the EU.  They all formed pa rt of the immediate periphery of the Union.  Association agreements,
referred to as Europe Agreements, were a crucial element of the EU foreign policy.  Thirteen of those
countries were in the process of becoming members of the Union.  With regard to the services
dimension of those agreements, the MFN exemption was a essential part of the EU acquis, thus it had
to be maintained.  The list of the countries concerned would be made available to the Secretariat for
those interested.  He noted that the list indicated 13 candidate countries, meaning countries which hadexpressed a wish to become members of the European Union; 9 Mediterranean countries; 12 CIS
countries; and 4 other associated countries which were in fact part of the Balkans.
35. The representative of Brunei Darussalam said that that his delegation had received questions
from Australia and Japan.  At that stage he would only be able to respond to Japan's questions No. 6
in document S/C/W/140.   In that regard, the source of foreign waters was traditionally from
neighbouring countries such as ASEAN's and some Commonwealth countries.  The impact of foreign
workers into Brunei at that time was based on the request and choice of the employers.  With respect
to other questions posed by Japan and Australia, he hoped to be able to respond to them at the July
meeting.
36. The representative of Thailand said that her delegation viewed the MFN exemption review as
an important process since it was one of a few undertakings mandated in the GATS.  Her delegation
participated constructively and hence had the pleasu re to provide answers to questions posed to it by
Australia, European Communities, Hong Kong China, Japan and Korea.  In response to questions by
Hong Kong, China (No.12), European Communities (No.1), Japan (No.131, 133, 134, 135), Korea
(No.18) on the Treaty of Amity and Economic Relations between Thailand and the United States, sheindicated that Thailand had signed such treaty in 1966 with a view to attracting investment from the
United States as well as for security and military reasons, owing to regional instability experienced at
that time.  The Treaty had been concluded long before Thailand became a party to the GATT and the
WTO.  During the period when the Treaty had entered into force, Thailand had no restriction on
business or commercial activities in which foreign investors could engage.  Therefore, the granting of
national treatment to U.S. citizens had not been perceived as being discriminatory to other countries
since all were enjoying the same treatment.  However, in 1971, the Announcement of the NationalExecutive Council No. 281 had been promulgated.  Under that Announcement, restrictions on
business activities and professions had been placed on foreign citizens and entities.  It had also laid
down conditions for foreigners wishing to do business in Thailand.  The major purpose of that
Announcement had been simply to reserve for Thai ci tizens certain types of commercial activities and
professions in which Thai citizens had not been in a position to compete with foreigners.  However,the Treaty of Amity had not been subject to  that Announcement.  The Announcement No. 281 had
been reviewed by many successive governments and it had only been the previous year (1999) that
substantial amendments to that law had been completed.  Regarding the MNF exemption, the treaty of
Amity should not be seen as a horizontal exemption since it did not cover all services sectors.  Under
the Treaty, Thailand granted national treatment to the United States nationals and companies inconducting commercial, industrial and services activities except for the following sectors:
communications, transport, fiduciary functions, banking involving depository functions, the
exploitation of land or other natural resources, and domestic trade in indigenous agricultural products.
During the past five years, the Thai government had taken many steps which would eventually render
that MFN exemption unnecessary in the future.  Most notably among those governments undertakingswere the reviews of restricted business activities and the new Foreign Business Act (1999) which
replaced the Announcement No. 281.  Through gradual liberalisation of Thai's services sectors underS/C/M/44
Page 15
the Foreign Business Act, rights of investors from  other WTO Members had been brought closer to
those granted to the U.S. citizens.  Under the Foreign Business Act B.E. 2542 (1999), types of
business activities which foreigners could engage in had been reviewed and subsequently many
categories had been derestricted.  As a result of that, non-U.S. investors had been  given equal
treatment as the U.S. ones in at least 14 additional commercial activities, for example, warehousing,infrastructural construction, securities brokering, futures trading, etc.  There were also business
activities which had been open to all foreigners subject to governmental approval.  Those activities
included among others accountancy, legal, architecture, engineering, advertising, hotel business, sale
of food and beverage and Tour agency.  In summary, the government of Thailand believed that
liberalisation in trade and investment which had al ready taken place, and would certainly continue,
would eventually lead to the situation where the MFN exemption should no longer be needed.
Thailand would notify to the CTS recent changes in its laws and regulation, in particular, the ForeignBusiness Act when internal administrative procedures would be completed.  In responding to the
Japan's question No. 132, she indicated that Thailand had no plan to develop that Treaty into an
economic integration.  In response to Korea's question No. 18, she said that there had been 613 U.S.
Citizens and entitities which had been granted national treatment since 1995.
37. The representative of Turkey also regarded the review as an exercise to discuss the conditions
which had given rise to MFN exemptions.  Concerning the questions put to her delegation by
Hong Kong, China in paragraph 2 of S/C/W/137 about the rationale behind the exemption on page 36,
of Job No. 1551, Turkey included that derogation in the list in order to prevent Turkish service
suppliers, especially the ones operating in the non-scheduled sectors of other Member countries, from
experiencing unreasonable actions.  The question relating to the exemption on consulate duties inparagraph 13 of the same document would be replied later in written form.  Regarding the Japanese
questions in paragraphs 294, 295, and  296 of the documents S/C/W/140 Add.1, concerning the real
estate MFN exemptions on page 26 of the document 1551, her delegation got confused as regards to
the meaning of the term "reciprocity".  For the pur pose of clarity the detailed information about real
property acquisition by foreigners in Turkey can be obtained by Japan from the Internet address:www.tapu.go.tr.  She proceeded to answer to Japan's questions in paragraphs 291 and 292 of the same
document concerning the investments in Turkey.  Question 291: the country referred to in column 2,
b), ii) was U.S.A.  A Protocol which was an integral part of the Treaty between the Republic of
Turkey and the U.S.A. concerning the reciprocal promotion and protection of investments signed in
1985, had a provision about foreign exchange rate guarantee.  The provision, Article 2(B)iii of the
Protocol, stated that "in exceptional financial or economic circumstances relating to foreign exchange,
the Republic of Turkey may temporarily delay transfers of the types specified in Article IV…and (iii)provided that the national or company has an opportunity to invest the proceeds in a manner which
will preserve their value until transfer occurs".  From the date of the signature of that treaty, Turkey
had not experienced balance-of-payments difficulties and there were no studies of the effects of that
measure on the investment policy from the U.S.A. to Turkey.  However, according to statistics it
could be said that direct investment flows from th e U.S.A. to Turkey had increased after the signing
of that Treaty.  Question 292: according to the MFN principle, the U.S.A. should accord the treatment
to any other country with which it had signed the bilateral investment treaty.  Question 293: In the
1980s, especially in the construction sector, a big number of Turkish nationals had been working in
Libya.  Aiming at a guarantee for the social security of Turkish nationals working in Libya and
recognizing the particularities of the regulations a nd related applications of that country, Turkey had
signed the treaty with Libya in 1985.
38. The representative of Poland  replied to the questions posed by Japan; Hong Kong, China;
and Korea regarding the MFN exemption on page 19 of document Job No. 1551.  He stated that the
conditions which had created the need for that exemption still prevailed.  Those exemptions were
needed by Poland in order, inter alia , to protect investors on the basis of arbitration clause of
agreement.  Poland had concluded 61 bilateral promotion and protection of foreign investment
agreements which were on the basis of reciprocal provisions.  The aim of such agreements was toS/C/M/44
Page 16
provide protection for investors.  The subject of mutual coincidence of bilateral investment treaties
and GATS was not clear enough and that was the reason behind the intention of maintaining all those
agreements in force.  Preliminarily, Poland did not exclude the possibility of introducing technical
modification to its list of MFN exemptions.  Howeve r, any eventual modification would be the subject
of negotiations.
39. The representative of Peru expressed satisfaction in taking part in the review of MFN
exemptions to Article II of the GATS and the corresponding annex.  Peru believed it to be a very
useful exercise in that the exchange of information should enable delegations to have a better
understanding of the reasons which had led Members to enter those exemptions  and to know how the
exemptions had been applied.  In the framework of the Uruguay Round, Peru had entered a horizontal
commitment referring to the presence of a natural persons as service providers, that was mode 4.
According to that horizontal commitment foreigners wo rking in his country could have a contract of a
period of 3 years which could be renewed.  Their remuneration  could constitute up to 30 per cent of
the pay roll and they may constitute 20 per cent of the workers in a given enterprise.  In principle this
commitment applied to all WTO Members pursuant to Article II of the GATS, that was the general
standard applied by Peru.  However, in the course of those same negotiations Peru had entered an
exemption to Article II which appeared on page 18 of document Job. 1551.  According to thatexemption, the horizontal commitment was not applied to nationals of countries with which Peru had
entered into a) reciprocal agreements, b) dual nationality agreements, or c) bilateral agreements
referring to foreign personnel.  In the framework of the review Australia, Chile and Japan had made
specific comments and/or questions on that exemption.  Mexico had also raised general questions in
that regard.  He thanked those delegations and informed that his authorities were still consideringthose questions.  Although ha was not in a position to deal with all questions at that meeting, he would
be giving a preliminary answer to 3 of them.  Japan had requested an explanation as to why Peru had
invoked reciprocity and dual nationality under that measure.  The reason which had led Peru to enter
an exemption on the basis of reciprocity in order to have better legal covering of the MFN plus aspect
had been to ensure that countries benefitting from Peru's MFN plus treatment would in turn also grantthat to Peruvian nationals on their market.  In that  way the Peruvian authorities could ensure that any
departure from the general standard was duly justified by the fact that Peruvian nationals should also
benefit from equivalent treatment in the beneficiary country.  Furthermore, it should also be borne in
mind that reciprocity was relevant because it constituted one of the essential components of bilateral
agreements.  Peru considered that that was a valid policy element because it was within the overall
efforts towards the progressive liberalization.  Furthermore, that policy was also appropriate insofar
that its application could contribute to drawing up an appropriate environment for a progressivelyhigher level of liberalization on a multilateral basis.  Progressive liberalization in the services area at a
multilateral level was one of the goals of the WTO towards which WTO Members should each adjust
their policies according to their own rhythm.  To da te, however, that was still one of the pending tasks
in the WTO and in that context, Peru believed that it was both valid and relevant to enter an MFN
exemption on the basis of reciprocity in order to draw up bilateral or plurilateral agreements toachieve that multilateral aim.
40. As regards to dual nationality, as mentioned above, the limitation entered by Peru in its
horizontal commitments applied to all foreigners working on the Peruvian labour market.  If a foreign
citizen – in light of his dual nationality- could also be considered a Peruvian citizen then the limitation
entered by Peru with regards to its domestic labour market would not be applied to her.   In order tolegally cover those cases within the framework of  the WTO, the Peruvian government entered that
MFN exemption to Article II of the GATS.  Chile had asked whether the Peruvian exemption being
considered would be covered by Article V bis of the Agreement which refered to labour market
integration agreements.  Peru shared the understanding of Chile to the effect that Article V bis granted
a country the right to apply MFN plus treatment in the framework of foreign workers which werenationals of a country which belonged to one of those integration markets.  Nonetheless, Article V bis
was limited in scope because it only refered to agreements providing for "full integration of labourS/C/M/44
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markets" between the parties.  According to that Ar ticle that type of integration was characterized by
the fact that it conferred upon the citizens of the pa rties to an integration agreement the right of free
access to the labour markets of each of those parties.  In other words, that article would not therefore
cover bilateral agreements whereby labour market integration was less than 100 per cent.  That was a
crucial aspect for countries like Peru.  His delegation believed it more appropriate to have an MFNexemption on the basis of reciprocity, as compared to the scope of Article V bis, since the exemption
entered by Peru granted a broader coverage and greater flexibility in applying progressive
liberalization policies.  The exemption afforded th e possibility for Peru to enter into reciprocal
opening up of the labour market by granting a more liberal treatment than the general Peruvian
standard, for example allowing foreign workers to constitute more than 30 per cent of the pay roll,
but without having necessarily to agree to 100 per cent opening up of the market.  Mexico had asked
whether the exemption was to be phased out over 10- year period as provided for in the annex of the
Article II of the GATS, Peru in due course would be prepared to consider the situation of the
exemptions in the light of 10-year period.  However, he pointed out that Members should also take
into consideration the words "in principle" which were written into the first part of paragraph 6 of the
annex.  As regards all other questions, he hoped to be able to provide the answers from his authorities
in the following days and submit them to the Secretariat.
41. The representative of Tunisia said his delegation had received question from Chile (No. 11)
concerning the duration of the exemption which Tunisia had not specified in the exemptions list.  He
had not received any reply from capital in time for th e meeting, but preliminarily he could say that the
Annex on exemptions did not recommend necessarily setting up a duration.  The Annex only said in
paragraph 6 that the duration should not exceed a period of 10 years.  However, a  more preciseanswers will be provided very shortly.
42. The representative of Indonesia thanked all delegations who had submitted questions
concerning MFN exemptions listed in Indonesia's schedule of commitments of 1993 and 1997.  Those
questions refered to covered mainly the areas of all sectors, construction, and financial services. His
authorities were in the process of reviewing all of  those enquiries in a comprehensive manner in light
of national policy objectives and regional considerations.  Answers would be prepared and submitted
in writing in the next meeting of the CTS.
43. The representative of Malaysia said his delegation supported the three points made by Egypt,
in particular as to the scope and purpose of the MFN, namely, to assess whether the conditions which
arose in the first place to have the exemptions st ill prevailed, and also the taking into account the
developmental aspect and due respect for national policy objectives.  Questions had been posed by
Japan, Australia and the Republic of Korea.  In addr essing those questions he would look first at the
conditions which would make it necessary for Malaysia to maintain the MFN exemptions.  It would
be a general answer but in essence it would address some or most of the questions posed by the 3
countries mentioned.  If some questions were not answered that day, his delegation would follow
them up with the delegations concerned at a later time.  In trying to understand the Malaysian MFN
exemption covering All sectors in terms of the labour market and of foreign equity, one would have tounderstand that Malaysia was a small country yet it was multi-ethnic and multi-religious.  In the early
70s when development had been imbalanced, it had led to social and economic unrest in the nation.
As a result the government had felt that the imbalance had to be redressed resulting in the new
economic as well as development policy.  Japan asked about specific development requirements, such
requirements were embodied in the development policies that had been mentioned earlier.  Thatpolicy was geared towards promoting growth with equity, fostering national unity among the various
ethnic groups, eradicating poverty, and lastly restructuring society to correct the social and economic
imbalances.  If those policies had not been in place, with the various policy options as well as the kind
of activities that the government had embarked, the imbalanced situation would have continued and
would have caused Malaysia not to have grown as fast as she had done in the last two decades or so.In terms of the kind of critical aspects that were embodied in those policies and which would spell outS/C/M/44
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the specific development requirements, it would basi cally encompass the following: first, to strike an
optimum balance between the goals of economic grow th and equity; second, to ensure the balance of
the major sectors of the economy so as to optimize growth; third, to reduce the social and economic
inequalities so that a fair and equitable sharing of the economic growth by all its citizens would be
provided; fourth, the  promotion and strengthening of national integration by reducing the widedisparities in economic development between the vari ous states in Malaysia, as well as between the
urban and rural areas; fifth, to develop a progressiv e society; and sixth (which answered the question
about industrial harmony raised by Japan as well as by the other two delegations) to promote human
resource development in order to create a productive and disciplined labour force and to develop the
necessary skills to meet industrial development challenges; seventh, to make science and technology
and integral component of social and economic planning and development; and lastly, in pursuit of all
that economic development attention would be given to the protection of the environment.
44. When looking at the questions of preferential and differential treatment, Malaysia had a
flexible approach in order to be able to reach the kind of objectives that had set forward in the two
policies  mentioned earlier.  That kind of treatment would be provided depending on the sector and
the benefits to be derived from the arrangement.  For example, if there were strategic alliances
between Malaysian domestic companies with foreign companies in capital intensive and hightechnology industries which could assist the domestic industries and also help them with access to
new technologies and markets, then the administration would consider providing such treatment.
Those kinds of foreign companies would be able to contribute to the development objectives.  In a
situations where the need to promote, for example, the multi-media capabilities of the country was
felt, Malaysia had the so-called  "multimedia super corridor" companies.  The participation of foreign
IT companies was welcomed so that they would help his country in developing the multi-media
capabilities in the high value-added IT related goods and services.  Therefore, those companies who
were given the status of multimedia super corridor companies (MSC status) were allowed 100 per
cent foreign equity levels.  There had been some additional questions by Korea – one had already
been answered – question 2 was whether Malaysia ha d had a review of the exemption on the so-called
preferential treatment, the answer was no; in relation to question 3 whether Malaysia had other
measures, no, there had not been any other additional measure pertaining to that particular objective.
Australia had asked about social stability, industrial harmony and the process involved to achieve that
kind of situation.  The selection process would take into account the suitability of the foreign workers,
first, in terms of their education level, and secondly , their ability to adapt to the local culture, religious
practices and local language.  Then from the operational aspect, officials from the labour department
would visit the companies as well as the factories where the workers may be employed to ensure,inter alia , that the accommodation for those workers was suitable.  Those visits were also to ensure
together with the employers that foreign workers were being educated as regards the local culture and
practices and improving the command of the local language, and that the existing practice that skills
enhancement and transfer between foreign workers and local ones was made known to the employers
at the recruitment stage.
45. The representative of El Salvador indicated that his delegation had received specific questions
from Hong Kong, China; Australia; Chile; and Japan, and a general question from Mexico.
Unfortunately those questions had been received just the previous week and they were still under
analysis in capital.  He hoped to be able to give replies as soon as possible.  For the time being, he
would comment on the conditions that had given rise to the exemption.  El Salvador had an exemptionin all sectors concerning measures contained in the General Treaty of Central American Economic
Integration.  El Salvador together with other Central American countries was involved in an economic
and political integration process which had been started up in the early 1960s, and then had been
given new impetus in the 90s.  One of the main pillars of that integration had been the General Treaty
of Central American Integration whose main purpose was to set up and consolidate an economicunion with a market for goods and services.  Thus, at present, Central America was in the process of
designing a Central American Treaty on services and investment.  In the mean time, the GeneralS/C/M/44
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Treaty made it possible to take preferential measures for service providers of the region in all or some
services sectors; that was the reason for mentioning the General Treaty of Central American
Economic Integration and taking an exemption of Article II of the GATS – that is Most Favoured
Nation – with the aim of safeguarding Central American preferences.  El Salvador considered that
measure to be valid because one of the main reasons  for it was to promote integration amongst Central
American countries which were still involved in that process.
46. The representative of Jamaica thanked those delegations that had posed questions.  They were
still under consideration by her Capital but her delegation would be providing answers in writing
shortly.
47. The representative of Guatemala expressed appreciation for the questions received from
Japan; Australia; Hong Kong, China; Mexico and Chile.  All of those questions had been sent back to
Capital; however due to the fact that some of them had reached her delegation earlier than others, shewould not be able to reply to all of them at that meeting.  She hoped to be able to provide additional
replies soon.  Having received the questions from Japan, Australia and Hong Kong, China in English
had been a limiting factor for analysis in capita l; her delegation would need to receive documents in
Spanish as well.  Turning to the replies, regardin g the questions asked by Australia the reason for
mentioning those agreements and treaties in the MFN List was basically for transparency's sake.Regarding Hong Kong, China’s questions, the exemption for measures stemming from agreements
signed by Guatemala as a part of the Central Am erican Economic Integration that were indicated
under No. 1, on page 11 of the document Job. No. 1551, takes into consideration inconsistencies
between Article II and the application of the Central American exemption clause contained in the
commercial treaties that had been signed on the basi s of MFN treatment with countries other than the
Contracting States.  That clause stated that no Central American country should grant better treatment
to third parties than the treatment given to the Cont racting States within Central American Integration
framework.  By an involuntary error, that clause appeared as No. 2 in the compilation and not as the
treatment given in relation to the measures indicated under No. 1.  The description of No. 3 on page
12 of the compilation granted preferential treatment in relation to the Convention on investmentguarantees with the United States.  Description  No. 4 on page 12 of the compilation gave preferential
treatment on protection of investment resulting from the agreement indicated thereof .  Description
No. 5 on page 12 gave preferential treatment to investments and the supply of trade in services in all
modes.  Turning to Japan's questions – question 264 – the exemption for measures stemming from
agreements signed by Guatemala in the economic integration framework mentioned in No.1 takes into
consideration inconsistencies between Article II and the application of the Central American
exemption clause contained in the commercial treaties that had been signed on the basis of MFNtreatment with countries other than the Contracting States.  That clause stated that no Central
American country should grant better treatment to  third parties than the treatment given to the
Contracting States within the Central American Inte gration framework.  By an involuntary error, that
clause appeared as No. 2 in the compilation and not as the treatment given in relation to the measures
indicated under No. 1.  Regarding question 266 from Japan – as a result of the Peace Agreementssigned in 1998, the application of the Law on Foreign Investment and the bilateral agreements for
protection and promotion of investment signed an adequate and favourable climate for investments
has been created in Guatemala.  Thus with the U.S., the Overseas Private Investment Corporation
(OPIC) afforded investment guarantees that had promoted several investments such as:  San José
Limitada electricity generation through NationsBank,N.A, the National Hotel Industry throughMarriott International Inc., Guatemalan electricity Enterprise through NationsBank, N.A and the
Ingenio Magdalena sugar refinery through the Citibank.  She apologized to the delegations of Mexico
and Chile and hoped to be able to give a reply to their questions as soon as possible.
48. The representative of Philippines expressed his appreciation to the delegations of Japan and
the Republic of Korea for the questions posed on the Philippines’ MFN exemptions.  Those questions
basically pertained to a national law which granted special visa categories for traders and investors ofS/C/M/44
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countries with which the Philippines had concluded treaties on entry rights for traders and investors.
Japan; Hong Kong, China and Australia had asked for a list of such countries.  The Philippines had in
fact concluded treaties with three countries: with Japan the Treaty of Amity, Commerce and
Navigation; with the U.S.A. the Agreement Relating to Entry of National for Purposes of Trade,
Investments and Related Activities; and with Germany three agreements, namely, the TreatyConcerning Promotion and Protect ion of Investments, the Trade Agreement between the Republic of
the Philippines and the Federal Republic of Germany, and the Protocol of the Negotiations Between
the Government of the Republic of the Philippines and the Government of the Federal Republic of
Germany.  The relevant provision of the aforementioned treaties concerning special entry rights
essentially stipulated that aliens entitled to enter the country under the provisions of a treaty of amity,
commerce and navigation might be admitted as non-immigrants.  They were given treaty-trader visas
for the sole purpose of carrying on substantial trade between the Philippines and the state of whichthey were nationals.  The visa might also be for the purpose of developing and directing the
operations of an enterprise in which they were investing or had invested a large amount of capital.
With regards to the question of Japan as to clarification of the "labour market test" with relevance to
the entry in column two, that test referred to a system aimed at protecting the Filipino workers from
unwarranted or undue competition from foreign nationals on domestic employment opportunities.  Itsmain purpose was to ensure that no Filipino who was willing, able and competent to do the job was
deprived of the same job in favour of a foreign national.  Thus prior to issuance of an Alien
Employment Permit to a foreign national, the applican t employer had the burden of proof to show that
it had exhausted efforts in determining whether or not there was a qualified Filipino who was willing,
able and competent to do the job for which the services of the foreign national were desired.  Thelegal basis for that would be found in various constitutional provisions as well as statutory law.  With
regard to the question from the Republic of Korea on whether traders and investors in column 2
conformed to natural persons supplying services in column 1.  His delegation viewed the free traders
and investors as necessarily included in the freest natural persons supplying services, but of course the
latter phrase, i.e. natural persons supplying services, did not appear to be limited necessarily to thosetraders and investors mentioned in column two.   As regards a question of Japan on whether the
Philippines had any plans to include new bilateral agreements with other countries concerning entry
rights for traders and investors, as the latest verification with the department of foreign affairs had
indicated the Philippines had no plans of entering into similar agreements or treaties; however, that
should not be interpreted as precluding the Philippines from entering into such agreements in the
future.  With regard to the question from Australia, on the basic experience of the agreements upon
perusal of the various provisions of the treaty agreement,  it appeared that the common provisionenshrined in each one of them was that aliens were entitled to enter the country under the provisions
of a treaty of amity, commerce and navigation and may be admitted as non-immigrants.  They were
given treaty-trader visas for the sole purpose of carrying on substantial trade between the Philippines
and the state to which they were nationals. The visa may also be for the purpose of developing and
directing the operations of an enterprise in which they were investing or had invested a large amountof capital.  He hope that those responses were sufficient for the purposes of the enquiring members;
however, should they choose to seek further clarification, his delegation was perfectly willing to sit
down with them and expand on the responses just made.
49. The representative of Honduras indicated that on the questions by some Members concerning
MFN exemptions granted by Honduras to other Central American countries, she would reply by
stating that the conditions that had given rise to such preferences still remained, as explained by the
delegates of El Salvador and Guatemala.  At the time the Central American region was designing a
Central American Treaty for services and investments, and in the mean time preferential measures had
been approved for Central American services providers in some services sectors, particularly in
energy, transport, telecommunications, financial services, construction, professional services andtourism.  Subsequently her delegation would be giving more detailed replies to the questions put by
other Members.S/C/M/44
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50. The Chairman said that other delegations might add to the discussions in writing at a later
date or at some point during the deliberations.  He invited delegations to ask questions or to seek
clarifications from those delegations that had responded to the written questions.
51. The representative of Pakistan indicated that he had two questions for the representatives of
the Philippines and Singapore.  Those questions had been addressed in their intervention to Pakistan's
full satisfaction, but he proceeded to state the questions for the sake of the record.  As regarded the
Philippines, the question pertained to the special visa category as well as the labour market test.
Similarly, regarding Singapore the question pertained to the definition of traditional sources of supply.
52. The representative of Mexico said that for his delegation the MFN exercise was extremely
important,  and he endorsed the opening statements made by Chile and Hong Kong, China.  There had
to be an exchange of information amongst members, making it possible for all to understand the
reasons and identify the current status of those MFN exemptions, as they were measures that wereincompatible with one of the fundamental principles of the multilateral trading system.  Furthermore,
Mexico was grateful to delegations for the replies that had been given and took note.  They had been
very useful, and he was particularly grateful to delegations that had referred specifically to the
questions put by Mexico.  Mexico's questions were general questions and basically they referred to
the status of the exemptions, since there was a cons iderable interest in seeing whether the conditions
for the exemptions still prevailed.  Mexico ha d put such questions with a more general and
straightforward nature hoping for detailed replies giving information on those particular elements.
Nevertheless, some of Mexico's questions had been not fully specified while others had been left
unanswered by Members who had taken the floor an d those who had not spoken.  Mexico's questions
had been more generic in nature precisely because they applied, and had been directed, to allMembers.  For the record and for the purpose of the conclusions that might be reached, Mexico
stressed the importance of having replies to those questions from all Members concerned.  He
reiterated the plead to Members that had already spoken, and those who were yet to speak, for
clarification as to whether the need for the MFN was created by domestic or by external
considerations; whether the inconsistent measure had been established by an active legislation or bystatutory administrative discretionary instrument; and whether the same procedure had to be followed
for the exemptions to be phased out.  It was also  important for Mexico to know whether delegations
were considering the possibility of limiting the scope  of any such exemptions.  Some of the replies
had addressed the latter point, however, he called for further specification of such conditions and
indication as to whether there was a possibility of applying other mechanisms as provided for in the
agreement itself, in order to do away with those ex emptions.  The temporary nature of the exemptions
was important and the time factor went hand-in-hand with the conditions that had created the need forthe exemption.  If the conditions still prevailed, Me xico would want to know how long the exemption
was going to last and whether those countries agree, if they had not indicated the timeframe for such
an exemption, that the exemption was set to last only 10 years.  Finally, Mexico was interested in
knowing whether Members had considered some type  of programme by which the exemptions would
be eliminated/phased out on the basis of some gradual timetable, or whether purely and simplyMembers would wait for the measure to expire within ten years.  His delegation would be grateful to
have further specification regarding those points from all delegations.
53. The representative of Hong Kong, China thanke d to all Members for the replies that had been
given that day and look forward to those that were  to come.  He strongly urged that the replies be
given in writing.  He noted that had delegations had written replies for that meeting, it might havemade it shorter and could have probably allowed for more meaningful interchange.  He expressed
concern that Members did not seem to have received the versions of questions in Spanish.  He found it
unfortunate, to say the least, that deadlines and meeting dates were set without taking into account the
translations of documents which were necessary for many Members, that certainly made for an
inefficient meeting.  Turning to the replies th at had been given, he welcomed the comment of
Liechtenstein that it was looking positively at it s exemption concerning labour movements with aS/C/M/44
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view to withdrawal, that was a very helpful and positive statement.  He thanked Thailand for its
comment on the Thai exemption concerning treatment for U.S. citizens as perhaps becoming
unnecessary in the future and Hong Kong, China look ed forward to that future being an early date.
Although not in response to a question from his dele gation,  he found the Estonian comment that there
would be no need to keep the exemption for more than 10 years very encouraging.Hong Kong, China had asked a general question about  bilateral investment treaties and the need to
schedule MFN exemptions for those.  The comments made had been listened carefully and the replies
would be studied when they come out in the minutes; however, it did seem odd to his delegation that
very many WTO Members had bilateral investment treaties but had not felt the need to schedule any
MFN exemptions relating to them, so perhaps that was an area to look at further.  With regard to
Switzerland's comment on the changing and broade ning scope of the longstanding links with
traditional recruiting areas, if it was changing and broadening it did not seem to me that it wastraditional any longer nor longstanding, perhaps that  was something that needed to be considered.  On
the question of MFN exemptions which purported to grant less favourable treatments to certain
Members, he had listened to the replies of the U.S. and Turkey.  Those replies had basically reiterated
what was in the MFN exemption list without responding to the question that had been posed by his
delegation.  In that regard, he noted paragraph 5 of the Explanatory Note by the Secretariat on theListing of Article II Exemptions (job No. 2061, 15 September 1993) that had never been endorsed by
Members but existed, which stated "…Accordingly a Member undertaking a market access or national
treatment commitment in a sector must accord the stated minimum standard of treatment specified in
its schedule to all other Members.  Therefore, an MFN exemption in such a case would only allow the
Member to extend to certain countries treatment whic h is more favourable than that specified in the
schedule;…"   To his delegation's reading of some of those exemptions that guideline did not seem to
be followed.  In his view that was an area where further consideration was required.
54. In response to Hon Kong, China's query, a representative of the Secretariat apologised for any
delays in the translation process.  He explained that the translation process of the documents had been
initiated as soon as the Secretariat had got the submission, and then the problem faced was thataccording to a General Council decision panel reports always took priority.  Given the quite
substantial load of translations that had to be done, delays were caused with respect to documents like
the questions on MFN exemptions or any documents other than panel reports.  Thus the delay was just
beyond the Secretariat's control.
55. The representative of Korea said his delegation attached great importance to this exercise, as
stated in the preamble of its questionnaires.  He thanked especially those delegates who had replied to
Korea's questions and reserved the rights to ask further questions in the process.  His delegationwondered how the EC would proceed with the three Members that had acceded more recently and its
List of MFN exemptions, whether changes would be necessary.  He also took note of several points
raised by Hong Kong, China and indicated an inte rest in following them up in future meetings.
56. The representative of  Japan also expressed appreciation for the replies.   Although a bit
burdensome, the process offered an opportunity to know information about all of those exemptions to
understand why they existed; that process very much contributed to the following process of
negotiations.  Japan also would have liked to have the replies in writing to better react to them,
however, he had some preliminary reactions.  It seemed that, as stated by others including Canada,
there were different understandings or lack of  common guidance regarding the listing of MFN
exemptions, and perhaps having more discussions on that would be the best way to pursue.  Alsowhen you see the Article II of the GATS it says  that "a Member may maintain a measure inconsistent
with paragraph 1 provided that such a measure is listed…", thus the focus was the measure and,
therefore, its clarity was important.  He sought further clarification from Canada and the EU.  With
respect to Canada's  MFN for compulsory arbitrat ion of investment disputes, his delegation was not
clear as to what was the point of inconsistency between such measure and the MFN obligation.  Withrespect to the EC's explanation of the exemption fo r Nordic cooperation, he believed to have heardS/C/M/44
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that it was non-discriminatory.  If so, it was not clear to him the need for an MFN exemption to cover
a measure which was not really discriminatory. That was just an example, he requested a bit more
information about the rationale behind that exemption.  He found some of the general questions posed
by Hong Kong, China interesting for future discussions  and reserved the right to revert to them at the
following meeting.
57. The Chairman invited those delegations to whom the questions had been directed to respond
to that second round, if they so desired.
58. In response to the question raised by Hong Kong, China on traditional recruiting areas, the
representative of Switzerland  said that Canada was part of the traditional recruiting areas.  What he
had said was that the concept of traditional recruiti ng areas was far from being exclusive in the Swiss
immigration policy and that other criteria, like the level of education or the qualification. were much
more important.
59. In response to the question from Japan about the general exemption covering compulsory
arbitration of investor-states investment disputes, the representative of Canada said that when
developing the list of MFN exemptions his delegation had been very transparent and cautious in theprocess.  Canada had tried to list all measures that resulted in differential treatment.  The exemption
dealing with compulsory arbitration in investor-state disputes had been taken to ensure that noobligation would exist by reason of the GATS to extend to other WTO Members the investor-state
rights which Canada provided through its 26 FIPA s or BITs.  The MFN clause within the GATS was
preceded by the words "With respect to any measure covered by this Agreement…", and some
Members might argue that that would preclude the application of any MFN obligations with respect to
measures, such as investor-state provisions, which were not included in the GATS, however Canadaconsidered that the scope of measures coming within the MFN obligation could include any measure
that resulted in differential treatment.  That would include, therefore, access to arbitration under
investor-state dispute settlement provisions of bilateral investment agreements.  As indicated before,
the conditions which gave rise to that MFN exemption continued to exist.
60. In response to the question from the Republic of Korea on the EU new members, the
representative of the European Communities said that at the time of the completion of the Uruguay
Round Austria had not been technically a member of the EC, although the accession negotiations hadbeen almost completed.  As a consequence of the accession process, Austria had had the obligation to
align its legislation to the Community legislation, what was called the Community Acquis, that was
why Austria in that case had undertaken an MFN exemption vis à vis  existing and future bilateral
agreements with Switzerland, which was the same as the EC-wide MFN exemption listed on page 8.
In response to Japan's question on the Nordic cooperation, he said such cooperation covered a broadrange of activities and included several firms whose activities were to provide financial support to
projects of Nordic interest and cooperation projects between Nordic companies.  The measures
included preferential access for Nordic companies, th at was cooperating to guarantees and loans for
common investments and exports, financial support to common research and development projects, as
well as funding of feasibility studies.  The preferential character of those arrangements required anMFN exemption in the GATS and it was the EC's in tention to maintain those MFN exemptions.  In
response to remarks by Mexico, in particular, and Hong Kong, China; he said that his delegation had
noted the comments on the general problems posed by MFM exemptions but in the EC's view there
was a distinction between the review and the ne gotiations.  The review provided a very useful
background for the negotiations as it gave information, however, it was not the negotiation process.Any  decision which had to be taken belonged to the negotiations, even general issues or series issues
regarding MFN exemptions; the EC wanted to keep th e strict dividing line between the review and the
negotiations.S/C/M/44
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61. Regarding the comment from Hong Kong, Ch ina stating that some Members had not
responded to the question posed in paragraph 2 of S/C/W/137, the representative of the United States
believed his delegation had answered that question.  The question contained in that paragraph stated"we would appreciate the Members concerned to a pprise of the rationale behind such exemptions",
and as indicated earlier in the case of the U.S. the answer was: deterrence of discriminatory taxpractices against U.S. corporations and individuals.
62. The representative of Slovenia indicated that there were different opinions about the coverage
of investments by the GATS.  In his delegation's vi ew the answer was in the negative, however, it was
advisable to settle such question before the negotiations.  The differences in views were evident given
that some countries had included MFN exemptions for promotion and protection of investment, while
others thought investments were not covered and thus had not included MFN exemptions in that
regard.
BUSINESS SERVICES
63. The Chairman turned to the following sector, namely, Business Services.  The exemptions in
that sector had been grouped under the subsectors:  professional services and other business services.
He invited Members to respond to the written questions that had been raised with respect to both of
those subsectors.
64. The representative of Costa Rica said that his delegation had two MFN exemptions: one
relating to professional services and the other relating to advertising.  In the case of professional
services, Costa Rica had a requirement concerning professional colleges making it necessary  to have
a reciprocal agreement in force with the country of origin for a foreigner to join, or foreigners had to
show that Costa Rican citizens might exercise the similar profession in similar circumstances in theircountry of origin.  The purpose of that exemption was to guarantee similar treatment for Costa Rican
citizens as well as to guarantee a minimum of level of treatment for professional services.  Some had
asked whether that would be covered by Article VII of the GATS, he indicated that as stated before
that exemption covered those cases where Costa Rican citizens could carry out professions in similar
circumstances independently of the existing or otherwise of bilateral agreements in that area.  Itrefered more to an autonomous recognition that could be called a "qualification", that possibility
therefore would not be covered by Article VII of the GATS and it was for that reason that the
exemption had been taken.  As to advertising, preferential treatment was given to commercials
coming from Central American countries which were not subjected to a surcharge of 100 per cent
value, and which in any case was not less than 10,000 Colinas (at existing exchange rate about 33
U.S.$) nor higher than 50,000 Colinas (about 166 U.S.$).  The legislation which contained that
measure was Law No. 1758, dated 19 June 1954, known as the "Radio and Television Law" in forceat present.  In answering to questions posed by several Members with regard to that exemption, he
made it clear that the MFN was not the result of a regional agreement and, therefore, was not subject
to the provisions of Article V of the General Agreement on Trade in Services.  The measure stemmed
from a national law which gave a better treatment to nationals from the region, even when those
preferences were in fact from a Central American integration process.  It was the result of adevelopment process rather than a process of progressive liberalization of trade in services as
established in Article V.
65. The representative of Singapore said that questions on the MFN exemptions for legal services
had been received from the EU, Japan, Korea, Australia and Chile.  He thanked those delegations and
proceeded to address the questions together.  The MFN exemption covered all measures pertaining tothe provision of legal services in Singapore.  The exemption was in respect of the right not to accord
immediately and unconditionally to services and service suppliers of any other Members treatment no
less favourable than what Singapore accorded to services and service suppliers of any other country,
as required under Article II:1 of GATS.  The conditions which had created the need for thatS/C/M/44
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exemption continued to prevail.  In view of the stage of development of Singapore's legal services
sector at the time, his country was not ready to remove its MFN exemption for legal services.  The
government had nevertheless taken steps in the direction of achieving a progressively higher level of
liberalization consistent with Article XIX of the GATS.  Since 5 May 2000, when the Legal
Profession International Services Rules, made under part 4(a) of the Legal Profession Act, had come
into force, the government had implemented the recommendations of the legal services review
committee to allow foreign lawyers working in join t-law ventures between Singapore and foreign law
firms to practice Singapore law, except representation before judicial, arbitral and regulatory bodies.
Foreign lawyers in formal law alliances with local law firms would also be allowed to draft legal
documents regulated by Singapore law.  In addition, the issue of recognition of foreign legal
qualifications for admission to the local bar was at the time being reviewed by a committee on the
supply of lawyers chaired by the Attorney General.  The government's overall legal policies were stillin the process of formulation and adjustment.  In the following five years or so, Singapore was not in
a position to accord MFN treatment or make specific GATS commitments on national treatment and
full market access for both domestic and off-shore legal practices.  On the question of the
establishment of foreign law firms in Singapore, he clarified that before the Legal Profession
International Services Rules had come into force the establishment of such firms had been based on acase by case approval given administratively without the need to comply with any statutory rules,
forms or procedures.  But since the rules had come  into force, all foreign law firms and lawyers
practising foreign law in Singapore were required to apply for statutory registration with the Attorney
General.  The detailed rules, forms, requirements and procedures for statutory registration were set out
in part 4(a) of the Legal Profession Act and the Legal Profession International Services Rules madethereunder.
66. The representative of Thailand responded to the question by Australia, Japan and Korea on
auditing services.  Article XV(4) of the Thai Auditor Act 1962, stipulated that persons who could be
registered as certified auditors had to be a Thai national or a citizen of countries in which Thai
auditors were allowed to work.  The last conditi on had given rise to the need to maintain the MFN
exemption based on the reciprocity principle.  As that time, Thailand was in the process of amending
the Thai Auditor Act to the Accounting Professional Act and that blanket would be derestricted.
Thailand did not have any bilateral agreement on auditing with any country.  She responded to the
questions by Australia, EC, Japan and Korea on publishing newspaper.  Article 24 of the Thai
Publishing Act stipulated that persons who coul d be publishers, advertisers, editors or own a
newspaper in Thailand had to have permanent residency in the kingdom and had to be a Thai national
or a citizen of a country with which Thailand had a bilateral agreement.  However, following recentchanges in regulation, foreigners were able to invest in newspaper and publishing services but
representatives of that juridical persons must be Thai citizens for security purposes.  At the time, there
was no bilateral agreements of the one referred to previously.
67. The representative of Brunei Darussalam said that on legal services his delegation had
received questions from Australia, Chile and Japan.  The provision of the exemptions was subject to
the criteria of qualifications in working experiences provided in Brunei's Legal Profession Act.  There
had been periodic reviews on that Act which he hoped to be able to furnish details on at a later stage if
necessary.
68. In relation to the MFN exemptions on page 39 on publishing, the representative of the
European Communities said that the MFN exemption was based on reciprocity, which did not imply
the formal verification of the existence of bilateral agreements between Italy and other countries on
that matter, but only required an evaluation of actual conditions.  Since the evaluation might vary
according to changes in actual conditions, the te st could be a means to promote less restrictive
measures in all those countries which did not allo w foreign citizens to own shares exceeding 49 per
cent of the capital of local companies, or limited shareholders voting rights.S/C/M/44
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69. The representative of Canada indicated that in that sector there were MFN exemptions for two
areas: fishing related services and services incidental to agriculture.  Canada had a question from the
European Commission on the conditions that created the need for the exemptio n on the fishing-related
services.  That exemption stated that licences for access to Canadian waters for a specific purposes
such as the purchase of fuel and supplies, ship repair, crew exchanges and trans-shipment of fish
catches were granted only to fishing vessels from a country with which Canada had favourable fishery
relations based primarily on adherence by that country to Canadian and International conservation
practices and policies.  Under the Coastal Fishery Protection Act, foreign fishing vessels were
prohibited from entering Canadian fisheries waters to conduct fishing and related activities unless
authorized by statute, by a treaty or pursuant to a licence issued by the Minister responsible for
fisheries in accordance with the coastal fisheries protection regulations.  The Canadian government
policy was to authorize the entrance into Canadian fisheries waters and to authorize the conduct offishing and related activities only by foreign fishing vessels from countries that had bilateral fisheries
agreements with Canada and/or countries that cooperated with Canada on fisheries conservation
issues.  The latter criterion was assessed primarily on adherence by that country to Canadian and
international conservation practices and policies.  He noted that exceptions to that general rule were
permitted in case of emergency – force majeure -  and where the specific provisions of bilateral fishery
treaties applied.  The conditions that had created the need for such an exemption continued to prevail.
Turning to the exemption on services incidental to ag riculture, he said that it dealt with the temporary
of agricultural workers.  Canada had a programme with the countries indicated in the list of the
countries to which measures applied, designed to provide for the organized movement of foreign
agricultural workers to Canada to meet the seasonal needs of agricultural employers for specificperiods.  That was primarily during the harvesting and planting of fruit and vegetable crops when an
insufficient supply of Canadian workers was most likely to occur.  The programme was intended to
improve Canadian prosperity through ensuring that crops were harvested in a timely fashion and
maintained job prospects for Canadian workers whose livelihood was dependent on the timely
harvesting of such crops.  The conditions that had created the need for that exemption continued toprevail.
70. The representative of Bulgaria said that his delegation had received several questions after the
8 May, so the answers would be of a preliminary character.  On legal services Japan had inquired
about the reasons for providing national treatment only to the companies established in and the
citizens of the countries mentioned in column 3 of the exemption list.  The answer was that under
Bulgarian legislation, that was the Law on the Bar published in the State Gazette No. 80 of 1991, and
amended in 104 of 1996 and 59 of 1998, barristers could be only Bulgarian citizens fulfilling therequirements of Article III of that law.  At the same time, the Republic of Bulgaria had, for example,
undertaken to align its legislation with that of th e European Union, including with the acquis relating
to legal services.  Regarding the question from Australia on legal services seeking clarification of the
instances in which only some Members of a specific  regional agreement had listed an exemption for
that agreement, specifically the sub-question (a) on their reasons for listing it when other members ofthe same agreement had not, he said that that part of the question was not addressed to Bulgaria but its
partners in regional trade agreements.  The sec ond part of the question was whether those exemptions
could be covered by GATS Article V, his delegati on's answer was that whether the exemption was
covered or not by Article V of the GATS, it did not exclude the possibility of including it in the MFN
exemption list.  Then on medical and dental services, his delegation had a question from Japan onbilateral agreements to which the preferential measures mentioned in column 2 of the exemption list
were applied.  The answer was that Bulgaria had bilateral agreements with the following countries:
Austria, Albania, Afghanistan, U.K., Vietnam, Iraq, Yemen, Cambodia, Cyprus, Slovakia, Turkey,
Hungary, the Czech Republic and Yugoslavia.  The signing of bilateral agreements with other
countries was planned.
71. The representative of New Zealand said that in relation to other business services,
Hong Kong, China and Korea had asked questions in relation to MFN exemption on interpretationS/C/M/44
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services which appeared on page 39 of the Secretariat's compilation list.  New Zealand's MFN
exemption regarding interpretation services derived from a special arrangement whereby New
Zealand employers who were unable to obtain suitably qualified New Zealand residents may recruit
interpreters from Japan to work in tourism related industries in New Zealand for a maximum of two
years.  The arrangement for interpreters from Japan to work in tourism related industries reflected thefact that tourists from Japan made up a substantial proportion of tourist trade.  The exemption did,
however, envisage the possibility of other such ar rangements for nationals of other countries with
whom such arrangements might be desirable.  In preparation for the review his delegation had looked
at where it might be possible to reduce or refine any of the exemptions.  Work on that was in progress
in relation to not only that exemption, he would keep the Council updated of the considerations in that
regard.
72.  The representative of Venezuela said that on the exemption on professional services
questions had been received from Korea; Hong Kong, China; Japan; Australia and Mexico. She
indicated that as her delegation began the analysis of the list of exemptions as a result of the Members'
questions, it was obvious that the common denominat or throughout the exemptions was that column 5
regarding the conditions creating the need for the exemption had been left blank.  The competent
authorities in Venezuela were at that time holding the necessary consultations in order to make a fullrevision of the entire list of exemptions and determine whether there were exemptions which
Venezuela could effectively do away with.  Thus, once those consultations should be concluded, the
results would be given to the Secretariat.
73. The representative of Honduras she said that on a preliminary basis would replying the
question asked by some members regarding the exemption under professional services.  The
conditions that gave rise to such an exemption continued to prevail, as domestic legislation required
the application of the principle of reciprocity to exercise any profession in the national territory.  The
purpose was to ensure competence in the capacity of professionals exercising their profession as well
as to ensure that Honduran nationals receive the sa me treatment in the territory of the other Members.
74.  The representative of Domincan Republic stated the preliminary nature of his replies and
those would be put in writing at a later stage.  Hong Kong, China in question 14 had asked whether
other conditions affected the exercise of the professions indicated. The answer would be that
reciprocity as well as the requirement to have something from the executive power was a measure
very general in countries such as the Dominican Republic and other Latin American countries.
Japan’s question 178 asked whether the description "architects and engineers" referred to legal
services; the same had been asked by Hong Kong, China (question 14) and Chile (question 18).
Obviously that was a mistake in the compilation because he looked through the original version of thelist and that description, as given in the compilation, did not correspond to the sector of legal services.
He requested that it be corrected in a new version.  Japan had asked whether there were any specific
reasons for reciprocity legislation not to be reviewed.  He said that there had not been a change in the
conditions which had given rise to that legislation and thus it remained in force.  Chile asked in
question 15, whether the exemptions listed were co vered by Article VI and VII of the GATS, the
answer was no because his delegation’s understanding was that those provisions, Article VI and VII,
applied to those sectors in which specific commitments had been made.  What was clear however was
that the exemptions listed had been based on the annex on Article II exemptions, where it clearly
stated the procedure to be followed for a review of those exemptions and a decision on whether they
would be phased out in connection with negotiations in subsequent rounds for trade liberalization.Chile had also asked question 16, what were the criteria for granting reciprocity? It was a very simple
criterion, it was established that if a national could exercise the listed profession in another country,
let's say Chile, well then a Chilean in that same profession would be able to exercise her profession in
the Dominican Republic.  Mutual recognition could be a means to make such reciprocity viable.
Finally, Australia had asked whether there were bilateral reciprocity agreements which were the basisS/C/M/44
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for the exemption to the MFN principle, the answer  to that question had not arrived on time, as soon
as the information was obtained it would be distributed to the Council.
75. The Chairman invited supplementary questions from delegations on professional and other
business services.
76. The representative of Hong Kong, China thanked Venezuela for the statement that the
authorities were reviewing the MFN exemptions to see whether any could be terminated before they
replied to the specific questions.  His delegation welcomed both the review and look forward to the
reply.  He noted that in at least two responses  from Singapore and New Zealand and maybe others, it
seemed that it could be possible to reduce the scope of the MFN exemption, in particular Singapore
seemed to suggest that it might be possible to limit the scope more.  Naturally, he had not expected
any Member to volunteer to do so at that stage; he felt those statements pointed towards what Chile
and his delegation had said earlier about the need to look at how Members could amend or eliminateMFN exemptions in the easiest way.  While taking note of the E.U. comment as to what they believed
was appropriate for the review and what should be dealt with in the negotiation, it seemed to him a
pity if delegations could not discuss in a multilateral setting general issues which clearly could not be
discussed only on a bilateral basis because a consensus amongst all Members would have to be
reached on the best way forward.  He recalled Chile suggestion that maybe the procedures that wehave agreed under Article XXI for rectifications and improvements might be a possible way to deal
with improvements and rectifications to MFN exemptions.
77. The representative of Japan thanked delegations for their replies and reserved the right to
revert to the answers at a later stage.  He had provisional follow-up questions for Honduras as well as
Canada.  With respect to Honduras, he understood and appreciated the explanation of reciprocity;however, his delegation’s question was “why reciprocity is necessary for this professional services?”
further clarification on that matter would be very useful.  For Canada, page 38, the MFN on
agricultural workers, he understood that there was a need to address seasonal shortages and some
movement of natural persons.  He sought further clarification as to why the measures should be
limited to the countries listed in the MFN exemption rather than trying to address the problemapplying the measures on an MFN basis.  He endorsed what Hong Kong, China had said about the
need to address certain issues, particularly general issues including the procedure to reduce or
eliminate MFN exemptions, in a multilateral exercise such as the review and to  try to come up with
some conclusions.
78. The representative of Mexico noted that Canada referred to the fact that the fisheries
exemption had its origin in a legislative measure.  Could Canada confirm that the same type of
legislation also existed in the case of agriculture? and could Canada also indicate whether thismeasure was intended to apply for 10 years or give some further comment on the time element.  He
also noted the fact that Singapore had indicated that its government was seeking liberalization in its
progressive liberalization programme that included the exemptions referred to in its answers. Could
Singapore confirm whether they had some type of  programme or timetable? If so, could Singapore
provide that to Members, or was the timetable part of the study still underway in capital?  RegardingThailand's comment on its auditing exemption, Mexico wanted to have confirmation as to whether the
intention of duration would be for 10 years, as it seemed to be indefinite, or what type of timetable
did Thailand have in mind?
79. The representative of Korea thanked the delegates from Thailand, Venezuela and New
Zealand for their kind explanations to his delegation’s questions.  The information given had been
extremely useful and he echoed the suggestion made by Hong Kong, China and Japan on the future
work programme.S/C/M/44
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80. The representative of Chile expressed appreciation to those delegations that had answered the
questions from Chile.  He appealed to those other delegations that had not been able to answer due to
not having received the questions in a language other than Spanish, to be prepared to provide the
replies as soon as possible.  He observed that as the discussion progressed what might have seemed
theoretical at the beginning of the session, the topic of modifying or reducing the scope of applicationof an exemption was taking on more immediate reality.  He added that if the issue were to be
discussed it should not be taken as a matter of negotiations, but simply and exclusively as a discussion
for an exchange of views amongst Members on a given issue.
81. The representative of Singapore clarified that the Singapore Government had implemented
the recommendations of the legal services review committee, and was taking steps in that direction of
achieving higher levels of liberalization.  However, Singapore did not have a formal programme of
progressive liberalization as commented by Mexico.  The Singapore government's policy was still inthe process of being formulated.  That did not preclude future steps being taken to achieve progressive
liberalization.
82. In response to the supplementary question from Mexico, the representative of Canada said
that he needed to verify whether a measure existed for the agricultural programme as did for the
fisheries exemption.  The agricultural workers programme had begun in 1966 with Jamaica andCanada’s domestic labour ministry, Human Resources and Development Canada worked with the
relevant ministries in the countries with which there were agreements. There was no quota there and
the numbers were based on the need of the Canadian agriculture sector.  The airfare was advanced by
the employer who tended to be a Canadian farm owner, on behalf of the worker, and the employer
could recover the airfare with an agreed to rate of reduction.  So he endeavoured to get back withinformation about the specific measure or agreement that was involved.  On the issue about time for
both of those measures, Canada had used the term indeterminate and he could not provide any further
information about the intended duration at that time.   The conditions, which required the need for the
exemption in both these cases, continued to prevail.
COMMUNICATIONS SECTOR
83. The Chairman turned to the next sector which is the communications sector.  There were
three headings under communications:  postal;  telecommunications and audiovisual.  He suggested
to take all three at once.
84. The representative of Bulgaria said that his delegation had two questions on audiovisual from
Japan; they had arrived later than the date indicated so the answers would be of a preliminary
character.  The first question, i.e. we would like to  know how Bulgaria draws the line between those
"countries with which cultural cooperation may be desirable" mentioned in column 3 and those
countries with which this may not – please explain precise terms referring to objective criteria.  The
answers was that the term "desirable" in that co ntext was used to refer to future agreements as
distinguished from already concluded or in the process of conclusion.  Thus, "desirable" would be the
cooperation which would be subject to bilateral agreements.  Such agreements had been concludedwith more than 70 countries, including Japan.  Regarding the agreements and programmes for cultural
cooperation with mutual projects in the field of culture and arts, Bulgaria was open to negotiate such
agreements with all countries.  The second question, i.e. the condition creating the need for the
exemption is cultural, please explain why such cultural objectives cannot be achieved by granting the
same frequency to WTO Members without deviatin g from the multilateral trade framework? The
answer was that the exemption was intended to cove r precisely those forms of preferential promotion
of cultural exchange and traditional cultural links under the listed agreements which may otherwise
may not be covered by GATS obligations.S/C/M/44
Page 30
85. The representative of India said that with  regard to telecommunications services, his
delegation had received questions from Japan; Australia; Hong Kong, China; and Korea.  All those
questions related to the two MFN exemptions taken by India in the Telecommunication services
sector on measures relating to application of different accounting rates of different
operators/countries.  Before giving response to the specific questions posed by the four delegations, itwas necessary to consider the background under which such MFN exemptions had been taken at the
completion of the basic telecommunication negotiations in early 1997.  The Accounting Rate regime,
the central measure in question, had been established under ITU rules and had been the usually
accepted method for termination of international traffic.  The system was one of bilateral agreements
between different administrations to which no MFN principle applied.  Thus more favourable rates
had been negotiated in ITU with some countries as a result of historic or strategic ties and regional
affiliations.  That approach had been duly accepted and recognized.  It was also necessary to recallthat when telecom negotiations had been going on, there had been no clear understanding on the status
of measures like accounting rate, whether it was a GATS measure at all.  While it was India's belief
that GATS did not cover price disciplines like accounting rates, some Members had held the opposite
view.  In fact, in the Reference Paper prepar ed in 1996 there had been an element relating to
accounting rates that had been deleted in 1997.  Moreover, as telecom negotiations had been inprocess one major delegation had tried to bring in significant changes unilaterally in the accounting
rate system.  Thus, there had been a considerable amount of legal uncertainty with regard to the
accounting rates at that time. It had been due to that legal uncertainty that India had taken MFN
exemptions to cover both accounting rates entered in to in bilateral agreements by the Government of
India with neighbouring countries and agreements by VSNL with various foreign operators, as part of
an international agreements.  He pointed out that  those were not MFN exemptions with regard to
market access but relating to accounting rates.  The sole objective had been to avoid the possibility of
disputes being raised against India on that issue in the future.  It was also necessary to recall in that
context that the understanding on standstill on disputes on the subject of accounting rates had come
after India, and some other countries, had taken MFN exemptions.  Thus, the MFN exemptions that
had been taken by India with regard to accounting rates had been just a defensive mechanism and not
discriminatory in its objective.
86. Regarding the specific questions raised by the aforementioned delegations, he said that Japan
(question No. 192) had asked about the special reasons for listing that measure.  That had already
been explained at the outset.  The main purpose had been to avoid the possibility of disputes being
raised against India.  That became inevitable because of the legal uncertainty relating to the concept of
accounting rates from the point of view of GATS.  As indicated already, the Understanding on duerestraint had come after India had taken the exemption and, as pointed out by the Secretariat itself, the
understanding was not legally enforceable by the affected party.  Australia (question No. 13) had
asked as to what additional arrangements were necessary to enable to lift the exemption.  If there was
a legally binding consensus-based decision, not an understanding, to the effect that no disputes would
be raised with regard to the different accounting rates, then India could consider lifting the exemption.Australia had also asked (question no. 15) why India had taken two exemptions, one for international
and other for regional agreements.  He said that in the case of regional agreements, they were
government-to-government agreements; in the case of other agreements, they were agreements
entered into by VSNL, a public sector monopoly, with other governments or carriers.  His delegation
had wanted to be absolutely transparent and mainta in the distinction between the agreements entered
into by the Government of India and those entered into by VSNL.  As to the other question by
Australia (question no. 15), many delegations including Australia had taken exemption for an
indefinite period and thus India had followed a similar approach.  Hong Kong, China (question no.
16) had asked India whether those exemptions would be lifted if and when a satisfactory solution to
the accounting rates would be reached in the review on the subject to be conducted by the CTS.  His
delegation had had a fundamental problem in accepting that GATS could cover price disciplines.  If
there was a clear decision that differential accounting rates as normally practiced in the areas of ITU
were not capable of being disputed in WTO, then India could lift the exemptions. Korea (question 31)S/C/M/44
Page 31
had asked about the significance of the word "including", he needed to consider that further. He
recognised that an MFN exemption should be a spec ific measure and in that sense the use of the term
"including" was not appropriate.  He would sensitise his Government to the concerns raised by Korea
and request them to examine the possibility of refining the language.
87. The representative of Argentina stated the importance his delegation attached to the review of
annex and that it must be carried out in accordance with the mandate given in its paragraph 3 and 4,
that is to say "examine whether the conditions whic h created the need for the exemptions still prevail
and determine the date of any further review".  Argentina had one exemption appearing on page 40 of
Job. 1551, which refered to the provision of satellite facilities of  geostationary satellites operating
fixed satellite services.  That was an exemption covering only one specific measure, that was not a
broad-ranging exemption.  His delegation had received specific questions from Korea, Japan and the
EU and also the general questions by Mexico applying to all exemptions that were underconsideration.  He would address all the questions together in his remarks. The conditions which had
led to the exemption adopted by Argentina were based on contractual obligations concluded by the
Government  with a satellite company, Nahuelsat, for establishing, operating and providing a satellite
system for the Republic of Argentina.  That contract award had been endorsed by Decree 1095 of
1993.  The obligation of the State was based on domestic considerations linked to the development ofa national satellite policy.  Article V, paragraph 14, of that contract between the State and the
enterprise stipulated that third suppliers of satellite facilities of fixed satellite services in geostationary
orbit would not be authorized unless there was reciprocity of treatment with the authority where the
foreign satellite was registered.  In part one of the regulations for satellite services (Resolution of the
Secretary of Communications 3609/ 99), Article 24 dealing with Convention on Reciprocity, it was
stipulated that for the purposes of providing satellite facilities and services by non-Argentine satellites
it would be necessary that the notifying administrations of such satellites would have concluded
reciprocity agreements with the Argentine authorities; those regulations set out the requirements
which those reciprocity agreements had to include.  The reciprocity requirement and thus, the
exemption, covered all countries without any distinction.  Since the exemption had been entered, theRepublic of Argentina had authorized on the basis of reciprocity suppliers of satellite facilities
operating fixed satellite services from the United States, and negotiations were under way with the
following countries: Spain, Canada, Netherlands and Mexico.  As to the development of domestic
satellite systems, he pointed out that the second satellite of Nahuelsat would occupy an orbital
position of 81° W, which would give it a continental coverage and the possibility of offering all types
of services (including DTH) for the U.S. market, in  conformity with the provisions of the agreement
concluded with the U.S.. The Republic of Argentina had not introduced any modifications to therequirements or conditions which led to that exemption taken at the WTO; therefore, it considered
that all the conditions which created the need for the exemption still prevailed.
88. The representative of Pakistan thanked India for giving the background to the maintenance of
those exemptions relating the accounting rates since his delegation was also in the same situation.  His
delegation had received question from Japan, Korea, Australia and Hong Kong, China.  Turning to thespecific questions, first, Japan's question 193: the reply was that there was no special reason to list the
measure indicated other than re-emphasizing the common understanding that the application of
different accounting rates under the international telecommunications regulations would not be
brought to or could not give rise to action by Me mbers under the dispute settlement of the WTO.  As
to Korea's question no. 31: he stated that there were no measures other than the application of thedifferent accounting rates.  Regarding Hong Kong, China's question, that question was viewed as  a
purely hypothetical question as it pre-supposed the outcome of the future review process and a
satisfactory resolution of issues in a specified direction.  Normally, in any meaningful negotiations
and discussion a commitment could not be made beforehand.  In response to Australia's questions 13,
14 and 15, he stated that there was no special reason to list the measure indicated other than re-emphasizing the common understanding that the application of different accounting rates under the
international telecommunication regulations would not be brought to or could not give rise to actionS/C/M/44
Page 32
by Members under the dispute settlement of the WTO.  Secondly, Pakistan was not seeking any
additional arrangements and Article II exemptions had been placed to re-emphasize its position on the
accounting rates.  Thirdly, indefinite exemptions had been sought as it was not proper at that stage to
pre-judge the outcome of future deliberations on that subject.
89. The representative of Turkey refered to the qu estions concerning the postal service exemption
posed by Australia and Korea.  His reply was that since the conditions creating the need to have those
exemptions were eliminated, Turkey would remove them from its list.  Secondly, the questions
relating to the MFN exemption on accounting rates posed by Australia; Hong Kong, China; Japan and
Korea would be replied as soon as possible in the written form.  Regarding Australia's second
question on the telecom MFN exemption (paragraph 15 of document  S/C/W/146), the reply was that
given that the measure had been disposed on general terms, Turkey had preferred to write "indefinite"
in column 4 of the telecommunication services derogation.
90. The representative of Chile addressed the two questions by Japan on the audiovisual sector
MFN exemption.  Chile applied national treatment in the audiovisual sector without any need for a
specific agreement to that effect.  That type of agreements of cinematographic co-production could
encourage greater cultural development in terms of cooperation and co-production in that area.  Since
co-production agreements in the cinematographic area were those which in his country benefittedfrom improved treatment, such co-productions made it possible to draw on public funds for support
and development and other forms of guarantees received by Chilean artists involved in such a co-
production.  Furthermore, the National Television Council had the authority to establish certain
requirements of programming on certain television channels – up to 40 per cent of national
programming.  Such co-productions could eventually be considered as national productions for thosepurposes.  His country wanted to continue to reserved the right of promoting cinematographic co-
productions with those countries with which there was a greater affinity in terms of values and
culture.  For that reason, and for the time be ing, Chile maintained such an exemption.
91. The representative of Norway addressed questions 232 – 235 of Japan relating to the
exemptions on page 64 of job. 1551.  Those were four exemptions on audiovisual services relating to
Nordic and European cooperation.  The Norwegian audiovisual market was characterized by a high
level of openness and it was really functioning as a free market, and that was valid also for Nordic and
European audiovisual markets.   The Norwegian MFN exemptions rested purely on cultural grounds.
They were based on national policy aims concerning Norwegian language and culture, and to
safeguard that Norwegian, Nordic and European measures for cultural aims could be kept within the
framework of the WTO agreements.   Concerning the exemption for transmission of audiovisual
programmes to the public, it ensured the applicability of legal instruments and regulation, such as theEuropean Broadcasting Directive, as well as national broadcasting regulation, aiming at protection of
regional and national, cultural and social objectiv es.  The exemption concerning motion picture and
videotape production and distribution services granted national treatment on audiovisual work through
framework agreements on film co-production, aiming at promoting cultural links.  The market share
of Norwegian movies was limited, only around 10 per cent market share of new movies in Norway.Admittedly some critics would say that was quite enough but, that was not the view that he
represented, on the contrary, his delegation thought that co-production funding might help small
industries to uphold a meaningful production.  On the exemption concerning production and
distribution of cinematographic works and television programmes in the Nordic countries, it aimed at
preservation and promotion of the regional identity of the Nordic countries which shared cultural,lingual and social traditions.  The Nordic audiovisual markets represented small language areas and
they depended on some measures provided by the State.  The exemption was needed in order to
preserve and promote European cultural identity, protection was needed to ensure the viability of
European financial support mechanisms such as EURIMAGES, concerning the Council of Europe,
and the MEDIA programmes concerning the EU cooperation.  As a general remark to all four MFNexemptions, unbalanced market situation in the field of audiovisuals had been the rationale behind theS/C/M/44
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Norwegian MFN exemptions during the Uruguay R ound negotiations.  Faced with increasing levels
of globalization and commercialization, the importance of the kind of support granted by the
exemptions would obviously continue.  All four  Norwegian MFN exemptions in the audiovisual
sectors should therefore be maintained.
92. The representative of Switzerland addressed the questions by Japan on audiovisual services.
On question 240, as to what exactly "common, cultural objectives" meant, common cultural objectives
between Switzerland and other European countries, as well as Canada regarding co-production
agreements, varied in number.  Switzerland's geographical position at the centre of Europe had for
sometime made it possible for it to have close li nks with European neighbours.  Those countries
shared history, values and languages, thus Switzerl and was fully integrated into the European identity.
Common cultural objectives were the promotion of the shared values, particularly from a linguistic
point of view.  The linguistic diversity went ha nd-in-hand with the promotion of cultural diversity
which was characteristic of Switzerland but also of Europe, which brought together a considerable
number of cultural minorities.  Switzerland had always attached great importance to those minorities
and had adopted measures in that direction.  Ling uistic and cultural promotion was done by means of
co-production agreements which were bi- or multilateral as well Eurimage's support measures and
Media promotion measures.  The exemption also applied to radio and television concessions andlicences for which Switzerland reserved the right to conclude bilateral agreements on a reciprocal
basis for the granting of concessions.  That reservation was intended to protect the diversity of
audiovisual services available in Switzerland.  Regarding Japan's second question, no. 241, the
cultural policy objectives in Switzerland were to promote identity values, European identity as well as
linguistic diversity, and by their nature the measures could not be applied ergo omnes.
93. The representative of Iceland addressed the question No. 228 and 229 by Japan on certain
audiovisual arrangements that existed in the Nordic countries. That MFN exemption had been made in
order to maintain the criteria granting benefits from the Nordic entertainment and TV fund NFTF for
production and distribution of audiovisual work produced in the Nordic countries.  The NFTF had
been established by agreement between the Nordic council of ministers, a number of TV broadcastersin all five Nordic countries and the Nordic film in stitutes.  The NFTF was intended to be a permanent
structure.  The agreement discussing the NFTF was renewable every five years.  The NFTF had been
established to preserve and promote the regional identity of the participating countries.  There were
important cultural policy reasons on that issue, the promotion of regional identity was justified
because of language policy reasons and historical links between the countries concerned.  An example
of uniting political factors was the existence of the Nordic council, a common parliamentary assembly
and the Nordic council of ministers acting as an executive organ for the Nordic cooperation.  TheNordic cooperation was exceptionally close in many things of the society, the existence of the NFTF
strengthens the Nordic countries as an export market for all the Members of the WTO.  The small
language area, low production capacity and a limited market of each Nordic country did no make it
possible to maintain a strong audiovisual infrastructure.  The Nordic and the national support teams
acted as a coercing measure and strengthen the cinema and television sectors through increasedopportunities for supplying services in that field, or from the point of view of a domestic industry and
the industry of other WTO Members who exported to the Nordic countries.  In the light of that, the
exemption needed to be maintained and no time-limit could be set.
94. The representative of Sri Lanka
 had received questions from Hong Kong, China; Korea;
Australia; and Japan in respect of MFN exemptions  in the telecommunications sector. She associated
her delegation with the background and the explanation provided by the distinguished Ambassador of
India and the delegation of Pakistan in respect to the measures at stake.  In the telecommunications
services sector, internet especially in internatio nal services, presently two MFN exemptions had been
listed relating to the applications of different ac counting rates, as provided for under the accounting
rate system and the agreements arrived at by the Government of Sri Lanka with that of thegovernments of neighbouring countries of the S outh Asian Association for Regional Cooperation.S/C/M/44
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The rationale for such exemptions:  First, agreements between Sri Lanka Telecom Ltd. and foreign
operators.  Payments for international traffic exchange between countries were made in terms of the
prevailing accounting rate system.  Under that system Sri Lanka Telecom entered into bilateral
agreements with foreign operators for termination of international traffic.  The accounting rate system
was the ITU-recommended system for that purpose, but with the de-regulation of markets, that systemwas expected to change.  At the time that was the existing system,  and therefore the intended duration
of the MFN exemptions would continue to be inde finite.  Second, agreements arrived at between the
government of Sri Lanka and the governments of neighbouring south countries in action taken by
technical committees for telecommunications for special accounting rates and the traffic for the
region.  The conditions, therefore, for those exemp tions continued to prevail and the MFN exemptions
were listed to provide legal certainty.  Regarding question no. 16 by Hong Kong, China, she said that
a satisfactory resolution between the countries had not been reached on accounting rates.  Thoseexemptions could be lifted only after a common basis was agreed, therefore no time-limit for the
exemption could be specified at that juncture.  In general, there was an understanding for the need to
move towards cross-based accounting rates, however, such adjustments had to be done over a period
of time on a planned basis.  Until then, it would not be possible to lift the exemption.  Regarding
question No. 30 by Korea, the neighbour countries were SARC countries namely India, Bangladesh,Pakistan, Bhutan, Nepal and Maldives as set out in the MFN exemptions.  Sri Lanka Telecom Ltd.
was the major operator partially privatized, 30 per cent of the shares were sold to NTT under a
management agreement entered into between the Government of Sri Lanka and NTT for five years.
Competition had been introduced in the fixed access domestic telephone market; once competition
was introduced in the telecommunications market, the agreements with competitors would be coveredby the exemption.  That applied to agreements arrived at between the Members of SARC countries in
relation to intraregional tariff and accounting rates.  Regarding the questions by Australia, No. 13 and
14, the replies and information were given in the MFN list, paragraph 2(b) under rationale for such
exemptions. As to Australia's question No. 15, although there was general consensus to a cost-based
accounting rate system the time-period for introducing a new system could not be given at that stage.Question No. 194 by Japan, the answer to that question had also been given in the information on the
rationale for such exemptions.  Furthermore, the MF N exemptions were listed in order to ensure the
legal certainty.
95. The representative of Colombia had received questions from Chile, Australia, Japan and the
general questions from Mexico.  He could only answer Japan's question at that stage, as to the other
questions his delegation would be sending the replie s in writing in the following weeks.  Japan's
question 302 was: "please specify the names of the countries making up the Andean group countries".The Andean group countries were Ecuador, Peru, Colombia, Bolivia and Venezuela.
96. The representative of the United States had received questions from Korea and Japan with
respect to telecommunications MFN exemptions on page 44 of the Secretariat's compilation.  Korea
and Japan had asked about classification of those services as telecommunication services, and the
answer was that the United States Federal Communications Commission (FCC) regulated thoseservices as basic telecommunication services.  Additionally, Japan asked whether the U.S. was of the
view that such an exemption had any effect, the an swer to that was yes, the MFN exemption was valid
and had effect.  Korea asked to specify what was meant by "certain markets" in column 5 of the MFN
exemption,  the answer was that "certain markets" referred to those markets among others covered by
a satellite that could also cover the U.S.  Korea asked to specify the corresponding domestic law, thatMFN exemption was implemented into U.S. law in th e International Satellite Services Order of the
FCC released on 26 November 1997.  Japan asked to explain the purpose for which the U.S. listed
that exemption, the purpose was clear from the text of the exemption, namely, to ensure substantially
full market access and national treatment in certain markets.
97. The representative of Australia indicated that Hong Kong, China; Korea and Chile had asked
specific questions about the two MFN exemptions re lating to audiovisual services.  He said thatS/C/M/44
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Hong Kong, China had included Australia's audiovisual exemptions in a list of Members which had
listed MFN exemptions that appear to allow those Members to grant less favourable treatment than
the one inscribed in schedules of commitments rather  than more favourable treatment as indicated in
the informal guidelines.  His delegation did not think that Australia's exemptions fell within
Hong Kong, China's list because Australia did not schedule commitments in audiovisual services.Regarding the question by Korea and Chile asking to clarify the exemptions which provided for
Australia to take measures to respond to unreasonable unilateral actions from other Members, the
reason for it was to protect against imposition of unilateral measures on the multilateral system.  That
exemption had never been applied in practice so no examples existed.  Korea had asked to clarify the
exemption which covered the bilateral film co-production agreement and asked which countries were
covered and which had received preferential treatment since 1995.  At the time Australia had bilateral
film co-production treaties with Canada, Italy, Ir eland, Israel and the U.K.; also his country had
memorandum of understanding with New Zealand a nd France.  Co-production agreements had been
completed with Canada, Italy, Ireland, the U.K., New Zealand and France and all of them had been
notified since 1995.
98. The representative of  the European Commun ities said that in preparing the replies his
delegation had tried to cover all the MFN exemptions and questions that had been posed.  A number
of MFN exemptions would be covered collectively.  To be more specific the three exemptions listed
by Austria on page 46, the three exemptions listed by Finland on page 58 and the three exemptions
listed by Sweden on page 69, and related questions, would be addressed together with the EC-wide
MFN exemptions which were listed on pages 55 to 57.  He explained that the EC had actually 8 MFN
exemptions concerning audiovisual services, five of them were EC-wide MFN exemptions and threeexemptions concerned specific Member state situation.  Regarding the two entries on page 55, those
were defensive MFN exemptions.  The first one provided for the possibility to adopt redressive duties
countering unfair pricing practices in audiovisual service trade.  The second entry allowed E.U.
discriminatory actions in the audiovisual works area to counter possible unilateral actions from other
WTO Members.  It gave the possibility to counteract by adopting measures to prevent, correct orcounterbalance adverse, unfair or unreasonable actions by other Members.  His delegation's view was
that those two MFN exemptions should be maintain ed simply because the situation of international
trade in audiovisual services at the time did not justify elimination of those measures.  Regarding the
EC-wide MFN exemptions on page 56, the first entry has been listed in order to protect audiovisual
policy, both at national and community level.  That MFN exemption had been listed to cover the
following measures: a) Preference in favour of European audiovisual works established by Article IV,
V and VI of the Television without Frontiers Directive. b) Preference in favour of Europeanaudiovisual work, established by Article X of the Convention of the Council of Europe among which
seven member states of the E.U.  c) Corresponding  and possible additional national measures.  That
exemption should be maintained in its existing wording.  The measures that had justified the
exemption were still in place and they needed to be kept because measures evolved to keep pace with
the changed technology and with the emergence of new policy priorities.  As to the second entry onpage 56, the rationale behind that MFN exemption was the fact that one of the axis of audiovisual
policy consisted in developing audiovisual cooperation with partners through agreements which were
based on preferential treatment, thus needed a derogation from the MFN clause.  That exemption
covered both national and EC cooperation agreements which had provisions related to audiovisual
services.  The underlying objective of those measur es was to promote and preserve cultural identity
and diversity.  The exemption must be maintained in order to cover existing and future agreements in
the field, taking into account the dynamics of the audiovisual policies of the parties.  As to the first
entry on page 57, the rationale behind that exemption was the fact that support mechanisms were a
pillar in the audiovisual policy, both at national and EC-levels.  The definition of European works
went beyond the EC framework as it concerned a number of countries beyond the EC, therefore,likewise the support mechanisms using that definition had a scope beyond the EC which necessitated
the taking of that MFN exemption.  Again, the underlying objective of the MFN exemption was to
promote and preserve cultural identity and diversity in Europe.  That exemption must be maintainedS/C/M/44
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in order to cover existing and future mechanisms  in the field.  He noted that for the two MFN
exemptions on page 56 and also the first MFN exemption on page 57, he was actually speaking on
behalf of Bulgaria, the Czech Republic, Hungary, Latvia, Slovakia and Slovenia.  Continuing on page
57, he addressed the Member State's MFN exemption concerning audiovisual.  As to the second entry
on page 57, that MFN exemption corresponded to the requirement in Spain to obtain licences for thedistribution of dubbed films of non-community orig in.  That measure aimed at promoting European
cultural values and linguistic policy objectives.  The third entry on page 57 was an exemption
concerning Italy, which was based on reciprocity.  The provision concerning reciprocity in the
participation in companies in Italy did not imply a formal verification of the existence of bilateral
agreements between Italy and other countries on this matter, but simply required an evaluation of the
actual conditions.  In replying to Hong Kong, China which had asked whether that MFN exemption
only concerned Italy, he indicated that the answer was in the affirmative, it did not affect the situationin other Member States.  As to the last entry on page 57 concerning the MFN exemption listed by
Denmark, it was already covered by Iceland as it concerned the NFTF – the Nordic Film and TV
Fund.  He noted that the exemption had been listed in order to maintain the criteria for granting
benefits from the Nordic Film and TV Fund for production and distribution of audiovisual works
produced in Nordic countries.  It had been esta blished by agreement between the Nordic Council of
Ministers, a number of TV broadcasters in all five Nordic countries and the Nordic Film Institute.  It
was intended to be a permanent structure.   The agreement establishing the NFTF was renewable
every five years, the present term run from 2000-2004.  The exemption needed to be maintained and
he reiterated that the NFTF had been established to preserve and promote the regional identity of the
participating countries.
99. The representative of Israel thanked Japan that had posed two specific questions with respect
of Israel's MFN exemption taken for the subsectors of film, video and television programming,
coproduction and distribution services.  Since the questions had been received only the previous week
he reserved the right to supplement with further info rmation in the near future in relation to the second
question.  Under the first question, No. 305, Japan asked to provide the names of the countries withwhich Israel had concluded a co-production agreem ent, those countries were Belgium, Canada,
France, Germany, Italy, Sweden and Australia.  With regard to the second question, No. 306, the
initial  response was twofold: firstly, his delegation was not sure whether the question was within the
scope of the review exercise provided for under paragraph 4 of the annex on Article II exemptions;
and secondly, as a country which was absorbing new immigrants from around the world, the
government placed major importance on cultural policy matters as a means to strengthen and to
promote national and cultural identity background.  Therefore, he stated that the conditions that hadcreated the need for the exemption still prevailed.
100. The representative of New Zealand said that his delegation had noted the two specific
questions of Japan and took account of Mexico's generic questions in relation to the MFN exemption
regarding audiovisual services on page 63 of the Job. 1551.  He said that like other Members in
relation to the audiovisual services sector, New Zealand's MFN exemption was based on culturalgrounds and was geared to support the development of the New Zealand film industry for cultural
reasons and to share such benefits with other countries with similar policies.  In that context and in the
context of the review of the annex on MFN exemptions, his delegation had had a look at whether it
might be possible to reduce or refine that exemption, and stated that New Zealand continued to see a
need to maintain that exemption in its existing form.  He noted, for transparency purposes, that onefurther co-production agreement had been concluded with Italy as provided for under the exemption.
101. The representative of Brazil thanked Japan for the question (No. 208) posed concerning the
exemption on the audiovisual sector.  That MFN ex emption referred to measures which defined norms
for co-production of motion pictures with foreign countries and granted national treatment to motion
pictures co-produced with foreign countries which maintained a co-production agreement with Brazil.It derived from the understanding that audiovisual services played a key role in the promotion ofS/C/M/44
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cultural diversity, which was a key cultural policy objective in his country.  It was listed to preserve
preferences granted to a certain number of countries aiming at promoting both Brazilian works as well
as greater diversity among foreign audiovisual works in the Brazilian market.  The exemption was
needed to cover for preferential treatment that might not be ensured under the GATS and it was the
Brazilian government's intention to preserve it in order to maintain the preferences accorded through
the aforementioned agreements, present and future.  The condition creating the need for the
exemption, therefore, still prevailed.
102. The representative of Canada provided additional background in response to questions posed
by Japan and Australia related to the Canadian exemption on film, video and television programming
co-production.  Co-production agreements provided for the co-production of films and television
programming between the producers of two or more countries allowing them to share the high cost
and risk of film production and providing access to a larger international market for cost recovery.The objective of those co-production agreements was to ensure maximum level of domestic, creative
and technical content proportionate to the financial contribution from each country.  His government
found that over time the declining licence fees paid by foreign and Canadian broadcasters had made
foreign-Canadian productions more difficult to finance domestically and that had encouraged more
international co-production.  At the same time, increasing production budgets also made it difficult tofund audiovisual productions domestically, as well as for co-production partners to raise their
financial participation in their domestic markets.  In the French language television market which was
more limited in size, producers provided more in co-productions particularly with France in order to
develop and market productions in French.  The cond itions that had given rise to that MFN exemption
still prevailed.  He encouraged those Members who were interested in the specific element of theCanadian regime to look at a website:  www.telefilm.gc.ca  which had information on the 44 co-
production agreements that existed between Canada and other countries at the time.
103. The representative of Cuba  indicated that her delegation had  received no specific questions
on the exemption entered under audiovisual services, however her delegation noted the general
questions put by Mexico and question 17 by Hon Kong, China.  In taking that MFN exemption for themeasures indicated in the list Cuba was aiming at promoting cultural exchange among interested
countries.  That objective and the conditions that had created the need for that exemption still existed.
Bearing in mind also the development in the sector, Cuba believed that the duration of the measures
and exemption should be maintained as it was.
104. The representative of the Slovak Republic stated that his delegation had received two
questions concerning audiovisual services from Japan contained in S/C/W/140.Add.1, dated 22 May.
Due to the short period of time he was not in a position to fully reply to those questions that day buthis authorities were considering the questions and would be providing Members with the replies as
soon as possible.  At that stage he made pre liminary comment.  The Slovak Republic had made no
commitments in market access nor in national treatment in audiovisual services during the Uruguay
Round.  The taking the exemption from Article II of the GATS had been aimed at making it clear to
WTO Members that there existed a policy to preserve and promote European cultural identity in theSlovak Republic.  By that the Slovak Republic intended to reserve a right to follow up that policy.
105. The representative of Poland  indicated that in order to provide detailed answers to questions
concerning the audiovisual sector consultations were being held with competent entities of the
administration.  Poland would, as soon as possible, provide Members with answers to written
questions.
106. The representative of Singapore said that two questions had been received from Japan
regarding the MFN exemption on broadcasting.  Unfortunately her delegation was not in a position at
that moment to respond to the questions; the rep lies would be provided to Japan bilaterally the
following days.S/C/M/44
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107. In relation to the MFN exemption in the area of telecommunications, the representative of
Honduras said that the conditions which had crea ted the need for that exemption still prevailed.
Those conditions related to the regional integration of the Central American area, a process under
which the members concerned were still determining the regime for services and investments. In the
course of that process the Members granted certain preferential treatment in order to promote thedevelopment of their infrastructure, to increase efficiency and competitiveness of the productive
sector.  In order to respond to the question by Australia as to why only Honduras had the exemption in
that sector, she said that the accession of Central American countries to the WTO had not happened in
a joint-block manner and that explained the differences  in their specific commitments and also in their
list of MFN exemptions.
108. The representative of Egypt indicated that his delegation had not received specific questions
on audiovisual services.  However, he stated that the condition that had created the need for such an
exemption, namely the need to preserve the Arab culture and identity, still prevailed.  The duration of
that measure should be maintained as stated in the list.
109. The representative of Venezuela indicated that in relation to the MFN exemptions on page 44
of Job. 1551 concerning the Telecommunications sector, Hong Kong, China and Japan had asked
about the content of column 5, which her delegation had already explained.  Australia had asked whyother countries of the Organization of American States had not also entered that exemption, in that
regard she said that the listing had been the result of internal analysis, and that the questions should be
posed to other Member countries of the Organisation of American States that could ascertain why that
had not been the case.  She concurred with the delegate of Honduras who had pointed out that there
were differences between the different regimes for audiovisual services applied by different LatinAmerican countries.  She noted that the scheduling of commitments and listing of MFN exemptions
had not been carried out in a joint manner and some countries had entered exemptions in some
conditions and others had done so in totally different circumstances.  For instance, Chile and Brazil
had been referred to in the Venezuelan list but they did not mention her country in their lists although
they were obviously signatories of the same agreements.
110. The Chairman invited supplementary questions or request for clarification from delegations
on Communication Services.
111. The representative of Korea thanked those delegates who had been kind to answer all the
questions raised by his delegation, especially India, Pakistan and Turkey for their very clear
clarification and also Sri Lanka, Argentina, Australia, and U.S. for their valuable information.  He
sought clarification from Sri Lanka regarding the explanation of the MFN on page 43, Sri Lanka
specifically had mentioned Sri Lanka Telecom Ltd. as beneficiary for the exemption to be sought andduring the intervention it was mentioned not only Sri Lanka Telecom Ltd. but other private
competitors as well as beneficiaries.  He wondered whether the term "benefit", as it had been used,
was the right terminology.  He wanted clarificati on on that matter.  The second clarification sought
was regarding the questions to the EC on the definitions contained on pages 55 and 56.  Korea’s
questions No. 35 and 36 sought clarification as to what was meant by "redressive duties", what wasmeant by "unfair pricing practices" – all those terminologies.  He requested some references if
concrete definitions were not possible.
112. The representative of  Mexico was grateful to all those who had taken the floor in the course
of the session and thanked them for their valuable replies, particularly, India, Pakistan and Argentina
for their detailed explanations on the different cases.  He made it clear that Mexico also saw the wholeMFN exercise as a review and not as a negotiation.  His delegation requested greater precision from
Norway, Switzerland, Egypt, Israel and New Zeal and on the establishment of their exemptions.
Whether those exemptions stemmed from legislation, i.e. question 3 from the Mexican questionnaire,
and if those measures or their elimination would fo llow the same process used for their establishment.S/C/M/44
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It would also be helpful to know whether the possi bility of limiting the scope of those exemption had
been considered given that those measures were inconsistent with the multilateral trading system.  As
stated in paragraph 6 of the Mexican questionnaire, it would be interesting to know why those
delegations believed that certain provisions of the present agreement could not be helpful in
eliminating those exemptions.  In the same way, his delegation wanted to hear more about theduration of those exemptions, was it ten years? or was there some other perimeter in establishing the
time-period?  Was there some sort of programme which would be aimed at gradually eliminating
those exemptions?
113. The representative of  Japan thanked delegations fro the information provided.  He had three
follow up questions and one procedural proposal.  The first question concerned Bulgaria, Chile, E.U.,
Switzerland and many countries about the audiovisual exemptions.  Those delegations said that to
preserve cultural identity one could not obey or be consistent with the GATS Agreement.  Japan'sconsidered it also important to protect cultural identity or to preserve cultural diversity but the
question was how to pursue that non-trade policy objective in a manner consistent with the expansion
of trade.  Also it was very important to avoi d the abuse of protectionist measures.  Japan also
understood that the cultural question was a political or a very tactical question, therefore delegations
should not discuss the matter just in general terms but in a concrete manner.  For example, manycountries made an MFN exemptions for the co-production of audiovisual works and that was trade
distortive.  There was a need to discuss that further.  Maybe one answer to that was to favour giving
national subsidies to promote the cultural industry.  The second point was about Switzerland's answer
about integration.  Switzerland had said that it had a close link or historical cultural link with
European countries, that Japan could understand; however, he wondered why Switzerland did notseek for solutions that were compatible with the WTO and GATS such as economic integration
compatible with GATS Article V.  The third point was about reciprocity which was mentioned by the
EC.  It had been said that in Italy there was a reciprocity question.  Members in the process of the
MFN review should try to discuss on an objective basis.  He suggested that that questions that had not
been addressed during that session should be addressed at the following one instead of providing theinformation bilaterally.  He also felt the need to address general issues that had come up in the
discussion, for instance, the relationship between the MFN exemption and uncommitted sectors at
some point, perhaps at the following meeting.
114. The Chairman clarified that any remaining question or clarification could be pursued at the
meeting on the 5 and 6 July, multilaterally rather than bilaterally.
115.  The representative of Hong Kong, China thanke d all those who have given replies that day
and particularly to the Ambassador of India for his detailed reply on accounting rates.  Perhaps that
reply would  give delegations some incentive to make  some real progress in the third review that the
Council was supposed to be undertaking.  He also welcomed Turkey's comments on the exemption
on postal services, as to the conditions which created the need for it no longer prevailing.  He referred
to questions posed to the EU which he thought had not been specifically addressed in the EU answers.
Hon Kong, China’s had asked in question 17, for transparency purposes, whether the EU couldprovide more information on those specific origin criteria which were mentioned in many of the
entries both for the EU and for other Members wh ich revolve around the EU.  He requested either a
reference to where to find those specific origin criteria or for some other clarification on the matter.
Also on the question relating to Italy’s exemption on page 57, the third entry, what his delegation
wanted to establish was whether all other Members of the EC were similarly caught by that Italianexemption, if not,  why not?  He also pointed out the EU exemptions at the bottom of page 55 which
in the intended duration column had an uncommon entry stating "the need for the exemption will
lapse together with corresponding exemption from  other Members".  It would be interesting to
consider whether that entry was any different from any other exemptions that there were.
116. The Chairman invited supplementary responses.S/C/M/44
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117.  In replying to Korea the representative of  Sri Lanka said that as a matter of fact the measures
covered were those of the Member state.  The measures taken by any competitor were not covered by
the agreement.  She requested the follow up question by Korea in writing in order for her delegation
to provide a more clarified answer.
118. Having heard the answer from Sri Lanka, the representative of  Korea said that given that
private operators would not be subject to that measure because the measure would be only under
government entities, his question had been already answered so there was no need for any further
question.
119. In replying to Korea the representative of European Communities reitaretaed that the MFN
exemptions listed on page 55 were of a defensive nature which meant that they allowed to take
commercial defense measures against unfair trade.  Thus what was meant by a "redressive duty" was a
commercial defense measure against unfair pricing.  "Unfair pricing" was understood as injuriouspricing creating serious disruption to the distribution of European work.  Turning to the questions
raised by Hong Kong, China asking for more information on the specific origin criteria, he gave the
reference to the Community Directive and the Convention.  So the first text to look at was Article
10.1 of the European Convention on TV Trans-frontier, dated 5 May 1989, as revised by the
additional protocol adopted on 1 October 1998; secondly, the EC Directive, the reference was89/552/CEE, Article 6 of that Directive as modified in 1997.  On the second question from
Hong Kong, China regarding the MFN exemptions from Italy, he confirmed that that did not concern
the other members states of the European Union.  Regarding the remarks made by Japan on the need
to preserve cultural identity, he stated that the EC felt it a very important goal, and in addition the EC
also shared the view that the abuse of protectionist measures should be avoided.
120.  The representative of Mexico
 reiterated that his delegation had posed some questions to some
delegations hoping to seek some kind of reply.
121.  The representative of Switzerland noted Mexico’s questions, i.e. Had Switzerland taken into
consideration a reduction in those exemptions or was there some type of timetable for their phasing
out?  The answer was no.  Regarding the other question, whether the system in force made it possibleto obtain the objectives set, the answer was no, as he had stated earlier.  Switzerland had a policy
based on the promotion of certain identities and values and by essence the measures resulting from
such a policy objective could not be applied on an ergo omnes basis.  Regarding the points raised by
Japan on economic integration in Europe, he said that that was a lengthy and complex process and at
present Switzerland was not in a position to achieve integration in Europe which would fall under
GATS Article V.
122. The representative of  New Zealand addressed the questions by Mexico and Japan. He
indicated that those questions nah been noted and that his delegation would revert to them at the
following meeting bearing in mind the scope of th e review in relation to the annex.  He added in
relation to question 3, 4 and 6 of Mexico's questionna ire, that his government had considered whether
it might be possible to reduce or refine the MFN exemption in relation to audiovisual services and
came to the conclusion that there was a need to keep the exemption in its existing from.  He addedthough that his delegation had taken account of the extra questions and would revert at the next
meeting.
123. The representative of  Israel said that his delegation had taken note of the points made by
Mexico.  He believed that at least a partial answer had been provided in the second intervention
regarding the duration of the MFN exemption.  Ho wever, his delegation would be happy to come
back with more informati on at the following session.S/C/M/44
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124. The Chairman stated that the communication sector had been completed.  For the following
sector he proposed that the construction and related engineering services as well as the distribution
services sector be combined into one.  That woul d allow countries both answering and asking to take
account of both sectors since it seemed feasible to effectively combine the two sectors.
CONSTRUCTION AND RELATED ENGINEERING AND DISTRIBUTION SERVICES
125. The representative of Switzerland addressed the questions posed by Japan, Australia, Korea
and Hong Kong, China.  He said that his country's MFN exemption on distribution services, which
applied to the Member states of the European Free Trade Association, was based on Article 16 of the
EFTA convention.  That exemption was intended to ensure that the benefits engendered from trade
liberalization would not be hampered or even nullified  by restrictions relating to regulations in the
distribution sector.  Thus the exemption was a type of natural domestic extension of the trade
liberalization measures for goods.  Since through the EFTA Convention goods could cross bordersmore easily, Switzerland needed to ensure that their distribution within the country until they reached
the final consumer was not subject to any restrictions which would frustrate the exporter and cancel
out the benefits expected from liberalization in trade in goods.  That measure had been limited to
distribution services because it was above all in that sector where work permit restrictions could
possibly hamper the results of liberalization of trade, and had been kept to the strict minimum so as tobe in line with the EFTA convention.  As to why Switzerland, as opposed to other countries, had felt
it necessary to list that MFN exemption, it was simply as a precautionary measure vis-à-vis  the EFTA
convention and also for transparency's sake.  As to the question on Article V of the GATS, he
specified that the EFTA convention was not a services trade liberalization instrument, it only
concerned trade in goods and therefore did not fall under the provisions of GATS Article V.  Themeasure concerned was a specific measure as allowed for under GATS Article II.
126. The representative of  Liechtenstein said that in regard to distribution services, his delegation
had got the same questions as Switzerland.  The arguments explained by Switzerland on its MFN
exemption were also valid for Liechtenstein.  He added that since Liechtenstein had joined the EEA in
1995, the conditions for that exemption seemed not to prevail any longer.  After a further study of theexemption in question by the relevant experts in capital, Liechtenstein would probably soon notify the
withdrawal of that exemption.  Wi th regard to construction and related engineering services, Japan
asked to clarify which Members were not granted rights of commercial presence and presence of
natural persons due to lack of reciprocity.  Liechtenstein had no list of Members that did not grant that
right.  Reciprocity was being checked on a case by case basis.  To the best of his knowledge, since
1995 when Liechtenstein had become a Member of the WTO, no applicant had been denied access
due to a lack of reciprocity rights.
127. The representative of  Venezuela stated that questions had been received from Korea,
Hong Kong, China and Japan and Mexico regarding the exemption for  distribution services.  She
reiterated that the replies would be submitted to the Council either at the following meeting or in
writing.
128. The Chairman invited any supplementary questions or requests for clarifications.
129. The representative of  Hong Kong, China welcomed the comment from Liechtenstein as to the
possible withdrawal of its MFN exemption and noted a slightly different approach from Switzerland.
In that respect the representative of  Switzerland clarified that his delegation had a slightly different
approach to Liechtenstein as Switzerland was not in the European Economic Area.
130. The Chairman announced that completion of the discussion on the exemptions relating the
sectors covered by that session.S/C/M/44
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131. The representative of Japan raised a procedural point.  Since there was a number of Members
who wished to answer the in writing by the next  meeting, perhaps other Members would could also
submit the already given replies in writing.  There were some difficulties in digesting some of the
answers given.  He suggested that Members that were in a position to provide written answers, with
respect to what had been asked for that day's session, made an effort to submit them by the 15 June,which was also the deadline for the questions for the July meeting.  The representative of Mexico
recalled that some questions had been left pending and that the delegations concerned had indicatedthat they would come back with the replies.  His delegation wanted to ensure that those delegations
would have the opportunity to provide their answers to questions posed at the following session.  In
the case of receiving the answer prio r to the July session, he also reserved the right to revert to those
answers with the membership at the July sess ion to clear up any such pending questions.
132. The Chairman observed that the following session would take place on the 5 and 6 July, and
that the indicative date for the tabling of questions was 15 June.  The Council had decided to cover
during the 5 and 6 July session the following remainin g sectors:  financial services, health-related and
social services, tourism and travel-related services, recreational, cultural and sporting and services and
transport services.  By the end of the followin g session, the Council also would need to decide
whether additional meetings were necessary.  He noted Japan's request for consideration in terms offacilitating the questions and answers in writing in advance of the following meeting.  He recalled that
when the Council had set up the process for the review , the specific guidelines indicated that written
questions should be posed three weeks in advance of  the session; oral questions and answers at the
meeting were also possible.  He encouraged Members to give consideration to that request with the
understanding that if delegations were in a position to facilitate written answers based on theirinterventions, they would do so when feasible.
133. The representative of  Hong Kong, China supported the Japanese suggestion that where
Members could put in their written replies by 15 June, if possible.  He also wanted to get confirmation
that there would be sufficient time at the July meeting, or at a subsequent meetings, for Members to
revert to the many replies that had been given that day, the other replies that Members had indicatedwould submit, and any others that might emerge.  There had been a wealth of information given out in
that session which he had not been able to absorb; he wanted to be able to look at that information
once in writing and have the opportunity to revert to it.  The representative of  Mexico supported the
comments made by Hong Kong, China.  He stressed that his delegation would like to have the
opportunity to obtaining replies to some of the questions made by his delegation at the July session, if
possible.  Ha was hoping to get some replies when necessary.
134. The representative of  Egypt noted the insistence of his colleague from Mexico that answers
be given to the Mexican questionnaire.  Egypt considered that the questionnaire had a very wide range
of general questions.  He understood the MFN review to be a process for exchanging information on
specific questions on specific issues, not very general questions.  He suggested to Mexico to formulate
questions on specific issues and addressed to specific countries, as had been done by other
delegations, to facilitate the answering from Members.  The representative of  Mexico  observed that
the annex did not limit in any way the exchange of information, i.e. questions and answers; in other
words, it did not say that the questions had to be closely related or specifically determined.  The
Annex stated that the review should examine whether the conditions which had created the need for
the exemption still prevailed and that was exactly what the Mexican questions tried to establish.
135. The representative of Brazil requested  clarification from the delegate of Mexico to whether
the existing Mexican questionnaire was going to be resubmitted or whether it was also valid for the
second part of the review.  The representative of Mexico   said that in principle that questionnaire
would also apply to the second part of the review si nce it dealt with general issues, and also specific
aspects relating to the exemptions.  That did not exclude the possibility of having certain additions
made to it or it might be amended in the light of the type of questions that might arise by the deadline.S/C/M/44
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136. The Chairman said that the following session would address the sectors that were planned for
it and then, if there was time during those two days, Members could revert to questions and answers
relating to sectors already covered in the June session.
137. The representative of the United States felt that there had been some interesting questions
raised by Chile and others regarding the issue of narrowing MFN exemptions, and whether any new
legal or other procedures were needed.  His delegation wanted to further consider whether those issue
could be addressed in the MFN review.
138. Following up the United States comment, the representative of  Japan said that the procedure
of amending the MFN list was not well developed, as rightly pointed out by Chile.  Some delegations
had already suggested some changes or some improvem ents in their MFN exemption lists, so he felt it
appropriate and useful to have some discussions on those procedural issues.  The representative of
Chile supported the statement made by Japan and also thanked the United States for considering the
questions his delegation and others had raised in the course of that meeting.  Some delegations had
referred to their intention of carrying out certain specific acts, for example, to notify the elimination or
withdrawal of certain established exemptions.  It was then obvious that the modification of MFN Lists
was an issue that the Council had to tackle sooner or later.  Chile was quite flexible as to whether the
MFN review process was the most appropriate place to do so or whether it should be done in theregular session of the services council; but regardle ss of the conclusion in that respect the Council
would have to face that particular question at some  point.  The only purpose of Chile's proposal had
been precisely to provide for an exchange of views amongst Members to see what positions were held
as regards the legal status of the list of exemptions.
139. The Chairman felt that the first session of the review had been completed quite well.  He
observed that when discussing the procedure for the review no one had specified the nature of the
questions.  There were different preferences but every delegation had the right to put a question, both
written as well as oral, without trying to attach too many conditions to it.  He expressed his
appreciation to all delegations and announced th at the following session on the MFN exemptions
review would start at 10:00 a.m., on the 5 July.
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