RESTRICTEDWORLD TRADE
ORGANIZATIONS/C/M/48
17 November 2000
(00-4914)
Council for Trade in Services
REPORT OF THE MEETING HELD ON 6 OCTOBER 2000
Note by the Secretariat
1. The Council for Trade in Services held a meeting on 6 October 2000.  The agenda for the
meeting is contained in document WTO/AIR/1396.  Under Other Business, the Chairman said that hewould make a statement on the cooperation agreem ent between the Interna tional Telecommunication
Union and the WTO.  The representative of India said that he would make a statement concerning
notifications pursuant to Article VII of the GATS.  The representatives of Argentina and Mexico  said
they would take the floor on enquiry and contact points.  The representative of Uruguay said that he
would inform Members of a technical symposium on tourism to be held in November in Uruguay.
2. The Chairman proposed that the Council adopt the agenda as circulated, with the addition of
the items raised under Other Business.
3. The Council so agreed.
A. REVIEW OF THE UNDERSTANDING ON ACCOUNTING RATES IN
TELECOMMUNICATIONS
4. The Chairman recalled that, at its last meeting, the Council had held discussions on this
agenda item on the basis of a note by the ITU, circulated as Job No. 2974, on reforming the
accounting rates system.  The note was quite informative of the status of the ITU work in this area and
had generated a useful discussion.  A representative of the ITU Secretariat had made a statement in
response to the question raised by the delegation of the European Communities on whether the issue
of accounting rates would be discussed by the World Telecommunications Standardization Assembly
at its meeting in September 2000.  After the clarification provided by the ITU Secretariat, it wasagreed that the Council would revert to the item in  the light of the outcome of the Assembly meeting.
As the Assembly meeting was still on-going on 6 October, he asked the representative of the ITU
Secretariat to provide the Council with any information he might have on the outcome of the
Assembly meeting in relation to accounting rates.
5. A representative of the ITU Secretariat explained that, as described in the note circulated as
Job No. 2974, the guidelines on transitional arrangements towards cost-orientation for developing
countries contained in the Annex to Recomme ndation D-140 were not approved in December 1999.
The issue was passed on for consideration by the World Telecommunications Standardization
Assembly.  The Assembly met once every four years and was still in session at that moment, so that
he could only provide Members with a progress report.  He informed the Council that he issue wasbeing considered by Committee 6, and was supported by a majority, but not all of the Committee
members.  The Chairperson had recommended that the Annex be approved, but the issue was up for
discussion by the plenary meeting that same day.
6. The Chairman suggested that the Council revert to this item in December, when the final
report from the ITU would be available.  The repres entative of Mexico agreed, but pointed out that theS/C/M/48
Page 2
reasons for the Understanding were not confined to the issues under consideration in, and the outcome
of, the ITU Assembly.
B. NOTIFICATIONS TO THE COUNCIL PURSUANT TO ARTICLE V OF THE GATS
– STATEMENT BY THE UNITED STATES
7. The Chairman suggested that, due to time constraints, Members agree to postpone discussion
of this agenda item until the following meeting of the Council.  The Council agreed to revert to this
item at its next meeting.
C. COMMITMENTS ON BASIC TELECOMMUNICATIONS  –COMMUNICATION
FROM BRAZIL
8. The Chairman recalled that, at the last meeting, the delegation of Brazil had made a
submission, contained in document S/C/W/160, concerning their revised commitments in basic
telecommunications.  Since the document had been submitted only shortly before the meeting,delegations had not been able to express any position.  The Council had taken note of Brazil's
submission and statement and had agreed to revert to the matter at that meeting.
9. The representative of Brazil explained that, since the last meeting, his delegation had engaged
in consultations with interested Members on his country's new schedule of commitments in basic
telecommunications, had not been able to provide all the clarifications which had been sought andwould proceed with consultations with any interested  Member.  In his intervention at that meeting, he
wished to focus on the procedure that would allow Brazil to bind its basic telecom commitments and
maintain the MFN exemption listed during the negotiations on the Fourth Protocol.  As explained at
the last Council meeting, Brazil was not in a position to ratify the Fourth Protocol, so that the only
procedural solution possible for Brazil involved a decision by the Council on their MFN exemptiontogether with the certification of their schedule.  An eventual decision on the MFN exemption would
take account of the fact that, notwithstanding that the Fourth Protocol did not enter into force for
Brazil, the MFN exemption listed in the Protocol had been submitted within the specified period of
time, in accordance with paragraphs 3 and 6 of the "Decision on Commitments in Basic
Telecommunications" contained in document S/L/19, and that the MFN exemption had also beenwithin the legal terms specified in the Annex on Basic Telecommunications according to which the
listing of exemptions was not contingent upon the submission of specific commitments.  The Council
would therefore agree that Brazil's MFN exemption would take legal effect.  As concerned Brazil's
new offer, a certification procedure would be carried out in accordance with the procedures set out in
document S/L/84.  The entry into force of the schedule would be made contingent upon its ratification
by the Brazilian Congress.  Additionally, the de cision on the MFN exemption could specify that the
entry into force of the exemption would be con tingent upon the entry into force of the specific
commitments, i.e. upon their ratification by Brazil.  Such a procedure would avoid the possibility that
only the MFN exemption would come into force in the event that the offer of specific commitments
did not.  He added that such a procedure would not constitute a precedent in terms of listing MFN
exemptions, for it would refer to a peculiar case, limited to the context of the negotiations on basic
telecommunications.
10. The representatives of Korea, Mexico
 and Hong Kong, China  expressed interest in being
included in Brazil's consultations.  The representative of the United States said that his delegation
looked forward to receiving written replies to the questions raised about Brazil's schedule and would
revert to the procedural suggestion.
11. The representative of Brazil said that his delegation was open and available to engage in
consultations with any interested Members.S/C/M/48
Page 3
12. Concluding the discussion on this item, the Ch airman  said that the Council would revert to
the issue at its next meeting.
D. WORK PROGRAMME ON ELECTRONIC COMMERCE –UPDATE OF THE
REPORT TO THE GENERAL COUNCIL (S/L/74)
13. The Chairman recalled that, at the meeting of the General Council on 17 July 2000, it had
been agreed that the General Council would "invite th e four subsidiary bodies; i.e. the Goods, Service
and TRIPS Councils, and the Committee on Trade and Development, to pick up where they had left
off in their work on electronic commerce within their respective spheres of competence, identify
cross-sectoral issues, and report back to the General Council at its regular meeting in December
2000".  He accordingly invited Members to revert to the Progress Report of the Services Council to
the General Council contained in document S/L/74 and dated 27 July 2000 to see whether they wished
to add anything to what was already in the report.  He felt that there was no need to repeat any of thestatements in the report, nor to re-open any of the issues identified for discussion unless there was
something new to add.
14. The representative of the United States said that the Services Council Progress Report was
comprehensive and valuable on how the GATS applied to e-commerce;  she looked forward to the
report being discussed in the General Council so that Members could continue their work along thelines identified in the report.
15. The representative of Uruguay stressed that the mandate from the General Council was
limited to three elements:  resumption of work in the subsidiary bodies' respective areas of
competence; identification of cross-sectoral i ssues which were beyond the competence of the
subsidiary bodies; reporting back to the General Council in December.  With respect to the firstelement, he suggested that the Service Council refe r in its report to those paragraphs in document
S/L/74 where Members had agreed that more work was necessary, and he mentioned in particular
paragraphs 5, 6, 20, 22 and 25.  The issues identified therein required further work, and while the
Council's examination would not be completed by December, Members could report to the General
Council that they agreed that further considerati on should be given to those issues.  With respect to
cross-sectoral issues, he suggested that Members identify more closely what such issues might be in
order to help discussions in the General Council.  He added that his delegation was flexible and could
go along with a consensus.
16. With respect to the first element of the General Council mandate, the representative of
Australia wondered what the resumption of work implied, whether a new Work Programme on e-
commerce or discussion of cross-sectoral issues.  She observed that, in order to resume work andbefore launching a new Work Programme, it would be useful that the General Council examine thereports submitted by the subsidiary bodies in the summer of 1999 and provide further guidance
following its examination.  As concerned the identifi cation of cross-sectoral issues, her delegation had
recognized four potential good candidates, namely the goods versus services classification issue,
customs duties, certain competition issues, which might only be partially relevant to the Services
Council, and technical assistance.  Her delegation had also identified nine issues in the ProgressReport as requiring further consideration.  She wondered if Members should report to the General
Council in December that the report in document S/L/74 still reflected Members' thinking and sought
guidance on how cross-sectoral issues could be identified.
17. The Chairman suggested that, in view of the fact that the Progress Report in S/L/74 still
reflected the thinking of the Services Council, that different views had been expressed with respect to
cross-sectoral issues and that the General Council had not yet discussed the subsidiary bodies'
progress reports, he would make an oral report to the General Council.S/C/M/48
Page 4
18. The representative of Brazil stated that the mandate for the Work Programme was the one
received from the General Council in September 1998.  In his delegation's view, the July remit to the
subsidiary bodies to resume their work meant conti nuing with their earlier work, without adding new
elements.  With respect to discussions on cross- cutting issues, he observed that some Members
wanted these taken up in the General Council, othe rs in a task force under the General Council and
others in still other fora.  The Services Council Progress Report in S/L/74 did contain inconclusive
issues, some of which, however, were not cross-cutting, such as the distinction between modes 1 and
2.  He therefore felt that it was not necessary to wait for the identification of cross-cutting issues
before the Services Council could continue its disc ussions.  He acknowledged that not much progress
could be made by December, and was therefore in favour of the Chairman reporting to the General
Council, in his personal capacity, that Members agreed that the issues which they had identified as
needing further examination were still before them and continued to require further exploration.  Hesuggested that the identification of cross-cutting issues be taken up by the General Council on the
basis of the progress reports submitted by the subsidiary bodies, also in light of paragraph 1.2 of the
Work Programme, which mandated the General Council to take up consideration of any trade-related
issue of a cross-cutting nature.
19. The representative of Japan was uncertain about leaving the task of identifying cross-cutting
issues to the General Council.  His delegation would give more thought as to what these were, but felt
that the increased participation of developing countries, regulatory and classification issues were
cross-cutting matters not confined to services, that could be considered by a Task Force if the latter
was eventually established by the General Council.
20. A representative of the WTO Secretariat noted that Members had identified several issues as
requiring further examination.  It was clear that substantial work on services was still outstanding and
unlikely that much progress could be achieved by December.  With respect to identifying cross-
cutting issues, he observed that the problem existed of defining what these were.
21. The representative of the European Communities concurred that the Services Council
Progress Report was valuable, comprehensive and reflected the state of play at the time as well as at
present.  With regard to cross-cutting issues, his delegation's view at that stage was that only
development-related matters were horizontal issues.  He said that that more discussion was clearly
necessary on a number of issues, that Members could continue their work after December and that
they needed to organize their future work.
22. The representative of Hong Kong, China shared the views expressed by the representative of
Brazil and said that his delegation had nothing to add to the Progress Report for the purpose of
reporting to the General Council.  He said that identifying horizontal issues would be difficult at thatstage, but concurred with the European Communitie s with respect to development-related matters
possibly being horizontal issues, whereas he felt the issues identified by the representative of
Australia were primarily of a services nature.  The representative of Australia explained that the nine
issues her delegation had identified as requiring further work all had a services connotation, but thatthe four that she had mentioned as possible cross-cutting issues had broader connotations andcontained both services and other elements.
23. The Chairman suggested that he draw up, in his personal capacity, a report of the discussion
to be delivered orally at the General Council meeting in December.  The representative of Hong
Kong, China asked that the report reflect the fact that on certain elements, such as horizontal issues,
no agreement existed.  The representative of India asked that the report not assimilate the absence of a
statement with lack of interest and that the Chairman inform Members of the content of his oral
report.  The Chairman said that the report would reflect the general mood of the discussion and that he
would share it with Members.S/C/M/48
Page 5
E. ARTICLE II (MFN) EXEMPTIONS –GENERAL ISSUES ARISING FROM THE
REVIEW
24. The Chairman recalled that, at the special meeting of the Council on the review of MFN
exemptions in July, it had been agreed that this it em would be inscribed on the agenda of the regular
meeting of the Council, to provide an opportunity fo r delegations to raise issues of a general nature
that had arisen during the review.  Several delega tions had felt that such issues would be more
adequately discussed outside the scope of the review itself.  It had also been agreed that those
delegations who had requested the inscription of the item on the agenda would make submissions to
the Council on the issues they wished to discuss.  He drew delegations' attention to the paper
submitted by the delegations of Hong Kong, China; Japan and Korea and distributed as document
S/C/W/173.
25. The representative of Japan introduced the paper on behalf of his own delegation and the
delegations of Hong Kong, China; and Korea.  He said that MFN was one of the most important
pillars for achieving liberalization in the multilateral trading system and one of the essential principles
of the WTO Agreement.  The review of MFN exemptions had succeeded in providing Members with
detailed information on many, if not all, measures, and would be an important contribution into the
negotiations on the elimination of MFN exemptions;  some Members had also voluntarily expressed awill to remove some of their exemptions.  Several systemic matters had been raised during the review
and it had been decided to discuss such issues in the regular meetings of the Council for Trade in
Services.  The paper by his delegation and the delegations of Hong Kong, China; and Korea was
intended as a contribution to the discussion and contained their preliminary thoughts on a number of
issues.  The submission, which was self-explanatory, identified a number of issues as arising from thereview:  the relation with bilateral investment agre ements;  measures related to recognition; measures
related to maritime transport services; procedure on autonomous reduction or elimination of MFN
exemptions; clarification of the term "indefinite" in the column of "Intended duration"; reciprocity;
regional co-operation; development policy; policy for the promotion of culture; measures taken by
local governments; MFN exemptions which purport to grant less favourable treatment; specificity oflisted measures; and guidelines for MFN exemptions.
26. The representative of Chile said that he agreed with most of the content of the paper by Hong
Kong, China; Japan and Korea.  The review of MFN exemptions had provided Members with detailed
information and had prompted the examination of important general issues which required further
analysis, such as those identified in the submission.  His delegation had also raised questions and the
main one was a clarification on the legal nature of  some exemptions, so that the Council be in a
position to carry out a legal procedure to limit the scope or eliminate such exemptions when they didconform with the MFN obligation.  He asked that this item be kept on the agenda of the Council.
27. The representative of New Zealand agreed with the general sentiment of the paper,
particularly with the statement that the MFN obligation was one of the most important pillars for
liberalization in a multilateral trading system.  A range of general and legal issues had come into
perspective in the course of the review, which merited further discussion.
28. The representative of Slovenia said that  the review had raised a number of general issues and
questions which needed to be clarified.  He noted that a limited number of Members only had listed
measures from bilateral agreements as MFN exemptions, whereas others with similar agreements had
not done so as they believed that such measures did not fall foul of the MFN obligation.  The
submission by Hong Kong, China; Japan and Korea identified exemptions relating to bilateralinvestment agreements and recognition measures;  his delegation had also identified measures relating
to social security, labour agreements and the prevention of double taxation as issues requiring further
clarification.  He concurred with paragraph 22 of the paper on the usefulness of clarifying the
guidelines for the listing of MFN exemptions.  He was in favour of more systemic discussion in theS/C/M/48
Page 6
Council and wondered about the possibility and usefulness of the Secretariat preparing a paper
seeking to  clarify legal and technical issues related to the listing of MFN exemptions.  A
representative of the WTO Secretariat said that he wished to give further consideration to the request.
29. The representative of Norway said that the i ssues identified in the submission by Hong Kong,
China; Japan and Korea merited further discussion.  She said that MFN exemptions might be used to
circumvent the intent of the GATS, and in principle they should be as few as possible.  There were,
however, legitimate concerns, including in areas such as culture, which Members should be able to
secure through MFN exemptions.  Even if MFN exemptions were part of the GATS system, she
concurred that exemptions granting less favourable treatment were not in line with the Agreement, nor
should exemptions be listed for areas not covered by the GATS.  She said that it would be useful if a
legal procedure for the removal of exemptions were set up.  She welcomed further discussion of this
agenda item.
30. The representative of Mexico said that MFN exemptions should be terminated as soon as
possible.  He was interested in continuing discussion of the issues, and offered preliminary comments
on the submission by Hong Kong, China; Japan and Korea.  He said that the review had been useful in
providing detailed information, but had not helped determine if the conditions which had created the
need for the exemptions still prevailed, and, in this regard, he expressed support for paragraph 23 ofthe paper.  He stressed the great importance of item E;  if an exemption contained no specific date, as
was required by paragraph 5 the Annex on MFN Exemptions, then the exemption in question had to
be removed at the latest 10 years after the date of its entry into force.  He noted the importance of
reaching a common understanding with respect to the issue mentioned in paragraph 8 of the
submission, as investment per se  should not be confused with services trade under the GATS, which
might or might not be investment-linked.  MFN exemptions unnecessarily covered bilateral
investment agreements, and he said that the Council should analyze if Members needed such
exemptions, or else they should be eliminated.
31. The representative of the United States reiterated what he had stated during the review,
namely that his delegation held a different view on the role of MFN exemptions, which was both trade
and non-trade-related.  By way of preliminary comments, he said that not all the issues mentioned in
the submission were systemic, as therein suggested, but rather concerns to be reviewed with
individual delegations.
32. The representative of Australia said that the position of her delegation was contained in the
minutes of the second meeting of the Council devoted to the review of MFN exemptions.
33. The representative of the European Communities observed, in a preliminary manner, that the
review had highlighted that legitimate policy considerations existed at the time which had required the
listing of exemptions, and referred in particular to paragraph 18 of the submission.
34. Summing up the discussion on this agenda item, the Chairman said that several delegations
had made preliminary comments and concluded that th e Council would revert to this item at its next
meeting.
F. REQUESTS FOR OBSERVER STATUS
35. The Chairman drew Members' attention to two new requests for observer status in the
Services Council, by the Universal Postal Union and the Gulf Organization for Industrial Consulting,
contained in Job Nos. 5621 and 4913, respectively.  He suggested that, in view of the fact that
Members were still awaiting guidance from the General Council with respect to the issue of
observership, Members decide that, pending the outcome of such discussions in the General Council,any future requests for observer status would be circ ulated to Members, added to the list contained inS/C/M/48
Page 7
document S/C/W/19/Rev.4, but not inscribed in the agenda of the Services Council.  The
representative of Pakistan expressed support for the Chairman's proposal.
36. The Council so agreed.
G. OTHER BUSINESS
37. The Chairman recalled that, at its meeting on 26 May 2000, and after several months of
discussion in the Council and consultations with the International Telecommunication Union (ITU),
the Council for Trade in Services had adopted the text of the cooperation agreement between the ITU
and the WTO.  Subsequently, the text had been sent to the ITU Council for adoption.  He informed
Members that the ITU had officially transmitted to the Director-General of the WTO that the text had
been adopted by the ITU Council at its annual session in July 2000.  In accordance with WTO
procedures, the agreement was before the General Council for final approval.
38. The representative of India stated that Article VII of the GATS required, inter alia , Members
who were parties to agreements or arrangements for recognition of qualifications to inform the
Council for Trade in Services whenever a new recognition measure was adopted or an existing one
significantly modified.  Members were also required to promptly inform the Council, as far in
advance as possible, of the opening of negotiations on an agreement or arrangement of that type, in
order to provide adequate opportunity to any other Memb er to indicate their interest in participating in
the negotiations before these entered a substantive phase.  It appeared that not all Members were
complying with the notification requirements unde r Article VII:4.  While Members did inform the
Council on completion of such agreements/arrangements, it was understood that copies of the
agreements were not even forwarded to the Secretariat and hence were not available to Members.  It
was observed that, in many cases, no advance information was provided regarding the opening ofnegotiations on the issue, and as a result interested Members were not given adequate opportunity to
participate in such negotiations.  In his delegation's view, there had to be prompt compliance with the
notification requirements under Article VII:4 (a), (b) and (c).  Besides, the full texts of the relevant
agreements/arrangements entered into by Members had to be made available to the Secretariat and
circulated to all Members for information.  His delegation proposed that the Council for Trade inServices monitor implementation of those requiremen ts, with a view to ensuring that the obligations
under Article VII were fulfilled.  Such recognition agreements/arrangements were all of paramount
importance for facilitating the movement of natural persons, especially professionals, and there had to
be full transparency in the process, as well as adequate opportunity for interested Members to join in
such negotiations.  The representatives of Pakistan and Egypt
 fully supported India's statement.
39. The representative of Uruguay informed Members that, in the framework of the Inter-
American Tourism Congress of the Organization for American States (OAS), a technical symposium
on "Sustainable development in tourism in the face of the challenge of globalization" would be held
on November 27 and 28 in Punta del Este.  His delegation was available to provide further
information, which could also be obtained from the web-site of the OAS at the address
www.oea-uruguay.org.ug
40. With respect to the Secretariat compilation list of enquiry and contact points in document Job
No 4427/Rev.1, the representative of Mexico noted that his country's information had been changed
and was correct.  The representative of Argentina said that his authorities had established only an
enquiry point and no contact point, and asked that the information in the Secretariat note be changedS/C/M/48
Page 8
accordingly.  A representative of the WTO Secretariat explained that the distinction between enquiry
and contact points had not been made in the note because the relevant indication was not always clear
in Members' notifications, but a revised version of the note would differentiate between enquiry and
contact points, as well as explain what each was.
41. The Council took note.
__________