RESTRICTEDWORLD TRADE
ORGANIZATIONS/C/M/29
24 August 1998
(98-3290)
Council for Trade in Services
REPORT OF THE MEETING HELD ON 22 AND 23 JULY 1998
Note by the Secretariat
1. The Council for Trade in Services held a meeting on 22 and 23 July 1998.  The agenda for the
meeting is contained in WTO/AIR/888.  The delegation of India raised a point under other business
regarding the format of records of meetings.
A. COOPERATION BETWEEN THE INTERNATIONAL TELECOMMUNICATION UNION
(ITU) AND THE WTO - STATEMENT BY THE CHAIRMAN
2. The Chairman recalled that at the last meeting the Council had discussed the draft prepared by
the ITU Secretariat of a cooperation agreement with the WTO.  Although the general view seemed to
be that a Cooperation Agreement in some form with  the ITU would be desirable, it was felt that in
some respects the draft went beyond what was considered appropriate.  As agreed at that meeting the
Chairman had held informal consultations during which Members clarified further their positions.
Subsequently, the WTO Secretariat started consultations with the ITU Secretariat on the basis of theguidance it had received during the informal consultations.  A representative of the WTO Secretariat
reported to the Council on the consultations held with  the ITU Secretariat.  He said that the reaction of
the ITU Secretariat to the Council’s position on the ITU draft had been entirely receptive and that it
appeared that it would not be difficult to reach an agreement with the ITU on the substance of thecooperation.  There was already a substantial amount of cooperation between the two Secretariats, and
the ITU had been particularly active in advising its Members on the implementation and the
implications of the Reference Paper on basic telecommunications.  The ITU Secretariat had also
expressed the desire to submit a draft agreed text to the ITU Plenipotentiary Conference, taking place
between October 1998 and March 1999.
3. The representative of the United States supported a timetable providing for the possibility of
an agreement in the Council on a draft text at its next meeting and for the submission of such text to
the ITU Plenipotentiary Conference.  He argued that such an agreement could support the ITU efforts
on reform in the telecommunication sector and the implementation of the Reference paper.  The
representative of the European Communities reminded participants that the Council had to agree on
the form as well as the substance of an agreement with the ITU and in particular on whether it should
take the form of a formal cooperation agreement or of a simple exchange of letters.  The
representatives of India and Indonesia  said that more work needed to be done on the substance and on
the form of the cooperation with the ITU and that  at the time being they were not in a position to
agree on any timetable.  Mexico argued that a formal cooperation agreement was not necessary and
that a mere exchange of letters and informal cooperation between the two Secretariats was sufficient.
The representative of Hong Kong, China said that  although providing an agreed text for the ITU
Plenipotentiary would be useful, his delegation did no t want to rush into an agreement without having
clarified all its details.  Like other delegations he wondered whether the ITU could explain why a
formal agreement was needed to ensure cooperation between the two organizations.S/C/M/29
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4. The Chairman asked the Secretariat to continue consultations with the ITU Secretariat and to
report back to the Council at its next meeting.  He suggested that the next discussion be based on a
draft agreement which the Secretariat would prepare on the basis of its further consultations with the
ITU Secretariat.  If at the end of the discussion in the Council the draft text turned out to be an
acceptable basis for continuing consultations with the ITU, the Council might decide to transmit it tothe ITU for consideration at its Plenipotentiary Conference.
5. He also suggested that a representative of the ITU Secretariat could be invited to the next
Council to participate in the discussion on the draft cooperation agreement text.  The representative of
India agreed to the Chairman’s suggestions provid ed that the discussion with the ITU Secretariat’s
representative would be conducted in informal mode.  The representative of Hong Kong, China said
that for the next Council meeting he would have liked to see some written text from the ITU.  The
Chairman suggested that the Council take note of th e statements made and revert to this item at its
next meeting.
6. The Council took note.
B. REQUESTS FOR OBSERVER STATUS BY INTERNATIONAL
INTERGOVERNMENTAL ORGANIZATIONS
7. The Chairman recalled that at its last meeting the Council had discussed briefly the
outstanding requests for observer status, whic h were listed in Document S/C/W/19/Rev.1.  In
subsequent informal consultations on this matter a distinction was made between international andregional organizations.  All of the requests were from regional organizations with the exception of
three:  the International Telecommunication Union (ITU), International Civil Aviation Organization
(ICAO) and the International Trade Centre (ITC).  The Chairman suggested that the Council focus on
these three international organizations and postpone the consideration of other requests from regionalorganizations to a later stage.
8. Regarding the request from the ITC, the Chairman recalled that the General Council had
agreed that the ITC, being a subsidiary organ of the WTO, should not be required to formally submit a
request for observer status, but that it should be invited, as appropriate, to those meetings of the WTO
bodies it wished to attend.  The Chairman therefore suggested that the ITC be invited to attend
meetings of the Council on this basis.
9. The Council so agreed.
10. On the basis of the informal consultations, the Chairman suggested the ITU and ICAO be
granted observer status on an ad hoc  basis.  The representative of Japan supported the Chairman’s
proposal and said that every time there was something regarding telecommunications or air transport
services on the agenda of the information exchange exercise, the ITU and ICAO respectively could beinvited to attend meetings of services bodies on an ad hoc  basis.  The representative of India
supported the Chairman’s proposal provided that th ese organizations sent written communications on
the matters they wished to discuss.  The representative of Uruguay asked what was the status of all
other requests including the request from SELA (L atin American Economic System).  The Chairman
replied that all the requests from regional organizations were still the object of consultations taking
place at the level of the General Council.  The Council would revert to such request after an
agreement was reached in the General Council.
11. The Council took note of the statements made and agreed  to grant observer status on an
ad hoc  basis to the ITU and ICAO.S/C/M/29
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C. STATUS OF ACCEPTANCES OF THE FOURTH PROTOCOL
12. The Chairman recalled that the Council adopted a Decision on 19 January 1998 extending the
deadline for acceptances of this Protocol until 31 July 1998.  He drew attention to the note by the
Secretariat dated 22 July containing the latest account of the status of acceptances.  Nine acceptanceswere still outstanding. The Chairman invited those Members who had not yet accepted to give any
information to the Council concerning their acceptance.
13. The representative of Bolivia informed the Council that its capital had ratified the protocol
and that her delegation would shortly be formalising the acceptance.  The representative of Argentina
said that the legislation ratifying the Protocol had been approved by the Congress at the beginning of
July and was sent to the executive, which would be finalizing the acceptance shortly.  Although the
acceptance procedure was at its final stage, he said could not indicate a date when the acceptancewould take place.  The representative of Brazil said th at the process of approval of the Protocol by the
Parliament was near to conclusion and that the delay was due to some last minute procedural
difficulties; there were no substantial difficulties.  He also informed participants that following the
approval by Parliament of a general law on telecommunications, Brazil would be making new
commitments in telecommunications and that its delegation was consulting with the Secretariat onhow to incorporate these new commitments in its schedule.  Responding to a question from the
representative of the United States the representative of Brazil
 confirmed that the new law had already
been approved and was in force, so that the new commitments would apply on a de facto  basis,
pending the finalization of a new schedule.  The representative of Guatemala said that her government
had decided not to ratify the Protocol, as the Guatemala’s general law on telecommunications,
adopted in November 1997, contained a provision inconsistent with the Schedule attached to the
Protocol.  She added, however that her dele gation would be submitting a new Schedule in
telecommunications under the certification procedure in conformity with the new legislation.  The
representative of the United States said that his delegation might seek further information from the
delegation of Guatemala.  The representative of Poland  said that it would be accepting the Protocol
shortly.
14. The Chairman emphasised the importance of concluding the acceptance procedures by the
expiry of the deadline for all those Members who had not yet accepted the Protocol.  He recalled that
failure to do so would mean that those Members who had missed the deadline would not be able to
accept the Fourth Protocol unless the Council took another decision to re-open the Protocol for
acceptance.  The delegations of Japan, Switzerland  and the United States  thanked those delegations
who had informed the Council about recent developments in their acceptance procedures and urged
all those Members who had not yet done so to accept by the deadline of 31 July 1998.  The Chairman
suggested that the Council take note of the statements made.
15. The Council took note.
16. The Chairman informed the Council of the latest situation concerning the status of
acceptances of the Fifth Protocol relating to Financial Services.  Since the last meeting of the Council
Israel and Japan had accepted the Protocol and Uruguay had signed subject to ratification.  He
recalled that the deadline for accepting the Fifth Protocol was 29 January 1999.  Although this
deadline was some time away, on the basis of experience with other Protocols he suggested that
Members concerned expedite their acceptance procedures in order to meet the deadline and avoid the
need for any extensions.S/C/M/29
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D. REOPENING OF THE SECOND AND THIRD PROTOCOLS FOR  ACCEPTANCE
17. The Chairman recalled that at the last meeting of the Council the delegation of the
European Communities made a statement under Other Business requesting that this item be inscribed
on the agenda.  He drew attention to document S/C/W/48 which contained a draft Decision by the
Council to re-open the Second and Third Protocols for acceptance.  The draft Decision stipulated the
re-opening as of the date of its adoption.  The representative of the European Communities introduced
the draft Decision re-opening the Second and Third Protocols, which would allow Belgium to acceptthese protocols.  The representative of Japan welcomed the fact that Belgium was now in a position to
accept the protocols, but expressed concern about the principle of re-opening of protocols.  Hestressed that deadlines have an important function which should not be allowed to deteriorate.  Other
participants agreed that it was a positive development that Belgium could accept the protocols, butsaid that the re-opening should not constitute a precedent.  The deadline for acceptance was set for
30 September 1998, taking into account of the fact that the process of acceptance in Belgium would
be interrupted by the summer break.  The representatives of Japan and the United States
 suggested
amendments to the text of the decision which were incorporated in a new draft.
18. The Council adopted the Decision.
E. PREPARATION FOR NEGOTIATIONS UNDER ARTICLE XIX - EXCHANGE
OF INFORMATION, SECTORAL DISCUSSIONS
19. The Chairman invited participants to refer back to the four main questions which Members
had agreed in order to structure the discussions on the exchange of information: (1) What are the
regulatory authorities, governmental and/or non-go vernmental?; (2) Are there any special or common
problems encountered as regards transparency or the application of the most favoured national
principle?; (3) What are the most prevalent types of restriction on market access or nationaltreatment?; (4) Are there other types of regulation - for example in the areas of licensing, technical
standards or qualification requirements - which commonly restrict trade in the sector?  In addition the
Chairman suggested that Members add a fifth question addressing the main barriers exports face in
the market of other Members.
20. The discussion focused on the following five sectors: Legal Services, Advertising Services,
Architecture and Engineering Services, Computer and Related Services, Environmental Services.  The
Secretariat introduced the papers it had prepared on each of these sectors, in documents S/C/W/43 to 47.
The Chairman also invited participants to raise points concerning sectors discussed at the last meeting
of the Council.
21. The following informal papers were submitted by delegations on the services sectors under
discussion: (a) Legal Services: Australia, Canada , Japan  and the United States ;  (b) Advertising
Services: Australia, Japan  and the United States ;  (c) Architectural Services: Australia , Canada , Japan
and the United States;  (d) Engineering Services: Canada ;  Computer and Related Services: Australia ,
Canada and the United States ;  Environmental Services: Australia , Canada , and Japan .  The delegation
of the United States circulated a submission made to the Committee on Trade and Environment on
Liberalization of Trade in Services and the Environment, dated 21 November 1997 (DocumentWT/CTE/W/70).  Regarding sectors discussed at th e previous meeting of the Council, held on 24 and
25 June 1998, the delegation of Canada submitted two informal papers one on Courier and Postal
Services and the other on Construction Services, while the delegation of Poland submitted an informal
paper on Postal and courier services.  The Chairm an circulated an informal paper containing a
communication from the International Bar Association (IBA) on legal services.S/C/M/29
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22. The Chairman suggested that for the discussion on the exchange of information the Council
follow the same procedure as at the last meeting.  The Council would conduct the discussions in
informal mode and revert back to formal mode at the end of the meeting.  In the formal session the
Chairman gave the following summary of the main points raised during the informal discussions on each
of the sectors:
(a) Legal Services
23. Members noted that international trade in le gal services performs a fundamental role in
facilitating investment and international business tran sactions.  In this respect the growth of the legal
services sector has paralleled the growth of international trade.  As some legal services sectors, which
happen to be the most relevant to international business transactions, are traded more than others,
future negotiations might start by focusing on these sectors.  In particular business demand for cross-border legal services appears to be concentrated in sectors such as home country law, third country
law and international law.  Liberalization of legal services, however, cannot progress without taking
into consideration some fundamental aspects of consumer protection.  For this reason Members
should explore ways of collaborating with professional legal organizations.
24. Some Members have legal services regulatory regimes that are more liberal than stated in
their specific commitments.  The current level of  market openness could therefore represent the
baseline for future discussions and negotiations in this sector.  The classification adopted by the vast
majority of Members in the Uruguay Round is useful and reflects domestic regulatory distinctions. It
was suggested that classification issues relating inter alia  to multidisciplinary practices, the distinct
character of the legal profession and the identification of new legal services sectors (such asalternative dispute resolution, legal training and business counselling) could be addressed in the
Committee on Specific Commitments.
25. It was also noted that domestic regulatory measures can constitute significant barriers to trade
in legal services.  For this reason it would be important to develop Article VI:4 disciplines applicable
to legal services either on a sectoral basis or at the horizontal level.  An important role in the field ofdomestic regulation could also be performed by mutual recognition at the bilateral and at the
multilateral level.  It was suggested that work in the field of domestic regulation should look at, and
take advantage of, principles developed by other international organizations and professional
associations.
(b) Advertising Services
26. Members noted the economic importance of the advertising sector and its role in facilitating
trade across a wide range of goods and services.  While appreciating the generally high level of
commitments in the sector, several delegations drew attention to the limited coverage of various
schedules and to access barriers resulting from local content provisions, joint venture requirements
and other investment-related restrictions.  It was widely felt that trading opportunities could be further
enhanced by more efficient domestic regulation, taking into account the potential for industrial self-regulation and, possibly, some form of international co-ordination.  Some delegations also pointed out
classification problems, including a potential overlap with audiovisual services.
(c) Architecture and Engineering Services
27. Several Members referred to the economic importance of the professions and perceived
barriers to trade for those services.  Some examples of limitations on market access identified in
Members' schedules were:  limitations on the types of legal entity permitted, limitations on foreign
capital participation, limitations on the number of foreign executives, and nationality or citizenship
requirements.  Non-transparent taxation regimes, restrictions on obtaining work permits and visas, andS/C/M/29
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burdensome requirements in documentation were also referred to as barriers encountered by the
professionals.
28. As with other professional services, the importance of domestic regulation, particularly with
regard to qualifications and licensing, was emphasized.  It was necessary to balance the necessity of
such regulation with their effects on trade.  Other related issues taken up were:  compulsorymembership in professional associations, the possibility of technology transfers, the effect of new
technologies on the modes of delivery of those services, and the elimination of MFN exemptions
based on reciprocity.
29. With regard to the sectoral classification, it was suggested that the appropriateness of the
classification in document MTN.GNS/W/120 of "engineering services" and "construction and related
engineering services" needed to be looked at, as well as the proper classification for surveyors or
topographical engineers.
30. Suggestions were made to deal with classification issues in the Committee on Specific
Commitments, and issues relating to licensing re quirements and other Article VI issues in the
Working Party on Professional Services.  However, the procedure for such work needed to be
discussed further in a broader context for all other relevant sectors.
31. A question was raised concerning regulations in those sectors;  i.e., suppliers of architectural
and engineering services generally required temporary presence in the markets in which the projects
were undertaken, while the regulations applied assumed a more permanent supply of the service or
permanent establishment.  It was suggested that this could make the regulations disproportionately
burdensome for the suppliers.
32. The fact that individual or small-scale suppliers constituted the bulk of suppliers for
architectural and engineering services was also a point to be noted, since it could make it more
difficult for them to access foreign markets compared to suppliers of other services.
(d) Computer and Related Services
33. On computer and related services, delegations noted that these services were important not
only to the computer and software industries, but also to a wide range of  other service industries who
rely on computer networks. It was noted that the trade barriers most commonly encountered by
suppliers of computer services were often horizontal in nature, so that future efforts to reduce
horizontal limitations would be beneficial.  Finally, a number of delegations pointed to four areas as
lending themselves to further examination in respect to these services: (1) mode four, movement of
natural persons; (2) regulatory issues, including professional qualifications and issues related to
convergence; (3) classification issues, which should be remitted to the Committee on SpecificCommitments; and (4) issues bearing on e-commerce, which would be relevant the work of the
Council in this area.  There were also observations that, while mode 1, cross-border supply, was
increasingly feasible for computer services, mode 3, commercial presence, would nevertheless remain
important and that efforts to reduce barriers to movement of personnel with the required computer
skills warranted greater attention.
(e) Environmental Services
34. Delegations emphasized the significant benefits arising from the liberalization of trade in
environmental services. Several Members stated that the environmental industry, including
environmental services, played a significant role in their economies and trade was growing from
previously low levels. Some Members described their own regimes, emphasizing liberalizing trends,and drew attention to the barriers their exporters faced in other markets. It was stated that only aS/C/M/29
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limited number of Members had made commitments in this sector. The problem of natural monopoly
in certain segments of the market was noted as was the importance of public sector production,
notwithstanding trends towards privatization.  Several delegations spoke of the important role of
public procurement of environmental services, and expressed the need for meaningful disciplines in
this area.  Some Members pointed to restrictions on investment and movement of natural persons assignificant problems while others noted that many of these restrictions were of a horizontal rather than
sector-specific nature.  A few delegations pointed to discriminatory taxes, subsidies and non-
recognition of foreign qualifications as problems. Barriers to trade arose in some cases because of
restrictions on trade in complementary sectors like construction. Inadequate protection of intellectual
property rights was also cited as a problem.
35. Environmental regulation played an important role in generating demand for environmental
services. But Members emphasized the need to prevent the creation of technical barriers to trade.Regulatory mechanisms which relied on economic incentives and allowed the purchaser to choose the
type of technology were to be preferred to those which specified the type of technology and could bias
choice towards domestic sources. In several cases, regulations were formulated at the central level but
implemented at the local level.  Some noted th at there was no industry-specific regulator and
regulation was carried out entirely at the local level.
36. Some delegations suggested that it may be neces sary to rethink the existing classification of
environmental services contained in the Services Sectoral Classification List (MTN.GNS/W/120).
Others felt that the proposals for changes in classifications should be carefully assessed.  Discussion
also focused on certain scheduling issues, particularly the indication in several Members' schedules
that a particular mode as technically infeasible.
F.
 CHAIRMANSHIP OF THE COMMITTEE ON TRADE IN FINANCIAL
SERVICES
37. The Chairman informed participants that in  his informal consultations a consensus had
emerged among Members on the issue of the chairmanship of the Committee on Trade in Financial
Services.  He said that it was envisaged that the Committee would meet once in 1998 in the fall.  Hethen suggested that the Council agree that Mr. Okubo continue as Chairman of the  Committee for this
year.  This agreement was reached on the understanding that for 1999 Mr Okubo will be replaced by a
new Chairman.
38. The Council so agreed.
G. OTHER BUSINESS
39. The representative of India raised a point regarding the format of records of meetings.  He
requested that for the convenience of members and for the sake of transparency in general, meetings
of the Council should be recorded in greater deta il, attributing views to Members expressing them as
it was done in other Councils.  This point had been raised before by India, and it had become more
important since then, as the Council engaged in preparations for a new round of negotiations andbecause reference had been made to records of meetings in recent dispute settlement proceedings.
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