RESTRICTEDWORLD TRADE
ORGANIZATIONS/C/M/34
16 April 1999
(99-1518)
Council for Trade in Services
REPORT OF THE MEETING HELD ON 22 AND 23 MARCH 1999
Note by the Secretariat
1. The Council for Trade in Services held a meeting on 22 and 23 March 1999.  The agenda for
the meeting is contained in WTO/AIR/1036.  Under other business, statements were made by the
delegation of Guatemala on the certification of its schedule in basic telecommunications, thedelegation of Hong Kong, China on a paper on “Systemic issues arising from Article V of the GATS”
and by the delegation of Switzerland on a paper on “Preparing for the GATS 2000 Negotiations”.
INSTALLATION OF THE NEW CHAIRMAN OF THE COUNCIL
2. The Chairman informed delegations th at the General Council had agreed that
Mr. Stuart Harbinson, permanent representative of Hong Kong, China should serve as Chairman of
the Services Council for 1999.  He proposed that the Council elect Mr. Harbinson as its new
Chairman.
3. The Council so agreed.
4. Ambassador Akao of Japan, who had served as Chairman of the Services Council for 1998,
thanked delegations for their work and for the spirit of collaboration demonstrated in the year of hischairmanship.  He underlined the numerous achievements of the Services Council and of its
subsidiary bodies in the past year, including the completion of the information exchange program in
the context of the preparation for the next round of services negotiations, the beginning of the work on
electronic commerce, the entry into force of the Fift h Protocol and the approval of the Disciplines on
Domestic Regulation in the Accountancy Sector.  He also extended thanks to the Secretariat for its
assistance.  The new Chairman of the Council, Mr. Harbinson, extended the thanks of the Council to
Ambassador Akao for his services as a knowledgeable, skilled and committed Chairman over a year
of very intensive and productive work by the Coun cil.  Several delegations intervened to thank
Ambassador Akao for his excellent work as Chairman and to welcome Mr. Harbinson as new
Chairman of the Council.
A. ELECTRONIC COMMERCE – IMPLEMENTATION OF THE PROGRAMME ADOPTED
BY THE GENERAL COUNCIL
5. At its last meeting, on 9 February 1999, the Council had a substantive discussion on four
items of the work programme, namely, domestic regulation, market access commitments on electronic
supply of services, national treatment, and access to and use of public telecommunications networks
and services.  The Chairman noted that the items for discussion by the Council at this meeting were
competition (Articles VIII and IX); protection of privacy and public morals and the prevention of
fraud; and customs duties.  Discussion of these items would complete the first part of the Council’s
work programme on electronic commerce.
6. Before starting the discussion on the items of the work programme, the Chairman drew
attention to three communications:  from the European Communities and their Member States,  fromS/C/M/34
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Japan and from the United States  on the work programme on electronic commerce, which were
contained in documents S/C/W/98, S/C/W/104 and S/C/7 respectively.  The three delegations
presented their papers to the Council.  The paper by the European Communities focused on domestic
regulation and on the relationship between Article VI of the GATS and electronic commerce, whilethe papers from Japan  and United States
 contained broader views on the relationship between current
WTO agreements and electronic commerce.
7. The Chairman then invited delegations to address the remaining elements of the work
programme.  The discussion was held in informal mode.  On the basis of the informal discussions the
Chairman provided the following su mmary under his own responsibility:
(a) Competition (Articles V III and IX)
8. It was noted that the expansion of electronic commerce might help reduce the extent of
restrictive business practices, inter alia, by facilitating market entry for smaller service suppliers.  Itwas also noted, however, that monopolies and restrictive business practices might pose serious
obstacles to electronic commerce and that in this respect it was important to clarify the reach of
existing GATS principles.  It was pointed out that the applicability of the Annex on
Telecommunications and of the Reference Paper on regulatory principles on telecommunications to
Internet access providers and to electronic transmission was of central importance to the workprogramme and that further clarification was needed on this point.  One delegation noted that in the
debate on competition it was necessary to take account of the limited reach of WTO and GATS rules
in this area and of the exploratory work which was taking place in the Working Group on the
Interaction between Trade and Competition Policy.
9. In discussion of the scope of the rules on competition safeguards in the telecommunications
Reference Paper, questions were raised concerning the applicability of its principles to major
suppliers of telecommunications services involved in electronic commerce and to major suppliers who
engaged in related services such as software, certification and authentication and to
telecommunications supplied via the Internet.  It wa s suggested that it might be necessary to develop
competition safeguards applying to all aspects of electronic commerce.  It was argued thatArticle VIII on monopolies only applied to monopolies formally established or authorised by a
government, not to suppliers who had gained a dominant position without government intervention,
and that Article IX only facilitated consultations between Members, without providing any
substantive rule on restrictive business practices.  Articles VIII and IX only applied to service
suppliers, and therefore not to software producers.
10. A number of Members suggested that to facilitate work in this area it would be useful to
consider some concrete examples of restrictive business practices affecting electronic commerce, suchas horizontal agreements, concerted practices and restrictions deriving from vertical integration.
(b) Protection of privacy and public morals and the prevention of fraud
11. Members noted that Article XIV of the GATS (General Exceptions) applied to the protection
of privacy and public morals and the prevention of fraud, and that measures taken by Members in
fulfilment of such objectives should be subject to a test of necessity and should not constitute a meansof arbitrary or unjustifiable discrimination nor a disguised restriction on trade in services.  It was
stressed that, as Article XIV constituted an exception provision, it had to be interpreted narrowly, and
its scope could not be expanded to cover other regu latory objectives than those listed in the same
Article.  Doubts were expressed about the appropriateness of developing criteria in the WTO for the
policy objectives identified in Article XIV, such as the protection of privacy and public morals andthe prevention of fraud.   One delegation suggested that there was no need for the Council to undertake
further work on the interpretation of the principles of Article XIV, such as the necessity test, because,S/C/M/34
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as in the case of Article XX of the GATT, these issues could only be settled in the context of dispute
settlement.
12. It was pointed out that in order to ensure effective protection of privacy and prevention of
fraud it was important for developing countries to have access to the most advanced encryption
technology and that access to such technology was often denied to them.  A suggestion was made thatit might be necessary to consider the adequacy of current WTO rules, including those of GATS, to
deal with such matters as competition and the protection of privacy, consumers and intellectual
property rights.
13. One delegation suggested that in the context of Article VI:4 it might be desirable to draw up a
list of policy objectives which might justify domestic regulatory measures with restrictive effects in
the area of electronic commerce.  Some doubt was expressed as to the desirability of doing so.
Another delegation expressed doubts about the enforceability of measures to restrict the electronicprovision of certain services in Members’ territory.  For example, an obligation for Internet Service
Providers to comply with measures of general application regulating content services might be very
difficult to enforce, particularly since the dist inction between the supply of content and the mere
transport function could be difficult to draw.  On technical standards some Members said that the role
of the WTO should not extent to setting specific standards for electronic commerce.  On the issue ofdomestic regulation and standards a delegation noted that the role of the WTO was that of tackling
trade restrictions, not that of legitimizing restrictions.
(c) Customs duties
14. Although in principle it was possible to apply customs duties to trade in services, it was
widely recognized that in the case of electronic transmissions this could present serious technicaldifficulties.  It was also said that any discussion on taxation issues had to take account of the general
exception contained in Article XIV(d) of the GATS, which allowed measures inconsistent with
Article XVII which were aimed at ensuring the equi table or effective imposition or collection of direct
taxes.  However, another delegation stressed that the discussion of customs duties should be kept
separate from any discussion of tax issues.  Domestic taxation was within the regulatory competenceof Members and only discriminatory taxation was subject to WTO rules.
15. It was argued that the current standstill on customs duties applied to electronic transmissions
should become permanent and legally binding.  A lthough it was suggested that the issue of the
application of customs duties to services was fully covered by the GATS, further examination of this
issue would be appropriate.  It was noted that there was a close relationship between the issues of
classification and customs duties.
16. One delegation made the point that the political issue concerning the status of the standstill
and the technical issue of the relevance of GATS provisions to customs duties should be kept separate
and that the work programme of the Services Counci l should be limited to the second issue.  Some
delegations argued that the debate on customs duties had important implications for revenues and
fiscal policies of developing countries, which were also being considered in the Committee on Trade
and Development.  One delegation suggested that it  was necessary to study the proper valuation of
electronically transmitted products in the context of encrypted electronic payments and related issues.
Doubts were however expressed as to the relevance of this question in the context of the work
programme.  It was pointed out that electronic commerce presented various problems for taxation,
including the difficulty of determining where an electronic transaction has taken place, the value of
the transaction, tax evasion and double taxation.  It was stressed that these taxation issues involvedconsiderations of equity and that it was important to ensure that all products would receive the same
tax treatment, whether they were supplied electronically or not.S/C/M/34
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17. At the end of the informal discussion on the remaining items of the work programme, the
Chairman reminded delegations that the General C ouncil would conduct an interim review of progress
in the implementation of the work programme at its meeting of 14 April 1999.  Like other concerned
WTO bodies, the Council for Trade in Services was expected to report on the work it had so far
conducted on electronic commerce.  For this purpose, the Secretariat had prepared a draft InterimReport on Electronic Commerce, which was contained in document S/C/W/100, dated
16 March 1999.  The draft did not contain sections on the items scheduled for discussion at the current
meeting.
18. The Chairman invited the Secretariat to introduce the draft Interim Report and delegations to
comment on the structure and content of the Report.  Delegations suggested various changes to the
draft prepared by the Secretariat, which were incorporated in a new draft.  Several delegations noted
that it was important to stress the provisional nature of the report and that all issues remained open fordiscussion.  A more in-depth and conclusive analysis of GATS issues involved in electronic
commerce should probably be reserved for the final report due for the end of July.  On the basis of
delegations’ comments the Secretariat prepared a revised draft for consideration and adoption by
delegations when the Council reconvened on the following day.  The revision also contained
additional sections relating to the remaining items of the work programme.
19. The final draft of the Interim Report contained a list of issues on which progress had been
made towards a common understanding and a second list of issues which would require substantial
further study before their implications could be properly understood.  Both lists were non-exhaustive
and no issue was to be regarded as closed.  It was agreed that the Interim Report would not reflect the
substantive discussions held on the individual items of the work programme.  Summaries of thesediscussions, prepared by the Chairman of the Council under his own responsibility and circulated to
Members for comment at the end of each meeting, were annexed to the Interim Report.
20. The Council approved the revised Interim Report on Electronic Commerce to the
General Council.
B. PREPARATION FOR NEGOTIATIONS UNDER ARTICLE XIX – EXCHANGE OF 
INFORMATION, SECTORAL DISCUSSIONS
21. The Chairman drew attention to a note prepared by the Secretariat on the structure of
commitments in modes 1, 2 and 3 (document S/C/W/99 and Corr.1) and to informal papers by the
European Communities and their Member States on transport services and movement of natural
persons and from Pakistan on movement of natural persons.  The Secretariat introduced its paper on
the structure of commitments in modes 1, 2 and 3.
22. The representative of Pakistan introduced an Informal Paper on Movement of Natural Persons
(Job No. 978).  Emphasizing the economic benefits involved in such movements, he saw a common
interest of both developed and developing countries in more liberal market conditions.  Nevertheless,
access under mode 4 continued to be subject to high regulatory and administrative barriers such as
economic needs tests, licensing and certification requirements, and visa and work permit regimes.  It
was important to bear in mind, however, that access under this mode was temporary in nature andwould not pave the way for uncontrolled immigration.  Therefore, it should be possible to address
major impediments in the new round and enhance transparency.  In the latter context, he referred in
particular to visa and work permit regulations and their implementation.  Consideration should also be
given to the establishment of complaints mechanis ms for adversely affected persons and the creation
of international frameworks facilitating mutual recognition of licences and certificates.  Suchframeworks might be confined to certain aspects of the licensing process, but should allow for the
participation of developing countries.  Moreover, to defuse the potentially restrictive effects of
residency requirements, he proposed developing a distinction between consulting-type activities
performed on a short-term basis and other activities actually requiring establishment.  In conclusion,S/C/M/34
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he stressed that the GATS was conceived to achieve a symmetry between investment-related
commitments and the obligations governing movement of natural persons.
23. The Chairman proposed that the Council conduct the discussion in informal mode and then
revert to formal mode.  At the end of the info rmal session the Chairman provided the following
summary of the discussions:
(a) Structure of commitments for modes 1, 2 and 3
24. Several delegations commented on the Secretariat Background Note circulated as document
S/C/W/99 and Corr.1.  The statements drew attention to broad patterns of commitments traced in this
Note, including significantly higher shares of full bindings of market access and national treatment for
mode 2 than for the two other modes examined.  Given the economic importance of commercial
presence for the supply of many services, the need for fuller liberalization under mode 3 was stressed.
25. Two delegations observed that, overall, the proportion of commitments under modes 1 and 3
assumed without limitations (full bindings) was higher for developing than for developed countries.
One delegation mentioned that the bulk of commitments undertaken by developed Members in
infrastructurally important and capital-intensive sectors were subject to market access limitations.
Noting that entry conditions for natural persons (mode 4) were particularly  restrictive, to the
disadvantage in particular of developing country suppliers, this delegation stressed the need to ensurespecial and differential treatment of developing countries in the next round.
26. Another delegation emphasized the general importance of further improving the current state
of liberalization under mode 2 as well as reducing the number and scope of limitations scheduled for
mode 3, including authorization, residency and nationality requirements.  Other areas proposed for
future work were disciplines on domestic regulation, to avoid unnecessary barriers to trade, andimprovements in scheduling practices.  The large number of scheduling problems identified in the
Secretariat Note was a matter of particular concern.
(b) Presence of natural persons (further comments)
27. Referring to an Informal Note on mode 4 recently submitted by Pakistan, several delegations
expressed concern about restrictions affecting the presence of foreign service suppliers.  In thiscontext, particular reference was made to access barriers associated with economic needs tests;
licensing, qualification and certification requirements;  and visa and work permit regimes.  The
important difference between the temporary presence of foreign suppliers, as defined in the GATS,
and migration or labour movements was emphasized.  Several participants were interested in further
examining the possibility of setting up exemption lists which would exclude specified sectors and/or
professions from economic needs tests.  The idea was also raised of developing a typology of such
tests for scheduling purposes.
28. One delegation pointed out some common elements contained in the submission by Pakistan
and an Informal Note by the European Communities.  In particular, both papers stressed the need to
facilitate recognition of professional qualifications and to increase the transparency of visa regimes.
Another delegation showed interest in the work programme tentatively envisaged by the EC which,
inter alia , would aim to develop a clearer understanding  of main categories of movement and of
technology-related changes in the relative importance of individual modes of supply.
C. ASSESSMENT OF TRADE
29. The Chairman recalled that paragraph 3 of Article XIX of the GATS provided that for each
round of negotiations, guidelines and procedures shall be established.  For this purpose, the same
provision called upon the Council to carry out an assessment of trade in services in overall terms andS/C/M/34
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on a sectoral basis with reference to the objectives of the GATS, including those set out in
paragraph 1 of Article IV.
30. He pointed out that trade in services suffered from a serious lack of statistical and other
factual information which could constitute a proper basis for a quantitative assessment.  This made it
very difficult to envisage an assessment exercise which would lead to precise or quantifiedconclusions.  A strong element of subjectivity was therefore inevitable in the assessment by each
Member of how trade in services had developed in general or on a sectoral basis.  For these reasons he
suggested that Members approach the assessment ex ercise as an opportunity to exchange views,
record the appreciation of individual Members and recognise their different priorities.
31. At the meeting of the Council held on 14 December 1998, delegations had held a preliminary
discussion on the modalities for the assessment.  It had been envisaged that, although it was not
desirable to set a fixed time-frame for this exercise, the assessment might require one or two meetingsof the Council.  The Council had also requested the Secretariat to prepare a background note on the
assessment of trade, to complement its earlier work  on statistics (S/C/W/27) and the economic effects
of services liberalisation (S/C/W/26 and S/C/W/26/Add.1).  Accordingly, the Secretariat had now
prepared a note on Recent Developments in Services Trade (S/W/C/94), which together with other
existing documents was meant to assist the Council in its assessment of trade in services.
32. The delegation of Japan presented its informal paper.  It was prepared as a contribution to the
discussion mandated by Article XIX:3 and consists of three main parts:  The analysis of Japan's trade
in services; its experience in the progressive liberalization of services trade through multilateral
negotiations; and its assessment of trade in services.  Japan's non-paper concludes with a section on
issues to be discussed in the future.
33. Commenting on the Secretariat's Note S/C/W/94, the delegation of Switzerland pointed to the
dynamic trend in trade flows exhibited by many countries at different levels of economic
development.  It remarked that foreign affiliates account for an important share of value-added in the
host economy and generate significant cross-border trade activity.  It also noted that the many policy
developments of relevance to trade in services which have taken place recently and their dynamic ofchange point to the appropriate timing of the upcoming negotiations.
34. The representative of Switzerland drew attention to the present uneven level of commitments.
The next round of negotiations should aim for increased convergence across countries, sectors and
modes of supply, but further improvements should come also with respect to countries, sectors and
modes which currently show a high degree of commitments.
35. The delegation of New Zealand noted the importance of stability and predictability of market
conditions in encouraging investment, and the value of a rule-based multilateral trading system in
bringing about such stability.  Paragraph 23 of the Secretariat's Note, pointing to the value of GATS
bindings, was useful in this respect.  The paucity of trade statistics in services, discussed in
paragraph 2, was an additional element to be borne in mind when carrying out an assessment of trade
in services.
36. Even if it recognized that the policy developments highlighted in document S/C/W/94 were
not intended to constitute a comprehensive list, the delegation of New Zealand raised doubts as to
their representativeness.  It also drew attention to the reference to ANZCERTA in paragraph 22 (iii),
which should in fact be to the Trans-Tasman Mu tual Recognition Arrangement (TTMRA).  Finally,
the representative of New Zealand noted that the chapeau to this section did not account for the
approach to regional integration embraced by the TTMRA, which provides for the recognition of theparties' registration systems, and thus goes beyond the traditional frameworks for mutual recognition.S/C/M/34
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37. The representative of India noted that the Secretariat's Note, while it summarized recent data
and policy developments, did not carry out an assessment of trade in services as mandated by
Article XIX:3.  It appeared however that overall developed countries continued to dominate services
trade and that the expected improvement in participation of developing countries had not taken place.
This indicated the need for special and more favourable treatment of developing countries andsuggested that developed countries had offered service providers of developing countries inadequate
access, whereas those of developed countries had been able to penetrate developing countries'
markets.  The current imbalance in commitments across countries, sectors and modes needed to be
corrected, bearing in mind in particular the requir ement for negotiating flexibility for and increased
participation of developing countries in services trade.
38. The Secretariat's Note did not specify the extent to which trade developments could be
attributable to deregulation and liberalization measur es negotiated under the GATS, nor did it analyse
the impact that liberalization since the Uruguay Round has had on developing countries.  The
representative of India suggested that a more detailed study on the effects of liberalization on
developing countries should be undertaken by the Secretariat before negotiating guidelines and
procedures could be established.
39. The delegation of Uruguay stated that it was carrying out an internal evaluation of services
sectors in Uruguay, and that it would provide further comments at a later stage.  It noted that the data
presented in Table A7 showed a high degree of concentration of services trade, and that a greater
focus on developing countries in the Secretariat's Note would have proven interesting.  It also
remarked that more discussion was needed on the assessment of trade mandated by Article XIX:3.
40. The delegation of Hong Kong, China noted that services trade liberalization is not a zero-sum
game, in spite of the painful adjustments which it  may involve, and that better and cheaper services
create more demand.  Attention was drawn to the benefits brought about by liberalization in the
telecommunications sector, in terms of lower costs for consumers and greater investment and
competition, but similar effects were highlighted also for other sectors.
41. Commenting on the Secretariat's Note, the delegation of Hong Kong, China expressed
disappointment at the lack of greater focus on the position of developing countries.  It suggested that,
in a longer term, studies be undertaken on such issues as the growth of developing countries’ services
sectors in the last few years, the increase in thei r exports as compared with imports of services, the
availability of research on the effect of increased imports of services in developing economies,
relative growth rates in developing and developed countries and the extent of trade in services
between developing countries.  The Secretariat might investigate whether UNCTAD or other bodies
had carried out any studies on these issues.
42. Finally, the delegation of Hong Kong, China noted that the information contained in Table 1
and Chart 4 of S/C/W/94, on the number of sectors in which a Member had made commitments,
depicted a partial picture, as the quality of the commitments made was perhaps more important.
43. The delegation of the European Communities, commented provisionally on the Secretariat's
Note, noted the current imbalance in sectoral coverage and stated that future negotiations should strive
for more comprehensive coverage.  With regard to Article IV of the GATS, the Secretariat's Note
recognized the difficulty of assessing the situation of developing countries, but this needed to be put
into perspective with paragraph 10, which referred to  the spectacular growth of Asia's services trade;
this supported the European Communities' view of the link between development and growth in
services trade.  The need for pro-competitive re gulation, regulatory safeguards and for improvement
of regulatory principles was also stressed.
44. The delegation of the European Communities noted that the Secretariat's Note had not
specifically discussed electronic commerce, and remarked that the boost to trade in services broughtS/C/M/34
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about by its development, along with any available statistical information, needed to be mentioned.
Similarly, the positive impact of the Reference Paper on Telecommunications could usefully be
emphasized.  It further remarked that the reference, in paragraph 22 (v), to the expected entry of
telephone and cable operators in the audiovisual sector may not be relevant for the assessment of trade
in services.
45. On the issue of how to proceed, the representative of the European Communities suggested
that the Secretariat's Note be used as a basis to draft negotiating guidelines, and urged Members to
reflect on how to do this with the greatest urgency, so that momentum would not be lost.
46. The delegation of the United States agreed with the comments made by a number of
delegations about the importance of services for economic growth.  One of the objectives of the
GATS was the expansion of trade through market opening and clear legal disciplines, and the
negotiations on basic telecommunications and financial services had achieved this to a significantextent.  The body of work produced in the Information Exchange Programme and the Secretariat
papers on the economic effects of services liberalization, where attention is drawn to the benefits for
developing countries in promoting their own greater services liberalization, should be used as the
basis for the drafting of negotiating guidelines and procedures.
47. The delegation of Cuba agreed with the delegation of India on the need for a study on the
effects of services liberalization on developing countries.  It noted the importance of the principle of
special and differential treatment for developing countries, contained in Article IV of the GATS and
in the Annex on Telecommunications, in promoting developing countries' participation in services
trade.
48. The Chairman concluded by asking the Secretariat to consider what additional information
could be provided, in relation to the assessment of services trade, which could be used to deal with the
suggestions and concerns expressed by several Members.  The Council would revert to the matter at
its next meeting.
D. DEVELOPMENT OF DISCIPLINES PURSUANT TO ARTICLE VI:4 OF THE GATS
49. The Chairman recalled that Article VI:4 of the GATS required the Council for Trade in
Services, through appropriate bodies it may establish, to develop disciplines on domestic regulation.
Members had restated their commitments to pursue work in the Council on Article VI:4 at the
Singapore Ministerial Conference, but had chosen to wait for the outcome of the work in the WPPS
on Accountancy, before beginning further work on domestic regulation in the Council.  The WPPS
completed its work on Accountancy at the end of 1998.  The Chairman invited the Council to decide
how to bring forward the work on domestic regulation, mandated by Article VI:4.
50. The Chairman recalled that at the meeting on 23 and 24 November 1998, the Council had
requested the Secretariat to prepare background papers on the development of disciplines on domestic
regulations applicable to all sectors.  The Secretar iat had produced two notes.  The first, contained in
document S/C/W/97, provided an account of work on domestic regulation undertaken in the WTO and
in other international organizations as well as gathering information on domestic regulation resulting
from the papers prepared by Secretariat for the Information Exchange Exercise.  The second note,contained in document S/C/W/96, provided an overvi ew of some of the issues which Members might
wish to consider in the process of developing disciplines on domestic regulation applicable to all
services sectors.
51. The Secretariat introduced the papers.  On the basis of the Secretariat’s papers, the Chairman
invited delegations to exchange views on this subject.  Several delegations noted that both Secretariat
papers constituted useful reference material for the Council’s work on Article VI:4.  The delegations
of Australia, the European Communities , New Zealand , Switzerland  and the United States  said thatS/C/M/34
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the four rule-making areas identified by the Secretariat in document S/C/W/96 provided a good
starting-point for negotiating disciplines under Article VI:4.
52. After having heard delegations’ views on the substantive issues of the Article VI:4 work
programme, the Chairman addressed the question of how to organise future work under Article VI:4.
He pointed out that the question related mainly to how to manage two overlapping mandates, that is,
Article VI:4 itself which required the Council to develop disciplines on domestic regulation for all
services sectors, and the Decision on Professional Services which called upon the WPPS to fulfil the
same task for professional services.  In previous discussions there seemed to be a general agreement
that all work relating to domestic regulation under Article VI:4 should be conducted in one body
instead of two.
53. The representative of Hong Kong, China proposed that horizontal work on domestic
regulation, i.e. the development of disciplines applicable to all services sectors, take place in the
Working Party on Professional Services, subject to a revision and extension of its mandate by the
Services Council.  Several delegations supported this proposal, also in the light of the fact that it was
important to take advantage of the knowledge and expertise developed by the WPPS in almost four
years of work on accountancy.  The delegations of Argentina; Hong Kong, China ; Japan;  New
Zealand; Turkey  and the United States  stated that if all work on domestic regulation were to take
place in one body, it would be desirable to give emphasis and priority to horizontal work.  It was thegeneral view, however, that although horizontal wo rk should be given priority, Members should retain
the option to take up work on specific sectors at a later stage.  The delegation of Hong Kong, China
argued that horizontal and sector specific work could proceed in parallel, within the same body.  Thedelegation of Australia agreed that it was necessary to begin work at the horizontal level, but stressed
that at the same time it was important that horizontal work did not undermine the goal of developing
specific domestic regulation disciplines applicable to professional services.
54. The Chairman proposed that the Council take note of the statements made by delegations and
revert to this item at its next meeting.  He also suggested that the Article VI:4 work programme might
be taken up in informal consultations to be held before the next meeting of the Council.
55. The Council took note.
E. COUNCIL INFORMATION SESSION ON TELECOMMUNICATIONS – REQUEST BY
THE UNITED STATES
56. The Chairman recalled that this item had been on the agenda of two previous Council
meetings.  On the first occasion, Members asked the United States to provide further details on their
proposal (S/W/C/69).  The United States presented in response a detailed proposal in an informal
document made available at the February 1999 meeting of the Council (informal document no. 580 of3 February 1999).  On the basis of the discussion at  that meeting, the Chairman noted that it centred
more on procedural questions than substantive problems or objections and that, overall, the idea
obtained broad support. He therefore suggested so me procedural elements concerning the proposed
meeting for consideration by delegations:
- On the date and duration of the session, he suggested that a one-day meeting take place on Friday,
11 June 1999.  This would imply the early arrival in Geneva of national delegates to the ITU
Council, due to start on 14 June 1999, but at the same time it would ensure that the Council
session on telecommunications did not overlap with any ITU meetings, since it might be difficult
for ITU delegates, particularly those from developing countries, to cover both at once.
- On format and participation, as proposed by the United States, he suggested that the meeting be
organized as a meeting of the Council for Trade in Services to be attended by Geneva-based
representatives, joined by their national telecom officials, and relevant international organizationS/C/M/34
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observers.  There was perhaps a further question of the format of such a Council meeting. The
U.S. proposals called for involving telecom experts in panel presentations on the various topics.
He asked delegations whether this way to proceed was acceptable to them.
- On background documentation, he suggested that the Council ask international organizations
involved in technical assistance in the telecommunications sector to provide background notes
summarizing their activities in this sector, perhap s with the help of the Secretariat.  He also
encouraged Members to make submissions outlining their own technical assistance activities and
experiences and to make any observations in relation to the other agenda items of the proposed
meeting.
- On the agenda of the meeting, he noted that at the last Council meeting a number of delegations
asked whether other items, in addition to those suggested by the United States, might also be
addressed in such a meeting.  No specific topics were named on that occasion.  He invited
delegations to mention any further items they might wish to see on the agenda in their comments
at the current meeting.
57. The representative of Argentina said that his delegation accepted and fully supported the
Chairman’s proposal.  He said that he had no objections to the participation of experts, but that he
favoured participation of experts from international organizations such as the ITU, the World Bank
and the OECD.  He said that his delegation was flexible on the issue of the agenda, and suggested that
other items relating to the Fourth Protocol could be inserted, particularly issues of technical assistancefor implementation.  The delegation of Japan expressed support for the Chairman’s proposal and for
the proposal by Argentina on the agenda.
58. The Chairman asked the Council whether they approved the proposal by the United States ,
with the procedural clarifications he added and with the suggestions made by Argentina and supported
by Japan, and on the basis that further consultations would take place on the organization of the
session.
59. The Council so agreed.
F. TRADE FACILITATION – (REPORT TO THE GOODS COUNCIL)
60. The Chairman recalled that on 1 September 1998 the Chairman of the Council for Trade in
Services received a letter from the Chairman of the Council for Trade in Goods requesting the
Services Council to include “trade facilitation” as an item on the agenda of its next meeting to address
its relationship with the GATS and provide the results of such discussions in March, to the GoodsCouncil as an input to its further discussions on the subject.
61. In informal consultations held on 6 October 1998 and at its meeting of 14 October 1998, the
Services Council had discussed the subject of trade facilitation.  On these occasions Members
expressed the view that issues of trade facilitation in services could be taken up as they related to
individual sectors in the context of the exchange of information exercise.  One delegation alsosuggested that issues relating to Electronic Data Interchange (EDI) could be taken up in the context of
the work programme on Electronic Commerce.  In the sectoral discussion on maritime transport
services, which took place at the Services Council meeting of 9 December 1998, delegations
underlined the importance of coordinating work in this sector with the work on trade facilitation
taking place in the Council for Trade in Goods.
62. At the Services Council meeting of 14 October 1998, the Secretariat circulated an informal
note on the GATS and Trade Facilitation, which was originally prepared as an input to the WTO
Symposium on Trade Facilitation held in March 1998.  The note focused on the role of services
liberalisation under the GATS in facilitating trade in goods, while it did not take up the issue ofS/C/M/34
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whether the concept of trade facilitation as originally raised in relation to trade in goods was
applicable to trade in services under the GATS.
63. The sense of previous discussions was that the concept of trade facilitation as originally raised
in the context of trade in goods, i.e. mainly concerned with simplifying, streamlining and modernising
customs formalities and administrative procedures, was not as such applicable to trade in services.However, in a broader sense, it was felt that liberalization of trade in services could play an important
role in facilitating trade in goods.  For example, liberalisation in some services sectors could help to
overcome procedural obstacles to trade in goods.  As internationally traded goods were physically
transported across national borders, transport services provided the essential infrastructure for cross-
border trade.  Competition in transport services was likely to bring down costs and improve the
quality and choice of transport services available to importers of goods.  Another service sector of
even more direct relevance to the specific concept of trade facilitation in goods was Electronic DataInterchange (EDI).  Also, telecommunication technology could facilitate trade, by allowing for faster
and more efficient communication between traders, businesses and government agencies, thus
reducing delays at borders and complicated and unnecessary documentation.  The electronic exchange
of data (EDI) significantly reduced waiting times fo r traders as it allowed them to provide different
government agencies with all the necessary documentation for clearance at the borders and to obtainthe necessary approvals through the network.
64. The Chairman recalled that the Chairman of the Council for Trade in Goods requested the
Services Council to provide input in time for a discussion which was scheduled take place in the
Goods Council in March 1999.  He proposed to communicate the main points raised by delegations in
discussions held in the Services Council in a letter  from the Chairman of the Services Council to the
Chairman of the Goods Council.
65. The Council so agreed.
G. CO-OPERATION AGREEMENT WITH THE ITU
66. The Chairman said that at the meeting of the Council held on 14 December 1998, delegations
had discussed matters concerning the form cooperation with the ITU should take and suggested
changes to the latest draft prepared by the Secretariat.  There was consensus on the idea of having a
cooperation agreement with the ITU, but delegations expressed different preferences regarding its
form.  Some delegations favoured a formal cooperation agreement, while others favoured an exchange
of letters.  However, delegations which favoured one particular type of legal form said that they were
also prepared to join a consensus on the other, considering that the choice of form did not affect the
legal value of the cooperation agreement.
67. Following further consultations with the ITU Secretariat, the Secretariat had prepared a
revised draft of the text of the proposed agreement, which incorporated the changes suggested by
delegations at the 14 December 1998 meeting of the Council.  The new draft was circulated to
delegations as Job No. 5340/rev.2.
68. The delegation of Australia expressed support for the current draft of the cooperation
agreement with the ITU.  The delegation of Japan supported the current draft subject to a minor
change to page 2 of Annex 1: they requested that the wording “decision-making bodies” when
referring to the WTO be defined as Ministerial Conference, General Council  and other subsidiary
bodies.
69. The Chairman proposed that Members approve the text of the cooperation agreement with the
ITU, subject to the amendment proposed by Japan.
70. The Council so agreed.S/C/M/34
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H. REQUESTS FOR OBSERVER STATUS
71. The Chairman recalled that at the meeting of the Council held on 14 December 1998,
delegations discussed a request for observer status from the South Centre.  It was pointed out that a
decision on this request should have been taken together with the requests from other international
intergovernmental organizations, which had been pending for a long time.  A list of internationalintergovernmental organizations requesting observer status was contained in document
S/C/W/19/Rev.1.
72. The Council had granted regular observer stat us to only four organizations: the UN,
UNCTAD, the IMF and the World Bank.  All other requests were held over, pending consultations in
the General Council on observership.  The Chairman emphasized that according to the Rules of
Procedure, each WTO Council and Committee was enti tled to take its own decisions on the admission
of observers.  Considering that some of the request s before the Services Council had been outstanding
for a considerable amount of time, he pointed out that it was desirable that Members moved towards a
decision on all such requests.
73. The delegation of the United States said that consultations on the issue of observership were
continuing in the General Council and that it would be better to defer any decision in the Services
Council until such consultations were concluded.  The representative of Japan noted that the requests
for observer status before the Services Council had been outstanding for a very long time.  He
suggested that the Council might want to focu s on some of these requests from international
organizations with universal membership, such as the ITU and ICAO, as the strong sectoral focus and
expertise of these organizations might be an asset for WTO Members in the next round of services
negotiations.
74. The Chairman invited delegations to reflect furt her on this matter, considering that the request
had been outstanding for such a long time and that Members’ work was coming to an important stage
as the new round of negotiations approached.
I. APPOINTMENT OF CHAIRPERSONS FOR SUBSIDIARY BODIES
75. On the basis of informal consultations held with delegations by the previous Chairman of the
Council, Ambassador Akao of Japan, the Chairman proposed that the Council elect the following
Chairpersons for its subsidiary bodies:
- Mr. Jean Le Cocguic [ France ] Committee on Trade in Financial Services
- Mr. Juan Marchetti [ Argentina ] Committee on Specific Commitments
- Mr. Siva Somasundram [ Singapore ] Working Party on GATS Rules
- Mr. Paul Robertson [ Canada ] Working Party on Professional Services
76. It was so agreed.
J. OTHER BUSINESS
77. The representative of Guatemala informed Members of the conclusion of the certification
procedure of Guatemala’s schedule of commitments in basic telecommunications, contained in
document S/C/W/88.  She said that although Guatemala had withdrawn its original schedule from theFourth Protocol, the new schedule was in line with a tradition of market openness in Guatemala,
where the State had withdrawn from the market and performed a mainly regulatory role.  She pointed
out that similar processes of privatization and deregulation were also taking place in many other
sectors of the economy.  The representative of the United States welcomed Guatemala’s commitments
in basic telecommunications, which represented an improvement of their Uruguay Round schedule.
He pointed out, however, that Guatemala was part of the Fourth Protocol to the GATS and as such itS/C/M/34
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was expected to accept the Protocol without modifications, like all other Members who had accepted
the protocol or who were going to do so in the near future.  He stressed that changing commitments
before acceptance of a protocol constituted a dangerous precedent for future negotiations.  The
Chairman suggested that the Council take note of the statements made by delegations and of the
conclusion of the certification procedure for the schedule on basic telecommunications of Guatemala.
78. The Council took note.
79. The representative of Hong Kong, China introduced a paper prepared by his delegation on
Systemic Issues Arising from GATS Article V, which was circulated as document S/C/W/102.  He
pointed out that the question of economic integration agreements had not received much attention in
the Services Council and that it would be desirabl e to address in this forum some of the systemic
issues relating to such agreements.  The paper raised some fundamental questions, which the Council
might address under Article V, such as: the meaning of the term “substantial sectoral coverage” inArticle V:1(a); the meaning of the wording “agreemen ts should not provide for the a priori exclusion
of any mode of supply” in footnote 1 of Article V:1(a); the reference under Article V:1(b) to measure
permitted under some GATS Articles, but not others; duration of the “reasonable timeframe” under
Article V:1(b); issues relating to the effect of economic integration agreements on the “overall level of
barriers to trade in services” as set out in Article V:4; and the meaning of “substantive businessoperations” in Article V:6.  He asked that the matter of systemic issues arising from Article V of the
GATS be placed on the agenda of the next Council meeting.  The representative of Brazil thanked
Hong Kong, China for its paper, but reserved the position of his delegation on the substance of the
paper, as authorities in capital needed more time to examine it.
80. The representative of Switzerland introduced a paper on the GATS 2000 services negotiations
(S/C/W/103).  The paper focused on the negotiating guidelines and procedures and outlined three
possible major areas of work for the next round: (a) specific commitments; (b) domestic regulation;
(c) functioning of GATS, including work on GATS rules (emergency safeguards, government
procurement and subsidies) and some review work  to ensure consistency of all parts of the
Agreement.  He suggested that the paper could be taken up at the next Council meeting in the contextof the discussion on the negotiating guidelines and procedures.
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