WORLD TRADE
ORGANIZATIONS/CSS/W/68
28 March 2001
(01-1536)
Council for Trade in Services
Special SessionOriginal:  English
COMMUNICATION FROM HONG KONG, CHINA
Logistics and Related Services
The attached communication has been received from the delegation of Hong Kong, China
with the request that it be circulated to Members of the Council for Trade in Services.
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I. INTRODUCTION
1. In September 2000, Hong Kong, China presented our views on the overall scope and
coverage of services negotiations and their guidelines by way of the paper S/CSS/W/6.  In that paper,we indicated interest in encouraging commitments covering several sectors in areas where suppliers
aim to offer a "one stop shop" approach.  Logistics and inventory, distribution and delivery hub
services have been flagged up as one of such priority areas. Hong Kong, China wishes to elaborate
our ideas in this regard and herewith presents a proposal on the liberalisation of logistics and related
services, including maritime services.  Hong Kong, China reserves the right further to supplement or
modify this proposal and looks forward to further meaningful discussion with Members.
II. IMPORTANCE OF LOGISTICS AND RELATED SERVICES
2. International trade is facilitated by efficient door-to-door logistics chains, simple trade
formalities, procedures and operations.  The concept of logistics services has evolved over the past
few decades, from the narrowly defined physical transportation and distribution of goods to the
integrated management of global/regional supply a nd distribution chains.  With the continuous growth
of global trade in goods and services, the demand for and benefits of logistics and related services arebecoming more and more significant.  The logist ics market has continued to grow as the trend to
outsource logistics and inventories and to concentrate on the core business develops.  The extent to
which such potential markets may be realized for service suppliers across the board, hinges much on
the efficacy of service providers, as well as on the availability of business opportunities.
3. High quality logistics services are in fact crucial in enhancing the economic welfare of
different economies.  Total logistics costs are estimated to reach up to 20% of total production costs in
developed countries and usually to an even larger share for developing countries.  The availability of
competitive logistics services should lead to the optimal utilisation of resources in this respect, as
manufacturers may then be relieved of the administrative and financial burden of logistics
management, and capitalize on their core business which could further improve their competitiveness.In addition, efficient integrated delivery arrangements by logistics services providers would also
enable manufacturers and material suppliers to meet consumer demand in a timely and reliable
manner.  With the dedication and expertise in transport planning by logistics agents, transport servicesS/CSS/W/68
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suppliers would benefit from more efficient use of their capacity.  Consumer welfare would also be
much advanced as a result of reliable supply and competitive pricing.  Indeed, the demand for highly
efficient one-stop logistics services to cater for fast-changing consumer demand is accelerating with
the proliferation of electronic commerce.  Having regard to the multitude of benefits and the demand
flowing from commercial reality as outlined above,  Hong Kong, China considers that it is opportune
for the services negotiations to accord priority in liberalizing the logistics and related services.
III. SCOPE FOR LIBERALISATION
4. Logistics, in general, is understood as the procedure to optimize all activities to ensure the
delivery of products through a transport chain from one end to the other.  Currently there is no
separate classification entry for logistics services in the WTO Services Sectoral Classification List
(W/120).  However, logistics related elements have already been included in W/120 under various
sub-headings, such as the "Transport Services" sect or (freight transportation, cargo-handling services,
storage and warehouse services and freight transport agency services etc) and "Business Services"
sector (inventory management, and order processing etc).  Further related elements, like customs
clearance services, container station and depot services, maritime agency services, have in fact also
been introduced under the model schedule on maritime transport services which formed the basis of
the last set of maritime transport services negotia tions.  Despite the suspension of such negotiations in
June 1996, Members generally recognized the specificity and the importance of these elements in
bringing about the seamless delivery of goods.
5. Finally, we consider that the Express Delivery industry is playing an increasingly important
role in logistics and inventory matters.  Hong Kong, China considers that Express Delivery goes much
wider than courier services and encompasses a significant number of services activities, includingsome which have been detailed above.  We also see a clear link here with the services vital for e-
commerce as an activity.  This is taken up in paragraph 13 below.
6. To facilitate the achievement of commercially meaningful liberalisation measures for the
logistics services sector, it would be useful to build a consolidated list of logistics and related services.
In the view of Hong Kong, China, a preliminary list could be as follows:
(a) freight transportation services;
(b) cargo-handling services;
(c) storage and warehousing services;
(d) customs clearance services;
(e) transport agency services;
(f) container station and depot services;
(g) inventory management services;
(h) order processing services;
(i) production planning services;
(j) production control services.S/CSS/W/68
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7. Coverage/definition for items (a) to (f) could be considered on the basis of the existing
classification on "Transport Services" sector in W/120 or the model schedule on maritime transport
services as appropriate.  Items (g) to (j) appear to fall under the category of "Management Consulting
Services" under "Other Business Services" sector in  W/120.  In this regard, Hong Kong, China would
suggest that Members might wish to review the appropriateness of the very important and wideranging services mentioned in paragraph 6 (g) to (j) being scheduled under "Management Consulting
Services".  This seems an inappropriate location given their broad scope.  We would also welcome
initiatives from Members to expand this list by suggesting other relevant sectors.
8. In order to accord ample opportunities for the development of logistics services in an
unambiguous manner, Hong Kong, China encourages Members to formulate substantial and
meaningful Market Access and National Treatment commitments in as many services sectors
mentioned in paragraph 7 above as possible.  We see this as the best way to enhance the commercialvalue of commitments and to improve comprehensibil ity for the trade.  Hong Kong, China continues
to attach paramount importance to the legal certainty of commitments made.  As always, Members are
free to schedule commitments according to their interests and level of development.
IV. MARITIME TRANSPORT SERVICES
9. Of equal importance to the meaningful business opportunities for logistics services is the
openness in the transport sector. Liberalisation of the maritime transport services (MTS) stands to
provide the most significant impact in this regard.  It is estimated that 80% of the total volume of
world trade is carried by vessel.  World seaborne trade has continued to experience a steady increase
over the past decade, and has reached a record high of over 5 billion tons, despite the intervening
economic fluctuations.  Substantial liberalization in this sector will contribute much to the furtherefficiency and welfare gains from logistics services.
10. The suspension of the 1996 MTS negotiations and correspondingly the Most-Favoured-
Nation (MFN) obligation for this sector was indeed a disappointing chapter in the history of
multilateral liberalization of services trade.  Hong Kong, China strongly supports early resumption of
negotiations as provided for in the Decision on Maritime Transport Services adopted by the Councilfor Trade in Services (S/L/24).  Negotiations shoul d be conducted with a view to attaining real and
meaningful commitments by all members on a MFN basis.
11. Hong Kong, China appreciates efforts made in the last MTS negotiations.  In our view, the
resumed negotiations should take account of both the efforts previously made, as well as recent
developments in the MTS sector.  We look forward to substantive commitments from Members
leading to the elimination of major obstacles in the MTS sector, including but not limited to
restrictions on foreign equity ownership and management in particular related to ports, measures infavour of national service suppliers both in interna tional and local services (including the freedom for
the maritime industry to operate in some, if not all, services in the domestic market of other
Members), restrictions on scope of business activities, and different licensing requirements for local
and foreign firms.
V. OTHER ELEMENTS
12. The pace of evolution of logistics and related services is such that addressing port-to-port
problems alone is no long adequate.  To meet the ever-increasing demand for customized door-to-
door logistics services, multimodal transport services, which link up both domestic and global
production and marketplaces through the interconnectivity of and between modes of transport,
becomes indispensable.  In this connection, we consider that the idea of multimodal transport servicesthat was first suggested in the 1996 MTS negotiations an important tool in this respect and we areS/CSS/W/68
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prepared to discuss with Members on how it should best be utilized, both to ensure smooth services
and for the avoidance of disputes in MTS.
13. Another element critical to the provision of effective global logistics services is the use of
information technology.  The Internet, e-commerce and electronic data interchange play an
increasingly prominent role in transport and logist ics services, as the management of information
becomes as important as the management of the shipping arrangements itself.  In order to provide
globally guaranteed and secure delivery of trade documentation in electronic form, many conditions
should be met, in particular global operational capability, a secure legal framework, harmonized
standards, and comprehensive data security.  H ong Kong, China will shortly submit a paper on how
WTO could help promote a facilitatory environment for the conduct of e-commerce.
VI. NEXT STEP
14. Hong Kong, China encourages Members to take an active part in the deliberation of issues
surrounding the important sectors mentioned in this paper.
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