RESTRICTEDWORLD TRADE
ORGANIZATIONS/CSC/M/8
15 April 1999
(99-1537)
Committee on Specific Commitments
REPORT OF THE MEETING HELD ON 23 MARCH 1999
Note by the Secretariat
The Committee on Specific Commitments held its eighth meeting on 23 March 1999 under
the Chairmanship of Mr. Juan Marchetti of Argent ina.  The agenda of the meeting was contained in
airgram WTO/AIR/1039.
I. PROCEDURES FOR THE IMPLEMENTATION OF ARTICLE XXI OF THE GATS
1. The Chairman indicated that his last compromise proposals on the draft procedures for the
implementation of Article XXI of the GATS were contained in document Job No. 7097/Rev.1 dated
17 March 1999.  He recalled that this was in fact the twelfth revision of the original proposal andpointed out that the procedures should have entered into force on 1 January 1998 at latest.  In spite of
the intensive discussions held, there was one outstanding issue on which it had been impossible to
reach consensus:  the question of the scope of retaliation i.e., whether non-compliance with the
arbitrator’s findings by the modifying Member allows (or not) the affected Member/s to cross retaliate
(both within and outside the service realm).
2. In the spirit of compromise, the Chairman had made a proposal to replace the present text of
paragraphs 16 and 17 by the text of Article XXI:4(b) itself in order to provide neutral language,
without prejudice to Members’ interpretation of the scope of that provision.  Moreover, the current
paragraph 24, that provides for a review of these procedures in three years' time, would give the
possibility of introducing the necessary adjustments to the text of the procedures in the light of the
experience in their application.  The adoption of neutral language could preserve other important
provisions contained in the draft procedures on which consensus had been reached.
3. The Chairman recalled that when he made this proposal in the informal meeting of the
Committee held in May 1998, all delegations save one seemed to be prepared to accept it.  In
subsequent meetings, the proposal received the support of a wide majority of Members.  Finally he
recalled that at the last informal consultations on 28 January 1999 he had suggested several options. A
consensus seemed to emerge on the so–called option three, whereby Members would adopt the neutrallanguage proposed while at the same a Chairman's note explaining in a succinct, factual and balanced
way the differences of interpretation on the scope of Article XXI 4.b) would be issued.
4. Certain Members however could not go along with those proposals at this stage.  He therefore
urged those delegations to consider the matter again and to take their responsibilities. In his view an
absence of agreement on a compromise solution would not only be a collective failure to fulfill amandate given by the text of the Agreement but also a serious impediment to the normal functioning
of the WTO system.  He hoped that this could be avoided.  He then opened the floor on this report.S/CSC/M/8
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5. The delegation of India indicated it wanted to put on record its position on six issues.  First of
all on the Chairman's "option three" and the European Communities' proposals on paragraphs 16 and
17, India felt the need for the development of certain guidelines before retaliation could be taken by
an affected Member against a modifying Member.  Certain safeguards were needed to prevent the risk
of unilateral retaliation by the affected Member.  This had parallel with the relationship between
Article 21.5 and Article 22 of the Dispute Sett lement Understanding.  Secondly the scope of
retaliation was an extremely important issue specially for developing countries.  India felt it should be
limited only to areas under the schedules of commitments.  Even if there was no consensus for
limiting the scope of retaliation for all Members India urged that at least in case of developing
countries, developed countries should not resort to  cross retaliation under Article XXI.  India wanted
this to be included in paragraph 23 of the draft procedures relating to the developing countries.
Thirdly India supported the EU proposal on notification and took note of the general support for this
proposal.  India also supported the Mexican proposal on the application of the draft procedures only to
modifications made by Members unilaterally.  Fifthly, India strongly supported the Egyptian proposal
to mention developing countries in paragraph 23.  Specific provisions had to be developed in the
procedures to take into account the special and differential treatment for developing countries and in
particular least developed countries rather than a simple general reference to their situation to be taken
into account.  Finally India felt that the recourse to a second arbitration should be made mandatory inthe case where a developed country had recourse to retaliation against a developing country.
6. The Committee took note of this declaration.
II. SCHEDULING GUIDELINES
7. At the request of the Chairman the Secretariat presented document S/CSC/W/19 and indicated
that this document had been elaborated in the ligh t of the experience of the past years in scheduling,
with the aim of providing elements for the draftin g of revised scheduling guidelines as the Committee
had agreed.  The opinions expressed in this document engaged only the Secretariat.  This work had
shown that in some instances somewhat odd decisions had been taken in the drafting of the existing
guidelines and that this was an occasion to correct them.  In some instances problems arising not from
the guidelines but from the text of the Agreement itself had been noted.
8. Delegations welcomed this document and agreed that revised guidelines could not have any
retroactive effect on existing commitments or reinterpret the GATS, as stated in paragraphs 6 and 3 of
the Note.  They also indicated that this document n eeded careful consideration and indicated that their
comments were of a preliminary nature in view of the number and complexity of the problems raised.
9. Hong Kong, China noted that the paper did not address scheduling problems not mentioned in
the existing guidelines such as grandfathering and the distinction between mode 1 and 2.  The
United States delegation suggested the idea of a check-list of problems not raised in the existing
scheduling guidelines.
10. Switzerland noted that the scheduling guidelines were linked to the negotiating techniques
that would be adopted for the next round. It wa s still unclear if the four columns format, the
distinction between Articles XVI and XVII and the bottom-up approach would remain as they stand
now or if for instance formula approaches or top- down approaches would be retained.  In any case
these uncertainties did not prevent a debate on revised scheduling guidelines based on the present
negotiating techniques.
11. Delegations then commented the document in a detailed manner.  Unless otherwise specified,
the paragraphs referred to in this report are the paragraphs written in normal characters in document
S/CSC/W/19.S/CSC/M/8
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12. On paragraph 7, answering a query, the Secretariat explained that the alphabetical index
referred to would be a simple table whereby Members could find for instance in which paragraph a
word such as "residence" had been mentioned, this in  order to be able to identify all relevant rules
regarding the scheduling of residency requirements.  Hong Kong and Australia approved the
suggestion of attaching the specific sectoral guidelines negotiated for telecommunication and
maritime transport as well as the suggestion to merge documents GNS/164 and 164/Add.1 which wasalso approved by Switzerland.  Australia opposed th e suggestion to attach the scheduling guidelines
for the drafting of MFN exemptions.
13. On paragraph 9 Australia approved in principle the statement according to which only
measures inconsistent with Articles XVI, XVII and XVIII should be included in the schedule but felt
that the only thing that could be done in that respect was to encourage Members to schedule properly.
The United States delegation suggested the deletion of the first two sentences and their replacement
by the following "since schedules are a record of legal commitments nothing should appear in themwhich a Member does not intend to be legally binding".
14. On paragraph 10 Egypt agreed on the thesis that footnotes and annexes were not legally
binding and suggested that the content of such elements, if it needed to be retained, should be entered
in a fifth column which might be added to the schedul es for this purpose.  Norway indicated that this
proposal was worth consideration, as the user-friendliness of schedules was an important question.The United States indicated that footnotes were in their view a very ambivalent question; on the one
hand lawyers insisted that their use should be strictly limited while on the other hand the private
sector wanted more of them for transparency purposes.
15. On the suggestion in paragraph 11 that the content of headnotes should be scheduled in the
four-column format, New Zealand suggested that this  required further thought.  Norway too suggested
that this approach might be too rigid, and the United  States agreed that while the idea of reformatting
headnotes in four columns might be the ideal approach, it should remain possible to use other
approaches so long as the drafting and the meaning were clear.
16. On paragraph 13 the United States suggested the deletion of the penultimate sentence ("the
date of entry into force of a commitment is relevant under Article XXI and to possible non violationcases") as in its view this was an interpretation of the agreement.  Norway, Egypt and New Zealand
agreed on the thesis that the indication of dates of entry into force did not really make sense from a
practical point of view.  Hong Kong, China expressed the opinion that the inclusion of effective dates
was going to be increasingly important in the future and that ways should be found to accommodate
it.
17. On paragraph 15 the United States considered that it was not helpful to distinguish pre-entry
and post-entry restrictions.  These terms did not appear in the GATS.  They could mean different
things in respect of different modes (1 and 2 as opposed to 3 and 4), and in addition a limitation on the
value of transactions could be a pre-entry restriction when the quota was already fulfilled.
18. On the italicised part of paragraph 16, the United states indicated that the suggested drafting
was not needed.  If clarification was necessary it should use the exact words of the Agreement and not
such notions as "foreigners" and "nationals".
19. On the italicised part of paragraph 17, Hong Kong, China supported the idea of giving more
details on the criteria of economic need test but expressed the opinion that Members would certainly
be reluctant to do so in certain areas such as mode 4.  Norway sought some clarification on the legal
implications of the binding of the criteria of the economic need test.S/CSC/M/8
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20. On the italicised part of paragraph 18, the United States stated that the drafting suggested that
licencing was not in general discriminatory.  This was disputable; a more neutral approach should
have been retained and the assumption that licencing was non discriminatory should be suppressed.
21. On paragraph 19,  New Zealand agreed with the idea that minimum requirements had an
impact notably on small suppliers and that this should be acknowledged somehow.  Japan expressed
concerns on this thesis.  The United States indicated that they considered it as a reinterpretation of theagreement, that could not be done through the scheduling guidelines.  Norway expressed similar
views.
22. On the italicised part of paragraph 20 New Zealand found the clarification on the scheduling
of residency requirements  in terms of columns and modes a priori useful.  The United States
indicated that they were not convinced by the argument that the composition of management of a
commercial presence should be scheduled under national treatment and mode 3 rather than as a
restriction on market access under Article XVI:2(e).
23. On paragraph 21 the United States indicated that it considered the suggested text as a
reinterpretation of the agreement (the word "total" could only mean "total") which could not be done
through the scheduling guidelines.  Hong Kong, China indicated it had encountered an example of
scheduling of a limitation on a partial value of transactions or assets.
24. On the italicised part of paragraph 23 New Zealand agreed with the idea that the content of
GNS/164/Add.1 could be included at this point.
25. In view of the comments expressed on the first section of the document the Chairman
commented that the object of the exercise was not to redraft the opinions expressed by the Secretariat,
which were made on its own responsibility.  In any case the suggestions regarding the drafting of the
non-italicised part of the document would be reflected in detail in the report.  As far as concreteexamples of difficulties encountered in schedules were concerned the Chairman recommended that
specific reference to schedules of particular Members should be avoided.
26. On paragraph 24 , Australia supported the inclusion of a list of national treatment restrictions
on condition that it would be an illustrative list only.  Norway agreed, but judged that the qualification
example seemed to belong to Article VI and to require more considerations.  The United States foundthe examples given interesting and wanted to give further consideration to them to see if they were
complete or not.  Hong Kong, China also indicated that the examples needed further examination and
suggested that the example of the residency requirement for two directors might well be a legitimate
measure under Article VI; it would be better to give an example requiring the residency of all
directors.
27. On the italicised part of paragraph 25, the United States considered that it was not helpful to
use terms such as de jure or de facto as those did not appear in the GATS and therefore were in favour
of the deletion of the italicised drafting.
28. On paragraph 26, Japan expressed strong concerns.  It appeared to suggest that any kind of
subsidy granted to a domestic supplier would be deemed to affect the conditions of competition.  This
would imply a requirement to schedule all existing subsidies, which would not be appropriate.
Norway considered this a very sensitive issue, which might prejudge the future disciplines onsubsidies.  Members should probably stick to the existing wording as long as disciplines on subsidies
had not been agreed.  The United States expressed similar caution and inquired if the statement in the
bold part (para 10) applied to all modes or only to mode 1.  Hong Kong, China and New Zealand also
stated that they were not convinced of the need for such an addition.S/CSC/M/8
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29. On paragraph 27, Australia, Norway, Japan, the United States Hong Kong, China and
New Zealand all agreed on the idea that the provision in Article XX:2 of the GATS gave rise to a
serious deficiency in the clarity of schedules.  However, they differed as to possible remedies for it.
Australia supported the view that measures limiting both market access and national treatment should
be scheduled in both columns, which would requ ire an amendment of the GATS.  Australia would
favour a recommendation to this effect by the Committee and sought the views of other Members onthis suggestion.  The United States was not sure that formal amendment was necessary to achieve the
purpose.  Japan expressed concern about formal amendment and Hong Kong, China felt it better to
avoid formal amendment through Article X of the WTO agreement, such as an interpretation or the
use of the scheduling guidelines.  New Zealand also considered that alternative scheduling practices
should be encouraged rather than an amendment of the GATS which may be difficult to achieve.
30. On paragraph 29, the United States indicated that they considered it inappropriate to  single
out prudential measures for commentary when the provisions in question were dealt with exceptionsgenerally.
31. On paragraph 32, Australia suggested that instead of insisting on an artificial demarcation
between mode 1 and mode 2 the scheduling of measures under both modes of delivery should be
encouraged in certain cases.
32. On paragraph 34, Norway supported what it judged an important clarification on the
combination of the horizontal and sectoral entries.
33. On paragraph 35, Hong Kong, China asked if the sentence referring to general legislation and
contained in document GNS/164/Add.1 ("it is und erstood that such references would not have
implications under the GATS ") was the Secretariat view.
34. On bold paragraph 22, Norway reiterated that Members should collectively reflect on ways to
schedule transparency information such as for instance the fifth column suggested by Egypt.
35. On paragraphs 36 and 47, both referring to the question of technical feasibility, Australia
sought clarification of the basis on which an entry is automatically converted to "unbound" if the
mode of supply thought to be infeasible is in fact feasible, or becomes so in the future.  Australia also
wanted to clarify whether it is for the individual Member to determine whether supply under aparticular mode is technically unfeasible.  Norway agreed with the view expressed in the paper that
those provisions were not very meaningful.  Th e United States however suggested that the entry
"unbound*"  served a useful purpose in so far as it distinguished areas where a Member chose not to
make a commitment from areas where it might be willing to make a commitment if and when the
mode of delivery were to become technically feasible.  Therefore it was useful even if there werewide divergences of interpretation.  Hong Kong, China shared these views.
36. The Chairman concluded that this useful exchange of views would continue in the next
meetings of the Committee.  On the question of modes 1 and 2 the Chairman suggested that
Secretariat should provide a short note.  Hong Kong, China requested that the Note should deal with
the question of the meaning of modes 1 and 2 in the national treatment column.  On the question of
grandfathering Hong Kong, China clarified that it was not requesting a paper by the Secretariat at this
stage but that this was a question worth thinking about.S/CSC/M/8
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III. CLASSIFICATION
37. The Chairman recalled that this part of the m eeting was going to be conducted in the informal
mode.  As agreed at the last meeting the report of discussions on classification would be contained in
a regularly updated informal document.  The details of the discussion of this last point of the agenda
can be found in document Job No. 205/Rev.1.
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