RESTRICTEDWORLD TRADE
ORGANIZATIONS/FIN/M/42
12 November 2003
(03-6072)
Committee on Trade in Financial Services
REPORT OF THE MEETING HELD ON 6 OCTOBER 2003
Note by the Secretariat1
1. The Committee on Trade in Financial Services held a meeting on 6 October 2003.  The
agenda is contained in airgram WTO/AIR/2178.
2. The Chairman noted his intention under "Other Business" to raise two issues:  firstly, the date
for the next transitional review of China's commitments;  and secondly, the distribution of a document
by the International Council of Securities Associations.
3. The Committee adopted the agenda with these changes.
A. ACCEPTANCE OF THE FIFTH PROTOCOL TO THE GENERAL AGREEMENT ON TRADE IN
SERVICES EMBODYING THE RESULTS OF THE FINANCIAL SERVICES NEGOTIATIONS
4. The Chairman informed the Committee that the Fifth Protocol entered into force for Poland
on 3 July 2003, as indicated in document WT/Let/448.  He also recalled that three other Members had
yet to accept the Fifth Protocol, namely:  Brazil, Jamaica, and the Philippines.  He invited those threeMembers to provide any further information on the status of their domestic processes, and perhaps
give some indication as to when they expected to conclude their acceptance procedures.
5. The representative of the Philippines said that the legislative process was still ongoing, but
that his delegation remained committed to ensure that it was concluded as soon as possible.
6. The representative of Brazil said that the acceptance of the Fifth Protocol was still following
the legislative process.
7. The representative of Norway noted that after six years of the completion of the negotiations
this item was still in the agenda of this Committee.  That was disappointing and disturbing in the face
of the current negotiations.  He said that one basic feature of the WTO was that all trading partners
lived up to their obligations, agreed after a considerable effort as part of broader balance.  Without
certainty on these commitments, it might be more difficult to take on new commitments as part of the
Doha Round.  It was also unfair to other Members.  Norway therefore encouraged the three remaining
countries to implement and accept their obligations under the Fifth Protocol as soon as possible.
8. The representative of Switzerland joined the statement made by Norway.
9. The Committee took note of the statements made and decided to revert to this agenda item at
the next meeting.
                                                     
1  This document has been prepared under the Secretariat's own responsibility and without prejudice to
the positions of Members and to their rights and obligations under the WTO.S/FIN/M/42
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B. TECHNICAL ISSUES
10. There were no interventions under this agenda item.
11. The Committee decided to revert to this agenda item at the next meeting.
C. RECENT DEVELOPMENTS IN FINANCIAL SERVICES TRADE
1. Addendum to the Communication from Switzerland on e-banking (S/FIN/W/26/Add.1)
12. The Chairman reminded Members that at the previous meeting Switzerland replied to
questions raised on its document on e-banking.  These replies were subsequently circulated as
document S/FIN/W/26/Add.1.
13. The representative of the United States supported Switzerland's view that technological
neutrality was an essential assumption of the GATS.  For example, mode 1 commitments for a
particular financial service would apply whether someone did it on the phone, over the internet, or by
means of some other emerging technology.  That did not mean that a country could not impose non-discriminatory disclosure or registration requirements on providers using certain technology.
14. The representative of Canada made a follow up question regarding question 3, paragraph 5, of
the document under consideration.  She asked how regulation was applied in practice, how the
supervisor monitored those provisions of the banking law, and what type of recourse was available in
the legislation in case of breaches of those requirements.
15. The representative of Switzerland said, with respect to Canada's question, that financial
institutions outside Swiss borders were not subject to the national supervisory authority, as was the
case in all countries.  For that reason, Switzerland wanted to ensure that customers were not misled
about the country where the institution was physically located when performing a transaction via
internet or other electronic means.  Beyond that, Switzerland considered that it was up to eachcustomer to make his/her choice.  Regarding the enforcement of this rule on consumer protection, the
first step would be to contact the institution concerned to make it aware that it was breaching a Swiss
law.  Experience showed that that procedure was enough to make the institution react.
16. The representative of the Philippines made a comment and a question.  Firstly, as indicated by
several Members in previous meetings of the Committee, technological neutrality was not a basic
assumption of the GATS.  It was not provided for, either explicitly or implicitly, in the GATS.
Secondly, he said that consumers were often prevented from making remittances abroad through
electronic banking, if the remittances were below a certain amount.  Noting that according to the
document there was no specific regulation on e-banking in Switzerland, including when performed on
a cross-border basis, he sought confirmation as to whether those limitations were due to regulatory
measures or to practices by private institutions.
17. The representative of Switzerland said that technological neutrality was something intrinsic in
the definition of mode 1.  Commitments under mode 1 must apply whatever the means of delivery,
because mode 1 did not distinguish between different means of delivery.  On the question raised by
the Philippines, he wondered whether that inform ation could be provided in writing so that an
appropriate response could be given at a future meeting.
18. The Chairman encouraged other Members to make similar presentations and consider ways to
continue analysing the issue of e-finance.  He noted that it would be interesting in that regard to
examine developing countries' practices in this field.S/FIN/M/42
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19. The Committee took note of the statements made and decided to revert to this item at the next
meeting.
2. Communication from Malaysia "Challenges in the Financial Services Sector"
(S/FIN/W/28)
20. The Chairman recalled that at the previous meeting, Malaysia made a very interesting
presentation, which was subsequently circulated as  document S/FIN/W/28.  In his view, the document
raised very interesting questions on the liberalization of financial services that Members might want
to consider further.
21. The representative of Japan commended Malaysia's efforts towards achieving a more
efficient, competitive and market-driven financial sector, based on the recognition of the benefits of
liberalization.  According to his understanding, Mala ysia would proceed to the next stage of structural
changes in accordance with the Financial Sector and Capital Market Master Plans.  In that regard, heasked whether the Master Plans included liberalization measures for foreign financial institutions.
22. The representative of the European Communities asked two questions on the conclusions in
paragraph 17 of the document, which seemed to be at variance with the rest of the paper.  Firstly, on
the capacity to absorb changes without undermining financial stability, she said that the vast majority
of international reports, including from the World Bank, pointed to the fact that foreign participationmight increase financial stability and help prudential soundness.  The EC would like to hear further on
the impacts of foreign presence on financial stability and prudential soundness in Malaysia, and
whether there had been any specific difficulty in that regard.  Secondly, the final sentence in
paragraph 17 said "an important lesson of the last financial crisis is that liberalization strategies must
go hand in hand with increased regulation, effective supervision and enhanced capacity building."The EC could understand this last point if it were made in reference to capital movements.  However,
if the reference was to the establishment and operation of foreign institutions, then the rationale was
less clear.  She wondered why the establishment of foreign presence might have been a factor of the
financial crisis.  She asked for further clarification in that regard.
23. The representative of Australia welcomed Malaysia's commitment to the opening up of its
domestic financial sector and the development of a sophisticated financial market.  He encouraged
Malaysia to keep the impetus for progress.  He noted that extending the period of adjustment would
not necessarily improve the ability of domestic institutions to equip themselves for international
competition.  Indeed, it might instead weaken thei r incentives to reform, to the detriment of the
economy.  Competition from overseas was vital to developing institutions that could cope with
shocks.  For example, financial system stability in Australia was quite enhanced by having an open
and competitive system.
24. The representative of Switzerland recognized the concern expressed in the paper with regard
to the link between an increased foreign presence and the stability of the financial system.  However,
that concern might depend on the type of financial activity under consideration.
25. The representative of Norway said that the Master Plans could had given Malaysia an
opportunity to phase in reforms.  Taking commitments in the GATS could bring credibility to the
reforms being undertaken by Malaysia.
26. The representative of Pakistan said that Malaysia's experience had been an eye-opener for
many developing countries.  The conclusions drawn in paragraphs 17 and 18 of the paper were very
relevant.  Pakistan agreed with those conclusions.  He said that in a country like Pakistan, which was
geographically spread out, highly populated, and with a big illiteracy rate, it had been difficult for theconcept of banking to take roots.  As a matter of fact, it was due to the nationalized banks – which didS/FIN/M/42
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not run only for profit - that the concept of banking had taken root in Pakistan' rural areas.  These
were areas where no private foreign bank would ha ve ventured to go.  He wondered how foreign
participation could contribute to the development of banking and banking systems in situations such
as the one he had characterized, with high illiteracy rates and big rural population areas.  He said that
the work carried out by those nationalized banks led the foundation for a more profit-oriented bankingsystem.
27. The representative of the United States agreed with the statement in page 1 of Malaysia's
paper that opening up of the domestic financial sector to foreign competition would contribute to a
more efficient, competitive and market-driven financial sector.  Indeed, foreign participation in
Malaysia could immediately enhance the domestic financial sector and contribute to overall economic
development.  She encouraged Malaysia to participate in the Financial Sector Assessment Programme
of the IMF/World Bank.  Such a comprehensive assessment could provide Malaysia with asupplement to its Master Plans, and could provide a context for greater technical assistance to address
vulnerabilities and to help its implementation of Basel requirements.
28. The representative of the People's Republic of China said that their reading of Malaysia’s
experience was the following.  On the one hand, although foreign banks might bring benefits to the
host country, there must be good regulation and supervision in place in the host country before thefinancial sector was widely opened, since foreign banks might not regulate themselves well and might
not work towards achieving a sound financial system.  The reason was simply that banks were
commercial and, therefore profit-oriented, entities.  On the other hand, as the financial sector was the
blood of a country's economy, domestic banks must be given a fair chance to grow steadily and
become strong.  Liberalization would not be desirable if foreign banks were allowed to “kill”domestic banks before domestic banks had had a chance to become strong.
29. The representative of Chinese Taipei recalled that when the Asian financial crisis occurred six
years ago, Malaysia was one of the victims.  However, it was affected in a different way, because it
had chosen to close the market for a while in order to avoid a direct impact.  At that time, Malaysia
was under great pressure from the international community, especially from the InternationalMonetary Fund, who claimed that that was the wrong thing to do.  Six years later however, he noted
that Malaysia was doing well, and the process of opening up of its financial market was launched
in 2002.  And the Malaysian market was becoming more  confident in the face of competition.  In spite
of the shared doctrine that opening up domestic financial markets to foreign competition was good for
the domestic market, attention should be paid to some of the problems raised while opening up, as
noted by Pakistan.  Paragraph 17 of the Malaysian paper was relevant when it said that it was
important to ensure that liberalization did not marginalize domestic financial institutions.  The latterwould sometimes happen.  For instance, foreign banks might decide to stay in the capital area, instead
of going to the non-profitable rural areas.  It happened in Chinese Taipei as well.  It might be a
difficult decision for the regulator to tell those foreign banks not to concentrate in the capital area.  In
addition, foreign institutions would tend to do business with good clients, because they are more
interested in making profit than in providing servi ces.  And they might absorb a majority of the good
clients of local banking institutions.  And the lo cal banking institutions might be marginalized.
30. The representative of Malaysia said that the steps undertaken by her country had been
recognized now by the financial community.  The measures were driven by the need to ensure
financial stability.  Malaysia had a long term liberalization programme.  Consolidation and capacity
building were essential components of both Master Plans.  Malaysia did not rule out welcomingadditional foreign institutions in the later stages of the liberalization plan.  The plans were on track.
She asked the delegations who posed questions to submit them in writing so that appropriate replies
could be provided at the next meeting.S/FIN/M/42
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31. The Chairman said that a wide range of views was expressed on Malaysia's document.  He
noted Malaysia's willingness to receive the questions in writing, and try to reply them at the next
meeting.  Some of the insights heard, such as the p ace of liberalization and the need to ensure that all
citizens benefit from liberalization, were indeed valuable for all Members.  He encouraged other
Members to present their own experiences in future meetings.  He suggested that the document bekept in the agenda for the next meeting.  The Committee so decided.
3. Presentation by Turkey on recent de velopments in its securities market
32. The Chairman turned to the third sub-item under this agenda item, namely the presentation by
Turkey on recent developments in its securities market.  The presentation was made by Dr. Bahsayis
Firatoglu, from the Capital Markets Board of Turkey.
33. Dr. Firatoglu started by saying that in the past the Turkish financial sector used to be a
banking-dominated sector.  However in 2003, the share of outstanding securities represented almost60% of all financial assets in the system.  More than 90% of outstanding securities belonged to the
public sector.  In fact, the share of public sector securities as a percentage of GDP had grown
dramatically since 1986.  Private sector securities issues had been reduced since the crisis in 2000.
The number of corporations traded in the Istanbul Stock Exchange (ISE) was 286 in September 2003.
Market capitalization was around 52,000 billion U.S. dollars in September 2003, with quite a highprice earnings ratio:  around 12 U.S. dollars.  Measured in terms of U.S. dollars, prices at the ISE fell
sharply as a consequence of the crisis.
34. The Capital Market Law, enacted in 1981, was the basic regulation.  It was further amended
in 1992 and 1999.  More detailed regulations, based on the Capital Market Law, were issued by the
Capital Market Board (CMB), which was the regulatory and supervisory organization in the TurkishSecurities Market.  Decree-law 91 laid down the framework for secondary market activities.  The
establishment and operation of companies was regulated by the Turkish Commercial Code, which had
been enacted in 1956, and was currently under revision.  Resolution 32, enacted in 1989, dealt with
international transactions.  By virtue of this Resolution, foreign portfolio investments had been totally
liberalized.  The Capital Market Board was in charge of regulating the following areas:  primarymarket activities;  secondary markets;  intermediation in the securities business;  collective investment
institutions;  and other capital market institutions, such as rating agencies, external auditors, stock
exchanges and clearing and depository institutions.
35. Regarding transparency in the regulatory process, draft regulations (Communiqués)
developed by the CMB were announced to market participants via the Internet.  The regulations were
finalized after processing the feedback received from the market participants.
36. Turkey put great emphasis on the harmonization of domestic regulations with the European
Union;  and on complying with disclosure standards issued by the International Organization of
Securities Commissions (IOSCO) and the International Accounting Standards Committee (IASC).  In
addition, Turkey had signed 12 memoranda of understanding for information exchange and
cooperation with foreign capital market authorities.  The basic objective was to protect investors,
particularly with regard to overseas or cross-border investments.
37. The Capital Market Law, enacted in 1981, had two major amendments in 1992 and 1999.
Major regulations introduced after the 1999 amendm ent included the following: investor protection
fund;  enhanced minority rights;  cumulative voting principles;  dematerialization of capital market
instruments;  improved independent auditing standards;  and principles for inflation accounting,
corporate governance, and licensing of intermediaries.  The Investor Protection Fund provided acompensation of up to 18,000 Euro per customer.  It was managed by a central registry, which was a
new institution introduced also by the 1999 amendments.  The Fund's income derived fromS/FIN/M/42
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intermediaries' contributions.  Regarding minority rights, she said that according to Turkey's
Commercial Code the minimum capital share required to qualify for minority rights was 10%.
However, the 1999 amendment to the Capital Market Law established that for publicly held
companies that percentage would be lowered to 5%.
38. The amendments also introduced the dematerialization of securities, for which a central
registry was established.  Capital Market instruments and the rights associated with them were
registered electronically by the Central Registry.  The aim of dematerialization was to reduce issuing
costs for companies, increase efficiency in settlement procedures, and provide for a secure
environment.  Also, in order to improve internal  audits and enhance the effectiveness of external
auditing, listed companies were required to establ ish audit committees inside the companies.  Those
committees were composed of members of the Board of Directors.
39. The CMB issued Corporate Governance Principles taking the OECD principles as a
benchmark.  Companies were not required to comply with these principles, but were required instead
to disclose whether they did comply with them or  not.  In case of non-compliance, companies had to
disclose the reasons.  It was expected that those principles would introduce better management for the
companies.  A system of corporate governance ratings for companies would also be introduced.
According to the envisaged system, rating agencies would rate companies according to their corporategovernance level.  The Corporate Governance Principles addressed four basic aspects: shareholder
rights, including equal treatment of shareholders;  public disclosure and transparency;  shareholder-
company relations;  and issues related to the Board of Directors.
40. The amendments to the Capital Market Law also introduced new institutions:  the Association
of Capital Market Intermediaries;  the Central Registry;  the Accounting Standards Board;  PrivatePension Plans;  and the Futures and Options Exchange.  The Association of Capital Market
Intermediaries was established in February 2001, and its membership consisted of brokerage houses
and banks.  The Central Registry was established in September 2001 as a first step towards
dematerialization.  The Accounting Standards Board had been operating since March 2002 and it was
in charge of setting national accounting standards in Turkey.  The Futures and Options Exchange hadalready been established, although trading had not yet started.  Trading was due to start early next
year.  Private pension plans were introduced as a complement to the social security system.
Participation was voluntary, and private pensions wo uld be based on a defined contribution.  Thus far,
60 funds had been authorized by the CMB to establish.  Their portfolio value amounted already to
11 billion U.S. dollars
41. As was said before, pursuant to Resolution 32 (1989), foreign portfolio investments had been
totally liberalized.  Foreign securities could be listed on the ISE International Market.  Clearing,settlement, and custody services were provided by Takasbank (ISE Settlement and Custody Bank).
42. Current projects included the demutualization of Istanbul Stock Exchange and Istanbul Gold
Exchange;  the establishment of an Exchange fo r Small and Medium-Sized Enterprises;  remote
access;  the set up of a Disaster Recovery Center;  and the launching of a technological modernization
process.  Following the example of the newly established Futures Exchange, which had already beenestablished as a joint stock corporation, all Exchange s would be transform into for-profit corporations.
The objective of the remote access initiative was to  enable intermediaries to access the Istanbul Stock
Exchange's computerised trading system using their own computers.  Remote access facilities were
already used by the majority of intermediaries.  The aim was to achieve the so-called straight through
processing, by which order routing, matching and clearing would be executed electronically.  The
Disaster Recovery Centre, which was due to be establish in early 2004, would store information,
databases and application codes of the following institutions: Capital Market Board, Istanbul Stock
Exchange, Takasbank, Istanbul Gold Exchange, Central Registry, Futures and Options Exchange,
SME Market, and the Association of Capital Market Intermediaries.  The TechnologicalS/FIN/M/42
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Modernization Process was aimed at integrating all the information systems.  Main features included
digital signature, public disclosure system, electronic admission and recording, real time surveillance,
and electronic data system.
43. The Chairman thanked Dr. Firatoglu for the very comprehensive presentation.  He asked how
the Turkish authorities dealt with the comments received from market participants on the draft
regulations announced via Internet.
44. The representative of Turkey (Dr Firatoglu) said that all comments made on draft regulations
were reviewed by the departments in charge of drafting the regulation.  However, although all
comments were taken into account, the system did not provide for a back reporting procedure.
45. The representative of the Republic of Korea asked two questions.  Firstly, he asked what
remedies had been undertaken by the Turkish government to overcome recent financial difficulties.
Secondly, he asked whether the Turkish government had faced difficulties in adopting OECDstandards.
46. The representative of the People's Republic of China said that China had two Stock
Exchanges.  Although the first one had been created 13 years ago, and the second one 10 years ago,
they were still in an infant stage and there was still a long way to go to develop them.  In order to
develop the Chinese securities market in an orderly manner, which was conducive and beneficial toeconomic development, the Chinese securities regulators were working hard to formulate relevant
regulations and practices, taking account of China's practical situation, international standards, and
other countries' experiences.  Therefore, China welcomed other Members having more developed
securities markets to share their experiences in this Committee.  She asked two questions.  Firstly,
how were the contributions from intermediaries to the Investor Protection Fund collected? Secondly,how did foreigners invest in Turkey's securities market?
47. The representative of Turkey (Dr Firatoglu) said that the banking sector had been severely hit
by the crisis, and major changes had to be introduced.  Securities were indirectly affected.  The new
regulations introduced in the securities market were not a response to the crisis.  They had been
envisaged before the crisis started.  Overcoming the crisis did not play a major role in the reform ofthe securities market.  Information on the measures taken in the banking sector had been given at a
previous presentation made by Turkey in May.  The securities business had been regulated since the
early 80s.  The EU, as well as other countries', experience had been taken into account since the very
beginning.  The current regulatory system was not in contradiction with the EU framework.  There
were only some minor divergences.  Regarding the Investor Protection Fund, she replied that
intermediaries were required to contribute a certain amount in order to be allowed to do business.  On
the other hand, foreigners were allowed to invest in Turkish securities, although they had to useintermediaries that had been authorized to do business in Turkey.
48. The Chairman said that, at the request of the Turkish delegation, the three PowerPoint
presentations made by Turkey on banking, insurance and securities would be compiled and distributed
to Members.  The Committee took note of the statements made.
D. THE GATS AND THE ANNEX ON FINANCIAL SERVICES – INTERNATIONAL REGULATIONS AND
FINANCIAL SERVICES
49. The Chairman said that the agenda item had been requested by the delegation of Antigua and
Barbuda in order to introduce a proposal by Antigua and Barbuda, Belize, the Fiji Islands, Guyana,
Papua New Guinea, The Maldives, Solomon Islands a nd St Kitts and Nevis.  This proposal had been
circulated as docum ent S/FIN/W/29/Rev.1.S/FIN/M/42
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50. The representative of Antigua and Barbuda said that the world had entered a dangerous phase.
Despite the international problems that were confro nting the global community and the logic that such
international problems demanded international solutions, a number of larger and more powerful states
had abrogated to themselves the task of making rules and imposing them on others through either the
threat, or the imposition, of sanctions.  The sovereign right of states to regulate and manage theircrucial financial services sector was being challenged continually by some countries who appeared to
have usurped the role of international organisations such as the WTO in global governance.  The best
rules, codes and practices - and the ones that were most effectively implemented and policed - were
those in which all states, large and small, had a real role in elaborating.  There was no better method
of securing enthusiasm and support than the full involvement of all concerned parties.
51. Flying in the face of that common sense approach, some larger and more powerful countries
adopted unfair and coercive practices in plurilat eral organisations such as the Organisation for
Economic Cooperation and Development (OECD) a nd the Financial Action Task Force (FATF) to
compel many other countries to implement measures which they alone had devised.  These measures
were protectionist of the financial sectors of the larger countries and harmful to his own country's
financial sector.  Moreover, the organisations that were imposing them, through sanctions and threats
of sanctions by their member states, had no legitimacy to do so.  Membership in these organisationswas effectively closed-off to many developing countries, especially small vulnerable ones like his
own.  The coercive methods they had adopted challenged a basic tenet of the WTO, namely
multilateralism, which included Most Favoured Nation treatment as well as open consultation
between WTO Members.
52. Over the past few years, the financial community had seen an unprecedented growth in the
number of codes, standards and guidelines that were fashioned entirely by these plurilateral groups
and with which they expected conformity from others.  These included financial standards relating to
money laundering, capital adequacy requirements, cross-border taxation and exchange of information.
The proposal's objective was to limit the impact of these plurilateral standards on WTO Members, and
to promote the greater inclusiveness of small states in the process of formulating these standards byplacing them under the umbrella of the WTO instead of  in the bosom of plurilateral organisations with
limited membership.
53. The inclusiveness and international legitimacy of financial standards, universally negotiated
and universally applied, could be accomplished best through the provisions related to Domestic
Regulation under Article VI of the GATS.  The recommendations contained in the proposal could
therefore be categorised as follows:
(a) that small states acquire some measure of flexibility in designating bodies responsible
for the administration of their standard setting and compliance obligations under
GATS, and that in particular, they be given technical assistance in formulating and
implementing standards with which they are being expected to comply;
(b) that a more explicit definition be given for what constitutes a "relevant international
organisation" in footnote 3 of the GATS, to ensure that all WTO Members, regardlessof their developmental status and through technical assistance, have access to
international processes aimed at setting these standards;  and
(c) that small states that may be expected to comply with these financial standards and
codes be notified and subsequently accorded the opportunity to engage in
consultations with these standard-setting members, bodies and institutions.
54. The proposal derived from a long experience of exclusion of small developing states in
standard setting, accompanied by sanctions being levied against them when they were unable toS/FIN/M/42
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comply with these standards.  This was a growing problem, which required urgent action to correct it.
These small states were already contributing, at gr eat cost to their economies, to the fight against
money laundering and terrorism financing, to which they were firmly committed.  But these countries
could not accept that a handful of states, however powerful, usurped the right to dictate standards to
the rest of the world under the threat, or the imposition, of sanctions.  The time was overdue for theinternational community as a whole to assume responsibility for this matter in a genuinely
international organisation such as the WTO.
55. The representative of Barbados said that, as a small developing economy with financial,
administrative and human capacity constraints, her country shared many of the concerns outlined in
the first part of the paper concerning the development of codes and standards in bodies with limited
membership.  As had been pointed out, those standards and codes could become a condition of trade
in the relevant sector or be imposed through threat of sanction on non-members of the organisation,especially small developing states.  Barbados could well attest to that situation through its first hand
experience with the OECD's harmful tax competition initiative in which Barbados was forced to
divert significant financial and administrative reso urces from developing its financial services sector
in line with its development objectives and to defend and safeguard its very survival.  Those standards
(i) were developed in an arbitrary and untransparent manner and without the input of small developingstates;  (ii) required regulatory obligations, which would be particularly onerous and complex for
small developing countries;  and (iii) had had the effect of limiting trade in financial services.  Even
after being recognised to be in compliance with  international standards and with the standards
imposed on small economies' jurisdictions, the chilling effect was that Barbados had been blacklisted
by a number of countries as a result of the perception of lacking probity in its financial servicesundertakings.  This had in turn impacted in Barbados ' ability to engage in effective trade in financial
services with a number of more developed and developing partners.  For these reasons, and for the
reasons articulated in the first section of the proposal, Barbados continued to assert that, in the
development of international regulations in the financial sector, all countries had the right to
participate, all countries must be treated equally, and monitoring of international standards must beconducted through a process of mutual evaluation and peer review.
56. The representative of Panama said that, as was well known, his country had addressed some
of the most important themes included in this proposal.  Since his authorities were still studying the
proposal, he refrained from making comments at this meeting.
57. The representative of Cuba said Members had recognized the structural disadvantages of
small and vulnerable economies, as well as their limitations in formulating and applying multilateral
trade rules.  In addition, Ministers agreed in Doha to look for solutions within the system in order to
avoid the threat of marginalization of these economies.  Trade in services was of critical importance
for these countries.  An important step forward could be taken if the proposals contained in this
document were taken into account, with a view to improving multilateral standards through the
incorporation of these countries' perspectives.  As was well known, these countries did not have the
possibilities or capacities to participate in the shaping of standards and codes for financial services.Regarding the document, Cuba considered that the proposal on Article VI of the GATS fitted
perfectly well in the current trends of regional integration initiatives and in the necessary
complementation between regional and multilateral processes.  The suggestion on footnote 3 of the
GATS was also perfectly understandable if it meant a greater participation in global decision-making
and the democratisation of institutions.  Notwithstanding, she suggested to add an additionalrequirement to define a 'relevant international organization'.  That new indent c) would say the
following: 'when this international organization does not exclude any Member for political reasons or
under unilateral pressure from other Members'.  She also said that the proposal concerning
Article VI:5 of the GATS, including the proposed footnote 4, defined important procedural matters
that would give greater transparency to the standard setting process.  Finally, the suggestions onArticles XIV and XXV of the GATS, as well as on paragraph 2 of the Annex on Financial Services,S/FIN/M/42
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were absolutely necessary once the pertinent ame ndments had been made to Article VI:5 of the
GATS.
58. The representative of Mexico said that the document dealt with two very important issues: the
steps that a WTO Member had to take when drawing up a technical standard;  and the requirements
that a body had to fulfil in order to be considered an international body.  The same discussion hadbeen held over and over again with regard to the Agreement on Technical Barriers to Trade.  The
experience, and the documents used in the Committee on Technical Barriers to Trade, could be very
useful for the current discussion.  With regard to the first of the issues, Mexico believed that it was
broader than what was contained in this proposal, and should therefore be part of the disciplines being
developed under Article VI:4 of the GATS in the Working Party on Domestic Regulation.  Some of
the principles highlighted in this proposal could be taken up in that Working Party.  With regard to the
principles that an organisation should fulfill in or der to be considered an international organisation,
Mexico was of the view that Annex 4 of the Second Triennial Review of the Implementation and
Operation of the Agreement on Technical Barriers to Trade might be relevant.  That Annex
established principles that must be observed by international bodies in charge of the development of
international standards.  That information might be very useful for the Members that submitted
document S/FIN/W/29/Rev.1, and could provide Member s with concrete elements in relation to this
matter, which was of great interest to Mexico.
59. The representative of Australia said that the proposal covered a lot of issues, which deserved
greater consideration.  Some of the issues were very serious and some of the suggestions made would
have far-reaching impact, including in relation to Members' abilities to establish and apply prudential
and tax related standards and general regulations.  Australia regarded any of those proposals,particularly those related to changing the GATS and the Annex on Financial Services, as requiring
substantial consideration before commenting on them.  Australia thought that there was a need to
make progress in developing open and transparent trading networks, and to have sound sophisticated
frameworks to underpin them.  Australia favoured the development of technical capacity.  In that
regard, he said that Australia was committed to pr oviding assistance to smaller nations and fostering
cooperative arrangements to overcome any existing barriers to participation in international
initiatives.  For example, prior to the Pacific Island's Forum meeting in August 2003, the Prime
Minister of Australia had written to Pacific leaders, urging consideration of options for managing
resources on a regional basis, including financial and economic policy elements.
60. He said that Australia fully supported the work of the Financial Action Task Force (FATF)
and its member countries, which was aimed at combating financial abuse in the global economy.
Australia recognized that meeting some of the FATF recommendations to combat money launderingand terrorism financing could be resource- and capital-intensive.  And Australia supported realistic
timeframes for developing countries to develop robust anti-money laundering systems and systems to
combat the financing of terrorism.  However, he noted that the international and regional communities
needed to act urgently to counter global terrorism.  Australia had been a strong supporter of providing
targeted funding, technical assistance and training to small and developing countries in the AsiaPacific region who were in the process of trying to meet the requirements of the FATF.  The OECD
and its member states also took an active interest in small states economies.  The OECD had
appropriate plans to assist the committed tax havens  in meeting the requirements of the Harmful Tax
Practices initiative.  Standards for effective exchange of information were jointly developed by eleven
small states and eleven OECD members.  And Au stralia supported the OECD initiative on Harmful
Tax Practices.  He also recognized that meeting some of the requirements could be, as was said
before, resource and capital intensive.  Therefore, where appropriate, Australia would provide
targeted technical assistance and explore options to lessen the burden of meeting the requirements on
the small developing states in the Asia Pacific region.  Australia believed that the concerns raised by
this proposal were serious and full participation of all WTO Members were necessary if GATSS/FIN/M/42
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commitments were to be realised.  Australia would like to give further consideration to this matter
before making further comments.
61. The representative of Canada said that her c ountry was undergoing a thorough review of the
proposals and would make some detailed questions and comments at a future meeting.  In conducting
its examination, Canada would like to ensure that some of the proposals made in this document didnot undermine any of the core obligations, or inde ed create new obligations, that might undermine the
balance of rights and obligations in the GATS, including its Annex on Financial Services.  Therefore,
Canada would be reviewing those proposals with that underlying principle in mind.
62. The representative of Hong Kong, China appreciated the contribution by Antigua and
Barbuda.  His delegation was open to discuss ways to facilitate and increase the participation of those
countries with capacity constraints in the ongoing negotiations, particularly in the area of rule-making.
Since his authorities were still considering the document, he clarified that his remarks would be of apreliminary nature.
63. He noted that a great part of the proposal was related to the definition of international
standards, and was connected to Article VI of the GATS.  In that regard, he sought the following
clarifications.  Firstly, he asked whether the proposed definition of international organizations, as
referred to in footnote 3 to Article VI:5 of the GATS, was aimed at all services sectors or justfinancial services.  Secondly, he considered that the suggestions made regarding Article VI:5 of the
GATS seemed to relate to the ongoing work on developing disciplines for domestic regulations.
Perhaps, this issue could be taken up further in that context, in the Working Party on Domestic
Regulation.  This contribution might be a useful input for the deliberations of that Working Party,
particularly with respect to the issue of technical standards, which had not been fully debated so far.Having said that, he added that in his view, Article VI:5 of the GATS was of a transitional in nature,
pending the entry into force of the disciplines that were being developed under Article VI:4 of the
GATS.  In that connection, he asked what was intended by the suggestions made with respect to that
particular paragraph, because if that GATS paragraph went away after the new disciplines entered into
force then the suggestions made in the document could be more appropriately included in thedisciplines to be developed in pursuance of Article VI:4.
64. He also said that the WTO was not in itself a standard-setting organization, and the
disciplines should not be prescriptive as far as any standard setting by individual Members was
concerned.  He wondered whether it would be possi ble or appropriate for the ongoing work on rule-
making to prescribe how technical standards or international standards should be formulated.
65. He finally made two additional points.  The first one concerned the suggestions made with
respect to Article VI:1 of the GATS to make it clear that Members might delegate any aspects of theadministration of measures of general application to an appropriate regional body.  In that regard, he
noted that Article I:3 of the GATS clearly stated that the GATS applied to measures taken by central,
regional and local governments, or non government bodies in the exercise of powers delegated by
governmental authorities.  He asked whether there was something in that proposal that had not been
already covered by the provisions of Article I:3 of the GATS.  The second point concerned thesuggestions made with respect to Article XIV of the GATS.  In his view, Article XIV was aimed at
clarifying that certain measures that might be considered necessary for certain purposes could be
applied as general exceptions.  Measures considered as justified under any of those categories of
general exceptions would be exempted from GATS disciplines and obligations.  He was not sure how
general exceptions could be made subject to provisions contained in Article VI:5 of the GATS.
66. The representative of Norway recognised that implementation of some of the standards,
e.g. the forty recommendations by the FATF, could be resource intensive.  He also echoed the points
made by other delegations that the WTO was not a standard setting body.  The continued fight againstS/FIN/M/42
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money laundering and the financing of terrorist activity was in the interest of all countries and of vital
importance.  Norway could not support proposals that could undermine that necessary effort and the
valuable work done by relevant fora.  He reserved his right to come back to the proposal by Antigua
and Barbuda for possible further details and comments.
67. The representative of the United States took note of the document and the concerns raised, in
particular those included in the first part of the document, as indicated by Barbados.  She also echoed
the comment made by Norway that the WTO was not international standard setting organisation.  At
the same time, she said that there were ongoing efforts in different fora to increase the participation in
the standard setting process, particularly of smalle r countries.  In that light, she suggested that that
might be considered a more appropriate avenue for addressing some of the concerns raised in the
document.
68. The representative of Antigua and Barbuda said he would not attempt to respond to all the
comments made.  He thanked Barbados, Panama and Cuba for their remarks.  He was also delighted
to hear that Australia favoured good technical capacity in the fostering of cooperative arrangements to
allow for full participation by countries, particularly in the areas addressed by the document submitted
by Antigua and Barbuda.  He was also glad to see that Australia regarded the concerns expressed in
the document as serious, and that Australia saw full participation as necessary.  He requested to havethe comments made by Hong Kong, China in writing in order to reply in a thorough manner.  That
notwithstanding, as a general response to the questions raised by Hong Kong, China, he pointed out
the situation raised was one in which his country and others were being expected to follow standards
imposed upon them under the threat of sanctions, without any capacity whatsoever to participate in
the making of those rules, codes and principles.  Regarding the remarks by Norway and the US that
the WTO was not a standard setting body, he expressed his surprise at these remarks.  He said that if
the WTO, an international organisation, could not set standards, then the OECD and the FATF, two
plurilateral organisations, certainly have no right to set standards either.
69. In concluding, the Chairman said that a wide range of views was expressed on the issue, and
several Members indicated that they were still considering the document.  Taking that into account, he
suggested that the Committee took note of the statemen ts made, and reverted to this issue at a future
meeting.  Since being a non-resident mission might limit the proponents' ability to attend meetings on
a regular basis, the Chairman said that he woul d consult informally with Antigua and Barbuda to
decide on an appropriate timing for the continuation of discussions.  The Committee so decided.
E. DATE OF THE NEXT MEETING
70. The Chairman suggested that the Committee hold  its next meeting during the next cluster of
services meetings, in December 2003.  The exact date would be announced in due course.  Taking
into account the need to conduct the review of Chin a's commitments before the meeting of the regular
Council for Trade in Services, the next meeting would most probably take place in the first week of
the "services cluster", likely on Monday 1 December.  The Committee so decided.
F. OTHER BUSINESS
1. Date of the next transitional review of China's commitments on financial services
71. The Chairman recalled that section 18 of the Accession Protocol of the People's Republic of
China provided for an annual review of the implementation by China of the WTO Agreement and of
the related provisions of China's Accession Protocol.  As indicated in Section 18, and as noted
previously by the Chairman of the Council for Trade in Services, the Committee on Trade in Financial
Services was one of the bodies in which that review had to be conducted.  The results of theCommittee's review would be reporte d to the Council for Trade in Services.  In that regard, heS/FIN/M/42
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announced that the Committee would conduct the next transitional review of China's commitments on
financial services at its next meeting, in December.  In terms of how to conduct the review, he
suggested that the Committee follow the same procedure as last year.
2. Communication from the International Council of Securities Associations
72. The Chairman informed Members that the Secretariat had received a communication from the
International Council of Securities Associations (I CSA), requesting the circulation of a statement on
"Regulatory Consultation Practices", adopted by that organization in April 2003.  The document had
been circulated for the information of Members in accordance with the Guidelines for Arrangements
on Relations with Non-Governmental Organizations  (WT/L/162).  Interested delegations wishing to
consult the document in more detail should contact the Secretariat (External Relations Division).  He
added that the document was also available in ICSA's website: www.icsa-intl.com
73. The Committee took note of both issues.
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