RESTRICTED
WORLD TRADE WT/REG3/M/3
23April 1997
ORGANIZATION(97-1769)
Committee onRegional Trade Agreements
Eighth Session
EXAMINATION OFTHE ENLARGEMENT OFTHE EUROPEAN COMMUNITIES:
ACCESSION OFAUSTRIA, FINLAND AND SWEDEN
Note ontheMeeting of19February 19971
Chairman: H.E. Mr.JohnWeekes (Canada)
1. TheCommittee onRegional Trade Agreements continued itsexamination oftheTreaty of
AccessionofAustria,FinlandandSwedentotheEuropeanCommunities(ECEnlargement)underagenda
itemB.IofitsEighth Session. Thefollowing items were treated:
A. General Remarks
B. Examination oftheGoods Aspects ofECEnlargement
C. Examination oftheServices Aspects ofECEnlargement
A. General Remarks
2. Therepresentative oftheEuropean Communities recalled some points fromtheCommittee 's
examination ofECEnlargement lastJuly. Hisdelegation hadatthattimeindicated thatitwould provide
written confirmation ofitsoralresponses; itwould beinaposition todosolaterthisweek. The
Article XXIV:6 process hadbeen concluded, ascommunicated indocument G/L/65/Rev.1. The
ArticleXXIV:5processofdeterminingthegeneralincidenceofdutiesandotherregulationsofcommerce
hadnotyetfinished, asthere weremethodological difficulties. Dataontrade creation anddiversion
hadbeenrequested inquestions 6and7indocument WT/REG/3/2 from theprevious examination;
suchdatawasnowavailable,asmuchresearchhadbeenconducted.Theinformationincludeddescriptive
andeconometric analyses, which showed atrendofliberalization. There hadbeentradecreation through
import penetration, andthere waslittleevidence oftrade diversion. Hisdelegation found thedata
reassuring.
3. TheChairman saidhewasnotyetprepared toleadadiscussion onthequestion ofthecalculation
ofgeneral incidence. There hadbeeninformal consultations onthis. Hehoped thattheSecretariat
would beabletocirculate anoteonthesubject inthenearfuture.
1Themeeting wasconvened inWTO/AIR/518.WT/REG3/M/3
Page2
B. Examination oftheGoods Aspects ofECEnlargement
4. Therepresentative ofUruguay saidthatthecomments bytheECdelegation hadbeenuseful
andinformative, butthat,asfarashewasaware, theArticle XXIV:6 negotiations withUruguay were
stillunderway.
5. Therepresentative ofSwitzerland saidthathisdelegation 'snegotiations withtheECunder
Articles XXVIII andXXIV:6 hadnotyetbeencompleted. Inviewofthefactthatamutually satisfactory
solutionhadnotyetbeenreached,hisdelegationrequestedthattheECauthoritiesrespondtoitsinvitation
topropose compensation atalevelcorresponding tothelosses incurred asaresult ofECEnlargement -
compensation forwhich hisdelegation hadgiven theECdelegation detailed figures.
6. TherepresentativeofCanadasaidthat,regardingthetariffScheduleoftheenlargedEC(EC-15),
Canada hadcompleted itsArticle XXIV:6 negotiations. TheSchedule hadbeencirculated toMembers,
butitstillneeded tobecertified. Many issues needed tobesorted out,especially technical matters.
TheCommittee should pursue thisactively.
7. Therepresentative oftheUnited States saidthathisdelegation hoped thatArticle XXIV:5(a)
general incidence consultations would becompleted inatimely manner. From aprocedural standpoint,
itwould behelpful ifsummary records fromprevious meetings could beissued sincetheywould enable
theCommittee tomake progress. Ifanswers anddataweredistributed wellinadvance ofmeetings,
itwould helpMembers prepare forsubsequent examinations. Dealing withsuchprocedural issues
would allow theCommittee toconcern itself withthesubstance ofitsmandate.
8. Therepresentative ofArgentina saidhisdelegation appreciated theinformation provided by
theECdelegation andwould welcome thecirculation ofwritten replies anddata,which werenecessary
iftheCommittee wastomove ahead. Ashisdelegation hadsaidduring theexamination inJuly, it
wasconcerned overregulations forthetransition period. Inparticular, there wasconcern overhow
Sweden'saccessionwouldaffectArgentina'smarketaccessinmeat.AtJuly'smeeting,therepresentative
oftheEChadspecified that,asof1January 1998, thetransitional period would beended andthe
ECregulations would befully inforce. Hisdelegation wassatisfied withthatinformation, but
understood thatprogress stillneeded tobemade sothatthetransitional period would notbeapplied
toorestrictively.
9. Therepresentative ofJapan saidthatwritten responses fromtheECdelegation andsummary
records fromtheJulymeeting would havebeenhelpful inpreparing fortheday'smeeting. Regarding
thetrade-creation effects, hisdelegation wasoftheviewthatregional tradeagreements (RTAs) might
infactdivert tradeandinvestment. Therecently published paper byCarla Hills, JohnJackson, Jaime
Serra andothers, entitled “Reflections onRegionalism, ”suggested thatregionalism would continue
toposeaserious challenge totheWTO 'sability toprotect andadvance theinterests oftheparticipants
inworld trade. TheCommittee should continue todiscuss these considerations withparties toRTAs.
10. Therepresentative ofKorea saidthatlastyear’sinformal meeting hadbeenhelpful indealing
withthematter ofgeneral incidence. Hisdelegation hoped thattheSecretariat would offeraconcrete
proposal forovercoming thetechnical problems inthecalculations. Hereported thathisdelegation
hadcompleted Article XXIV:6 negotiations. Hehadasystemic question, however, concerning the
response toquestion 23.There, theECrepresentative hadstated thatArticle XXIV:6 andtherelevant
Understanding provided thatcompensatory negotiations needed tocommence before tariffconcessions
weremodified orwithdrawn, butdidnotprovide thatthenegotiations needed tobecompleted before
changes weremade. Hisdelegation readArticle XXIV:5 tosaythat,ifsatisfactory negotiations were
notreached within areasonable period fromtheinitiation ofthenegotiations, thecustoms union could
nevertheless modify orwithdraw concessions. Itseemed thatthespirit oftheclause indicated thatWT/REG3/M/3
Page3
there should besome substantive negotiations before tariff concessions were made. Theconditions
ofparagraph 4were necessary butnotsufficient forthemodification oftariff concessions. His
delegation wasconcerned overthesystemic implications ofwhathadtaken placeintheECmodifications
oftariff concessions.
11. Therepresentative oftheEuropean Communities saidthattheconcern putforth bythe
representative ofUruguay wasabilateral matter. Heagreed withthepoint made bytheSwiss
representative regarding outstanding technical questions ontheSchedule. Hisdelegation, too,was
eagertoresolvethosemattersandwelcomedtheindicationsofcooperationfromanumberofdelegations.
Theconcerns expressed bytherepresentative oftheUnited States astosummary records andthetimely
provision ofinformation seemed fairandvalid, buttheCommittee needed tobecareful nottoincrease
theworkload. Itshould notraise obstacles tofurther progress. Thepoint raised bytheKorean
representative seemed important, butthesuggested linkage between Article XXIV paragraphs 4and5
wasnotnecessarily asystemic issue orproblem. According tohisreading, members ofacustoms
union wereallowed toproceed without being heldhostage byothers whowould prolong negotiations.
When hehadmentioned thenewfindings ontradecreation anddiversion, hehadnotintended todetract
fromthefocus oftheexamination. Thefocus should beonwhether ECEnlargement wasinconformity
withWTO rules.
12. Therepresentative ofKorea clarified hisearlier intervention, pointing outthatthere seemed
tobeadiscrepancy between theprovisions ofArticle XXIV:4 and5andwhathadhappened withthe
negotiations surrounding ECEnlargement. Thesecond partofparagraph 5called forareasonable
timebefore modification. Hedidnottakethistomean thatnegotiations hadtobecompleted, butrather
thatasubstantive negotiation should takeplace before modifications weremade. Thesystemic conflict
laynotinthelanguage ofthetwoparagraphs, butrather inthefactthat,inpractice, there hadnot
beenenough time. Hisdelegation wasnotsuggesting thatitsnegotiating position hadbeenweakened,
butwasinstead calling attention tothefactthatthere hadbeeninadequate timeafforded.
13. Therepresentative oftheUnited States saiditclearly would bebestifnegotiations were
concluded before tariff concessions weremodified. Regarding theneedfortimely summary records,
theSecretariat should beabletohandle thematter, simply presenting thepoints made atameeting
asabasisforsubsequent, deeper discussion. TheCommittee could notoperate smoothly without that
substantive information.
14. Therepresentative ofJapan saidhesupported thepoints made bytherepresentatives ofKorea
andtheUnited States. Referring toaremark bytheECrepresentative, hesaiditwashisdelegation 's
viewthatadelegation hadtherighttoraisesystemic points atanystage ofanexamination.
C. Examination oftheServices Aspects ofECEnlargement
15. TheChairman called theCommittee 'sattention toadocument dated 31January 1997, entitled
"Job 510," which theECdelegation hadcirculated. Thedocument consisted oftwoparts: the
Consolidated Schedule ofSpecific Commitments oftheEuropean Communities (EC-15 Schedule)
incorporating theSchedules ofSpecific Commitments ofAustria, Finland andSweden intotheSchedule
ofSpecificCommitmentsoftheEuropeanCommunities'twelveformerMemberStates(EC-12Schedule);
andaConsolidated ListofMFN Exemptions incorporating theListsofMFN Exemptions ofAustria,
Finland andSweden intotheEC-12 ListofMFN Exemptions. Thedocument stated thatthese two
items weresubmitted asproposals andthattheywould notreplace therespective Schedules andLists
untilafterthecompletion oftheexamination process.WT/REG3/M/3
Page4
16. Therepresentative oftheEuropean Communities saidthatherdelegation hadsubmitted what
itconsidered tobetherelevant information. FortheEC-15 Schedule, ithadusedinformation onthe
original EC-12 asthebasic working document andhadthenincorporated theSchedule ofSpecific
Commitments thateachofthethree acceding countries hadtaken individually on15December 1993;
thatwasalsothecasefortheListofMFN Exemptions. Thelevelofliberalization needed tobejudged
inlightofboththenumber ofspecific commitments andthenumber ofMFN exemptions thataMember
State took. Herdelegation hadtriedtoprovide theinformation inawaythatwould beaccurate and
“technically neutral, ”adding theinterests ofthethreeacceding Member States intotheEC-12 Schedule.
Nevertheless, thatsometimes resulted inachange ofterminology, orinabitmore precision needing
tobeadded totheclassification ornomenclature ofsome sectors orsubsectors, sotheEC-15 Schedule
appeared heavier interms ofscheduling.
17. Therepresentative oftheEuropean Communities continued, reporting thatnotasingle barrier
toaccess toMembers outside theeconomic integration agreement hadbeenadded inthecommitments;
theoverall level ofliberalization forMembers outside theagreement hadincreased. Therationale
usedfortrade ingoods wasevenmore pronounced fortrade inservices: byhaving three additional
Member States aspartoftheEC'sinternal market andinternal liberalization, theeffect wastradecreative
forthirdparties. Anoutside service supplier established inoneoftheMember States would nowbenefit
from treatment asanECsupplier intheenlarged area. Aservice supplier established onthebasis
oftheindividual commitment taken bythose three acceding countries would nowalsobenefit from
theEC'sinternal market andtheaccompanying liberalization. Atthesame time, thedocuments were
proposed texts. Thatwasalegalprecaution theECdelegation wished totakevis-à-vis other Members,
because Article V:7foresaw anexamination. Pending theexamination, herdelegation wished toreserve
itsrighttohavethelevelofliberalization andtheSchedule andalllegalrights beonthebasis ofthe
individual Schedules. Italsoprovided security fortheother Members, asthedocuments could be
scrutinized. Itseemed appropriate fortheChairman toallow timeforaperiod ofquestions andanswers,
asitwasthefirsttimetheCommittee wasdealing withtheenlargement ofaschedule ofservices.
Thiswasdifferent from theenlarging ormerging oftariff concessions, since theCommittee needed
tomeasure thedegree ofliberalization through regulations rather thanthrough atangible measure.
18. TherepresentativeoftheEuropeanCommunitiescontinued,indicatingthatherdelegationwould
provide replies toremaining questions. Many ofthequestions which delegations hadposed were
answered inthedocuments submitted. Forexample, theanswer totheCanadian question astowhat
theAustrian Government intended todoconcerning maritime transport services wasevident fromthe
Schedule andevenfromacommunication ofJune1996, found indocument S/L/26, made attheend
ofthemaritimetransportnegotiations.Inexaminingthedocuments,itwasimportanttouse15December
1993 asthereference point. What needed tobemeasured wasthelevelofliberalization achieved at
theendoftheUruguay Round fromtheEC-12 andfrom thenewMember States individually. This
would nottakeintoaccount theimproved Schedules andCommitments thattheEuropean Communities
hadmade inthemeantime with respect tofinancial services, movement ofpersons andbasic
telecommunications. Thechanges withrespect tothelevelofliberalization asof15December 1993
werefullycompatible withtheconditions andrequirements ofArticle V,andinparticular, withthose
ofArticle V:4. Theoverall levelofbarriers totradeinservices hadnotbeenincreased; tothecontrary,
trade hadbeenfacilitated foroutsiders coming intotheenlarged EC.
19. TherepresentativeoftheUnitedStatessaidheagreedthatthemembershipoftheEChadpositive
rights under theGATS. Thatwassomething theCommittee would consider inexamining theproposed
documents putforward toit.However, therevised Schedules andMFN Exemptions hadbeenexpanded,
andinatleastthree cases exemptions from theMFN rulehadbeen added. These hadpotential
detrimental effects onthesectors involved. What plans didtheECauthorities havetoaddress those
specific concerns asprovided under theWTO Agreement? While onecould point totheoverall level
ofliberalization thathadtaken place, GATS Article Vaddressed notonlytheoverall level, butalsoWT/REG3/M/3
Page5
individual sectors. Thatlanguage hadbeenincluded attheexpress request oftheECauthorities, and
itseemed apositive contribution atthetimetheAgreement wasbeing drafted. Ithappened thatin
thiscasetheexemptions being taken inonesector were ofinterest tohisdelegation. Thethree
delegations which hadbecome Member States oftheCommunities hadhaddynamic services schedules
intheirownrights, sotheMFN exemptions theyhadtaken hadstrategic consequences interms of
opportunities forthird-country providers intheirmarket. Howwould thoseadditional MFN exemptions
beaddressed under theterms oftheWTO Agreement?
20. Therepresentative ofKorea sought clarification astowhether thisCommittee hadthefinal
sayontheverification oftheSchedule orastowhether thatcompetence belonged totheCommittee
onSpecific Commitments.
21. Therepresentative ofJapan noted thatGATS Article V:4provided thatanyagreement "shall
notinrespect ofanyMember outside theagreement raisetheoverall levelofbarriers totradeinservices
within therespective sectors orsubsectors compared tothelevelapplicable priortosuchanagreement."
Hisdelegation haddoubts concerning thismatter andrequested confirmation thattheEChadnotraised
barriers against thirdparties incertain sectors.
22. Therepresentative ofSwitzerland saidthathiscomments wereofapreliminary nature. His
delegation hadexamined theUruguay Round Schedule ofAustria andthepresent EC-15 Schedule in
parallel. Three points wereworth mentioning. First, thespecific limitations under Mode 4(presence
ofnaturalpersons)werenotmentionedintheEC-15Scheduleforthefollowingservicessectors:services
incidental tomanufacturing, investigation services, collection agencies services, andnoise abatement
services. What were thespecific limitations inthose sectors? Second, asdataprocessing inthe
telecommunications sector hadbeenincluded inAustria 'sUruguay Round Schedule, itshould thus
belisted intheEC-15 Schedule. Third, space transport, CPC733,hadbeenincluded intheprevious
Austrian Schedule andshould therefore beincluded intheEC-15 Schedule. Hethensaidthathis
delegation hadalsocompared theUruguay Round Schedule ofFinland withthepresent EC-15 Schedule,
where onlyCPC 87305 waslisted withregard tosecurity services. IntheFinnish Uruguay Round
Schedule, thatservice hadbeenlisted assecurity services withreference toCPC873.Thus, atleast
CPC87302, security consultation services, andCPC87309, other security services, should bebound
intheEC-15 Schedule. Hisdelegation hadnocomment ontheSchedule forSweden atpresent.
23. Therepresentative ofCanada referred toaquestion hisdelegation hadposed inSeptember,
andsaidthatheunderstood theECdelegation tohavesaidthatthenewEC-15 Schedule answered
allquestions submitted. Thequestions hadidentified some issues relevant foraGATS Article V
examination. ThenewEC-15 Schedule could serve asabasis foranswers, butitneeded tobe
complemented byother information necessary foranexamination. TheCanadian delegation hadasked
whether there hadbeenanyspecific commitments inthehorizontal orsector-specific sections ofthe
Schedules forthethreeacceding countries thathadnotbeenincluded intheEC-15 Schedule. Aquestion
onMFN derogations hadalsobeenasked, andapparently additional MFN derogations hadsubsequently
beenintroduced. Specific answers tothesequestions would helpmove theexamination process forward.
24. Therepresentative ofIndia reserved hisdelegation 'srighttocome backwithquestions ata
laterstage. However, hewished toflagaspecial interest inMode 4.
25. TheChairman saidthatitwasobvious there werenumerous issues pertaining toservices that
wereunder thepurview ofother WTO bodies. Hedidnotwishtogiveadefinitive answer astohow
those bodies treated various provisions oftheGATS.
26. Therepresentative ofSwitzerland proposed thatthematter ofthecompetence oftheCommittee
beconsidered bytheSecretariat, especially theLegal Affairs Division, andthattheSecretariat indicateWT/REG3/M/3
Page6
itsviews. Hisdelegation approached theexercise inthecontext ofthisCommittee asareview ofthe
compatibilityoftheservicesaspectsoftheagreementsnotifiedunderGATSArticleV.Certainprovisions
ofthedraftSchedule oftheEC-15 might beconsidered incompatible. Itwaslikely thattheCouncil
forTrade inServices hadsomething tosayregarding thetechnical andlegalaspects oftheSchedule.
27. Therepresentative oftheUnited States shared theviewexpressed from theChair regarding
thecompetencies oftheCommittee. Examining agreements withrespect tobothgoods andservices
aspects wasefficiently doneinthisoneCommittee. Hedidnotquestion thelegalstatus ofanydecision
taken bytheCommittee withrespect tocompatibility withGATS Article V.Assistance could always
beasked from other WTO bodies, buttaking thefinaldecisions withrespect toregional integration
agreements wasaresponsibility lying withthisCommittee.
28. TheChairman asked theSecretariat toreflect onthematters raised before thenextmeeting.
TheCommittee should focus onitsownworkandnotonthatofotherCommittees. Itshould thensubmit
itsfindings totherespective parent bodies: theCouncil forTrade inGoods ortheCouncil forTrade
inServices.
29. Therepresentative oftheEuropean Communities saidthat,while shecould provide oral
information atthemeeting, herdelegation sawmerit inastructured exercise ofwritten questions and
answers.ThedelegationofCanadacouldfindtheanswerstoseveralofitspreviouslysubmittedquestions
inthevarious documents theEChadprovided. Forexample, theanswer tothequestion regarding
maritimetransportservicescommitmentscouldbefoundinadocumentfromthelatterpartofJune1996.
TheECauthorities didnotintend tomaintain thatcommitment, astheywereentitled towithdraw it
aspartoftheterms oftheMinisterial Decision onthecontinuation ofnegotiations onmaritime transport.
TheECauthorities didintend toreplace theSchedules ofCommitments ofeachofthethreenewMember
States with anew single Schedule. Therepresentative ofSwitzerland hadmentioned that
telecommunications hadbeentaken outoftheAustrian Schedule; thischange wasduetotheresults
oftherecently concluded negotiations onbasictelecommunications services, which, infact,substantially
maintained theAustrian commitment. Noother services sector hadbeenexcluded fromtheAccession
Treaty.AsapreliminaryanswertothequestionposedbytherepresentativeoftheUnitedStatesregarding
GATS Article V:4,shesaidthatherdelegation wasnotoftheopinion thattheAccession Treaty had
raised theoverall levelofbarriers. Thiswastheultimate test,anditwasclearthatthecompetent body
tocarry itoutwastheCommittee. Thatwastheimplicit answer totheKorean question. Themandate
oftheCommittee onSpecific Commitments wastocarry outatechnical exercise. Itwasthuslogical
thatthereview ofthedocuments submitted bytheECdelegation becarried outinthisCommittee,
intheprocess ofexamining whether theAccession Treaty wascompatible withGATS Article V.Once
afinalSchedule wasputforward, iftheCommittee deemed ittoneedverification from atechnical
point ofview, theverification should bedoneintheCommittee onSpecific Commitments. Whatever
conclusions weretobedrawn inthatCommittee should thenbereflected inthereport bytheCommittee
onRegional Trade Agreements totheCouncil onTrade inServices.
30. TheChairman saidthatthescheduled meeting forApril 28hadoriginally beenreserved for
theexamination oftheservices aspects oftheTreaty establishing theEuropean Communities. However,
astheexamination oftheservices aspects ofECEnlargement hadalready beenstarted, itwould be
natural firsttofinish thatexamination. Hetherefore suggested thattheCommittee continue totreat
itatthatApril meeting. Written questions should bereceived bytheSecretariat nolaterthan12March,
andanswers should besubmitted nolaterthanApril 14.Thatwould allow delegations twoweeks of
preparation before themeeting. Heasked theSecretariat toprepare summary records ofthediscussions
onthegoods aspects ofECEnlargement.
31. TheCommittee tooknoteofthestatements made.