RESTRICTED  WORLD TRADE  
ORGANIZATION  S/CSC/M/31 
14 January 2004 
 (04-0112) 
Committee on Specific Commitments  
   
 
REPORT OF THE MEETING HELD ON 4 DECEMBER 2003 
 
Note by the Secretariat
1 
  
1. The Committee on Specific Commit ments held a meeting on 4 December 2003.  The agenda 
for the meeting is contained in WTO/AIR/2224.  The Chairperson
 proposed to change the order of 
agenda items C (Scheduling Issues) and D (Consider ation of Issues Relating to Article XX:2).  He 
noted that the delegation of Hong Kong, China w ould introduce a paper under the item of scheduling 
issues. 
2. The representative of th e European Communities  asked whether the paper by Hong Kong 
China should be taken up under Other Business, as it  was a new paper.  The representative of Hong 
Kong, China  stated that he only wanted to distribute a room document on issues he wanted to address 
under the item of Scheduling Issues. 
3. The agenda was adopted  with the proposed changes. 
4. The representative of Brazil  noted that the communication put forward by Brazil at the last 
meeting under the item of Scheduling Issues (JOB (0 3)/189) was still on the table.  As soon as the 
market access negotiations were to resume, his dele gation would wish to revert to the issue.  He 
requested that the document be listed in future Airgrams once the market access negotiations had 
resumed. 
5. The representative of the United States  stated that only part of her intervention concerning the 
submission of Brazil at the last meeting was reflecte d in the report(S/CSC/M/30).  She would take this 
issue up at another time.  In particular, her comme nt in paragraph 21 on a statement by Brazil (in 
paragraph 20) was reflected inadequately.  Her delegation did not support the idea of a generic 
discussion of technical issues in the CSC, as para graph 26 of the report might suggest.  Rather, she 
had stated that it was very difficult to distinguish  between technical and non-technical issues, a point 
that had been raised also by at least one other delegation at the last meeting.   
A. ADOPTION OF THE ANNUAL REPORT TO THE COUNCIL FOR TRADE IN 
SERVICES 
6. The Chairperson  recalled that in July the Committee had updated its annual report for 2002 to 
inform the Ministerial Conference of the developments  in the first half of 2003.  Hence, the present 
draft report only reflected the two m eetings that were held after the adoption of the update of the 2002 
report, i.e. the July and September meetings.  The draft annual report (S/CSC/W/41) followed the 
traditional format for annual reports in that it was f actual and summarized the ma in areas of activity of 
the Committee during the reporting period.  
7. The Committee adopted the annual report .2 
                                                      
1 This document has been prepared under the Secret ariat's own responsibility and without prejudice to 
the positions of Members and to their rights and obligations under the WTO. S/CSC/M/31 
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B. CLASSIFICATION ISSUES 
8. The Chairperson
 stated that the delegation of Indonesia had circulated a proposal on the 
classification of energy services ahead of the meeting (S/CSC/W/42.)  He invited the delegation of Indonesia to introduce its proposal. 
9. The representative of Indonesia
 stated that since the communicat ion had been circulated to all 
Members, he would outline only the general aspects.  His delegation was open to any suggestions and 
happy to respond to any qu estions that Members wished to raise.   The proposal was submitted without 
prejudice to Indonesia's position on this and other ser vices sectors, or on any future proposal.  His 
delegation reserved the right to modify th e substance of the paper at any time. 
10. In the current negotiations, several developed countries had included energy services in their 
requests to Indonesia, and had called on Indonesia to make, inter alia,  additional commitments in the 
energy sector.  Indonesia was continuing to conduct consultations on these and other issues under the 
services negotiations.  The purpose of the communicati on was to suggest that the classification list in 
the Annex be used as a supplement to the classifica tion of energy services in the sectoral classification 
list (MTN.GNS/W/120).  He considered that the deve lopment of a more detailed list, which reflected 
the current commercial reality of the energy services market, was of key importance for the 
negotiations on specific commitments.  Such a list would also enable Members to identify their 
specific interests selectively.   
11. Indonesia had an abundance of energy resources a nd reserves, including oil, gas, and coal, as 
well as geothermal and renewable energies such as wa ter, solar and wind power.  In the paper, his 
delegation had classified energy services in five categories: (i) upstream activity, which comprised 
non-renewable as well as renewable energy; (ii)  down-stream activity, which related to energy 
transformation, transportation and distribution services; (iii) energy commercialization, which consisted of the wholesale supply of energy, retail supply of energy and commission agent services; 
(iv) professional services, which included expertise supply services, as well as human resource training and development services; and finally, (v) ot her energy service activities, which covered any 
activity not listed above.  In view of the strategic nature of the energy sector, the multilateral 
framework should respect the right of Members, and especially of developing countries, to regulate the supply of energy services within their territories in order to meet national policy objectives while 
facilitating their increasing participation in inte rnational trade in energy services through the 
strengthening of their domestic capacity, in acco rdance with the GATS preamble.  The particular 
needs of developing countries, as well as their leve l of development, both overall and in the energy 
sector, needed to be acknowledged.  In this re gard, negotiations on trade in energy services should 
guarantee the latitude of developing countries to implement policies aimed at domestic capacity 
building, in particular that of their small and medium-sized energy service suppliers.   
12. In recent years, the Indonesian government ha d been restructuring the energy sector by 
issuing three new laws, namely the Oil and Gas Law of 2001, the Electricity Law of 2002, and the 
Geothermal Law of 2003.  The spirit of the new la ws anticipated liberalization as well as the shifting 
of the paradigm from a centralized to a decentralized  system of government.  One of the benefits of 
the restructuring would be to raise the sector's energy service standards under the impulse of open competition.  This restructuring effort had enc ouraged Indonesia to improve the existing energy 
services classification, which could be utilized fo r various purposes, including that of providing 
guidelines for the negotiation and development of energy services.   
13. He noted that a comparison with the energy service classifications submitted by other 
Members showed some similarities with the Indonesian classification.  As an energy producing 
developing country, Indonesia had adopted policie s aimed at developing a strong domestic energy 
                                                     
 
2 The annual report is contained in document S/CSC/9  S/CSC/M/31 
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services sector, especially in the upstream segment  of the industry, as a stimulus to overall 
development.  To achieve greater participation in  the energy business, Indonesia needed to combine 
the export of energy sources with the enhancement of professional capacity, human resource training 
and technological progress in the services segment of the energy industry.  It was his delegation's view that these developments, wh ile creating export opportunities for local firms in the energy service 
and related sectors, would also e nhance overall economic growth and di versification.  The results of 
the negotiations should enable developing countries to use energy supply services as an instrument to 
boost their development and a means of both dive rsifying their economy and strengthening their 
private sector. 
14. He finally noted that negotiations on energy services should accord individual developing 
country Members such as Indonesia appropriate flex ibility to open fewer sectors, liberalize fewer 
types of transactions and to progressively extend th eir market access in line with their development 
situation, in accordance with Article XIX of the GATS. 
15. The representative of Canada
 acknowledged the importance of the energy sector for economic 
development.  Commenting preliminarily on the communication from Indonesia, it appeared that the 
classification proposal had a certain internal logic: it  was helpful, for example, that all engineering 
services were grouped together irresp ective of whether they were used  by the environmental industry 
or the energy industry.  This was a more appropr iate reflection of how services were regulated.  In 
particular, engineering services were normally re gulated generally and it was not distinguished 
between energy engineering and environmental engin eering.  He believed that a document similar to 
the very detailed classification list in the back of the Indonesian document could be valuably used by 
Members as an aide memoire  in the negotiations.  The nature of some of the changes proposed in the 
document raised possible concerns for Canada in  terms of legal stability, an issue which his 
delegation had been raising regularly in this Co mmittee.  He was also concerned about a possible 
imbalance as the proposal seemed to disaggregate en ergy services to a level that was much beyond the 
disaggregation in other sectors.  Finally, some activ ities were included in the list which were equally 
relevant for other sectors.  For example, technical  testing and analysis services were used in the 
energy services area, but were also important for mining services or environmental services.   
16. The representative of the European Communities  considered that the paper by Indonesia built 
upon previous work, but added more detail.  She we lcomed the fact that the paper covered not only 
the areas of oil and gas, but also renewable sources of energy which were important for a large number of Members.  It appeared that the pape r supplemented what was already contained in the 
W/120 classification, and it clearly identified many ot her sub-sectors, which were relevant for making 
commitments in the energy sector.  Spelling out  the CPC codes in the way Indonesia had done 
allowed to align them under the W/120 headings.  She noted that in the area of professional services, a 
good number of references were made to training and human resource development.  These would 
probably fit normally under education services.  Sh e also noted that construction services appeared 
only as a minor element, i.e. a sub-division of engineering in the Indonesian paper, but that their 
importance for energy services would seem to warrant a broader inclusion.  Her delegation saw construction as a sector in its own right with energy construction only forming a part of it.
  
17. The representative of Colombia  stated that her delegation was very interested in energy 
services.  Colombia was one of the few countries th at had made specific commitments on energy and 
mining during the Uruguay Round and also was an exporter of energy services.  She requested 
clarification as to the difference in approach between the Indonesian proposal compared to the 
proposals by the European Communities, Canada and other Members; as well as the proposal of 
Venezuela and Norway.   
18. The representative of Chinese Taipei  stated that her delegation was favouring a 
comprehensive approach to the classification of energy services, as was contained in the detailed 
proposals from a number of Members, including today's communication from Indonesia.  She noted S/CSC/M/31 
Page 4  
 
that some service sectors included in the classificati on, in particular professional services such as 
education, training and other energy services, were  closely related to other professional services and 
were already covered elsewhere.   
19. The representative of the United States
 welcomed the proposal which added Indonesia to the 
growing number of countries who recognised the importance of being able to address energy services 
in a comprehensive and consistent manner in thes e negotiations.  Indonesia's contribution underscored 
the importance of energy services to both devel oped and developing countries.  The United States, 
together with Canada, Chile and ot hers, were part of a group of c ountries that had tabled negotiating 
objectives for this sector.  The US, EC and Japan ha d tabled a joint proposal  for scheduling energy 
commitments and Venezuela had tabled a commercial r eality paper.  In looking at all these inputs, her 
delegation found that Indonesia's proposed classifica tion shared a number of elements with other 
proposals.  First, all papers acknowledged that ener gy services did not extend to ownership of natural 
resources.  Along these lines, Indonesia's paper stated that the management and utilization of natural 
wealth and resources should not impair the inherent right of all peoples to enjoy and utilize fully and 
freely their natural wealth and resources.  Secondly, like other proposals, Indonesia's paper applied to 
a range of energy sources including oil, gas, electri city and renewable energies.  Third, the structure 
of Indonesia's paper was also similar in many r espects to the scheduling guideline papers already 
tabled.  For example, like the proposed guide  for scheduling energy services commitments, 
Indonesia's proposed classification included headings for upstream services, i.e. exploration and 
development; downstream transmission and distribution services; energy commercialization; marketing services; and other energy services.  At the same time, however, Indonesia's paper appeared 
to differ in certain respects from one or both guidelin es that had been already tabled.  For example, it 
covered not only different energy sources, but in cluded mineral resources as well.  Other papers did 
not extend beyond energy sources.  She requested clarification as to whether Indonesia meant to limit the coverage to energy producing minerals such as  coal.  Also, Indonesia's classification proposal 
attributed a CPC number to the wholesale and retail sale of electricity.  She was curious about the 
basis on which Indonesia had assigned a CPC number to these activities.  Indonesia further appeared 
to take a broad view on activities included as energy services.  She was interested how Indonesia had arrived at some of its conclusions.  The proposed classifications included a separate section on professional services, a heading that did not appear in her delegation's guideline.  It appeared to apply 
primarily to adult education services and other edu cation services.  She sought clarification for the 
rationale behind the inclusion of this section in th e proposal.  Finally, she noted that Indonesia's paper 
was presented as a classification of energy services, whereas the guideline that her delegation had 
proposed jointly with other delegations did not atte mpt to create new classifications for the sector, but 
rather to build on the existing W/120 structure to facilitate scheduling of a meaningful set of energy 
and energy-related services.  She wondered whethe r the Indonesian paper was intended to serve the 
same purpose.   
20. The representative of Australia
 stated that the Indonesian prop osal on classification of energy 
services appeared similar to a working document de veloped by the APEC energy working group some 
years ago, as it broke the sector into five sub-sector s.  His delegation believed that this was a useful 
sectoral breakdown with sufficient detail, providi ng clarity and reflecting commercial reality.  
Specifically, he requested clarification on the en try on pipeline services.  Indonesia's description 
under 2.7.1 seemed to cover pipeline services, but the corresponding CPC number 7130 did not 
actually appear in the CPC classifi cation list.  He wondered if this was a technical error or whether 
Indonesia was in fact classifying this sector at the three digit level of 713 or at a more sub-sectoral 
level. 
21. The representative of China  shared Indonesia's view that sin ce the energy sector was vital for 
economic growth and sustainable development, the multilateral framework should respect national 
policy objectives and Members' right to regulate.  China took note that the fourth category of the 
classification in Indonesia's paper ("professional services"), which had not been separately indicated in previous proposals, had been independently liste d as a main classification in the communication.   S/CSC/M/31 
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Professional services were a crucial element in the supply of energy services.  Commenting on a proposal made by Venezuela at a meeting in July , he suggested to add one extra sub-category of 
storage services under item 9, that was “Offshore terminal support services and FPSO (Floating Production Storage Offloading)”.  He further sugg ested to add “geologic log services” under item 1. 
22. The representative of Norway
 stated that the energy sector was crucial to any society, and it 
was therefore of greatest importance to ensure maximum freedom and flexibility for Members to 
undertake commitments according to their level of de velopment.  He agreed with paragraph 7 in the 
Indonesian paper “that a detailed classification of  the energy services sector offers a comprehensive 
and essential instrument for WTO members in negotia ting specific commitments in energy services”. 
A list that helped to find individual commercial services in the classification system was needed. 
Venezuela had previously put forward a proposal for a detailed and comprehensive checklist that 
would assist Members in working out requests and offers according to their national interests.  
Indonesia had taken an equally comprehensive a nd transparent approach and had included all 
commercial services mentioned in the Venezuelan list, but had also added some new items, for 
instance related to thermal energy.   
23. Commenting on the classification, he stated th at it was his delegation's understanding that 
item 1A.2.1. “Rig positioning and preparation" re lated to offshore activities and included services 
provided by tug-boats.  The correct CPC corresponden ce, as used in the Ve nezuelan correspondence, 
was 7214.  Turning to “Vessel transportation and supply services”, item 2.4.4., he noted that such services, when supplied offshore, were provided by supply ships.  The CPC correspondence was 
7212.  As CPC 7212 included a wide range of mar itime transportation services, it should be indicated 
that the supply ship services only covered a part of the CPC 7212 correspondence.  Item 2.4.4. 
“Vessel transportation and supply services” should therefore be moved to the upstream section. 
24. He felt that the scheduling guidelines, S/L/92, should be the basis for commitments in energy 
services, as was the case for other areas.  Norway's e xperience had shown that in  order to fully realise 
the benefits of efficient, competitive energy servi ces, one needed to consider the entire chain of 
activities involved.  His delegation had included the valu e chain in its initial offer, and had attached an 
overview of the value chain to the offer to make it easier for Members to identify the energy related 
services in the schedule. 
25. The representative of Chile 
stated that classification issues were of critical importance for the 
energy sector.  One particular challenge arose from the fact that in order to cover the supply of energy 
services, commitments in several sub-sectors were  required.  Indonesia's paper reflected this 
commercial reality.  The paper complemented earlie r contributions and would help in the negotiating 
process. 
26. The representative of the Philippines  welcomed the premise set out  in the Indonesian paper, 
particularly the recognition of Members' nationa l policy objectives and the consequent right to 
regulate the supply of energy services, as well as Members' inherent right to the ownership of their 
natural resources.  He understood that Indonesia's in tention was to capture activities included in the 
proposed classification only in so far as they rela ted to energy services.  Given the scope of the 
proposed classification in certain instances, seve ral activities could be interpreted as including 
activities falling under other sectors as well.  He also was interested in Indonesia's view on the 
possible relationship of the proposal with discussions relating to core vis-à-vis non-core services in the energy sector.   
27. The representative of Venezuela
 stated the similarity between the different proposals was 
interesting.  In a preliminary reaction, she supporte d what was set out in paragraphs 5 and 7 of the 
proposal by Indonesia. S/CSC/M/31 
Page 6  
 
28. The representative of Indonesia
, replying to the comment by Canada, concurred that the 
proposal also related to sectors that were not speci fic to energy services only.  However, the proposed 
classification presented activities specific to the en ergy sector.  On the comment by the European 
Communities regarding human resources development,  she noted that the paper addressed the training 
and education especially for the energy sectors.  On Colombia's' question, the difference in approach 
to what had earlier been proposed by Venezuela was that Indonesia sought to integrate both up- and 
downstream services for all energy sources, including for renewable energy.  Also, a large segment of professional services was included.  Turning to the comment by the United States, she confirmed that 
wholesale electricity distribution was included for do wnstream activities.  The classification had been 
developed with the help of  the national stakeholders in the various energy sub-sectors.  She welcomed 
the invitation that Indonesia join the 'friends of energy ' group.  It appeared that China agreed that there 
should be a special classification for professional services. She thanked Norway for pointing to certain CPC numbers and stated that she would revert to this question following a discussion in capital.  She 
also thanked the other delegations for their comments and stated that she would reply to the questions 
in more detail at the next meeting. 
29. The Chairperson
 suggested that the Committee take note of  the statements made and revert to 
the paper by Indonesia and the questions raised a the next meeting. 
30. It was so agreed . 
C. CONSIDERATION OF ISSUES RELATING TO ARTICLE XX:2 
31. The Chairperson  recalled that the Committee had held a first discussion of issues related to 
Article XX:2 at its last meeting in September.  Also, at a dedicated informal meeting on 
20 November, he had presented a Chairman's Note  (JOB (03)/213), in which he had tried to 
summarize the various issues as they had emerged from prior contributions and interventions by delegations.  He had also sketched out possible a pproaches to the issue, some of which had been 
mentioned previously by various delegations.  He felt that the Committee might provide some added 
value to the discussion of this issue by first consid ering its substance in a more clinical way before 
exploring how best to address the issue in practi ce.  Ahead of this meeting, the delegation of 
Switzerland had submitted a paper, JOB (03)/214.   
32. The representative of Switzerland
 stated that his delegation's paper had been prepared in 
response to the questions and options raised by the Chair and should be read together with the Chair’s 
paper.  The paper only dealt with approaches 1-4 of  the Chair's paper and did not cover the issue of 
Article XX:2 per se, as this issue had been addressed  in an earlier paper by Switzerland, JOB(03)/85.   
33. The first issue that the paper tackled was the question whether there was a hierarchy between 
Articles XVI and XVII.  Switzerland believed that there was no indication that would point towards 
such a hierarchy.  In fact, the only possible sour ce for such an indication was Article XX:2.  If one 
supposed, for argument’s sake, that Article XX:2 in troduced a hierarchy, it would do so in a very 
indirect and unclear manner.  However, if it was indeed the purpose of Article XX:2 to stipulate a 
hierarchy between Articles XVI and XVII, then th e question arose why the Article was worded the 
way it was; rather than simply stating that market  access extended into some elements of national 
treatment, or that there was a hierarchy between those Articles.  However, it did not seem that Article XX:2 was designed to introduce such a hierarchy.  Instead, it was worded as a scheduling convention.  
This was also made clear by the title of Article XX, which reads “Schedules of Specific Commitments”. 
34. The second issue that needed to be examined were the scheduling functions of "None" and 
"Unbound".  Schedules were positive lists of commitme nts, in the sense that they listed sectors with 
partial or with full commitments.  Where no comm itments were intended, there was no need to list a 
sector and then inscribe "Unbound" for all modes under market access and national treatment.  In  S/CSC/M/31 
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other words, not listing a sector at all, or listi ng a sector and scheduling "Unbound" everywhere would 
have the same meaning.  From this, one coul d infer that "Unbound" had a different scheduling 
function than "None".  The latter entry could not be ignored.  For example, a Member could not 
introduce new legislation that would be inconsiste nt with the entry "None", while a Member could 
always alter its legislation where it main tained an "Unbound" in its schedule.  
35. The next question to be tackled was the meani ng of Article XX:2 within the four approaches 
identified in the Chair's Note.  Under the first approach, market access essentially extended into 
national treatment as concerned the zone of overlap .  This established a hierarchy between market 
access and national treatment.  If this premise was accepted, there would be no purpose for Article XX:2.  However, provisions of a treaty must not be  interpreted in a way th at made them redundant.  
Only one interpretation of Article XX:2 was po ssible, namely that the second paragraph was 
introduced solely to extend mark et access into national treatment.  However, as we had pointed out 
before, if this was the goal of Article XX:2, why w as it not stated in an unequivocal way?  And why 
had it been included under Article XX on scheduling conventions, rather than under Part III of the 
Agreement?  In sum, under the first approach, e ither Article XX:2 was totally useless, or it was 
drafted in a very unclear or even misleading wa y.  Either interpretation should be avoided. 
36. A similar reasoning would prevail for the second approach mentioned in the Chair's Note.  
Simply put, under this appr oach, national treatment would extend in to market access.  In this scenario, 
the wording of Article XX:2 would even be inconsistent with the second approach.   
37. Under the third approach, an "Unbound" would ove rride a "None".  Again, there was no need 
for Article XX:2, which could even be deemed inc onsistent with this approach in certain cases, 
namely in the event of a "None" for market access and a scheduled measure for national treatment. 
38. Finally, approach four, where "None" would override "Unbound", was the only scenario from 
which it would follow that measures inconsistent w ith both Articles XVI and XVII would have to be 
inscribed in both columns to provide a condition or qualification to Article XV I and XVII.  In other 
words, in the absence of Article XX:2, only the fourth approach would lead to double listings of 
conditions and qualifications.  Since such double lis tings were cumbersome and should be avoided, 
Article XX:2, as a scheduling convention, served the useful purpose of streamlining the schedules.   
39. Turning to systemic considerations, the representative of Switzerland stated that the second 
and third approaches would produce peculiar results .  Namely, in cases where there was no limitation 
under market access, and national treatment remain ed "Unbound", the Member could introduce only 
discriminatory market access measures.  Members thus would be induced to take such more restrictive 
measures compared to cases where they had no  commitments whatsoever.  This would run 
systemically against the principle of progressive lib eralization.  He was not advocating, however, that 
certain ways of scheduling should not be possible at all.  Somewhere, there might be a political 
intention to inscribe contents of a restrictive na ture, which technically would remain possible under 
conditions and qualifications.  Bu t more importantly, the preferre d approach to choose should be, 
from a systemic point of view, in line with the overall aim of the GATS, i.e. progressive 
liberalization.  Many other overlaps were conceiva ble, such as overlaps of modes or sectors.  For 
systemic reasons, it seemed that the most coherent  approach was to assume that full commitments 
remained full commitments, whether any overlaps could be found or not. 
40. The representative of Australia
 stated that his delegation found the argument put forth by 
Switzerland in this technically complex area very pers uasive.  However, he also recognised that those 
delegations with opposing views we re unlikely to be swayed to accep ting a legal interpretation that 
was not in their favour.  Clearly, there was a pref erence for technical issues like this to be kept 
separate from procedural considerations associated with  the negotiations.  However, in this instance, 
Members were faced with a technical problem on wh ich there seemed to be little progress, and there 
was a negotiating round that offered the potential to deal with a quirk in legal interpretation or S/CSC/M/31 
Page 8  
 
scheduling patterns.  The Committee could suggest to  the Council for Trade in Services the option of 
setting the question of legal interpretation aside wh ile encouraging Members to make offers during 
the negotiations that removed the existing ambiguities.   
41. The representative of Chile
 remarked that the paper by Switzerland helped to better 
understand the problems at hand.  Chile agreed that approaches one and two assumed a hierarchy 
which was not spelt out in the Agreement.  While  it might be difficult to arrive at a joint 
interpretation, approach number five in the Chai r's Note might offer a realistic way out.  This 
approach should be further explored.   
42. The representative of Brazil  stated that the discussion was not just a theoretical exercise but 
addressed very important issues, especially in a negot iating round.  It was essential to understand what 
other Members were putting on the table, and how to express own intentions.  Leaving this question 
aside with regard to the current schedules would not do anything to resolve existing problems, even if 
a solution was found for future schedules.  Also, solu tions for future schedules might have an impact 
on existing schedules.  Therefore one should first try to clarify this issue and then find a solution.    
43. His delegation agreed that there was no hierarchy between Articles XVI, XVII, and XX:2.  It 
seemed that there were actually not only market access and national treatment restrictions, but a third 
category of restrictions that combined market access and national treatment restrictions.  For these three restrictions, three Articles existed in the Ag reement.  Article XVI dealt with market access 
restrictions, Article XVII with national treatment rest rictions, and Article XX:2 with those restrictions 
that combined market access and national treatment restrictions.  Looking at those three Articles as 
having an independent justification would be consistent with Appella te Body jurisprudence that an 
Article of an Agreement could not be read to nullif y another Article of the same Agreement.  If every 
Article must be given meaning, it followed that the market access column actually addressed two 
issues.  First, it could be used to schedule mark et access restrictions as stated in Article XVI, and 
secondly, it would also be used to schedule restrictions  that fell under Article XX:2.  An inscription in 
the market access column could hence stand for two different things because the GATS stipulated that 
two different types of information were to be scheduled in the same column.  An "Unbound" under 
Article XVI could be understood to encompass both the restrictions set out in Article XVI:2 (a)-(f), as 
well as those in Article XX:2, because both Articl es state that any inscription of the respective 
restriction should be made in the market access column.  Having said that, it seemed that the first approach in the Chair's Note did not impose any hierarchy between Articles XVI, XVII and XX:2.   
44. He thus disagreed with the statement in para graph 20 of the paper by Switzerland, that the 
first approach presumed the existence of a hierarchy between Articles XVI and XVII.  Although 
paragraph 19 of the paper stated that approach number four did not imply any hierarchy between Articles, it nevertheless advocated a solution by which a "None" would override "Unbound." This 
would in fact introduce a hierarchy between an "Unbound" and a "None."  As the question of hierarchy was a central element of the discussion,  he requested the Secretariat to prepare a 
compilation of jurisprudence regarding the question of hierarchy between Articles within the same 
Agreement.   
45. The representative of Chinese Taipei
 stated that her delegation's preferred solution was to 
employ a schedule-based approach, along the lines of approach five in the Ch air's Note.  Approaches 
one and two introduced a hierarchy between Articl es XVI and XVII, while there was no legal ground 
for assuming such a hierarchy.  One needed to be careful with the th ird and fourth approach,  because 
these approaches could lead Members to interpret the scope of commitments in a way that might 
either diminish the commitments or change their dire ction.  The current negotiations provided an ideal 
opportunity to use bilateral negotiations in order to clarify certain entries in schedules that might be 
modified in the context of the schedule-based a pproach.  Any new commitment in each Member's 
offer would then follow this approach.    S/CSC/M/31 
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46. The representative of Hong Kong, China  welcomed the opportunity to address the problem on 
a technical basis and to put aside legal and procedur al considerations for the time being.  He agreed 
that the fifth approach was a pragmatic way of tryi ng to avoid that the problem would repeat itself in 
respect of new commitments.  Even if no decision came out of the current discussion, it had already achieved the purpose of raising Members' awareness of the problem.  In the course of the 
negotiations, delegations would pr esumably be aware of the ambiguities arising from those entries 
and would try, as far as possible, to clear up those entries.  It was now clear that the problem was wider than concerning only Article XX:2.  It concerned more generally the overlap between 
Articles XVI and XVII and the resulting overlap of commitments in the market access and national treatment column in individual schedules of specific commitments.   
47. These observations on the various approaches di d not necessarily represent the interpretation 
of his delegation and were intende d only to take the discussion forward.  In his view, approaches one 
and two did not establish a hierarchy between Articles XVI and XVII, but actually aimed at 
eliminating the overlap by assigning the overlapping area to one of the Articles.  In approach number one, the overlapping area would be assigned to Article  XVI, and therefore Article XVI would govern 
all the measures in paragraph 2 (a)–(f) in both non-discriminatory and discriminatory form.  Under 
both approaches, the intention was to eliminate th e overlapping area and to dr aw a clear line between 
Article XVI and XVII.  A measure would then either  fall within Article XVI or Article XVII but not 
within both at the same time, th ereby eliminating the need for deciding which Article should take 
precedence over the other because the two Articles w ould not be applicable at the same time.   
48. Another observation was that Article XVI:2 re fered to well-defined categories of measures 
which, of course, were only a subset of the measure s that were governed by the GATS.  On the other 
hand, the scope of Article XVII was in principle th e same as that of Article I of the GATS, capturing 
the discriminatory aspects of all possible measures.  Conceptually and structurally, there might hence 
be merit in retaining the scope of Article XVII, but to reduce the scope of Article XVI because the 
latter contained a well defined subset of measur es.  This would ensure that the notion of 
discrimination was retained in its entirety in Article  XVII.  From a structural point of view, it might 
be less desirable to carve out segments from th e scope of Article XVII and allocate them to 
Article XVI.  Thus, approach two might have a mer it over approach one.  There were further practical 
considerations in comparing the two approaches.   For instance, when Members crafted their 
schedules, they had to decide whether to inscrib e limitations under the market access or national 
treatment column.  If the national treatment colu mn was reserved entirely to any discriminatory 
measures, and the market access column was entirel y reserved for quantitative or other restrictions on 
legal form or equity, then a decision might be easi er to make than a decision between measures which 
were quantitative and discriminatory and measures which were non-quantitative and discriminatory. 
49. As an alternative to assigning the overlapping area to either one of the two Articles, it would 
be conceivable to simply require all measures fa lling into the overlapping area to be scheduled under 
either the market access column or the national tr eatment column.  While the first two approaches 
outlined in the Chair's Note see med to involve a change to th e architecture of the GATS, the 
alternative merely required an agreement on where the entries under the two Articles should appear in 
the schedule.  This alternative would of course not eliminate the overlap.  Yet at least in terms of scheduling, it might provide greater clarity.  In th eory one could also envi sage a scenario with three 
columns one of which was assigned specifically to th e overlapping area.  Conceptually, the alternative 
essentially tried to find a place for what w as to be put in this third column.   
50. Approaches three and four in the Chair's Note retained the overlap of the two Articles, but 
provided that the commitments in the overlappi ng area would be governed by the scope of 
commitments being undertaken in either column, i.e. either "Unbound" prevailed over "None", or 
"None" over "Unbound".  In this regard, the pape r by Switzerland contained a very interesting 
analysis.  Contrary to that analysis, he believed th at approaches three and four introduced a hierarchy, 
albeit not between Articles XVI and XVII, but be tween "None" and "Unbound".  If one had only the S/CSC/M/31 
Page 10  
 
choice between approaches three and four, he would agree with Switzerland that approach four would 
appear more convincing.  No matter how one read  Article XX:2, if "None" was scheduled in the 
market access column, and "Unbound" in the nationa l treatment column, it could hardly be argued 
that the Member could still introduce a measure under Article XVI which was discriminatory in 
nature, because such a measure, by the logic of Ar ticle XX:2, should have appeared in the market 
access column of the schedule.  A "None" in the market access column could only mean that there 
was no such limitation in place.  Another reason in support of approach four over approach three was 
that Articles XVI and XVII represented obligations that Members assumed by inscribing entries in their schedules. Scheduling an "Unbound" for a certa in mode, or omitting a sector altogether from a 
schedule did not absolve the Member from any other obligations for the sector, such as the 
unconditional MFN obligation.  By the same token,  an "Unbound" in either the market access or 
national treatment column only meant that the Memb er did not assume obligations under that column.  
However, this did not absolve the Member from obligations assumed elsewhere, for instance through 
entering "None" in the corresponding other column.  Seen in this light, there were good reasons that 
"None" should prevail over "Unbound". 
51. To further the analysis of the four approaches,  it seemed that the following issues needed to 
be examined: (i) whether there were any substan tive differences between removing or retaining the 
overlapping area; (ii) whether the notion of market access restrictions should be reduced to their non-
discriminatory form, and discrimination be reserved in entirety to national treatment, in terms of GATS architecture, conceptual tidiness and practical  ease in scheduling; and (iii), whether there 
should there be any hierarch y between "None" and "Unbound". 
52. The representative of Japan
 proposed to distinguish between the two scenarios at issue, 
depending in which column the "Unbound" was sche duled.  Article XX:2 obviously related to a 
situation where a measure was inscribed in the market access column.  Where a commitment was 
inscribed in this column, and an "Unbound" was ente red in the national treatment column, it appeared 
that the commitment should not be decreased by that "Unbound".  For example, if in the market 
access column no limitation was maintained except fo r a quantitative limitation on the number of 
licenses, and the national treatment column was left "Unbound," it would be unreasonable to assume 
that the Member would nevertheless be able to intr oduce restrictions for fo reign capital because they 
were discriminatory in nature.  As far as this pa rticular situation was conc erned, his delegation was 
basing itself either on the logic of approach one or  approach four where the market access column or 
the commitment would prevail over the "Unbound" situation.   
53. More problematic was the situation where th e "Unbound" was in the market access column 
and a full or partial commitment was inscribed in the national treatment column.  Having heard the 
different statements and different interpretations of the meaning of "Unbound," and also given that 
measures which would be subject to  national treatment obligations were  not specified in Article XVII, 
he believed that there was ultimately no other way of understanding the underl ying intention of the 
schedule other than to seek clarification from the Me mber who had originally submitted that schedule.  
In other words, there was no choice other than opti on five for these cases.  Of course, this would need 
to be done in a very cautious manner, so that the domain of "Unbound" would not prevail beyond the 
original intention of the Member who had made the commitment.  Countries seeking an extensive 
interpretation of "Unbound" should be required to explain their intentions, and, so to speak, carry the 
burden of proof.  
54. The representative of Canada stated it was difficult to deal with  the issue in a purely clinical 
way, because any solution had implications for Members current and future schedules.  These 
implications needed to be taken into account.  Hi s delegation was still examining the Chair's Note and 
in particular the question posed in paragraph 14.   His delegation was further exploring the exact 
meaning of "Unbound", and whether, as had been sugg ested in an earlier paper by Hong Kong, China, 
it could be understood as a listing of a ll existing and possible limitations.    S/CSC/M/31 
 Page 11 
 
 
55. The representative of the United States,  in making preliminary comments, stated that one of 
the important questions in the de bate related to the meaning of  "Unbound".  More precisely, the 
question was whether "Unbound" w as equivalent to what Article XX:2 described as measures 
inconsistent with both Article XVI  and Article XVII, if it was inscribed in either place.  Was an 
"Unbound" tantamount to a measure inconsistent with  something?  Looked at the question in that 
way, one found oneself going back to the title of Article XX "Schedules of Specific Commitments," 
and the first paragraph which set out how to sch edule specific commitments.  The question arose 
whether inscribing "Unbound" actually meant listi ng a specific commitment.  One should also ask 
whether paragraph 2 of Article XX should in any wa y be read in conjunction with paragraph 1 in 
order to determine what was meant by "measures in consistent with both Articles XVI and XVII".  On 
the issue of hierarchy, one needed to distinguish between hierarchy of substance and hierarchy of how 
to inscribe.  Some guidance was given by pa ragraph 18 of the scheduling guidelines which she 
reiterated should be looked at.  However, she noted  that the Chair's Note stated that paragraph 18 
might be deficient to resolve the issues at hand.   She did not suggest, however, that paragraph 18 
needed to be revised to incorporate some of the many questions at hand, since the discussion was 
nowhere near a solution.   
56. She recalled that, in the informal discussion, Chile had asked whether situations involving an 
"Unbound" were actually situations where Article XX: 2 applied.  It had been pointed out that an 
"Unbound" might include some restrictions that we re not in effect at the moment, but could be 
introduced at a later stage.  The "Unbound" would al so reserve the right to inscribe limitations at a 
later stage.  On the question of whether Article XVII should be viewed as the only domain for 
discrimination, she noted that Article XVI:2 (f) al ready covered discriminat ory measures.  Following 
this approach might require to amend Article XVI to clean up any indication of discrimination.  She 
therefore urged for restraint in the debate.  Her delegation appreciated Aust ralia's suggestion.  The 
present debate should not lead to a legal interpreta tion, and she was not suggesting to tamper with 
existing commitments.  As for future commitments, one would of course have  to take into account 
some of the questions that had been raised in th e various papers and discussions.  She suggested that 
Members started to think in that light, also becau se the Committee had to report back to the Council 
for Trade in Services.  Members were relying on the Chair in finding the best way to produce a report.   
57. The representative of Singapore  stated that his delegation was broadly inclined towards the 
first approach.  As everyone recognized, Article  XVI dealt with both discriminatory and non-
discriminatory aspects of the six types of measures contained therein.  Thus, the "Unbound" entry in 
the market access column should by definiti on apply to both the discriminatory and non-
discriminatory aspects of the six measures.  If th ere was a "None" entry in the national treatment 
column, it should only apply to those measures that fell strictly under national treatment.  Given the 
structure of Article XVI, as it applied to both th e discriminatory and non discriminatory aspects of the 
six measures, option one would not create a hierarch y.  His delegation was still assessing this complex 
issue.  The current round presented a useful opportunity to clarify ambiguities.  In this regard, his 
delegation was also looking at approach five with  an open mind.  That approach could provide a 
useful modality for future work in this area, although it might not solve ambiguities with respect to 
existing commitments, as some delegations might rega rd certain interpretations as a nullification of 
commitments.  This created a major challenge, na mely how to balance the integrity of current 
commitments with Members' interpretations of their existing schedules.  These problems might not 
necessarily be resolved through bilateral negotia tions, as Members held differing views on these 
issues.   
58. The representative of the Republic of Korea  stated the discussions thus far had proceeded in 
two parallel tracks without much convergence of ideas.  Korea was of the view that the fifth approach 
was most appropriate at this moment.  He fully appreciated that this would not solve existing 
problems, but hoped that all Members would try to  reduce discrepancies by maintaining effective 
market access liberalization.   S/CSC/M/31 
Page 12  
 
59. The representative of Australia
 said that option five should onl y relate to new or improved 
commitments, but could not serve to clarify existing problems through applying any of the less liberal interpretations or approaches such as, for example,  option three.  A Member could also choose to 
resolve an ambiguity in existing commitments by ma king an offer consistent with the most liberal 
interpretation, which was option four, or by unamb iguously expanding its obligations.  For example, a 
situation of "Unbound" and "None" could beco me "Unbound except for measures falling under 
Article XVII" and "None," or it could become "N one" and "None".  There might be concerns about 
how to give credit in the negotiations for improvi ng schedules in this way, which was one issue his 
delegation was looking into.  Australia was pr eparing a paper to explain its position.   
60. The representative of the European Communities
 stated the Chair's Note and the paper from 
Switzerland were currently examined in Brussels.  The latter paper seemed to follow a very clinical 
approach; however, its para graph 23 also implied the possibility to look at approach number five.  The 
Chair's Note provided a useful summary of the debate  so far.  It was clear from paragraph 21 in the 
Chair's Note that approach number five might only he lp in relation to future commitments, and that 
there was a reluctance on the part of many Member s to apply it to existing commitments.  Whatever 
course of action was followed, it would have to a ddress the question of the potential overlap between 
old and new commitments. 
61. The representative of Switzerland  replied to the comments.  He did not agree with the view 
taken by Brazil that there were three types of measures and three corresponding GATS provisions to deal with them for mainly three reasons.  First, the structure and sequence of the GATS, which placed 
the substantive provisions on commitments in Artic les XVI and XVII in Part III and Article XX in 
Part IV, preceded by Article XIX on negotiations . . Article XX had the heading "Schedules of 
Specific Commitments," and was a technical provision aimed at setting out how to draw up schedules, which was different from the substantive provisions on market access and national treatment in Part 
III ("Specific Commitments").  Secondly, the wordin g of Article XX:2 clarified that it was merely a 
scheduling convention.  Third, if Article XX:2 indeed  contained a third type of measure, it would be 
difficult to see why Article XVI:2 (f) already covered a measure of this third type, which would fall 
under the Brazilian approach under Article XX:2.  
62. If the second approach in the Chair's Note w as correct, there would be no possible way to 
explain why Article XVI explicitly covered a meas ure which was discriminatory in nature, namely 
maximum foreign capital participation (Article XVI :2(f)).  It was always possible to find specific 
arguments in favor of any of the four approaches.  Switzerland, in contrast, had tried to consider all 
approaches in a holistic manner and test each appro ach against any possible internal inconsistency, 
taking into account the architecture of the GATS.  In doing so, only approach number four had proved 
to be truly robust.  Even if one accepted that a pproaches one and two did not imply a hierarchy, but 
only an allocation of the overlap zone, the questions  would remain the same.  It was not clear where 
such an allocation was provided for in the GATS.  The existence and content of Article XX:2 could 
not be explained, if an allocation was already fo reseen in other GATS provisions such as Articles XVI 
and XVII.  And, finally, the mere existence of Article XVI:2(f) raised problems especially if one 
wished to follow approach two. 
63. Turning to process, he felt that the discussions on this issue had been exhausted.  It was 
unlikely that the Committee would be able to reac h a consensual conclusion.  It was thus up to 
delegations to consider the ideas exchanged in the Committee and draw their own conclusions. In this 
context, it was certainly helpful that that the discu ssions had occurred at the start of the request and 
offer process.  Finally, the mandate received by the CSC was limited both in terms of time-frame and scope.  The Services Council had referred the item to the CSC for consideration on the understanding 
that the Chairperson of the CSC would report b ack to the Council on the discussions, complemented 
by the reports of the relevant CSC meetings.  S/CSC/M/31 
 Page 13 
 
 
64. The Chairperson  stated that he sensed that some delega tions were still looking at the issues.  
These delegations would need at least another formal meeting.  As the next such meeting was the last 
possible opportunity before the report to the Serv ices Council was finalized, he requested delegations 
to consider whether another informal meeting would be of use.  After the next formal meeting, he 
would prepare a technical report to the CTS under his own responsibility. 
65. The representative of Brazil stated that consideration of the issue should continue even after 
the report to the Services Council had been made.  It was important to find a possible solution for 
future schedules, even if it appeared that a solu tion for the current schedules was not possible.  He 
was in favour of convening an informal meeting.  
66. The representative of Switzerland  stated that prior to deciding on the need for an additional 
informal meeting, one should consider the purpose of such a meeting.  He was not opposed to an 
informal meeting if it served to bring any additiona l views into the discussion.  He suggested that the 
Chairperson consult on the issue.   
67. The representative of the United States  concurred with the point made by Switzerland.  If 
there was an urgent need to have an informal meeti ng, she would like to hear more about the reasons.   
68. The representative of Canada  supported the Swiss suggestion.  The Chairperson could 
undertake consultations to determine what exactly would be discussed at an informal meeting.  
Members could then decide whether they wanted such a meeting to take place.  
69. Further to the comments made by delegations, the Chairperson  suggested that he would 
explore with delegations whether any additional ma terial for discussion or other motivation for an 
informal meeting existed among delegations.  He w ould ensure that the next formal meeting was 
convened for a full day to avoid th e time constraints that had handicapped the present meeting.  He 
felt that the discussion had been very deep and substa ntive.  As some delega tions had indicated, the 
discussion itself had raised awareness of the issu es involved and would he lp delegations during 
bilateral and other negotiations.  He  noted a sense of pragmatism on th e part of several delegations, as 
well as expressions of concern by some other dele gations about how to deal with the relationship 
between old and new commitments.  
70. Addressing the suggestion by Brazil for Secretariat research on the question of hierarchy in 
WTO Agreements, a representative of the Secretariat  noted that there were some clear principles 
establishing hierarchy, for example between exception provisions and provisions establishing obligations.  If one wanted to look into other more subtle distinctions, it might be useful to clarify the 
parameters of such a paper.  He felt that the relationship between Articles XVI and XVII was not so 
much a question of hierarchy, but rather one of the delineation of the scope of these provisions.  He 
requested more time to reflect and discuss the question with the delegation of Brazil. 
71. The representative of the United States
 stated that her delegation would like to be a part of 
any consultation on this issue.  She reiterated th at her delegation did not want to see a legal 
interpretation.  However, if the request was merely  to factually compile what panels had said about 
certain provisions, there c ould be consultations.  
72. The representative of the European Communities  stated that it would be useful to come back 
to the CSC and report on any consultations before th e Secretariat was tasked with the preparation of a 
paper.   
73. The Chairperson stated that the purpose of the consultations was merely to clarify the 
intended scope of the request by Brazil.  There wa s no prejudice to the question whether such a paper 
should be prepared or not.  He proposed to consu lt whether a further informal meeting prior to the 
next cluster was needed.  Due to the time constrai nts at this meeting, item D (Scheduling Issues) S/CSC/M/31 
Page 14  
 
would be taken up at the next meeting.  He suggested  that Members take note of the statements made.  
As there were no interventions under the agenda item of Other Business, he suggested that, in 
accordance with the practice of grouping meetings of  subsidiary bodies close to meetings of the 
Council, the next formal meeting be held befo re the next regular meeting of the CTS.  
74. The Committee so agreed.
 
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