RESTRICTEDWORLD TRADE
ORGANIZATIONS/FIN/M/24
24 June 1999
(99-2594)
Committee on Trade in Financial Services
REPORT OF THE MEETING HELD ON 11 JUNE 1999
Note by the Secretariat
1. The twenty-fifth meeting of the Committee on Trade in Financial Services was chaired by
Mr. Jean Le Cocguic of France.  The discussion followed the agenda contained in
airgram WTO/AIR/1093.  No item was raised under Other Business.
2. The Committee first discussed the status of acceptances of the Fifth Protocol to the GATS.
The Chairman reported that since the last meeting on 7 May, Honduras and most recently Luxemburg
had accepted the Protocol.  As mentioned in the last meeting, he had written a letter dated 17 May tothe Members which had not yet accepted the Protocol, seeking information on the status of
acceptances in those countries, with the intention of reporting to the Committee.  Seven of those
members have replied in writing, which were El Salvador, Luxemburg, Nigeria, Philippines, Poland,
Slovenia, and Uruguay.  The Chairman then briefly summarized the content of the responses.  Apart
from Luxemburg which had just accepted, El Salvador had finished all its domestic procedures for
ratification and was only waiting for a formal communication to arrive from its capital.  Nigeria had
promised early action even with the change of gove rnment, Philippines indicated that it was unlikely
that its Congress would finish ratification before the deadline of 15 June, but that the government
remained committed to pursuing the expeditious ratification of the Protocol.  Poland unfortunately did
not have information from its capital as to when acceptance could be completed.  Slovenia expected
its Parliament to adopt the necessary Law at its session scheduled for 15 June.  It had suggested,
however, that some additional time might be necessary to finalize the procedures beyond the deadline
of 15 June.  Finally, Uruguay stated that the ratification was underway in its Parliament.
3. On invitation from the Chair, Costa Rica explained that the approval process in its Legislative
Assembly was well advanced, although it was unlikely to complete the required procedures before the
deadline of  15 June.  It was hoping to conclude the procedure by the month of July.  It had submitted
a letter in the meeting with this information.  Brazil informed Members that it was preparing a
response to the Chairman's letter.  It would not be possible to meet the 15 June deadline, but this was
not because of lower priority attached to this matter;  the heavy workload of its Congress was thereason for the delay.  Honduras stated that it had accepted the Protocol as of 21 May, and thanked the
Members for providing an extension of the original deadline of 29 January 1999.  El Salvador added
that it hoped to have formal confirmation of its acceptance from its capital in a matter of days, before
the deadline of 15 June.  The acceptance had already been published in its Official Journal of 26 May.
Slovenia stated that the ratification of the Protoc ol was on the agenda for the Parliamentary session of
15 June and that the only phase remaining after Parliamentary adoption was the signature of the
document.  Nicaragua mentioned that it was not able  to conclude the procedure by 15 June, but it was
hoping to finalize it by the end of June or the be ginning of July.  Uruguay explained that the Protocol
was being examined by its General Assembly and the Chamber of Representatives with a view to
obtaining legislative approval for its ratification, but it was not sure when the procedure could befinalized.  It did say however that the message and draft law had been sent to Parliament with the
signature of all ministers of the executive and that the improved commitments had been embodied in
national law.  Ghana stated that ratification was under way in Parliament, but it was not possible
before 15 June.  The Protocol would be ratified in one or two weeks' time.S/FIN/M/24
Page 2
4. The Members which had already accepted the Protocol voiced their thanks to the delegations
for the information and for the efforts in trying  to meet the deadline of 15 June.  However,
disappointment was expressed with regard to the lack of progress in many countries, causing a
significant number of Members to miss the deadline.  There was a need to obtain more information on
what had been happening in those countries.  It was requested that those countries which had not yetaccepted notify the Chairman in writing and explain the situation in the near future.
5. On the question of whether or not to further extend the deadline, several delegations were
against an immediate extension.  There was a preference for a case-by-case approach as had been the
case for the Fourth Protocol, i.e. to open a window for Members to accept the Protocol in the future,
as they became ready.   The Chairman suggested that the Committee on Trade in Services be
informed of the status of acceptances and ratification of the Protocol and of the views expressed byMembers.  The view of the Committee was that the deadline should not be re-extended.  He onceagain urged those Members which had not yet accepted to ratify the Protocol as soon as possible, even
after the deadline, so as not to send a negative signal to the world on the integrity of the multilateral
trading system.  It was pointed out that the system was based on contract, and countries needed to
honour the commitments undertaken in the negotiations.   In the next round of services negotiations,
Members needed to make improvements on the basis of offers made by those Members during thecourse of the negotiations in 1997, even if the actual commitments in force were those made earlier.
6. The European Communities stated under the agenda item, "Recent Developments in Financial
Services Trade" that the Commission had prepared and would circulate an Action Plan for a
Framework on Financial Services.  The United Sates reported that its consultations with the Republic
of Korea on the latter Member's proposed changes to its schedule in financial services were still
continuing.  In its view, the improvements made had not fully reflected this Member's commitments
made upon accession to the OECD.  It was pleased to report that Korea had agreed to make some
further improvements to its proposal and hoped that this matter would be resolved very soon.  The
European Communities reported that it was also consulting with Korea on this matter.  Its
understanding was that the new schedule had not yet entered into force since it had sent a formalcommunication requesting clarification on some of the points in the proposal, and was still consulting
with Korea.  Korea promised to convey those comm ents to its capital with a view to expediate the
resolution of this matter.  The Chairman added that a conference on financial services trade
liberalization and development had taken place at the WTO on 10 May1, and that delegation were
invited to obtain any interesting papers presented in the conference from the Economic Research
Division of the Secretariat.  He added that it was important to obtain information on recent
developments in financial markets of countries, and that this item would be kept on the agenda for the
next meeting as well.
7. On the organization of future work, the Chairman introduced an indicative checklist of issues
for discussion (S/FIN/W/14) produced by the Secretariat on request from Members at the last
meeting.   He asked delegations for their preferences on the issues to be taken up in the future
meetings of this Committee.  Delegations generally expressed the view that duplication of workbetween Committees and other bodies must be avoided, and that the Committee should focus on areas
in which there was value to be added.  A number of delegations proposed discussing the issue of the
distinction between Modes 1 and 2 in the context of  financial services.  Although the issue was being
taken up in the Committee on Specific Commitments, and it was also being discussed in the Council
for Trade in Services within the work programme  on electronic commerce, there might be value in
understanding how financial services transactions were conducted in those Modes of supply and in
examining concrete examples of anomalies in Modes 1 and 2.  In financial services, the
Understanding on Commitments in Financial Services, and the  function and consistency of the
various headnotes and footnotes in Members' schedules required special attention.  The nature of
                                                     
1 Liberalisation and Internationalization of Financial Services. Conference jointly sponsored by the
World Bank and WTO Secretariat.  Geneva, Monday 10 May 1999.S/FIN/M/24
Page 3
financial services transactions might also require discussion, as financial transactions often involved
activities in several geographical locations, such as  the case with insurance contracts for which the
insurer, the insured property and the insured person could be in separate territories.  On the other
hand, some delegations cautioned that this issue needed to be considered horizontally in the
Committee on Specific Commitments.
8. A suggestion was made to conduct surveillance of the implementation of Members'
commitments, which would be more interactive than simple explanations of recent developments.
There could also be an analysis of the patterns of commitments, identifying the areas in which few
countries had commitments.  Some further exchange of  information concerning financial services
trade.  The Secretariat might be asked to provide updates of its past studies, in order to better capture
the effects of liberalization in the financial services sector.
9. Other issues suggested for discussion were the sectoral classification of financial services, a
clarification of prudential measures, the difference in the definition of (financial) service suppliers
between Article XXVIII of the Agreement and the Annex on Financial Services, grandfathering, and
the improvement of the legal clarity of the schedules.  It was pointed out that the content of the
surveillance proposed was not clear, and could be covered already by the obligations of members on
notification and transparency.  Caution was also expressed in dealing with the content of prudentialmeasures, due to the complexity of the issue and the fact that it involved work at the national level
and in other international fora.  A request was made not to restrict the issues to be taken up for
discussion to those in the checklist.
10. After some discussion, the Chairman proposed that the Secretariat be asked to produce a short
note elaborating on the relevant questions to be discussed with regard to the first two issues in the
checklist, namely the distinction between Modes 1 and 2 and the sectoral classification of financial
services.  He suggested that if the Committee wished to make any meaningful input to the discussion
of those issues in the Committee on Specific Commitm ents and in the Council for Trade in Services,
in preparation for the Ministerial Conference in No vember, it needed to discuss those two issues on a
priority basis.  He had no intention, however, to limit the discussion to the two issues, nor to preempt
any other issues to be raised in the course of the following discussions.  Other issues could certainly
be taken up at a later stage.  On the proposal for including surveillance in the items for discussion, he
reminded delegations that the current terms of reference of the Committee, as prescribed in the
Decision on Institutional Arrangements for the GATS, already covered surveillance of the application
of the Agreement, and a mandate to provide a forum for technical discussions and to conduct studies
on measures of Members and to conduct examinations of any other technical matters affecting trade in
financial services.  Therefore, he proposed that the second item on the meeting's agenda, "RecentDevelopment in Financial Services Trade," be expanded to stimulate more interactive discussion on
the application of the Agreement and the commitments made thereunder by Members.
11. The Committee agreed to this proposal by the Chairman.
12. It was decided that the date of next meeting would be just after the summer break, in
September.  The exact date would be communicated later.
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