WORLD TRADE
ORGANIZATIONS/CSS/W/42
22 December 2000
(00-5634)
Council for Trade in Services
Special SessionOriginal:  English
COMMUNICATION FROM JAPAN
The Negotiations on Trade in Services
The attached communication has been received from the delegation of Japan with the request
that it be circulated to Members of the Council for Trade in Services.
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I. INTRODUCTION
1. According to the "Roadmap" adopted by the Special Session of the Council for Trade in
Services in May 2000, which states "proposals would be submitted by Members by the end of
December 2000", Japan hereby submits this proposal.
2. The proposal consists of two parts: "II. Japan's Position on How to Proceed with the
Negotiations" and "III. The Significance of Liberalisation and Expectations from the Negotiations." In
the procedural part, Japan's position is expressed, in a comprehensive manner, on various pointsconcerning the negotiations, including those identified in paragraph 2(c) of the "Roadmap".  The latter
part provides, in an illustrative list, a number of issues in various sectors that are expected to be
solved in the service negotiations.
3. As is expressed in paragraph 2(b) of the "Roadmap", flexibility is given to Members to make
further or more detailed proposals in the future. Acco rdingly, Japan reserves its right to make further
or more detailed proposals.
II. JAPAN'S POSITION ON HOW TO PROCEED WITH THE NEGOTIATIONS
4. Article XIX of the GATS stipulates, "In pursuance of the objectives of this Agreement,
Members shall enter into successive rounds of negoti ations...with a view to achieving a progressively
higher level of liberalisation". While Members need to pay due attention to other relevant provisions
of the GATS, the achievement of "a progressively higher level of liberalisation" is the primary
objective of the current negotiations.
5. Based on its experience as a net importer in the service trade, Japan has made its own
assessment of trade in services (please see S/C/W/105, April 1999).  According to our assessment,
(a) the GATS and the multilateral negotiations on trade in services contribute to the
expansion of trade in services through progressive liberalisation and greater
transparency,  and
(b) the liberalisation and the expansion of trade in services contribute to the economic
growth of Members regardless whether such Members are exporters or importers of
the services trade.S/CSS/W/42
Page 2
6. Japan has been conducting analytical research on the relationship between the number of
commitment of a Member and its economic growth, and the performance of its trade in services.
From this research, we have found that the larger the number of commitments Members have, the
higher the growth rates have been achieved with regard to the economy as a whole and the service
industries as well as the growth of trade in services.  Since the result of this analysis demonstrates the
importance of the liberalisation of trade in services, Japan intends to submit to the Council for Trade
in Services a paper concerning the results of this analysis.  Japan hopes that the paper will contribute
to facilitating the negotiations.
7. Based on the assessment given above, in the section "III. The Significance of Liberalisation
and Expectations from the Negotiations", Japan explains, for some sectors, the significant impact of
trade liberalisation of the sectors in the overall context of the economy as a whole.  In the same
section, Japan also raises a number of issues that are expected to be solved in achieving the objectiveof a progressively higher level of liberalisation.  The issues listed are of an illustrative nature and are
by no means exhaustive.
8. Some of the issues listed could be solved through negotiations on specific commitments
regarding market access and national treatment.  Others could be addressed through eliminating or
reducing MFN exemptions, making additional commitments, or establishing disciplines on domesticregulations or on other GATS rules areas.  Japan believes that a progressively higher level of
liberalisation of Article XIX of the GATS will be achieved through these various types of
negotiations.
9. Negotiating guidelines and procedures should be established pursuant to Article XIX of the
GATS so that the development of the service nego tiations is visible to the outside world.  The
negotiating guidelines should be established in the context of the overall situation in the WTO that
leads to the launching of a new round of WTO negotiations.  The negotiating guidelines should be
developed in such a way that it enables the diverg ent interests of Members to be duly incorporated in
the negotiating process.
A. N
EGOTIATIONS ON SPECIFIC COMMITMENTS
(a) Scope
10. No sectors or modes of supply should be excluded a priori . The current service negotiations
should aim at promoting the benefits of all Members, and at securing an overall balance of rights and
obligations through the liberalisation of services across a broad range of sectors. In this light, the
scope of negotiations should be comprehensive.  As far as Japan is concerned, its keen interests are
illustrated in "III. The Significance of Liberalisation and Expectations from the Negotiations".
11. The importance of the maritime transport services should be recognised.  In fact, the maritime
negotiations were suspended, leaving the commitments extremely limited and the principle of Most
Favoured Nation treatment not being applied in this area. Recalling the joint statement on maritime
negotiations (S/CSS/W/8) tabled in October by Japan and many other Members, Japan would like to
encourage others to express their views on the maritime transport negotiations.
(b) Request and Offer: A Central Method
12. The central method of negotiations should be "request and offer" which fits comfortably with
the notion of achieving a progressively higher level of liberalisation.S/CSS/W/42
Page 3
(c) Other Complementary Approaches
13. On the other hand, other possible ways to complement the "request and offer" approach
should not be foreclosed.  The following are some examples of such methods.
14. Some of the issues in section III can commonl y be found in a number of sectors, for example:
− Restrictions on the participation of foreign capital
− Nationality or residency requirements for executives and/or employees
− Restrictions on the types of legal entity
− Restrictions on overseas remittances, foreign exchange, and settlements
− Domestic procurement requirements
− (Regarding intra-company transfer in sectors with commitments to trade liberalisation
in mode 3,) restrictions of the movement  of senior management or personnel with
high level of expertise, who are directly related to the supply of services.
Although some of the issues listed may not be addressed fully through negotiations on
specific commitments, the consideration of possible ways of reducing such trade barriers of a cross-
cutting nature will be worth exploring in terms of enhancing the efficiency of negotiations and theuser friendliness of the GATS.
15. A way to encourage Members to expand their sectoral coverage of commitments, based on
their economic development during the post Uruguay Round period, may also be worth being
explored so that a progressively higher level of liberalisation in the services trade can be achieved.
After having analysed the relationship between the liberalisation of trade in services and the economic
growth of each Member, Japan is studying the possibility of reaching agreement among Members ona sectoral coverage of commitments based on the scale of the economy as well as the economic
growth of each Member.
16. With respect to maritime transport, the progre ss of negotiations up to the suspension should
be revitalised.  In this light, the model schedule would be a useful tool.
(d) MFN Exemptions
17. The Most Favoured Nation principle is one of the most important pillars in realising trade
liberalisation in a multilateral framework and one of the most fundamental principles of the WTO
Agreement.  Thus, an MFN exemption is a deviation from this important principle.  Therefore, the
elimination and reduction of MFN exemptions should be among the most important agenda in the
current services negotiations.  In this connection, the results of the MFN exemption review and thesubsequent discussions on the general matters that have arisen from the review should be effectively
utilised in the context of negotiations.
18. In our analysis of the MFN exemptions, we have found that some 10 per cent of the Members
register more than half of the total exemptions. The exemptions are not evenly registered by different
Members. Rather, a handful of Members register a large portion of the total exemptions.  It isindispensable for those Members with many exemptions to make serious efforts to eliminate and
reduce their exemptions.  Japan shares with other Members the idea that all registered MFN
exemptions should be eliminated by the end of 2004 or the conclusion of the current negotiations,
whichever comes earlier.S/CSS/W/42
Page 4
B. AUTONOMOUS LIBERALISATION
19. An appropriate treatment for autonomous liberalisation needs to be considered so that the
liberalisation process can be facilitated even between the periods of negotiations.  An appropriate
recognition should be given to those measures that are liberalised autonomously and are notified to
Members through, for instance, the Council for Trade in Services.  It should be noted that, within theframework of the GATS, transparency and legal stability can be secured with respect to such
autonomous liberalisation measures when they are bound and, through being bound, such measures
will contribute to further expansion of trade in services.
C. I
NCREASING PARTICIPATION OF DEVELOPING COUNTRIES AND THE SPECIAL TREATMENT FOR
LEAST DEVELOPED COUNTRIES
20. Japan supports a proposal that "Increasing the participation of developing country Members
to negotiations" should be an agenda item for th e Council for Trade in Services, where the concrete
ways to assist those Members would be discussed.  Japan attaches importance to assisting developing
countries in their capacity building efforts with a view to achieving a progressively higher level of
liberalisation and increasing their participation in world services trade.
21. Japan is also ready to look positively into liberalisation proposals that include progressive
implementation or transition for least developed country Members. Special treatment should also begiven to least developed country Members when negotiating methods of a multilateral and cross-
cutting nature are to be considered.
D. I
SSUES ARISING FROM THE WORK OF THE COUNCIL FOR TRADE IN SERVICES AND ITS
SUBSIDIARY BODIES
22. Issues that Japan expects to be resolved through the current negotiations, which attempt to
achieve a progressively higher level of liberalisation, include several matters under the on-going
exercise, such as enhancing transparency and government procurement.  Reflecting upon the work
carried out so far by the Council for Trade in Serv ices and its subsidiary bodies, rule-making exercise
should proceed taking into due consideration the following points.
(a) Domestic Regulation
23. The establishment of a multilateral discipline shou ld be targeted pursuant to Article VI:4 of
the GATS, attaching particular importance to enhanc ing the transparency of the regulations.  Such a
discipline should aim to be of a horizontal nature, to the extent possible, recognising the right of
Members to regulate.
(b) Safeguards
24. Consideration should be given to the question of how safeguard measures can be placed in the
context of GATS negotiations that aim to achieve a progressively higher level of liberalisation.  In thislight, Japan will continue to make concrete contributions to the discussion of the Working Party on
GATS Rules.
(c) Government Procurement
25. Each Member should recognise the significance of government procurement in trade in
services.  At the same time, since the Working Group on Transparency in Government Procurementhas been working in a comprehensive manner including services, we need to proceed taking into
account the work of this working group on transparency.S/CSS/W/42
Page 5
(d) Technical Review
26. Consideration should be given to the question whether a technical review for enhancing the
clarity and legal stability of the GATS will be necessary, reflecting upon the previous discussions in
the Committee on Regional Trade Agreements and the Committee on Specific Commitments
regarding such provisions as Articles V and XX:2 of the GATS.
E. RELATIONSHIP WITH A NEW ROUND
27. It is extremely important to promote the current services negotiations for the development of
the world economy in the 21st century. However, given the diversity of interests of Members,
successful results will not be achieved unless the multilateral negotiations are carried out in a well-
balanced manner so that all participants can gain benefits.  Therefore, a new round with a balanced
and sufficiently broad-based agenda that responds to the interests of all Members should be launched
expeditiously.  And the services negotiations should be a part of this new round and also part of a
single undertaking.  The launching of such a new round is crucial in order to gain momentum in the
services negotiations, facilitate the participation of Members, and, thereby, achieve fruitful results in
the liberalisation of trade in services.
III. THE SIGNIFICANCE OF LIBERALISATION AND EXPECTATIONS FROM THE
NEGOTIATIONS
A. PROFESSIONAL SERVICES
(a) Significance of Professional Services
28. As overseas business activities are expanding, there is an increasing need for professional
knowledge to conduct business abroad smoothly.  As a result, globalisation has become an important
issue for professional services.   However, each professional service is carried out by a professionalwith a specific qualification, such as a lawyer, an accountant, a patent attorney, an architect and an
engineer.  It should be noted that the scope for each profession varies from one country to another and
each profession is subject to a specific discipline that is unique to each profession and country.
Liberalisation in these sectors, therefore, needs to take into account the specific characteristics of the
profession in question.
(b) Expectations from the Negotiations
29. The following are the basic obstacles which lawyers, patent attorneys, accountants, architects
and engineers face when they conduct their business abroad.  Those problems are expected to be
improved while the unique characteristics of each profession being maintained.
− Nationality requirements
− Reciprocity on permissions of qualification
− Lack of legal framework for accepting professionals with foreign qualifications, or
lack of internal consistencies of such a framework
− (In the architecture and engineering services,) prohibition of the establishment of
offices and/or branches, restrictions on capital participation, joint business obligations
and limitations on the total ratio of foreign business.S/CSS/W/42
Page 6
B. BUSINESS SERVICES OTHER THAN PROFESSIONAL SERVICES
(a) Significance of Business Services
30. Business services are playing an important role as the key infrastructure sectors, which are
essential not only for services industries but also  for other industries including manufacturing when
they expand their business overseas.  Special attention should be given to advertising services,rental/leasing services, real estate services and computer and related services which are essential in
the development of information technology.  Liberalisation of those services are not only important
for the smooth conduct of the respective service activities but also essential in assisting various kinds
of business activities overseas.
(b) Expectations from the Negotiations
31. The removal of or improvement on the following restrictive measures are expected through
the negotiations with regard to advertising services, rental/leasing services, real estate services and
computer and related services.
− Restrictions on the participation of foreign capital
− Nationality and residency requirements for executives and employees
− Restrictions on the types of business operations permitted to the foreign service
suppliers
− Domestic procurement requirements
− Requirements for export contribution
− Licensing limitations
− Administration management that lacks rationality, objectivity, and impartiality.
C. TELECOMMUNICATIONS SERVICES
(a) Significance of Telecommunications Services
32. Telecommunications services are becoming increasingly important due to the recent
technological innovations in the information a nd communication sector.  Basic telecommunication
services play an essential role as the infrastru cture for data communications as well as for voice
telephone services.  However, many Members retain limitations on the market access, providing theirdomestic companies with preferential treatment.  Value added telecommunication services can expand
their scope of activities infinitely due to the development of information and communication
technology as well as electronic commerce.  However, here too, many Members retain limitations on
the market access.
33. Telecommunication services show a remarkable and rapid development of cross-border
transactions compared with other services.  Technologies can easily become obsolete unless seamless
efforts are made to ensure that the most advanc ed technologies are incorporated into businesses.
Therefore, Members, including developing country Members, need to encourage foreign service
providers to participate in their domestic markets if they are to maintain the technology of their
telecommunication services at the latest international level.S/CSS/W/42
Page 7
(b) Expectations from the Negotiations
34. Improvements are expected on the following issues. Such improvements will be necessary to
ensure that the telecommunication services are provid ed with technologies at the latest international
level.
− Exemptions of Most-Favoured-Nation Treatment in providing services
− Restrictions on the participation of foreign capital
− Unreasonably high licensing charges
− Quantitative limitation on new entrants
− Monopoly of business by state owned enterprises
− Nationality and residency requirements for board members and other management
personnel
− Different regulations in sub-central governments
− Domestic procurement requirements.
35. The "Reference Paper" established through the negotiations on basic telecommunications is
essential to ensure fair competition.  Therefore, those Members that have not yet made commitmentsbased on this document are highly encouraged to do so during the current negotiations.
D. A
UDIO -VISUAL SERVICES
(a) Significance of Audio-visual Services
36. The liberalisation of audio-visual services is important for respecting the right of the citizens
of each Member to free access to a variety of cultures and information.  Audio-visual services have
become remarkably important with the recent progress of information technology.
(b) Expectations from the Negotiations
37. In the audio-visual services, we expect the following issues to be improved through the
current negotiations for the liberalisation of trade in services.
− Exemptions of Most-Favoured-Nation Treatment in providing services
− Quantitative limitations
− Deviations from the principle of national treatment.
E. CONSTRUCTION AND RELATED ENGINEERING SERVICES
(a) Significance of Construction and Related Engineering Services
38. Only a half of the Members have made commitments in this sector.  From the perspective of
long-term economic management, however, it is indispensable to ensure that those services areprovided in the most efficient, least expensive, and safety-guaranteed manner, and, for this purpose,S/CSS/W/42
Page 8
further liberalisation should be aimed at in this sect or.  Ensuring minimising the risks through utilising
the most advanced technology is essential with re gard to the construction and related engineering
services, in particular when such services are devoted to the establishment of a cross-border network.
Thus, the market access of foreign service suppliers needs to be ensured.  It should also be noted that
restrictions limiting the number of foreign service suppliers who have access to construction marketsincrease the construction cost.  To achieve more efficient economic management, therefore,
liberalisation is necessary in a wide range of construction and related engineering services.
(b) Expectations from the Negotiations
39. The scope of construction and related engineering services consist of a wide range of
activities that are mutually related.  Therefore, any barrier in a part of this sector may create
difficulties in supplying the services of the sector as a whole. Thus, as far as this sector is concerned,
the following problems need to be addressed as a package.
− Restrictions on the participation of foreign capital
− Restrictions limiting the types of legal entity
− Discrimination against foreign services suppliers
− Nationality requirements for executives and other employees
− Administration management lacking rationality, objectivity, and impartiality.
F. DISTRIBUTION SERVICES
(a) Significance of Distribution Services
40. The liberalisation of distribution services, i.e. commission agents' services, wholesale trade
services, retailing services and franchising, has become an important issue not only for service-related
companies but also manufacturers extending their activities overseas.  Moreover, among variousservices sectors, the distribution services sector is the largest in scale in many countries in terms of the
sectoral proportion in GDP and the numbers of employees.   The effect of liberalisation in the
distribution services is not limited to the widening of business opportunities for service providers. It
will also benefit consumers through reduced costs and prices and increased levels of quality, when
fair competition leads to further development of this sector.  Thus, liberalisation in this sector isexpected to push the growth of world economy.
41. However, few Members have made specific commitments in the distribution services. Those
who have made commitments even in the one sub-sector of distribution are 36.  This means that, of all
the Members of WTO, more than two-thirds have not made any liberalisation commitments in this
sector.  Japan hopes that such state of commitments will be improved through the current servicesnegotiations.
(b) Expectations from the Negotiations
42. Japan expects that the problems listed below, which our distribution service suppliers face,
will be straightened out through the negotiations:
− Restrictions on the participation of foreign capital
− Nationality and residency requirements for executives and employeesS/CSS/W/42
Page 9
− Restrictions on the types of legal entity
− Requirements for market-entry, such as export contribution requirements and local
production requirements
− Discriminatory treatment against foreign companies
− Minimum capital requirements
− Lack of transparency and efficiency regarding the criteria and procedures of
licensing.
43. With respect to the provision of distribution services by manufacturers, after-sales services
are indispensable for the expansion of distribution services by manufacturers.  Thus, when retail
services are to be liberalised, it is important to liberalise such after-sales services as well.  In the eventof establishing companies that provide distribution services, land property acquisition is a key issue.
It is necessary to reduce and eliminate limitations on land property acquisition, to establish clear
criteria for permissions, and to increase the transparency of procedures.
G. F
INANCIAL SERVICES
(a) Significance of Financial Services
44. Needless to say, among various services sectors, the financial services sector is, in particular,
essential as the infrastructure for economic activities.  From the viewpoint of enhancing operationalpredictability through lessening business risks, insurance services are extremely important not only
for developed countries but also for developing countries striving for economic development.
Regarding banking and securities services, it is necessary to establish a system where all types of
related services are smoothly provided, which is conducive not only to the interests of individual
firms through the diversification of funding methods and credit creation but also to alleviating countryrisks by stabilising the economy.
45. The last negotiation on financial services was concluded at the end of 1997 with the
participation of 70 Members.  If we include those Members that did not participate in this negotiation
but had already made commitments in the field of financial services, some 100 Members have made
some commitments at least.
(b) Expectations from the Negotiation
46. Japan hopes that the following restrictions, which are still maintained by a number of
Members, will be improved through the current services negotiations:
− MFN exemptions
− Restrictions on the participation of foreign capital
− Restrictions on the forms of establishments
− Restrictions on the number and/or area of establishments
− Nationality and residency requirements for executives and employees, limitation on
the number of foreign employeesS/CSS/W/42
Page 10
− Mandatory outwards reinsurance obligations, monopoly by state insurance agencies
− Discriminatory tax treatment against foreign firms
− Limitation on certain business operations
− Arbitrary and opaque administration
− Different regulations across sub-central governments.
47. In addition, we hope that many Members will make commitments based on the
"Understanding on Commitments in Financial Services", which indicates certain criteria for the
liberalisation of restrictive measures specific to the area of financial services.
H. TOURISM SERVICES
(a) Significance of Tourism Services
48. With the technical progress in transport, co mmunications and other relevant services, the
number of overseas tourists in the world has been increasing rapidly in the past several years. In
addition to non-business tourists, the international movement of business tourists is becoming more
and more active with the globalisation of business activities.
49. In such circumstances, the liberalisation of hotel and restaurant services is important from the
point of view of further economic growth thr ough attracting non-business and/or business tourists
from overseas. It is also desirable not to impose unnecessary restrictions on travel services (travelagencies services) for ensuring the smooth movement of non-business and/or business tourists.
50. The level of commitments on tourism services is generally higher than that of other services.
However, many Members have not made commitments in the sector of tourist guide services
(CPC 7472). A small number of Members have made commitments but with various restrictions.
Thus, the level of commitments is comparatively low in this sector. As far as mode 3 of the hotel andrestaurant services and travel services is concerned, some Members maintain such restrictions as an
economic needs test, nationality and/or residency requirements and a limit on the participation of
foreign capital.
(b) Expectations from the Negotiations
51. Given the viewpoint mentioned above, Japan expects further improvement on the following
issues.
− Nationality requirements on tourist guides and/or attendants services
− Foreign capital and/or numerical restrictions on hotel and restaurant services.
− Overall restrictions on establishing a commercial presence providing travel services
(travel agencies services)
I. TRANSPORT SERVICES
(a) Significance of Transport Services
52. The transport services are an important sector that underpins trade in goods.   They also
facilitate trade in other service sectors, such as distribution and tourism services.  Furthermore, theyS/CSS/W/42
Page 11
play indispensable roles in consumption abroad (mode 2) and the movement of natural persons
(mode 4) as well. Thus, the transport services are providing an infrastructure for liberalisation in trade
in general including the trade in goods and services. In this context, the achievement of the
liberalisation of the transport services is an important agenda for Members during the current
negotiations on trade in services.
53. The level of commitments on transport services is  generally low. With regard to international
maritime transport and maritime auxiliary services, Members could not reach agreement in the
Uruguay Round and its successive negotiations, and, therefore, the current commitments are still very
limited. With reference to land transport services, many Members do not make commitments, and the
level of existing commitments is extremely low especially in the field of railway transport.
Concerning air transport services, although the level of commitments on aircraft repair and
maintenance services is somewhat higher than that of other transport services, many Members havenot made commitments on the selling and marketing of air transport services or on the CRS services.
(b) Expectations from the Negotiations
(i) Maritime transport services
54. In spite of the efforts made during the Uruguay Round and its successive negotiations,
maritime transport services negotiations were suspended in 1996, virtually leaving the almost entiresector out of the scope where the main principles of the GATS apply.
55. Japan considers that substantial negotiations on maritime transport services should start as
soon as possible according to the Decision adopted by the Council for Trade in Services in 1996,
which refers to the resumption of the negotiat ions "with the commencement of comprehensive
negotiations on services."
56. In this context, Japan, together with the EC; Hong Kong, China; Korea; Norway and
Singapore submitted a joint statement (S/CSS/W/8) on the negotiations on maritime transport services
to the Special Session of the Services Council in October, and stressed the importance of the
negotiations on this sector.
57. As stated in the joint statement, we look fo rward to real and meaningful liberalisation and
commitments during the course of the negotiations.
58. In order to efficiently proceed with the current negotiations, Japan believes that the previous
results of the UR and its successive negotiations should not be discarded. In this regard, Japan
believes that the model schedule discussed during the last negotiations would still be an effective tool
for the new negotiations. The negotiations should be conducted based on the three pillars established
last time, namely, international maritime transport, maritime auxiliary services, and access and use of
services at ports.  Intermodal transport should be appropriately considered as well.
59. Japan expects that the obstacles for business activities in the international maritime transport
sector, such as those mentioned below, should be removed or reduced through the negotiations.
− Restrictions on the participation of foreign capital
− Measures that favour national flag vessels and national companies
− Restrictions of new entrants
− Restrictions on specific types of legal entityS/CSS/W/42
Page 12
− Measures lacking rationality, objectivity and impartiality.
(ii) Air transport services
60. Japan expects that the following obstacles could be removed or reduced through the
negotiations.
− Restrictions on the participation of foreign capital and/or residency requirements on
aircraft repair and maintenance services
− Reciprocity on the selling and marketing of air transport services and on CRS
services.
(iii) Land transport services
61. Liberalisation on land transport services is an important issue not only for such services
providers as transport and distribution services but also for manufacturers that extend their activities
abroad. Liberalisation on the land transportation of cargo is badly needed.  Japan expects that the
following issues could be tackled and improved through the negotiations.
− Restrictions on the participation of foreign capital
− Restrictions on the types of legal entity
− Numerical restrictions
− Measures that favour the providers of road transportation services of certain
Members.
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