RESTRICTEDWORLD TRADE
ORGANIZATIONWT/REG/M/21
10 March 1999
(99-0959)
Committee on Regional Trade Agreements
Twenty-First Session
NOTE ON THE MEETING OF 10 FEBRUARY 1999
Chairman: Mr. Jean-Marie Noirfalisse (Belgium)
A. ADOPTION OF THE AGENDA
1. The Twenty-First Session of the Committee on Regional Trade Agreements (CRTA) was
convened in Airgram WTO/AIR/ 1014 and Corr.1, dated 29 January and 9 February, respectively.
2. The Chairman welcomed the addition of Latvia to the Committee.
3. The Chairman noted that the corrigendum, dated 9 February had informed Members that the
System of European Cumulation of Origin and the Election of Officers had been dropped from the
agenda.  In the case of the Election of Officers, appointments would to be made by the General
Council on 16 February so the Committee would have to wait until the next Session to approve new
officers.  As for the System of the European Cumulation of Origin, one delegation had requested more
time to consider the relevant documents, given that the minutes of the last meeting on this complexsubject had been distributed only the previous week.  The Chairman recommended that in light of
these developments, all delegations should give attention to the documentation currently available and
use the time between the meeting and the Session scheduled for late April to clarify, through written
questions and replies, any points arising either fr om the replies in document WT/REG/GEN/1 or from
the minutes.  He recalled that the item in question was of particular relevance to the examination of a
number of agreements which, in some cases, had reached a stage where discussion on the report was
well advanced.  Given the changes noted, the day's meeting would address the systemic issuesfollowed by the examination of the Customs Uni on between the European Communities (EC) and the
Principality of Andorra.  The following day w ould be dedicated to the examination of seven
agreements: between Turkey and, respectively, Hungary, Romania, Israel and Lithuania; followed by
those involving Israel and, respectively, Hung ary, the Czech Republic and the Slovak Republic.
Finally, he indicated that while the Committee had initially set aside Friday 12 February for informalmeetings to consider the drafts of reports on the examinations of the EFTA-Hungary Agreement and
the CEFTA Agreement, these consultations had been postponed until 15 February.
4. The representative of Hungary regretted the deci sion to postpone the discussion of the System
of European Cumulation of Origin, as his delegation had come prepared to discuss it.  Given that the
Committee's next meeting was not until late April, he  wondered whether it would be possible to make
use of the next meeting of the Rules of Origin Committee (where that item was already on the agenda)
to discuss the matter,  or whether it might be preferable to have a joint meeting with the Committee on
Rules of Origin.  He expressed his surprise that the meeting scheduled for Friday 12 February had
been postponed and suggested that one of the consultations could have taken place.  He added that a
meeting on Monday 15 February would create scheduling conflicts for his delegation and asked thatthe Chairman consult with the delegations concerned.WT/REG/M/21
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5. The Chairman said that consultations would be necessary to address the first request.
Regarding the postponement of the Friday meeting, he suggested that this could be further clarified
during the course of the meeting and that a reply could be forthcoming at the end of the meeting.
6. The representative of Poland expressed his concern that the discussion of the System of
European Cumulation of Origin had been deleted from the agenda.  While he subscribed to the need
for the timely submission of documentation, he did not consider it proper to demand deletion of items
on such short notice.  The organizational inconveniences created tended to undermine the credibility
of local representatives in Geneva, especially when experts from capitals needed to be notified at such
short notice that the relevant discussion would not be taking place.  Indicating that it was not the first
time this had happened, he appealed to Members of the Committee to communicate requests for
alterations to the agenda in a more timely manner.  He added that his delegation had not yet received
the corrigendum sent by the Secretariat and he supported the Hungarian representative's request thatan alternative solution be found.
7. The representative of the European Communities (EC) stated that while he would not seek to
prevent the deletion of the System of European Cumulation of Origin from the agenda, his delegation
was disappointed, not only by the inconvenience caused to the people concerned, but also due to the
fact that, while his delegation had been in a position to cancel its experts, other delegations may nothave been able to do so.
8. The representative of Norway joined the concerns of previous speakers regarding the delay of
the important discussion on the System of European Cumulation of Origin.  She also expressed the
willingness of her delegation to explore the possibility of discussing this item, either formally at the
end of this meeting or, anytime thereafter.
9. Speaking on behalf of the Slovak Republic as well as his own, the representative of the
Czech Republic joined previous speakers in their concern over the untimely alteration to the agenda.
He supported the suggestion made by the Hungarian representative to convene an informal meeting towork towards the resolution of this issue.
10. Offering her apologies to delegations inconv enienced by the change in the agenda, the
representative of the United States said that the late dissemination of the minutes had slowed the
preparations by her delegation for the meeting.  She offered to consider proposals on informalconsultations before the next meeting in April.
11. The Chairman suggested that one of the issues - an introductory discussion of the System of
European Cumulation of Origin - could be dealt with that day under Miscellaneous through
communications between representatives to further cl arify views.  However, this could be done only
on the understanding that, due to the late submission of the documents, there could not be a finalresolution of the issue that day.  Regarding the second item - the possibility for an informal discussion
on the System of European Cumulation of Origin - he stated that due to the long delay between the
present meeting and the April meeting, the Committee might consider this possibility during the
course of this meeting.  On the third item, the Chairman wondered whether it would be possible to
consider the System of European Cumulation of Origin in the Committee on Rules of Origin.  Hestated that the Committee could revert to this issue during discussions under Miscellaneous.  The
Chairman suggested that a date be set for an inform al meeting, after which there would still need to be
consultations with the Committee on Rules of Origin as some of the issues raised went beyond the
mandate of the CRTA.
12. The representative of the United States stated that, due to logistical difficulties, she might not
be present during the discussion on items under Miscellaneous.  As such, she would have to consult
her delegation, but welcomed the opportunity to find a solution to the matter.WT/REG/M/21
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13. The representative of Switzerland stated the opinion of his delegation that the discussion on
the System of European Cumulation of Origin should take place in a formal context, given the highly
technical nature of the discussion.  He suggested a postponement of this issue until a later date when
the Committee could be reconvened to further discuss the matter.
14. The Chairman said that a formal meeting woul d be possible and would be convened in the
near future.
15. Before moving to agenda item B. 1, the Chairman reminded the Committee that it had agreed
to grant observer status on an ad hoc basis to the Latin American Integration Association (LAIA).  It
was agreed that LAIA would retain this status during the next meeting.
16. The following agenda was adopted:
A. Adoption of the Agenda
B. Systematic Implications of the Regional Trade Agreements for the Multilateral
Trading System and Relationship between them
C. Examination of Regional Trade Agreements
I. Status Report on the Examination of Agreements
- Statement by the Chairman
II. Customs Union between the European Community and the Principality of
Andorra
III. Free Trade Agreement between Turkey and Hungary
IV. Free Trade Agreement between Turkey and Romania
V. Free Trade Agreement between Turkey and Israel
VI. Free Trade Agreement between Turkey and LithuaniaVII. Free Trade Agreement between Hungary and Israel
VIII. Free Trade Agreement between Israel and the Czech Republic
IX. Free Trade Agreement between Israel and the Slovak Republic
D. Other Business
B. SYSTEMIC IMPLICATIONS OF REGIONAL TRADE AGREEMENTS FOR THE
MULTILATERAL TRADING SYSTEM AND RELATIONSHIP BETWEEN THEM
17. The Chairman stated that since the creation of the Committee, this item had been placed on
the agenda of almost all its meetings.  Thanks to oral and written contributions by delegations, as well
as by the Secretariat, the Committee had at its disposal an enormous amount of material on this
complex and interesting subject.  It was clear, however, that the Committee had not been able to
explore fully all the material available and that Members were not united on how they should progresson this debate.  Therefore, the time had come for the Committee to reflect on how this issue could be
advanced.   While he did not expect to complete the debate during this Session, he hoped that by April
the Committee would be able to adopt a clear strategy on how to tackle the systemic debate
throughout 1999.  In that context, he felt that the Committee should decide, sooner rather than later,
whether it intended to address the second part of item 1(d) of its terms of reference, namely to "makeappropriate recommendations to the General Council".  This was reflected in paragraphs 15 and 16 of
the Committee's 1998 Report to the General Council, where it stated that "on systemic issues, the
Committee held discussions on some important topics and identified different approaches to these
subjects; the need to move forward in the discussi on of systemic issues was also recognized" and that
in 1999 it would "also continue to examine systemic issues, and, as appropriate, makerecommendations to the General Council".  He added that the representative of Hong Kong, China
had produced a paper that was available in the room.WT/REG/M/21
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18. The representative of Hong Kong, China introduced her paper on Systemic Issues Arising
from GATS Article V, which had been promised by her delegation some time ago and which
addressed an area in which some delegations had expressed an interest.  She regretted that the paper
had only recently been made available to Members and welcomed comments by other delegations on
it, either at this meeting or at a later occasion.  As for her delegation's paper on GATT Article XXIV,its purpose was to stimulate discussion and to do so without prejudice to the position of any Member,
including her own delegation.  The paper contained more questions than statements.  Admittedly, the
questions were not exhaustive and, in some cases, the intention was only to point the way forward in
order to promote a better understanding of the questions themselves.  The paper addressed a number
of issues: were there any inter-linkages between GATS Article V and GATT Article XXIV?; did
Article V.1 allow Economic Integration Agreements  on Services (EIAS) to depart from any GATS
obligation other than MFN?; what exactly did "subs tantial sectoral coverage" require?; how should
Footnote 1 be applied, in particular, the provision stating that there should not be a priori  exclusion of
any mode of supply in an agreement?; how should "substantially all" discrimination in Article V.1(b)
be interpreted and were only those exceptions listed in the subparagraphs to be allowed in an
agreement?; what constituted a "reasonable time-frame" under Article V.1.(b) for the elimination of
discriminatory measures under an EIAS?  Furthermore, what did a "wider process of economicintegration" in Article V.2 mean, and how would it affect the evaluation of conformance of an
agreement?; how could one determine the appropriate level of "flexibility" available to developing
countries as provided for in Article V.3?; how could the level of barriers vis-à-vis outsiders be
evaluated objectively under Article V.4?; how would this relate to the more favorable treatment
granted to service suppliers from developing countries that were parties to an agreement, as allowedunder Article V.3(b)?; how was the concept of "substantive business operations" to be interpreted?
Noting that the same concept was found elsewhere in the GATS, did "substantive business
operations" allow a service supplier of another Member certain rights under an agreement?  Finally,
how did "prompt" notification relate to the requirement under Article V.5 for at least 90 days advance
notice of the withdrawal of a modification of a Member's schedule in connection with an economicintegration agreement?  She hoped that Members were not put off by the number of questions she had
just raised and that they would take time to reflect on them.  GATS Article V was not a long article,
but a great number of questions arose from its interpretation and application.  It was important for the
CRTA to give early consideration to these questions.
19. The representative of New Zealand stated that it was timely for the Committee to move on to
consideration of GATS Article V on the understa nding that GATT Article XXIV issues could be
revisited as Members contemplated the linkages and implications stemming from the first questionraised in the Hong Kong, China paper.  His preliminary reaction to the paper was that it raised a
number of important questions which needed to be answered in order to move the systemic debate
forward.
20. The representative of Korea stated that, although a number of papers on systemic issues in
GATT Article XXIV had been circulated, there had been little discussion on GATS Article V in the
Committee and he welcomed the Hong Kong, China paper as a starting-point for discussions on the
issue.  Given that regional trade agreements constituted an important exception to the principle of
MFN, his delegation supported a rigorous and narrow interpretation of GATS Article V and GATT
Article XXIV in order to minimize the impact of these agreements on trade with third parties.
Secondly, his delegation was interested in a clarification of linkages the between GATT Article XXIVand GATS Article V.  He concluded his remarks by stressing the importance that his delegation
attached to the provision in GATS Article V calli ng for the services aspect of regional trade
agreements to be looked at in terms of "a wider process of economic integration" and expressed the
view that this issue overshadowed debates regardin g the interpretation of "substantially all the trade"
or the interpretation of what constituted a "reasonable length of time" for integration.WT/REG/M/21
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21. The representative of India said that the paper raised a number of important issues spread over
the entire gamut of Article V.  Given that the Committee had examined Article V issues in relation to
specific regional arrangements during the review process, it was important to address some of the
issues, both general, and with respect to the discussions that had taken place in relation to specific
agreements.  In view of the fact that that the Committee had already spent much time on such issues,he supported the Chairman's view that it was time to move on to more specific recommendations.  He
continued by offering his initial views on the issues  raised by the paper.  Firstly, with reference to
Article V.1, he posed the question, Which obligation of the GATS other than the MFN obligation
prevented Members from entering into, or being a party to, an agreement that met the test of Article
V?  The analysis of the delegation of Hong Kong, China on the footnote to Article V.1(a) as well
as modes three and four were important because the focus and interpretation was something which the
Committee needed to consider.  Concerning Article V.1(b), the debate would benefit from a similardebate to that on substantially all the trade in  that the Committee had had on Article XXIV.  As the
services sector had a different connotation, the Committee would have to review what constituted
"substantial sectoral coverage" trade with respect to services.  His delegation was deeply concerned
that apart from having a general discussion on the issue, the Committee had progressed no further on
this topic.  Therefore, he wanted to support the Chairman's earlier comment that the Committee
should, sooner rather than later, determine how be st to move forward.  The final report of the
Committee should indicate how it could proceed on systemic issues and looked forward to further
informal consultations on the matter.  The representative of Japan voiced his delegation's support to
the issues raised by the Hong Kong, China paper and said that he looked forward to future discussions
on this issue.
22. The Chairman thanked the Hong Kong, China delegation for submitting various key questions
pertaining to the systemic nature of the debate and said that the paper justified an effort by the
Committee to develop a methodology for discussing the issue with a view towards addressing its
mandate to develop consensus on the systemic debate.  He appreciated the ideas that had been
expressed during the course of the meeting.  In the interest of furthering the agenda, he suggested thatan informal meeting be convened in advance of the Committee's next session.  The issue at hand dealt
with methodology and was not a neutral question; on the contrary, it was both sensitive and political.
The change in officers of the Committee might present an opportunity to begin along this path before
the end of the year.  He suggested that the Secretariat inform representatives of a date on which an
informal meeting relating to systemic issues could be convened.  He encouraged representatives to
arrive well prepared for this meeting with the intention to develop a clear picture of how the
Committee could move forward.  Finally, the Committee should reserve time for further comment onthe questions raised by the representative of Hong Kong, China on the scope of GATS Article V.
23. The representative of Hong Kong, China sa id that the Committee should make further
progress in the systemic discussion as a means to fulfill its mandate.  She recalled that prior to
beginning substantive discussion on systemic issues, the Committee had spent more than a year
deliberating over how to structure the discussion itself and she hoped that the Committee was notmerely preparing to discuss further such procedural issues.  There had been a lack of progress in the
discussion over systemic issues with a view towa rds making recommendations to the General Council
and her delegation had noticed that during the course of prior meetings, a number of ideas and
proposals had been put forward that had generated differing views.  Such materials could be useful to
the task before the Committee.  Noting that she had no formal instructions on her latest suggestion,she thought that it would be useful to take stock of the arguments that had already been put forward.
24. The representative of New Zealand said it would be a good idea to embark on a stock-taking
exercise given that debates that had already taken place on systemic issues and a number of serious
issues had been raised by Members. The Committee had not been able to arrive at conclusions on
such issues and the fact that there was not agreement in a range of areas represented a point of realconcern in the WTO.  Members should bear in mind that a range of issues in the systemic debateWT/REG/M/21
Page 6
remained unresolved.  He recalled that, in some cases, Members had not come out with clear views on
the interpretation of certain provisions.  At some stage the Committee was obligated to report to the
Council for Trade in Goods on issues that had been  raised in the systemic debate and an informal
meeting would provide an opportunity to discuss the methodology of work within such a context.
25. Underlining the appropriateness of the stock-ta king exercise, the Chairman wondered whether
the Committee was ready to address the second part of its mandate, namely to make appropriate
recommendations to the General Council or relevant Councils.  He suggested that Members consider
this matter and urged them to come to the next meeting prepared and, if possible, with proposals.
26. The representative of Hungary said his delegation attached great importance to satisfying all
parts of the Committee's mandate.  It was his view that the finalization of outstanding reports would
be the best way to make progress in the systemic discussion.  Although his delegation was ready to
consider the issue of how to make progress on the systemic side of the deliberations, he hoped that theCommittee would expend the same energy on the other side of the Committee's mandate.
27. The Chairman said that an informal meeting would take place during the second half of
March.
C. EXAMINATION OF REGIONAL TRADE AGREEMENTS - STATUS REPORT ON THE
EXAMINATION OF AGREEMENTS
28. The Chairman presented the Committee with a picture of the state of examination regarding
all the regional trade agreements which had been referred to the Committee and added a list entitled
"Status of Examination of Regional Trade Agreements" that had been distributed that day.  The
Committee was dealing at the moment with a total of 60 RTAs; nine other agreements under Article
XXIV of the GATT had already been notified to the WTO but had yet to be considered by the Councilfor Trade in Goods.  The Committee was certainly more than familiar with the 34 RTAs for which
draft reports were under consideration; there had recently been or soon would be consultations on
them, and discussions were well advanced in some cases.  However, even in those cases a number of
divergences remained and the Committee was considering how to proceed in light of these
divergences.  In the second grouping, there were four RTAs for which factual examinations were wellengaged.  The drafting of these reports had not yet begun as some additional information was still to
be provided by the Parties and, in light of the content, additional meetings may prove necessary.  The
Secretariat had recently received information concerning the Canada-Chile and EC-Slovenia
Agreements, and that information was being processed; Members would be contacted to determine
whether a further formal examination was needed.  In the third grouping there were 20 RTAs for
which the examination was underway.  Regardin g MERCOSUR and the EC-Turkey Customs Union,
the Secretariat had yet to calculate the general incidence of duties as the necessary data had not beenprovided by the Parties to the Agreements.  Further, information on some issues raised by Members
was also lacking with respect to both Agreements.  He proposed that, in both cases, the Committee
organize informal consultations to settle pend ing issues in order to move forward with the
examination of those two important Agreements.  The fourth group contained two Agreements for
which examination had not yet begun.  In the fifth group, there were nine Agreements which were tobe considered by the Council for Trade in Good s during its March meeting, and would then be
transmitted to the Committee for examination.  With the exception of the Agreement between
Slovenia and the Former Yugoslav Republic of Macedonia, both the notifications and the text of the
Agreements were available.  The Chairman in tended to place those Agreements for which
examinations were already underway on the agenda for the April session and to schedule the firstround of examinations on new Agreements for the July Session.  During the informal meetings held
the previous week, the Chairman had proposed what he had hoped would be accepted as a consistent
approach to the examination of agreements, beginning with the group that was already at a relatively
advanced stage.  This approach was to present reports which, particularly in their conclusions,WT/REG/M/21
Page 7
followed a similar pattern consisting of a "chapeau", which referred to the systemic debate in the
Committee, followed by two paragraphs each on goods  and services which, in turn, reflected the areas
of agreement in Part C of the reports and the areas marked by a divergence of opinion.  These items
were followed by a final paragraph referring to the importance of the reporting provisions of the
GATT 1994 and the GATS in the relevant Councils, which reflected the texts of the MarrakeshAgreements and were intended neither to add to nor to detract from them.  So far, at least at the
informal level, there seemed to be acceptance of  this approach and the Chairman asked Members if
they were prepared to formally accept this approach as a working methodology, without prejudice to
the content of any of the paragraphs of any agreement.
29. The representative of the European Communities said he wished to make the same point he
had made during the informal meeting held the week before.  While his delegation supported and
shared the objective of bringing examinations that were ripe for conclusion to a close in a way that
was satisfactory to all Members, his delegation had not yet concluded its examination of the issue and,
as such, was unable to support the proposal.
30. The representative of Hungary thanked the Chairman and the Secretariat and said that the
method outlined had been of great help.  The Chairman joined the representative of Hungary in
observing that the innovative approach taken by the Secretariat had helped to bring everyone aboard.
The representative of Norway joined the previous two speakers and stated that the approach tended to
limit conflicts.  She expressed her hope that the work would be concluded successfully by the time ofthe next meeting.
31. (The minutes of the examination of the Agreements listed under agenda items C.II-IX are
being distributed as separate documents.)
D. OTHER BUSINESS
32. Under Miscellaneous the Chairman opened the floor for comment on the System of European
Cumulation of Origin and wondered if a formal meeting should be scheduled in conjunction with the
Committee on Rules of Origin.
33. The representative of Brazil said that having followed the Committee on Rules of Origin he
did not think it appropriate that a joint meeting be organized, given the heavy workload facing both
Committees.  He preferred a formal meeting of the CRTA in advance of the next scheduled Session,
as suggested by the representative of Switzerland.
34. The Committee took note of the comments made.
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