RESTRICTED  WORLD TRADE  
ORGANIZATION  TN/S/W/33 
18 February 2005 
 
 (05-0710) 
Council for Trade in Services 
Special Session Original:   English 
 
 
 
COMMUNICATION FROM CANADA, JAPAN AND THE UNITED STATES 
 
Trade In Air Transport Services  
 
 
 The following communication, dated 17 Febr uary 2005, from the delegations of Canada, 
Japan and the United States is being circulated to the Members of the Council for Trade in Services.  
 
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 1. In December 2004, Australia, Chile, the Europ ean Communities, New Zealand, Norway and 
Switzerland (the co-sponsors) submitted a paper (J OB(04)/185, 3 December 2004) proposing that 
Members take certain actions with respect to air transport services.  The co-sponsors urged Members to: 
(i) take specific commitments in all three areas referred to in paragraph (3) of 
the Annex on Air Transport Services (Air Annex),  
(ii) take commitments on ground handling during the current round, and 
(iii) give further consideration to the characterization of other aviation services as 
related to the exercise of either "hard" or "soft" rights prior to the next round 
of negotiations. 
I. COMMITMENTS FOR THE THREE SERVICES SPECIFICALLY REFERRED TO 
IN PARAGRAPH (3) OF THE AIR ANNEX 
2. The co-sponsors urged Members to take specific co mmitments in all three areas referred to in 
paragraph (3) of the Air Annex, namely, aircraft  repair and maintenance services, the selling and 
marketing of air transport services, and computer reservation systems services.  Canada, Japan, and 
the United States agree that Members have the opti on of taking specific commitments in the three 
areas specifically listed in paragraph (3) of the Air Annex. 
II. GROUND HANDLING 
3. The co-sponsors urged Members to take specifi c commitments in ground handling services.  
They point out that ground handling has become a commercial service in its own right and that, like 
other service sectors, it should be covered by speci fic commitments.  The co-sponsors argue that 
paragraph (2) of the Air Annex, which excludes fro m GATS coverage services directly related to the 
exercise of traffic rights does not exclude "soft" ri ghts, such as ground handling, because, according to 
the co-sponsors, these services are not directly related to traffic rights.  Therefore, the co-sponsors believe that ground handling is open to commitments, in spite of the fact that there was no consensus TN/S/W/33 
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 on these issues after discussions during the First Air Annex Review.  This issue will be discussed at 
the Second Air Annex Review. 
4. Canada, Japan, and the United States agree with  the view that ground handling is becoming a 
major service within the international aviation indus try, with the role of third party ground handling 
service providers slowly growing in importance.  We do not agree, however, that the GATS currently 
applies to ground handling services, and, therefore, do not agree that it is possible for Members to 
take specific commitments in ground handling services at this time.  Paragraph (1) of the Air Annex indicates that the Annex applies to measures affecti ng "trade in air transport services" and "ancillary 
services".  Paragraph (2) specifies that traffic rights and services directly related to the exercise of traffic rights are excluded from GATS coverage, with  the exception of the three services that are 
specifically covered under paragra ph (3) – aircraft repair and maintenance services, the selling and 
marketing of air transport services, and computer reservation systems services. 
5. In the case of ground handling, we do not agr ee with the co-sponsors that ground handling is 
not directly related to the exercise of traffic right s.  The bilateral air services agreements of many 
countries include provisions on ground handling.   According to International Civil Aviation 
Organization (ICAO) information, a total of 233 bila teral air agreements include such provisions, and 
they are also included in ICAO's bilateral air ser vices template agreements.  These provisions often 
permit airlines to do their own ground handling, to have their ground handling done by code share 
partners or third parties, or to  do ground handling for other carriers.  These agreements treat ground 
handling as a necessary adjunct of traffic rights held by designated carriers.  The co-sponsors point to 
mediation clauses in support of their assertion th at not all provisions of bilateral air service 
agreements address services directly related to the ex ercise of traffic rights.  We disagree with this 
characterization.  Mediation clauses address procedural matters.  It is our view that, where such agreements address obligations with respect to serv ice activities conducted by or on behalf of carriers 
exercising traffic rights, there is a clear and direct  relationship between these services and the exercise 
of those traffic rights.  Furthermore, the inclusi on of these provisions in air services agreements has, 
in fact, promoted the development of the indepe ndent third party ground handling services referred to 
by the co-sponsors.  Canada, Japan and the Un ited States view ground handling as being directly 
related to traffic rights.  As such, we do not agree that ground handling is open to GATS 
commitments at this time. 
6. Moreover, Canada, Japan and the United States belie ve that paragraph (2) of the Air Annex is 
broader than claimed by the co-sponsors, in that services directly related to the exercise of traffic 
rights include what the co-sponsors refer to as "soft"  rights services.  In support of this observation, 
we note that paragraph (3) of the Annex, which lis ts the three areas of air transport services where 
GATS coverage does apply, includes two services that  fit within the co-sponsors' concept of "soft" 
rights services – aircraft repair and maintenance and computer reservation systems services.  Since paragraph (3) brings these two "soft" services under GATS coverage, one can conclude that the carve-
out in paragraph (2) is broader than the interpre tation held by the co-sponsors and includes "soft" 
services.  Thus, we do not agree with the view that "soft" rights services are open to commitments at this time. 
7. If Members wish to extend the coverage of th e GATS coverage to include ground handling, 
they must do so through a formal amendment to paragraph (3) of the Air Annex that would add 
ground handling as a fourth item to the exhaustive lis t.  Canada, Japan and the United States believe 
that the proper forum to discuss su ch an amendment is through the Air Annex Review.  In this forum, 
air transportation experts can discuss the issues surrounding ground handling.  If the co-sponsors wish to have ground handling added to the list of service s covered by the GATS, the opportunity to discuss 
the matter will present itself at the next Air Annex Review, which is scheduled to commence at the last regular meeting of the Council in 2005.  TN/S/W/33 
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 8. Should such an amendment be considered, we ha ve some concerns with the specific services 
included by the co-sponsors under ground handling.  According to the background note provided by 
the Secretariat during the First Air Annex Revi ew (S/C/W/163/Add.1), there is no consensus 
internationally on a single definition of "Ground Ha ndling Service".  The universe of services that 
comprises ground handling is open to question and s hould be the subject of discussion amongst air 
transportation experts. 
III. CHARACTERIZATION OF OTHER AVIATION RELATED SERVICES 
9. The co-sponsors urge Members to give further c onsideration to the characterization of other 
aviation services as related to the exercise of either "hard" or "soft" rights prior to the next round of negotiations.  Canada, Japan, and the United Sates be lieve that the Air Annex Review is the proper 
forum for the discussion of such issues.  During the First Air Annex Review, di scussions were held on 
"soft" right services, but no consensus was reached on the issues.  The next Review is the forum 
where Members will have the opportunity to give  further consideration to the issue of the 
characterization of other aviation services and wher e air transportation experts can have a fruitful 
discussion of the issue. 
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