RESTRICTED  WORLD TRADE  
ORGANIZATION  S/C/M/89 
19 November 2007 
 (07-5027) 
Council for Trade in Services  
  
 
REPORT OF THE SECOND SESSION OF THE REVIEW MANDATED 
UNDER PARAGRAPH 5 OF THE ANNEX ON AIR TRANSPORT SERVICES 
HELD ON 2 OCTOBER 2007 
 
Note by the Secretariat
1 
 
 
1. On 2 October 2007, the Council for Trade in Se rvices held the third meeting devoted to the 
second review of air transport services pursuant to paragraph 5 of the GATS Annex on Air Transport 
Services.  The agenda was contained in document WTO/AIR/3075.   
2. The Chairman , Ambassador Trevor Clarke of Barba dos, indicated that the delegation of 
Australia wished to provide Members with a brief a ccount of the air transport industry seminar held 
on 1 October 2007. 
3. The representative of Australia  reported on the industry seminar on developments in the air 
transport sector held on the occasion of the third meeting of the Council for Trade in Services 
dedicated to the second review of the GATS Annex on Air Transport Services.   
4. The co-sponsors of the seminar expressed their a ppreciation for the high level of participation 
by Members, and in particular by capital-based ai r transport officials.  They also acknowledged the 
Secretariat for its assistance in holding the even t, Mr. James Bradbury of the European Commission 
who organised the seminar, and most importantly the industry speakers, i.e.:  Mr John Willis, Chairman, International Aviation Handlers Associa tion;  Dr Warren Mundy, Group General Manager, 
Corporate Strategy, Infratil Airports Europe;  Mr  Carlos Grau-Tanner, Director, Government & 
Industry Affairs, International Air Transport Associ ation;  Mr Ulrich Schulte-Strathaus, Secretary 
General, Association of European Airlines;  Mr  Ulrich Ogiermann, President and Chief Executive 
Officer, Cargolux, and Vice Chairman, The Internati onal Air Cargo Association;  Mr Christian Folly-
Kossi, Secretary General, African Airlines Association;  Ms Nancy Sparks, Managing Director, Regulatory Affairs, FedEx;  Ms Ilse Wilczeck, Me mber of the Board, European Cargo Alliance.  
Some incisive closing remarks on the relevance of the GATS framework to the air transport sector 
were also made by Mr Harsha Vardhana Si ngh, Deputy Director-General, WTO Secretariat. 
5. The intention of the seminar was to provide a forum for industry to feed their perspectives 
into Members' discussions within the air transpor t services review.  Members heard from speakers on 
ancillary air transport services, and from airline repr esentatives and others on developments in the air 
transport sector. 
6. While it was not possible to provide a full report of the seminar, the representative 
highlighted a number of the key points made during the event.  He noted that these were intended as a quick summation of some of the issues raised, to in form Members, and were not intended to represent 
                                                     
 
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/C/M/89 
Page 2  
 
  the views of individual participants, nor of Australi a or the organisers.  Others might wish to add 
additional, or alternative, views.  
7. Firstly, it was noted that there was a con tinuing trend towards the private and often 
independent provision of ancillary services.  On  ground handling, it was noted that there were 
essentially three types of services providers:  airlines  providing self-handling and in some cases third 
party handling services, particularly to alliance pa rtners;  airports and their subsidiaries;  and 
independent handlers.  Consider able differences remained in the level of access for each of these 
categories, leading to inefficiencies and, in some cases, abuse of market power.  Members were urged by industry to open the ground handlin g market where space permitted.  
8. In the area of airport operation services, it was noted there was a trend to merge the 
management services market with the capital market , although there were also market opportunities 
for pure management or operational arrangements. 
9. On air transport services, there was a wide, if not universal, recognition of the value of 
multilateral or plurilateral ASAs to address limitati ons in the bilateral system, and improve market 
opportunities.  Much discussion focused around th e US-EU ASA and its impact both in market 
developments and as a potential model or basis for air services into the future, although one speaker 
considered it was unlikely others would become parties to this or similar agreements in the near future 
because of differences in regulatory approaches in ot her large markets and the smaller size of other 
markets.  
10. While multilateralism and plurilateralism were  a major theme, with some exceptions, 
speakers were not yet sure of the best model for ai r traffic rights.  While the GATS was recognised as 
a possible route to address air traffic rights, ther e was uncertainty as to how this would work in 
practice and many speakers were not yet ready to st ate firm views, possibly indicating an area where 
further work might need to be undertaken.  One speaker noted that his organisation was 'agnostic' on 
the issue, but open to being convinced, a theme that others seemed to share.  Perhaps surprisingly the 
GATS dispute resolution measures were identified as one area of concern by industry, which was 
suggesting that dispute resolution could be leng thy and expensive.  However, as one respondent 
noted, dispute resolution was more often than not  achieved the consultation stage, which was not 
unlike the approach in ASAs.  
11. All speakers with one exception supported libera lisation of air services.  This speaker noted 
that liberalisation could result in market dominan ce by foreign carriers in small or developing 
markets.  This created considerable discussion about the necessity of own country-owned or 
controlled airlines, as well as stimulating discussion on the value of creating internal markets within 
regions and to act as negotiating blocks.  
12. Perhaps the two biggest issues raised were t hose of ownership and control and of fifth 
freedom market access, although seventh freedom se rvices and cabotage were also identified as areas 
of concern for airlines.  This was particularly prominent in the air cargo and express sectors.  
Representatives noted that air cargo routes were rarely round-trip;  they were often one-way and relied 
on the higher freedoms and on change of gauge provis ions to provide efficient services.  Given the 
characteristics of the sector and its importance to world trade (carrying 30 or 40 per cent of global 
trade by value), a number of speakers considered th at cargo rights should be considered or negotiated 
separately to passenger rights.  This was an area Member s might wish to consider further in the future.  
13. In summary, the seminar had provided an impor tant opportunity to gain a perspective from 
industry, which no doubt Members would feed into th e general discussions at the meeting and into the 
future of the review.  S/C/M/89 
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  14. The representative of the United States  said that the seminar had been a good event with 
eloquent speakers and had provided an important  background for the review meetings.  She hoped 
that the Members which had sponsored the event wo uld provide the Powerpoint presentations used by 
the speakers.  She noted that th e summary that had been provided was on the responsibility of the 
delegation of Australia and that, while her delega tion might have some nuances, it thanked the co-
sponsors for having organised the seminar and having shared their views. 
15. The representative of Australia  said that all the Powerpoint presentations of the seminar had 
been made available to the Secretariat for posting on the WTO Members' website. 
ITEM A DEVELOPMENTS IN THE SECTOR 
16. The Chairman  said that agenda item A had been divide d in two parts:  part I covered the 
eleven areas for discussi on at that meeting, while part II took up the Quantitative Air Services 
Agreement Review (QUASAR) that had been a ddressed at the review meeting in March.  
17. Part I addressed developments in the air trans port sector with regard to:  plurilateral ASAs;  
economic and financial situation of scheduled p assenger airlines;  low-cost carrier services;  non-
scheduled passenger services;  regional air transport services;  general aviation services;  air cargo 
services;  slots;  alliances and cooperation amongs t airlines;  ownership;  and other significant 
economic and regulatory developments.  To assist Me mbers with the examination of this item, the 
Secretariat had produced yet another hefty background note, circulated as document 
S/C/W/270/Add.2. 
18. A representative of the Secretariat  said that, while the Secretariat was mindful of the delay 
with which the document had been issued, it was al so hopeful that, having seen its content and depth, 
Members would be indulgent.  He also explained th at the Secretariat had faced technical constraints 
related to the formatting and circulation of such  a big document, which had further delayed its 
issuance.   
19. He also noted that the Secretariat had relied on the same types of sources of information as for 
the previous review documents and thus extende d the invitation to Members to communicate any 
errors or omissions to the Secretariat, so that these could be included in the final version of the 
document.  The structure of the document was al so in line with past practice, addressing economic 
and regulatory developments in the sector.  The on ly new elements concerned:  the application of 
QUASAR to plurilateral ASAs, with the emergence of  interesting conclusions in terms of degree of 
openness and traffic coverage;  the section devoted to  low-cost carriers, one of the most significant 
new developments in the sector;  the section dedicat ed to regional air services;  and the ownership 
part, which had been improved and refined since the first review. 
20. The Chairman  suggested that, in order to better stru cture the debate, each area covered in the 
Secretariat note be taken up individually.   
A. PLURILATERAL AIR SERVICES AGREEMENTS  
21. The representative of the United States  said that he had been perplexed by the absence of the 
most significant plurilateral arrangement, i.e. th e EC Single Aviation Market, from the relevant 
section of the documentation on the grounds that it  was considered as covering domestic traffic.  
While some consideration had been given to th e fact that Commission had been given certain 
mandates by Member States to negotiate on their behalf, the reality was that the EC Member States were all sovereign Signatory Members of ICAO.  He therefore sought further clarification on the 
issue.   S/C/M/89 
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  22. With regard to the application of QUAS AR to the First Phase US-EU Air Transport 
Agreement concluded between the United States, th e European Union and its Member States, it was 
important to note that, while the agreement had been signed on 30 April 2007, it would only be 
provisionally applied starting on 30 March 2008, so that any appli cation of QUASAR and attribution 
of traffic were premature.   
23. The representative informed Members about the significance of the agreement.  The 
agreement extended valuable "opens skies" rights between the United States and all of the Member 
States of the European Union.  It would authorize every US and every EU airline to fly between every 
city in the European Union and the United States, operate without restrictions on the number of flights, aircraft and routes, allow carriers to set fares entirely according to ma rket demand, enter into 
cooperative arrangements including code-sharing, franchising and leasing arrangements, such as the 
provision of aircraft with crew, subject to  normally applied regulatory requirements.   
24. The agreement would also foster enhanced regulatory cooperation in areas as diverse as 
competition law, government subsidies, the envir onment, consumer protection and security.  It 
established a consultative joint committee through wh ich the United States and the European Union 
could resolve questions and develop further areas of cooperation.  In advance of the provisional 
application of the agreement, US  and EU delegations ha d already begun holding preliminary meetings 
of the joint committee, where they  had focused on progress already ach ieved on the regulatory front, 
including through the US-EU Transportation Secu rity Coordination Group and the joint launch 
between the European Commission and the US Fe deral Aviation Administration of the Atlantic 
Interoperability Initiative to Reduce Emissions.  Th e joint committee had also already focused on the 
question of developing procedures, including amendmen ts if necessary, to bring third countries into 
the agreement and had agreed to fo cus as a priority on States that acced ed to the European Union.   
25. The agreement also had investment measures.  US  investors were allowed to invest in a EU 
airline as long as the airline was majority-owned and effectively controlled by a Member State and/or 
nationals of Member States.  The agreement made clear that EU investors might hold up to 
49.9 per cent of the total equity of the US airlin e, on a case-by-case basis even more provided that 
foreign nationals did not own more than 25 per cent of the voting stock and the airline was under the 
actual control of US citizens.  The agreement also  opened the possibility for EU investors to own or 
control airlines from Switzerland, Liechtenstein, members of the European Common Aviation Area, 
Kenya, and other US "open skies" partners in Afri ca, without putting at risk such airlines' rights to 
operate to the United States.   
26. Finally, the grant of new traffic rights to EU carriers opened the door to cross-border airlines 
mergers and acquisitions within the European Union because it endorsed the concept of the EC carrier 
and as a result those carriers' operated rights were no longer in legal jeopardy. 
27. A representative of the European Communities
 said that the information contained in the 
Secretariat note was very valuable in clarifying the pi cture with regard to plurilateral ASAs.  By way 
of preliminary remarks, he had also been surprised  by the omission of the EC Single Aviation Market, 
as the agreement provided an extreme example of regional liberalisation in the sector, which went 
beyond just market access issues and provided for ve ry significant regulatory convergence.  He would 
also welcome seeing the agreement in cluded in any future work.  A nother interesting omission, which 
had been highlighted by the previous day's semi nar, related to the fact that the documentation 
concentrated solely on passenger air traffic rights, while the cargo sector was also of great importance.  
30 to 40 per cent of world cargo by value was transported by air and the needs of that segment of the 
industry differed from those of passenger services.  He  would welcome an investigation into whether 
it would be feasible to extend the analysis to cargo services.   S/C/M/89 
 Page 5 
 
 
  28. With regard to the content of the plurilateral s ection as it referred to the EC, he noted a couple 
of points, for the sake of accuracy.  First, he unde rlined that both the US -EU, Euro-Med and ECAA 
were new types of ASAs as compared to both bila teral ASAs and other plurilaterals, because they 
included security elements and provided for regul atory convergence on safety and competition policy.  
He then noted that the US-EU agreement did not provide for multi-designation of carriers, but 
actually contained no designation provision, which was a step much forward than just multiple 
designation. 
29. After commending the Secretariat for its work, the representative of New Zealand  said that 
the diagram contained on page 12 of the Secretaria t documentation was very telling in illustrating the 
number of plurilateral ASAs developed around the wo rld.  He appreciated that in some cases 
plurilateral ASAs were firmly in place, in some case s they were imminent, in others just aspirational, 
but highlighted that they tended to be much more liberal than bilateral ASAs.  He informed Members 
about developments with regard to the PIASA, a pl urilateral agreement that had been a decade in the 
making.  Whereas the PIASA was shown in the Secretariat note as not being in force due to an insufficient number of ratifications, the missing ratifi cation for entry into force was actually expected 
in the following two weeks.  One of the elements that was of significance was the granting of fifth 
freedom traffic rights, not only on long-haul services,  for example from New Zealand and Australia to 
Europe, but also for the small airlines of the Sout h Pacific islands, scattered over a vast area of the 
Pacific Ocean, to establish viable air services essential to tourism and trade. 
30. Another element of importance was the liberali sation of ownership and control provisions.  
This had been well-illustrated with in Europe, and in this regard he concurred with the comments 
about the omission of the EC Single Aviation Market.  One technical point in this regard was that the 
Secretariat had understandably allocated to the MALIAT the traditional su bstantial ownership and 
effective control provision.  In fact, the agreemen t provided for greater flexibility than the traditional 
ownership clause would imply.  It restricted ownership from a country investing into an airline of another party to the MALIAT to then fly back to the initial investor country;  this was designed to 
avoid the establishment of off-shore airlines poten tially undercutting labour conditions.  This had 
been an issue of particular concern to one of th e members of the MALIAT, but not to the others, who 
had hoped for a more liberal ownership condition.  He  had also noted with great interest comments by 
the EC and the United States that they were looking at the possibility of accession to their new agreement by additional parties, and also noted that the EC was considering mandates later in the year 
for negotiations with other parties, and regist ered New Zealand's interest in this regard. 
31. The representative of the United States
 said that he had omitted a very important part of the 
US-EU agreement.  The agreement was very defini tely a first stage agreement between the United 
States and the European Union.  In addition to the areas of cooperation that had been established and 
the work of the joint committee, there was a mandate to come back  to the table in 2008 to discuss 
further liberalization.  His delegation anticipated th at those negotiations, in tandem with the work of 
the joint committee, would further enhance trans-At lantic aviation and perhaps provide a vision and a 
model for wider application.  His delegation could not predetermine the outcome of those 
negotiations, which would be tough an d address serious issues, but they would cover items of priority 
interest for both sides, including further liberaliz ation of traffic rights, additional investment 
opportunities and the impact of environmental measur es and infrastructural constraints on the exercise 
of those traffic rights.   
32. The representative of Australia  echoed other delegations' comme nts about the importance and 
quality of the Secretariat note, which added to the body of knowledge about developments in the air 
transport sector.  He felt this work would be of gr eat interest to air transport officials around the 
world, and encouraged delegations to pass back the information to their capital-based transport 
officials, to ensure greater participation in the review.   S/C/M/89 
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  33. With regard to plurilateral ASAs, he said that while Australia was not currently signatory to 
any such ASAs, it was open-minded about them.  He also indicated that a horizontal agreement had been initialled with the EC, and that his delegation was interested in a comp rehensive agreement with 
the EC.  He had a number of technical amendments w ith regard to the information in the Secretariat 
document, which he would submit directly to the Secretariat separately.  With respect to the 
suggestion in paragraph 11 of the Secretariat note th at the text of all plurilateral agreements be 
published, he noted that, while the resource implica tions might need to be considered, his delegation 
strongly supported in principle any initiative ai med at increasing transparency in air services 
arrangements.  He mentioned the specific MALI AT's website, which was maintained by New 
Zealand, as a good example of such transparency  initiatives.  The representative of New Zealand
 
supported the statement by Australia on the desirability of transparency with regard to the status and 
the content of plurilateral ASAs. 
34. The representative of the United States  pointed out a clarification with regard to paragraph 37 
of the Secretariat document.  In that paragraph,  it was noted that, in coding the US-EU agreement 
with regard to seventh freedom rights, the totality of  the points attributable had been assigned, in spite 
of the fact that seventh freedom rights only appl ied to EU carriers and only to a very limited 
geographical area.  He indicated that the geogr aphical scope was slighted misleading because the 
seventh freedom rights applied to services between the United States, all 27 EU Member States plus ECAA countries including Norway, Iceland and the Balkan States.  Services by an EU carrier from an EU Member State that was not its home State to the United States were a grant of seventh freedom 
rights. 
35. The representative of South Africa
 posed two questions.  He wished to know, first, whether 
the US-EU agreement allowed cabotage and, second, wh at the withholding provision of the agreement 
was.  The representative of  the European Communities  indicated that cabotage was not covered by the 
US-EU agreement.  The issue n eeded to be looked at in terms of balancing market access 
opportunities;  intra-EU Member States flights were  international flights, while intra-United States 
flights, which could cover very large distances, were  domestic flights, to which cabotage restrictions 
applied.  The freedom to operate intra-EU Member States flights was granted to US carriers, while on 
the other side seventh freedom rights had been grante d uniquely to EU carriers, and not to US carriers, 
as a way of balancing the agreement.  Replying to  the second question, the representative of the 
United States  said that part of the genesis of the US-E U agreement was to accommodate a situation 
where the acquisition of a stake in a carrier resulte d in that carrier, when serving the US market, no 
longer fulfilling the withholding clause in the bilatera l agreement with the United States, i.e. no longer 
being substantially owned and effec tively controlled by the nationals of the State designating it.  Such 
situations could put rights in lega l jeopardy, even if no immediate action was necessarily taken in that 
regard.  It had always been US policy to consider  waivers to the ownership and control requirements, 
provided some public interest conditions were met, many of which were indeed satisfied if both 
parties concerned had an "open skies" agreement with the United Sates.  Even before the US-EU 
agreement had been concluded, the Air France/KLM example was illustrative of an instance were the 
carriers' operations themselves had not been jeopard ised by the change in ownership structure. 
36. The representative of Chinese Taipei  expressed appreciation for the Secretariat note.  Even if 
the core activities of the air transport sector, i.e.  scheduled, non-scheduled, cargo and low-cost carrier 
services, were not covered by the GATS, the note illustrated that significant progress in the 
liberalisation of air transport had been achieved th rough bilateral or plurilate ral ASAs, and especially 
with the US-EU agreement, which was very compre hensive both in terms of geographic coverage and 
content.  While her delegation also supported the concept raised by some Members that the second 
review should lead to concrete outcomes by wideni ng the sectoral coverage of the GATS, it was of 
the view that the contribution of such an approach to the liberalisation of air transport might be 
fragmented and not so effective as a multilateral air service agreement.  She therefore wondered if it 
might not be possible in the future for two plurila teral agreements to be combined, such as, for  S/C/M/89 
 Page 7 
 
 
  instance, the US-EU agreement and the MALIAT, and was interested in obser ving the development of 
such tendencies.  
37. The representative of New Zealand  was of the view that Chinese Taipei had raised an 
interesting point and would we lcome delegations' thoughts on the possible rationalisation of 
plurilateral agreements, also in light of their rela tively similar nature.  He indeed wondered if some 
kind of merger of these agreements was one of the longer-term trends to be looking towards, and had 
welcomed the EC and US comments about possibl e accession to their agreement by third parties. 
38. With regard to the issue of accession, th e representative of th e European Communities  said 
that the accession provision was primarily meant to address the fact that the European Union was still 
growing.  However, he also added that the provisi on as such was generic a nd there was the possibility 
of looking at other third parties and working out wh ether in the future there would be feasible means, 
subject to the agreement by both the US and the EU, of extending the agreement to them. 
B. ECONOMIC AND FINANCIAL SITUATION OF SCHEDULED PASSENGER AIRLINES  
39. The representative of Australia  said that the section provided a sound analysis of 
developments in the sector since 2000, one of the mo st tumultuous periods for the aviation industry.  
He had a comment with regard to section C dealin g with government support.   Paragraph 124 noted 
that "heavy capital injections were needed on the pa rt of governments to keep several of the major 
airlines afloat", while paragraph 130 stated that  "governments had to intervene to prop up their 
collapsing airlines".  While these statements were fact ually correct in many instances, he felt that such 
aid, while a legitimate policy option, was not always  necessary, or indeed optimal, as it could lead to 
market distortions.  He mentioned the case of An sett Australia, Australia's second largest airline, 
which collapsed on 12 September 2001.  At that time , the Australian government chose not to provide 
financial support to keep the carrier afloat.  This had naturally created great anguish to the employees 
of the airline, to some of the communities it serve d as well as short-term disruptions to the transport 
system.  However, in the longer term the decision proved right, as the Australian aviation sector emerged stronger and more competitive.  Australia  had been fortunate to have other successful 
airlines, namely Qantas and Virgin Blue, both of wh ich were able to respond quickly and successfully 
to changes in the market, also he lped by the fact that Australia had already deregulated its domestic 
market and promoted competition on the international market. 
40. The representative of New Zealand
 said that Ansett was owned by Air New Zealand at the 
time of its collapse but that, because of ownershi p and control provisions in bilateral ASAs, the 
options available to Air New Zealand and the Ne w Zealand Government were limited.  Some 
countries had very small equity markets, and even  some large countries had relatively small equity 
markets when it came to investing in the risk y airline sector, while other countries had other 
mechanisms to deal with these pr oblems, like the Chapter 11 provisions under US law.  He further 
noted that Ansett's major competitor was Australian Airlines, which had been merged with Qantas 
only after its debt had been writte n off by the Australian government. 
41. The representative of th e European Communities  said that the period under review had seen 
some of Europe's flag carriers disappear as well as th e impact of EC's strict, "first time, last time" 
rules on the granting of State aid, but that the i ndustry was now back to profit for the first time 
globally.  European carriers on the whole had remain ed profitable since 2002-2003.  Interestingly, the 
huge growth of low-cost carrier transport had requi red the Commission to look more carefully at the 
way in which routes were being developed.  A n eed had emerged for clear State aid rules to be 
developed with regard to the way in which ne w point-to-point services were being set up between 
regional airports.  This was a niche in the market that low-cost carriers had exploited to the full, 
especially by taking advantage of the Single Avia tion Market.  Nevertheless, opportunities which 
were offered to low-cost carriers ha d to be offered to all carriers on a non-discriminatory basis.  That S/C/M/89 
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  had been the main rationale behind the 2005 State aid guidelines by the European Commission.  
These guidelines had been beneficial also to regi onal airports, many of which were undertaking 
important investments and were h eavily dependent on only one carrier, usually a low-cost one, as they 
provided a stable and predictable environment for regi onal airports to conclude their contracts for air 
services. 
42. The representative of China
 said that the Secretariat note was valuable and helpful.  He then 
provided some information about scheduled passe nger transport in China.  2006 saw rapid 
development of air transport in China:  160 million passengers were carried and the growth rate of 
passenger kilometres was 9.8 percentage points higher th an that of the world's average.  The shares of 
domestic and international passenger kilometres were  77.9 per cent and 22.1 per cent, respectively. 
From 2000 to 2006, the annual average growth rate  of passengers carried was 15.6 per cent, and 
international passengers increased 12.7 per cent annua lly.  In 2005, scheduled passenger kilometres in 
China surpassed those in Great Britain and ranke d second among the ICAO members.  In the first 
seven months of 2007, passenger traffic still maintain ed a fast growth rate and, compared with the 
same period of the previous year, passenger tra ffic increased 16.5 per cent, higher than the annual 
growth rate in the previous six years.  Sche duled airlines in China earned a net profit of 
CNY 2.38 billion in 2006, a CNY  2.73 billion increase from 2005.  
C. LOW-COST CARRIER SERVICES  
43. The representative of New Zealand  said that he would provide an update of recent 
developments in Australasia with regard to low-co st carriers (LCCs), and would also do so in detail 
subsequently with the Secretariat.  Since the S ecretariat note had been written, the Australian-owned 
and controlled carrier Pacific Blue, subsidiary of Virgin Blue, had announced that it would be 
commencing cabotage services within New Zealand.  Access to terminal faci lities was an issue for 
LCCs.  As for the way in which established carrier s had adapted in their response to LCCs, in Air 
New Zealand's case a "less frills" pr oducts was introduced and air fares were cut.  The Secretariat note 
indicated that Air New Zealand, like many other legacy carriers, had established a low-cost 
subsidiary, Freedom Air, which was actually be ing wound up.  The development of LCCs in the 
South-West Pacific region had had an impact on some  of the smaller Pacific islands' airlines, which 
had found it difficult to compete, but had also had a c onsiderable positive effect on tourism, in light of 
its significant positive economic and employment spin-offs. 
44. The representative of the European Communities  noted that in the EU the fight for market 
share was taking place between full network carriers,  LCCs and those airlines in-between, such as 
Virgin Express and Brussels Airlines, which had recen tly merged.  It appeared that in the low-cost 
sector there was often a deliberate strategy to unde rmine competitors by competing directly on the 
routes that the incumbents served.  LCCs were not  part of the alliance networks, could not provide 
interconnectivity to intercontinental flights and in th at respect they were offering a different type of 
product from full network carriers.  He also wondere d about the viability of the low-cost model on 
flights beyond 3 hours. 
45. The representative of Australia  echoed New Zealand's comments about developments in the 
South Pacific with regard to LCCs.  He noted that , while LCCs had attracted a lot of attention and a 
substantial body of literature existe d on the topic, low-cost was really  just a business model, and these 
carriers not subject to separate regulatory treatment in most instances.  He therefore wondered if, at the time of the next review, LCCs would not just be  treated as part of the industry as a whole, rather 
than a constituting a sector in its own right, which he did not think they were.  He said that there was a 
great deal of diversity in the low-cost sector;  only some carriers were follo wing the "pure" Southwest 
model, while others were moving away from it.  In r eality, he thought that this was just a reflection of 
different airlines identifying different business oppor tunities and niches.  One area that was quickly 
changing, however, was the medium- to long-haul sector of the low-cost market, particularly in the  S/C/M/89 
 Page 9 
 
 
  Pacific region, not least because of the long distances required to travel internationally.  Jetstar was 
offering international services in a two-class configura tion from Australia to destinations up to eight-
hours away, VivaMacau was flying from Macao to Australia and AirAsiaX was also intending to serve Australia from Kuala Lumpur.  These market tre nds were evidence of the fact that LCCs were 
continually evolving their business model to take  advantage of any new business opportunities that 
emerged.  With regard to the issue of access to te rminal facilities, he noted that one of the great 
markers of many LCCs was their level of in novation and that many ha d opened up both secondary 
airports and terminal facilities very quickly.   
46. The representative of China
 said that the Secretariat note gave a brief account of low-cost 
airlines in China, and that we wi shed to share a bit more informat ion with Members on this model of 
air transport in China.  In order to satisfy th e differentiated needs of consumers, the Chinese 
government had approved several airlines since 2005, wh ich aimed to operate as low-cost airlines.  To 
better understand the needs of cons umers, in 2005, before the launch of Spring Airlines, the Civil 
Aviation Administration of China (CAAC) had held  a public hearing on the service differentiation for 
Spring Airlines to develop low-cost operation.  The service differentiation included lowering free 
baggage allowance, providing no free food, using no  passenger loading bridges, introducing specific 
procedures for passengers enplaning and deplanin g, cutting unnecessary services on ground, turning 
aircrafts around fast, and developing own sale, arriva l and departure information IT systems, etc. 
47. CAAC was working hard to improve the business environment for low-cost airlines.  But the 
price of fuel, which was an important factor in the operation of airlines, was beyond the control of airlines, even the CAAC.  The fuel price guidan ce applied to all sectors of China’s economy.   
48. This relatively new model was still of experimental  nature in China.  International air routes 
of China had opened to low-cost airlines from other regions, among which Thai AirAsia, Tiger 
Airways, Hong Kong Express Airways. 
49. With regard to the recent bid by Ryanair fo r Aer Lingus, the representative of South Africa
 
wondered whether, had Ryanair been successful, th e carrier would have faced any restrictions on 
operating transatlantic routes in light of its status  as a low-cost airline.  The representative of the 
European Communities  replied that under the new US-EU agre ement, but also under the bilateral 
ASAs of the Member States with the US, there was no requirement that an airline be a network carrier to be allowed to fly. 
D. N
ON-SCHEDULED PASSENGER SERVICES  
50. The representative of New Zealand  sought the opinion of Members with a significant charter 
industry about what they saw as the future of that  industry in an increasing deregulated, open market.  
His understanding was that the non-scheduled, or char ter, industry had arisen because of a provision 
in the Chicago Convention that allowed it to devel op outside the framework of bilateral ASAs.  There 
remained some consumer protection regimes that applied to non-scheduled, but not to scheduled, 
operations, but he was wondering what future this segment of the industry had and how much of it 
would be left in five to ten years' time. 
51. By way of brief response to the question by  New Zealand, he representative of Australia  said 
that, while the charter segment was not well-devel oped in Australia, given the constraints of the 
bilateral system as it was in many traditional arra ngements, the charter industry was still important, as 
it enabled carriers to test the market with servi ces on seasonal or small bases, and was still of great 
relevance to the tourism sector. 
52. The representative of the United States  said that New Zealand had raised an interesting 
question.  The Secretariat note had provided a good  explanation of the dynamics of the sector;  as S/C/M/89 
Page 10  
 
  liberalisation proceeded, some of the rationales fo r the genesis of non-scheduled services had changed 
and they now also faced the threat coming from low-co st carriers.  He added that in the long-term he 
did not foresee any diminishing importance for non-scheduled services in the cargo sector;  he noted the critical importance of non-scheduled cargo flights,  for instance for the transportation of outsized 
or heavy cargo, military airlift, satellite launch, etc.  This made it incumbent that the traditional liberal 
approach to charter approvals be continued. 
E. R
EGIONAL AIR TRANSPORT SERVICES  
53. The representative of Australia  said that the sector was of particular interest to Australia, 
which was a large country with significant dist ances between its populations.  He said that a 
difference should be made between regional airlin es and regional air transport services, as many 
regional air transport services are undertake by non-re gional airlines, such as for instance LCCs.  In 
Australia, quite a number of communities, particular  coastal ones with tourism markets, had had jet 
services for the first time through the operation of LCCs. 
54. The representative of China  indicated that, in 2005, th e CAAC announced a package of 
polices to boost regional air transport services in Chin a.  The measures included that airlines would be 
allowed to open regional routes independently, th e approval procedures for purchasing or renting 
regional aircraft abroad would be simplified, impor t tariffs conditions for re gional aircraft, engines 
and spare parts would be improved, the developmen t of regional airports would be enhanced, and 
regional airports and airlines for universal services would be offered subsidies, etc.  
55. The representative of New Zealand  noted that many regional services were essentially 
domestic, and there were very few, essentially concentrated in Europe, that were operated 
internationally.  He wondered where regional airlines could secure their equity capital.  In the case of 
New Zealand, as well as Australia, it was permitted very early-on in the trend towards economic 
deregulation to operate ninth freedom rights, on a unilateral basis, opening-up this segment of the 
industry to foreign investment with no restrictions.  He was of the view that this was an area that 
could be possibly looked at for potential GATS cove rage in the future.  A representative of the 
Secretariat  confirmed that most of these regional services were domestic;  They had nevertheless been 
addressed in the Secretariat note as the mandate was to review developments in the air transport 
sector, not only the international air transport sector. 
F. GENERAL AVIATION SERVICES  
56. The representative of New Zealand  said that the general aviation sector was often neglected 
but was an important part of the industry.  He had noted with particular interest the information given 
on page 301 of the Secretariat note about the inclusion of speciality air services by the United States 
in the free trade agreements that it had been negotiati ng.  New Zealand had picked up on this in some 
of the free trade agreements that it was involved in.  He noted that some elements of the sector were 
covered by the CPC classification, for instance with  regard to the education sector, and that it was 
often in this part of the industry that skilled pilots  were trained and gained their experience, before 
moving on to other segments of the aviation industr y.  He had also read with interest about 
developments with the air taxi industry, particular ly in the United States, as smaller, less expensive 
business jet aircraft were entering into the charter indus try in its purest form and was interested to see 
how that part of the industry would evolve in the future.  He suspected that  quite some challenges for 
the development of this segment would come from the infrastructure side, particularly air traffic control. 
57. The representative by the European Communities
 said that his delegation had identified this 
as an important and growing sector, and had been impressed by the amount of information gathered by the Secretariat in its note.  The Commissi on was conducting its own investigation on what the  S/C/M/89 
 Page 11 
 
 
  shape of the general aviation sector looked like and had issued its own consultation paper earlier that 
year in order to reach out to stakeholders for information.   
58. The representative of China  said that the total flight time of general aviation in China was 
192,000 hours in 2005, 27.3 percent more than the previous year.  Besides the pilot training, petroleum service was the main field of general av iation in China, accounting for 11.1 percent of total 
flight hours.  Deer Jet Company, the main busines s jet operator in China, flied 4,168 hours in 2005, 
which took the 70 percent share of the business jet market.  Air China and Shanghai Airlines also operated business jets.  In China, business jet ope rators offered business jet trust management 
services, but there were currently no fractional ownership operators in China.   
G. A
IR CARGO SERVICES  
59. The representative of New Zealand  said that the sector had been well covered in the industry 
seminar of the previous day.  One element that ha d emerged was the special nature of the sector when 
it came to air rights and the emphasis placed on the n eed for fifth freedom traffic rights that the more 
open agreements provided.  The industry had pointed  out the imbalances in the flows of cargo;  on a 
particular route between A and B, two to three tim es the weight of cargo was heading in one direction 
rather than the other, so that the flexibility of ope rating triangular, if not more complex, routings was 
essential.  Air New Zealand, by taking advantage of ASAs that New Zealand had with Australia, China, Germany and the United States, and that were open with respect to cargo, had been able to put 
together a one-directional, round-the-world service that was meeting the needs of traders. 
60. When liberalising, New Zealand had initially take n the approach that providing separately for 
cargo was not necessary.  More recently, however, it ha d been convinced that, even if a bilateral 
partner was not prepared to liberalise passenger servic es, it might be prepared to liberalise with regard 
to cargo services, and had begun to accept that with a number of partners.  The cargo industry had different characteristics from the passenger industry,  even if passenger airlines were also carrying 
cargo in belly-holds and had a legitimate point when they noted that they were also competing with 
those carriers who might have a more liberal regi me to operate under if dedicated cargo carriers 
services were treated separately. 
61. The Secretariat note had asked whether the cargo sector warranted further work, and he 
indicated that it would be worth exploring whethe r globally separate provisions were being made for 
cargo services, although, conscious of th e data constraints that existed, he indicated that the first step 
was to assess the feasibility of undert aking such work.  He felt that it would be a useful extensions of 
the QUASAR methodology, but that perhaps one way of getting a feel for the task would be to focus 
on the major cargo flows, similar to the work on passenger services, where the Secretariat had 
identified that the top 100 or 200 ASAs would cover the bulk of the industry. 
62. He also noted that cargo was an area which had been looked at as a pilot for the possibility of 
extending the GATS to cover hard rights.  Conceptua lly, his delegation was interested in this work, 
but stressed the need for careful examination of the re levant pros and cons, and added that useful food 
for thought had been provided by discussions held du ring the industry seminar .  He also noted that, 
starting on page 355 of the Secretariat note, an au thor's thoughts as to what an agreement covering 
cargo might look like had been reproduced.  From an initial reading, he felt that the agreement looked 
more like an ASA than an arrangement that might take advantage of the kind of provisions found in 
the GATS. 
63. The representative of China
 indicated that freight and mail traffic in China had reached 3.49  
million tones in 2006, a 13.9 per cent increase fro m 2005.  The annual average growth rate was 
12.6 percent during 2001 and 2006.  China's policy on foreign investment in all-cargo airlines was consistent with that of all-passenger airlines or comb ined airlines; the policy was that the total foreign S/C/M/89 
Page 12  
 
  capitals were allowed to hold 49 per cent shares of airlines in China while the shares of a foreign 
investor and its affiliates could add up to 25 per cent at most.   
64. In recent years, some all-cargo carrier joint ventures were being fou nded or had been founded 
just as described in document S/C/W/270/Add.2.  However in paragraph 396 there was a minor 
mistake about the cooperation between China Eastern Airlines and Singapore Airlines.  The two 
airlines sought for a complete strategic alliance in stead of mere cooperation in air cargo.  The 
negotiation had been concluded, and Singapore Airlines and Temasek Holdings would take a 
24 per cent share of China Eastern Airlines.  Bu t the deal was waiting for the approval of the 
shareholders of both sides by the end of the year .  All-cargo airlines designated by the United States 
were permitted to establish their own cargo hubs in China Mainland after the China-US ASA was 
modified in 2004.  FedEx and UPS were deve loping their cargo hubs at Guangzhou Baiyun Airport 
and Shanghai Pudong Airport respectively.  The air cargo market between China and the United 
States would be liberalized completely in 2011 accord ing to the amendments of the ASA in May that 
year.   
65. He noted that the imbalance of international ai r cargo traffic between China and other regions 
was in line with the international trade structure of China.  Processing trade comprised about half of 
China's international trade market.  Processi ng trade required importing raw materials and 
components, and the final products had to be sent out to the rest of the world.  The importing might be 
carried by sea, while exporting by air due to the different time sensitiveness. 
66. The representative of the United States
 said that China's statement illustrated that gains that 
could be reaped from innovating in liberalisation.  He stressed the importance that cargo liberalisation 
had had in China-US relationship with China comi ng together with the United States in a very 
significant achievement to completely open its cargo market by 2011.  This agreement had already facilitated FedEx and UPS in opening hubs in China and would contribute significantly to tie together 
the US, Asian and European markets in term s of seamless express delivery services through those 
markets, greatly facilitating global trade. 
67. The representative of Australia
 noted that the pace of cargo liberalisation reflected the 
centrality of the service to global trade.  He concurred with New Zealand's statement about the 
importance of fifth freedom rights for the cargo industry, but stressed the increasing importance also of seventh freedom rights.  Paragraph 472 in the Secretariat document noted that the round-the-world cargo service that fifth and seventh freedom traffic rights enabled was a system that had no equivalent in the area of passenger transport, where it was larg ely unthinkable.  This w as indeed largely the case 
at the moment, but hopefully this was an area wh ere some progress could be made in the future.  
Australia had had a policy of negotiating complete ly open cargo agreements for the previous ten 
years;  it now had open cargo agreements, including for fifth freedom rights, in over a third of its ASAs, which still did not account for the full picture as many of these ASAs had been negotiated in 
the previous ten years and concerned Australia's ma in trading partners.  Hi s delegation would provide 
further comments to the Secret ariat at a later stage.   
68. He also supported New Zealand's suggestion that  cargo was an area wher e further conceptual 
work could be undertaken, whether in the current revi ew or into the future;  it was an area where 
multilateralism had a lot to offer, and where th e GATS might provide a useful model as well as 
alternative. 
H. S
LOTS  
69. The representative of China  said that, in 2006, aircraft movements at the airports in China 
Mainland totalled 3.49 millions and Beijing Capital International Airport saw 380 thousand aircraft 
movements, a new record, while aircraft movement s at airports in Shanghai and Guangzhou had also  S/C/M/89 
 Page 13 
 
 
  increased.  The boost of aircraft movements led to a conflict between the rapid rise of market demand 
and the limited slots available.  In August 2007, the CAAC issued Provisional Rules on Slot Management, which constituted the slot manage ment system of government regulating and 
stakeholders participating.  Slot Coordination Committees were set up at busy airports and the 
members of the Committee came from the CAAC, air traffic control bureaux, airlines and airports.  
The prevailing principles around the world were adopt ed to ensure the openne ss, equality and justice 
in slot allocation. 
70. The representative of the European Communities
 said that in its note the Secretariat had 
reported quite extensively on the investigative work  on-going in the EC about ways of meeting the 
challenge of airport capacity in Europe, where many  airports were congested and fully coordinated 
throughout the day.  That investigation was explor ing whether there were ways of improving market 
access possibilities for airlines and addressing the i ssue of the so-called "grey market", whereby 
airlines traded slots between themselves rather th an going through the coordinator which allocated the 
slots at the beginning of each scheduling season.  Th e EC consultations were on-going with interested 
parties, including the Member States' civil aviation authorities and other transport stakeholders, with a 
view to finding a system that could satisfy the capac ity issue in Europe in the shorter-term.  When it 
came to the long-term planning of airport infrastru cture, these were planning issues which were dealt 
with at the local level by the local or national authorities of the Member States. 
I. ALLIANCES AND CO -OPERATION AMONGST AIRLINES  
71. The representative of New Zealand  said that alliances and other forms of cooperation were a 
way for airlines to cope with the constraints of th e bilateral framework that it was operating in, and a 
business reality.  As for the Secretariat paper, he  noted that one element which was missing, and 
which was of continuing importance in particular fo r airlines that were not aligned to some of the 
global alliances, was the role that IATA had been playing and which had been affected considerably 
by the competition authorities of a limited number of  Members.  This was impacting on the industry, 
and though he appreciated that the GATS did not focu s a great deal on competition regulation, he felt 
that this was an area that would have perhaps warranted some analysis.   
72. He noted that, at the end of the relevant secti on in the note, the Secretariat had touched upon 
elements of code-sharing in terms of how they were  affected by ASAs.  This was an area where one 
was constantly learning about the original ways one's  bilateral partners were tackling the issue of how 
to handle code-sharing, and on other area were fu rther consideration was warranted.  He was, 
however, aware of the documentary constraints in this respect, as code-sharing was not necessarily 
always addressed in bilateral ASAs that were suppo sed to be filed with ICAO, but was often covered 
in memoranda of understanding, whic h were much harder to obtain. 
73. As for global alliances, he noted how they had been  very fluid affairs in the past and how they 
seemed to have settled down somewhat more recen tly.  However, there were still many airlines 
around the world that were not part of these global alliances. 
74. The representative of Australia  concurred with New Zealand th at code-sharing and alliances 
were some of the innovative ways with which air lines responded to some of the restrictions of the 
bilateral framework, but they were also a way for airlines to grow market opportunities on long, thin 
routes;  one case in point were the Australia to  Europe routes, where over the past decade every 
continental European airline had withdrawn from th e Australian market yet most retained a strong 
presence though code-sharing arrangements.  This was an area where there was not a lot of detailed 
research available, perhaps highlighting some of the data limitations that the Secretariat had 
mentioned.  As for the point made by New Zeala nd about code-sharing provis ions being included in 
memoranda of understanding, he conc urred, noting that the same was often true also for cargo, and 
added that it was unfortunate that memoranda of unde rstanding were generally not publicly available.   S/C/M/89 
Page 14  
 
  Australia had a policy of making its memoranda of  understanding available whenever the relevant 
bilateral partner agreed.  This was another exam ple where transparency of air services arrangements 
could really increase their understanding for academics as well as practitioners and industry participants about the opportunities available to them.   
J. O
WNERSHIP  
75. The representative of New Zealand  said that this was an exceedingly important part of the 
review, an area where many in th e industry, if not in government, had expressed frustration and an 
issue that ICAO had sought to address in its Fifth Air Transport Conference.  He congratulated the 
Secretariat for bringing the concepts together very clearly.  There was an important difference 
between the ownership and control regime a country c hose to adopt for its own ca rriers, as in the case 
of New Zealand, where airlines not substantially  owned and effectively controlled by its own 
nationals were not designated, from the kind of cr iteria included in ASAs, where one was potentially 
denying rights to a partner in light of the ownershi p of its airline, particularly if the airline was 
looking to circumvent the arrangements a State had with another country.  The United States touched 
on this issue well in replying to a question by South Africa and indicating that, if for example the 
parties involved all had "open skies" agreements, wa ivers could be granted.  However, New Zealand 
had a restrictive bilateral with the United Kingdom and an issue had been raised when Sir Richard 
Branson sought to set up an airline w ithin Australia to operate to New Z ealand.  As the airline, Pacific 
Blue, was now under Australian ownership and control that was no longer an issue but it had been a 
concern at the time. 
76. Internationally there was a trend towards the adoption of criteria such as principal place of 
business where the effective regulatory control of th e business lay.  Effective regulatory control was 
very important when it came to safety and security c oncerns for flags of convenience carriers.  Such 
concerns had arisen in New Zealand when an airlin e from a country in the region had been looking to 
operate to New Zealand but with aircraft registered in Sierra Leone and being on the EC's black list.   
77. The ownership concepts were thus very important, but the key question was which was the 
best way forward.  For years, New Zealand ha d sought to negotiate mo re flexible ownership 
conditions with its bilateral partners with some c onsiderable success.  But if an airline operated a 
network of international services, it could be constr ained by operating under just very few bilateral 
arrangements with the traditional substantial ownership and effec tive control criterion and on that 
basis the airline concerned did not have certainty  about permitting greater foreign ownership.  The 
ability to access international foreign equity markets c ould be of some significance to the viability of 
the business, access to cheaper capital, etc.  The ow nership issue was not adequately addressed by the 
bilateral framework that most of the internationa l airline industry was currently operating under and 
the real question was which was the best way to addr ess the issue.  He noted that the Secretariat had 
gone into considerable detail of examples of fore ign investment in airlines, mostly under 25 or 
49 per cent as a consequence of the bilateral constraint s.  Some airline groups, particularly the Virgin 
Group, had come up with creative way of expanding th eir operations internatio nally in partnerships, 
but this was one area where the airline industry was being singled out for a restrictive regime that most other services industry were not faced with. 
78. The representative of China
 said that, according to the Provisions on the Foreign Investment 
in Civil Aviation Industry issued in 2002, domestic investors must hold at least 51 per cent of shares 
in the joint ventures of airlines when the total shares of an individual foreign investor and its affiliated 
enterprises must not exceed 25 per cen t.  Before this, the ceiling shar es held by all foreign investors 
were 35 per cent and the voting rights were 25 per cen t.  The figures in Table 54 of the Secretariat 
note with respect to this issue were not correct.  In China, domestic investment policies required that 
the State must own or have the controlling shares in Air China, China Southern Airlines and China 
Eastern Airlines.  The share distribution for the ab ove-mentioned three major airlines in Table 56 of  S/C/M/89 
 Page 15 
 
 
  the Secretariat note were somewhat inaccurate.  By  the end of 2006, the State held 40.4 per cent of 
shares in Air China, Cathay Pacifi c took 17.34 per cent and the total shares of foreign investors were 
34.21 per cent.  The State owned 50.3 per cent of China Southern Airlines and foreign investors had 26.84 per cent.  And 61.64 per cent of shares of Ch ina Eastern Airlines was in the hands of the State 
and foreign shares totalled 32.2 per cent.  China Northern Airlines and Yunnan Airlines were no 
longer independent airlines.  The former had merged  into China Southern Airlines by the end of 2004 
and China Eastern Airlines had taken in the latte r in May 2005.  The designation clause in ASAs 
concluded by China still used the criterion of substan tial ownership and effective control.  Each party 
could revoke the operation approval if the designa ted airlines failed to meet this standard. 
79. The representative of Brazil
 commended the Secretariat for its note.  Regarding New 
Zealand's approach to the ownership question, he wondered how the issue would relate to the GATS.  
Under Article XXVIII of the GATS, juridical persons  of another Member we re defined as any party 
engaged in substantive business ope rations in the territory of that Member, regardless of its 
ownership.  Moreover, in the GATS jurisprudence in the bananas case it was stated that ultimate 
ownership did not matter for assessing which Member the services supplier was accounted for.  He 
therefore wondered how the question of ownershi p would relate to GATS commitments in air 
transport.  In response to the question raised by Brazil, the representative of the United States  said that 
the ownership and control question at  hand related to the exercise of traffic rights, and traffic rights 
were excluded from the coverage of the GATS by the Annex on Air Transport Services.  The representative of New Zealand
 agreed with the United States and added that this might illustrate a 
possible solution to one of the international air transport industry's major dilemmas and that the 
GATS perhaps had something to offer in this area. 
K. OTHER SIGNIFICANT ECONOMIC AND REGULATORY DEVELOPMENTS  
80. No delegation  took the floor on this issue. 
81. Replying to some of the points raised under th is item, a representative of the Secretariat  said 
that the EC Single Aviation Market had not been c overed for consistency's sa ke, as the agreement had 
always been considered throughout QUASAR as cove ring domestic traffic, but the Secretariat stood 
ready to include it in its analysis.  
82. As for the coverage of the regulatory harmonisa tion elements in the description of the EC's 
plurilaterals, he explained that the issue had not been addressed in the document because, as noted in 
paragraph 9 of document S/C/W/270, the Secretaria t documentation covered only pure market access 
elements in view of the time constraints faced.  He also indicated that, in the description of the ECAA, 
the note had touched upon regulatory harmonisati on measures, as these conditioned the market access 
concessions granted, and that a proposal had been made to circulate the text of the plurilateral 
agreements, through which regulatory measures could be appreciated.  In passing, he noted that the 
information on plurilateral agreements was inco mplete, as no data was publicly available on 
ratification and entry into force.   
83. As for the comments by Australia and New Ze aland about the resource implications of 
circulating the text of all plurilate ral agreements, he indicated that this would not be a big task, as the 
Secretariat had already collected, with great effort, all of the agreements. 
84. With regard to the question raised about the f easibility of including cargo in the analysis, he 
indicated that this would require the availability of  the text of bilateral ASAs.  These could be found 
in ICAO's DAGMAR application, an application that  the Secretariat had repeatedly and, until then 
unsuccessfully, tried to access.  No clear indications  had been received from ICAO about conditions 
of access to DAGMAR. S/C/M/89 
Page 16  
 
  85. As for extending the analysis of code-sharing, th is could be undertaken relatively easily, as 
the Secretariat had already created a database with relevant available information.  Due to time 
constraints, it had not been able to fully check a nd utilise the information therein, but it could do so 
easily and would take about one month.  Similar considerations applied to the extension of the 
analysis of ownership. 
86. With regard to competition policies and IATA interlining, there again the Secretariat had 
made a deliberate choice not to address the issue,  which did not have a direct bearing on market 
access, also in light of the controversy surrounding th e coverage of the topic by the Secretariat at the 
time of the first review.  However, the Secretariat was both in a position and ready to undertake such 
work. 
87. Finally, as for the erroneous data for the owners hip of Chinese airlines, he indicated these had 
been drawn from Airline Business and in that resp ect he reiterated the call to Members to point out 
any errors and omission to the Secretariat. 
88. The representative of Chinese Taipei
 highlighted a mistake in Table 56 on page 424 of the 
Secretariat note, where China Airlines was shown as  belonging to China whereas the airline belonged 
to Chinese Taipei. 
89. Turning to part II of agenda item A, the Chairman  recalled that, at the dedicated Review 
meeting held on 1 March, the Council had discussed the QUASAR note prepared by the Secretariat (document S/C/W/270/Add.1, dated 30 November 2006).  Following that discussion, several delegations had called upon Members to provide to the Secretariat updated information on their 
bilateral ASAs, so as to updated the QUASAR database.   Moreover, at the informal meeting of the 
Council held on 13 March, it had been decided that th e date of the third meeting of the Review, i.e. 
that day, would be taken as the deadline for Member s' submissions of corrections and complements to 
QUASAR.  It was against this background that the delegation of Aust ralia had submitted, on 
10 September 2007, the communicati on contained in JOB(07)/136.   
90. The representative of Australia
 introduced his delegations' contribution on the Australian 
update of QUASAR (JOB(07)/136)  He recalled th at, at the March 2007 meeting dedicated to the 
second Air Transport Review, Australia had enc ouraged Members to update the information 
contained in QUASAR on bilateral ASAs, be those agre ements of formal treaty status or of less than 
treaty status.  He further recalled that, at the mee ting of the Council for Trade in Services held on 
7 June 2007, the Chairman had also encouraged Memb ers to provide information to the Secretariat to 
update QUASAR ahead of the present review meeting.  Australia, for its part, had done so using the 
template provided at the end of the QUASAR documentation, adding 27 new agreements to 
QUASAR and updating 34 other agreements out of 42.  Additional information had also been 
provided, notably regarding the stage of ratificati on of the agreements, the 33 agreements including 
unlimited capacity for cargo services and the 26 agreem ents that contained the Australian "regional 
package", an initiative that provided for unlimited capac ity for passengers to d estinations in Australia 
outside the major airports of Sidney, Melbourne, Br isbane and Perth.  He considered that QUASAR 
had the potential of becoming a very useful tool  for aviation policy makers.  It was therefore 
important that other Members considered updating QUASAR to make it as complete as possible.  He 
underlined in that respect that the workload im plied by the updating was in fact relatively minor. 
91. The representative of the United States  indicated that he had not been under the impression 
that a deadline had been set for the submission of th is type of information to the Secretariat.  He 
indicated that, in addition to the problems noted by Australia with regard to notification to ICAO and 
to the varying legal status of the agreements dependi ng of their stage of ratification, the United States 
had further legal problems regarding the notification of  this type of information, which was needed to  S/C/M/89 
 Page 17 
 
 
  complete WASA and henceforth QUASAR.  The Un ited States were therefore still examining the 
legal feasibility and the legal consequences of a potential update. 
92. The representative of New Zealand  indicated that he had just provided to the WTO and ICAO 
Secretariats a scanned copy of virtually all of New Zealand's ASAs.  Noting the US comment on the 
possible legal consequences of notification to ICAO,  the representative indicated that he had reached 
an informal agreement with the ICAO Secretariat th at the notification of this information would not 
constitute a formal filing of the agreements with  ICAO - although New Zeala nd had the intention to 
do so in the future - but that New Zealand felt it was useful that ICAO benefited from the totality of 
this information for the purpose of its analytical work .  He too considered this exercise of notification 
useful, as it contributed and would contribute in the future to improving the understanding of the 
global aviation picture, thereby allowing Members to draw conclusions on liberalization trends. 
93. The representative of the European Communities  noted that the EC had contributed to the 
updating exercise by providing information to the Secretariat on the "horizontal agreements" negotiated by the European Communities on behalf  of its Member States as well as on wider 
agreements such as the European Common Aviati on Area (ECAA).  With regard to bilateral 
agreements linking individual Member States with th ird parties, he indicated the consultations would 
have to take place with Member States first and th at at any rate such potential information would be 
incomplete since many provisions were enshri ned in confidential memo randa of understanding. 
94. The Chairman
 recalled that, at the end of the March 2007 dedicated meeting, it had been 
agreed that the Secretariat would produce a not e consolidating suggestion for future work on 
QUASAR for consideration by Members.  This note was contained in document S/C/W/284, dated 
22 September 2007.  A representative of the Secretariat  indicated that the note listed improvements to 
QUASAR and ASAP that the Secretariat deemed po ssible, including their posting on the WTO public 
website, the improvement of the underlying data a nd their computations and displays.  It also 
contained elements on the implications in terms of resources for the Secretariat.  This list was by no 
means exhaustive and suggestions by Members were welcomed.  The Secretariat was therefore 
seeking guidance on what Members considered the most  useful use and refinements of the data until 
the next review. 
95. The representative of the United States  indicated the United States were still trying to 
ascertain what they would like to see in the context of the next review, and to decide which of these 
recommendations made the most sense.  Posting QUASAR and ASAP on the public website of the 
WTO was definitely a good suggestion.  As to the rest, further works on QUASAR were clearly 
linked to how the next review would be structured and to what type of topics it would prioritize.  
Timing was also of the essence:  the United States had to share the material gathered during this 
review, when fully derestricted, with stakeholders in  order to identify what mattered most to them so 
that policy-makers in the United States could decide  what were the best improvements to make and in 
what kind of time-frame. 
96. The representative of New Zealand  indicated that he too felt that some more time was needed 
to reflect further.  He saluted th e work of the Secretariat and suggest ed that, after the efforts made, the 
Secretariat work quietly without deadline on this issu e, in the perspective of the next review.  The 
suggested work on cargo was certainly useful, particularly in view of the debates held during the industry seminar of the preceding day.  Similarly, the public posting of QUASAR/ASAP was useful and should be done with constant  updating, rather than waiting for a new paper edition of QUASAR 
at the beginning of the next review.  If prioriti es had to be established between QUASAR and ASAP, 
QUASAR should be chosen, as the visualization tool  of ASAP was useful but not essential, whereas 
the key element was the database of QUASAR.  He  wondered, therefore, if it was absolutely 
necessary to publish QUASAR in a paper form as the S ecretariat had been doing for the rest of the 
documentation so far.  He noted the point made by the Secretariat on the need for a more robust S/C/M/89 
Page 18  
 
  database software than Excel and indicated that he had met with similar difficulties in the conduct of a 
comparable project.  He, therefore, sympathised with the suggestion of the Secretariat in that regard.  
Generally speaking, New Zealand welcomed the s uggestion on QUASAR works but urged that works 
be undertaken at a slower and more considerate pace. 
97. Another representative of the United States
 noted that paragraphs 17 and 18 of the 
Secretariat's note were alluding to possible budgetary implications of this work.  The United States 
wanted to get a clearer picture of these implications in order to consult its Budget Committee representatives to see it was appropriate or not to support the posting of QUASAR on the internet.  The same went for the IT support required.  She want ed to know in particular if the funds required 
were coming from the Services Division's regular budget or, if extra funding was needed, if this could 
come from other divisions and, if so, whether on existing budgets or on new ones.  If the Budget 
Committee had to be consulted, she also wonde red under which budgetary item this work would 
appear, since it was not strictly speaking technical cooperation, how it would combine with the preparation of the next review, and what were the in-house procedural steps for the Services Division. 
98. The representative of the European Communities
 underlined the great usefulness of the 
QUASAR instrument.  In his view, accuracy should be privileged against urgency:  time should be 
taken to work with WTO Members to check the a ccuracy and completeness of the information, if 
necessary through a more formal process.  Only wh en this had been accomplished, it would time to 
think about how to make this information publicly available.  
99. The representative of Australia  indicated that he considered QUASAR very useful and 
therefore worthy of further work.  Some of the pr iorities of this work would certainly emerge as 
Members worked their way to determine the priori ties of the next review.  Accuracy was of the 
essence and the existence of a "live", online documen t would help Members with the updating of their 
agreements and hence improve overall accuracy.  This was preferable to having to wait for the 
publication of the paper version of the document every five years. 
100. The representative of Canada  indicated that he had no problem in seeing QUASAR posted on 
the WTO public website.  He shared the view of Ne w Zealand on the priority to be given to QUASAR 
versus ASAP, if choices had to be made in that  regard.  A final decision would have to await 
consideration of the budgetary implications.  He fina lly indicated that his delegation needed to reflect 
further on the feasibility of a notification updating QUASAR. 
101. A representative of the Secretariat  indicated that the resources ne eded for the work suggested 
were not going to come from the existing regular  budget of the Services Division and that the 
Secretariat would have to seek other resources within  the house.  The Secretariat could not yet provide 
numbers as to possible costs of this work but could undertake to do so at the next meeting.  At any 
rate, the sums at stake were not important. 
102. The representative of the United States  indicated that, since the posting on the website of 
QUASAR would require additional funding, further cost -benefit analysis was needed, in particular in 
view of the fact that, in the absence of proposals to  extend the Annex to hard rights, this work could 
be termed as academic and falling outside the scope  of the present review.  This question was also 
linked to the next item "further steps of the review" and should therefore be discussed in that context. 
103. The representative of New Zealand  stated that no objection had been made to make QUASAR 
public and that the question was rather whether this  information should be made available in a raw 
form at no cost or in a more user-friendly, mo re easily accessible and searchable form which may 
require additional resources.  S/C/M/89 
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  104. The Chairman  noted that several delegations had stat ed that they needed more time to 
consider if and what further work should be d one, therefore no decision could be reached at that 
meeting on that point.  He stated also that there was no opposition to the idea of further transparency 
but only a debate on its modalities.  The cost question was clearly raised but could not be solved at the 
meeting, since the Secretariat could not yet provide precise numbers.  
105. The representative of the United States  agreed that there was a meeting of minds on 
transparency, but views diverged as to what, how and how much.  The posting of QUASAR at no cost 
in its raw form was not a problem, while a more complex and costly project would need more consideration.  Still, the question was minor in co mparison with the discussion of further steps for the 
review. 
106. The representative of th e European Communities
 indicated that QUASAR was a longer-term 
undertaking which spanned beyond the present review.  If the document was to be a "live" document, 
as proposed by some delegations, it would have to take into account the changes that were occurring 
in the aviation world on a daily basis and it would have to be updated in the interval between two 
reviews so that Members could get an already prep ared document to discuss at the beginning of the 
next review.  The fate of QUASAR had therefore to be somehow separated from the present review. 
107. The Chairman  suggested giving the floor to the re presentative of the International Civil 
Aviation Organization (ICAO) for a statement informing Members of the main topics discussed at the recently held Thirty-Fifth Session of the ICAO Assembly.  
108. The representative of the United States
 asked if the statement from ICAO was relevant to the 
agenda item dealing with developments in the sect or that was being discussed.  The representative of 
the ICAO Secretariat  indicated that she would tailor her interv ention to the structure of the agenda.  
The representative of the United States  said that she preferred to have all the discussions on agenda 
items A and B amongst WTO Members in one go and only thereafter entertain comments from the 
ICAO Secretariat, under the "Other business" agenda  item.  The representative of New Zealand  
expressed a preference for hearing the ICAO statem ent before Members discussed agenda item B.  
109. After a short suspension of the meeting,  the representative of the United States  indicated that 
she had agreed, under the aegis of the Chairman, with the New Zealand re presentative, that ICAO 
would present a short statement under the present ag enda item and would come back under the next 
agenda item. 
110. The representative of the ICAO Secretariat  indicated that one of the main topics discussed at 
the ICAO Assembly regarding economic regulation ha d been the question of transparency.  Following 
the presentation of a paper by the delegation of Au stralia, there had been broad support for the need 
for information-sharing on transparency of Air Se rvice Agreements.  States' notification obligations 
under Articles 81 and 83 of the Chicago Convention ha d been recalled and acknowledged.  It was also 
felt that more widespread domestic publication of Air Service Agreements could also promote 
transparency.  ICAO would continue to work in this area.  With re gard to the information-sharing 
between ICAO and the WTO, the ICAO representa tive noted with satisfaction that the ICAO 
Secretariat's work had been fully acknowledged an d hailed in the documentation produced by the 
WTO Secretariat.  The WTO work heavily relied on ICAO 's databases, Template Air Services Agreements, guidance material, manuals and studies.  She commended the work done by the WTO 
Secretariat on QUASAR.  She, however, put a note of caution on the interpretation of its results as the 
level of openness of bilaterals c ould not only be judged on the basis of the criteria and assumptions 
retained by QUASAR, nor on the basis of the inform ation on regional agreements that had not always 
entered into force and were, in certain instances, not even binding.  With regard to document 
S/C/W/284, she noted that QUASAR was already availa ble to the general public in a limited way and 
that the WTO Secretariat envisaged enhancing that dissemination.  It was ICAO's understanding that S/C/M/89 
Page 20  
 
  the WASA database had been provided to the WTO S ecretariat for internal use.  Further use would 
touch upon ICAO's intellectual property policies, an  issue which required careful consideration.  
ICAO had just created a mechanism to look into  how best to market and promote its own 
documentation.  ICAO was presently exploring wa ys and means of enhancing the use of its 
information through appropriate arrangements, in cluding cooperation with partner organizations.  
By 2008, ICAO intended to place both the WASA and the DAGMAR databases online. 
111. The Chairman
 suggested that the Council suspend the discussion on this item and re-examine 
the questions raised in the light of the debate unde r the next agenda items, i.e. item B on the operation 
of the Annex and item C on further steps for the review.  The Council so agreed .   
ITEM B OPERATION OF THE ANNEX 
112. The Chairman  recalled that, at its last dedicated meeting held on 1 March 2007, the Council 
had addressed the submission contained in JOB(06)/ 237, dated 13 September 2006, jointly sponsored 
by Australia, the European Communities, New Ze aland, Norway and Switzerland and titled "Review 
of the Annex on Air Transport Services – Ground Handling and Airport Operation Services".  In 
addition, since the last meeting, a new communicati on had been tabled by the delegations of Canada 
and the United States and circulated as JOB(07) /143, dated 28 September 2007 (and Corrigendum 1, 
dated 2 October) and titled "Sec ond Air Transport Review". 
113. The representative of the United States  recalled that the United States, like Canada and other 
WTO Members, considered that ground handling and airport services were excluded from the scope 
of the GATS.  They nevertheless welcomed the opportunity to discuss the proposal contained in 
JOB(06)/237.  In studying this proposal, the United States and Canada had decided to put forward a 
certain number of questions.  Without prejudice to their final position, it was the United States' view 
that an amendment of the GATS was required for Members to schedule legitimately commitments in 
those sub-sectors as well as any other sector not explicitly listed by paragr aph 3 of the Annex.  
Preserving the legal certainty embodied in the Anne x was a key concern for the United States, who 
wanted to avoid a situation where Members were en couraged independently a nd variously to interpret 
the scope of the Annex and of the relative commitments.  The compromise stemming from the 
Uruguay Round negotiations was very clear:  only three air transport services were covered by the GATS.  Virtually all Members drafted their co mmitments accordingly and even the co-sponsors 
themselves avoided scheduling commitments on ground handling and airport management services.  
Hence, having that understanding, Members did not list MFN exemptions in those two sectors.  She recalled finally that the present US-Canada prop osal followed on substance the submission in 
document TN/S/W/33 tabled previously by the United States, Canada and Japan.  
114. The representative of Canada
 indicated that Canada's objective as a co-sponsor was to draw 
Members' attention to the fact that if the GATS Air Transport Annex provided for the possible further 
application of the Annex it was s ilent on the process by which this could be achieved.  Members had 
before them a proposal to amend paragraph 3 of the Annex in order to include ground handling and 
airport-management services.  In Canada's view it was necessary that, before thinking of amending 
the Annex, Members should be informed precisely of the process by which this could be achieved. 
115. Another representative of the United States  introduced the questions contained in paragraph 4 
of the proposal by the United States and Canada.  The proposal to amend the Annex had a potential effect not only on the ability of Members to sch edule commitments but affected also their general 
obligations under the Agreement, including MFN ob ligations.  The regulatory universe of the GATS 
and of aviation were very different and their compa tibility was an open question that needed a careful 
assessment at a national level.  The first questi on requested of the proponents a description of the 
legal process through which the Annex would be amende d and of its various steps – should there be a 
recommendation by the regular Council for Trade in Services, or were co-sponsors envisaging  S/C/M/89 
 Page 21 
 
 
  alternative ways?  The second question was about th e implication of the proposal on current MFN 
exemptions and on the possibility to lodge new MFN exemptions based on an extended list of services 
in paragraph 3.  Third, would Members have a si milar opportunity to make technical corrections to 
their schedules to clarify the scope of the commitme nts already made when the expanded scope of the 
Annex could have the effect of extending the scope of those previous commitments?  Lastly, would 
there be an opportunity to revisit the definiti on of ground handling services and airport-operation 
services currently contained in the co-sponsors' propo sal to ensure that those definitions accurately 
reflected the regulatory environment in which those services were provided? 
116. The representative of Australia  thanked the United States and Canada for their paper, which 
constituted a very useful contribution to the debate .  He had some preliminary, purely Australian, 
answers to the questions raised.  As to the firs t question, Article X of the Marrakech Agreement 
provided a mechanism for taking forward proposals to  amend the provisions of the WTO Agreements.  
Such an amendment could fruitfully be adopted at  a Ministerial Conference level but also, legally 
speaking, at the level of the General Council.  Politically speaking, Australia would see that 
happening most likely in the context of the conclusion of the Round, but of course there would be 
preliminary stages to ensure that there was a con sensus to do so, and that Members having concerns 
could be sure that these would be addressed and w ould therefore be in a position to make offers on 
ground handling and airport-management services.   A recommendation of the regular Council for 
Trade in Services stemming from the review pr ocess was not necessary but it was preferable, 
precisely to give certainty to all Members on how to best make their offers and clarifying concerns, if any, on the scope of the Annex.  Sugges tions were welcome in that regard.  
117. As to MFN exemptions, Australia recalled that those two sectors were in its view already 
covered by the GATS and that, therefore, there was no particular need for new MFN exemptions.  In 
addition, Australia was not convinced that there was a practical need for new MFN exemptions as 
most air agreements were dealing with the rights of  airlines to self-handle and not with the rights of 
independent handlers to provide services.  Howeve r, Australia was willing to engage with any 
Member that did have a problem to envisage ways to address it.  As to technical corrections, these 
could be considered.  Australia recalled, in that respect, that Members always had the opportunity to 
make technical corrections to their schedules sinc e a specific procedure had been devised to that 
effect.  Australia was finally open to the idea of revisiting the definitions of the sectors in the proposal but noted that in a GATS, positive listing context Memb ers were always free to define sectors as they 
saw fit. 
118. The representative of th e European Communities
 also welcomed the US-Canada paper and 
indicated that he shared broadly the remarks made by  Australia at that preliminary stage.  He wanted 
to know more about the concerns underlying the issues raised by United States and Canada. 
119. The representative of the United States  thanked Australia for the precisions it had brought on 
how it saw the procedural aspects.  Another representative of the United States noted that many non-
open skies US bilateral ASAs and all US open sk ies agreements had provisions that addressed both 
self-handling for airlines and access to competitive markets for ground handling at the airports that 
they served.  He noted that the co-sponsors' propo sal did not distinguish between the nature of the 
services supplier (e.g. an airline, an airport or an  independent handler).  He reminded Members that, 
as often recalled by the co-sponsors, the GATS applie d to measures, and that in most instances ground 
handling access regulations were not making distinc tions based on the type of handlers.  Ground 
handling was addressed through reciprocity provision s in many agreements, including some between 
the United States and the co-sponsors. 
120. The representative of Canada  considered that Members, when  taking MFN exemptions at the 
end of the Uruguay Round, had done so on the basis of what they thought was the scope of the Agreement.  Canada, for instance, had done it on the b asis of the three sectors listed in paragraph 3 of S/C/M/89 
Page 22  
 
  the Annex.  It was for each Member to determine if the hypothetical extension of the scope of the 
GATS would require them to lodge or not new MF N exemptions, but the point was whether Members 
had the right to take MFN exemptions when new sectors were added to the Agreement.  As to technical rectifications, Article XXI was not providing the legal comfort needed.  For instance, Canada had scheduled its commitments on services a uxiliary to all modes of transport on the basis 
that only three ancillary services were covered by the Annex.  For Canada and for many other 
Members, those existing commitments on auxiliary  services would, in the absence of a corrective 
action, be automatically expanded by an extensio n of the scope and therefore would need to be 
clarified without going through the Article XXI process. 
121. The representative of China
 indicated that China had a positive appreciation of the review 
process.  It shared certain of the concerns and poi nts of view expressed in the US–Canada paper.  For 
instance, for China the scope of the Annex was limite d to the three services listed in paragraph 3 and 
therefore any extension of the Annex would have to follow a formal amendment procedure.  For 
China, legal certainty was also very important. 
122. The representative of Australia  recalled that, for his delegation, the GATS already included 
these services and that therefore the legal certainty of its own offer on these services was sufficient.  
However, he acknowledged that this was not the positi on of some Members and that  therefore efforts 
should be made to address their concerns.  Still, since there was no addition of sectors he could not 
agree with the idea of an automatic  entitlement to add new MFN exemptions.  In Australia's view, the 
only way to open up that possibility, not this so-calle d "right", was to demonstrate the existence of a 
problem of a magnitude big enough to require that t ype of solution.  More information was therefore 
needed on the provisions for which some Members wa nted new MFN exemptions to be lodged.  The 
same applied for technical  rectifications.  If the clarification inscribed itself in a forward movement in the context of an Article XIX offer, then Article XXI was not needed, but if the clarification had the 
effect of a backward move, then Article XXI was needed. 
123. The representative of China
 asked the co-sponsors which were in their view the sectors liable 
of "further application of the Agreement" accordin g to paragraph 5 of the Annex.  She also sought 
clarification from the Secretariat on the negotia ting history of the Annex and its coverage. 
124. The representative of Australia  indicated that the entire aviation sector was subject to review 
which explained why the documenta tion covered all aviation sectors including traffic rights.  He 
recalled that, in the view of the co-sponsors, ground handling and airport-management services were 
not directly related to traffic rights. 
125. The representative of the United States  indicated that indeed there was a problem with regard 
to ground handling and MFN.  Various US statutes within aeronautical codes and notably the International Air Transportation Fair Competitive Practices Act required that the DOT implement 
reciprocal treatment and retaliate against unfair an ti-competitive practices by foreign entities.  This 
required the protection of an MFN exemption.  The same law applied to CRS and selling and 
marketing and was covered by an MFN exemption for those two sectors and, had the US back in 1993 
had the impression that ground handling was covered by the Annex, this MFN exemption would have 
been extended to ground handling. 
126. A representative of the Secretariat
 indicated that it was decided at the end of the Uruguay 
Round that air transport would be excluded from the GATS.  The Annex was not drafted in the most 
helpful way, however:  the simultaneous definition of what was included and what was excluded was 
bound to create ambiguities and grey areas.  A clarification of these provisions was in the hands of the 
Members.  The same applied for new MFN exemptions.  It was up to Members to decide if they wanted to allow new MFN exemptions to be lis ted and this was linked to the question of the 
amendment procedure.  If Members chose to follow the amendment way, they would have to follow  S/C/M/89 
 Page 23 
 
 
  Article X of the WTO Agreement, which distinguish ed between three types of majority.  For MFN 
obligations, Article X.2 required an  agreement by all WTO Members.  For parts I, II and III of the 
GATS and its Annexes, Article X required a two-thir d majority and the amendment would enter into 
force for two-thirds of the Members and then for each Member at the time of the deposition of its 
instrument of acceptance, the assumption being still  that all Members adopt the amendment, though 
with different calendars.  Finally, for the proce dural and institutional provisions under parts IV, V and 
VI, Article X foresaw entry into force of the am endment for all Members after acceptance by two-
thirds of the Members. 
127. For the amendment of the Annex, the procedur e foreseen for parts I, II and III of the GATS 
and its Annexes would apply, but it might not be a right assumption from a legal point of view to 
think that such an amended Annex by a two-thir d majority would allow the listing of new MFN 
exemptions.  This is because the Annex on MF N exemptions indicates that any new exemption 
applied for after the date of entry into force of th e Agreement shall be dealt with under Article IX.3 of 
the WTO Agreement (waiver procedure).  Indeed  there existed examples of MFN exemptions 
posterior to the entry into force of the WTO Agreement (telecom, financial services and the 
possibility to list exemptions at the end of the ongoing suspension of MFN for maritime transport 
services) but they were all specifically stipulated under the GATS and its Anne xes (or of a subsequent 
decision in the case of maritime tran sport).  So for MFN exemptions, Members might have to think of 
a proper and specific way to deal with that case. 
128. The representative of China  reformulated her question on the sectors candidate for further 
application of the GATS saying that it was a distin ct issue from that of the scope of the review. 
129. Replying to China's question,  the representative of Australia  said that were many ancillary 
services that were not related to traffic rights and we re therefore included, the rationale for exclusion 
being the presently bilateral nature of traffic rights.   The proposal of the co-sponsors was focused on 
two of these ancillary services, the most significan t ones commercially speaking:  ground handling 
and airport-management services.  As to the US re marks, Australia noted that were there was an 
additional possibility, distinct from new MFN exempti ons, namely that of amending the description of 
a measure indicating its inconsistency with Article II  in a current MFN exemption.  For instance, if 
the US wanted to make clear in the description of the CRS/selling and marketing measure that it applied also to ground handling it would probably not be a new MFN exemption.  The Secretariat 
could shed some light in that respect, for instance on whether Article XXI could be used to clarify or 
modify MFN exemptions. 
130. The representative of the United States
 recalled that only the Members and the panels could 
interpret the Agreement.  Th e representative of Canada,  commenting on a point made by Australia 
earlier, noted that one of the three services listed in  paragraph 2, aircraft repair and maintenance was 
in no way linked to the exercise of traffic rights.  Secondly, he reminded Members that ground handling was among the services that had been considered for a long time in the Annex but that had 
disappeared from the list in the last days of th e Uruguay Round.  Thirdly, he called on Members to 
leave behind them the legal debates and to focus on  the question of legal certainty.  Canada had no 
export interests in those two sectors and had an open market for both services.  It did not want to stand in the way of Members willing to make commitments in this area, what it wanted to achieve was legal 
certainty. 
131. The representative of Chinese Taipei
 noted that Chinese Taipei was one of the rare Members 
that had listed an MFN exemption of ground hand ling because it considered that the GATS covered 
already ground handling as well as some supporti ng services.  Chinese Taipei had undertaken 
commitments on services auxiliary to all modes of transport such as of storage and warehousing and 
freight transport agency services and other auxiliary services and wondered if those commitments would be automatically extended to air transpor t in the case of an extension of the Annex. S/C/M/89 
Page 24  
 
  132. The representative of New Zealand
 also welcomed the US-Canada paper.  He joined Canada's 
call for Members to move away from the legal de bate, and noted that some Members had export 
interests in those sectors.  He also noted that the co-sponsors were  not asking all Members to commit 
in these areas but simply to make clear that th e scope of the Annex extended to those services and 
stressed that their main aim was legal certainty.  There was international trade in these areas, e.g. 
between the EC and New Zealand, both ways.  These sectors had changed with the emergence of 
independent ground handler s and the privatization and concession of airports, and the commercial 
value of bringing those sectors clearly under the amb it of the GATS was real.  The proposal to amend 
the Annex had been made to bring legal certainty and to allow for commitments. 
133. The representative of the United States  considered that legal questions were key.  The 
questions raised by the US-Canada paper had to be discussed in depth in order to give legal certainties 
to the stakeholders, else no negotiations on an amendment could ever take place.  The US acknowledged the export interests of other Members, but legal questions had to be answered first.  It 
was not only a question between the US and Ca nada on the one hand and the co-sponsors on the 
other, all other Members, and in particular t hose that had scheduled commitments in auxiliary 
services, should take an interest in this question.  
134. The representative of Australia
 renewed its call to Members, and in particular to the United 
States and Canada, to indicate precisely their diffi culties and needs so that these could be addressed. 
135. The Chairman  suggested that the Council take note of the statements made.  The Council 
so agreed.  
ITEM C POSSIBLE FURTHER STEPS FOR THE REVIEW 
136. The Chairman  opened the floor on this agenda item and asked Members if there was a need 
for a further dedicated meeting of the review and, if so, when this should be held. 
137. The representative of the European Communities  expressed his delegation's surprise:  how 
could the idea of closing the review be even evoked?   In his view, the review was "in full swing" as 
the debates of the afternoon and the industry seminar had shown.  Members needed to go back to their 
stakeholders, and the contribution by Canada and the United States did imply numerous consultations 
and discussions in order to come back in February , for instance, to move the discussion forward.  
There was also a need to h ear from the Secretariat about future works on QUASAR and its 
implications.  The representative of Australia  supported the statement made by the European 
Communities. 
138. The representative of the United States  disagreed with the European Communities' point of 
view.  The United States was not sure that a further meeting would be needed.  Answers given to the 
US-Canada proposal were indeed preliminary but a nother meeting would probably not add clarity to 
them.  Her delegation was also not sure that the ve nue for the proponents' proposal was a critical issue 
for the Review.  Indeed QUASAR could be a subj ect for the next review and issues concerning 
QUASAR should be dealt with in the context of the prep arations for the next review rather than in the 
course of the current one.  The United States fe lt that the discussion had been exhausted and was 
sceptical about the additional impetus that stakeholders could give. 
139. The representative of Canada  considered that it was premature to determine if Members could 
finalize the review since there remained outstan ding issues, such as those raised in the paper 
submitted by the United States and Canada, the prel iminary answers given and how those answers 
could relate to the co-sponsors' proposal.  Cana da therefore suggested that the Chairman hold 
consultations on the need and timing of a further meeting of the second review.  S/C/M/89 
 Page 25 
 
 
  140. The representative of New Zealand  also expressed his delegation's surprise at the idea that the 
review could be stopped.  Only half of the job had been done.  For instan ce, the Swiss proposal to 
abolish the Annex had not been addressed.  Simila rly, the Secretariat needed more guidance from 
Members on the preparation of the next review in order to spread its workload over a longer 
timeframe.  The scenario of the first review, that of prolonged meetings purely devoted to procedural 
issues, should be avoided, but the s ituation was not similar, there were  many questions of substance to 
be dealt with at least in one further meeting. 
141. The representative of China  noted that the US-Canada paper was too recent to have attracted 
as many comments as it deserved, hence a further meeting was probably needed and its timing would stem from consultations. 
142. The representative of the United States
 agreed with the idea that the Chairman should hold 
consultations.  She nevertheless disagreed with the point of view expressed by EC and New Zealand.  
Instructions to be given by Members to the Secretar iat for the preparation of the next review did not 
require a dedicated meeting of the review but co uld be handled in other meetings, for instance 
consultations or meetings of regular bodies.  Follo wing on the Chinese comment s, she considered that 
if Members were to have another meeting to allow them to reflect on the exchange that took place on 
the basis of the US-Canada paper, th e US could perhaps consider that to be an appropriate purpose to 
have another meeting.  That t oo required consultations by the Chairman on when such a meeting 
would be held and on what basis. 
143. The Chairman  noted the consensus for consultations bot h on the issue of the continuation of 
the review and on further work on QUASAR and its budgetary implications.  He thus closed the 
agenda item dealing with further work on QUASAR that had been suspended until then.  He then 
asked if the review could be concluded now on the ground that consultations would take place. 
144. The representative of Australia  totally rejected the suggestion.  The review was ongoing.  
Australia welcomed consultations to decide on the date of the next meeting, it could accept discussing 
the agenda items of such a meeting, but there was a need for a further meeting to pursue the 
discussions on the operation of the Annex.  The prob lem was the same as for the first review.  After 
completing the examination of the documentation produ ced by the Secretariat, some delegations tried 
to shut down the review, but Members needed to complete the examination of the operation of the 
Annex and that could take some time. 
145. The representative of the European Communities  also rejected adamantly the idea of a closure 
of the review at that meeting.  He welcomed th e constructive ideas put forward by some Members on 
how to move the process forward.  He noted the hi gh-level character of the industry seminar and the 
wealth of information it had brought to Members.  It would be extremely disappointing that these 
efforts remained vain when this information had not even been considered and when consultations 
with stake-holders had just begun. 
146. The representative of the United States  also regretted the repetition of the scenario of the last 
review, when the process was uselessly prolonged.  She underlined the purely informal character of 
the industry seminar, which should therefore have no bearing on the review process and its agenda.  
She recalled her agreement to consultations by the Chairman to discuss whether another meeting 
should be held and, if so, to decide on its age nda.  Those consultation coul d also address the question 
of when to close the review and when  the next review would take place.  
147. The Chairman  indicated that he would hold consulta tions on those issues and adjourned the 
meeting . 
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