RESTRICTEDWORLD TRADE
ORGANIZATIONS/CSS/M/10
21 September 2001
(01-4562)
Council for Trade in Services
Special Session
REPORT OF THE MEETING HELD ON 9 TO 12 JULY 2001
Note by the Secretariat
1. The Council for Trade in Services held a Special Session from 9 to 12 July 2001.   The
agenda for the meeting is contained in document WTO/AIR/1581.  Under Other Business, the WTO
Secretariat informed delegations about the organization of the October cluster of services meetings,
the representative of the UNCATD Secretariat made a statement about the forthcoming UNCTAD
Expert Meeting on energy services and the representative of Hong Kong, China made a statement onthe World Services Congress, scheduled to take place in September 2001 in Hong Kong, China.
2. The Chairman proposed that the Council adopt the agenda as circulated, with the addition of
the items raised under Other Business.
3. The Council so agreed.
A. ASSESSMENT OF TRADE IN SERVICES
4. The Chairman recalled that, at the May meeting, two new papers had been tabled:  a
Secretariat note providing an update on the work of the Inter-Agency Task Force on Statistics of
International Trade in Services, in document S/CSS/W/81;  and a communication submitted by the
delegation of Norway in JOB(01)/71, titled "D iffusion of Information Technology, SADC and
International Production".  Members had held only a preliminary discussion of the two papers.
5. The representative of Cuba said that the assessment of trade in services was of the outmost
importance and had to be kept as a permanent item on the agenda of the Special Session.  The
exercise had to arrive at an assessment of the effect of liberalization for developing countries.  To that
effect, the impact of Members' commitments and the extent to which such commitments had
contributed to increasing the participation of developing countries to services trade had to be
examined.  On the basis of the discussions carried out until then and of WTO statistics, it was possible
to conclude that no concrete benefits had accrued to developing countries.  Using WTO statisticalinformation on services trade for the year 2000 and other submissions tabled on the assessment, the
following picture emerged.  First, international trade in commercial services was highly concentrated;
the top 15 services exporters and importers accoun ted for 71 and 68 per cent of world exports and
imports of services, respectively.  Second, services trade took place mainly amongst developed
countries;  the top exporters coincided to a great extent with the top importers.  Third, thepreponderance of developed countries' participation in services trade was evident from their exports,
accounting for 72 per cent of world exports of services in 1999.  Fourth, developing countries'
participation in services trade was not favourable:  their main export headings were not related to
technological innovation, knowledge or information, but were travel and transportation services;  in
most developing countries, the share of services in  total exports was below average;  many developing
countries exhibited persistent deficits in their services trade balance;  and developing countries'
participation was less than 20 per cent in world exports and imports of services.  Fifth, Latin AmericaS/CSS/M/10
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and Africa contributed only to 6 per cent of the world commercial services market.  Sixth, the level of
geographical concentration of services exports was high in the case of developing countries.  In Latin
America, 5 countries, namely Argentina, Chile, Colombia, Mexico and Brazil, represented 64 per cent
of the total;  in Africa, Egypt and South Africa accounted for nearly 50 per cent of exports;  and in the
Middle East Israel and Saudi Arabia accounted for 69 per cent of services exports.  Such dataindicated that the assessment of trade in servic es needed to focus on determining how and to what
extent the objectives of the GATS, and especially those of Article IV, had been achieved.
6. The representative of Uruguay, speaking on behalf of the MERCOSUR countries (Argentina,
Brazil, Paraguay and Uruguay), stated that Article XIX:3 of the GATS mandated, for the purpose of
establishing the negotiating guidelines and procedures, the Council for Trade in Services to carry out
an assessment of trade in services in overall terms and on a sectoral basis with reference to the
objectives of the GATS, including those set out in Article IV:1, which referred to increasing theparticipation of developing countries to services trade.  Members had carried out extensive
discussions on the assessment and the general emphasis had been on the benefits that had accrued to
developing countries from their liberalization efforts.  He stressed that this should not be the only
aspect of the discussion;  the objective of the assessment should rather be if, and to what extent,
developing countries had benefitted from market access provided by developed countries, in keepingwith the objectives of Article IV.  The paper submitted by Argentina in document S/CSS/W/44
showed that 75 per cent of world services exports came from fifteen developed countries and that the
level of participation of developing countries in services exports had not changed since the GATS had
entered into force, having diminished in a few instances.  He stressed the importance of determining if
developing countries had benefitted from developed countries' liberalization of access to their servicesmarkets and, if not, what the reason was.  He underscored the relevance that this had for the
negotiations, in light of the objectives of Article IV  and its effective implementation;  in this regard,
he recalled that Members had agreed, in paragraph 14 of the negotiating guidelines and procedures,
that the assessment would be an on-going activity and that the negotiations would be adjusted in the
light of the results of the assessment, and, in paragraph 15, that to ensure the effective implementationof Articles IV, the Council would consider the extent to which the objectives of that Article were
being implemented and suggest ways and means of promoting the goals established therein.
7. The representative of Senegal underscored the importance of the assessment of trade in
services, not only in light of what had been agreed in the negotiating guidelines and procedures of
28 March 2001, but also, and particularly, because it allowed Members to deal with the assessment
and to demonstrate their willingness to make it a concrete reality in the negotiations.  The adoption of
the negotiating guidelines was a decisive step towards ensuring that the assessment be given the sameimportance in the negotiations as the negotiating proposals and the guidelines themselves, and not be
a simple agenda item without substance.  His dele gation continued to attach great importance to the
guidelines, but was of the view that the Council had only taken partially into account the mandate of
Article XIX.  The GATS contained a dual-faceted mandate:  the establishment of the guidelines and
the assessment.  The mandate in Article XIX was e ssential for credible negotiations, and had to be
dealt with as soon as possible.  Without calling into question the negotiating process and the
negotiating proposals tabled, his delegation was of the view that the Council needed to give the
necessary priority and importance to the assessment as to the negotiations.
8. Devoting the necessary attention to the assessment did not mean making it an academic
exercise.  The assessment was at the heart of the GATS and of the way in which WTO Members, anddeveloping countries in particular, had to participate in the negotiations.  Paragraph 14 of the
negotiating guidelines mandated that the assessment be an on-going activity of the Council and that
the negotiations be adjusted in the light of its results.  On the one hand, the assessment had to evaluate
the impact of Members' commitments on their national economies and establish a balance of rights
and obligations, so as to measure Members' degree of participation in services trade, in conformitywith the objectives of the GATS and, of Article IV in particular.  On the other hand, the assessmentS/CSS/M/10
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had to determine the progress made in achieving the objectives of the GATS, and in particular, as
stated in the Preamble and in Article IV, that of increasing the participation of developing countries to
services trade.  Article XIX needed to be read in conjunction with Article IV, in order to have the full
measure of the mandate and objectives of the Agreement.  Besides, in conformity with the GATS, the
assessment would allow developing countries to participate in the negotiations with the necessarygrasp of the issues, transparency, equity and flexibility, guarantees of a multilateral trading system
open and credible for all Members.  The assessment would also pay justice to the objectives of the
GATS, whose structure guaranteed of good faith, openness and benefits for all Members.
9. The GATS contained no ambiguity with respect to the mandate for the assessment and it was
therefore essential to give it full attention.  It required political commitment, technical expertise and
cooperation that extended beyond the WTO.  Developing countries were looking for concrete signals
with regard to the assessment, which, in the run-up to the Fourth Ministerial Conference, would givecertainty and confidence in the system.  He acknowledged that difficulties existed in conducting the
assessment, but noted that the symposium on tourism and the seminar on services statistics had been
useful and had allowed for important progress.  Such were the actions that were needed to perfect the
preparatory work for the negotiations.
10. As concerned least-developed countries' participation in services trade, he stated that their
specific situation was explicitly recognized in th e GATS:  the Preamble called for "taking particular
account of the serious difficulty of the least-developed countries in trade in services in view of their
special economic situation and their development, trade and financial needs", and Article IV:3
mandated that special priority be given to least- developed countries, thereby granting them special
and differential treatment.  According to WTO statistics, the share of least-developed countries inservices trade had remained unchanged throughout the 1990s at around 0.42%, in spite of an increase
in certain travel-related sectors, with a share of 0.63% in 2000.  Without prejudice to the outcome of
the assessment, he said that such data showed the need to strengthen capacity and technical assistance
and to implement the special and differential treatment as contained in Article IV, in order for
progressive liberalization to contribute to lasting development and the fight against poverty.  Herecognized the role of services liberalization in attracting foreign direct investment, in setting up
infrastructure and in building regional integration;  the GATS was promising in that regard, and the
assessment could allow for the measurement of its potential.
11. The representative of Mexico reiterated the importance of the assessment of services trade
and echoed the statements by Cuba and Uruguay.  He said that the juridical framework to conduct the
assessment was in place and noted in particular the provisions contained in the negotiating guidelines.
He asked that the statement by the representative of Cuba be circulated in writing, as it referred to
data that could help in arriving at conclusions on the assessment.
12. The representative of Pakistan supported earlier statements, which lent credence to the
importance attached by developing countries to the assessment of trade in services.  He indicated that
paragraphs 41 to 44 of document S/CSS/M/9 reflected his delegation's views on the assessment as
expressed at the May Special Session.  In terms of substance, the Council was adequately equipped todeal with the assessment in a more conclusive manner.  A purely academic discussion would not be
productive, and delegations' statements had been fairly repetitive;  the assessment was an on-going
exercise, but it should not last indefinitely and needed to be focused and brought down to substance.
He suggested that the Secretariat produce a compilation of all statements made and of all submissions
tabled on this item to help the Council focus and make progress on the issue.
13. The representative of Indonesia said that a thorough assessment could serve as a valuable
input for the design of developing countries' indivi dual negotiating position, and for ensuring that the
overall approach to services liberalization led to economic growth for all Members.  When analysing
existing data, it was important to focus on those economic objectives of the GATS which particularlyS/CSS/M/10
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related to developing countries.  These included:  the promotion of economic growth of all trading
partners;  increasing participation of developing country Members;  liberalization of sectors and
modes of supply of interest to developing countries;  and the improvement of access to technology, to
distribution channels and information networks.  Lack of data, analytical and methodological
problems, among others, made it difficult to conduct a detailed empirical assessment of services trade;however, his delegation was of the view that thos e difficulties should not delay the assessment
discussion and process in the WTO context.  He suggested that Members might wish to assess
whether the GATS had allowed developing countries to exercise fully their right to determine their
national policy objectives, whether it had permitted developing countries the flexibility to achieve
those objectives through the type and means of regulation they considered appropriate.
14. Summarizing the discussion on this item, the Chairman noted that delegations had referred to
data problems with respect to services trade and to the importance of the assessment not being an
academic exercise, stressing that the Council needed to focus on the issue.  The MERCOSUR
countries had raised relevant questions, and the delegation of Pakistan had suggested that the
Secretariat produce a compilation of statements and submissions on this item.  He proposed that the
Secretariat prepare such a document, to help structure the discussion, and that the Council take note of
the statements made and revert to this standing item at its following meeting.
15. It was so agreed.
B. WORK OF THE SUBSIDIARY BODIES – REPORTS BY CHAIRPERSONS
16. In keeping with what had been agreed concerning the regular reporting from the subsidiary
bodies to the Special Session, the Chairman invited the Chairpersons of those bodies to present their
oral reports.  He recalled that, since the previous Special Session in May, the Committee on Specific
Commitments and the Committee on Trade in Financial Services had not held any meetings.
17. The Chairman of the Working Party on GATS Rules, Mr. Hugo Cayrus of Uruguay, reported
that, since the last Special Session, the Working Party on GATS Rules had held one formal meeting,
on 2 May, when it had examined the three items on its agenda:  safeguards;  subsidies;  and
government procurement.  The Working Party had also met informally on 26 and 27 June to examineissues relating to emergency safeguard measures.
18. The Working Party had devoted most of its attention to the issue of emergency safeguard
measures.  On 26 and 27 June, the Working Party held an informal meeting to examine all the
subjects contained in the Chairman's list of is sues in document Job No. 1979/Rev.1.  An informal
communication presented by Chile, Costa Rica and Switzerland on "Possible Comprehensive
Approach for an Emergency Safeguard Mechanism" , JOB(01)/81, was also discussed.  Since the
informal meeting, three additional non-papers on the subject of safeguards were circulated:  acommunication from Canada on "A Multilateral Surveillance Procedure" in JOB(01)/100;  an
informal document by Venezuela on "Causal Link", in JOB(01)/101;  a non-paper by Japan on
"Emergency Safeguard Measures" in JOB(01)/105.  These contributions were presented during the
meeting on 2 July.
19. The Working Party also considered how to organize its work until at least November 2001,
bearing in mind the deadline for the negotiations on emergency safeguard measures of 15 March
2002.  In the absence of consensus to work on the basis of a draft text, the Working Party agreed the
following.  First, the Chairman would prepare, under his own responsibility, a summary setting out
the state of progress of the discussions on the ten issues identified in the Chairman's list of issues.
The summary would be based on the written and oral contributions of Members, would outline themain options presented up to the end of July 2001 and indicate the main comments made by
Members.  The purpose of the document would be to facilitate analysis and future discussions byS/CSS/M/10
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Members;  it would be without prejudice to the question of feasibility and desirability, and without
prejudice to the form that a possible emergency safeguard mechanism might take.  Accordingly, he
would work with the Secretariat so as to be able to present the summary, as a non-paper, after the
summer recess, at the beginning of September.  Second, and bearing in mind that the preparation of
the Fourth Ministerial Conference would probably take up most of the delegations' attention, theWorking Party agreed to hold two meetings, one informal and the other formal, between the summer
recess and the Ministerial Conference so as to continue with the on-going negotiations on the ESM.
Finally, and bearing in mind that the period agreed by all the Members to finalize those negotiations
expired on 15 March 2002, the Chairman emphasized that the Working Party should consider at the
end of November, after the Ministerial Conference in Qatar, the possibility of working on a draft text.
With this end in view, the work should be very intensive from November 2001 until the deadline of
15 March 2002.  Accordingly, he felt that, after the summer recess, delegations would wish to focustheir attention on the substantive issues that had been identified as being the most important and on
which different positions existed.
20. With regard to subsidies, Members continue d to examine the Chairman's "Checklist on
Subsidies" in Job No. 4519/Rev.1.  At the last meet ing, they examined the fifth and final item on the
Checklist, namely whether there was a need for additional GATS disciplines to avoid trade-distortiveeffects, and whether this would include consideration of the appropriateness of countervailing
procedures.  The delegations exchanged views on how to structure and continue the work in the
coming months.  It was decided to continue to examine the issues on the Checklist for the time being,
as well as any other question that delegations might wish to raise.
21. As for government procurement, one delegation expressed its interest in raising some issues
at the next meeting.
22. The Chairman of the Working Party on Domestic Regulation, Mr. Scott Gallacher of New
Zealand, reported that, since his previous report to the May meeting of the Special Session, the
Working Party on Domestic Regulation (WPDR) had held one formal meeting, on 3 July.  Based
largely on the revised version of the Checklist of Issues for WPDR in JOB(01)/92, and a newChairperson’s Note in JOB(01)/93, discussion focused primarily on the issue of the distinction
between measures falling under GATS Article VI:4 and those under Articles XVI and XVII, as well
as on the question of examples of actual regulatory  issues.  Some exchanges occurred on the issues of
necessity, transparency, equivalence and international standards.  There was also a tentative proposal
from one delegation to “jump start” the work on professional services.
23. With regard to the discussion of concepts relating to the development of regulatory disciplines
under GATS Article VI:4, a number of Members commented favourably on the recent informalSecretariat paper, entitled "Examples of Measures to be Addressed by Disciplines under GATS
Article VI:4" in Job(01)/62, and stated that additional examples, and greater specificity, would be
useful.  Delegations also noted the difficulties unde rlined in the paper with respect to distinguishing
between measures falling under GATS Article VI:4 and those under Articles XVI and XVII.  While
some Members suggested there might be a certain degree of overlap between VI:4 and XVI/XVIImeasures, it was generally acknowledged that ther e should probably be no overlap between these
disciplines for the reason of ensuring legal certainty.  Instead, their complementary aspects were
noted.  The Secretariat observed that, while there could be no overlap, licensing systems could be
composed of both VI:4 and XVI/XVII measures.  It was therefore necessary to distinguish between
the licensing system and its specific components.  This observation provided Members with somevery useful clarity in relation to the question of Article VI:4 and Articles XVI/XVII measures.  The
issues of equivalence and international standards were added to the discussions, as agreed in the
previous WPDR meeting, with some pre liminary comments being made by Members.S/CSS/M/10
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24. As concerned the development of disciplines for professional services, one delegation
tentatively suggested that Members could “jump start” the work on professional services by focusing
on a small group of professions, namely architecture, engineering, and land surveying.  Another
Member suggested that legal services be added.  Several Members expressed general support for this
idea, while others reserved their position with regard to the selection of professions at this stage of theWPDR work.  No new reports of Members’ domesti c consultations with professional organizations,
regarding the applicability of the accountancy disciplines to their professions, were received at the
meeting.
25. Members agreed that the next meeting of the Working Party would be held in early October,
just before the next session of the Council for Trade in Services.
26. The Council took note of the reports.
C. PROPOSALS RELATING TO THE NEGOTIATIONS UNDER ARTICLE XIX OF
THE GATS
27. The Chairman recalled that, at the May meeting, delegations had held an initial discussion of
all negotiating proposals submitted on a number of services sectors, modes of supply and horizontal
issues.  Members had also agreed that proposals on the movement of natural persons, other horizontal
issues and services sectors up to and including distribution services would be taken up in July for asecond round of detailed discussion.
28. In order to structure better the discussion of the negotiating proposals, at the May meeting
delegations had been invited to submit their questions, and possibly answers, in writing.  The
delegations of Japan, Jordan, the United States, the European Communities, the Republic of Korea
and Australia had prepared questions and responses which had been compiled in a note by theSecretariat, circulated as JOB(01)/96 and Addenda 1 to 4.  The Chairman invited delegations to refer
to the questions and responses contained in these documents under the relevant sub-items as they
came up for discussion, while reserving comments on sectors scheduled to be discussed in October for
that meeting.
29. He then drew delegations' attention to documents JOB(01)/63/Addendum 1 and Corrigendum
1, which, respectively, updated and corrected the Secretariat synopsis identifying the main elements
of the negotiating proposals.  It had been stressed that this synopsis by the Secretariat would serve as
an aid to the discussion, would be factual, non-exhaustive and regularly updated.  He underscored that
the synopsis did not substitute for the proposals themselves, which delegations needed to continue to
refer to.
30. Since the May meeting, new proposals had been submitted by New Zealand, in documents
S/CSS/W/90 to 94 and, more recently, by Japan, in document S/CSS/W/42/Suppl.2, by Australia, in
document S/CSS/W/67/Suppl.1, by MERCOSUR, in document S/CSS/W/95, by Colombia, in
documents S/CSS/W/96 to 98, and by Brazil, in document S/CSS/W/99.  He then offered the floor to
the delegation of New Zealand to introduce its initial submission on the "Objectives for the resumed
services negotiations", as well as its submissions on sectors that were not up for discussion at the
meeting, and to the delegation of Colombia to briefly introduce its proposal on financial services, indocument S/CSS/W/96, which was also not up for discussion at the meeting.  The other sectoral and
mode-specific proposals by New Zealand and Colombia, as well as the ones by Japan, MERCOSUR,
Australia and Brazil would be taken up under the relevant headings.
31. The representative of New Zealand explained that his delegation had submitted five
negotiating proposals, four specifically related to sectors of interest to New Zealand and one sketching
out New Zealand's initial objectives for the resume d services negotiations in relation to both rule-S/CSS/M/10
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making and specific commitments.  Such objectives complemented and supplemented those contained
in the negotiating guidelines and procedures and reflected the interests that New Zealand, as an
individual Member, had in the negotiations.  As concerned the objectives paper, he briefly referred to
the first and possibly most significant objective, namely that New Zealand would actively encourage
Members to explore ways in which existing commitments in all services sectors, in terms of bothmarket access and national treatment, could be progressively liberalized.  The process needed to take
into account fundamental principles, such as the right to regulate in order to meet national policy
objectives, as well as the undertakings in Articles IV and XIX:2 in respect of the interests of
developing countries.  But for New Zealand, comprehensive services negotiations offered the best
prospect for ensuring that all Members benefit from the negotiations, because of the opportunity
afforded to reach balanced outcomes.
32. With regard to the sectoral proposals, the one on construction services would be introduced
under the relevant heading;  the other three, on education, air transport and sporting services, would
be considered in more depth at the Special Session in October.  He briefly introduced them.
33. On air transport, the proposal highlighted that the air transport sector remained an anomaly
under the GATS, as it was the only services sector subject to specific sectoral exclusions, but noted
that the dilemma was not unique to air transport services.  Notwithstanding such an anomaly, andwithout prejudice to the Annex on Air Transport Services, the proposal highlighted his delegation's
belief that there was sufficient scope for Members to increase the number and quality of commitments
for air transport services during the course of th e negotiations.  In terms of such commitments, New
Zealand was of the view that, aside from the specif ic exclusions outlined in paragraph 2 of the Annex
on Air Transport Services covering the limited area of those services only able to be supplied by theholders of traffic rights, all other air transport services and general aviation and supporting services
had to be considered to fall within the scope of the GATS.
34. On education, while this was a sensitive and rather tricky sector, New Zealand had submitted
a proposal in recognition of the vital importance of the sector to all Members, given the critical role of
education in economic and social development.  Trade in education services was of increasinginternational significance, to both private and public sector providers, but the sector remained one of
the least committed under the GATS.  This might in part be attributed to the need Members saw to
strike a balance between pursuing domestic education priorities and exploring ways in which trade in
education services could be further liberalized.  New Zealand considered that there was scope for
Members to find such a balance, in order to permit further benefit from international trade in
education, and that furthermore, trade in education services could supplement and support national
education policy objectives.  The proposal highlighted several issues that Member might wish to givefurther attention in the context of the negotiations, focusing in particular on the classification of
"adult" and "other" education services.
35. As concerned recreational, cultural and sporting services, New Zealand had submitted a paper
on a subsector that was not usually addressed in the Services Council, but which was of growing
importance to a number of economies whose suppliers would benefit from expanded opportunities toprovide their services to overseas markets.  The proposal highlighted a range of areas in the subsector
which would probably benefit from greater analysis and consideration in the context of the
negotiations.
36. The representative of Colombia explained that her delegation had submitted proposals on the
movement of natural persons and on professional services, which she would present under the
relevant headings, and on financial services, which she briefly introduced.  She indicated that the
existence of a healthy and efficient financial system contributed to a better functioning of the overall
economy and that liberalization of the sector could become an element for progress for all Members.
Nevertheless, as the financial sector was a basic part of a country's economic infrastructure, properS/CSS/M/10
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prudential regulations and adequate supervision were required to prevent management errors from
resulting in losses to depositors and consequently de stabilizing the financial system itself.  Therefore,
the negotiations on such services should take account of national policies and individual Members'
level of development.  Colombia was particularly sensitive to the pace of liberalization of financial
services supplied cross-border.   Liberalization of trade in financial services through modes 1 and 2needed to take into consideration, inter alia , the financial, monetary and exchange rate policies of the
countries concerned.  The nature of the sector also needed to be taken into consideration.  A surfeit of
banking institutions or uncontrolled competition in the financial sector could bring in their wake,
inter alia , systemic risks which could eventually become destabilizing;  market access restrictions
based on economic needs tests for commercial presence were therefore legitimate for some Members.
To ensure that the rate of liberalization was in line with Members' level of economic development,
one of the objectives of the current negotiations was the removal of MFN exemptions based onreciprocity.  Colombia had undertaken full commitments in relation to the provision of financial
services through commercial presence, thereby grantin g guarantees to foreign investors and, in turn,
promoting competition and technology transfer.  She then noted that, in their schedules, some
Members had used the classification in the Annex on Financial Services and others the provisional
Central Product Classification (CPC).  This led to uncertainty as to the scope of the commitments, and
it was therefore desirable, insofar as is possible, for a single classification to be used.   She added that
the Annex classification was more disaggregated and therefore more appropriate for the purposes of
scheduling than the provisional CPC.  Paragraph 3 of the Annex on Financial Services on the
recognition of prudential measures of other Members was a valuable tool for boosting trade in
financial services.  Her delegation therefore pr oposed that Article VII:4(b) of the GATS be
implemented to afford enhanced opportunities to Me mbers to become parties to such agreements and
arrangements when the negotiations commenced.
(a) Movement of natural persons
Communications from:  India (S/CSS/W /12 and Corr.1);  the United States
(S/CSS/W/29);  the European Communities (S/CSS/W/45);  Canada (S/CSS/W/48);Japan (S/CSS/W/42/Suppl.2);  Colombia (S/CSS/W/97)
37. The representative of Japan presented the main elements of the submission by his delegation.
First, horizontal commitments on intra-corporate transferees had to be improved;  second,
transparency on laws and regulations was of importance to Japan;  third, economic needs tests, which
were a limitation on market access in the sense of Article XVI, needed to be eliminated and, as a first
step towards this goal, if they we re maintained the criteria for their application had to be identified,
for the sake of transparency.  His delegation was still analysing the different proposals tabled on thisissue, but he noted that social security issues were outside the coverage of the GATS and recalled the
provisions of the Annex on the movement of natural persons, wondering about the appropriateness of
discussing such issues in the Council.
38. The representative of Colombia introduced her delegation's proposal on the movement of
natural persons by saying that developed countries needed to improve their commitments on mode 4
and that developing countries encountered difficulties in accessing developed countries' markets.
Nowadays, the flow of natural persons went from developed to developing countries and followed an
economic logic.  If earlier on the pulling factor was the relatively low cost of land, at present the
movement of natural persons originated with wage differentials and different employment
opportunities.  The GATS did not apply to measures affecting natural persons seeking access to theemployment market of a Member, nor to measures regarding citizenship, residence or employment on
a permanent basis.  Nonetheless, the GATS represented a powerful multilateral framework for the
elimination of restrictions to the movement of natural persons who were services suppliers or
employed by a service supplier.  Her delegation's proposal suggested that Members, and particularly
developed country Members, undertake sector-specific commitments on mode 4.  The recognition ofS/CSS/M/10
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qualifications and experience, as well as the granting of licences, were obstacles to the supply of
services to developed countries on the part developing countries' natural persons.  Mutual recognition
agreements were an important mechanism to overcome such obstacles;  to that effect, it was important
that the provisions in Article VII as concerned the notification of such agreements be implemented, in
order to give developing countries an opportunity to participate in such agreements.
39. The representative of India responded to some of the questions that had been made, both
orally and in writing, in respect to his delegation's proposal.  First, he addressed the queries raised by
Canada.  With regard to their first question, asking India to elaborate on the limitations and
administrative hurdles that reduced the effectiveness of the mode 4 commitments, he explained that
there were many barriers to trade in service, especi ally with regard to the provision of services in
overseas markets through the temporary migration of professionals.  However, unlike trade barriers in
goods, trade barriers in services were difficult to quantify and even identify.  They related mainly todomestic regulations and were therefore mostly  administrative in nature.  These regulations
concerned, first, immigration-related regulations regarding entry and stay of service providers;
second, regulations concerning recognition of qualifications, work experience, and training;  and,
third, differential treatment of domestic and foreign service personnel.
40. First, as concerned restrictions on the entry and stay of professionals, the main restriction to
the movement of professionals originated in immigration and labour market policies of individual
countries.  In fact, temporary movement of labour was not separated from permanent movement of
labour and, therefore, temporary movement came under the purview of immigration legislation and
labour market conditions.  These restrictions ranged from strict eligibility conditions for applications
of work permits and visas, cumbersome procedures for actual application and processing of thosevisas and permits, limitations on the length of stay and transferability of employment in the overseas
market.  All of these restrictions raised the direct and indirect costs, due to delays and uncertainty, of
entering the foreign market, thereby eroding the cost advantage of the foreign service supplier.  These
constraints were the main barriers to trade in services such as software, where there were few explicit
barriers such as recognition and licensing requirements.  Wage parity was another restrictiveeligibility condition that affected the comparative advantage of Indian professionals.  Wage parity
required that wages paid to foreign service providers be at par with those that would have been paid
for a local person in the same position and with similar qualifications.  However, this requirement
acted to negate the cost-based advantage of developing countries such as India in exporting labour
intensive services and worked against the very concept of comparative advantage based on cost
differentials.
41. In addition to strict eligibility criteria for en try, procedures for the issuance of work permits
were time-consuming and burdensome.  This was an important impediment in the case of Indian
software service exports.  A typical application by an Indian software programmer seeking entry into
the United States or an European Union country required exhaustive details about the employer, the
job, efforts to find local personnel and evidence of failure to find local persons, details of the
candidate in terms of his experience, skills and training, and verification of other personal details.The filing process could take from two weeks to over two months due to the cumbersome nature of
the application requirements.  Such a long and tedious process hurt Indian software exporters, who
often needed to ship their professionals overseas at short notices and where delays meant a loss of
opportunities and business.  Restrictions also applied to professionals after they had entered the
foreign market.  For instance, there were limitations on the transferability of work permits andmobility of the provider after he had entered the host country.  Work permits received by Indian
software professionals pertained only to the specific job detailed in the application and did not permit
the individual to take up any work in the host countr y;  to transfer, the entire application process had
to be repeated.  There were also limits on the duration of stay for service providers: work permits or
visas were valid only for the specified duration, which in turn depended on the nature of the position,the candidates skill level, and other criteria.  These limits ranged from 3 months to 5 years.  AlthoughS/CSS/M/10
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permits were often extendable, renewals and extensions were subject to stringent conditions and high
fees which discouraged start-up companies from hiring foreign nationals and forced them to use local
persons who might be in short supply and costlier.  Apart from immigration-related restrictions on
entry and stay, there were also entry barriers in the form of additional requirements imposed on
foreign service providers.  These included economic needs tests, local market tests, and managementneeds tests to ascertain the need for entry as well as the number to be allowed to enter.
42. Second, the movement of professionals was also constrained by requirements on
qualifications, work experience, and licensing/certification.  Recognition requirements could either
prevent market access for the foreign service provider, causing a rejection of the work permit or visa
application, or limit his scope for work to specific activities once he had entered the overseas market.
Such regulations were common in the case of accredited services such as legal, accounting, and health
services, where there were licensing and certification norms and procedures in most countries.  India'strade, in terms of outward flow of service provide d, was constrained by recognition barriers in several
service sectors.  The health services sector provided a good example of a sector that faced restrictions
on exports due to recognition barriers on professionals.  At present, the main export markets for
Indian health services sector were in the Middle East and Africa, as degrees received by Indian
doctors and nurses were recognised in those countries.  Movement of Indian health professionals todeveloped countries such as the United States and the United Kingdom was constrained by the non-
recognition of Indian degrees received by doctors and nurses in those countries.  Indian health
professionals were required to take host country medical and nursing examinations to get re-certified
and to be able to practise in those developed country markets.
43. Third, there was the differential treatment of foreign service providers.  Trade in services via
the movement of natural persons was also constrained by policies which discriminated against foreign
service providers.  More stringent qualification requirements imposed upon foreign service providers
or eligibility conditions requiring citizenship were examples of such discrimination.  In addition to
such recognition-based regulations, there were many other discriminatory policies that restricted trade
in services through mode 4, which were not as well recognized.  There was differential treatment inthe context of social security taxes and benefits.  For instance, temporary service providers in the
United States were required to make social security payments in the absence of tax treaties between
the home country and the United States.  These contributions were required despite the fact that the
service provider was on deputation abroad for a period which was less than the period of stay required
to avail of social security benefits in the future, which in the United States was of ten years.  The
service provider not only paid social security taxes in the United States, but also continued to make
his contributions back home and did not recover them upon returning to the home country.  In effect,there was double taxation on earnings.
44. He then turned to the second question by Canada, which asked about the difference between
the category (a) of intra corporate transferees and the category (c) of executives, managers and
specialists.  Having looked at the Oxford Dictionary definitions, he indicated that for his delegation
intra-corporate transferees could cover a wide spectrum of personnel, including managers, executivesand specialists, which a company might want to transfer from one unit to another in a different
country.  They were the persons who were transferred from a branch office of an organisation in a
foreign country to another branch in other country or corporate headquarters for the sake of business
of the organisation.  The intra-corporate transferees who could be executives, managers, specialists or
other designations, were different from other executives, managers or specialists in the sense that theyhad first-hand knowledge of the company, its products and other background details, to which other
external executives, managers, and specialists might not be privy.
45. Third, Canada asked how India proposed that certain personnel be defined.  He explained that
there was no rule or standard or criteria to define the personnel categories as such;  however, to bring
in more clarity and uniformity, it was advisable to work out definitions and the criteria forS/CSS/M/10
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determining the eligibility to a category of personnel or service providers.  Next, Canada wondered if
it would be useful to promote discussion and commitments on a list of sectors in which professional
movement was important.  He answered in the affirm ative, stressing the usefulness of promoting such
discussions and commitments on a wide spectrum of service activities which were of interest to
developing countries like India.  He also assented  to the fifth question by Canada, and agreed that a
way of increasing predictability would be to get Members to improve the transparency of their
temporary entry and stay regimes, including administrative guidelines or field instructions, but
stressing that, in itself, this would not be sufficient in achieving the objective.
46. Elaborating on the view that an important restriction was the movement of natural persons
being linked to immigration and labour market development policies, he reiterated that the main
restriction originated in the same officials dealing with immigration and permanent job-seekers as
well as with the movement of natural persons under the GATS.  As for the difference between seekingagreement on a definition of a particular category and on the relevant criteria for determining the
eligibility to a particular category, he indicated that the definition as well as relevant criteria should be
worked out and an understanding should be developed among Members so as to arrive at consistency
with respect to definition and criteria for a particular category of professionals.
47. With regard to the European Communities proposal for common code of practice on
economic needs tests (ENTs), he said that India had already proposed that multilateral norms be
established to reduce the scope for discriminatory practices in use of ENTs, and in this regard
favoured discussing the European Communities proposal.
48. As for India's call for more transparent and objective implementation of visa and work
permits regimes, Canada had asked if it could not be argued that the information on such regimes,including field instructions, was already available and that a chief problem was that business people
were not aware of it and not sufficiently prepared when they sought temporary entry and stay.  He
replied that, while more transparency could help, professionals who were already aware of the rules
also faced important barriers in acceding foreign ma rkets.  With regard to the question why temporary
entry and stay rules were tied so completely to permanent immigration in India's view, he reiterated
what he had stated earlier and what was contained in their proposal.
49. Canada had then queried how the special GATS visa for certain categories, or a special subset
of administrative rules and procedures within the overall immigration policy framework would be
different from what already existed in several Members.  He reaffirmed the crucial importance of
separating the movement of professionals from the normal, permanent immigration policy;  in this
regard, a GATS-specific visa should be introduced.  Such a GATS visa would be different in the sense
that it would be related to Members' specific commitments.
50. With regard to developing countries' concerns that developed countries had not fully
implemented their commitments with regard to mode 4, Canada wondered whether, during course of
India's domestic consultations, India had heard about any significant barriers, particularly with respect
to Canada, and stated that they had not heard about problems for Indian professionals getting into
Canada for temporary work assignments.  He replied that, during domestic consultations in regard tobarriers on movement of professionals to developed countries, it had been noted that, as compared to
other countries, Canada's system was more liberal.  While his delegation would rather not discuss
country-specific problems relating to mode 4 at that stage, given that Canada had specifically asked a
related question, he provided the following information.  In order to engage professionals in Canada,
an employer had to give details of professionals j ob to a Canada Employment Centre.  In essence, this
body determined whether the job could be performed by a suitable, qualified and available Canadian
permanent resident;  an employment authorization fo llowed for the specific work, for a specific time.
In practice, it was difficult for independent professionals to provide services on account of lack of
parity of qualification and Canadian experience.  This was particularly true in the field of medicineS/CSS/M/10
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and accountancy, whereas an exception was the field of information technology, where Indian
professionals did not appear to encounter major difficulties in entering the Canadian market.  In the
field of medicine, it was virtually impossible to provide services on the basis of qualifications from
India, as examination, internship and local experi ence made it extremely difficult. In the field of
accountancy, it was learnt during domestic consultations that the Indian chartered accountants whowere going to Canada for a longer period had to wait for a visa for about 24 months.  After entry into
Canada, they were not treated at par with the chartered accountants in Canada and were subjected to
more burdensome requirements than necessary.  He also indicated that India-based Indians
encountered greater difficulties than foreign-based ones.
51. He then turned to Japan's queries.  As for question 1.1, asking for concrete examples of the
specialists described as "individual professionals" in section IV.1.(a) of India's proposal, he said that
individual professionals were those not attached to  any company, organisation or corporate office and
who provided services independently;  he would provide real-life examples which were still being
collected.  With reference to question 1.2 on a "GATS visa" mentioned in paragraph 18 in
section IV.2, he explained that the GATS visa referred to in his delegation's proposal was different
from the normal immigration visa in the sense that  it was related to sector-specific commitments.
Once a country had undertaken sectoral commitments in mode 4, the movement of professionals inthat sector should be separated by a new category of visa, namely a GATS visa.
52. He then addressed the questions posed by the European Communities.  With regard to the
first question, wondering about the distinction betw een "independent professionals, including those
providing services within a service contract" and "contractual service suppliers", he explained that
individual professionals were those not attached to  any company, organization or corporate office and
who provided services independently, whereas "contractual service suppliers" was a broader category,
and appeared to include independent professionals.  The second question sought clarification on the
difference between the second and third bullet points in section IV.1(a) of India's submission;  he
indicated that the two were linked but that, while the second related to a particular category, the third
related to uniform definitions and coverage of broader service personnel categories included in thehorizontal commitments.  As concerned the third question, on the meaning of the term "Bilateral
Totalisation Agreements", he explained that once such an agreement was concluded between two
countries, professionals would be required to contribute social security payments only at the place of
employment, while contributions made earlier in the parent country would be counted towards
eligibility to social security benefits in the host country.
53. The representative of Switzerland expressed his delegation's interest in the movement of
natural persons;  it was essential for multinational en terprises to be able to send their experts abroad,
and at the same time skill shortages might have serious repercussions on the domestic economy.  His
delegation had expressed the wish to see improved mode 4 commitments in some of its own
negotiating proposals, in professional services, where mode 4 was particularly significant;  in
environmental services;  given that the focus on prevention increased the importance of consultancy
and engineering services, and in tourism services, particularly for travel agents, tourist organizers andtourist guides, especially when such restrictions hampered the benefits of liberalization under other
modes.  The sectoral improvements, nevertheless, should not stop horizontal progress in mode 4.
Turning to the proposal by India, he agreed that a certain degree of uncertainty existed because of the
lack of common definitions on the different categories, but in Switzerland practice had shown that a
relatively open definition was not necessarily used restrictively by immigration authorities.  It was notalways correct to assume that a loose definition would necessarily result in unfavourable
consequences for foreign natural persons.  As concerned economic needs tests and the absence of
criteria, he concurred that a problem existed and added that in a well-functioning liberal economy
such instruments should not be necessary, as the situation should be taken care of directly by the
market.  If Members were not ready to eliminate economic needs tests, these should at least be basedon clear and transparent criteria.  He indicated that Switzerland had not listed economic needs tests forS/CSS/M/10
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natural persons and had drawn a crude distinction between temporary and long-standing immigration.
Admissions in the context of the GATS were temporary and did not represent access to the Swiss
labour market;  the authorizations issued corresponded to the temporary nature of the permitted stay,
there was no mobility and a time-limit on the contract.
54. He had found the idea of a GATS visa interesting and favoured finding a solution to ensure
that temporary applications for the provision of se rvices would not go through the same procedures as
requests for permanent immigration;  at presen t, however, such a procedure did not exist in
Switzerland.  He concurred with the importance of developing regulatory disciplines to ensure that
existing commitments were respected.  In principle, his delegation could support any effort to
improve regulatory transparency, and in particular echoed the suggestion in paragraph 5 of the
submission by Canada.  He also indicated that his government regularly updated its web-site
containing information on the various categories authorized to enter the Swiss market in order toimprove transparency.  As concerned the proposal by the United States, he fully endorsed the
comments in paragraphs 2 and 3 regarding the specificities of the temporary movement of persons and
was willing to work in the same direction.  He called for reflection on possible model schedules,
which would give greater homogeneity to Members' schedules and could constitute the basis for an
improvement of commitments.
55. Wage parity was a particularly sensitive point, which was linked to some ethical questions.
He felt that there was no reason which could justify a foreigner being paid less than a national for the
same work;  this discrimination would be difficult for a foreign worker to accept and would introduce
distortions in the labour market.  With regard to paragraph 15 of the submission by India, addressing
the fact that developing countries professionals paid social security contributions without benefits inreturn, he said that, on the whole, Swiss law on social security was independent of the nationality of
the contributor;  in some areas differences existed, and that was why Switzerland had signed bilateral
conventions for social security with more than 30 countries.  The minimum period of insurance to be
entitled to old-age pension was one year, while there was no minimum period to be entitled to
professional insurance systems, regardless of nationality.  This was different for the payment of old-age pensions or invalidity or disability insurance for persons resident abroad;  Swiss and nationals of
countries with which an agreement had been reached received their pensions also abroad.  However,
foreigners domiciled abroad whose country had not concluded a social insurance agreement with
Switzerland did not receive a pension, but their contributions might be reimbursed as long as these
had been paid for at least a year.  This difference in treatment was therefore not necessarily a barrier
to market access for professionals from developing  countries.  As concerned India's proposal that
bilateral conventions be reached in the area of social security, and that professionals from developingcountries be excluded from contributions so as not to affect their comparative advantage, he stressed
the need to take into account that the coordination of national social insurance system through the
conclusion of social security agreements was linked to certain conditions, and thus that the two parties
to the convention needed to have a social security system based on legislation and on a corresponding
infrastructure for the application of such agreements.  The exemption from contributions for personswho were temporarily employed in another country  and who continued to be insured in their own
country was possible if there was a system for the exchange of information between the countries.
That was why Switzerland had reached such agreements with countries that had comparable social
security systems.  In any case, his delegation was not convinced that bilateral conventions for social
security were covered by the GATS.
56. The representative of Norway welcomed the emphasis given to access and transparency with
regard to regulations and procedures.  Efficient administrative procedures, when considering
applications for work and stay, were of great importance to facilitate the movement of natural persons.
He informed the Council of steps that the Norwegian government had recently taken to increase
efficiency in this area.  Proposals had been introduced in Parliament aimed at making the immigrationauthorities more efficient, by, among other things, simplifying procedures for residents or workS/CSS/M/10
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permit applications.  These proposals included, inter alia,  increased ability for the employer to seek
work or residence permits on behalf of the foreign nationals they wanted to hire, increased possibility
for foreign nationals to apply for work after ente ring the host country, authorization to Norwegian
missions abroad to grant work permits to certain categories of personnel.  Such measures would ease
the recruitment and service provision by foreign nationals in the Norwegian labour market, while alsoaccommodating the needs of employers.  Procedural simplification and transparency were important
elements for reducing the barriers to the movement of natural persons, regardless of occupational
sectors, thus taking into account both the need of the individual and the need to maintain flexibility in
the labour market for temporary movement of service suppliers across sectors.  Horizontal
commitments on information and administrative simplification would be beneficial to the movement
of natural persons.
57. With regard to the proposal by India for a special GATS visa for categories of personnel
covered by Members' commitments, his delegation was looking into the issue.  The current proposals
by the Norwegian government on simplified procedures would contribute to ensuring a timely
response to all applications, and he was not sure how the idea of a special GATS visa would provide
added value measured against such an objective.  As for the submission by Japan, he particularly
acknowledged that, due to the globalization of economic activities and technological developments,demands for services supplied by highly-skilled professionals with specialized knowledge were
increasing.  Recent changes in Norwegian regulations had taken those developments into account;
under the revised regulations, the formal criteria required for specialist competence had been extended
to take into account the real necessary competence.  He also shared the expectations of the Japanese
industry with respect to enhancing transparency, simplifying and facilitating more rapid immigrationprocedures, work permits and the status of residence for service suppliers.  He would revert to the
submission by Colombia.
58. The representative of Nicaragua stressed the importance of regulating the movement of
natural persons, of transparency and of the temporary nature of mode 4.  It was essential to determine
what barriers existed with respect to this mode of supply and to examine the reality that servicessuppliers faced.  He indicated that his delegati on would be presenting a submission on the issue.
59. The representative of the European Commun ities noted that some common elements were
emerging from the discussion, which merited more detailed analysis:  first, the importance of
improving procedural transparency, and the related issue of access to information;  second, the
establishment of a multilateral framework for economic needs tests;  third, definitional issues;  and,
fourth, the need to improve horizontal and sectoral commitments on mode 4.  Turning to the
compilation of questions and responses compiled by the Secretariat, he indicated that the EuropeanCommunities had only submitted questions in document JOB(01)/96/Add.1.
60. As for the questions posed on the European Communities submission, he grouped them into
three main categories.  First, as concerned the elaboration of a common code of practice for economic
needs tests and the question by Jordan on how the definition of application criteria related to the
different criteria that Members used to evaluate market needs, he stressed the importance of the issue.His delegation was not suggesting that the same economic needs test be applied by all Members, but
rather that there be greater clarity, by identifying some principles which could be acceptable for all
Members.  For example, guidelines for the scheduling of economic needs tests could be established,
which might build upon the ones elaborated by the Committee on Specific Commitments for the
scheduling of commitments, and which would not necessarily be legally binding.  As for how theyintended to pursue work on economic needs tests, he said that it would be useful to have more
information on Members' practices and suggested that the Secretariat prepare a note on how economic
needs tests were applied in Members' schedules, to see what common elements could be identified.
Reviewing the work carried out by the Working Party on Domestic Regulation on transparency might
also be useful in the context of economic needs tests.  He also indicated that, although his delegation'sS/CSS/M/10
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submission only concerned mode 4, the same rationale applied to the use of economic needs tests in
mode 3 and he was ready to consider also this mode.
61. Second, questions addressed the suggestion for harmonisation of the definitions.  As for
whether it was feasible to have common definitions, he said that, while this might be difficult, it was
first necessary to try.  Members should initially try to arrive at common definitions;  guidelines ondefinitions could be considered in the course of the discussions on definitions.  With regard to
whether his delegation was considering more than just intra-corporate transferees and contractual
service suppliers, he answered in the negative, but agreed with India that the category of contractual
suppliers was potentially very broad.
62. Third, with regard to sector-specific liberalization, he indicated his delegation's openness to
considering work also on a sectoral basis, but stressed that a sectoral approach could not be the only
approach.  His delegation was of the view that, at that stage, a horizontal approach would be morefruitful.
63. A representative of the WTO Secretariat expressed the Secretariat's willingness to produce the
suggested note on economic needs tests, looking into the work carried out by other inter-governmental
organizations, but warned that analysing Members' commitments would only offer a partial picture of
the application of economic needs tests.
64. The representative of Turkey said that, while taking national policy objectives into account
and recognizing that Members had the right to control the entry of natural persons, particularly for
reasons of security, her delegation was willing to contribute to increasing the level of transparency
and liberalization of mode 4.  She concurred with the need to reach a common understanding on
definition of administrative and technical personnel, and said that definitional issues should be givenpriority attention.  She sought clarification from the delegation of India on their suggestion for visas
for select companies.  She indicated that not only the professionals mentioned in the submission by
India encountered problems in accessing foreign markets, but also other professionals, as was the case
for Turkish tourism professionals, especially tourism agency representatives, tour operators and
tourist guides.  She supported a strengthening of GATS recognition provisions, especially mutualrecognition agreements, and concurred with the objectives to improve notification and transparency of
such agreements under Article VII;  she also d eemed it necessary to improve transparency with
respect to work permits and visas.  She expressed the hope that commitments on mode 4, particularly
horizontal ones, would be improved as a result of the negotiations.
65. Responding to the questions raised on her delegation's proposal, the representative of Canada
first gave additional information on Canada's proposal for a special mode 4 session.  She indicated
that a number of Members had made suggestions for harmonization of definitions of mode 4categories, the specification of labour market tests and the elaboration of a common code of practice
for ENTs, increased transparency and predictabili ty and greater access to information in order to
increase transparency.  Canada was in principle willing to explore the possibility of further work in
these areas, but felt that, in order for work to proceed, a more focused approach was needed.  Her
delegation had suggested that all policy officials, trade as well as immigration and labour marketofficials, be engaged in such meetings and that some type of structural group be established to look
into more detail at mode 4 issues.  An option could be a special session dedicated to mode 4, bringing
together all relevant officials, looking at specific issues.  She said that her delegation considered this
as an organizational issue and that Members needed to decide whether work on mode 4 could advance
in the Special Session or whether a special group was required.  With regard to Canada's suggestionon the "tools of the trade", she explained that it had originated with Canadian businesses having
identified this as a barrier to trade;  she was not sure where the issue would best be addressed, whether
in goods negotiations, if a comprehensive round were launched, or in the context of the discussions on
trade facilitation, but indicated that it represented a problem.  She said that in the context of NAFTA,S/CSS/M/10
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chapter III clarified the rules allowing business persons to bring into any NAFTA country necessary
professional equipment and tools of the trade on a duty-free, temporary basis.  These rules also
covered goods imported for such purposes as sports , display and demonstration, commercial samples.
Subject to certain conditions, NAFTA parties granted duty-free temporary admission for these types
of goods, regardless of whether like, directly-competitive or substitutable goods were available in theterritory of another party.  The measures facilitated border crossing for business people.
66. The representative of New Zealand said that discussions of mode 4 issues were of real
relevance to her delegation.  As a small, geographically-isolated economy, many of New Zealand's
young people, particularly those with tertiary education, left every year to work abroad.  In the
previous three years, for example, New Zealand had been a net exporter of professional services
suppliers.  This had been a cause of much concern and internal reflection about the "brain drain" of
New Zealand's best and brightest.  However, recent  studies of migration patterns over the previous
decade had revealed that the brain drain was in fact better characterised as a "brain exchange".
Foreign services suppliers had entered New Zealand's market in significant numbers, on either
temporary or permanent bases.  Taken in consideration with the work experience and training that the
high proportion of New Zealand's citizens who returned brought with them, this meant that mode 4
supply of services had assumed a vital importance for the health of New Zealand's economy andsociety.
67. Against this background, her delegation welcomed the papers submitted on the movement of
natural persons and had started reflecting on how it might be possible to move beyond the existing
pattern of mode 4 commitments, and the potential benefits for the domestic services industries.  She
was particularly drawn to the proposals by India and Canada that Members consider commitments onthe temporary movement of individual services suppli ers on a contract basis, not linked to commercial
presence.  As already noted, such commitments would be of substantial benefit to smaller economies
whose exporters were principally small and medium-sized enterprises.  Her delegation had previously
commented in support of India, the European Communities and Canada in their proposals for
developing criteria for ENTs;  she noted that very useful work had been done by the OECDSecretariat on improving transparency in the scheduling of ENTs, which might assist Members'
consideration of the issue.  She underscored the points made about the benefits of transparency and
predictability of immigration requirements.  New Zealand's practice for some years had been for all
immigration regulations, rules, application forms and the manual used by immigration officers to be
published on the Internet for easy access by applicants.
68. She was very interested in India's comments on the integration of labour market and
immigration policies, and its contention that this had had a detrimental effect on the movement oflabour suppliers, at least in respect of GATS commitments on mode 4.  India's paper further suggested
that there needed to be a separation of temporary services suppliers from permanent labour flows.
New Zealand's own experience was that a high de gree of integration between labour market and
immigration policies had enabled foreign services suppliers to enter the New Zealand market in
substantial numbers.  Perhaps rather than separation as such, it would be useful to encourage arealisation among regulators that as populations grew more mobile, and modern migration patterns
moved further away from the traditional model of flows in one direction on a permanent basis, the
temporary movement of services suppliers, and appropriate measures to facilitate and support such
movement, were important components of a flexible and responsive labour market policy.
69. In her delegation's view there was no getting away from the integration of labour market and
immigration policies, particularly for a country as distant as New Zealand.  While she saw merit in
India's suggestion that entry requirements for temporary services suppliers be less stringent that those
applied to permanent immigrants, these could only be reduced to a certain level.  It was not easy to
envisage, for example, that basic entry requirements relating to character, health and the ability to be
self-supporting would be forgone.  However, it was interesting to consider that many MembersS/CSS/M/10
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allowed quite substantial periods of either visa-free or facilitated entry for services consumers,
particularly tourists and some categories of students.  It might be worth Members assessing whether
any of the assumptions that had led to the removal of these requirements could be applied equally to
temporary services suppliers.
70. The representative of Argentina concurred with India that it was important that mechanisms
be developed to de-link mode 4 from mode 3, as it was essential that Members be able to move
natural persons in the absence of a commercial presence and that commitments on the movement of
independent service suppliers be improved.  As concerned suggestions on harmonizing definitions, he
observed that this would not solve the problem if restrictions were still in place, and stressed that
discussions had to proceed in parallel.  With regard to the proposed listing of economic needs tests on
the basis of Members' commitments, he said that these would only provide a partial picture, different
from the status quo.  He could agree to having a Special Session dedicated to the movement of naturalpersons, to focus on issues of relevance to the negotiations.  He then sought a clarification from the
delegation of Japan as to whether the suggestion in paragraph 6 of their proposal on economic needs
tests was intended to apply to the categories identified in paragraph 4 or whether its coverage was
broader.  Responding to the question by Argentina, the representative of Japan explained that
paragraph 6 of his delegation's submission on economic needs tests was meant to apply to all aspects
of mode 4, and not necessarily only to intra-corporate transferees, although Japan's major expectations
from the negotiations concerned this category of natural persons.
71. The representative of Chile asked the delegation of India to clarify its thinking with respect to
the suggestion in paragraph 19(ii) of their proposal, and to indicate whether they were considering an
understanding, a reference paper or changes to Article VII.  She supported Canada's suggestion for adedicated special session on mode 4, allowing for the participation of capital-based experts.
72. The representative of Australia said that her delegation was reflecting on how to move the
discussion forward on mode 4 and had identified a number of common features in the debate,
identical to those listed by the European Communities.  She concurred that it was a good idea to focus
on the common elements and could support either a special group or a special session dedicated tomode 4, with the participation not only of immigration officials but also of other relevant regulatory
authorities.  She said that it was preferable, howeve r, to wait until after the October meeting when all
the proposals had been discussed.
73. Commenting on the submission by Japan, the representative of Brazil noted with interest the
suggestion to tackle economic needs tests.  He said that ENTs were an important barrier also in other
modes of supply, and noted that the submissions by the European Communities and India also
addressed the issue.  He concurred with the representative of Argentina that it was essential to keep abalanced focus on intra-corporate transferees and independent service suppliers.  With respect to the
proposal by Canada that a special session be held on mode 4, he said that it was premature and that
Members needed to wait until all the negotiating proposals had been discussed.
74. With respect to the Secretariat note on economic needs tests, the representative of Pakistan
indicated that useful work had been carried out by the WTO Secretariat itself, as well as by the OECD
and UNCATD Secretariats, and that the UNCATD MAST database could be useful in identifying
instances when Members applied ENTs.  By way of preliminary comments, he reiterated his
delegation's strong interest in the movement of natural persons.  He recalled that Pakistan had
submitted a paper on the issue to the General Council and to the Council for Trade in Services in
November 1998 and April 1999.  He was particularly supportive of India's suggestion to establishmultilateral norms to remove limitations in the gu ise of economic needs tests, and for issuance of
GATS visas or permits.  He had taken note of the interest in mode 4 expressed by the delegations of
the United States, the European Communities and Canada in their proposals.  While he did not
necessarily agree with the entirety of their content, he had found them concrete and helpful inS/CSS/M/10
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understanding their approach to mode 4 and the categories of natural persons they were interested in.
He shared the call for greater transparency and predictability, but stressed that this was by itself not
sufficient.  His delegation was still reflecting on the proposals on classification and definitional issues.
Pakistan was interested in improvements in both horizontal and sector-specific commitments.  As for
the categories of natural persons, he could see why delegations were focusing on intra-corporatetransferees and key business personnel, but emphasised that other categories of lower and middle-
skilled persons also needed to be taken into acc ount.  As for the European Communities suggestion
for non-binding guidelines on economic needs tests, he compared it with their approach on other
WTO issues, such as trade facilitation.  His delegation was also cognisant that, as stated in the Annex
on the Movement of Natural Persons, mode 4 was different from permanent immigration.  He had
noted some convergence in the interests of developed and developing countries, but stressed that an
asymmetry existed with other modes of supply, which had nullified the benefits that developingcountries had expected from the GATS.  Pakistan would therefore be looking for the removal of
barriers to the movement of natural persons, along with deeper commitments on mode 4 on the part of
its trading partners.
75. The representative of Uruguay supported the European Communities suggestion that the
Secretariat prepare a note on the application of economic needs tests, but proposed that the note
address ENTs in all modes of supply, and not ju st mode 4.  He drew attention to the UNCTAD
Secretariat note contained in document UNCTAD/IT CD/TSB/8 dated August 1999 and titled "List of
economic needs tests in GATS schedules of commitments".
76. The representative of Mexico stressed that mode 4 concerned the temporary movement of
natural persons and noted that, differently from the Uruguay Round, exchanges of concessions in this
area seemed a concrete possibility.  He indicated that the submissions shared a number of features.
First, there was the emphasis on transparency.  In this respect, he noted that enquiry and contact
points established under the GATS made information available on temporary mobility, but also
stressed the importance of being able to access such information.  Second, a consensus seemed to be
emerging on economic needs tests, where guidelines might usefully be developed.  Third, thecoverage of the commitments needed to be improved, particular in those sectors, such as engineering,
construction and professional services, where the movement of natural persons was particularly
relevant.  Fourth, to improve the effectiveness of mode 4 commitments, it was important to look at
mutual recognition agreements, which were of significance particularly for professional services.  He
looked favourably at the proposal by Canada that  an ad-hoc group be set up to look seriously into
mode 4.  He indicated that Mexico was aiming to submit its own proposal on the issue.
77. Commenting on the submission by Japan, the representative of the Philippines said that he
appreciated their frankness in stating that their inte rests lay with intra-corporate transferees, but would
have welcomed more attention being given also to other categories of greater relevance for
developing countries.  He appreciated the explanation of developments in their respective regulatory
regimes provided by the delegations of Switzerla nd and Norway;  he would revert to the submission
by Colombia.  He concurred with the elements identified by the European Communities as commonfeatures of the discussion.  He urged Members to consider the logic of distinguishing, and perhaps
subsequently establishing separate mechanisms for, the administrative supervision of temporary
movement of labour vis-à-vis  the administrative supervision of immigration status, as that was where
many of the difficulties which independent service suppliers encountered as they tried to move across
market originated.  As for the proposals from Canada on ways to move forward, at this point in timehis delegation was not inclined to look solely at the possibility of having a dedicated session on
mode 4, but was more sympathetic to an ad hoc group.  This would allow for the concerns of mode 4
exporting countries not to be trivialised into a single set of meetings but rather to be addressed on a
more continuing basis, in a way that was more reflective of the needs of developing countries.S/CSS/M/10
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78. The representative of Hungary said that the movement of natural persons was a sensitive issue
due to its potential impact on the employment market and to the thin line that separated services
markets from labour markets.  For example, he referred to a service that could be supplied both by a
national worker and by a foreign self-employed supplier, which, along with intra-corporate transferees
and persons providing services on a contractual basis, was one of the categories under mode 4.Hence, liberalization of mode 4 could have effects similar to the liberalization of the employment
market.  He also said that wage parity requirements could undermine the comparative advantage of
Members with lower wages.  In spite of the link between the services and employment markets, his
delegation was willing to move forward on mode 4, particularly as concerned the implementation of
existing commitments, for example with respect to greater transparency.  He agreed that the Council
needed to focus on common elements, and echoed Paki stan's comments to the effect that procedures
were not the only way to address the movement of natural persons.
79. The representative of Poland supported the thrust of the submission by the European
Communities.  He indicated that Poland was not a demandeur on mode 4 at this stage, but added that
the movement of natural persons, in particular as far as the construction sector was concerned, was a
matter of interest to his delegation.  He had found the explanations by Switzerland and Norway of
developments in their respective regulatory regimes interesting.  The suggested structured approach to
further discussion made by the European Communities appealed to his delegation;  he stressed the
importance of finding common ground before proceeding with further examination of the issue.
Furthermore, the proposal for a dedicated Special Session on mode 4 constituted a facilitating factor
and could contribute to the results of future negotia tions, provided that it received adequate responses
from capital experts.
80. The representative of Venezuela noted the importance of trade in services and of the
movement of natural persons, which faced many restrictions in most Members.  She informed the
Council of a new legislation on visas adopted by her government and published in the Official Journal
No. 5427, dated 5 January 2000, which had entered into force on 5 March 2000.  The legislation
granted business visitors improved access opportunities and easier access.  Intra-corporate transfereesand key executives, managers and specialists in given fields were also given priority treatment, in
light of their status of transferees.  Similarly, temporary access was granted to independent service
suppliers, provided that they had a work contract for technical assistance or advisory services pursuant
to their specialization.  She also highlighted that, for the entry of natural persons, the labour law,
which was reflected in Venezuela's horizontal commitments, established percentage limits for foreign
personnel recruited by companies employing more than 10 employees, as well as a number of
exceptions for specific cases;  the law was currently under review.  As concerned the law on thepromotion and protection of investment, access was granted for specialized staff, administrative and
management staff and those dealing with investment operations directly, depending to a great extent
on the sector in which the investment was taking place.  Bearing in mind the prescriptions in Article
XIX:2, she suggested that priority be given to sectors where better access could be granted to natural
persons supplying services, which, in the case of Venezuela, were the oil, gas and telecommunicationssectors.  Her delegation was aware of the importance of transparency and access to information with
respect to procedures for entry and stay.  As concerned the recognition of degrees and qualifications,
she proposed that Members engage in separate discussions on the issue, thereby giving effect to the
prescriptions of Article VII of the GATS;  likewise with respect to the issue of stay of personnel in the
country.  She also highlighted that, as concerned social security questions, even though these wererelated to the labour market, separate mechanisms had been adopted;  she also indicated that
Venezuela was re-evaluating its entire social security system.  As concerned the proposal by Canada
that a Special Session be held on the issue of mode 4, her delegation was favourably inclined.
81. With respect to the proposal to hold a dedicated Special Session on the movement of natural
persons, the representative of Norway stressed that mode 4 was important, and that it involved
complex regulatory issues which required the participation of experts.  He had taken note that someS/CSS/M/10
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Members considered holding such a meeting as premature, whereas others found it a useful
suggestion;  his own delegation was flexible, and he suggested that a possible solution would be to
bring together experts in an informal gatherin g to exchange views and learn from each others'
respective experiences in the area.  He suggested th at such an informal event could be held in the
autumn.
82. The representative of the Czech Republic said that the issue was complex and called for
clarification of a number of issues, including definitions, transparency and criteria for economic needs
tests.  He concurred with the need to bring together regulators and to have civil society on board in
order to deepen Members' knowledge of the issue, and to achieve a balanced outcome in the
negotiations.
83. The representative of India gave an initial response to Chile's question on the legal
implications of multilateral norms for mutual recogn ition agreements.  He referred to Article VII:5,
which states:  "whenever appropriate, recognition should be based on multilaterally agreed criteria.  In
appropriate cases, Members shall work in cooperation with relevant intergovernmental and non-
governmental organizations towards the establishment and adoption of common international
standards and criteria for recognition and common international standards for the practice of relevant
services trades and professions".  Article VII:5 contained a mandate.  As for advancing the discussionon mode 4, by way of preliminary comment he said that his delegation was flexible on how to move
forward and obtain improved commitments from developed country partners;  however, he had found
Norway's suggestion to involve relevant authorities, and not just trade policy experts, useful.  He also
echoed the comments by the Philippines that whatever  was done was without pr ejudice to India's clear
intention of having a negotiating group on mode 4 whenever a decision on the issue of negotiatinggroups was taken.
84. The representative of Cuba said that the importance of mode 4 was demonstrated by the
proposals tabled on the issue.  Her delegation was still examining the proposal by India, but in a
preliminary manner considered it a good way for developing countries to obtain better market access
to developed countries' markets.  The submissions by the United States, the European Communitiesand Canada addressed issues such as definitions, transparency and additional disciplines, which
should be included in the analysis.  As for how to advance the discussion on mode 4, her delegation
was flexible and in favour of the most efficient way forward.
85. Concluding the discussion on mode 4, the Chairman said that it had been a rich debate, which
highlighted the importance of the movement of natural persons for many Members, and particularly
for developing countries.  The proposals had been a useful contribution to the discussion, and the
many common elements were promising in terms of possible improved commitments.  The Secretariatwould produce a note on the application of economic needs tests to all modes of supply, drawing upon
Members' schedules and work undertaken by the UNCTAD and OECD Secretariats.  As for how to
move forward, some Members had supported the idea of holding a Special Session dedicated to
mode 4, while others had considered it premature.  It was suggested that competent authorities, and
officials dealing with mode 4 and with immigration questions be brought together to discuss the issue;the delegation of Norway had proposed that the discussion take place in an informal setting in a first
instance.  He proposed that, in order to move the debate forward, an informal event, possibly in the
form of a symposium, be held after the Fourth Ministerial Conference in Doha, possibly in early 2002.
86. It was so agreed.S/CSS/M/10
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(b) Horizontal issues
Communications from:  Canada (S/CSS /W/46, 47, 49);  Japan (S/CSS/W/42 and
Suppl.1);  the European Communities (S/CSS/W/32);  Members of the Andean
Community (Bolivia, Colombia, Ecuador, P eru and Venezuela) (S/CSS/W/89);  New
Zealand (S/CSS/W/90)
87. The representative of Chile said that her delegation was interested in several of the horizontal
issues raised, such as transparency in domestic regulation, small and medium-sized enterprises and
MFN exemptions.  She suggested that an additional one be addressed by Members, namely
Article VII.  This Article had been raised in many proposals, such as the one by India, as well as in
the one submitted by her own delegation.  Article VII was applicable to any service where a licence
was required, and was therefore an issue of a horizontal nature.  Members should address how
Article VII could be implemented, to complement the work on disciplines on domestic regulation butalso to give life to this Article, which had had limited application until then.
88. The representative of Saint Lucia, speaking on behalf of the delegations of Barbados, Jamaica
and Trinidad and Tobago, as well as her own, said that, as mandated in Article XIX of the GATS, the
evolving liberalization process had to accommodate national policy objectives and the level of
development of individual Members, both overall and in individual sectors.  The provision ofeffective market access had to take place under conditions aimed at achieving the objectives referred
to in Article IV.  In addition, paragraph 15 of the negotiating guidelines provided that "[i]n
implementing Article IV, consideration shall also be given to the needs of small service suppliers of
developing countries".
89. Article IV of the GATS imposed an obligation on developed country Members to undertake
specific commitments to facilitate the increasing  participation of developing country Members in
world trade.  Developing countries' participation in commercial services trade remained
disproportionately low due to a number of factors which were essentially supply-side constraints, on
the one hand, and market access barriers, on the other.
90. The supply-side constraints of small developing economies were well-known, even if not
addressed, in the special and differential treatment provisions of the Uruguay Round Agreements, and
included:  the absence of "critical minimum size" and the consequent constraints of small domestic
markets on economies of scale;  limited natural resource endowments, leading to a high degree of
product and market concentration in exports, i.e. limited diversification;  the relatively high
transaction costs of trade stemming from small size, and from landlocked or island status, a situation
aggravated by the cartel-like activities of carriers and consequent constraints in pursuing economic
diversification programmes;  the administrative, institutional and human resource limitations facingsmall economies, resulting in difficulties in ensuring effective and developed infrastructure and
efficient provision of government services;  a high share of public sector expenditure in GDP;  and
high per capita costs in establishing basic infrastructure.  There was therefore a lack of "institutional
thickness", as it was referred to in economic literature, namely supportive political and other public
institutions in conjunction with strong private support services which were necessary for clusterformation in vertically and horizontally integrated industries.  There was also greater volatility in
income growth than in larger economies:  annual deviation  of annual real per capita growth in small
states was about 25% higher than in large states.  Some suggested that poverty levels also tended to be
higher and income distribution more uneven in smaller versus larger states:  the resultant income
volatility impacted especially on the poorer members of the community.  This was compounded bylimited domestic savings capacity and difficulties in attracting FDI:  private markets tended to see
small states as more risk-prone than larger states.S/CSS/M/10
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91. As a consequence, many small developing economies, particularly relatively isolated island
developing states, had little opportunity to benefit from vertically and/or horizontally integrated
industries and a very broad range of external economies.  Significantly, small economies appeared to
have few of the characteristics necessary for successful cluster formation which was of critical
importance in developing scale-economic industries.  Similarly, they generally lacked highlyspecialised private and public institutions, such as defence research establishments or technological
universities, and a suitably large and diversified pool of technically qualified labour conducive to the
geographical clustering of small enterprises, a factor facilitating the creation of an innovative milieu
or "learning economy", i.e. the ability to share "tacit" technological information among firms, a
particularly important factor for the information technology industry.
92. Small service suppliers based in small developing economies suffered from a triple handicap:
they were the smallest of the small and medium-sized enterprises world-wide;  additionally, when onetook into account the level of development and size of the economy both overall and in individual
sectors, factors of some significance as highlighted in the negotiating guidelines, it was being
suggested that regional market access was a more realistic view of the possibilities.  However, if
regional market access was to circumscribe the level of ambition of 99% of their service suppliers,
then their energies were best spent elsewhere, possibly focusing on the establishment of theCARICOM Single Market and Economy.  Nevertheless, they chose to remain engaged in the
multilateral process.
93. Article IV of the GATS had to be effectively operationalized in the context of the mandated
negotiations.  Small developing country Members could not be made to feel that the system excluded
them, that they were not to be the beneficiaries of the progressive liberalization process.  Thisexclusion would occur where there was no real and effective recognition of the unique circumstances
they faced as small developing economies and the need for special and differential treatment.  It was
these circumstances which precluded their countries from taking advantage of market access
opportunities which were not sufficiently targeted to the needs of small service suppliers of small
developing economies.  The progressive liberalization process needed to be inclusive and targeted tothe needs of the most vulnerable.
94. The representative of Israel said that the submission by Canada on small and medium-sized
enterprises was of great interest to her delegation.  Small and medium-sized enterprises were a key
source of economic growth and job creation for both developing and developed countries.  Regulatory
barriers faced by all suppliers were particularly difficult for small and medium-sized enterprises to
overcome, as they had limited resources;  at the same time, due to the revolution in information
technology, they had an increasing potential to compete with larger firms.  She concurred with
Canada that the negotiations had to address the needs of small and medium-sized service suppliers in
facilitating their access to export markets.  In that regard, her delegation was interested to know how
Canada intended to proceed on this issue.
95. The representative of Malaysia offered some general comments on his delegation's overall
stance with respect to the services negotiations.  He expressed appreciation for New Zealand's call to
effectively address interests and concerns of developing and least-developed countries.  He noted that
the various proposals on the table, especially the ones from developed countries, were based on the
premise that liberalization should take place because it was beneficial for all Members, and led to
economic development and to improvements to the domestic industry also of developing countries.
Malaysia could share that sentiment to the extent th at there was a level playing field.  In that respect,
he felt that  there should be a recognition that there was no such level playing field in the services
sector.  The GATS itself provided the basis for a development dimension to the whole services
negotiations.  Members always needed to refer to Article XIX:2, where this was very clear;  in
particular, Article XIX:2 provided that developing countries be given appropriate flexibility for,
inter alia , opening fewer sectors.  Members' development situations always had to be borne in mindS/CSS/M/10
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and taken into account.  In addition, Article XIX:2 stated that developing countries, when undertaking
market-access commitments, could attach conditions aimed at achieving the objectives refered to in
Article IV.  He concurred with Saint Lucia that small economies experienced particular difficulties,
but noted that developing countries in general also encountered difficulties when opening up their
services sector. Article IV:1(a) referred to the need to strengthen developing countries' domesticservices capacity;  this meant that liberalization by itself would not help the Malaysian domestic
services industry and that was why the development dimension in Article XIX:2 was essential.
Developing countries had to be able to attach conditions to market openings, and to open up their
services sectors to the level that the market could bear, and developed countries needed to recognize
this fact.
96. He indicated that a number of capital-based officials were present at the meeting, in order to
allow for better domestic consultations.  The Malaysian domestic industry would be making its ownassessment as to what was best for them, and if liberalization was viewed as beneficial, it would call
for market openings.  However, if they felt this not to be the case, they would let the government
know;  in that respect, he expected Members to  understand the situation of Malaysia and that of
developing countries in general.
97. For Malaysia to benefit from the negotiations, it had to be ensured that its domestic industry
was able to participate in world services trade as reflected in Article IV.  Hence, he was concerned
that conditions that existed in Malaysia, such as requirements for joint-ventures or for local equity
participation, were viewed as strict barriers by developed countries.  He argued otherwise, as there
were economic justifications for joint-venture requirements or local equity requirements.  By way of
additional example, he referred to residency requirements.  Several proposals had identified these astrade barriers, but from the viewpoint of Malaysia there were economic and security justifications to
such requirements.  As mentioned in May during the discussion on financial services, without a
residency requirement, in case of problems, it would be difficult to take action against those
responsible.  If Malaysia had to give access to foreign companies without attaching such conditions,
this would defeat the very purpose of Articles XIX and IV, and Malaysia would be unable to enhance
the capacity of its domestic industry.  He believed that this was one area that could be explored
collectively, to assess how developed countries could help developing countries enhance the capacity
of their domestic services industry in the context of the negotiations.
98. Commenting on small and medium-sized enterprises first, the representative of Canada said
that SMEs were important to many Members and all sectors.  She provided answers to some of the
questions posed on her delegation's proposal.  First, she indicated that Canada had no official
definition of SMEs, but that their department of statistics commonly defined small–sized those
enterprises employing less than 50 people, and medium-sized those employing between 50 and 500
people.  This categorization was sufficiently flexible to incorporate most small and medium-sized
enterprises in most Members.  SMEs were active in all sectors;  Canadian SMEs were present in
sectors such as professional services, computer and related services and environmental services;
engineering services, database services, sewage and hazardous waste disposal services were but a fewexamples of sub-sectors that could be included in these sectors.  Small and medium-sized enterprises
had a significant impact in cross-cutting discussions:  she noted that mode 4 liberalization being
linked to commercial presence was a situation that SMEs faced commonly.  Under the proposal by
Canada, Members would not be expected to make separate commitments for SMEs.  Turning to the
issue of regulatory transparency and predictability, she stressed the importance of the issue toCanadian businesses and noted that lack of information and difficulty in obtaining information in
foreign markets had been identified as a significant barrier.  The fact that most impediments to
services trade arose in the context of domestic regulatory action suggested that the way in which
countries regulated and provided access to regulatory information had an important bearing on efforts
to ensure open markets.  Progress in this area could be one of the most important achievements of theservices negotiations for service providers.  She noted that the GATS had several provisions whichS/CSS/M/10
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dealt with transparency, namely the Preamble, Articles III and IV:4, the Accountancy Disciplines,
enquiry points, notification procedures.  Some of these provisions referred to transparency with
respect to how Members related to each other;  others to how Members related to foreign service
providers.  Both of these approaches to transparen cy needed to be examined, in the context of best
practices, to determine whether enhancements or additional provisions needed to be pursued.  She feltthat Members were well-equipped to address the issue, noting that several proposals had been tabled
in the Working Party on Domestic Regulation, a nd that Members could draw on the Accountancy
Disciplines and on the large body of work carried out in organizations such as the OECD and APEC.
99. The representative of Uruguay, speaking on be half of the MERCOSUR countries, expressed
support for the suggestion in paragraph 20 of the submission by Japan in document S/CSS/W/42 that
a standing item be inscribed on the agenda of the Special Session on "Increasing the participation of
developing country Members to the negotiations".  He concurred that, in order to effectivelyimplement Article IV, it was important that developing countries their table own proposals on sectors
of interest to them.
100. The representative of Japan offered comments on three issues.  First, he said that developed
countries should take the initiative of eliminating MFN exemptions, as suggested in his delegation's
submission in document S/CSS/W/ 42/Suppl.1.  He was encouraged to see that several proposals
contained references to the elimination of MFN exemptions, and felt that a useful disucssion could be
held on the issue.  Second, with regard to domestic regulation, he said that horizontal disciplines
under Article VI:4 were of great importance, in particular with regard to increasing transparency, a
suggestion which was also raised in many proposals.  With respect to the Canadian suggestion to
study best practices, he said that this would be a good way for developed countries to respond to somedeveloping countries' concerns with respect to the burden of additional transparency provisions.  He
added that the best way to treat transparency was for the Council to give directions to the Working
Party on Domestic Regulation for additional work in the area and for Members to present their
experience in that forum;  in that regard, he drew attention to the submission by Japan.  Third, as for
the proposal on classification, he understood the idea in principle, but felt that the decision on whereclassification should be changed had to be taken on a case-by-case basis.
101. Commenting on the submission by Canada on small and medium-sized enterprises, the
representative of Hong Kong, China said that SMEs  were a key contribution to economic growth and
job creation and were pillars of Hong Kong, China's economy, employing more than 1.36 million
people and representing 98% of local enterprises and 60% of private-sector employees.  The
globalisation of the world economy and the emergence of a knowledge-based economy as a result of
the advent of information technology had created new challenges and opportunities for SMEs.  In thepast, only multinational enterprises could establish market presence abroad;  with the rapid
development of the Internet and electronic commerce, even SMEs could theoretically-speaking be
transformed in multinational enterprises in terms of market coverage.  Her delegation was of the view
that regulations related to international trade s hould facilitate, rather than hamper, transactions
through e-commerce.  Owing to the small scale of operation and limited resources, most SMEs foundit very difficult to comprehend and follow oversees regulations;  their participation in international
services trade would be further hindered if the oversees regulatory environment were discriminatory,
burdensome and non-transparent.  Therefore, Hong  Kong, China supported Canada's proposal for
removing barriers that limited the participation of SMEs to services trade.  In the case of Hong Kong,
China, more than 88% of their SMEs employed less than 10 people each.  In view of their limitedsize, most SMEs did not have the resources to set up commercial presence abroad;  in this connection,
her delegation also welcomed Canada's proposal to explore ways to remove unwarranted mandatory
commercial presence requirements on the cross-borde r supply of services, so that SMEs could take
advantage of e-commerce to expand oversees in an affordable manner.  A high-level, advisory SMEs
Committee had been set up in Hong Kong, China to advise the government on issues affecting the
development of small and medium-sized enterprises.  Turning to the submission by Japan on MFNS/CSS/M/10
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exemptions in document S/CSS/W/42/Suppl.1 , she expressed her delegation's support for the paper,
and particularly for its concluding suggestions.  She also welcomed and broadly shared the
submission by New Zealand in document S/CSS/ W/90 and looked forward to discussing it.
102. The representative of New Zealand welcomed Canada's proposal on small and medium sized
services suppliers because it picked up on a very important cross-sectoral issue regarding trade in
services.  SMEs were a very significant part of the New Zealand economy, particularly for the
services sector, providing a sizeable share of overall employment.  This situation was probably
common for many smaller economies, both developed and developing.  In this regard, he recognized
that the notion of what constituted an SME would vary between Members and this was particularly
highlighted by the comments by Saint Lucia.  He had also taken note of the numbers that Canada had
introduced and noted that for New Zealand those numbers were quite high and would probably
encapsulate most of their large-scale enterprises.
103. In any event, Canada's paper was a reminder that a "one size fits all" approach did not
necessarily provide the best solution for the particular needs of SME service providers, in terms of
market access and national treatment.  In certain cases, regulatory hurdles which might only be
problematic for large services providers could prove insurmountable barriers for SMEs.  Examples
given in the paper included excessive user fees and onerous licensing requirements.  Article IIIrequirements of transparency were clearly all the more important for SMEs, particularly at the point
when they were looking for export market opportunities.  A key point highlighted in the paper, and in
a number of other negotiating proposals under different issues, was the significance for SMEs of
commitments in modes 1 and 4, given that these were more efficient and cost effective ways to
engage in business, in comparison to establishing commercial presence under mode 3.  His delegationlooked forward to further exchanges on SMEs with a view to giving emphasis to particular areas that
will promote opportunities for SME services providers.
104. The representative of the European Communities echoed the comments made by New
Zealand and indicated that, while the European Communities had its own definition of size, they
could appreciate that the size of the economy could determine what were small or medium-sizedenterprises.  She also concurred with the importance of transparency of regulations for SMEs, which
had limited resources, and looked forward to exploring ways of increase the coverage of services
trade of  SMEs.  She stressed the relevance of the point raised by Chile on mutual recognition
agreements, concurring that work on the issue could facilitate mode 4 trade and access to markets;  in
this regard, she recalled that that Members had developed non-binding Guidelines for Mutual
Recognition Agreements or Arrangements in the A ccountancy Sector.  At the same time, she stressed
that some level of similarity was necessary in order to arrive at mutual recognition agreements.
105. She then responded to some of the questions raised on her delegation's overall approach to the
negotiations and their proposal on electronic commerce in document S/C/W/183.  First, Japan had
enquired how they intended to proceed with future work in the Council relating to whether and when
they would set up negotiating groups.  She said that Members were just entering into a first overview
of the sectors and that an informal seminar on mode 4 would be usefully held in the autumn.  Thequestion of more permanent groups to take the work forward might best be asked after the October
Special Session or the stock-taking in March.  Her delegation would hesitate to suggest that
negotiating groups might be necessary for all issues, but not doing so might suggest that they were
prioritising;  she said that developing some criteria might be helpful in this regard.  Second, with
regard to what kind of pro-competitive disciplines the European Communities was considering, shesaid that the real issue was what kind of substance Members needed for such disciplines;  all options
could be looked at and then the decision taken with respect to the most appropriate approach.  The
Working Party on Domestic Regulation should prov ide some cross-cutting elements and the question
of additional sectoral disciplines should be looked at in that forum as well as in the Special Session's
sectoral discussions.  Third, on their proposal on electronic commerce, she explained that documentS/CSS/M/10
Page 26
S/C/W/183 had been submitted in the context of the Work Programme on Electronic Commerce.
Apart from proposals made in relation to the Work Programme itself, her delegation had noted that
there were elements related to the negotiations in specific sectors which could help to facilitate
Internet access and the various elements involved in e-commerce transactions, such as distribution,
advertising, telecommunications.  While they were not making any sort of proposal for an e-commerce type of cluster, in the negotiations they would be pointing to the relevance of these
elements.
106. The representative of Mexico offered comments on four issues.  First, he had noted that
various proposals referred to the establishment of reference papers or annexes for pro-competitive
principles.  He expressed concern that the proliferation of such instruments might compromise the
structure of the GATS, as they might reduce the ability of developing countries to attach conditions to
market access related to their national policy objectives, reduce their flexibility and the progressiveliberalization guarantees of the GATS.  He stressed the importance of coherence of multilateral rules;
such reference papers would only be applicable to some sectors and would result in a sectoral, rather
than multilateral system.  Competition rules should be developed in a wider context, rather than solely
in a services context, to take into account the level of development and appropriate flexibility for
developing countries.  He indicated that at that juncture his delegation could not agree to proposals onsuch issues.  Second, he welcomed the proposals submitted on transparency, but stressed the
importance of advancing work also on the necessity element of domestic regulation, and not only on
transparency.  He recalled that such work was already part of the agenda of the Working Party on
Domestic Regulation and underscored the importance of avoiding duplications and excessive work
burdens.  Third, on classification, he indicated that Mexico had used the W/120 classification and wasflexible as to some elements of that classification being changed, provided that the legal certainty and
coherence of commitments was maintained;  any changes to the W/120 had to be technically possible
and duly justified.  Fourth, he echoed New Zealand's comments on small and medium-sized
enterprises.
107. Commenting on MFN exemptions, the representative of the Republic of Korea recalled that
the Annex stated that in principle MFN exemptions "should not exceed a period of 10 years".
Therefore, their elimination or reduction had to be one of the important horizontal issues that the
Special Session had to focus on.  He said that the submission by Japan was a useful basis for future
negotiations on this issue in that it portrayed the current situation of MFN exemptions, and grouped
them in different categories.  However, in order to assess and understand the nature of the exemptions
listed, a more in-depth analysis was necessary in terms of their legal or economic implications.  He
informed the Council that his delegation was working on a paper which would be presented at theOctober meeting.
108. The representative of India echoed the statement by Malaysia.  He then raised a question with
regard to small and medium-sized enterprises:  while he agreed that the issue was important, he
recalled that the negotiating guidelines contained a reference to small and medium-sized suppliers,
and not to enterprises.  The definition of size was therefore crucial;  while the number of employeeswas one consideration, the market share was also important and, in that respect, he wondered whether
the relevant market in that regard was the domestic, export or global one.  His delegation was still
reflecting on this issue, as well as on the question of whether a differentiation needed to be made
depending on the sector under consideration.  He al so noted that Members needed to decide what was
meant by the term "due consideration" in the guid elines and stressed that had to involve more than
just access to information.
109. The representative of Thailand concurred that small and medium-sized enterprises were of
great importance and looked favorably at discussion s of this issue.  She cautioned that SMEs were
facing different situations in different markets, and, within the same market, in different Members,
and stressed that any solution in this rega rd needed to reflect these differences.S/CSS/M/10
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110. Commenting on the Canadian proposal on small and medium-sized enterprises, the
representative of Norway said that it was important to develop the different part of the WTO
agreements in a way that did not disadvantage small and medium-sized enterprises in competitionwith larger firms.  Active steps needed to be take n to remove trade barriers for SMEs' participation in
world trade, particularly SMEs from developing countries.  That work was to some extent alreadyunderway, for instance, through the questions raised concerning barriers that SMEs faced in the
business service sectors.  It was important that the issue of SMEs be taken care of without establishing
complicated methods of differentiating between enterprises of different size, which could hinder the
competition between enterprises and result in an inefficient use of resources.  Turning to the
environmental review mentioned in point 8 of the Canadian proposal in document S/CSS/W/46, he
underlined that Norway attached great importance to  the role that an environmental assessment might
play in order to achieve the objective of sustainable development.  He therefore welcomed theinitiative from Canada and other countries to undertake such national environmental assessment.  As
regarded trade in services, Norway was conducting a study of the transport sector.  The transport
study took as its point of departure three items:  first, it investigated which transport services had what
kind of environmental effects, based on existing economic analysis;  second, it analysed how the
GATS could influence the environmental effects of transport;  and, third, it developed three scenarios,which included both changes to the GATS framework agreement and liberalization of specific
commitments and MFN exemptions, ranging from status quo  to partial liberalization to total
liberalization.  The assessments were intended to indicate the level and direction of possible
environmental impact of trade liberalization.  Quantitative estimates would be made only when
appropriate economic models existed;  otherwise, qualitative assessments would be drawn.  Thesectoral studies would apply the 1994 OECD me thodology for environmental reviews of trade
policies and agreements, and the OECD environmental indicators.  An external research institute
would carry out the work, and the results would be subject to broad consultations with business, trade
and environmental organizations, with the aim of having transparency and an open discussion.  He
indicated his delegation's willingness to share some of the findings with Members at a later stage.
111. The representative of Cuba particularly welcomed the reference to increasing the participation
of developing countries;  however, she could not see any concrete proposals on specific problems
which would make such increased participation feasible.  This was a horizontal issue which had to be
addressed with particular attention.  She noted that there was an increasing number of proposals
addressing questions dealt with in the Council's subsidiary bodies, and wondered how Members were
going to take up these aspects in parallel, and particularly how developing countries would have the
capacity to participate in all these discussions.  On classification, her delegation was still analysing theproposal by the Andean Community;  in a pr eliminary manner, she considered the W/120
classification as the basis, which might be susceptible of precise amendments arrived at through
consensus.
112. The representative of Brazil echoed the statement by India on small and medium-sized
enterprises.  On MFN exemptions, he expressed interest and fully supported paragraph 12 of the
submission by Japan in document S/ CSS/W/42/Suppl.1;  in that regard, he recalled that paragraph 6 of
the negotiating guidelines referred to appropriate flexibility being accorded to developing countries.
On regulatory issues, he noted that the issue pervaded the proposals and expressed concern with the
possible proliferation of reference papers in many of the sectoral proposals.  He recalled that the
Working Party on Domestic Regulation was conducting negotiations on disciplines on domesticregulation, as mandated by Article VI:4, which involved both the issue of transparency and of
necessity;  he was therefore preoccupied with discussions on regulatory issues being limited only to
transparency.  He shared the view that Members should wait for the WPDR to pursue its work on a
general basis and that drawing conclusions in the Special Session on how to deal with the issue was
premature;  work had to continue in the Working Party.  On classification, he agreed with Mexicowith regard to changes to the W/120 classificatio n and the criteria to which these changes should
conform.  As a more general comment, he said that the classification issue needed to be looked at inS/CSS/M/10
Page 28
terms of what objectives Members were pursuing.  His delegation considered any trade agreement to
have three pillars:  rules, market access, and classification.  The GATS had rules, in that it was a
framework agreement that was incomplete with resp ect to some rules and contained some ambiguities
with respect to some provisions.  On market access, the GATS was very much work in progress.  As
for classification, document W/120, which corresponded with the UN CPC Provisional, had beendeveloped during the Uruguay Round.  In the Urug uay Round, most Members, including Brazil, had
based their schedules on that classification;  however, other Members had not, which had resulted in a
situation where some Members were bound to a very specific definition of services activities
contained in the explanatory notes of the CPC wher eas others were bound by the definitions contained
in their internal definitions of such activities.  He pointed to the fact that in previous dispute
settlement cases this had made a difference.  His delegation was reflecting on what the ultimate
objective of proposing changes to the classification was, and had come up with a few questions whichthey were still considering.  First, were Member s looking for a common classification for all, or only
some, sectors;  second, was this common classification to be adopted by all Members;  in which case,
third, would Members be looking at some sort of  transposition or harmonization of schedules and
classification;  or, fourthly, would the exercise resu lt in some parameters or guidance for Members to
use voluntarily when scheduling commitments.
113. Commenting on the issue of small and medium-sized enterprises, the representative of
Malaysia echoed the points raised by New Zealand, with regard to one size not being able to fit all
Members, and by India, and stressed the need to take these concerns into account.  The submission byCanada touched upon liberalization for small and medium-sized enterprises because of the difficulties
that SMEs faced in competing internationally;  however, he noted that SMEs from developingcountries faced additional difficulties, even domestically.  SMEs accounted for a large share of the
Malaysian economy, and the difficulties they faced were more related to domestic inadequacies,
especially with regard to funding, and government assistance in terms of advice.  He therefore called
on Members to take into account the difference between SMEs in developed and developing
countries, including the level of assistance and fundings provided to SMEs by developed countries, toensure that a level playing field was in place.
114. Reacting to the comments by Brazil on classification, the representative of Colombia
explained that the objective of the Andean Community's submission on classification had been
precisely to encourage discussion.  Serious problems existed with respect to classification which had
never been addressed.  She understood the preoccupation with respect to changing the W/120
classification, but noted that, in spite of that classification being based on the CPC, it was insufficient
with regard to some activities.  For example, she felt that the classification in the Annex on FinancialServices was better than the one in the CPC.  In addition, W/120 and the CPC were not the only
classifications that could be used, and she called on Members to agree what classification would be
used and arrive at a shared language.  She noted the usefulness of having a general discussion on
classification, either in the Special Session or in the Committee on Specific Commitments, to decide
how the issue could be tackled, whether on a sectoral or horizontal basis.
115. Turning to MFN exemptions, she recalled that the special situation of developing countries
had to be taken into account.  It was up to developed countries, which had the biggest numbers of
exemptions, to take the lead in dismantling their exemptions, as th ese undermined the objectives of
trade liberalization;  she therefore called on them to begin to dismantle them.  As for small and
medium-sized enterprises, she welcomed the suggestion that preferential treatment be given to them,and concurred that the reference to "due consideration" in the guidelines had to be clarified and that
Members needed to agree on what SMEs were.
116. The representative of the United States responded to the comments by Brazil on
classification.  From the United States postponed, the discussions in the Committee on Specific
Commitments over the previous years had been proceeding on the basis that the objective was havingS/CSS/M/10
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an agreed common classification system.  Members attempted to do so for all W/120 sectors, and the
Secretariat produced several notes to compare the two versions of the CPC.  However, Members
realised that it was not possible to change the classification system in its entirety.  Therefore, work
focused on those sectors where Members had particular interests or which raised problems;  that had
resulted in the four or five sectors under discussion over the previous year.  Therefore, the UnitedStates viewed proposals addressing classification issues submitted to the Special Session as an
extension of the current state of play in the Committee on Specific Commitments;  these proposals
dealt with specific classification problems in given sectors in the context of possible new
commitments.
117. The representative of Brazil acknowledged that, in 1996, when the Committee on Specific
Commitments began its work, it was considered useful to try to arrive at a common classification;
however, he was not sure that this was the understanding at present.  In this regard, he recalled thatthe United States had circulated a document in 1998 stating that their objective was to agree on a
common classification which should be adopted by all Members.  He expressed interest in further
discussing this issue.
118. Concluding the discussion on this issue, the Chairman noted that many issues had been
mentioned as horizontal issues:  Article VII;  Article IV;  small and medium-sized enterprises;  MFN
exemptions;  classification;  transparency and other aspects of domestic regulation, where the
emphasis had been on avoiding duplication of the work on-going in the Working Party on Domestic
Regulation.  He proposed that the Council revert to these topics at its next meeting and that the
discussion be organized on an issue-by-issue basis, in order to encourage more focused discussions.
119. It was so agreed.
(c) Business services
Communications from:  the United States (S/CSS/W/20, S/CSS/W/28, S/CSS/W/30);  the
European Communities (S/CSS/W/33, S/C SS/W/34);  Japan (S/CSS/W/42);  Canada
(S/CSS/W/52, S/CSS/W/55, S/CSS/W/56);  Norway (S/CSS/W/59);  Australia
(S/CSS/W/62, S/CSS/W/63, S/CSS/W/65, S/CSS/W/67 and S/CSS/W/67/Suppl.1/Rev.1);Switzerland (S/CSS/W/75);  Chile (S/CSS/W/88);  Colombia (S/CSS/W/98); Mercosur
(Argentina, Brazil, Paraguay and Uruguay) (S/CSS/W/95)
Business services
(with the exception of accountancy , legal services and computer and related services)
120. The representative of Colombia introduced her delegation's communication on professional
services.  The proposal suggested that the recognition of qualifications, academic certifications and
experience gained in other Members' territory be encouraged and that qualifications be checked withinreasonable periods.  The procedures for presenting and processing a request for authorization to
exercise a profession in another Member country should not in themselves be a restriction on the
supply of the service.  Members should ensure full compliance with, and effective implementation of,
Article IV:2(b) and Article VII, in particular paragraph 2, which stated that "A Member that is a party
to an agreement or arrangement of the type referred to in paragraph 1 (recognition of education andexperience), whether existing or future, shall afford adequate opportunity for other interested
Members to negotiate their accession to such an agreement or arrangement or to negotiate comparable
ones with it".  Commitments should be undertaken which paved the way for the entry of professional
service providers through mode 4, in such a way as to facilitate the stay of foreign professionals,
subject to compliance with domestic requirements.S/CSS/M/10
Page 30
121. The representative of Australia responded to questions from the European Communities on
architecture and Japan on engineering services (as contained in JOB(01)/96/Add.3).  Regarding the
European Communities question on compulsory membership, he stated that, as a general rule,
Australia would not expect compulsory membership in professional organizations to be necessary.  A
possible exception might be if the professional organization was the sole arbiter of the standardsevaluation process.   Regarding Japan’s question, he stated that legitimate objectives were still a
matter of debate within the WPDR, but that Australia favoured a non-exhaustive, illustrative list.  On
mutual recognition agreements (MRAs), there were 3 types, i.e. professional engineer, engineering
technologist and engineering associate.  Australia was promoting the recognition of academic degrees
for all 3 types, and noted that, for professional engineers, there was already the Washington Accord
and, for engineering technologists, the Sydney Accord.  Australia also supported the model for mutual
recognition established under the Engineers Mobility Forum.
122. The representative of Switzerland, responding to questions received from Japan and the
European Communities, stated that the sectors in which Switzerland wished to draft new disciplines
were the regulated professions where legal conditions impacted on trade, and that this work should be
pursued in the WPDR.  The representative of Chile, responding to a question from the European
Communities on its proposal for minimum uniform comm itments, said that Chile felt that nationality
and permanent residency requirements in most cases could not be justified.  They could be substituted
by other less restrictive measures;  therefore Members should try to eliminate them.  Chile was open
to various ways of achieving this objective, possibly including a reference paper.
123. The representative of Japan said that nationality requirements for professional services should
be abolished.  The accountancy disciplines could possibly be used as a model for other areas.
Obstacles such as maximum shareholding limits and local content requirements should be removed,
he stated.  JOB(01)/96 gave answers to the questions raised by other Members, and he welcomed
answers to the questions submitted by Japan.  He asked Australia for further clarification regarding its
answers.  Concerning the European Communities question asked in JOB(01)/96/Add.1, Japan did not
foresee at this stage submitting further, or more detailed, proposals.  Regarding reciprocityrequirements for services, Japan thought these might be an MFN problem, but was aware that they
might also be an Article VI issue.
124. The representative of Norway said that answers to the questions raised by the European
Communities and the United States, as well some questions from Norway, would be submitted to the
Secretariat in written form. The representative of the European Communities said that the legal
regime for business services was generally liberal, but there was still a number of potentiallyimportant restrictions remaining.  Regarding Australia’s and Japan’s questions, on sectors in whichnationality and residency requirements might be justified, the European Communities representative
said residency requirements should be replaced by less restrictive measures where possible.  They
could be acceptable only for consumer protection only when less restrictive measures were not
available.  Where they were applicable, the period of the residency requirement should be reduced to
the minimum possible, she stated.  Nationality requirements could be justified for official duties, shestated, and should be based on specific activities, not whole sectors.
125. The representative of Canada said, regarding Japan’s question on alternatives to residency
requirements, that examples could be bonding or liability insurance requirements, or the appointment
of local agents.  With respect to the European Communities question, the inclusion of management
services in Canada’s professional services proposal was not a classification issue, but instead reflectedcommon interests domestically for these sectors.
126. The representative of Iceland said business services constituted a large group, with
considerable input potential.  National regulations were imposed in order to achieve quality
objectives, and liberalization had to take into account consumer protection, environmental protection,S/CSS/M/10
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public safety and other legitimate objectives.  Iceland shared most of the points introduced in the
European Communities proposal with respect to professional and business services, and believed that
Members should aim for broad negotiations in these sectors.
127. The representative of New Zealand agreed that nationality and residency requirements should
be replaced.  In addition, New Zealand questioned the need for most mode 1 restrictions, saying there
might be less need for regulations, and that compliance with such measures would seem difficult to
enforce.  She supported Switzerland’s thinking on the elimination of nationality and residency
requirements.  New Zealand was currently refining its thinking on consulting services, and would be
looking to submit a paper in the future.
128. The representative of Australia, with respect to architecture, asked for the European
Communities position regarding Members' negotiating MRAs with third parties, following the Nice
treaty.  The representative of the European Communities responded by noting that the Nice treaty was
not yet ratified.
Accountancy services
129. The representative of the United States, regarding the questions from Japan and the European
Communities on examples of inappropriate restrictions on electronic transmissions, said that if these
submissions contained only accountancy information, it did not seem appropriate to block them.Concerning Japan’s question on promoting liberaliza tion in advance of the WPDR discussions, the
United States believed the WPDR work could proceed in parallel with the negotiations on market
access and national treatment.  He stated that the Un ited States maintained the right to introduce new
proposals on professional services.  With respect to the European Communities question on any
linkage between the United States reference paper proposals for accountancy and legal services, andthe on-going work in the WPDR to develop general disc iplines, he replied that the United States could
foresee exploring disciplines for legal services, but th ese must take into account the specificities of the
profession.  On the European Communities question re garding sitting for examinations, he said the
United States did not consider examination requirements as inappropriate, but did believe it was
inappropriate to impose citizenship requirements in  order to sit for examinations.  On the European
Communities question regarding the amendments to the accountancy disciplines in the United States
proposal, the representative stated that the Eu ropean Communities interpretation regarding the
extension of the necessity test to scheduled measures was not correct;  the United States only wanted
to make sure that the negotiations covered Articles XVI and XVII, in addition to the disciplines.  On
Argentina’s and the Republic of Korea’s questions asking why the United States had replaced the
term “measures”, with “regulations”, he responded that the change was made because the United
States believed there was a difference between legislative transparency and administrativetransparency, and that it was easier for Members to provide for prior comment on proposed
regulations in the administrative process.
130. The representative of Argentina thanked the United States for its replies, and asked if they
could be circulated in writing.  Regarding the accountancy discipline amendments in the United States
proposal, if scheduled measures were subject to the necessity test, it would establish a hierarchy, hestated.  He did not understand the United States exclusions.  In Argentina’s view, there was no need to
justify scheduled measures.  The United States amendments could result in a double level of
obligations, he stated.
131. The representative of Turkey said, on business services generally, that her delegation
concurred with the aim to reduce barriers without affecting the quality of the service, especially with
respect to computer-related services.  She had concerns over the United States changes to accountancy
disciplines, and said Turkey preferred the accountancy disciplines without the modifications.S/CSS/M/10
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132. The representative of Cuba said she still had concerns over the United States proposal.
Negotiations on business services, including accountancy, needed to be based on the actual
capabilities of all Members.  As part of special and differential treatment, developing countries'
requirements should be studied, rules for mutual recognition developed and technical assistance
provided, the representative stated.
133. The representative of the Republic of Korea, regarding the United States proposal, said that
some of the barriers listed, such as limitations on the number of foreign accountants, concerned the
mutual recognition of qualifications, and should be dealt with as a horizontal issue.
134. The representative of Australia, in response to Members’ questions, stated that the Australian
proposal did cover auditing.  Concerning examples of unreasonable requirements for qualifying
examinations, the representative stated that, if the home country exam was generally accepted by
other countries, foreign candidates should not be required to again sit for exams, other than for hostcountry conditions.  In Australia’s view, there should be a more pragmatic and case-by-case analysis
of qualifications, and the assessment process should be transparent in this regard.  On strengthening
the accountancy disciplines, Australia noted the concerns expressed by other Members, but believed
there was a need for further clarification, and to address a weakness in the disciplines.  Australia
wanted to explore ways in which the accountancy disciplines could be applied to licensing andqualification requirements linked to scheduled measures.  While the accountancy disciplines
contained a strict separation between VI:4 disciplines and measures subject to scheduling, Australia
was not convinced that the separation was as strict in practice.  Australia believed that, if licensing
and qualification requirements, as well as technical standards, were part of scheduled measures, they
should be covered by the accountancy disciplines.
135. The delegation of the Philippines, regarding the United States amendments, thanked the
United States for their replies.  The minutes of the previous meeting said that the amendments were
not intended to expand the implied scope of the disciplines.  However, in his view, the amendments
did not imply this.  He wondered if the accountancy disciplines could stand without the United States
changes.  On the United States “measures” answer, he agreed with Argentina that a written replywould be welcome.  On deleting “endeavour” in paragraph 6, this was a departure from what had been
previously agreed, and was unnecessary.  On the paragraph 11 changes, he stated that the fulfilment of
legitimate objectives might not be achieved as a result of the changes.
136. The representative of Brazil thanked the United States and Australia for their answers and
clarifications.  He did not intend to repeat his delegation’s position as stated in the May meeting, and
noted that Argentina had already elaborated most of his arguments.  Brazil was also interested in a
written statement from the United States  The United States objective of addressing Articles XVIand XVII limitations was fair, he stated, but in Brazil’s view there was no overlap. Brazil’s
impression was that extensive discussions in the WPDR had confirmed this view.
137. The representative of the United States stated that, with respect to Article VI versus
Articles XVI and XVII, the United States view was that in many cases there was an overlap.  The
United States did not intend to apply Article VI to scheduled limitations per se , but only to the
implementation of scheduled measures.  The overlap arose in the sense that Article VI could apply to
one aspect of a particular measure, and Articles XVI and XVII to another, the representative stated.
Legal services
138. The representative of Australia introduced a submission elaborating on the concept of limited
licensing, contained in document S/CSS/67/Suppl .1/Rev.1, which was prompted by questions from
Japan and the European Communities.  He recalled that Australia's key objectives in the liberalization
of legal services were the promotion of a regulatory system that facilitated transnational trade in legalS/CSS/M/10
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services in all four modes while ensuring consumer protection, ethical standards, the quality of
service, and safeguarding the rule of law through appropriate non-discriminatory and regulatory
means.
139. Australia defined the limited licensing concept as a regulatory approach that permitted foreign
legal practitioners and foreign law firms to practise their home-country law, third-country law (wherequalified) and international law in a host country, without having to satisfy the more burdensome
requirements in relation to gaining a right to practise host-country law.  The International Bar
Association (IBA) definition of limited licensing wa s: "Regulation of foreign lawyers as practitioners
of foreign law for the limited purpose of permitting them to practice the law of their home jurisdiction
in the host jurisdiction without examination or full admission to the host bar."
140. A regulatory system adopting the limited licensi ng concept should aim for the following two
outcomes: first, formal recognition, under a transparent regime, of the right of a foreign legalpractitioner to practise home-country law, international law and, where appropriately qualified, third-
country law; and second, the right to practise in partnership or in other forms of voluntary commercial
association with other foreign legal practitioners or host-country legal practitioners, without
limitations on the number and type of such associations.
141. A prerequisite for the adoption of a limited licensing concept was the recognition of home-
country law, international law, third-country law; and host-country law as distinct bodies of law.  The
main interest of legal practitioners operating in foreign jurisdictions was the provision of advisory
services in home-country, third-country, and international law; generally, they were not interested in
practising host-country law, or having the right of audience in courts of host jurisdictions.  Several
Members had justified nationality requirements with the public function that arose from duties andobligations connected to appearance in host-country courts.  However, this was not of interest for the
vast majority of foreign legal practitioners.  Public interest and consumer protection concerns could be
addressed by subjecting foreign practitioners to the same disciplines as local practitioners and to
oblige them to be sufficiently covered by professional indemnity insurance.  The limited licensing
concept provided a framework to accomplish access in the relevant legal areas without intruding in
the domain of local practitioners.
142. The representative of Poland cited as main obstacles to international trade in legal services
citizenship requirements, a lack of legal basis for the recognition of foreign qualifications, a lack of
internal coherence of regulations governing the supply of legal services by foreign lawyers, and
requirements of mutual recognition of qualifications.  Foreign lawyers should be generally admitted
by independent and objective organs to practice home-country, third-country, and international law in
accordance with their qualifications.  He stated that Poland had eliminated citizenship requirements inthis sector and was about to lift existing residency requirements.
143. The representative of the Republic of Korea stated that the specific national character of each
country's legal system needed to be taken into account in the negotiations on liberalization of legal
services.  The present differences in the coverage and scope of foreign practices, and association
between foreign with local lawyers reflected these differences.  It was not appropriate to establish aclassification based on the prevailing circumstances in only one legal system.
144. The representative of Norway stated that his country did not maintain far-reaching restrictions
on the practice of foreign legal practitioners.  The regulations in place served the purpose of consumer
protection and ensured to establish independence for lawyers.  Consumer protection was to be
guaranteed through a requirement of formal legal trai ning of about five to seven years at a university
and two years of legal practice, of which 18 months had to be spent with a law firm, a public
prosecutor’s office, or as an assistance judge; each lawyer had to work on at least three cases in a
court of first instance.  Further, the government maintained an Independent Counsel to keep a recordS/CSS/M/10
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of all lawyers practising at any time. This Independent Counsel ensured that all practising attorneys
were insured in accordance with the law.  As for safeguarding the independence of lawyers, Norway
had adopted the national bar association's code of conduct which now governed bar-members and
non-members alike.  Lawyers had to be independent, both financially and otherwise, from clients and
other outside influence.
145. The representative of Norway then requested information on Members' proposals.  On the
United States' proposal, paragraph 4 acknowledged a problem for lawyers to practice in foreign
jurisdictions, particularly through the need to demonstrate knowledge and competence in the law of
the host country.  He wondered if the United St ates saw any way to overcome such problems.  He
requested additional information on the proposed reference paper, as set out in paragraph 7 of the
United States proposal.
146. On the proposal by Australia, he requested additional information on the fee-sharing
arrangements mentioned in paragraph 6.  The representative of Australia replied that foreign lawyers
and law firms should be allowed to enter freely into fee-sharing arrangements or other forms ofcommercial association, free of any conditions.
147. The representative of Norway also requested the delegation of Canada to explain why in its
submission on professional services, under the heading of "sectoral coverage," the bullet on legal
services did not mention home country law.
148. The representative of the United States replied to questions posed by delegations at the last
meeting or thereafter in writing.  The delegation of Jordan had requested clarification on the activities
that would fall under the services to be included in the W/120 classification of legal services in
relation to the provision of legal advice or legal representation as suggested by the United States.  Asimilar question had also been asked by the Republic of Korea and Japan.  The United States
responded that corporate governance was concerned inter alia with procedures and assisting
stockholders and management of corporations to comply with laws applicable to business. Public
advocacy and lobbying were concerned with representing clients' views before government decision-
makers, e.g. in administrative procedures.  Management consulting services were broader than thefunction performed by lawyers in advising on corporate governance.  Management consulting
included assistance in setting up corporate information technology systems, assessing operations and
recommending ways of improving efficiency and output.  Legal advice on corporate governance
typically focused on establishing procedures and assisting stockholders and management of
corporations to comply with laws applicable to business.
149. In response to a question by Jordan on what kind of problems faced by lawyers and law firms
in serving clients internationally could be addressed in the proposed reference paper, he stated that theUnited States was not yet prepared to submit a reference paper, but was seeking ways to address
issues of recognition, scope of practice and association of foreign lawyers or foreign legal consultants
with local lawyers and law firms, as well as transparency of regulation. Japan, the European
Communities and Australia had asked similar questions.
150. In response to a question by the European Communities as to whether the United States also
saw a need for facilitating supply under mode 1, the representative of the United States stated that he
was not aware that mode 1 was a problem with regard to cross-border transmission of reports or
information.  Problems were generally encountered in obtaining authorization to serve as a lawyer or
foreign legal consultants and to be permitted to employ, work for, and become partners with local
lawyers.  Such problems were mainly related to mode 3.
151. In response to Thailand's question at the last meeting whether the United States wanted
Members to include the services mentioned in paragraph 5 of its proposal under legal services, orS/CSS/M/10
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alternatively, whether it sought the understanding of Members that these services were already
covered, the representative of the United States replied that his delegation urged Members who had
not already done so to undertake commitments in these fields.
152. The representative of Argentina wondered whether the adoption of the concept of limited
licensing could be undertaken in an ad hoc fashion, or whether it required membership in the
International Bar Association.
153. The representative of Australia replied that the International Bar Association initially
promoted the full licensing approach.  However, there was no need to be a member of the
International Bar Association to adopt their approach.
154. The representative of Japan stated that in some countries the requirements for the
qualification of lawyers differed from region to region.  This obstacle could be addressed in future
scheduling.
Computer and related services
155. The representative of Uruguay, speaking on behalf of MERCOSUR and Bolivia, introduced
their proposal.  He stressed that it was presented for the purposes of negotiation, not as a legal text.
The proposal sought to promote liberalisation of this sector and to encourage the participation of
developing countries in trade in services in accordance with Article IV of the GATS and the
guidelines and procedures for negotiations, adopted on 28 March 2001.  He described the informatics
sector as including equipment, programmes and related services and as encompassing both
standardized and customized programs. He underlined the economic importance of this sector in
promoting growth and as a generator of well-paid jobs.  Given the increased demand for personnel, he
stated that the movement of persons (GATS mode  4) took on added economic importance.  He noted
the existence of trade impediments such as degrees, licences and technical standards which gave rise
to discretionary measures, particularly for modes 3 and 4. He noted, for example, that for sub-
sectors (a) to (d):  the share of unrestricted market access on consumption abroad was 70 – 76 %;  on
unrestricted commercial presence it was 68 – 77 % (or 29 – 30 % including horizontal measures);  and
full access of natural persons stood at 4 – 7 % (or only 2% including horizontal constraints).  He notedthat limits on foreign equity and restrictions on the type of legal entity were the limitations most
commonly listed in schedules.  In summary, he stated that the proposal sought commitments by WTO
Members, as well as the elimination of market access and national treatments restrictions, in all of the
in the sub-sectors listed in W/120 (supply of consultants installing equipment, installing programs and
data processing services, data-base services and other informatics services).
156. The representative of India noted that the MERCOSUR proposal included a discussion of the
importance of taking into consideration GATS Article IV, as well as a discussion on defining this
sector and how to take into account the UN- CPC. He thanked MERCOSUR for stressing the
particular importance of mode 4 in this sector and the existence of mode 3 barriers.  He noted that
India's position in this sector was drawn from the Indian software companies, whose concerns related
primarily to barriers under mode 4.  He encouraged all Members to enter "none" in their commitments
for this mode.
157. The representative of the Philippines welcomed the submission by MERCOSUR as a
reflection of the aim of Article IV to encourage developing countries to take the initiative to put forth
proposals.  He also noted the usefulness of the propos al from Canada, stressed the Philippines' strong
interest in this sector and encouraged further commi tments in all modes in this sector.  He supported
further discussions on how to give this sector priority in the upcoming negotiations.S/CSS/M/10
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158. The representatives of Canada agreed on the need for Members to make specific
commitments in all sub-sectors of computer related services and eliminate restrictions on market
access and national treatment.  She said Canada hoped to see other Members make proposals in this
sector.  Responding to questions from Japan, the European Communities and Jordan regarding the
classification of electronically delivered services she said that it might be premature to decide inwhich forum to approach this issue.  However, that said she considered the Committee on Specific
Commitments to be best positioned to deal with technical questions that may arise.  Responding to a
further question from the European Communities and Japan, the representative underlined that
Canada's proposal sought only to highlight the possibility of uncertainty about how GATS
commitments apply to new or emerging services, for example:  application service providers (ASP);
data warehousing;  on-line shopping and web-site hosting.  Clarifying which GATS commitments
may apply, she noted, would require further study, since for example, ASPs might be classified undercomputer related services such as data processing or a data-based services or as a value-added
telecommunications service.  Canada was therefore of the view that some ambiguity may exist
regarding the application of existing GATS classifications.  In response to a question from Japan
concerning what trade rules might need to be examined, Canada said it felt that Members should
clarify on how the GATS classification system applied in relation to the growth of internet andelectronic modes of delivery.  In response to a question from the European Communities about why
Canada's proposal in this sector was separate from other business services, she noted that the
computer-related sector was an important part  of the new knowledge-based economy, requiring
careful consideration and a separate negotiating proposal.  Responding to a question from the
European Communities on the specific types of barriers Canada would like to address in thenegotiations, she noted that Canada was currently consulting with its industry to identify such
barriers.  In response to Jordan's question regard ing how trade rules relate to the current nature of
business activity in this sector, she responded that the reference made in paragraph 10 of Canada's
proposal highlighted its interest in determining how existing obligations and classification codes
applied to a variety of services that arise as a result of electronic delivery.
159. The representative of the United States noted that computer services were at the core of
information technology and that the United States saw commitments in this area as important to the
creation of a globally-networked economy. He noted that as computers become increasingly
integrated into networks, computer services are increasingly network oriented.  He noted that the
proposal by MERCOSUR and Bolivia identified an important link between a Member's ability to
participate in and benefit from these networks.
160. The representative of the European Communitie s agreed with the representative of the
Philippines that, in order to better implement Article IV, more developing countries should submit
proposals to help clarify developing countries' interests and facilitate cooperation in addressing those
interests and concerns.
161. The representative of New Zealand stated that the analysis of the schedules by MERCOSUR
highlighted a number of discrepancies among the commitments already made across all the modes,
and expressed support for the thrust of their proposal.
162. The representative of Mexico noted that the proposal by MERCOSUR and Bolivia
demonstrated that globalisation made concessions in this sector beneficial to both developing and
developed countries.  He noted that this sector lent itself particularly well to service provision without
the movement of individuals across a border.  He expressed support for the MERCOSUR proposal
and felt that both developed and developing countries could seek to liberalise.
163. The representative of Uruguay observed that reactions to its proposal appeared to confirm the
importance Members attach to this sector a nd said that MERCOSUR and Bolivia would remain
available in future discussions to answer questions.S/CSS/M/10
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164. The representative of Chile said the MERCO SUR’s proposal was still being examined in
capital and hoped to have comments at the next session.
165. The representative of Singapore noted his country's desire to see further liberalisation in this
area, expressed support for the MERCOSUR proposal.   He expressed his support for classifying data
warehousing and application service providers, referred to in the intervention by Canada, ascomputer-related services.
(d) Communication services
Communications from:  Australia (S/CSS/W/17);  the United States (S/CSS/W/21,
S/CSS/W/26, S/CSS/W/30);  the European  Communities (S/CSS/W/35, S/CSS/W/61);
Japan (S/CSS/W/42);  Canada (S/CSS/W/53) ;  Norway (S/CSS/W/59);  Switzerland
(S/CSS/W/72, S/CSS/W/73, S/CSS/W/74);  the Republic of Korea (S/CSS/W/83);  Chile
(S/CSS/W/88);  Brazil (S/CSS /W/99);  Mexico (S/CSS/W/101)
Postal and courier services
166. Noting that there had been a number of questions from other delegations, the representative of
the United States said he wished to clarify that the United States submission was not a negotiating
proposal on "postal and courier services", but rather on "express delivery services".  The difference isthat courier services are akin to messenger services while express services used advanced electronictechnology and handled items from end-to-end in an integrated and time-sensitive manner, including
logistics services and customs facilitation.  In response to a question from Jordan on cross-
subsidisation, he said that the United States had concerns about the possibility of earnings of a
monopoly postal service being used to subsidise competitive express services.  In response to a
request for clarification from Japan, he noted that customs-related obstacles included difficulties inobtaining licences for customs brokerage and arranging timely customs clearance.  Responding to
Japan's request for details on "rapid release customs procedures for express consignments", he noted
that it referred to the facilitation of express delivery services through the adoption of expedited
customs procedures for such consignments, upon request.  Responding to Japan's question about
discriminatory treatment, he noted that such disc rimination could be between domestic suppliers and
foreign-service suppliers and/or between express delivery suppliers and other service suppliers.  With
respect to a question by the European Communities on the relationship to the air transport sector, the
delegate noted that services excluded, from the GATS under the Air Transport Annex, would also be
excluded from the coverage of express delivery services.  However, he did not consider that cargo
handling, customs clearing and forwarding services would be excluded.  Responding a request from
the European Communities for clarification on the United States position on postal services, the
delegate noted that while it did not seek to re-classify postal services, it would want to ensure thatexpress delivery services, supplied by postal operators as well as by private operators, would both be
classified under express delivery services.  Responding to a question from the Philippines, he said that
customs facilitation consists of practices and procedures used to avoid delays of customs processing
or to obtain rapid release of shipments while fully satisfying customs requirements. He elaborated that
this could include preparation of shipments and documentation in a way that would speed entrythrough customs, including electronic transmission of documents, advanced notification of in-coming
shipments and the ability to perform of customs broker functions.
167. The representative of New Zealand said her country hoped to present a proposal in the near
future.  The perspective of New Zealand, she said, was similar to that of the European Communities
proposal, particularly in respect to its suggestion to  clarify the relationship between the UPU and the
GATS regarding terminal dues.  She endorsed the idea that this issue needed to be taken up during the
negotiations.  She noted that such aspects of the UPU did not fit well with GATS principles, most
notably MFN, and suggested that Members might need  to need to look at the UPU and its regulationsS/CSS/M/10
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with a view to enhancing coherence between the two agreements.  She said New Zealand also
supported the classification suggestions made by the European Communities.  In response to
questions regarding the Swiss proposal on the need to include more elements of air transport, she
explained that it would be necessary to deal effectively with commitments on time-sensitive postal
operations.  However, New Zealand reserved its views on the idea of a postal cluster approach.  Shewelcomed the United States listing of obstacles as useful and suggested that these could also apply to
postal services generally.  She noted that obstacles, such as the denial of reasonable access to facilities
(e.g. highway, railways and airports), underlined the importance of bringing transport, and particularly
aviation services, under the GATS framework.  Not doing so, she argued, could hinder the efficient
movement of both goods and services.  Concerning cross-subsidisation of express delivery services by
suppliers with exclusive rights in another services, New Zealand endorsed it as an important issue for
discussion. With respect to classification, she agreed that the current CPC does not reflect marketrealities. However, she expressed concern about removing express delivery from the courier/postal
segments as this could lead to confusion in undertaking of commitments, perhaps, for example,
leaving in question the status of small- and medium-size suppliers who might not fit within the
proposed United States definition of express delivery.
168. The representative of Venezuela noted that developing countries must seek to balance the
requirements of UPU participation with competition in express services.  She noted that given the
accelerated development of technology, there will be fast growth in on-line services and this would
require fast hand-over of documents and goods.  For parcel delivery services, she noted that large
scale operations have been based on two concepts:  rapid hand-over and low costs.   She felt that in
order to maintain global competitiveness and more  evenly spread access for express mail service
suppliers, it was necessary to review and reduce operational, technical and legal obstacles.  She said
Venezuela supported the United States proposal on classification of express mail services and
suggested that a review of the characteristics of these services be undertaken.  She also suggested a
need to address  obstacles to access to internatio nal markets: e.g. it might be possible to define
procedures for handling which required government approval; to make customs clearance moreflexible; and to harmonize  certain criteria in this sector, such as treatment of items, weight
limitations, packaging, and delivery times and consider standardised quality control measures for the
granting of licences.  Finally, she noted the need for discussion to facilitate the interchange of
technology and training among Members.
169. The representative of Argentina said his government was very interested in this sector and
had sent reactions to the submissions by the European Communities, Switzerland and the United
States.  Concerning definitions, he said  that "public need" must mean that the citizen receives morethan minimal, inexpensive and basic service and that the provider was responsible for non-arbitrary
interference, non-violability and  confidentiality;  thus the concept of public service extended beyond
the idea of universal service.  He noted that an important distinction existed between postal services
and the transport of goods.  He stressed that postal services included a number of public service
segments for which there was an obligation of provision and this linked the state to postal services.However, a de-linking of postal service and national administrations had occurred along with the
separation of the operator and regulator and, in some instances, national postal suppliers were
operating like private enterprises in competition with other providers.  Express services, he thought,
could be distinguished from postal because they involved the transport of goods in less time and with
door-to-door pick-up and drop-off.  He said that the transport aspect of the service was not its
distinguishing factor since transport occurred on a multimodal basis;  rather express delivery services
were distinguished by speed requirements, which thus made it a postal services with special
characteristics. He said that postal activity was a union of coordinated actions with a view to handing
over the mail to the recipient while ensuring confidentiality and inviolability.  A distinction could thus
be drawn between the postal aspect of the service and ancillary services such as pick-up, delivery and
intermediate sorting, transport and delivery.  Defi ning postal in terms of the nature of the service
supplier, Argentina felt, was no longer sufficient given the current industry structure with manyS/CSS/M/10
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operators, both private and public, and thus the classification of this activity must be further
scrutinised.  Argentina felt that in a liberalised postal market, the need to ensure public service in
conjunction with free competition required that all operators become licenced postal operators, subject
to appropriate regulation in order to ensure the protection of the user as was required of the traditional
postal supplier.   He noted that, in principle, the European Communities position better fit a unifiedconcept of liberalised postal services because it was linked to interpersonal communications, legally
protected against interference, and reconciled public service and commercial activity.  The express
courier service could only be distinguished from international postal service by the committed speed
of delivery;  this characteristic was not sufficient to warrant a de-linking of them from their postal
aspects.
170. The representative of the Czech Republic welcomed the European Communities proposal on
the reclassification of postal and courier services in which express delivery services were classified as
a sub-sector of postal services.  She noted that the current CPC no longer reflected the reality of the
industry.  The Czech Republic supported the European Communities proposal on a market opening
that was compatible with universal service obligations, and its call for clarification of the relationship
between the UPU and the GATS.  The Czech Republic further supported the need for clarification in
the GATS of the relationship between postal and transport services as contained in the proposal fromSwitzerland.  With respect to the United States  proposal that express delivery have its own
classification, the Czech Republic felt that because these services were also carried out by postal
service providers, defining them as distinct from postal services would not be appropriate.
171. Regarding the reduction of trade restrictive domestic regulations in this sector, the
representative of Japan suggested that the work being carried out on domestic regulation at the
horizontal level and the International Convention on the simplification and harmonization of Customs
procedures needed to be taken into account.  Japan felt that these issues, and the United States list of
obstacles, would be a good starting point for discussion.  Japan was not convinced of the need to
distinguish express delivery services from other postal and courier services.  He noted that in the
United States list, most of the obstacles applied to all postal services and only a few relatedexclusively to express delivery.  He underlined the wide divergence in the express delivery services
being offered in different countries and felt that the business practices in different countries also
should be taken into consideration.
172. Responding to a question about its references to overly burdensome bureaucratic practices,
such as documentation requirements and customs procedures, the representative of the European
Communities noted that the variety of such obstacles outlined by the United States in its intervention
demonstrated the need for discussions on ways to ease these burdens.  In response to a question onhow it would define universal service, the delegate cited universal service as defined in
telecommunications as an example, noting that those negotiations left the definition of universal
service up to each Member.  She noted that the European Communities was interested in further
opening of market access and national treatment in negotiations on postal and courier services, while
commitments  could accommodate the existence of monopolies, universal service obligations andlicencing.  She noted that the GATS did not oblige deregulation and privatisation, so that these
decisions would be left to individual Members.  With respect to its suggestion to address with how
UPU obligations may relate to schedules of commitments, she noted that, given the existence of an
international forum dealing with public postal providers, clarification between the UPU and the
GATS would be required. Issues to consider included terminal dues and other parts of the UPU ruleswhich might not be compatible with MFN principles.  Responding to a request for clarification on
how to achieve the reduction of unnecessary barriers while maintaining service quality and consumer
protection, she cited certain regulatory provisions, customs delays, and weight and value limitations
for express delivery services as examples.  On the issue of the classification, the delegate said that the
European Communities remained open to the possi bility of combining elements of the EuropeanS/CSS/M/10
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Communities and United States proposals.  In this regard, she said the European Communities took
note of the references by Argentina and New Zealand to the transport question.
173. The representative of Norway expressed support for the proposal of the European
Communities regarding reclassification, but suggested that it should more clearly distinguish postal
and courier services on the one hand and communications and transport services on the other.  Henoted that the Swiss proposal stressed the importan ce of links between postal and transport services
and suggested that the European Communities position might be adapted to reflect this issue.  He also
cautioned that, by including hybrid mail services, the European Communities proposal might lead to
confusion regarding commitments on other communication services.  He suggested that more clear
distinctions could be achieved by listing sub-categories and noted, for instance, that “express delivery
services” was too vague a category, in itself.  Norway expressed support for the European
Communities proposal in respect to the schedules of  commitments.  He noted that the United States
proposal did not provide a clear distinction between postal and courier services.  Moreover, he
inquired as to why the United States had made distinctions based on the nature of the provider rather
than of the service.
174. The representative of Brazil supported the European Communities proposal with respect to
the importance of maintaining universal service.  He expressed interest in its critique of  the CPC
distinction between postal and courier services solely on the basis of the nature of the operator.
Regarding the proposal of the United States, the delegate noted that Brazil failed to see how a
definition based on the criteria of time sensitivity and the utilisation of advanced technology would
justify a distinction between express delivery and what was traditionally viewed as courier services.
He noted that in the Brazilian market there was little difference between courier services and expressdelivery services.  He felt that the main element distinguishing these two activities was that in the case
of express delivery the chain of activities from collection to delivery were performed by one
company, whereas with courier services some of the activities were commonly sub-contracted to other
companies.  However, he remained unsure as to whether this distinction justified a separate
classification.  He said Brazil agreed with New Zealand regarding the need for an examination ofthese issues.
175. The representative of Switzerland responded to a question from Japan on "postal taxes" by
specifying that these referred to the prices approved by the relevant ministry.  She noted that whereas
incoming international packages in Switzerland wa s subject to the “postal taxes”, outgoing packages
were not and therefore were liberalised.  She expressed general support for the proposal from the
European Communities, particularly the need to ma ke liberalisation compatible with public service
requirements, the need to create a new classification scheme, possibly in conjunction with the UPU,and the need to take into account UPU conventions in drawing up schedules of commitments.  She
requested the European Communities to explain what time-frame it foresaw for market access in the
following segments:  courier, express delivery services, handling of addressed parcels, handling of
addressed press products, handling of non-addressed items and document exchange.  With respect to
the United States proposed distinctions based on time-sensitivity and use advanced technology, thedelegate agreed that high performance logistics were necessary to provide express delivery services,
however similar needs applied to non-express deliveries.  As such, she noted Switzerland's
reservations about separating express delivery from other services on the basis of this distinction.
176. The representative of Hong Kong, China noted her delegation's interest in this sector and in
the idea of combining elements of the United States and European Communities proposals with
respect to classification.  She noted that the obstacles listed in the United States paper provided a
useful basis from which to work towards the relaxation of overly burdensome procedures for customs
clearance, so long as appropriate controls would be maintained. She expressed support for the
European Communities proposal to relax weight and value restrictions for advance clearance.  With
respect to compatibility between UPU and the GATS, particularly on the question of terminal dues,S/CSS/M/10
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she noted that Hong Kong-China would continue to  support a system of terminal dues that provided
favourable treatment to developing countries.
177. Commenting on the United States proposal, the representative of Mexico agreed with
Switzerland that in terms of distribution there was no distinction between express delivery and other
services; the only difference was speed of delivery.  However, he noted that this difference was notsignificant enough to justify a new classification for this sector, since aspects of express delivery
(collection, transport and distribution) already formed part of the classifications in document W/120.
With respect to the United States list of obstacles, he commented that none of the items listed (such as
local equity requirements, restrictions on joint ventures or denial of access to government programs)
were particular to this sector but applied to many services, and reflected policy objectives that could
be accommodated in  GATS schedules.  Citing anot her example, he noted that customs clearance
obstacles could apply to any type of trade across borders, not just express delivery.  He reiterated thatnone of the arguments advanced by the United States sufficiently distinguished express delivery from
other postal and courier services in such a way as to justify a separate classification and welcomed
further clarification of the United States position.
178. The representative of Cuba referring to the proposal of the European Communities noted that
the UPU was the designated agency to deal with te rminal rights. He noted that the UPU was currently
studying the issue with a view to gradually moving to cost-oriented terminal expenses.  He noted that
many among the 159 countries with designated postal service providers, particularly developing
countries, lack the material and managerial capabilities required to enter into trade relationships on a
cost basis.  Cuba felt that the conditions for the Council to discuss this issue were not forthcoming,
and that the Council should await the conclusion of UPU's effort.
179. The representative of Canada, reacting to the proposals of the European Communities and
Switzerland, noted that the suggestion to merge the postal and courier classifications raised questions
about the ability to maintain universal service oblig ations within the UPU. Canada felt that although
some Members had chosen to contract postal services to private companies, this did not appear to be a
sufficient reason to overturn the existing classification.  Canada asked how operators with anobligation to provide universal service would be identified in the schedules, and whether countries
wishing to retain universal service responsibilities of national postal administrations would be
compelled to exclude services provided by these administrations from their commitments.
Commenting on the United States proposal, the delegate noted that Canada was not convinced of the
need to create a new classification for express delivery as none of the distinctions mentioned seemed
to justify  this approach.  She suggested that the issue be discussed further in the Committee on
Specific Commitments.
180. Responding to Switzerland, the representative of the European Communities said that its
proposal did not mention gradual liberalisation for the services cited by Switzerland as it had in
interest in liberalising them as quickly as possible. However she recognised that a timeframe for
progressive liberalisation that gave developing countries greater flexibility could be envisaged.  As for
Hong Kong-China’s suggestion to merge elements of the European Communities and United Statesdefinitions on express delivery, the European Communities said it would consider whether this was
possible.
181. The representative of the Republic of Korea asked Switzerland and the European
Communities to respond to the questions it had posed  in an informal submission.  With respect to
classification, he agreed with the difficulty in distinguishing postal services from courier servicesbased on the current CPC scheme.  While sympathetic to the European Communities proposal, he
noted that the European Communities would need to reduce the number of listed services so as to
make it more applicable to Members outside the European Union and to developing countries.S/CSS/M/10
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Telecommunication services
182. The representative of Mexico noted that during the negotiations barriers in telecom were
reduced and Mexico's intention was to reduce them even further.  In order to do this, he observed that
the negotiations would require a balanced framework in which developing countries participated on
the basis of GATS provisions in Articles IV, XIX:2 and XIX:3.  He noted that, until 1990, the sectorin Mexico was under state monopoly. This was priv atised and today the market had many private
companies with foreign participation. He underlined that Mexico’s commitments in the telecom
negotiation opened all sub-sectors to competition except in satellite services and Mexico had adopted
the reference paper.  Today, 89 countries had commitments in telecom.  The representative noted that
Mexico sought a framework in which to carry out negotiations which would take into consideration:
the co-operation agreement between the ITU and WTO;  the classification scheme in document
W/120;  the definitions in the annex on telecommunications and the reference paper. Theunderstanding on accounting rates should remain applicable as Members had determined, through
consensus, the conditions that led to this understanding.  Mexico, thus, still considered the
understanding to be in force.  The negotiations should also take into consideration the results of the
assessment of trade in services under Article XIX of the GATS.  The objective of the negotiations
should be the gradual liberalisation on the basis of the provisions of the GATS relating to developingcountries.  He also suggested that principles for Internet service at the international level should be
drawn up so as to make available to all c ountries information needed to promote economic
development.  He noted that since exercises to this end were being carried out in other fora,
duplication should be avoided.  For example, APEC ministers had discussed regulation on
international taxes on Internet services and their progress could be taken as an example. Mexicoconfirmed that its commitments in the telecom reference paper had been implemented in national
legislation, but that it still felt that competition principles should not be part of the negotiations on
market access for certain sectors of interest to certain Members.  He felt that negotiation in this
respect, if necessary at all, should take place in a far broader discussion and should recognise the
different levels of development.  Mexico observed that competition obligations, which applied in onlyone sector, constituted anomalies and, that in order to create the same pro-competitive principles in all
countries, negotiations should ensure that all countries adopt the reference paper.  He noted that
Mexico was considering linking the negotiations with other issues, notably MFN exemptions.  At the
end of the negotiations some countries had included MFN exemptions, which lowered their
commitments.  He said Mexico would submit a document on this point.
183. The representative of the United States noted that the basic telecom agreement and reference
paper constituted a critical event in telecom which have helped propel the market into a globalised
age.  He said that increased privatisation and competition in telecom services would benefit millions
of users by lowering costs and offering innovativ e services.  The next step, to create a networked
economy in all sectors, would require increased private investment in order to build the infrastructure
over which services and products would flow.  He not ed that in order to improve investment climates,
countries should increase market access and national treatment commitments, since limitationsincreased the hesitancy of investors. The United States encouraged countries to remove barriers, adopt
the reference paper in order to foster competition, and avoid unnecessary restrictions on competitive
providers.  In responding to requests to clarify its use of the term "full privatisation” of the
telecommunications provider, the United States stressed the need for reduced barriers on investment
in order to foster increased competition.  He said  that full privatisation was a key step to opening
markets to competition.  He recognised that adequate regulation was important for competition, while
full privatisation and regulation were complimentary elements of liberalisation. The United States was
pleased that many countries had moved towards full privatisation of telecom operators, and noted that
they had been able to do so while continuing to satisfy their public interest concerns.  He pointed out
that liberalisation was ultimately a domestic decision and that the WTO could only articulate thebenefits of liberalisation and show where failures hurt the country and it’s trading partners. In order to
realise the benefits of a liberalised market, the United States urged other Members, who had not doneS/CSS/M/10
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so, to liberalise as soon as possible.  Responding to questions regarding the use of the terms "value-
added" and "basic" in relation to the reference paper and regarding whether the United States thought
that the reference paper should cover internet (internet telephony, in particular), he noted that a
country with commitments on voice telephony must allow voice telephony over internet, but that it
should not be regulated them the same as traditional voice.  He emphasised that regulatory treatmentand market-access commitments could and should be separated.  He discouraged the imposition of old
regulations on new Internet services, saying it would stifle innovation and send the wrong message to
new service providers and investors. While recognising that regulation of value-added services was a
matter of domestic policy, he outlined how, in the United States, the regulator was instructed to
refrain from regulating where there was competition and urged other country regulators to adopt a
similar approach, particularly where regulation was not necessary to achieve public interest goals.
Where regulation was applied, he stressed, it should be transparent, clear and not overly burdensome.He further noted that regulations might need to sc rutinise the incumbent supplier more carefully than
new entrants do in order to provide the incentive for the latter to enter the market.  He said that the
Federal Communications Commission defined value- added services on a functional basis (including
code and protocol conversion, changing content or format or user-supplied information, etc.) and did
not regulate these. He observed that the Internet and value-added services remained highlycompetitive and that the absence of regulation had encouraged growth.  Asked whether the regulation
of major suppliers in relation value-added services would expand the scope of the reference paper, he
said that it would, but noted that the Annex allowed value-added service suppliers non-discriminatory
access to the telecom network. The reference paper should not be expanded, he said, to operators who
are not major suppliers of basic telecom services.  He said the United States felt that value-addedservices experiencing a high degree of competition should not be regulated, but whether the Reference
Paper currently applied was a different question.  He said those efforts to interpret the Reference
Paper as applying to value-added service providers would be an extension that the United States was
not in a position to support.  Responding to the question on whether the United States proposal
concerned telecom or e-commerce, he said that the they did not want to create a new sector, nor wasthe proposal an e-commerce proposal.  However, in their view it sought to facilitate meaningful
negotiations by proposing a wider opening of those sectors, which are necessary for a networked
economy, and the flow of services and goods.  He encouraged countries to participate in the
networked economy by accepting greater market access and national treatment commitments in a
variety of sectors.  On a question about how the proposal related to the level of development in
individual countries, the United States responded that restricted access would only hurt developing
countries since those countries who did not open their markets would fall further behind in thenetworked economy and lose out on the increased educational, cultural, social, economic and
financial benefits it offered.
184. The representative of Japan stressed the importance of the expansion of commitments,
particularly improvements on the limitation of participation of foreign capital and on the quantitative
limitations on new entrants.  Japan felt that MFN exemptions on satellite services were an obstacleand fully supported the termination of the related MFN exemptions.  With respect to domestic
regulation, Japan supported the United States view that regulation on value-added service suppliers
should be minimal.  Japan further supported the European Communities view that regulation based on
scarce resources should also be minimised.  He also suggested that unreasonably high-licensing fees
was an area in which to seek improvements.
185. The representative of Australia took the floor to respond to some of the questions posed in the
May meeting.  Responding to the European Communities question regarding whether the Australian
proposal included all electromagnetic signals, Austra lia answered affirmativel y and said its view was
based on the definition included in the Telecom A nnex.  With respect to the question posed by the
European Communities and Jordan on clarifying terms used in the reference paper, Australia said itfelt that provisions associated with "competitive safeguards" needed to be made more comprehensive
by including examples beyond the ones currently listed (anti-competitive cross-subsidisation, usingS/CSS/M/10
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information with anti-competitive results and the non-communication of technical information in a
timely fashion).  Australia argued that more safeguard provisions were needed to prevent companies
with substantial market power from taking advantage of that power.  With respect to the term
"independence of the regulator", Australia noted that  there were no criteria to determine independence
and that such criteria should be developed.  Examples would include the separation of regulatoryagencies from suppliers, giving clear responsibility for the development and enforcement of
regulations to the regulator, impartial decision-making, and being held accountable for their decisions
by administrative and judicial review processes.  Responding to the European Communities question
on Article VI of the GATS, Australia expressed support for the development of a necessity test as,
without it, provisions of Article VI would remain am biguous and of little benefit to service exporters
facing inappropriate barriers.  The delegate noted, however, that a necessity test must conform to the
right of Members to adopt appropriate regulations in pursuit of legitimate public policy objectives.Responding to Jordan's question on market access, Australia pointed out that paragraphs 14 and 15 of
its proposal listed barriers to market access that Australia would like to see addressed in the
negotiations. These included:  restrictions on legal forms of commercial presence;  the privileges of
some satellite operators;  lack of transparency in licensing requirements;  over-burdensome licensing
requirements; high licensing fees; anti-competitive bundling of services; high interconnectioncharges; high mandated accounting rates; etc.  In response to the issue raised by the United States on
treating Internet as value-added and its consequences for the application of the reference paper,
Australia asked how the United States would reconcile this characterisation of Internet with a
technical analysis of Internet delivery?  Australia said it considered it to be packet-switched data
transmission services and not value-added services.  Australia recalled the technical analysis itpresented at the last Services Council meeting, whereby its characterisation relied on distinguishing
three steps:  dividing digitised information into pa ckets;  addressing and routing at the sender's end;
and reassembling packets at the receiving end.  The representative argued this point needed to be
considered further since, if internet services were categorised as packet-switched data transmission
services, then the reference paper would apply, which would ensure fair competition in Internetdelivery services.  The delegate underlined that this would give governments the ability to intervene
in order to promote competition where there were dominant players, it being understood that there is
no need to intervene in private arrangements.
186. The representative of Israel noted that liberalisation in this sector was key to the development
of the overall economy.  She informed the Counci l that the reduction of the monopoly power of the
Israeli domestic Telecom Company had had an enormous impact, with competition in international
service bringing lower rates and other benefits to consumers.  In mobile service, the number ofsubscribers was 2.9 million by the end of 1999.  She noted that the changes had allowed the
development of new multimedia services and that Israel was now creating new infrastructure for new
services.  Israel said that the liberalisation of the market, whether linked to a WTO commitment or
not, had served the Israeli economy well, fostering lower prices, innovation, growth in e-commerce
and social benefits. She said that opening the market, whether autonomously or not, contributed tooverall development in the country and encouraged others to do likewise.  The delegate said it was
impressed with Brazil's liberalisation and regretted that its offer did not find proper expression in the
Fourth Protocol.  She also noted that this case underlined the debate about autonomous liberalisation.
With respect to the use of the term "technological neutrality" in a number of proposals, Israel sought
clarification from the Secretariat on the legal implications of this term in the framework of thenegotiations and the GATS.  Israel was also not clear about how to reconcile this term with the
classification discussion, which sought to take into account technological developments. She said
Israel looked forward to a more detailed response from the United States on this topic.
187. The representative of Norway noted that over the last few years telecom had become the key
infrastructure for the development of all sectors for both goods and services and that telecom had
become a generator of welfare in national and interna tional trade.  He referred to recent studies that
pointed to the fact that developing countries also benefited from this growth.  The delegate noted thatS/CSS/M/10
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since January 1998 the Norwegian telecom market had been fully liberalised and that Norway placed
strong emphasis on technologically neutral regulations enforced by an independent regulator.  He
underlined that three years after liberalisation, the new competition had proven beneficial to
consumers, business and telecom companies with innovative services, lower costs and new business
opportunities arising.  Norway therefore felt that there are good reasons why members who have nocommitments, partial commitments or phased-in commitments on basic and value-added services
should fully adopt the relevant commitments, particularly on Internet, mobile and satellite services, as
well as the reference paper.  In response to the question posed by the European Communities on
whether the Norwegian proposal addressed the transport of all electromagnetic signals, the delegate
said that Norway's proposal, as it stands, did not include this point but Norway nonetheless recognised
the transport of all electromagnetic signals as covered in commitments.  Norway had begun a process
of revising the framework for telecom, which was to include broadcasting.  On the issue of revisingthe internal legal framework for electronic networks and services where networks used for radio and
television are included, Norway asked the European Communities how it thought this might impact
on the definition of telecommunication services?  Norway affirmed its support for the reference paper
and the need for it to be strengthened through cl arification. However, Norway sought to know how
Australia found the text unclear.  As a genera l note, Norway informed  the Council that it had
undertaken further steps to privatise the former monopoly provider which separates the government
ownership interest from its regulatory oversight.
188. The representative of Cuba expressed support, in principle, for the proposal from Mexico.  He
noted that many proposals suggest that countries had not made commitments because of time
constraints or restrictions on the participation of foreign capital and that these proposals invited allMembers to undertake full commitments.  Cuba supported higher levels of liberalisation of trade in
services, but recalled that Article XIX:2 recognised the need for this process to consider national
policy objectives, the levels of development of Members and stipulated the flexibility for developing
countries to gradually open their markets.  Cuba felt it was not in a position to fully and immediately
open its market in many sub-sectors, but hoped to participate in the negotiations in accordance withthe provisions of Article IV.  In response to the calls for adoption of the reference paper, Cuba felt
that the practice of limiting its adoption to countries who have taken commitments should be
maintained, otherwise, the right to regulate based on national policy objectives, of particular relevance
to developing economies, could be called into question.  Finally, on the need to regulate value-added
services, Cuba expressed the view that this decision should reflect the vast difference between
developed and developing countries in implementing Internet communication and information
technologies and the impact of these technologies on international electronic trade. The absence ofappropriate regulation, he noted, could disadvantage competition in developing countries.
189. The representative of the European Communities responding to a question from Jordan.  The
question related to the statement that the Europ ean Communities felt, in many countries, operators
face cumbersome administrative requirements, such as a large number of reporting obligations in
order to obtain a licence, business plan authorisations and mandatory changes to business plans inorder to obtain interconnection agreements.  The European Communities were not convinced that it
was necessary to maintain all of these authorisation obligations and felt that some could be dispensed
with.  He pointed out that the European Communities is reviewing the obligations it requires for
suppliers and that it would welcome more discussion on licensing obligations.  In response to another
question by Jordan regarding how the European Communities defined “full liberalisation” of atelecom market, especially for developing countries, the European Communities reiterated Israel's
comments that competition is beneficial at any development level because telecom significantly
reduced costs of all other economic activities and in turn fostered new activities, particularly e-
commerce.  Therefore, the European Communities encouraged Members who had not already done so
to fully open their telecom markets to liberalisation and noted that the experience of a few lesserdeveloped countries has shown that this can be done quickly.  He recalled that many developing and
least-developed countries which have recently acceded to the WTO have agreed to liberalise by 2004S/CSS/M/10
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thereby giving them an adjustment period in which a legal framework and an independent regulator
could be established.  The delegate suggested that, henceforth, governments would no longer be
directly supported by telecom taxes, but by the development of telecom activities in general and, as
such, old sources of revenue would be more than replaced by new sources.  Responding to Jordan's
question regarding why the European Communities felt that liberalisation would solve the accountingrates problem, the European Communities recalled that accounting rates were subject to the GATS
only when there were government measures and not when it was commercially negotiated between
companies.  So, once competition existed between two territories there would no longer be a need for
government measures to impose accounting rates within those territories.  This should resolve any
problem of implementing the MFN clause.  Moreover, he argued that once a market was liberalised,
there should be no restrictions on market access or national treatment.  Regarding Mexico’s
suggestion that the negotiations take into account the ITU's work on classification while maintainingrecourse to W/120, he asked how Mexico reconciled  these two points.  Regarding the intervention
made by the United States on the European Communities question on privatisation, the European
Communities said it felt that the United States had not clearly and precisely responded to its question.
The explanation given did not convince the Europ ean Communities of the need for a new parameter,
namely privatisation, in opening markets.  The European Communities reiterated:  what was the legalbasis within the GATS framework for discussing privatisation?  Also, with respect to value added
services, how were Internet services defined?  The definition proposed by the United States and its
response to Australia’s question on packet-switched data services seemed unclear and the European
Communities requested that the United States clarify whether it considered Internet services to come
under packet-switched data transmission services.  Responding to Norway's question on whether therevision of the European Communities internal regulatory framework would have an impact on its
position in the GATS negotiations, the European Communities noted that it would consider how
changes the European Communities could serve the negotiations, including the question of
broadcasting signals in the telecom sector, but reserved a final answer on the question until the review
process was completed. Regarding the price of licences the European Communities asked Japan howwould one assess what constituted an unreasonable licence cost, what criteria could be used and how
would this be reflected legally in the GATS?
190. The representative of Switzerland, responding to the European Communities question
regarding the transport of electromagnetic signals, noted that its proposal was based on the definition
contained in the Annex on Telecommunications, which foresaw provision, by any electromagnetic
means.  However, she noted that the paper did not deal with content, which would be the subject of
specific commitments undertaken in other sectors.  Responding to Korea as to why the Swiss proposalmade a distinction between monopoly and the limitation on the number of suppliers, the
representative compared economic theory, which stated that a monopoly was never a first-best
solution, with economic reality, which had shown that a few suppliers could still generate competition
and that a limitation on the number of suppliers was often motivated by a shortage of frequencies.
Commenting on the proposal by the United States, she noted that on e-commerce the United Statesproposed to take full commitments on complimentary  services that were integrated into network-
based transactions including distribution, computer services, express delivery, advertising, and some
financial services which were critical to completing e-commerce transactions.  Switzerland noted its
interest in forming clusters in order to make progress in the liberalisation process. She said that a
cluster approach may be useful and may help progress in liberalisation. She noted that thecombination of services to be used in the negotiating process should depend on and be tailored to
country interests.
191. The representative of Iceland noted that it had no major difficulties with the proposals and
supported elements that favoured better market access and national treatment commitments.  She
noted that further liberalisation enhanced growth but privatisation without regulation did notnecessarily lead to competition, but could lead to the opposite result.  Iceland argued that what was
most important was competition and the implementation of a regulatory framework, but privatisationS/CSS/M/10
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is a domestic matter.  Iceland felt that WTO Members could play a role in promoting competitive
Internet charging.
192. The representative of the Czech Republic noted that in her country the market had moved
from a monopoly to a liberalised market in a short time  and that it had two goals:  to develop a fixed
digital network;  and to prepare for liberalisation.  The process began with a series of pilot projects inpublic fixed networks and by selection procedures for mobile operators.  In mid-2000 a new telecom
act was passed implementing full liberalisation. The Czech Republic noted that its commitments in
basic telecom took effect in January 2001, with no restrictions for entry into basic or other services.
Reacting to the Japanese proposal, the delegate noted that the Czech Republic had no restrictions of
the kind mentioned.  The Czech Republic expressed general support for the proposals of the European
Communities, Canada, Norway, Switzerland and Mexico.  She supported the need for liberalisation
and a better infrastructure.  She also saw a need, for the purpose of the negotiations, to harmoniseterms used in basic and value-added services as there were difference between countries and
organisations.
193. The representative of Turkey said that recent technological innovations and liberalisation had
resulted in increased competition, decreased prices, innovation and infrastructure development.
Telecom liberalisation was beneficial for consumers and contributed to national economicdevelopment.  She noted that Turkey supported the European Communities position of a limitation on
the number of suppliers may only be justified where scarce resources exist.
194. The representative of Brazil presented an overview of the Brazilian developments in the
sector.  Brazil had undergone a process of regulatory reform and liberalisation in telecom with the
main features being full privatisation in 1999 and the creation of a regulatory framework aimed atpromoting competition while ensuring universal service and the interests of consumers.  The results
had been impressive with the number of installed fixed telephone lines rising from 13 million to
35 million between 1994 and 2000.  For mobile telephones the number of subscribers rose from
800,000 to 21.5 million in the same period.  Estimates were that if this trend continued in the future,
by 2005 the number of fixed lines would match the number of mobile subscribers, totalling120 million lines. The delegate noted that in the view of the United States, Internet protocol
telephony, even though it provided the same voice and data services as basic services, should not be
regulated as a basic service and asked how this approach was consistent with the concept of
technological neutrality developed in the negotiations on basic telecom.   With reference to Internet-
based services, the delegate asked what the United States understood these to be and how they could
be captured within the current categories of value-added services.  He requested further clarification
about the impact of major suppliers of telephone services expanding into value-added sectors andwhether this raised the problem expanding their market power.  He inquired whether this implied that
the reference paper could apply to so-called value-added services, for example Internet telephony,
when supplied by a supplier of traditional serv ices.  With respect to the European Communities
comments on the reduction of restrictions linked with the allocation of scarce resources and the
reduction of interconnection-related obligations imposed on operators, Brazil expressed requestedfurther clarification.
195. The representative of Uruguay noted that some proposals stated that the objective of the
negotiations should be full privatisation of networks and operators and he underlined that this went
well beyond the scope of the GATS.  He felt that the Council needed to bear in mind certain basic
concepts of the agreement.  He requested clarific ation as to the legal basis for the privatisation
objective.
196. The representative of Korea shared the view of the United States that regulation on value
added services in undesirable.  Korea felt that the scope of the reference paper and its application
should not be expanded to include value-added services.  Responding to the European CommunitiesS/CSS/M/10
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question regarding the coverage of electromagnetic signals, the delegate noted that its own proposal
did cover all signals provided by all means, however , it did not cover content provisions and therefore
did not include broadcasting.
197. The representative of Singapore, agreeing with the thrust of the proposals, called for further
liberalisation and the deepening and broadening of commitments.  He noted that, like others,
Singapore supported the call for the adoption of the reference paper.  Singapore further supported the
removal of restrictions based on specific technologies with the exception of direct-to-home
broadcasting and Internet content services.  Commenting on the proposal from Australia that all
telecom services should be recognised as traded services and that all international telecom services
and settlements be subject to GATS principles, he requested clarification from Australia as to which
GATS principles they was referring to and how countries who had completely liberalised could
commit their carriers' commercial negotiations to the WTO dispute settlement.  Singapore endorsedthe Australian proposal for competition in Internet charges. However, it was not in favour of
regulation of the Internet or the institution of regulated settlements.  He felt companies could best
come to commercial solutions while underlining the need to take into account mutual benefits and the
principle of cost sharing.  Singapore reiterated it s advocacy of cost sharing in international Internet
connectivity, which would accelerate the growth of Internet capacity and highlighted the value ofAsian access and content.  He expressed support for the proposal of the United States on
complimentary services.
198. The representative of Canada stressed that Canada's proposal outlined its interest in market
liberalisation based on the benefits that would accrue to all Members.  Canada had liberalised its
domestic market and this had resulted in economic and social benefits.
199. The representative of Mexico replied to the European Communities question concerning how
to reconcile ITU classification and W/120 by noting that the ITU work could be helpful in clarifying
definitions while W/120 would remain the basis of negotiations on commitments in the WTO.
200. The representative of Argentina presented a study by his authorities and remarked that
telecom constituted a key sector for the facilitation of investment on the basis of a stable and clear
regulatory framework.  He supported the concept of greater market access for all countries regardless
of their level of development and suggested the developing countries could specialise in certain
sectors enabling them to be exporters of certain types of services.  Aspects of the Mexican proposal,
he noted, coincided with portions of the proposal of Argentina.  He indicated that there had been
substantial growth in telecom in the second half of the 1990s, that Argentina adopted, by national law,
the commitments in basic telecom and recently, had laid down, by decree, the conditions for full
market access and national treatment.  The result had been a penetration rate of 24%, which was asubstantial improvement over rates at the beginning of the liberalisation process.  He stated that
authorities were currently examining, and would probably revise, the concepts that gave rise to the
reference paper. The issues being examined included:  the need for relaxing restrictions on foreign
investments;  the consideration of new topics in telecom such as convergence and its impact on GATS
rules;  e-trade commitments;  the possible review of content of the reference paper;  accounting ratesand internet access charges.
201. The representative of Venezuela shared the results of studies by the national telecom
commission and ministries which showed that the provision of new telecom services has resulted
from a process of opening the market in order to foster a knowledge society.  She noted that this
process had seen the emergence of new operators and a regulatory body nationally. Venezuela hadfurther become a regional leader in telecom, had held the Chair of the Andean Telecommunications
Authority, and had participated actively in activities of the ITU and in the Simon Bolivia satellite
project.  The delegate said that the opening of the basic telecom sector must not be seen in isolation,
but as connected to a relaunching of activity throughout the sector.  She underlined that VenezuelaS/CSS/M/10
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had an independent regulatory authority that sought  to promote investment, help with the promotion
and protection of free competition, strike a balance between the needs of operators, and assess quality.
Regarding Mexico's proposal to take into account the assessment of trade in services, the delegate
asked if Mexico would consider making a specific co ntribution to a sectoral study that would include
autonomous liberalisation and expressed Venezuela's desire to do likewise.  In a further question toMexico regarding preparation of principles for the development of international Internet networks and
the reference to an APEC document, the delegate asked if this was a contribution in addition to the
proposal, an annex to the proposal or simply flagged for general information?  Responding to
Australia's comments regarding the reference paper and type of technology, Venezuela noted that in
principle it restricted only shareholdings of radio-broadcasting enterprises and noted that its regulates
services and not technologies.  Venezuela agreed in principle with the need to analyse the content of
the reference paper in order to determine the need for clarification, given different levels ofdevelopment in countries. Such an analysis could help encourage wider adoption of the document.
Commenting on services provided over the Internet, their relation to basic services and whether the
dominant supplier provisions of the reference paper would apply to internet services, the delegate said
that Venezuela considers Internet access to be a basic service, but that services over the Internet are
value-added services for which content is examined and to which other regulations are applied.  Withreference to the Australian paper, which speaks of clarifying criteria on the independence of the
regulator, Venezuela underlined that its regulatory authority had its own legal status, was autonomous
technologically and financially and did not reflect the interests of government or individual
corporations.  With respect to the inclusion of licensing prescriptions, Venezuela noted that its
regulator had clearly defined transparent criteria for the issuance and withdrawal of licences.Commenting on the moratorium on accounting rates she stated that this topic should be analysed to
determine the impact of such measures on the economies of countries concerned.  She also noted that
this issue was being discussed in Study Group Three of the ITU and in regional bodies that were
examining the methodologies for cost-models for ob taining reference accounting rates.  Venezuela
agreed on the need to assess the viability of studies to provide a new interpretation for the disputesettlement procedure since no agreement has been reached in the ITU on this point.  Commenting on
the proposal by the United States, and specifically on the inclusion of a wide range of services
involving a large variety of technologies, Venezuela noted that it did not share this position since its
national legislation covered services and not technology.  She stressed that the regulator must
guarantee certain principles, such as preserving the right to formulate the rules to be applied to
services provided through new technologies for which countries have no undertakings, and noted that
this was particularly true if third generation technologies emerged.  Regarding the United States viewthat countries should avoid regulating value-added services, Venezuela felt that it was each country's
right to regulate and set norms for Internet and transactions on the Internet in accordance with
national policies.  There were value-added services for which the Venezuelan regulator requires
capacity requirements for Internet service provision.  Responding to Japan's comments on the
restriction of the number of providers, Venezuela noted that it did not have a limit on the number ofproviders, except where scarce resources existed.  With respect to state monopolies, Venezuela noted
that since 1991 the state ceased to provide service, except for defence and security related issues.
With respect to Japan's concern with the regulation of settlement disputes, these did not apply to
Venezuela.  Commenting on the EC proposal's objectives regarding commitments in modes 1, 2 and 3
in all modalities without restrictions, Venezuela reaffirmed its need for access restrictions such as therequirement for the State to attribute operating righ ts and the need for companies to be domiciled in
Venezuela. With regard to the reference paper and the EC's proposal to encourage a revision of the
domestic framework, Venezuela agreed with this idea although stressed its domestic nature.  She
noted that Venezuela was in the process of reviewing its legal framework and stressed that the
negotiations should not seek to deregulate but to re-regulate in such a way as to ensure that marketconditions were consistent with national policy objectives.
202. The representative of the European Communitie s, in response to a question from Brazil,
clarified that he had kept his comments regarding the need to limit interconnection obligations to aS/CSS/M/10
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minimum with a view to ensuring universal services.  His comments should be understood in the
national context.  He said that in some countries licensing procedures included an obligation to notify
all interconnection agreements whatever the size of the operator and that this requirement was
excessive.  He clarified that his comments on licensing conditions were inspired by the licensing
procedures in the European Communities in which such conditions are based on scarce frequencies,numbers and right of passage, all of which were requirements which related only to the guaranteeing
of universal service.  The European Communities reiterated that it wished to exchange views with
other Members on reducing licensing requirements to a bare minimum.
203. The representative of Poland noted that there had been a process of liberalisation in Poland,
including the adoption of a new telecom law that came into force on 1 January 2001 and which
completed the implementation the commitments it made in 1997.  He expressed Poland's support of
the proposal by the European Communities and identified with its regime as proposed in paragraphs 9to 13.  Furthermore, Poland supported paragraph 8 of the proposal calling for a separate debate to be
held on the objectives of the negotiations on the telecom sector.
204. In response to comments that restricting access based on developing country status only hurt
the country concerned, the representative of Saint Lucia said that such a comment did not pay due
regard to the underlying progressive liberalisation allowed for by the GATS.  She recalled that Saint
Lucia does not have a commitment in telecom, but has undertaken significant reform in pursuing a
harmonised approach with other members of Orga nisation of Eastern Caribbean States (OECS) in
which they had enacted harmonised telecommunications acts and regulations that create new
liberalised and competitive environments.  She no ted that this was occurring with due respect to
national policy objectives and the level of development, which provided due flexibility for OECSMembers, and she characterised the “one-size-fits-all” approach as inappropriate.  She noted that the
Cable and Wireless monopoly position in Saint Lucia was changing.  She reiterated the legitimacy of
maintaining a flexible approach to liberalisation, su ch as is the case with one OECS Member who has
adopted an approach which mixes monopoly and private sector elements.  Saint Lucia challenged the
notion of technological neutrality, as it could have far-reaching impact on future commitments,including across-the-board adoption of commitments in terms of the removal of barriers, the extension
of commitments in one sector to a complimentary sector, or the adoption of regulatory principles
without regard to the discretion built into the GATS.  She noted that Saint Lucia's agreements with its
OECS partners and Cable and Wireless established regulatory principles pursued on a best-endeavour
basis.  She informed the Council that Saint Luci a was implementing phase one of the liberalisation
programme and the transition to full competition would be completed by end-September 2002.  The
OECS had also established the Eastern Caribb ean Telecommunications Authority, which was a
regulatory body.  She stressed Saint Lucia's belief that the flexibility of the GATS approach must not
be undermined by the liberalisation process and that developing countries should be able to make
commitments on the basis of their level of development and the size of their economy.
205. The representative of Mexico, responding to Venezuela's questions, noted that Mexico would
seek to contribute to an evaluation exercise with re spect to telecom.  Furthermore, Mexico stated that
it considers the APEC document attached to its paper to be submitted on a negotiating basis.
206. Regarding privatisation, the representative of the United States underlined that the United
States proposal saw this as a goal, and commended those Members who have achieved it.  It was a
first step among many necessary to achieving full liberalisation.  Responding to Australia's question
on Internet transport services he agreed that these were based on packet-switched services.  However,he noted that it would be incorrect to equate Internet transport services with packet-switched data
services.  The United States was also reluctant to expand the reference paper principles in ways that
might stifle Internet services development.  Referring to the distinction between basic and value-
added services, he noted that in the United States basic telecom services were based on the pure
telecom transmission path, whereas value added was defined on a functional basis.  On the questionS/CSS/M/10
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about a dominant basic service supplier expanding into value added services, he agreed that this issue
required oversight and safeguards to prevent the leveraging of monopoly services in basic telecom in
the supply of value added services.  Agreeing with Venezuela, the United States said that where this
line was drawn was a matter of domestic policy, but cautioned against over-regulation. Privatisation,
he noted, was also a matter of domestic policy, but was another example, in the United Statesexperience, where the results were beneficial.
207. The representative of Australia responded to Norway's question by saying that reference
paper provisions on the independence of regulators remained unclear and could be strengthened by
criteria that ensured independence and impartiality.  In response to Singapore comments, Australia
clarified that it had not suggested that commercial settlements come under the GATS, but that
accounting rates were only subject when the result of a government measure.  She further referred
Members to their non paper (Job No. 111) on accounting rates issues, she said provided some counter-arguments to Mexico's suggestion that the situation had not changed and addressed Venezuela's
concern on the need for analysis on the impact on countries concerned.  She noted that because
accounting rates had been falling quickly and half of all international traffic now bypassed the
accounting system, the few countries that used accounting rates had become much less dependent on
revenues since the moratorium was devised.
Audio-visual services
208. The representative of Brazil said that the communication presented by his delegation was
motivated by the idea to approach audiovisual services from an integrated perspective.  Progressive
liberalization should be promoted, while ensuring governments' autonomy to regulate for cultural
purposes.  Developing countries should find increasing opportunities to export their products.  GATSseemed to provide appropriate tools for liberalization in this sector, but additional measures might
need to be contemplated, such as subsidies or trade defense mechanisms, like anti-dumping and
safeguards.  Such instruments might be useful given the oligopolistic structure of the market.  Brazil
recognized the social and political sensitivities of th is sector, but considered that the debate in these
negotiations should overcome the two radically conflicting positions that characterized the UruguayRound negotiations.  Therefore, the various thoughts contained in his delegation's communication
aimed at finding a common ground on how to move forward on audiovisual services, a sector in
which Brazil had export interests.  This communication did not prejudge Brazil's final position in the
negotiations.
209. The representative of the European Communities said that, as stipulated in the Negotiating
Guidelines, no sector should be excluded a priori  from the negotiations.  The European Communities
had not tabled a negotiating proposal on audiovisual services.  The European Communities objectivein this sector was to guarantee the possibility of Members to preserve and develop their capacity to
defend and implement cultural policies for preserving cultural diversity.  The European Communities
noted with interest that the negotiating proposals presented by the United States, Switzerland and
Brazil explicitly recognized the need to preserve and promote cultural diversity.  Turning to the
proposal by Switzerland, he enquired what the general negotiating objective was, and moreparticularly, what should be the purpose of a "cultural diversity safeguard" in paragraph 11.
210. The representative of Hong Kong, China noted with interest that the proposals from the
United States, Switzerland and Brazil contained a common theme, which was that new thinking
should be injected in the negotiations for commitmen ts in this sector, in order to go beyond the two
radically conflicting positions which prevailed during the Uruguay Round.  Her delegation wasnevertheless concerned that some of the proposals referred to certain trade policy measures and trade
defense mechanisms as possible means to facilitate cultural diversity and encourage commitments in
this sector.  The GATS should not be used as a means to prevent the preservation of cultural diversity.
But her delegation wanted to caution against any attempt to use any reason, including preservation ofS/CSS/M/10
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cultural diversity, as a disguised means of protectionism.  While Hong Kong, China considered it was
important to promote its own distinct culture, it adopted no specific instruments aiming at the
preservation of cultural diversity in relation to film productions and did not provide subsidies for the
commercial broadcasting sector.  Nevertheless, the local audiovisual industry had been able to
maintain itself in a healthy state.  Her delegation wa s, however, prepared to look into the feasibility of
certain carefully circumscribed and non trade-distortive subsidies for tackling the question of cultural
diversity in the audiovisual sector, in a manner which would not compromise the general development
of subsidy disciplines under GATS Article XV.  As regards classification, her delegation generally
had little difficulty with the list put forward in the United States submission, but noted that radio
services had not been included.  Hong Kong, China believed that its audiovisual industry and that of
other Members would also benefit from a wider covera ge of the sector and could also support that the
principle of technological neutrality.
211. The representative of Argentina wished to underline some figures concerning the audiovisual
sectors.  These figures were not meant to point a finger at a particular country, nor to establish any
kind of value judgement regarding the markets in volved.  He indicated that production in the
United States currently fluctuated between 400 to 450 feature-length films per year.  This production
was equivalent to the total production of the European Communities' members.  United States filmsrepresented about 75 per cent of screen time in European countries, with lower percentages in
countries maintaining stricter protection policies.  United States distributors controlled at least
60 percent of the titles offered in cinemas and between 70 and 75 per cent of the income from these
cinemas.  These figures could be higher in countries with low productive capacity.  The greatest
consumer of films was not the cinema any longer, but the television.  For instance, in Argentina, morethan 1200 titles were offered annually on open TV channels. On pay-TV channels, the figure was
more than 15,000 titles per year.  On television and video, the presence of United States
cinematographic industry was 30% higher than in the cinemas themselves.  On the other hand,
imports of audiovisual products into the United States did not exceed 2% of films shown in cinemas
and on TV screens (less than 0.5% for products originating in Latin America).  United States productswere already amortized when they reached foreign markets.  These figures should be kept in mind
because they indicated the real state of operation of the market.  This did not mean, however, that the
audiovisual sector should be treated differently from other sectors in these negotiations.  The GATS
was flexible enough to provide mechanisms of protection for pursuing legitimate objectives.
Argentina was not convinced that other instruments were necessary to protect cultural diversity.  His
delegation welcomed the communication by Brazil, and in particular its paragraph 7, which proposed
to consider how opportunities of effective market access for exports of developing countries could becreated.
212. The representative of Norway considered that the perspective drawn up in the proposals by
the United States, Switzerland, Japan and Brazil, as well as Canada in their initial negotiating
proposal, illustrated the complexity and importance of the sector.  Like the European Communities,
Norway noted that all proposals underscored the importance of cultural diversity and the legitimacy ofpromotion of national cultural interests.  The proposal from Brazil rightly pointed to the dual
character of this sector, indicating its potential as a vehicle for growth in the world economy,
including for some developing economies.  Norway  had two questions regarding the United States
proposal. First, Norway wanted to know how the United States intended to proceed regarding the
suggestion to review the different activities that constituted the audiovisual sector, and whether theUnited States considered it desirable to undertake a reclassification of audiovisual services.  Second,
with respect to the possibility of developing an  understanding on subsidies, Norway welcomed any
further indications of what a possible subsidy carve-out might contain.  She noted that the proposal by
Switzerland strongly emphasised the cultural importance of the sector.  Norway shared the view,
expressed in paragraph 7, that a "broad discussion needs to take place, that will reveal to what extentthe GATS has the necessary flexibility to offer appropriate solutions to the specificity of the
audiovisual sector, and to sufficiently take into account the cultural social and democratic objectivesS/CSS/M/10
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of Members in that sector".  With reference to paragraph 11 on a cultural diversity safeguard, Norway
wondered how Switzerland saw the possibility of deve loping a general enabling clause, and what the
content of such a clause could be.  With respect to a possible review of definitions of services in the
telecommunications sector, and the possible consequences it might have for audiovisual and
broadcasting services, Norway was currently in a process of reviewing relevant definitions.
213. The representative of Mexico said that his delegation could support the main thrust of the
communication by Brazil, but was still reflecting on specific elements.  Trade and culture could go
hand in hand.  In particular, trade allowed a country to export its culture.  He took note of paragraph 7
of the Brazilian communication and stressed that "special treatment" for developing countries should
not be limited to the audiovisual sector.  He also enquired what Brazil had in mind when referring to
anti-dumping in audiovisual services.
214. The representative of New Zealand noted that the communications presented by the United
States, Switzerland and Brazil contained an assumption that sensitivities in the audiovisual sector
could be addressed using subsidies.  However, subsidies were available only to a limited number of
countries having the necessary financial capacity.  He noted that Switzerland suggested addressing a
range of regulatory issues and wondered whether, should these suggestions lead to concrete results,
new disciplines would apply to existing commitments.
215. The representative of Israel asked the United States to indicate where each item referred to in
Annex A of W/21 was currently classified in W/120.
216. The representative of the Republic of Korea recognized the need for an in-depth discussion on
how trade liberalization of audiovisual services related to the preservation of cultural identity, and
agreed that the debate should not be framed as an "all-or-nothing" issue.  However, the right for
Members to regulate to preserve cultural identity should be recognized.  The current classification of
audiovisual products should be reconsidered to reflect the fact that audiovisual products had
undertaken technological changes.  However, a revision of the classification should be limited to the
minimum necessary, in order to maintain legal certainty.  The Republic of Korea was of the view that
trade in audiovisual products needed to be treated differently from other sectors.
217. The representative of Venezuela said that, as explained in the communications by the
United States, Switzerland and Brazil, technological changes, in particular digital progress, had
permitted the development of new products, to reduce production costs and to increase the overall
content produced and distributed.  Venezuela, a developing country, would not be able to compete
with developed technologies, such as those descri bed in the United States proposal.  Undertaking
specific commitments in this sector might thus bring more problems than advantages.  Having fewer
financial resources, developing countries would be affected by a more permissive subsidy regime.Her delegation agreed with the communication by Japan that liberalization of audiovisual services
would allow citizens of Member countries to access freely different forms of culture and information,
but wondered what type of regime Japan suggested for the liberalization of audiovisual services.
Venezuela agreed that the "all-or-nothing " debate should be overcome and that a balanced solution
was needed.  Discussions should address the role of public services in the audiovisual sector.Moreover, it would be useful to analyse to what extent the flexibility of the GATS allowed taking into
consideration the specificities of the audiovisual sector, as well as cultural, social and democratic
goals of Member countries.  Regulatory aspects of audiovisual markets should also be examined and
concerns of developing countries should be taken into account.  Venezuela had export interests in this
sector.  Her delegation would comment on the communication by Brazil at the next meeting.
218. The representative of the United States said  her delegation appreciated the focus that the
communication by Brazil put on developing countries, which would allow expanding the dialogue on
audiovisual services.  Addressing the written quest ions posed by Japan in document JOB(01)/96, sheS/CSS/M/10
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indicated that "pre-production" services might include the rental of equipment and costumes, rental of
a sound stage, or other specialized facilities, such the deep-water facility (for filming water scenes);
"post-production" services" might include services such as editing, sound-mixing and dubbing or sub-
titling.  "Converged systems operators" were operators who were technically able to use the
infrastructure originally intended to provide one service for provision of another, or several differentservice(s):  for example, in some countries, a ca ble operator might be authorized to provide basic
telecommunication services, or a telecommunication services provider might be authorized to provide
filmed entertainment services.  Replying to the questions posed by the Republic of Korea in document
JOB(01)/96/Add.2, she said that Annex A was not an official classification by the United States of
audio-visual services.  It was not comprehensive, which explained that radio broadcasting was not
included.  Annex A was intended to provide an indication of the broad spectrum of commercial
activities that could be viewed as audiovisual or audiovisual-related activities.  The purpose of AnnexB was to illustrate that many developing countries were involved in that industry.  With respect to the
questions by the Republic of Korea and Jordan, relating to a possible understanding on subsidies, she
noted that several delegations had questioned the suggestion by the United States to take a sectoral
approach on subsidies, noting that in the Working Party on GATS Rules, the United States had shown
little interest in the issue.  In the WPGR, the Un ited States had stated its willingness to pursue the
discussion on subsidies if specific problems could be identified.  To date, however, with the exception
of the current discussion on subsidies for film production, this did not appear to be the case.  Her
delegation believed that two issues, which characterised theatrical film production subsidies, could be
discussed.  First, the use of audiovisual subsidies was widespread.  The Secretariat's background note
on audiovisual services in document S/C/W/40, for example, listed public support programmes forfilm and video in Australia, Canada, seventeen European countries, and three regional or sub-regional
European support programmes.  Further indications that audiovisual subsidies were common could be
reasonably inferred from the number of exemptions that either referred to the promotion of European,
Latin American or Arab works, or to co-production agreements.  Second, many governments provided
subsidies to their film production sector because they believed that production subsidies might benecessary to ensure the production of cultural or socially desirable works that might not otherwise be
economically viable.  Examples might be broadcasts of local operas, plays or other culturally or
socially significant forms of programming that lacked broad, commercial appeal, but at the same time
satisfied cultural objectives.  In the United States, for example, although the federal government had
virtually no specific role in the production or distribution of cinematic motion pictures, and offered no
subsidies to the motion picture industry for commercial purposes, the National Endowment for the
Arts provided small production subsidies for nonprofit film and video production. And modest levelsof subsidies were provided for activities like Hispanic or Asian Film Festivals, to help celebrate
America's many different cultures.  In reviewing the characteristics of theatrical film subsidies, one
option had always been the process of scheduli ng sector-specific commitments.  Members might
begin a discussion on subsidies by examining the adequacy of this approach. The treatment in
scheduling might, for example, involve limitatio ns on national treatment commitments to permit
certain classes of subsidies. Countries could, for example, write into their national treatment
commitments the exceptions they needed to take for film production subsidies.   Some Members,
including the United States, had already followed th is approach.  Her delegation was of the view that
this approach, which could affirmatively permit the use of subsidies under certain specified conditions
and circumstances offered some advantages:  (i) it was flexible, permitting each individual country toinscribe its subsidy program in its own terms;  (ii) such flexibility avoided the problem of coming to
agreement on such terms as what constituted a cultural objective:  the approach proposed by the
United States would leave it to each nation to make that determination;  (iii) the scheduling approach
implicitly recognized that fostering a domestic film industry was important to virtually every country
as an expression of its unique cultural identity.
219. The representative of Canada recalled that the initial GATS negotiating proposal presented by
his delegation stated clearly that "Canada will not make any commitment that restricts our ability to
achieve our cultural policy objectives until a new international instrument can be established designedS/CSS/M/10
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specifically to safeguard the right of countries to promote and preserve their cultural identity."
Canada noted with interest that concerns surrounding the issue of cultural diversity found resonance
internationally and appreciated that the communications from the United States, Switzerland and
Brazil acknowledged the importance of cultural dive rsity and identity.  During the meeting of the
General Council at Senior Officials level, held on 25 June, Canada had called for Ministers in Doha toaddress the issue of cultural diversity.  His delegation hoped to build support for a broad-based
discussion on the issue of how Members might respond to the growing concern over the preservation
and promotion of cultural diversity, while respecting international trade rules.  In reply to enquiries
received from various Members, he indicated that the objective of the New International Instrument
on Cultural Diversity (NIICD) was to set out clear ground rules to enable Canada and other countries
to maintain policies that promoted their culture, while respecting the rules governing the international
trading system and ensuring markets for cultural exports.  These concerns extended beyondaudiovisual services.  Canada was continuing to discuss these issues in a number of international fora
to build a consensus on a new approach to trade and culture. For example, discussions had taken place
in the G-8, UNESCO, the Francophonie , and the International Network on Cultural Policy.  At this
stage, it was not clear where an instrument should eventually be negotiated and housed.  Canada did
not intend to propose that this instrument be the subject of current GATS negotiations.
220. The representative of Switzerland said, in reply to the question by the European
Communities, that the objective pursued by the Swiss communication was to invite Members to
discuss audiovisual-related themes which had not be given sufficient attention so far in the WTO.
There was a need to find the right answers to a number of questions relating to the regulatory
framework in the audiovisual sector, before undertaking specific commitments.  Addressing thequestion posed by Norway, he said that the notion of cultural diversity had become a general principle
which should be reflected in the GATS;  an enabling clause could be one way of doing it, with the
appropriate conditions to avoid abuse.  As noted by Venezuela, the notion of public service was a
fundamental aspect of the audiovisual sector.  Regarding the question raised by New Zealand,
Switzerland had no definite answer as to whether regulatory disciplines should also apply to existingcommitments.  He enquired whether the United States considered that the Internet involved only
telecommunication aspects.  Second, with respect to Annex A of the United States proposal, he
wondered whether the question of ownership and contro l of TV stations was implied in listing these
services.  Paragraph 10 of the communication by Brazil contained an analysis of economic realities
that should be kept in mind when looking for solutions to protect cultural diversity.  With respect to
the various instruments proposed by Brazil, Switzerland wished to note that the audiovisual sector
was different from other sectors because it entailed cultural values.  Instruments for emergencysituations would not help to reach the regulatory goals necessary to protect cultural diversity.  The
audiovisual sector could only be successfully opened if cultural and economic aims were given equal
value.  Switzerland was equally sceptical concerning the appropriateness of anti-dumping disciplines
since such disciplines would show market failure.  However, what was needed was a regulatory
framework that would prevent such market failures from occurring.  Switzerland supported Brazil's
suggestion to work on competition disciplines.
221. The representative of Australia said that her country's unique intersection of culture,
geography, history and economic circumstance had pr oduced a rich cultural diversity.  Australia's
audiovisual sector was critical to the achievement of key social and cultural objectives.  Australia
approached negotiations to liberalise the audiovisual sector with some degree of caution, butacknowledged that this was likely to be a significant area of interest in the services negotiations.
Australia had long recognised the essential role of creative artists and cultural organisations in
reflecting the intrinsic values and characteristics of its society, and was committed to sustaining its
cultural policy objectives within the context of multilateral trade negotiations.  There were factors
which distinguished cultural goods and services from other goods and services. Cultural activitiesmade a unique contribution to the social, economic and political fabric of any country.  Audiovisual
services were the most immediate and pervasive media for creative expression and massS/CSS/M/10
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communication.  They played an integral role in developing and reflecting a sense of national and
cultural identity within Australia's multicultural society, and provided opportunities for almost
universal access by Australians to their own experiences and narratives.  Australia's current policy
framework was designed to ensure that audiovisual services fulfilled public needs and expectations.  It
was essential that Australia's media reflect Australian identity, character and cultural diversity andprovide an Australian perspective on local and international events.  Measures such as Australian
local content regulations and limits on the foreign ownership of broadcasting services had been put in
place to ensure this perspective.  Australia also had a tradition of openness and recognised the value in
Australians accessing the rich variety of cultural pr oducts and services produced internationally.  The
Australian Government also provided support for the development and production of Australian film
and television programmes so that Australians could make and view a rich variety of high quality,
film television and other audiovisual productions.  The successful achievement of Australia's culturalobjectives in the audiovisual sector depended in large measure upon the existence of a vibrant local
film and television production industry to develop Australian programs for broadcast and exhibition.
Government support for the sector was provided in areas of greatest market failure.  This support
complemented and underpinned the growth that was occurring in the more commercially sustainable
sectors of the industry.  Market forces alone were rarely sufficient to allow cultural organisations andindividuals to be fully self-sufficient.  This wa s true for the cultural sector world-wide, but in
Australia's demographic and geographic circumstances it was particularly the case. A limited
domestic market in turn limited the capacity of cu ltural industries to generate advertising revenue to
recoup costs and sell cultural services. This was particularly the case for high budget, culturally
significant television programming and especially so for children's drama.  The important mix ofsubsidy, regulation and tax concessions that forms Australia's support for the audiovisual sector was,
accordingly, not designed to present barriers to market access, but as a necessary subvention in the
national interest to sustain Australian creative resources and to ensure that Australians had access to
their own images and stories in the cinema and on television.  In addition to these cultural objectives,
Australia also had a broad range of social objectives for its audiovisual media. These included themaintenance of community standards, the protection of children, encouraging the provision of diverse
services, local services and programs, high quality and innovative programming, fair and accurate
reporting, and the protection of the national interest.  The extent to which the Government regulated
any particular audiovisual medium to achieve its cultural and social objectives would differ according
to the particular characteristics of the medium concerned.  In Australia's view it was too early to talk
about a "new" audiovisual sector. Australia supported the principle of technological neutrality.  This
required a distinction to be made between "carriage" and "content" services.  "Carriage" referred tothe transmission service, whereas "content" was the service - for example, audiovisual or financial -
which was transmitted.  Following this approach, an audiovisual content service would not need to be
reclassified because it was delivered in a different way - for example by using an Internet delivery
service.  In a converging technological environment it was essential for the Australian Government to
have access to a wide range of policy measures and the flexibility to apply them as necessary toensure that Australia's cultural and social objectives for the audiovisual sector were met.
222. Her delegation welcomed the explicit recognition of the cultural importance of the
audiovisual sector in the communications on audiovisual services from the United States, Switzerland
and Brazil.  There was a complex inter-relationship between the measures applied by nations to
achieve their cultural and social objectives for the audiovisual sector;  dealing discretely withindividual measures might jeopardise the broader objectives and the policy framework as a whole.
The communication from the United States suggested, in paragraph 8, that "the scarcity of outlets
available to local film producers ... has in large part been alleviated by multiplex cinemas and multi-
channel TV".  Australia's experience was that the growth of multiplex cinemas and the availability of
cable and satellite TV had actually enhanced market access for imported cinematic films, and had hadan adverse effect on the number of screens available to local film producers.  Such experience
reinforced Australia's continuing commitment to cu ltural objectives within the audiovisual sector.
Australia, accordingly, approached consideration of the audiovisual sector with caution.  With respectS/CSS/M/10
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to Brazil's proposal, she noted the emphasis in paragraph 8 on the flexibility of the GATS instrument
and the right of Members to regulate to meet national policy objectives in line with the principle of
progressive liberalisation.  She also noted Brazil's recognition, in paragraph 6, of the sensitivities
associated with the sector given its role in the transmission and diffusion of cultural values and ideas.
Australia appreciated the need to clarify the issue of subsidies, as proposed by the United States andSwitzerland, and would welcome further information on how this issue should be dealt with, keeping
in mind the ongoing work in the Working Party on GATS Rules.  She enquired about the nature,
breadth, scope and force of the putative International Instrument on Cultural Diversity.  Finally,
Australia remained committed to preserving its right to regulate audiovisual media to achieve cultural
and social objectives and to maintain the broad matrix of support measures for the audiovisual sector;
this included retaining the flexibility to introduce new measures in response to the rapidly changing
nature of the sector.
223. The representative of Poland said that the audiovisual sector had undergone substantial
changes.  It played an important role in Europ ean cultural heritage and should receive a special
treatment.  Poland was not convinced that further liberalization was possible and, like Canada, did not
intend to liberalize as long as countries were not ensured that they could protect cultural diversity.
Poland could support the Swiss proposal to discuss is sues related to the regulation of the audiovisual
market.
224. The representative of India said that his country's interest in the audiovisual sector was far
bigger now than during the Uruguay Round.  India was still examining the various proposals on the
table.  Brazil's focus on interests and prospects for developing countries was interesting.  As a
preliminary comment, he believed that the GA TS already made it possible to commit without
prejudice to legitimate cultural objectives.
225. The representative of Japan said that his delegation supported the protection of cultural
diversity and further liberalization in the audiovisual sector.  Commitments should be expanded and
MFN exemptions should be reduced.  A list of issues based on the different communications should
be established.  Although cultural diversity was difficult to define in abstracto , it would be possible to
specify measures related to it.  Japan was ready to consider a possible understanding on subsidies.  A
general enabling clause should be looked at with caution.
226. The representative of Brazil thanked delegations for their comments and said he would
appreciate receiving the questions in writing so as to reply at a later stage.  The GATS already
recognized the right for governments to regulate and there was no reason why the preservation of
cultural diversity should be considered more important than other legitimate objectives, such as the
protection of the environment or of the consumer.  Brazil did not intend to limit Members' ability toprovide incentives for domestic production and was not advocating specific rules for subsidies in the
audiovisual sector.  Brazil's communication refered to Article IV of the GATS because it should be
kept in mind that developing countries, including Brazil, had export interests in this sector.  The
second sentence of paragraph 7 referred to concerns voiced in previous meetings regarding
suggestions to treat the audiovisual sector differently.  His delegation introduced the issue of anti-dumping in its proposal on audiovisual, but this did not mean that consideration of anti-dumping
disciplines should be limited to this sector.  Addressing the comments made by Switzerland on the
question of market failure, he drew attention to paragraph 10 which attempted to describe a pattern of
the global audiovisual market, particularly with regard to motion pictures, that was the question of
transfer pricing resulting from marketing in the dominant market.  Audiovisual products were oftenplaced at "dumping" levels in foreign markets, si nce most of the costs of production were already
recouped in the home market.  This resulted in a situation of unfair competition.  This was why Brazil
proposed to devise an instrument similar to an an ti-dumping mechanism, and to consider competition
issues.  Brazil did not have answers to all these issues but encouraged Members to consider them
further.S/CSS/M/10
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(e) Construction services
Communications from:  the European  Communities (S/CSS/W/36);  Japan
(S/CSS/W/42);  Australia (S/CSS/W/64);  the Republic of Korea (S/CSS/W/84);  Chile
(S/CSS/W/88)
227. The representative of New Zealand introduced his country's proposal.  He said that
construction and related engineering services sector was an essential sector for all economies, since it
provided infrastructure for most sectors of industry, and was in itself a major contributor to
employment and GDP.  New Zealand believed that there was sufficient scope to increase the number
and quality of commitments in this sector.  He added that New Zealand would explore ways in which
future commitments would encompass all stages of the construction process, ranging from pre-
erection work for construction sites to the building completion and finishing work.
228. The representative of Thailand said her country was interested in construction services.  She
looked at the submission by New Zealand with special interest because of the classification questions
raised at the Committee on Specific Commitments.
229. The representative of Chile answered questions posed by the European Communities
regarding the submission by Chile.  Regarding the meaning of "special registration requirements", he
said that the private sector had identified cases in certain countries where, over and beyond the normallegal requirement for establishment, an additional special registration was required for engineering
enterprises.  On the meaning of "prompt reco gnition of the qualifications of engineering and
construction professionals", he said that the issue was related to articles VI and VII of the GATS.
There were cases in which the transboundary moveme nt of professionals was subject to temporary
voluntary licenses issued in fact by local professional associations.  Additionally, regardingparagraph 12 of the submission made by Chile, his country was proposing the elimination of the
requirement to have a local partner as a general condition for the provision of engineering and/or
construction services.  If it was possible for some Members, he suggested that the foreign company
could be given the possibility to choose a local partner depending on the type of work involved.  The
purpose was to eliminate the requirement in certain countries to have one single permanent localpartner regardless of the type of work involved.  Fi nally, he expressed interest in the issue raised in
paragraph 8 of the submission by New Zealand regarding ways to ensure that future specific
commitments encompass all stages of the construction process ranging from pre-erection work at
construction sites through to building completion and finishing work.
230. The representative of Canada posed questions to Australia and the European Communities
regarding their respective submissions.  She asked Australia what was meant by the expression
"commercial basis", and whether an example could be provided of a barrier that could be justified ona commercial basis.  She also asked both the European Communities and Australia whether they were
advocating a sectoral approach to deal with mode 4 concerns in this sector.
231. The representative of Norway said his country had considerable interest in this sector.  He
shared the view that it was a vital element of infrastructure, and one of the largest sectors in the
economy.  He hoped it would be possible to reduce unnecessary distortive trade barriers to aminimum, preserving the quality of the service, public safety, and the rule of law.  In this connection,
he supported the proposal submitted by the European Communities, and considered it as an
appropriate way to proceed in this area.  For the sake of clarification, he asked the European
Communities what was the reason to include dredging services within the scope of their proposal,
since this particular subsector was not covered by the services sectoral classification list, but as a
reference to CPC 72140 (towing and pushing services).S/CSS/M/10
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232. The representative of Turkey favoured liberalization in this sector, particularly by facilitating
the temporary movement of natural persons providing this service.  The concept of contractual service
suppliers was very relevant for construction services.  Therefore, a precise and harmonized definition
of that concept should be developed.
233. The representative of the Republic of Korea replied to a question posed by the European
Communities on the requirements regarding the hiring of local workers in this sector.  The specific
question was whether the Republic of Korea had particular categories of personnel in mind and, if so,
in what sectors.  He replied that in some Members a certain proportion of labourers for a particular
project must be composed of local labourers or  that a certain proportion of the work must be
subcontracted to local contractors.  His delegation would like to discuss all categories of personnel,
both skilled and non-skilled.
234. The representative of Japan said that improvements could be made regarding limitations on
maximum percentage of foreign shareholding, on the types of legal entity, and on citizenship
requirements for executives and employees under mode 3.  Disciplines on government procurement
were also important.  He hoped that the discussion at the Council for Trade in Services could serve as
a useful input to the discussions in the Working Group on Transparency in Government Procurement.
Improvements regarding discriminatory treatment or administration lacking rationality, objectivity,and impartiality were also possible.  The idea of a necessity test applicable to licensing and
qualification requirements could be discussed in a horizontal context.
235. The representative of India said that his country had an interest in this sector.  He supported
the statement made by Turkey, and said that India had similar interests.
236. The representative of Cuba said that construction and engineering services had historically
been linked to design services.  He considered that the proposals submitted by India, Australia,
Canada, New Zealand and Colombia were useful and positive.  He lent his support to arguments on
transparent regulations as regard entry and licenses for services suppliers, as well as bilateral rules on
visas and work permits.  Mutual recognition, equivalence of qualifications, avoidance of
discriminatory practices in the application of economic needs tests were also of importance.  In thecase of developing countries, there should be progressive liberalization in the areas of architectural
services, engineering services, and construction in the broadest sense.  And this should be
underpinned by the transfer of technology, know-how and experience.  International organizations,
and developed Members should support the creation of training programmes in the developing
countries.  There should also be the utmost transparency in the procedures regarding government
procurement.  Liberalization measures adopted thus far had been mainly beneficial to the companies
of major developed countries.  Very few developing countries had benefitted.  Only one developedcountry represented 40 per cent of international design services.  The situation clearly showed the
differences between modes of supply 3 and 4.  Mode 3 was the way through which developed
countries increased their commercial presence in the developing countries.  Mode 4 was virtually the
only way open to developing countries to increase their presence in developed countries' markets.  He
did not share the approaches adopted by the European Communities and Japan regarding restrictionson the establishment of foreign companies, particularly in developing countries.  It was important in
that regard that all participants benefit from the negotiations, that national policy objectives be
respected, and that appropriate flexibility for developing countries be ensured.  Special treatment for
the least-developed countries should also be taken into account.
237. The representative of Iceland said her country was interested in this sector.  She believed that
there was sufficient scope for Members to increase the number of commitments.  Results should be of
clear commercial significance for service suppliers.  Iceland supported proposals aimed at reducing
and eventually eliminating trade distorting barriers, not necessary to ensure the quality of the service
and public safety.  She agreed that effective market access in this sector depended on the possibility toS/CSS/M/10
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compete for public procurement in foreign markets,  which was something to be taken into account
when considering this sector.
238. The representative of the European Communities replied to some of the questions raised
regarding their submission.  On the question regarding which subsectors could be the object of
commitments under mode 1, he said that in the light of technological advances intelecommunications, Members should reflect on whet her further commitments could now be made in
certain subsectors.  Blueprints, plans, and engineering designs could be transmitted electronically.
Although technological advances had an obvious impact on architectural and engineering services,
there might be some impact in construction services, for example in the case of site investigation work
(CPC 5111) that could be undertaken on a cross-border basis.  Additionally, mode 1 commitments
could also be considered for related sectors, such as architecture and integrated engineering services.
On the question posed by the Philippines about examples of domestic regulations, including buildingregulations, technical requirements, and building permits, he said that some of those measures might
be more onerously applied to foreign suppliers.  Finally, on a question posed by Canada, he said that it
was not the European Communities intention to treat mode 4 on a sectoral basis.  Work on mode 4
issues should continue on a horizontal basis, but he recognized that specific sectoral characteristics
could also be considered in the future.
239. The representative of Australia replied to questions posed by the European Communities and
Canada on its submission.  First, it was not Australia's intention to prescribe legitimate policy
objectives to Members.  This was a matter for each Member to decide.  A non-exhaustive illustrative
list could assist in developing disciplines under Article VI:4.  Second, in reply to Canada's questions,
he said that he could not provide any example of a commercial presence limitation justifiable on acommercial basis.  Third, on mode 4, Australia was willing to engage in a discussion to improve the
efficiency of visa processing on a horizontal basis.
240. The representative of Brazil said that this sector was of great interest to his country, since it
was a sector where Brazilian companies had developed an export capacity and had established a
presence in international markets.  He also pointed to the existence of subsidies in this sector, some ofwhich had trade distortive effects.  He considered that the issue of subsidies should be taken up in
these discussions.
241. The representative of the Philippines reiterated his country's interest in this sector, particularly
through mode 4.  In that regard, he showed interest in the relevant provisions contained in the
submissions by the European Communities in paragraph 9.d, and by Australia in paragraph 2 and in
the last bullet of paragraph 6.  He also took note of the statement contained in the submission by the
Republic of Korea regarding some Members' requirements on the hiring of local workers.  Finally, heobserved that the submission by New Zealand placed particular attention limitations affecting
commercial presence.
(f) Distribution services
Communications from:  the United States (S/CSS/W/22);  the European Communities
(S/CSS/W/37);  Japan (S/CSS/W/42);  Canada (S/CSS/W/57);  Switzerland
(S/CSS/W/77);  Mercosur (Argentina, Braz il, Paraguay and Uruguay) (S/CSS/W/80);
the Republic of Korea (S/CSS/W/85);  Chile (S/CCS/W/88)
242. The representative of Uruguay, speaking on behalf of MERCOSUR, responded to questions
raised on the proposal in document S/CSS/W/80 made at the May meeting.  First, the European
Communities had noted that the proposal did not mention related services such as testing and analysis,market research and adverting, which were usually necessary for distributors and wondered if
MERCOSUR held any specific views on those services.  He replied that the proposal concernedS/CSS/M/10
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distribution services and was based on the W/12 0 classification and its corresponding CPC codes,
which established the services that were covered by the distribution sector.  The services mentioned
by the European Communities were covered by other services sectors, namely section F. on "Business
services", categories e, b, and a of the W/120 classification, which corresponded to CPC codes 8676,
864 and 871.  Second, the European Communities had asked if MERCOSUR considered CPC 613(retail sales of motor fuel) not to be included in the distribution sector.  He replied that, looking at the
W/120 classification and its corresponding CPC codes, it was clear that the W/120 classification did
not include CPC 613 under the distribution sector and indicated that that code had not been included
in their proposal.  Third, Mexico had asked for additional information on what was stated in
paragraph 13 of the proposal and wondered if th at reflected MERCOSUR's own experience with
economic needs tests.  He indicated that th e MERCOSUR countries had not scheduled economic
needs tests and had no experience with this issue.  Looking at schedules, it emerged that severalMembers, and especially developed country ones, had scheduled many economic needs tests in
different services sectors, including distribution services.  Economic needs tests were one of the most
important barriers to trade in services, and especially to trade in distribution services, as they could be
used with a high degree of discretion.  In this respect, they seriously affected the predictability and
legal certainty of commitments, affecting the interests of domestic suppliers to develop integratedexport strategies of goods and services.  Fourth, with respect to paragraph 14, Mexico had asked for
additional information on tax discrimination, noting the exceptions in Article XIV of the GATS.  He
explained that, in spite of the fact that tax discrimination was not one of the most important barriers to
trade in distribution services, some measures that could affect such trade did exist, and indicated that
paragraph 13 was linked to the previous paragraph which referred to measures arising from generalinvestment regulations.  Although it was possible to identify some limitations which were specifically
applicable to distribution services, most of the limitations had been scheduled in the horizontal section
of Members' schedules, and therefore affected all services sectors, including distribution services.
243. The representative of Switzerland responded to the question posed by Japan on his
delegation's proposal.  While Switzerland recognised that to some extent restrictions to the
distribution of pharmaceuticals, foodstuffs and lu xury goods might be legitimate for health, food
security or national security concerns, they should be confined to those which were strictly necessary.
244. Responding to a question that the European Communities had also asked of the MERCOSUR
countries, the representative of Chile echoed the explanation that MERCOSUR had provided in its
second reply.  Her delegation's proposal described a fact that could be observed in W/120classification, namely that distribution services corresponded to CPC codes 621, 622, 631, 632, 6111,
6113, 6121 and 8929.  Therefore, CPC 613, the retail distribution of motor fuels, was not covered bythe W/120 under distribution services.  At that stage, Chile did not have a particular interest in
including also this activity, but was ready to consider including other activities under the distribution
sectors if other Members wished to do so.  She also indicated that, in spite of her delegation's proposal
referring to improving commitments in distribution services, especially with regard to the presence of
natural persons, this did not imply that Chile was interested only in mode 4;  she clarified that herdelegation was also interested in mode 3 commitments, and said that Chile would be submitting a
more detailed proposal on this sector.
245. The representative of Turkey said that Turkey had undertaken no commitments in distribution
services, but was in the process of determining its pos ition, particularly with regard to retail trade and
franchising, taking into account the specificities of certain products and services.
246. The representative of the United States responded to some of the questions raised about their
proposal.  He addressed first the questions posed by Jordan.  On the clarification Jordan had sought
about additional commitments, he explained that for the distribution sector additional commitments
could be made on transparency and administration of regulations.  For example, commitments could
be undertaken to make information readily available on zoning requirements, and to provide anS/CSS/M/10
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opportunity for service providers to meet with local officials and community representatives.  As for
the question Jordan had posed on discriminatory tax treatment, he said that it was difficult to foresee
all the circumstances that might affect taxes;  where foreign-owned businesses were however required
to pay higher taxes than locally-owned businesses, questions of national treatment would arise.  Japan
and the European Communities had both asked whether the United States representative intended todiscuss the services mentioned in paragraph 6 of their proposal as a cluster of distribution services;  he
answered that he would prefer to use a checklist approach.  On the question by Japan about what "the
direct contracting for production of merchandise" was, he explained it was intended to show the broad
scope of activities in which wholesalers and retailers were engaged, including distribution of their
own brands of products or merchandise;  it was not meant to bring production of merchandise into the
GATS.
247. The European Communities had asked three additional questions.  First, they wondered
which, amongst the list of trade obstacles identified, were those that United States considered to fall
under domestic regulation;  sought elaboration on their suggestion that Members consider undertaking
additional commitments relating to regulation of this sector;  and asked how they suggested that these
obstacles be tackled in the negotiations, in particular in relation with the work in the Working Party
on Domestic Regulation.  The United States representative replied that that was basically a proceduralquestion.  The issues could be discussed in the Working Party or in the Special Session, but it was
important that they be addressed adequately.  For those issues that fell under domestic regulation, his
delegation believed that Members could develop horizontal approaches on transparency.  Second, the
European Communities asked if, in the proposal by the United States, the coverage of each sub-sector
of the W/120 classification was that in the CPC codes for the distribution sector.  The United Statesrepresentative explained that, even though there was no uniform classification for services in the
WTO, many countries relied on the W/120 as a guide, as had done the United States in drafting the
proposal.  Members that used the CPC could apply it to their commitments.  Third, the European
Communities wondered how the United States suggested tackling the access of distributors to the
additional activities "listed";  he replied that the United States would favor a checklist approach and/orlisting of additional commitments in the distribution sector.
248. Canada had asked whether the list in paragraph 6 of the proposal was meant to be a
negotiating checklist.  The United States representati ve replied that the list was intended to illustrate
the types of obstacles faced by suppliers of distribution services and that it could also be used as a
checklist.  Finally, Argentina had sought clarification on the obstacle identified as "denial of access to,
and use of, services essential to this sector (e.g., highways, airports, railroads) on reasonable and non-
discriminatory terms and conditions".  He explaine d that this obstacle referred to situations where
foreign-based retailers, wholesalers, distributors, and express delivery companies were denied the
opportunity to build warehouses, terminals or other facilities at key transportation points, possibly
because their local competitors were opposed.
249. The representative of Japan said that distribution services was one of the most important
services sectors for Japan, not only because of its importance per se  but also because of its linkage
with goods trade.  Japan's experience in recent decades in opening up the domestic distribution service
market to foreign service providers, thereby allowi ng some of world's largest retail service providers
to come in, was a good example that service liberalization did benefit the country that liberalized its
own domestic market.  In that connection, he drew Members' attention to paragraph 40 of his
delegation's proposal, stating that "among various services sectors the distribution services is notlimited to the widening of business opportunities for services providers. It will also benefit consumers
through reduced costs and process and increased levels of quality, when fair competition leads to
further development of this sector.  Thus liberalization in this sector is expected to push the growth of
world economy".  His delegation was therefore interested in continuing to discuss the liberalization of
this extremely important sector.  He then provided comments on the proposals on the table.  First,regarding MERCOSUR's proposal, his delegation agreed that sectoral or categorical exclusion ofS/CSS/M/10
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specific items from commitments was a significant barrier to distribution service providers.  Second,
maximum percentage limits on foreign share holding, mentioned by MERCOSUR and the Republic
of Korea, as well as nationality and residency requirements, mentioned by the United States, were
among the barriers which his delegation believed the Council should work hard to eliminate.  Third,
he said that, when liberalizing retail services, it was vital to liberalize also after-sales services, such asmaintenance of electric appliances, because there was an obvious linkage between retail and after-
sales services.
250. The representative of the European Communities provided responses to some of the questions
raised about their proposal, starting with those raised by Jordan.  On their question concerning what
activities were covered under "distribution services from a fixed location or away from a fixed
location (direct selling)" in paragraph 9 of their proposal and what distribution services existed other
than those related to a fixed location, he explained that, in direct selling, products were marketed tocustomers by independent salespeople, person-to-person, primarily through in-home product
demonstrations.  This was a variety of retail distribution which should be understood as included in
this sub-sector and which had been included in their proposal for clarification purposes.  Jordan had
then asked how commitments would apply to both distributors and foreign-invested manufacturers as
regarded the goods they produced and how the latter would relate to service suppliers and fall under
the GATS.  He said that it was appropriate that manufactures be able to distribute, themselves, the
products they produced if they so wished and not necessarily be forced to outsource this activity to
independent distributors.  When distributing goods, they operated as distributors, were regulated as
such in their home market and were, for that activity , covered by the GATS.  He then turned to the
clarification sought by Argentina on the goods exclus ion in paragraph 7 of their proposal with respect
to electricity and gas through mains.  He explained that the distribution of those goods was classified
under energy services and had been included in the European Communities energy proposal.  The
United States had also sought additional inform ation on the suggested product exclusions and on
whether the European Communities believed that there might be some general principles which might
apply even when such products exclusions were be ing sought.  He explained that his delegation did
not have any general principles to advance in this respect;  the exclusion of some products merely
reflected that the distribution of such products was classified elsewhere than under the distribution
sector and should therefore be covered in the approp riate sector.  The United States had also asked
whether the proposed exclusion for written correspondence was intended to exclude all postal services
or only letters;  he replied that the reference was meant to clarify that mail distribution was classified
under postal services.  Goods could obviously be distributed by mail, but two different services would
be involved:  the distribution of the goods carried out by the distributor, whose main element was theintermediation in the property of the good;  and the mail delivery of the good carried out by the postal
or courier company, whose main element was the logistics between the sender, usually the distributor
or seller, and the receptor, usually the client or buyer.
Correction to New Zealand's statements at the previous meeting
251. The representative of New Zealand drew Members' attention to paragraph 365 of the minutes
from the previous meeting, contained in document S/CSS/M/9, which purported to record New
Zealand's statement on air transport services.  Unfortunately, the last sentence did not reflect the
statement that they had made at that meeting.  New Zealand did not indicate that their forthcoming
proposal "would be centered on the existing scope and its extension", rather made it clear that their
proposal "would be squarely focussed on the exis ting coverage of air transport and the scope for an
increase, within this scope, of the number and quality of commitments".  Indeed, this point had been
made very clear in their proposal on air transport services in document S/CSS/W/92.S/CSS/M/10
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Presentation of new proposals by the United States
252. The representative of the United States introduced two new proposals by his delegation, one
on transparency in domestic regulation and the other on advertising and related services.  The first
paper, contained in document S/CSS/W/102, highlighted the benefits of an open, transparent
regulatory system, such as promoting good governance, and increasing investment while promotingtrade in goods and services.  The value of transparency was found in giving market participants
confidence in their ability to make business de cisions for the commitment of resources with a
reasonable understanding of risks and rewards in the context of all appropriate regulations.
Transparency in domestic regulation was grounded most importantly in providing a country's market
participants a full understanding of domestic policy objectives, contributing to public confidence in
government, and forming a basis for consensus around the promotion of trade in services and the
productive role that could be played by foreign participation.  The United States was interestedparticularly in discussing means to increase the participation of developing countries in the practical
application of principles of transparency in domestic regulation.  The devotion of resources to setting
up and sustaining a system with robust transparency needed to be set against the cost of potentially
ineffective regulation characterized by costly corrections and disincentives to investment, social
welfare improvements and economic growth.  This was especially true for small and medium-sizedenterprises which most needed the advantage of clar ity and certainty in their regulatory environment.
The paper proposed that WTO Members use their current best practice in this area to develop
principles that supported existing GATS measures and promoted greater transparency in domestic
regulation, to complement existing GATS provisions such as market access and national treatment.
The proposal contained elements that his delegation thought should be part of any discussion oftransparency in domestic regulation, such as notification and comment procedures, a transparent
application process, and procedural review and remedies.
253. The second new proposal, contained in document S/CSS/W/100, concerned advertising and
related services.  The United States offered the proposal for the purpose of initiating a dialogue among
WTO Members on the importance of continued liberalization of the advertising services sector.Advertising services were those services provided in connection with the creation, planning,
placement and distribution of advertisements via various communication platforms.  Advertising
assumed different forms, whether brand advertising, corporate advertising, or business-to-business
advertising.  Advertisements were distributed via newspapers, magazines, radio, TV, cable, satellite,
the Internet, billboards, transportation displays and circulars.  Advertising was a powerful catalyst for
economic growth:  it included a broad range of services activities, and at the same time served as an
input to the marketing of virtually every good and service, promoting the entry of new firms, newconsumer goods and new services.  Advertising revenues contributed significantly to the foundation
and financial support of a free press, offsetting th e cost of newspapers, maga zines, cable, satellite and
broadcast media.  In many countries, advertising completely underwrote radio/television broadcast
programming;  these media could not exist at no or reduced cost to consumers without the support of
advertising.  Liberalization in the advertising sector could lead to enhanced consumer protectionstandards:  in scheduling GATS commitments in this sector, governments still would retain the ability
to set and maintain high standards of consumer protection.  In addition, a robust advertising sector
such as that which existed in many countries woul d often use self-regulatory guidelines and voluntary
industry norms as a valuable complement to regulation.  The advertising industry had often found it
beneficial to develop and maintain high standa rds of business conduct to help promote consumer
confidence.  In 58 countries, the International Chamber of Commerce played a leading role in
promoting high standards of consumer protection, addressing such areas as compliance with
prevailing standards of decency;  honesty;  us e of comparisons, testimonials and endorsements;
denigration;  protection of privacy;  imitation;  and safety.  Restrictions on the distribution and
placement of foreign advertising could diminish the quality of advertising materials, delay theintroduction of an advertising company's commercial message, and thus hinder new consumer goods
or services to a market.  These restrictions might put foreign advertising service providers at aS/CSS/M/10
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competitive disadvantage vis-à-vis domestic firms.  Advertisers around the world faced barriers to
creating and distributing specific advertisements or launching global advertising campaigns.  These
barriers included, for example:  residency require ments for advertising professionals filming in some
countries;  requirements for local participation in the production of advertising;  requirements for
local post-production work if foreign actors were used in commercials;  restrictions on the importationand broadcast of foreign-produced commercials;  equity limitations on foreign ownership of
advertising firms;  requirements that host-country nationals hold managerial positions in foreign-
owned advertising firms;  requirements that program services carried by cable or satellite be "local" in
order to carry certain advertising.  The United States believed that improved market access
commitments for advertising services would not only benefit those entities directly engaged in the
purchase and sale of advertising services, but because advertising services were an ancillary business
activity, liberalization of the sector would also serve to stimulate other services activities thatbenefitted from lower cost and more effective advertising services, as well as facilitate new entrants to
the market.
254. The representative of Norway concurred with the crucial importance of transparency in
domestic regulation.  He noted with great interest the United States emphasis on the importance of
transparency for small and medium-sized enterprises, which was also a concern for his delegation.  Heindicated his delegation's readiness to cooperate with all Members to fulfill the obligations in the
guidelines on small and medium-sized enterprises, particularly in developing countries.
Concluding remarks on Item C
255. The Chairman said that the Special Session would take note of the statements made.  He
recalled that proposals on the remaining sectors would be addressed at the October meeting.
256. The representative of Mexico asked that at the October meeting delegations be given the
opportunity to introduce proposals and discuss matters on issues raised at this meeting.
257. The representative of Norway supported Mexico's proposal that the option to introduce new
proposals at the October session be kept open.  Norway particularly encouraged developing countries
to come forward with proposals and was of the view that no procedural obstacles should stand in theway of new proposals.
258. The representative of Uruguay echoed Mexico's suggestion.  In March, Members had agreed
that there would be flexibility with respect to the work programme agreed for the year and that this
would be adjusted to allow for the introducti on of new proposals, also on sectors previously
addressed.  He then suggested that the horizontal issues discussed be maintained on the agenda also
for the October meeting, in view of their being of a cross-cutting nature.  The representative of Saint
Lucia echoed the statements by Norway and Uruguay and informed Members of their intention to
submit a proposal at a later date.
259. The Chairman concluded that the October m eeting would address, as agreed, proposals
relating to education, energy, environmental, financial, tourism, recreational and transport services.
Members would still be able to submit proposals on services sectors previously addressed, but no
structured discussion would take place on those sect ors.  Horizontal issues would continue to figure
on the agenda of the Special Session in October.
260. It was so agreed.S/CSS/M/10
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D. OUTLINE OF THE CHAIRMAN'S REPORT TO THE GENERAL COUNCIL
261. The Chairman recalled that, at the May meeting, the delegation of Paraguay, speaking on
behalf of the MERCOSUR countries, had requested that a standing item on the outline of the
Chairman's report to the General Council be inscribed in the agenda of the Special Session.  It had
been agreed that an item to that effect would be added as a standing item of the agenda.
262. Based on Members' discussion over the previous days, he indicated that, in his report to the
General Council, he would state that the Council had met from 9 to 12 July and that Ambassador
Amorim had been unable to chair the meeting, so that, in accordance with the Rules of Procedure, he
had been elected by the Council for Trade in Services as interim Chairperson for the meeting.
263. With respect to the item on the assessment of trade in services, he would report that many
delegations had pointed to the dearth of statistical information and the methodological problems that
made it difficult to have a quantitative assessment of trade in services.  Several delegations had alsostressed that the discussion needed to be more focused and conclusive.  The Secretariat had been
mandated to produce a compilation of all statements and submissions tabled until then with respect to
the assessment of trade in services.
264. He would further report that Members had held a second detailed discussion of the
negotiating proposals submitted to the Special Session of the Services Council.  These addressed themovement of natural persons, other horizontal issues and the following services sectors:  business
services, communication services, construction services and distribution services.  New proposals had
been tabled by the delegations of New Zeala nd, MERCOSUR, Colombia, Japan, Australia, Brazil,
Mexico and the United States.  The debate had been very substantive and several comments had been
raised with respect to different elements of the proposals.  The Secretariat had been mandated toproduce a note on the application of economic needs tests, drawing upon available information in
Members' schedules and work undertaken by other inter-governmental organizations.
265. He indicated that he would also be reporting on the dedicated meeting on modalities for the
treatment of autonomous liberalization, to be held upon the conclusion of the meeting.
266. The representative of Brazil asked that the Chairman also report that, in the course of the
discussion on the assessment of trade in services, Members had called for the discussion to be more
focused and that the MERCOSUR countries had call ed for the focus to be the extent to which
developed countries' liberalization had resulted in benefits for developing countries in terms of the
objectives of Article IV of the GATS.
267. It was so agreed.
E. OTHER BUSINESS
268. The representative of Hong Kong, China drew  Members' attention to the World Services
Congress to be held in Hong Kong, China on 20-21 September 2001.  The Congress provided a good
opportunity for services negotiators to get together and have in-depths discussions.  She indicated that
the Coalition of Services Industries, Hong Kong, China's General Chamber of Commerce,
government and quasi-governmental bodies were also involved.
269. The representative of Venezuela drew Members' attention to the UNCTAD Expert Meeting
on energy services to be held from 23 to 25 July 2001 in Geneva.  She said that it provided a good
opportunity to deepen Members' understanding of energy services outside the scope of a negotiating
context and in a more academic environment, and felt that it might be useful in light of the discussion
of the sector at the October meeting.S/CSS/M/10
Page 67
270. The representative of the UNCTAD Secretariat said that, within its mandate, UNCTAD was
organizing an Expert Meeting on "Energy Serv ices in International Trade:  Development
Implications".  This was likely to be the first in tergovernmental meeting on the issue.  It would take
place, as stated by Venezuela, from 23 to 25 July 2001 at the Palais des Nations in Geneva.  National
experts from the oil, gas, electricity and other energy firms, industry associations and regulatoryinstitutions from both developing and developed countries and economies in transition had confirmed
their participation.  Experts were expected to discuss the following issues:  main features of markets
for energy and energy services, including discussion of the structural reform and trends in
international trade;  how the sector was similar a nd different from other services sectors, and what
issues and barriers to international trade could be  identified in the energy services sector;  energy
services in the GATS and the related on-going debate; what the development implications of
international trade in energy services were.  The UNCTAD Secretariat had prepared an issues paperwhich would serve as a basis for expert discussions during the meeting.  The paper was in fact one of
the first studies on trade in energy services, and was available for downloading from the UNCTAD
web-site.  Representatives from relevant international organizations, including the WTO, OECD,
OPEC, the Energy Charter Secretariat, the Inter-American Development Bank, the UN Regional
Commissions, had confirmed their participation.  The outcome of this Expert Meeting was expectedto contribute to the better understanding of energy services in its trade and development dimensions.
Considering the novelty of the issue, and that six proposals had so far been tabled in the area until
then in the framework of the services negotiations , she believed that the event would provide a timely
opportunity to gain a better understanding of the issue for all interested actors.
271. A representative of the Secretariat informed Members of the schedule of services meetings for
the October cluster.  He explained that the General Council was scheduled to meet on 10-11 October,
in the middle of the services week.  That forced the normal pattern of meetings, with the subsidiary
bodies meeting during the first week and the regula r and special sessions of the Council meeting
during the second week, to be altered.  The new schedule was organized as follows.  First, because of
the clash with the General Council, the dates of 10 and 11 October would be used to schedulefinancial services-related events, namely the meeting of the Committee on Trade in Financial Services
and the Briefing Session by International Standard-Setting Organizations.  It was further suggested
that, in order to facilitate the participation of capital-based experts, the discussion of negotiating
proposals on financial services be taken up in the Special Session on 12 October.  Second, the review
of the Annex on Air Transport Services had been moved from the previously suggested date of 4
October to 9 October, because of the clash with an ICAO event scheduled for 4 October.  Finally, the
date of 1 October had been only provisionally booked for the meeting of the Committee on SpecificCommitments, as no decision had been yet reached on whether that meeting would take place, and the
Committee would only decide at its informal meeting on 19 September.
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