RESTRICTEDWORLD TRADE
ORGANIZATIONS/C/M/63
11 November 2002
(02-6194)
Council for Trade in Services
REPORT OF THE MEETING HELD ON 25 OCTOBER 2002
Note by the Secretariat1
1. The Council for Trade in Services held a meeting on 25 October 2002.  The agenda for the
meeting is contained in document WTO/AIR/1935.
2. The Chair noted her intention under "Other Business"  to inform the Council about two letters she
had received from the Chairs of the Special Session of the Committee on Trade and Development and
the Working Group on Trade and Transfer of Technology.  She proposed that the Council adopt the
agenda as circulated.
3. The Council so agreed.
A. NOTIFICATION MADE TO THE COUNCIL PURSUANT TO GATS ARTICLE V:7
4. The Chair drew the attention of Members to the joint notification pursuant to Article V
(Economic Integration) of Jordan and the Unit ed States, contained in document S/C/N/193.  She
suggested that the Council take note of the notification and that the agreement notified under
Article V:7 of the GATS be referred for examination to the Committee on Regional TradeAgreements.
5. The Council so decided.
B. RE-OPENING OF THE FIFTH PROTOCOL FOR ACCEPTANCE BY THE
REPUBLIC OF BOLIVIA
6. The Chair drew the attention of the Council to a communication from the Republic of Bolivia,
contained in document S/C/W/214, requesting that the Council re-open the Fifth Protocol to the
GATS relating to Financial Services, for acceptance by the Republic of Bolivia.  She further drewattention to a draft decision in this regard, contained in document S/C/W/215, for consideration and
adoption by the Council.
7. The representative of Bolivia requested that the decision specify that the Fifth Protocol be re-
opened for six months.
8. The Chair proposed that the Council adopt the draft decision contained in document
S/C/W/215, with 31 May 2003 appearing in its last paragraph as the date until which the protocol
would remain open for acceptance by Bolivia.
9. The Council so decided.2
                                                     
1 This document has been prepared under the Secretariat's own responsibility and without prejudice to
the positions of Members and to their rights and obligations under the WTO.
2 The decision was issued as document S/L/108.S/C/M/63
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C. TRANSITIONAL REVIEW UNDER SECTION 18 OF THE PROTOCOL OF
ACCESSION OF THE PEOPLE'S REPUBLIC OF CHINA
10. The Chair noted that Section 18 of the Accession Protocol of the People's Republic of China
provided for an annual review of the implementation by China of the WTO Agreement and of the
related provisions of China's Accession Protocol.  As indicated in Section 18, the Services Councilwas one of the bodies in which this Review was to be conducted.  She noted that, as agreed at the
Council's last meeting, she had undertaken consultations on the timing of the Review and thanked
China for its cooperation in this regard.  She further noted that the results of the Services Council's
review, as well as those bodies mentioned in Section 18 of the Protocol, would be reported to the
General Council, which would conduct its own review.
11. The Chair noted that on 21 October the Committee for Financial Services had conducted and
concluded a transitional review under Section 18 of China's Protocol of Accession and that its Chair
had submitted a report contained in document S/FIN/7.
12. The Chair proposed that the Council take note of the report from the Financial Services
Committee on the understanding that it would form part of the Services Council's report to the
General Council.
13. It was so decided.
14. Turning to the Review by the Council, the Ch air recommended that the Council first call upon
the People's Republic of China to respond to comments and questions contained in the
communications from the European Communities and their Member States (S/C/W/211 and
S/C/W/211/Corr.1); the United States (S/C/W/212); Japan (S/C/W/213); Chinese Taipei (S/C/W/217);
and Australia (S/C/W/219).  Members would then have an opportunity to make comments and posesupplemental questions, and China would have opportunity to respond.
15. The representative of China welcomed the opportunity to make a presentation to the Council
on the implementation of China's commitments with re gard to trade in services within the framework
of section 18 of China's Protoc ol of Accession.  He noted that the Chinese government attached
importance to the review, as witnessed by the delegation in attendance, which was composed ofcapital-based senior officials from the relevant services administrative authorities, including the
Ministry of Information Industry (MII), the Ministry  of Justice, the Ministry of Communications, the
Ministry of Construction, and the Ministry of Foreign Trade and Economic Cooperation.  They were
present in order to address comments and concerns raised by other Members.  He hoped that an
exchange of information would be achieved by way of the review, so that Members better understood
China's efforts and achievements in services subsequent to its accession to the WTO.  He said China's
presentation consisted of two parts:  (1) a brief account of China's preparations for the review and theimplementation of its commitments in the services area, and (2) responses to comments and questions
of common concern received from Members.
16. The representative stated that information rega rding trade in services had been provided in
advance to the Council for Trade in Services as pr ovided for under Annex IA to China's Protocol of
Accession, as well as notifications pursuant to Article III of the GATS.  This included the status ofmarket access in sectors and sub-sectors listed in China's Schedule of Specific Commitments; a list of
administrative authorities responsible for the specific services sectors or sub-sectors;  information on
the independence of regulatory authorities from se rvice suppliers; information related to the MFN
Exemption List; and laws, regulations and administrative measures directly related to market access in
specific services sectors and sub-sectors.  With regard to laws, regulations and administrativemeasures, he noted that preliminary screening had found 45 of them directly related to market access
in specific services sectors and sub-sectors, and that since the majority of the 45 pieces of legislationS/C/M/63
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contained approval conditions and procedures which were of great interest to Members, notification
of them had been made pursuant to Article III of the GATS in English.  He recalled that, thus far, 35
notifications had been submitted (with the remaining 10 to be notified soon) and that this work
required a considerable input of resources by the Chinese government, particularly in terms of time.
Given such severe time constraints, inaccuracies or perhaps errors in the translation might not havebeen completely avoided.  In this regard, he noted that all translated versions of the notified
legislation were for reference purposes only and that the legislation was only authentic in Chinese.
17. He further noted that the enquiry point for trade in services had been established and notified
to the WTO pursuant to Article III:4 of the GATS and that measures of general application to trade in
services and pertinent laws, regulations and administrative measures could be retrieved from it.  He
also felt that, outside the framework of the transitional review, the enquiry point served the same goal
as the review, namely that of information exchange which sought to provide Members withinformation regarding trade in services in China.  Regarding other notification obligations under the
GATS, he informed the Council that China was continuing the verification process with various
services administrative authorities.  Given the extensive and time-consuming nature of this work and
given the obvious priority China had put on the fulfilment of its market access commitments and
legislation streamlining, this work remained on-going.  He pledged that China would fulfil itsnotification obligations under the GATS and that  notifications would be submitted upon being
identified in this verification process.
18. The representative recalled that the Chinese government had made great efforts to  implement
China's commitments in services since its accession.  Firstly, a series of new regulations and
administrative rules governing trade in services had been promulgated since accession with a view tofulfilling China's WTO commitments.  These included:  Regulations on Administration of Foreign
Law Firms' Representative Offices in China; Regulations on Administration of Foreign-Invested
Telecommunications Enterprises; Measures fo r Administration of Sino-Foreign Contractual
Distribution Ventures for Audio-Visual Products; Provisions on Administration of International
Freight-Forwarding Agency Enterprises with Foreign Investment; revision of the Regulations onAdministration of Travel Agencies; Regulations on International Maritime Transportation; and
provisions on Administration of Foreign Investment in Road Transport Sector.  He noted that the
broad and in-depth revision to the pertinent regula tions and administrative rules in accordance with
WTO commitments had consolidated the legal basis upon which improved market access
opportunities for foreign services suppliers rested.
19. Regarding the commenting period for these regulations and administrative rules, he
underlined the difficult situation with which China had been confronted during the process oflegislative streamlining and hoped Members understood these difficulties.  On the one hand, China
accelerated the promulgation of these regulations and administrative rules as quickly as possible after
accession in order to fulfil the market access commitments outlined in its Protocol of Accession.  On
the other hand, in order to observe the principle of transparency, every possible means had been
utilised to provide WTO Members, enterprises and individuals the opportunity to comment.  Indeed,China had effectively improved market access opportunities for foreign services suppliers since its
accession.  He informed Members that the first 9 months of 2002 saw 24,771 new approvals of
foreign-invested enterprises  - an increase of 33.36% over the same period in 2001;  contractual
investment totaled US$ 68.4 billion and actual investment US$ 40 billion - a 38.4% and 22.5%
growth rate respectively over the same period in 2001.  He noted that newly approved investmentservices enterprises accounted for a substantial share of this and felt that this was convincing
testimony to the increasing liberalization of the Chinese market, including for services.  Adherence to
the principles of transparency and non-discrimination had ensured that the investment environment in
China improved steadily. China was accredited the top place in the 2002 Kearney-sponsored Index on
FDI Confidence.S/C/M/63
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20. Turning to the market access changes in some of the major services sectors since China's
accession, he informed Members that for distribution services, in the first half of 2002, eight
foreign-invested enterprises had been approved to open 28 chain stores in total including Carrefour
with more than 30 chain stores and Walmart with 22 outlets in 9 cities.  With respect to legal services,
17 new representative offices of law firms had been approved since accession, thereby increasing thenumber of foreign law firms' representative offices in China to 149 from 17 Members. On
audio-visual related services, since accession, two foreign-invested cinemas had been approved to
provide film projection services, and the first distribution joint venture of audio-visual products had
also been approved.  Regarding medical services, th e past 18 months saw 49 new licenses granted to
foreign services providers in the form of Sino-foreign equity or contractual joint ventures.  On
education services, 36 Sino-foreign cooperation schools and projects had been approved since
accession, bringing the total approved number close to 700.  In addition to one new foreign-fundedenterprise which had obtained a license in telecommunications, in road transportation approvals had
been granted to 30 foreign-invested enterprises.  Finally, on tourism services, another Sino-foreign
equity joint venture travel agency had been approved since accession, bringing the total approved
number to 12.  He felt that these facts demonstrated China's sincerity and resolve to honour its
commitments and that China's achievements since accession in promoting market access for trade inservices should be recognized by all.
21. Turning to the next part of his statement, the re presentative of China stated that some of the
questions posed to China revealed a lack of understanding of the relevant legislation, legislative
practices and administrative system in China.  In his view some of the questions amounted to market
access requests, which were to be presented in the new round of market access negotiations ratherthen in the review.
22. Responding to the first question on legal services, which sought a clarification on the
definition of 'information on the impact of the Chinese legal environment', he stated that article 15 of
the Regulations on Administration of Foreign Law Firms' Representative Offices in China foresaw
that a representative office and its representatives could only conduct those activities that did notencompass Chinese legal affairs.  The Implementing Rules stipulated six activities that were regarded
as "Chinese legal affairs".  These rules were formulated in accordance with China's entry for legal
services in its schedule, which excluded Chinese law practice from the description contained in CPC
861.  He further recalled that legal services required specific qualification, and that most countries
acknowledged that only qualified lawyers might provide legal services in the country from which they
received their certificate.  Lastly, he noted that China, having taken into consideration the common
practice for international legal services and the need to ensure high quality foreign legal services,defined "Chinese legal affairs" within a specific scope.  China allowed representative offices of
foreign law firms and their foreign lawyers to provide services related to international conventions,
international practices, international business operations and foreign law for cases falling under the
jurisdiction of Chinese law.  This was reflected in article 33 of the Implementing Rules, which stated
that representative offices should not provide opinions or judgment on the application of Chinese lawin any specific case when requested to provide information on the impact of the Chinese legal
environment.  This provision of the Rules was based on the fact that CPC 861 did not cover Chinese
legal affairs;  that it confirmed the situation in China prior to its accession which allowed for
representative offices and their lawyers to provide information regarding the impact of the Chinese
legal environment to non-specific clients free of charge so as to market their business and services;and that it meant that when providing informatio n on the impact of the Chinese legal environment,
foreign lawyers and their representative offices were prohibited from providing specific legal opinions
and/or judgment with regard to application of Chinese law.  The rules, he stated, were in compliance
with China's commitments and noted that foreign lawyers practising in China had been consulted on
this provision and understood it to mean that information provided on the impact of the Chinese legalenvironment should not include interpretation of Chinese law.S/C/M/63
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23. Responding to the second question on legal services, which sought a clarification on Chinese
national registered lawyers and cooperation between representative offices and Chinese lawyers, he
noted that article 16 of the Regulations stipulated that "a representative office shall not employ
Chinese practitioner lawyers; its support staff employed shall not provide legal services to clients" and
that the Implementing Rules provided more detail.  This provision of the Regulations were elaborated,firstly, on the basis of the inscription in China's schedule that "representative offices shall not employ
Chinese national registered lawyers."  The term "Chinese national registered lawyer" was further
clarified in the Working Party Report of China's accession as "Chinese nationals who had obtained a
lawyer's certificate and were holding a Chinese practicing permit and were registered to practice in a
Chinese law firm."   Secondly, he stated, China's Schedule of Specific Commitments in sum (a) only
allowed representative offices to enter into a business co-operation relationship with Chinese law
firms, as was the usual practice for representative offices that form long-term and regular cooperationrelationships with Chinese law firms; (b) allowed for the requirement of the Law on Lawyers of China
that Chinese lawyers shall practice and work as members of a Chinese law firm and that a lawyer
would be disbarred if he or she left a legal service providing unit; (c) allowed for direct instruction
from the representative office to the Chinese lawyer in individual cases on the basis of prior
agreement with the Chinese law firm, with the stipul ation that in this case, the Chinese lawyer should
not provide legal service as an employee of the representative office in the name of the office.  These
stipulations, he stated, did not break China's WTO commitments.
24.  Responding to the request for a clarification on the MFN issue, the representative stated that
Article 34 of the Regulations stated that "measures for administration of the representative offices
established in Chinese mainland by law firms in the separate customs territories shall be separatelyformulated by the judicial administration department of the State Council in accordance with the
principles of these Regulations", and included a certain differentiation in language which took into
account the return of Hong Kong and Macao to China.  It was for this reason that the Ministry of
Justice promulgated Regulations on Administration of Representative Offices of Law Firms of Hong
Kong and Macao Special Administrative Regions on 13 March 2002, the substantive contents ofwhich were the same as the Regulations and therefore did not constitute an MFN problem.
25. Turning to the first question on courier services , regarding the latest developments in their
administration, the representative responded that for foreign-invested freight forwarding enterprises
that engaged in international courier services to deliver letters and articles that had the nature of
letters, entrustment registration with the post authority was a matter of procedure.  He stated that the
entrustment registration was not a second approval since the post authority would issue an
entrustment certificate that contained duration an d business scope information consistent with the
issuance of the certificate by the Ministry of Foreign Trade and Economic Cooperation (which
excluded political, government and military documents).  Moreover, he noted, foreign-invested freight
forwarding enterprises that did not engage in inte rnational courier services to deliver letters and
articles that had the nature of letters did not need to go through the entrustment procedure.  After a
foreign-invested freight forwarding enterprise file d the entrustment, its branches already established
or further new branches did not have to go through the entrustment procedure again.  In this regard, he
recalled paragraph 7 of the Doha Declaration, which reaffirmed the right of Members under the
GATS to regulate, and to introduce new regulations on the supply of services.
26. Responding to a concern regarding the independence of the regulator, he noted that in the
current Chinese postal system, China Post acted as both regulator and operator, as was reflected inparagraph 309 of the Working Party Report on China's accession, which notes that "relevant
regulatory authorities would be separate from, and not accountable to, any service suppliers they
regulated, except for courier and railway transportation services".  He informed Members that China
was actively studying and moving forward the process of establishing an independent regulator for
courier services, but reiterated that each WTO Member had its own domestic situation and thereforeS/C/M/63
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had the right to define the content of public services and to reform its own public sector.  He stated
that China's current postal regulatory model should be fully respected by other WTO Members.
27. Turning to the first question on telecommunication services regarding licensing and minimum
capital requirement, the representative responded that all enterprises could apply for licenses to
provide telecommunication services in accordance with the requirements and procedures of theRegulations of the People's Republic of China on Telecommunications, the provisions of the
Administration of Foreign-Invested Telecommunications Enterprises and the Administrative
Measures on Licensing for Operation of Telecommunication Business. He noted that in order to
establish a foreign-invested telecommunication enterp rise providing services in China, the principal
Chinese investor should, after obtaining the Exam ination Report on Operation of Telecommunication
Business by Foreign-Invested Enterprises and the Approval Certificate for the Establishment of
Foreign-Invested Enterprise, make an application to the competent telecommunication authority underthe State Council.  The examination of the application for the provision of basic telecommunication
services was completed within 180 days, and for the provision of value-added telecommunication
services within 60 days and, if approved, the license was issued.  The telecommunication industry was
a capital-intensive industry that needed economies of scale and strong professional expertise.  As
well, telecommunication services were provided to the general public, and required that thetelecommunication service provider have sufficient funds to establish an operation network, sufficient
professionals capable of business development, and sound credit and capacity to ensure service
provision in the long-term.  This ensured the quality of the services and the protection of the rights of
consumers.  The minimum capital requirement of foreign-invested enterprises to provide basic and
value-added telecommunication services, stipul ated in the Provisions on Administration of
Foreign-Invested Telecommunications Enterprises, was the same as that for domestic enterprises.
28. Responding to a concern on the independence of the regulator, he noted that the requirement
for the "independent regulator" in the telecommunication reference paper was that "the regulatory
body is separate from, and not accountable to, any supplier of basic telecommunication services. The
decisions of and the procedures used by regulato rs shall be impartial with respect to all market
participants."  In this regard he stated that in  1998 the establishment of the Ministry of Information
Industry had separated the regulatory body from the operational business.  MII relinquished all
management functions of all the enterprises and regulated in an impartial, fair and transparent manner
and acted as independent regulator.
29. Finally, addressing the issue of universal service, the representative noted that the Regulation
on Telecommunications of China stipulated that telecommunication operators should fulfil the
relevant universal service obligations according the relevant laws and regulations. The short-termobjective of the universal service obligation centred on voice services and the authority governing
telecommunications under the State Council defined the telecom universal service obligation either
through designation or public bidding. The administrative rules on cost compensation of telecom
universal service would be stipulated by the finance authority together with the telecommunication
and pricing authority under the State Council, although he stated that at present, those authorities werestudying and drafting administrative rules. China hoped to enhance communication and cooperation
with other Members, and to draw upon their lessons , so as to establish scientific and reasonable
methods for cost compensation for telecom universal service.
30. Responding to a first question on distribution and logistics services regarding the business
scope of logistics companies, the representative noted that according to the pilot policy contained inthe Notice on Establishing Foreign-invested Logistics Companies in  Pilot Regions, two categories of
international logistics business had been encouraged to develop.  The first was international
distribution logistics based on cross-border delivery, which included import and export business and
related services regarding the business of import and export of goods conducted independently or as
an agent. It also included international freight forwarding for the import and export of goods byS/C/M/63
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maritime, air, road and rail transportation.  The second was third party logistics with hi-tech and
advanced management at the core which included:  transport, warehousing, loading and unloading,
processing, packaging, delivery of general goods by road, related information processing services and
consultancy, domestic freight forwarding, and logistics managed and operated by computer network.
These two categories of logistics, instead of being a strict distinction of types of logistics, served onlyto guide the development encouraged by the government.
31. Responding to a second question on this issue pertaining to geographic limitations and
licensing, the representative noted that foreign-invested logistics enterprises could establish in the
pilot areas of Jiangsu, Zhejiang, Guangdong, Beijing, Tianjin, Chongqing, Shanghai and Shenzhen, in
which foreign capital was more concentrated.  Existing or new enterprises in these areas could be
eligible under the pilot policy so long as they met the requirements.  The enterprises which were
engaged in  part or parts of the logistics business could continue their business without being affectedby the pilot policy.  If these enterprises met the re quirements of the pilot policy, they could apply for
an expansion of their business scope.
32. Finally, turning to a question on regulation and approval procedures in maritime transport
services, the representative recalled that the Regulations on International Maritime Transportation
were promulgated on 11 December 2001 and had become effective on 1 January 2002 and that, inorder to facilitate their implementation, Implementing Rules were being drafted and revised based on
suggestions and comments solicited from the public.  He stated that the rules were being internally
finalised and expected them to be promulgated at the beginning of 2003, and reiterated that the
regulations and rules were in compliance with Ch ina's WTO commitments.  With respect to these
Implementing Rules, he stated that they would give further detail about the provisions on internationalmaritime transportation business as well as auxiliary services, including the definition of international
shipping companies as the companies providing international cargo and/or passenger sea
transportation services by owned or operated ships.  Articles 5 and 6 of the Regulations regarding the
operation of international shipping services applie d exclusively to international shipping companies
registered in China and were not applicable to foreign companies.  The Implementing Rules would
also define a number of maritime auxiliary services operators, including international shipping agency
service operators, international ship management operators, international maritime cargo warehousing
operators, international maritime container freight station and container yard operators.  Neither the
Regulations nor its Implementing Rules applied to freight forwarding services, which were regulated
by the Rules Governing the International Freight Forwarding Services.
33. The representative of China expressed his hope that the information provided to the Council
prior to the meeting and the presentation made allowed Members to better understand the efforts andachievements made by China in implementing its co mmitments in trade in services. China believed
that the review provided a useful forum for clarification and information exchange which would lead
to constructive and positive results in the review.
34. The representative of the United States thanked the Chinese delegation for its hard work on
the implementation and statement that contained relevant information.  He noted, however,
disappointment that his delegati on had not received the information contained in the oral statement
prior to the meeting as required by section 18 of China's protocol.  It was difficult to follow up in
detail on the statement, as required for a meaningful review.
35. With respect to legal services, he highlighted the significant concerns not addressed in China's
responses.  Article XVI of the GATS, he noted, barred a Member from imposing an economic needstest (ENT) where there existed a market access commitment, as China had done with legal services.  It
appeared as though the new rules allowed the Ministry of Justice to determine whether there was a
need for a representative office based on demand.  He requested that China confirm that an ENT was
precluded under the GATS and explain how it interpreted articles 7:3 of the Regulations and article 4S/C/M/63
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of the Implementing Rules in this regard.  He further noted that new rules in the Regulations seemed
to impose new quantitative limits on foreign representative offices for example, article 10 of the
Implementing Rules which required that the most recently established representative office of a
foreign law firm must have been in business for three years before being allowed to apply to open
another representative office.  In its accession agreement China committed to eliminate allquantitative limits by 11 December 2002, and he inquired as to what steps China would take to
eliminate quantitative restrictions from the new Implementing Rules.  Thirdly, the representative
noted a discrepancy in the time allowed for authorities to consider an application for a new foreign
representative office, which was up to nine months for foreign suppliers, while only 30 days for
domestic suppliers, and inquired as to why the 30 day limit was not applied to all suppliers.  He also
inquired into the permissible activities of foreign law firms and noted, that despite China's response, it
still seemed that the new regulations in the Implementing Rules imposed limitations on representativeoffices' activities which seemed more restrictive than  provided for in China's services schedule or to
prohibit activities in which foreign firms could previously engage.  He requested that China comment
on this question.
36. With respect to telecommunications services, he noted that China stated that the Ministry of
Information Industry was the independent regulator, but noted that the MII was not fully separatedstructurally and financially from all telecom operators and providers.  He requested clarification that
this was or was not the case.
37. With respect to express courier services, he appreciated the efforts China had made to
alleviate the United States' concerns, but noted that it would be difficult for China Post structurally to
operate separately as a regulator and as a competitor of other courier services, and would have liked tohave seen some mechanism to ensure that China Post's did not act as regulator.  In response to China's
clarification provided with respect to the types of services in which express delivery providers could
engage, he requested further clarification on the definition of something which was in the "nature of a
letter".  He noted with appreciation the hard work and effort that the Chinese government had made
on this issue.
38. With respect to logistics, he noted that this was not a defined term for WTO purposes and that
the scope of the term as used in the Regulations was not clear, but seem to include several types of
services for which China had made commitments in its schedule and noted that regulations applied
must comply with the commitments made by China under the rubric of logistics.  He thanked China
for its efforts to define the scope of these services.
39. On Financial Services, he reiterated the United States' concern contained in its questions, and
as included in the committee's report, on the timing of the adoption of final regulations for theinsurance and motor vehicle financing industries.  He noted that, for insurance, the US had been
encouraged by the willingness of Chinese authorit ies to examine alternative capitalisation structures
which would help improve the prudential environment in China and enhance market access.
40. The representative of Japan thanked China for its explanation, efforts and contribution
regarding notification and other information, which Japan had not been able to fully examine due to
the information having been distributed just prior to  the meeting.  He requested that China provide in
this regard and in the name of transparency, fu rther information in writing and requested that it
distribute its statement.  Having heard China's responses to Japan's questions on courier services,
packaged documents (particularly paragraph 4 regarding the acquired rights of foreign operators), and
the regulation on the scope of correspondence excluded from these services even in the case wherethere was entrustment, he sought further elaboration.
41. On distribution services and referring to the points raised in paragraphs 5 and 6 of Japan's
communication he expressed concern on China's schedule for the liberalization of the distribution ofS/C/M/63
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various items including processed crude oil and motor vehicles and on the restriction on automobile
retail sales.
42. With respect to transport services, the repres entative thanked China for its explanations on
maritime transport, logistics services and freight fo rwarding services.  Given the ambiguities in the
different categories under different regulations, he sought the possibility to come back to these topicsfor further information.  Referring to questions on maritime transport, the discount system and port
facilities fees in paragraphs 7 and 8 of Japan's communication, he noted that China had not addressed
these points and sought further information.   Referring to paragraphs 9 and 10 he thanked China for
its explanations and wished to come back to these topics.  Referring to paragraph 12, right of trade, he
requested that China give further explanations.
43. He noted in China's comments that it was undergoing a process of incorporating its WTO
obligations into its administrative structure, and commended China on its efforts.  He noted thattransparency was key to this process and he hoped that China would strengthen its recent efforts by
giving interested Members and the private sector the ability to comment on new rules and regulations.
He expressed Japan's wish to continue to exchange views constructively with the Chinese government
to ensure that, in compliance with WTO rules, transparency and an open market prevailed.
44. The representative of the European Communitie s thanked China for its extensive replies, but
regretted that these had not been received in advance, thereby rendering them difficult to process
fully.  He requested that a copy of China's statement be made available.  He commended China on its
efforts to implement its accession obligations, but noted that some elements of this process have given
rise for concern, for instance the general lack of transparency regarding the implementation process.
He noted that with regard to specific regulations, there remained unclear and ambiguous provisionswhich made them difficult to fully understand and difficult to ensure a predictable business
environment.  He indicated his intention to focu s on some more specific elements arising from the
EC's questions for which he hoped China could provide more information.
45.   Turning to the EC's questions on telecom, which had not fully addressed, he requested
further information on interconnection and on the regulation adopted in December 2001 on foreigntelecom companies and asked whether this regulation on foreign-invested enterprises was also
applicable to Chinese telecommunications companie s listed on foreign stock exchanges.  He also
inquired as to who was responsible for managing State participation in telecommunication companies.
46. On foreign lawyers, he reiterated that the United States' supplemental questions had been
included in the EC's initial communication.
47. With respect to courier services, the representative said that the EC took note of the responses
given and hoped that its concerns would be alleviated.
48. He noted with respect to financial services that this was a sector in which the EC had
concerns, both with respect to banking and insurance, particularly on branching and other issues such
as capitalisation rates on insurance companies.  He expressed the EC's interest in pursuing these and
other issues in the EC's communications in the coming days.
49. The representative of Chinese Taipei noted th e efforts involved in preparing the statement
which had sought to respond to questions and comments tabled by his delegation and others.
However, as he had not received the oral statement in written form in advance, he was not sure that all
Chinese Taipei concerns had been fully addressed.  He requested that a copy of China's statement be
made available.  With respect to tourism, he felt an obligation to identify areas in which China might
have lapsed in its implementation of its accession protocol and noted that such implementation was inthe interest of all Members, including China.S/C/M/63
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50. The representative of Australia appreciated China's hard work on the implementation of its
services commitments.  With respect to legal services  and referring to stipulations of the Ministry of
Justice regarding the enforcement of the Regulations on the Management of Foreign Representative
Offices, he noted that these put new limitations on foreign lawyers practising in China.  He noted that
Australia would require more time to study China's responses and might have further questions. Herequested that China make its statement available.
51. The representative of Pakistan extended sincere thanks to China for its very detailed and
comprehensive replies to the questions posed to it.  He felt that, despite the onerous and
unprecedented obligations placed upon it, China had adequately answered and he expressed Pakistan's
total satisfaction.  He reiterated his delegation's appreciation for all of China's efforts to implement its
obligations and wished it a successful conclusion to its review.
52. The representative of Canada noted China's considerable efforts in preparing its
communication and particularly its submission on relevant laws pertaining to the review.  He noted
that Canada shared the concerns expressed by others regarding legal services, particularly with respect
to the apparent geographical and quantitative limitations on establishment.  He sought more time to
consider closely the responses given by China and the opportunity to raise any supplemental
questions.  He requested that its statement and a list of officials and ministries present at the meetingbe made available.
53. The representative of Cuba thanked China for its complete responses regarding the
mechanisms established to fulfil its commitments and recalled that entering the WTO was difficult in
terms of legislative and administrative changes and notifications, which required tremendous effort.
The statement by China was evidence of its commitment to meet its obligations and Cuba expressedsatisfaction with its responses and urged other Members not to make requests that exceeded China's
commitments.  She congratulated China and noted that the extensive delegation present testified to
China's firm commitment to the WTO.
54. The representative of Uruguay expressed gratitude for the participation of several delegations
in this process and to China for the enormous work  involved in fulfilling its commitments linked to
entering the WTO.  He underscored that, as in other bodies, all statements made should be reflected in
the formal record of the meeting and that a factual report, having attached to it these minutes, could be
prepared for the transitional review of the General Council in December.
55. The Chair recalled that a number of delegations in their comments had requested that China
make available its statement, and that a list of the delegation also be provided.  She noted the large
number of questions and requests for clarifications, including in legal services, telecommunications,
courier services, transport and related services, tourism services, and the issue of the right to trade.
56. The representative of China thanked delegations for their positive comments, good wishes
and supplemental questions.  Responding to the request that China's statement be made available, he
confirmed that it would be given to the Secretariat for circulation to the Council.  With respect to
further bilateral contacts with Chinese officials, he noted that capital officials were in Geneva until 2
November and that they were available for such contacts, on the understanding that these were outsidethe framework of the transitional review mechanism.
57. Responding to comments concerning financial services, he stated that this transitional review
mechanism had been completed earlier that week  in the Committee on Trade in Financial Services
and that he would not return to this issue until next year's review, but remained available to discuss
with Members these issues on other occasions.  In  light of the follow up questions that had been
asked, he felt that all major concerns had been addressed but would endeavour to respond to the
remaining written and oral questions.S/C/M/63
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58. Responding to the first question on legal services regarding transparency and public
commenting,  he noted that according to clause C, article 2 of the Protocol of China's accession, China
had fully complied with transparency requirements in drafting the Regulations on Administration of
Foreign Law Firms and Representative Offices in China (hereafter "Regulations") and the Regulations
of the Ministry of Justice on the Implementation of these Regulations  (hereafter "ImplementationRules").  Before the promulgation and implementation of the Regulations, meetings had been held
with representatives of foreign law firms to solic it their comment.  For example, invitations for
comment on issues of concern to representative offices had been sent in April and May 2002 in
advance of the meeting, and this, in places where most offices were located, such as Beijing, Shanghai
and Guangzhou.  Further meetings had been held in August with representative offices in Shanghai
and Beijing to ask for their comments.
59. With respect to the question on the duration of examination and the approval procedure, he
explained that the nine month period as defined in the Regulations, had been circulated on the basis of
the actual time needed to complete a full examination and approval procedure for the establishment of
representative offices.  It covered the time needed to process the application which included the
receipt of the documents; pre-examination formalities; the obtaining of the complete list of documents
and determining their authenticity; confirming the validity of qualifications and certifications; the
sending out of notices for supplementary documents; and verification that documents had been duly
notarised and accredited.  The period for increasing the number of representatives or the number of
employees would be no more than 30 working days after receipt of a complete application with
documents for examination by the two levels of authorities handling the matter.
60. Wishing to clarify the question regarding geographical limitations or the time requirement for
the establishment of additional representative offices, he noted that item 1 of article 10 of the
Implementation Rules stated that representative offices for foreign law firms established in China
should have practiced for three consecutive years before establishing any additional representative
offices.  Two factors had been considered in drafting this requirement.  Firstly, the domestic situation
was different as Chinese offices must have practiced for four consecutive years.  Secondly, in the past10 years, the experience of foreign representative offices in China had shown that it normally took
about three years to obtain a licence, open the business and regularly run the office. Therefore, foreign
law firms required a transitional period before opening up any additional offices.  He noted that a
number of representative offices could not expand their business after their establishment, and that
some never opened after having received approval.  Nonetheless, a considerable number of these
offices applied for authorisation to establish additional offices, which China believed to be
unreasonable.  The three-year requirement was not a quantitative limitation, but an administrativemeasure.
61. Regarding the fourth question requesting clarification on representative limitations, he
responded that it was stipulated in article 18 of the Regulations that the representative of the
representative office should not be a full time or part time representative concurrently in two or more
representative offices.  Two factors had been consider ed in drafting this requirement.  Firstly,  this
same regulation was applied to Chinese representatives of law firms according to item 3 of article 5 of
the Regulations.  Measures for representative offices promulgated by the Ministry of Justice stated
that  representative offices of Chinese law firms should have three or more lawyers posted in the
branch office and that no Chinese lawyer was permitted to be a full time or part time representative in
two or more representative offices.  Secondly, the requirement was that a different representative beappointed to each representative office of foreign law firms.  A representative office of a law firm in a
Beijing office could concurrently practice law in other representative offices of that firm in China, and
could add up his or her law practising time in different offices in China.
62. Responding to the question of actual needs tests, he responded that in item 3 of article 7 of the
Regulations stated that when a foreign law firm applied to establish a representative office in China, itS/C/M/63
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should meet the requirement that there be an actual need to establish a representative office to conduct
legal services business.  More details could be found in article 4 of the Implementation Rules.  The
following factors had been taken into consideration. Firstly, the prudential principle whereby only a
legal service supplier with profound expertise and experience could protect the rights and interests of
consumers.  This made it important to test whether foreign law firms provided high quality services toclients in China, based on their qualifications, history of providing legal services, and demonstrating
the main professional capabilities.  Secondly, the provision was related to an economic gap and the
actual demand for legal services in different areas of China.  China was developing with imbalances
in economic growth in different areas and the level of legal services among different areas and regions
was also different.  The overall legal services market had not matured, market order had not been
strengthened and a sound services mechanism had not been brought into place.  Therefore, Chinese
authorities had demonstrated a responsible attitude in undertaking their duty to set up a reference ofeconomic growth level and the actual need for legal services for foreign applicants.
63. With respect to the issue of the application of  Chinese law in arbitration activities, he noted
that the Implementation Rules considered that an agent who gave an opinion or comment concerning
the application of Chinese law or concerning facts that involved Chinese laws in his capacity as an
agent in the course of arbitration activities was practising Chinese law.  The reasons were thefollowing.  Firstly, this stipulation did not prohibit foreign lawyers and offices from taking part in
arbitration activities in China in their capacity as  an agent.  It did not prevent them from handling
arbitration cases related to the application of Chinese law, but rather set a limit on the issue of
opinions or comments on the application of Chinese law as well as on acts or events governed by
Chinese law in arbitration activities.  Secondly, China's schedule of specific commitments explicitlystated that with respect to CPC 861 foreign lawyers could not engage in the practice of Chinese law.
Thirdly, it was common practice for some WTO Memb ers to not allow foreign lawyers to provide
opinions or comments concerning the application of the law of the host country.
64. Regarding the question on the re-registration of foreign law firms operating  in China on a
trial basis, he responded that this re-registration requirement, stipulated in article 35 of theRegulations, was basically a registration procedure that would not affect the business of the foreign
representative offices and consequently did not violate acquired rights.  With respect to the question
of fees to be paid in Renminbi (local currency), he  stated that according to the relevant regulations of
the administration of foreign exchange, applicable to  all foreign service providers, all charges and fees
in China were to be paid in Renminbi.
65. Turning to courier services and the question rega rding the deadline for entrustment, he noted
that this deadline was November 5, 2002 which was 60 days after the issuance of the supplementnotice.
66. With respect to telecommunications services  and the question of international gateway
facilities, he noted that during its accession negotiations and in final legal documents, China had not
made a commitment to open international gateway facilities, but instead it required all international
services to be supplied through the international gateway facility authorised by the MII.
67. Regarding the question of the regulatory author ity, he stated that the Information Industry
Authority to the State Council referred to the MII.  The telecom administration authority of the
provinces, autonomous regions and municipalities referred to the telecommunications regulatory
bureau in the respective jurisdiction.  The MII s upervised and administered the telecommunication
industry nationwide.  The provincial regulatory bureau supervised and governed thetelecommunications industry in their respective region under the direction of the MII.
68. Regarding the transparency of laws and regulations and general issues of telecommunications
services, he stated that during the preparation and drafting of telecom laws and regulations, the MIIS/C/M/63
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had sought the opinions of telecommunications enterprises and other relevant entities and had
modified and improved these in light of the opinions received from the different parties.    With
respect to licencing procedures, Regulations of the People's Republic of China on
Telecommunications, the Provisions on Administ ration of Foreign-Invested Telecommunications
Enterprises, and the Administering Measures for Approval Certificate of Telecommunications,contained concrete provisions concerning the qualification procedure of the application for a
telecommunication approval certificate.  The preceding three regulations had been published on MII's
web-site, which made the procedure totally transp arent.  The laws and regulations governing the
telecommunication sector included the following:  the Regulation of the People's Republic of China
on Telecommunications, the Administering Regulation of the PRC on Wireless Radio and
Administrative Measures for Internet Information Services, and the Provisions on Administration of
Foreign-Invested Telecommunication Enterprises.  On the basis of the above laws and regulations, afurther 24 departmental rules including administering measures for approval certificates of
telecommunications were issued.  China had launched the work of drafting the telecommunication
law in 2001 and it would continue to improve its legislative work in telecommunications services.  He
noted that according to the Regulations of the People's Republic China on Telecommunications, the
content of telecommunications services covered broadcasting services.  He noted that the regulatoryplanning, distribution and allocation of nationwide public telecommunication resources were assigned
to the MII.  Telecommunication service providers could only apply for a nationwide licence from the
MII.
69. Responding to the question on dominant telecommunication carriers, he stated that according
to Order 291 of the State Council and its administrative regulation on interconnection of publictelecommunication networks, dominant carriers re ferred to those who controlled the necessary
facilities of basic telecommunications and held more than 50% market-share in the fixed local
telephone business and the level of local network, and were able to substantially influence other
telecommunication carriers entering market.  The dominant carriers were required to establish
interconnection rules and provide interconnection during the requested period.  They were prohibitedfrom denying interconnection with other telecommunication carriers or operational units of specific
networks.  They were also prohibited from hinderi ng consumers' selection of other telecommunication
carriers.  The quality of interconnection services provided by dominant carriers to other
telecommunication suppliers should be the same as th at of like services for their own networks and
like services provided to their subsidiaries or branches.  The dominant carriers had the obligation to
adopt the necessary technical measures to ensure that consumers enjoyed their network call functions.
70. Responding to the question regarding public hearings for the setting up of government
oriented or fixed prices, he noted that Chin a was confronted with a new situation in the
telecommunications market after accession and stated that, in making market adjustments, resources
would be distributed reasonably.  In order to pr omote the development of telecommunication services,
the MII and the Commission of State Developmen t and Planning (SDPC) had applied the market
adjusted price where there was sufficient competition, which had allowed enterprises to determine andadjust fees autonomously.   He noted that quantitative assessments of competition levels in the
telecommunications market were complex and that most countries lacked a detailed assessment
standard.  China remained open to further cooperation with other Members and hoped to learn from
their experiences so as to establish competition assessment standards for the Chinese market
consistent with China's domestic situation.  Both the government price and guidance pricing appliedto a few basic telecommunication areas which were characterised by a monopoly or insufficient
competition.  The telecommunications fees standard was subject to government pricing and was
proposed by the MII and approved by the State Council after consultation with the pricing authority
under the State Council.  The telecommunication fees standard, which was subject to the government
guidance pricing, was established and promulgated by the MII after consultation with the pricingauthority under the State Council.S/C/M/63
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71. Responding to a second question regarding interconnection, the representative responded that
interconnection should be achieved among telecommunications networks based on the principle of
technical applicability, reasonableness, fairness and mutual cooperation.  The interconnection
settlement standards were to be based on cost.  With the further development of interconnection
among telecommunication networks, the determinati on of fees of interconnection would comply with
international practices.  China was willing to strengthen cooperation with other Members and share
their successful experiences with respect to interconnection cost and settlement standards.  As
stipulated by the Regulations of Telecommunication of China, dominant telecommunications carriers
established interconnection rules and procedures, guided by the principles of non-discrimination and
transparency.  The interconnection rules, which were binding on dominant carriers, were examined
and approved by the MII prior to their implem entation.  Interconnection agreements between public
telecommunications networks and between public  and specific telecommunications networks were
concluded on the basis of consultations between the parties and according to the Administration
Regulation on Networks Interconnection and were filed with the MII.
72. In response to a question on the construction of public telecommunication networks, he said
that the construction of dedicated telecommunications networks and radio and television transmission
networks including the distribution of rights of way, was subject to overall planning and industryadministration under the competent information indu stry department of the State Council.  The
competent information industry department of the State Council would author the overall plan for the
development and construction of the information industry and took into account the development
goals of the national economy and social society.
73. Responding to a question regarding the elimination of geographical restrictions, he noted  that
the phase-in period in China's schedule called for the elimination of geographical limitations and that
implementation would proceed in line with China's schedule of commitments.
74. Responding to the question on public bidding for basic telecommunications licences, he stated
that the issuance of licences for basic telecommunication operations was currently subject to approval
of the application.  The MII would study and draft rules on the issuance of basic telecommunicationsoperating licences through public bidding as soon as possible so as to increase the transparency of
licence issuing.
75. Turning to logistics services and in response to a question regarding majority foreign
shareholding in logistics companies, he noted th e foreign investors' share in a foreign invested
logistics enterprise that engaged in international distribution logistics activities should not exceed
50%.  This allowed China to maintain certain relevant policies and he noted that the liberalization of
equity limits would be carried out simultaneously with trading rights.  This provision was stipulateddue to equity limits in the areas of import and e xport operation rights involved in international
distribution logistics and international logistic freight forwarding.
76. With respect to distribution services and the question on the phase-in period for special
commodities listed in China's schedule, he recalled the phase-in period for crude oil or processed oil,
and noted that the relevant laws and regulations were being drafted.  With respect to the regulation ofautomobile distribution, he stated that the current situation foresaw that the application for the
distribution of domestically produced cars and imported cars could be approved simultaneously.
77. With respect to freight-forwarding and the question on majority foreign shareholding, he
noted that the Ministry of Foreign Trade and Economic Cooperation (MOFTEC) had revised and
promulgated administrative Regulations on Foreign-Invested International Freight ForwardingAgencies.  These stipulated the exact time for foreign investors to establish joint ventures in
international freight forwarding enterprises in which foreign parties control or play a dominant role.
Foreign international freight forwarding agencies  would be announced at the appropriate time byS/C/M/63
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MOFTEC and it would allow foreign majority shareholding before 11 December 11 2002, in-line with
China's commitment.  Responding to a question regarding the right to issue the bill of lading, he
stated that according to the Regulation on Intern ational Maritime Transport promulgated by the State
Council for implementation in December 2001, intern ational freight forwarding enterprises could
issue bills of lading after it had received the operation qualifications of carriers with ships.
78. With respect to Maritime Transportation Services and a question on access to and use of port
facilities, he stated that the discount system for port facilities fees had been abolished as of 1 January
2002.  Responding to a question on trading rights, although not an issue on trade in services, he noted
that MOFTEC was studying the expansion of trading rights and that the formulation of relevant laws
and regulations was underway and would be consistent with China's commitments made in the
working party report.  On the issue of the refund of value-added tax, he noted that according to
China's accession regime, trade in services such as finance, insurance, transport, construction andtourism were subject to business taxes, and that value-added tax rebates involved only trade in goods.
The issue of value-added tax rebates did not need to be raised in the review.
79. Reiterating an earlier point, the representative noted that with respect to written responses,
paragraph 18 of the protocol served as the only legal basis governing the TRM exercise, and that no
Member could justify its request for written responses based on that paragraph.  He noted that therewere different understandings of the paragraph but assumed that it was not the mandate of the Council
to interpret the paragraph.  Secondly, he believed that the information China provided prior to and at
the meeting was sufficient for a meaningful review.  He agreed that the statement of the head of the
delegation would be circulated in the interests of transparency and to facilitate delegate's reports to
capital.  Lastly, he reiterated that bilateral contacts could be held but not in connection with the TRM,and that this would help the exchange of views.  He stated that all questions could not be exhausted at
one TRM, but recalled that it was an eight to nine year program.  He compared the situation to not
allowing a child to graduate from an eight to ten year program after the first examination, because not
all questions could be put into one examination pape r.  China looked forward to more bilateral and
multilateral consultations and thanked Members for their questions and comments.
80. The Chair thanked China for its responses and suggested that the Council take note of the
statements made before moving on to the issue of the report to the General Council.
81. It was so decided.
82. Regarding the report to the General Council, the Chair suggested that the Secretariat prepare a
factual report stating:  that pursuant to Section 18 of the Protocol on the Accession of the People's
Republic of China, the Council for Trade in Serv ices conducted a review of the implementation by
China of the WTO Agreement and of the related provisions of the Protocol, in the meeting held on 25October 2002;  that written communications had been  received from five WTO Members, namely, the
European Communities, the United States, Japan, Chinese Taipei and Australia; and that the details of
the discussion could be found in the meeting report.  As agreed earlier in the meeting, the Report from
the Committee on Trade in Financial Services would form part of the Services Council's report.
83. It was so decided.
D. PROPOSALS FOR A TECHNICAL REVIEW OF GATS PROVISIONS –
ARTICLE XX:2
84. The Chair recalled that at the July meeting of the Council, the Secretariat had presented a
background note on the drafting history of Article XX: 2, contained in Job (02)/89.  This was followed
by a preliminary discussion in which some Member s explored the possible merits of conducting a
technical review of this provision.  In response to a request by Canada, she had suggested that theS/C/M/63
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Secretariat prepare a short note elaborating on the scenarios raised by some Members at that meeting.
This new Secretariat background note was contained in Job (02)/153 dated 24 October 2002.
85. The Secretariat stated that the note was self-explanatory and included some illustrative
examples that sought to clarify where ambiguities might arise, particularly where market access or
national treatment entries consisted of an "unbound / none" or vice versa .  The question arose to the
common area of overlap between the scopes of the two articles.  He noted that the last paragraph did
not suggest any course of action, but that the qu estion of whether action was needed was raised.
86. The representative of Brazil noted that it appeared that the situation as outlined in Part A of
the note was not the same as the one outlined in Part B because, whereas Article XX:2 could not
provide an answer to the scenario outlined in Part A,  it could provide an answer on how to schedule a
commitment in the situation outlined in Part B.  Regarding Part A, where market access was unbound
and national treatment contained a restriction for mode 3, the question arose as to whether a Membercould schedule a measure violating both Articles XV I or XVII.  Paragraph 18 of document S/C/M/61
stated that it was possible to schedule a quantitative discriminatory restriction in the market access
column because of Article XX:2.  The opposite view was that it would not be possible because, if the
discriminatory aspect had not appeared under national treatment, then it would be impossible to
schedule a discriminatory measure, although it was quantitative.  In example B the situation wasdifferent (where market access read "none" and national treatment "unbound") and the question was
whether a Member could inscribe a discriminatory restriction but with a market access component.
The answer provided by XX:2 was negative, because if a measure had been at the same time an
Article XVI and Article XVII restriction, it should have appeared in the market access column.  If
"none" appeared in the market access column, a Member would not have the opportunity to enter adiscriminatory measure that was also quantitative.  This meant that the remaining possibility would be
to inscribe a discriminatory limitation that had no quantitative aspect.  He noted that the conclusion
could be that for example B Article XX:2 provided an answer whereas in example A there remained
an ambiguity which could be clarified through an agreed interpretation.
87. The representative of Hong Kong, China agreed with the Secretariat's caution as noted in the
first footnote.  He stated that he shared Brazil's assessment of parts A and B of the note and wished to
delve deeper into paragraph 9 of the paper regarding the applicability of XX:2.  He noted that
paragraph 9 said that there were two instances in which Article XX:2 was arguably applicable.  The
first was that Article XX:2 would apply only when a binding with limitations appeared in both the
market access and national treatment columns, but not in other cases, such as those outlined in
examples A and B.  He did not see why the appli cability of Article XX:2 would be limited in this
fashion.  If "unbound" was inscribed in the national treatment column, then the measure inconsistentwith both market access and national treatment, according to the wording in Article XX:2, should
appear in the market access.  He inquired as to why the Secretariat felt such a situation would not
apply.  The second instance outlined in paragraph 9 stated that Article XX:2 was arguably not
applicable where national treatment was "unbound" because the inscription under Article XVI
provided a qualification under Article XVII as well.  He stated that he was not sure he agreed withthis because the wording in Article XX:2 (i.e. "condition and qualification to Article XVII as well")
did not presuppose a commitment under Article XVII and thus he was not sure that the applicability
of Article XX:2 would be nullified.  Again, he sought further clarification on how such an
interpretation could be possible.  He noted that a panel might concur with such an interpretation which
was at odds with the understanding of some Members.
88. The representative sought to highlight two questions which would be key to finding a
solution.  The first was whether under Article XX:2 a Member had an obligation to schedule a
measure inconsistent with Articles XVI and XVII under the market access column even if it did not
intend to make a commitment under either column.  The second was what was meant by the entry
"unbound" – did it mean that no measures could be inscribed, was it a measure in itself or could itS/C/M/63
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represent a listing of all possible measures?  He observed that the Secretariat's analysis of scenarios
arising when "unbound" was inscribed, was simila r to a common scheduling approach employed by
Members, namely, the use of "unbound, except for …" and seemed to yield similar ambiguity.  He
suggested that a possible solution would be a multilaterally agreed scheduling convention or
interpretation, such as considering that any measure, including "unbound" in the market accesscolumn would be considered as inconsistent with  market access only, unless otherwise indicated.  He
was still reflecting on how an inscription in the national treatment column could be subject to the
same interpretation and might revert to this.  He reiterated that the goal of this exercise for Hong
Kong, China was to ensure as much legal clarity as possible, particularly in light of the fact that
Members would be making new commitments.  He felt that the consolidation of schedules underway
could provide an opportunity for technical adjustments necessitated by any solution that might be
agreed upon by Members.
89. The representative of Switzerland noted the importance of the discussion in connection with
the request-offer process.  He agreed with Brazil that, for the example provided in paragraph 6 (where
"none" was entered in the market access column), Article XX:2 foresaw that the market access
column entry would prevail.  Article XX:2 did not state that in such a case a national treatment entry
would extent to the market access entry.  An answer to the other example (where a limitationappeared in both columns or only in the first but not the second) was not so apparent.  He stated that
Article XX:2 provided that measures inconsistent with both articles should be inscribed in the market
access column.  It was a simple scheduling convention whereby measures in a Member's legal system
inconsistent with both market access and national treatment could be scheduled.  However, Article
XX:2 stated nothing about the reverse case, namely one with limitations under market access and"none" under national treatment.  In this case there was no way to know whether the intention was to
apply XX:2 or whether it intended to indicate that  there were no national treatment limitations, but
only market access limitations.  He felt that this was the technical source of the problem, namely that
Article XX:2 operated only in one direction.  He not ed that, while the Council's discussion could help
in finding a solution, some reference to the classical rules of the interpretation of treaties ininternational law concerning the intentions of the parties and context would be required.
90. Further commenting on the cautious approach in paragraph 9 of the Secretariat note, the
representative was inclined on a preliminary basis to believe that Members who inscribed "unbound"
in the market access column intended to apply Article XX:2 and wished to cover all possible
measures and "inscribed" them by entering "unbound".  He further noted that in the majority of
existing schedules, when "unbound" appeared in the national treatment column it actually appeared in
both columns.  This fact suggested the opposite solution, namely, that Members had thought thatArticle XX:2 did not apply, had to be considered in any solution.  He felt that a first question was to
define the scope of XX:2 and the cases in which it applied.  A second was to understand how it
applied, and how the scheduling convention might be applied in the reverse fashion with a view to
interpreting the schedules.  Looking to the future, he stated that a review might be helpful in terms of
the present negotiations, but also that embarking on a review of provisions could change the extent ofexisting commitments since any redrafting would have legal consequences.  For this reason, it was of
the utmost importance that any result would make the agreement as clear as possible in order to avoid
future confusion.
91. The representative of Canada stated that he wished to revert to this item at the Council's
December meeting.  He felt that, like other delegations, the discussion contained in paragraph 9
underscored the need to continue to examine this issu e. He believed that the fact that there existed
numerous places in specific commitments where the precise scope of market access and national
treatment could not be clearly inferred, meant that the Council needed to reflect on whether a
technical clarification could affect current commitments.S/C/M/63
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92. The representative of Poland acknowledged that only Members were in a position to explain
their schedules but that they had interpretation problems when reading other schedules.  She
suggested that a solution to the example in paragraph 9 would be that Article XX:2 would only apply
when bindings were envisaged in both columns and in all other cases, it would not be applicable.  It
would add clarity to schedules if Members agreed that, for all future limitations in the market accesscolumn with a discriminatory aspect, this would be clearly referred to in the market access column.  If
the market access limitation were also applicable to national treatment, the word "foreign" could be
inserted, thereby indicating that national treatment is also limited.  Or, as suggested in paragraph 18 of
the scheduling guidelines the phrase "also limits national treatment" could be inserted in the market
access column.  Or, in the national treatment column could be added the words "none, except for
commitments in the market access column".  Finally , she noted that if Members left the schedules as
they were, the overlap between Articles XVI and XVII would not disappear and believed the doubts
over the interpretation of schedules should be eliminated.
93. The Chair suggested, given the preliminary interest generated by the Secretariat note, that
perhaps an informal and interactive meeting on this topic would prove helpful.
94. The representative of Chinese Taipei noted that any clarification or interpretation would
affect existing schedules but also have consequences on the existing round.  She inquired in a
preliminary fashion as to whether the inscription "unbound" in the market access column historically
was meant to permit Members' discretion in terms of market access measures.  In the case where
national treatment was unbound but market access bound, she stated that this was unclear.  Finally,
with respect to an "unbound" under national treatm ent, she noted that the example given in the
Secretariat note applied to mode three only, and wondered how Article XX:2 would apply where thereexisted a full commitment under market access and an "unbound" under national treatment for mode
one.  She noted that the discussion raised was with out prejudice to Members' positions and rights and
obligations under the WTO.
95. The representative of India noted the proposal made by Hong Kong, China regarding a
scheduling convention and the substantive comments made at the meeting and in July and reiterated
that no agreement had been reached to embark on a review.  He indicated that he wished to revert to
this item at the next meeting.
96. The Chair noted that it was also her understanding that the Council had not embarked on a
review.
97. The representative of Uruguay, making comments without prejudice to a technical review of
GATS provisions, noted that Members were referring to a problem which had already been identified
at the time of the negotiating of the Guidelines for the Scheduling of Specific Commitments.  He feltthat Members who had identified the problem could also put forth possible solutions in the form of
specific examples, without prejudice to a review.  Members, and perhaps the Secretariat, might also
make a contribution, possibly drawn from the scheduling guidelines, which could act as a guide, even
if they were not legally binding.  He underscored the importance of examining possible solutions and
of bearing in mind the decision-making procedures at the WTO.  He recalled that the deadline forinitial offers was four months away, and that any problem of a technical nature should be resolved
swiftly.  He stated that any possible decision woul d be non-retroactive, namely, that it would apply as
of the moment the decision was taken and would not affect past decisions.
98. The representative of Thailand noted that any outcome of a review should not be retroactive
and that Thailand had originally agreed to discuss this item on the understanding that it would be a
technical exercise and did not undermine the legal clarity of schedules.  She was somewhat alarmed
that, in a discussion meant to clarify Article XX:2, some Members were putting forth proposals on
how certain schedule entries, such as "unbound", might be interpreted.  In this regard, she recalled theS/C/M/63
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Secretariat's comments contained in the last sentence of paragraph 2 of Job(02)/153.  She reiterated
that the discussion should be limited to the agreed upon scope.
99. The Chair reiterated that the Council had agreed that it was not engaged in a technical review,
but rather was exploring areas in which a review might be necessary.  At the first meeting of the year,
the Council had agreed for this purpose to discuss Article XX:2.  She noted that the last three sessionshad been helpful in determining if there were ambi guities in the text of Article XX:2.  She suggested
that the Council convene an informal meeting on this item.
100. The representative of Mexico noted the importance of this issue in the negotiations and
requested that an informal meeting be held during the same week as the cluster meetings.  He stated
that, with respect to the two scenarios outlined in the note, consideration should be given to that fact
that in most countries there were already foreign service suppliers who enjoyed national treatment and
the consequences of any interpretations must be taken into account.  National treatment could notchange for those already present in the market when the GATS agreement was negotiated.  New
participants who established themselves after the Uruguay Round would be governed by the
commitments that were undertaken at that first round.  If Members had applied restrictions to those
already established, that might have affected the operations of those suppliers already present in the
market prior to the negotiation of an agreement.  That was why the need was felt to have a grandfatherclause and a standstill to protect those already present. Then, as of the entry into force of the
Agreement, a Member would be allowed to introduce restrictive measures in whatever of the columns
market access and national treatment. He considered that the drafting of Article XX:2 was clear.
However, what was not clear were the restrictions listed under the market access and national
treatment columns, and therefore, further examples were needed. He felt that the document wasuseful, and expressed the hope that further consider ation could be given to the situation of those
already present in the market before the agreement was negotiated and how they would be affected by
the entries made in the market access and national treatment columns.
101. The Chair stated that she understood that the Council had agreed to convene an informal
meeting on this item before the next formal session.  She suggested that, in advance of this meeting,
Members with questions forward these to the Secretariat, which, along with questions raised at the
meeting, would be used to guide the beginning of the discussion.  She invited Members to review the
three Secretariat notes on this item prior to this informal meeting.
102. The Secretariat, seeking to clarify the second sentence of paragraph 9 of Job (02)/153, stated
that perhaps the degree of definitiveness of this sentence had been mis-expressed, and could be
understood, incorrectly, to sound more conclusive than intended.  He suggested that the intended
meaning would be clearer if Members read the sentence as though it were prefaced with the phrase "itcould be argued that …".
E. OTHER BUSINESS
103. The Chair informed the Council that on 21 October she had received a letter from
Ambassador Smith, Chairman of the Special Sess ion of the Committee on Trade and Development.
This letter noted that, during its meeting held on 28 January to 1 February 2002, the TNC agreed that"the review of all special and differential treatment provisions with a view to strengthening them and
making them more precise, effective and operational provided for in paragraph 44 of the Ministerial
Declaration shall be carried out by the Committee on Trade and Development in Special Sessions."
She further stated that pursuant to this mandate, the Chair of the Special Session of the CTD had
requested "information on any discussions or other developments relating to special and differentialtreatment that have taken place in the Council for Trade in Services" and that this information should
be conveyed to the Special Session of the CTD by 30 November 2002.  She suggested that she reply
in the form of a factual letter on S&D-related issues that may have arisen in the Council if any, and onS/C/M/63
Page 20
the understanding that this would be without prejudice to the position of any Member on the issue of
S&D.
104. The Council so agreed.
105. The Chair further informed the Council that on 22 October she received a letter from
Ambassador Jóhannesson, Chair of the Working Group on Trade and Transfer of Technology, with a
request to inform him of any discussions, submissi ons and/or other developments relating to trade and
technology transfer that have taken place in the Council for Trade in Services.  The Working Group
had decided to request this information of other WTO bodies and to provide such information by 20
November 2002.  She suggested that she reply in the form of a factual letter on any issues related to
the trade and transfer of technology that might have arisen in the Council, and that this would be
without prejudice to the position of any Member on the issue.
106. The Council so agreed.
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