RESTRICTED
WORLD TRADE S/CSC/W/2
13September 1996
ORGANIZATION
(96-3578)
Committee onSpecific Commitments
DEVELOPMENTS ININTERNATIONAL SERVICES CLASSIFICATION SYSTEMS
AND IMPLICATIONS FOR NEGOTIATIONS UNDER THE
GENERAL AGREEMENT ONTRADE INSERVICES
Note bytheSecretariat
Table ofContents
I. BACKGROUND AND PURPOSE OFTHIS NOTE .....................2
II. WHY THE GATS CLASSIFICATION ISBASED ONTHE CPC ............3
A. International transactions .................................3
B. Activities ...........................................3
C. Products ............................................4
III. OVERVIEW OFWORK TO DEVELOP INTERNATIONAL SERVICES
CLASSIFICATIONS .........................................4
A. Transaction-based classifications .............................4
B. Activity-based classification ...............................5
C. Production-oriented nomenclature ............................5
D. Product-based classifications ...............................6
International level: United Nations andtheCPC ..................6
Regional developments: Europe andtheCPA ....................7
E. Classification issues intrade agreements ........................7
NAFTA ............................................8
GATS .............................................8
IV. SOME SECTORAL ISSUES RAISED BYRECENT DEVELOPMENTS IN
NOMENCLATURES ........................................9
Business services .................................9
Telecommunication services ..........................9
Distribution services ...............................10
Financial services .................................10
Tourism andtravel-related services ......................10
Transport services ................................11
Newservices ....................................11
V. CONCLUSIONS AND ISSUES REGARDING FURTHER WORK ...........11S/CSC/W/2
Page 2
1. Atthefirstmeeting oftheCommittee onSpecific Commitments heldon24May1996, many
participants expressed theviewthatwork should getunderway toimprove thetechnical accuracy and
clarityofschedulesofspecificcommitments,inpreparationforthenextroundofliberalizationscheduled
fortheyear2000. Itwasfurther proposed thatthework should begin withissues related tosectoral
classification including examining theadequacy oftheSecretariat services classification list1(hereafter
referred toastheGATS classification list)which hasbeenusedbythemajority ofMembers intheir
schedules.
I. BACKGROUND AND PURPOSE OFTHIS NOTE
2. Schedules differ considerably inthedegree ofdetail withwhich theydefine thesectoral coverage
oftheircommitments. Some Members haveusedtheirowndefinitions; most haveusedtheGATS
classification buthavedeparted from itinvarying degrees. While itisnotobligatory forMembers
touseacommon list,itisgenerally feltthatvariations between countries indefining thesectoral scope
ofcommitments canmake comparison andevaluation ofschedules more difficult thanitneedbe.Many
Members appear tosupport theobjective ofdeveloping acomprehensive, detailed, andwhere possible,
common sectoral classification system thatwould enable Members tomake, compare andrecord
commitments inamore consistent manner.
3. Inorder toprovide apreliminary analytical basisforsuchwork, andassist delegations intheir
consideration oftheissues involved, theSecretariat wasrequested: (a)toundertake anexamination
ofthemaininternational andregional classification systems forservices and(b)toassess howcurrent
work aimed atdeveloping andrefining these systems could offer guidance onways toimprove the
classification ofservices under theGATS.
4. Thepaper firstsummarises howandwhytheservices classification listisbased ontheCentral
Product Classification approach andthenconsiders what canbelearned from thefirstfewyears of
experience ofusing thisapproach intheGATS context. Itthentakes stock inthethirdsection ofthe
on-going work indifferent foratoimprove existing international andregional classification systems
covering thethreemaintypesofnomenclatures -transactions, activities, andproducts; thepaper focuses
inparticular onproduct-based classifications suchastheCPCwhich include detailed descriptions of
services sectors andsub-sectors. Using anumber ofservices sectors forillustrative purposes, thefourth
section ofthepaper considers howthese developments might beofuseinpossible revisions or
amendments tothecurrent GATS classification. Finally, thenoteattempts tosummarize some ofthe
issues thatMembers might wishtodiscuss inconsidering further work.
5. Byfocusing onclassification issues within theframework ofnegotiated commitments, thepaper
onlytouches upon thedevelopment ofimproved classification systems from thepoint ofview of
generating better andmoredetailed statistics formeasuring services tradeandproduction. Theintensive
short, medium andlong-term work being undertaken atthenational, regional andinternational levels,
andtheunderlying problems involved, constitute animportant on-going preoccupation oftheSecretariat
andhavebeenthesubject ofrecent detailed analysis.2
1Services Sectoral Classification List-Note bytheSecretariat contained indocument MTN.GNS/W/120
of10July1991.
2SeeGATS andStatistics onTrade inServices indocument S/C/W/5 of17July1995.S/CSC/W/2
Page 3
II. WHY THE GATS CLASSIFICATION ISBASED ONTHE CPC
6. Thefirstattempt atcompiling aservices classification listfornegotiating purposes resulted
from theministerial mid-term review oftheUruguay Round which tookplace inDecember 1988.
Inthesection relating tofuture work, theMontreal Ministerial Declaration3provided forthecompilation
ofareference listofsectors bytheGATT Secretariat. Inaddressing thistask,itbecame clear that
therewereanumber ofinternational sectoral classification systems inexistence orunder development
thatcould constitute thebasis fordrawing upareference listofsectors.
7. Thechoice ofsystem depended intheendonwhether participants considered thatthefocus
should beontheclassification ofinternational transactions inservices; orofservices activities; orof
products. Indeveloping itsrecommendations onwhatkindofsystem would beappropriate forthe
needsofthe(then)GroupofNegotiationsonServices,theSecretariatmadeanevaluationofthestrengths
andshortcomings ofthemain international classification systems which typify eachofthethree
categories. TheIMFBalance ofPayments (BOP) classification wasexamined asthemain example
ofthefirsttype; theInternational Standard Industrial Classification (ISIC) astheprime example of
thesecond category; andtheprovisional Central Product Classification (CPC) system ascharacteristic
ofthethirdtype.
8. Asthefollowing analysis shows, theCPCapproach wasbroadly preferred because ofitsimplicit
coverage ofallmodes ofsupplying services anditshighly disaggregated nature which allows fordetailed
description ofservices sectors andsub-sectors. Itisworthwhile briefly recalling theanalysis and
arguments made infavour oftheCPC approach because oftheircontinuing relevance tothemain
concerns ofthispaper.4
A. International transactions
9. ThebalanceofpaymentsstatisticscollectedbytheIMFaregatheredforBOPaccountingpurposes
andaretheprimary source ofdataoninternational transactions inservices. Thistypeofclassification
isframed withaviewtomonitoring developments incountries 'balance-of-payments accounts which
comprise twoparts: thecapital account andthecurrent account (i.e.merchandise andservices). Services
trade isoften further sub-divided into"factor services" (i.e.direct investment income andother
investment income) and"non-factor services" (i.e.shipment, other transportation, travel andother
services). Inexamining thesuitability ofthesystem, theoverall conclusion wasthatthefocus of
transaction-based classifications isoncross-border transactions andconsumption abroad involving flows
offoreign exchange and,unlike activity- orproduct-based systems, theyarenotdesigned tocapture
fullytheuniverse ofcommercially supplied services.
B. Activities
10. Since itscreation in1968, theInternational Standard Industrial Classification ofallEconomic
Activities (ISIC) hasbeenwidely usedbothnationally andinternationally forstatistics on,forinstance,
output, value-added andemployment invarious industrial categories including services. Under the
ISICanindustry isdefined asthesummation ofallproduction unitsprimarily engaged inthesame
orsimilar kindofactivity. From thepoint ofviewoftheproposed reference list,anactivity-based
classification suffered from twomain shortcomings. Oneisthat,interms ofstatistical coverage, an
3Seedocument MTN.TNC/7(MIN)
4SeedocumententitledConsiderationsrelatingtotheProposedReferenceListofSectorsinMTN.GNS/W/50,
April 1989. Thedocument contains aclassification listwhich subsequently, andwithsome modifications, formed
thebasis ofW/120 which wasissued inJuly1991.S/CSC/W/2
Page 4
activity-based classification isincomplete. Theunitsclassified under aparticular category oftheISIC
mayinclude services which arenotcharacteristic oftheprimary economic activity oftheproducing
unit.While exports ofadvertising services, forexample, aresupplied primarily bytheadvertising
industry (which areclassified under theISIC), advertising exports mayalsoarisefrom anindustry
other thanadvertising (which maynotbeclassified under theISIC). Thus, recorded activities may
notcorrespond withtheactual production ofservices. Thesecond shortcoming derives fromthefact
thatitisultimately service outputs (whatistraded ),andnottheactivity thatgenerates theoutputs (who
istrading ),which enter international trade andwhich arethesubject ofcommitments.
C. Products
11. Product-based classifications, suchastheProvisional Central Product Classification (CPC),
arerelated toactivity classifications inthesense thatproducts aretypically theoutputs ofspecific
kinds ofactivities. Important differences, however, existbetween themattheconceptual andpractical
levels. Themain conceptual distinction, already alluded toabove, canperhaps befurther illustrated
asfollows: intheISIC, theactivity ofamanufacturer ofacertain product thatalsosupplies maintenance
andrepair services willbeallocated tothesector thatconstitutes itsprimary sphere ofactivity which
isthemanufacture ofthegiven product; theCPC, incontrast, provides forseparate categories for
thevalue ofproduction ofallthecomponents involved, thusgiving amore detailed andcomprehensive
picture.
12. What thismeans atthepractical levelisthattheCPCprovides ahigher degree ofdisaggregation
thantheactivity-based ISICsystem because there aremore identifiable products thanactivities. The
CPC distinguishes nearly 600service products incontrast totheISIC's130service activities thus
allowing more precision anddetail tobeattained inthedescription ofservices commitments. The
main advantage oftheCPC overthetransaction-based classification isthatitalsoimplicitly covers
themovement ofproduction factors (i.e.themovement ofasupplier tothelocation ofaconsumer)
totheextentthattheyactuallyproduceaserviceproduct.Followingconsultationsinvolvingparticipants
andtheSecretariat, thepreliminary reference listofsectors wasadjusted andimproved andissued
astheServices Sectoral Classification ListinJuly1991. Eachsector contained inthelistisannotated
withaCPCnumber which refers totheappropriate partoftheCPC'sexplanatory notes describing
whatshould becovered bytheservices listed.
III. OVERVIEW OF WORK TO DEVELOP INTERNATIONAL SERVICES
CLASSIFICATIONS
13. Importantworkisbeingcarriedoutinvariousinternationalforaonconceptualandmethodological
issues relating totheclassification ofservices. Given theconsiderable amount ofdetail involved in
attempting tocover regional andinternational efforts atimproving services nomenclatures, thissection
ofthenotecandonomore thanhighlight whatappear tobethedevelopments withthemost significant
implications fortheworkoftheCommittee andwhich willperhaps require further research andanalysis.
Thefollowing paragraphs broadly discuss recent andcurrent work covering allthree types of
classification discussed above, butfocuses primarily onthose classification systems thatareconcerned
withdescribing services activities orproducts atarelatively highdegree ofdisaggregation.
A. Transaction-based classifications
14. Significant moves havebeenmade recently towards greater disaggregation intheclassification
ofinternational services transactions. Originally, BOPstatistics werenotintended tomeettheneeds
ofservices datausers. Theservice categories inBOPclassifications wereaccordingly highly aggregated.
However, asthere werenoalternative sources ofcomparable dataoninternational trade inservices,S/CSC/W/2
Page 5
BOPstatistics became amajor source ofdataandusers began torequest more detailed information.
Inconsequence, theservices partofthestandard BOPcomponents, asincorporated inthefifthedition
oftheIMFBalance ofPayments Manual of1993(IMF-5), ismuch more detailed thantheclassification
contained inthefourth edition.
15. AnimportantrelateddevelopmentisthattheOECDandEurostathaveagreedonajointtrade-in-
services classification5which maybecharacterized asadisaggregated sub-system oftheIMF-5
classification. Theservice categories oftheclassification cover transactions ofallresidents withall
non-residents. Thejointclassification hastaken theGATS intoaccount toacertain extent andincludes
anumber ofdefinitions ofindividual items comprising transportation (covering different modes of
transportationaswellaskindsofserviceincludingpassengerandfreightservices,andauxiliaryservices),
travel divided intobusiness andpersonal travel, communication services (postal, courier and
telecommunications), construction services, financial services, computer andinformation services, and
arange ofother business services. However, generally itcanbesaidevenatthehigher level of
disaggregation theOECD/Eurostat classification covers onlysome ofthedetailed components inthe
GATS classification.
B. Activity-based classification
16. Atthepresenttime,mostnationalaccountingsystemsrelyonsomeversionoftheUnitedNations
System ofNational Accounts (SNA). Gross domestic product dataunder theSNA areorganized by
economic activities inninesectors following theInternational Standard Industrial Classification (ISIC).
Production units areclassified according tospecific ISIC categories onthebasis oftheirprincipal
economic activity. Themost recent revision oftheISIC(Rev.3)6identifies 138service activities.
AttheEuropean level, theactivity classification based onISICRev.3 isNACE7Rev.1, which further
disaggregates therespective international classification.
C. Production-oriented nomenclature
17. Averyrecent development ofnoterelates tothenewNorth American Industry Classification
System8(NAICS), which isbeing developed through cooperation among thestatistical agencies ofthe
United States, Canada andMexico andwhich paysspecial attention toservices. TheNAICS system
provides common industry definitions forthethree countries inorder tofacilitate economic analyses
thatcover theireconomies. Itwasagreed thatNAICS would bedeveloped along certain principles
including thefollowing: First, thenewNAICS willconform toaproduction-oriented economic concept,
meaning thatproducing unitsthatuseidentical orsimilar production processes willbegrouped together
5SeeJoint OECD-EUROSTAT Trade-in-Services Classification inOECD document STD/SERV(96)12/rev.1
dated 8July 1996.
6SeeInternational Standard Industrial Classification ofAllEconomic Activities ,Series M,no4,Rev.3 (New
York, United Nations 1990).
7General Industrial Classification ofEconomic Activities within theEuropean Communities .Therevised
NACE wassetintoforce byCommunity Regulation (OJnoL293/33 of24October 1990, no3037/90) thus
obliging Member States tousethesystem astheactivity classification forcollecting andpresenting statistics.
8Seeforexample theFederal Register of28May1996, partII,inwhich theU.S. Office ofManagement
andBudget isseeking public comment ontheproposed industry structure foranumber ofNAICS sub-sectors.
SeealsoEconomic Classification Policy Committee, Bureau ofEconomic Analysis, USDept ofCommerce:
Issues Paper no6,Services Classifications ,March 1994S/CSC/W/2
Page 6
intheNAICS. Second, thethree countries willstrive forasystem thatwillbecompatible withthe
2-digit levelofthecurrent ISIC classification. Third, special attention willbegiven todeveloping
production-oriented classifications forinteraliahightechandnewandemerging industries andservice
industries ingeneral. Thedevelopers oftheNAICS believe thattheapplication ofproduction-oriented
reasoning toservice industries isfeasible butacknowledge thatthetaskofclassifying service industries
isparticularly difficult. Section IVofthisnotegives anillustrative example ofhowtheNAICS proceeds
toclassify services, andMembers might wishtoconsider whether more analysis ofthisapproach will
berequired.
D. Product-based classifications
18. TheCPCisthebasisoftheGATS classification and,assuch, willbeattheheartofdiscussions
intheCommittee withrespect toexamining ways toimprove andupdate thecurrent system. This
section attempts tosummarize on-going work intheUnited Nations regarding therevision ofthe
Provisional CPCandalsotakesnoteofexperience attheEuropean levelwithrespect tothedevelopment
ofaproduct-based classification fortheEuropean Community.
International level: United Nations andtheCPC
19. TheVoorburg Group, consisting ofofficials from various national statistical offices, was
established attherequest oftheUnited Nations Statistical Office toassist inthedevelopment ofthe
Central Product Classification forServices. Thefindings andrecommendations oftheGroup were
incorporated intothedraftofwhich wasconsidered andapproved bytheUnited Nations Statistical
Commission atitstwenty fifthsession inFebruary 1989. Theclassification wassubsequently published
in1991bytheUnited Nations astheProvisional Central Product Classification9and,given theneed
ofUruguay Round participants tohaveadetailed services classification, hasserved asthebasis of
theGATS classification forservices during theUruguay Round andsubsequent negotiations. From
thepoint ofviewofnegotiations, averyimportant characteristic oftheCPC isthatitsexplanatory
notes contain adescription ofthebroad spectrum ofoutputs or"service products" ofheterogeneous
service industries. Thevirtue oftheexplanatory notes isthattheygivesufficiently detailed descriptions
ofservices forthepurpose ofdelineating withsome precision thescope ofaspecific commitment.
20. Since thepublication oftheCPC, themembers oftheVoorburg Group have, inanon-going
process ofrevision, examined andtested selected areas oftheProvisional CPC using interaliathe
technique ofthemodel survey foranumber ofservice sectors including computer services, audiovisual
services, telecommunications, andbanking andinsurance. TheGroup prepared aninterim report10
onitsrecommendations forchanges totheservices partoftheProvisional CPCforthetwenty-sixth
session oftheUNStatistical Commission heldin1995. Theauthors ofthereport areaware thatthe
CPCisbeing usedinitsprovisional formasthebasisforinternational trade inservices classification
andnegotiations andraised thepossibility thatforthenextsession oftheStatistical Commission in
1997, theGroup would beinaposition toundertake areview oftheentire services partoftheCPC,
andoffer recommendations onstructure anddetail aswellasprovide rewritten explanatory notes.
9Statistical Papers Series M,no.77, Provisional Central Product Classification ,Department ofInternational
EconomicandSocialAffairs,StatisticalOfficeoftheUnitedNations,NewYork,1991.Accordingtothepreface,
thename "Central Product Classification" isintended toindicate thatthepurpose oftheCPC istoprovide a
framework forinternational comparison ofvarious kinds ofstatistics dealing withgoods, services andassets
e.g.industrial statistics andnational accounts, price statistics, foreign trade statistics including trade inservices,
andBOP statistics.
10Recommendations forChanges totheServices PartoftheProvisional Central Product Classification (CPC),
prepared bytheClassification Subgroup fortheVoorburg Group Conference, Sydney, Australia October, 1994.S/CSC/W/2
Page 7
21. Itappears thattheclassification sub-group oftheVoorburg Group iscurrently drawing together
itsconclusions andrecommendations forchanges totheservices partoftheProvisional CPC. Itis
intended thatarevised version oftheCPCwhich incorporates theexperiences andrecommendations
oftheVoorburg Group andother users oftheCPC bepresented forapproval tothetwenty-seventh
session oftheStatistical Commission in1997. Thenewversion would thenbesubject toreview and
revision atfairly frequent intervals inthefuture.11Asthenewversion willnotbeavailable forcomment
before September/October 1996, itisnotpossible atthisstage topresent anycomprehensive analysis
oftheproposed revisions oftheCPC. What hasbeenattempted inthenextsection istoillustrate
thekindofrecommendations thathavebeen made intheVoorburg Group 'sinterim reports inrespect
ofanumber ofservices sectors.
Regional developments: Europe andtheCPA
22. Based ontheProvisional CPCoftheUnited Nations, Eurostat hasdeveloped aClassification
ofProducts byActivity (CPA) which provides forinternational harmonization between theEuropean
Community andtherestoftheworld. TheCPAisthesubject ofaCouncil Regulation12whose purpose
istoestablish aclassification ofproducts (including services) byactivity within theECinorder to
ensurecomparabilitybetweennationalandCommunityclassificationsandhencenationalandCommunity
statistics. Theregulation thusensures thattheCPA isusedbyMember States asthenomenclature
bothforthecollection anduniform presentation ofstatistics. TheCPA comprises onlyitems that
canbeviewed asanoutput i.e.aproduct, andtherefore doesnotincorporate CPCitems thatarenot
products suchasland. Thepotential interest oftheCPAnomenclature fortheneeds oftheCommittee
onspecific Commitments liesinitsdetailed structure, withmany more services items thanintheCPC,
andinthefactthatithasquite elaborate explanatory notes,13covering alarge number ofservices.
E. Classification issues intrade agreements
23. Thepresent section highlights thewaydifferent services nomenclatures havebeenused, and
tosome extent adapted, inthecontext ofregional (NAFTA) andmultilateral (GATS) tradenegotiations.
TheEurope Agreements (agreements between theEUandvarious EastEuropean countries), which
aresignificant examples ofregional tradeagreements covering services, provide foruniversal coverage
subject togradual coverage ofsome services activities. Asthese agreements generally donotcontain
acomprehensive services classification, theywillnotbefurther examined here.
11Itisworth noting thattheInter-Agency Task Force onServices Statistics, which includes representatives
fromtheOECD,Eurostat,IMF,UN,UNCTAD,theWorldBankandtheWTO,iscurrentlyworkingondeveloping
aninternational manual ontrade inservices statistics what willcontain adraft classification ofservices. Itis
expected thatthisclassification will: first, ensure concordance withtheCPC and,second, befully compatible
withtheOECD/Eurostat classification inorder tomeet theIMF-5 standards. Moreover, thework onthemanual
willtakeintoaccounttheneedsarisingfromnegotiationsonservicesasreflectedinthecurrentGATSclassification.
12Council Regulation (EEC) No3696/93 of29October 1993 onthestatistical classification ofproducts by
activity (CPA) intheEuropean Economic Community.
13Thelatest draftofexplanatory notes fortheservices partoftheCPA nomenclature iscontained inEurostat
doc.B6/94/21 of19July1994.S/CSC/W/2
Page 8
NAFTA
24. IntheNorth American Free Trade Agreement (NAFTA), theservices-related chapters
(chapters 12:cross-border trade inservices; 13: telecommunications; 14: financial services
and16:temporary entry forbusiness persons) contain articles pertaining tothescope andcoverage
ofthechapter andrelevant definitions, more orlessonthelinesofthecorresponding articles inthe
GATS. Detailed useofservices nomenclatures, however, appears intheannexes which contain
reservations andexceptions taken bytheparties withrespect toservice sectors, sub-sectors oractivities
(inorder tomaintain, oradopt new, measures which arenotinconformity withrelevant NAFTA
obligations). Generally, eachreservation includes thefollowing classificatory elements: sector :refers
tothegeneral sector inwhich thereservation istaken; sub-sector :refers tothespecific sector inwhich
thereservation istaken; andindustry classification: refers, where applicable, totheactivity covered
bythereservation according tointernational ordomestic industry classification codes. Ineachcase,
thecodenumber andthetitleofthesector isentered (e.g.inthelandtransportation sector, anentry
might read"SIC 4213 Trucking, Except Local"). Themain codes usedaretheCPC, theMexican
CMAP14andtheStandard Industrial Classification (SIC) nomenclatures forCanada andtheUnited
States.
25. Asexplained inparagraph 17above, theSIC-type nomenclatures usedintheNAFTA are
currently intheprocess ofbeing replaced bythenewNorth American Industry Classification System
(NAICS) which isbeing developed jointly bystatistical agencies inCanada, Mexico andtheUnited
States. Thenewsystem isdesigned toimprove datacollection andincrease comparability among
industrial statistics inallthree countries. Theneedforanewsystem hasarisen partly because the
American SICsystem hashaddifficulty inkeeping upwiththerapid growth andsignificant changes
inthenature ofservice industries. Some ofthechanges which make detailed services datacollection
adifficult challenge include: technological developments intheareas ofcomputer andcommunication
services, thegrowing range ofservices thataretraded andtheincreased volume ofthattrade, more
contracting outofservices inparticular fromthemanufacturing sector, andthegrowth inimportance
ofinformation, knowledge andeducation asinputs intoservices transactions.
GATS
26. TheGATS classification gives apractical indication ofwhatiscurrently regarded asaservice
across eleven broad sectors andisdivided into140sub-sectors. Each ofthesub-sectors contained
inthelistisannotated withaCPC number andthecorresponding entry intheexplanatory notes of
theProvisional Central Product Classification describes whatisunderstood tobecovered bytheheading
intheSecretariat list.
27. Theprimary purpose oftheGATS classification listhasbeentoaidMembers inthenegotiation
andscheduling ofspecific commitments intheUruguay Round andsubsequent negotiations. The
agreed guidelines forscheduling recognize thatthelegalnature ofaschedule requires themaximum
degree ofclarity inthedescription oflisted sectors andsub-sectors andtherefore strongly encourage
useoftheGATS classification. Butasexperience hasshown, classifications arenotimmutable and,
inresponse totheparticular concerns ofnegotiators, parts oftheGATS nomenclature were quite
extensively modified. Thisoccurred, forexample, inthetelecommunications andmaritime transport
sectors. Itappears likely thatsuchclassification-related developments willinfluence thediscussion
onhowtoimprove thecurrent services nomenclature asatoolfornegotiations.
14ClasificaciónMexicanadeActividadesyProductos,InstitutoNacionaldeEstadistica,GeografiaeInformatica,
1988.S/CSC/W/2
Page 9
IV. SOME SECTORAL ISSUES RAISED BY RECENT DEVELOPMENTS IN
NOMENCLATURES
28. Astheforegoing section demonstrates, much work isbeing doneonindustrial classification
systems inorder tobetter meettheneeds ofdatausers formeasurement andanalysis. Itwould appear
thatdevelopments inallthree basic types ofclassification -those based ontransactions, activities and
products -haveimplications intheGATS context ofdefining sectoral coverage ofspecific commitments.
Thesheer scope andvolume ofdevelopments innomenclatures make itimpractical inthispaper to
attempt asystematic andcomprehensive evaluation oftheirimplications foreachitemoftheGATS
classification. Inthisrespect, theCommittee might wish toconsider thedesirability ofsuch an
evaluation andhowitcould bedesigned andcarried out.Itwould seem useful, however, toillustrate
whatcould belearned from whathasbeendescribed above interms ofsome ofthemain sectors of
theGATS classification list.
Business services
29. Thissection covers averywiderange ofservices including professional services, computer
services, research anddevelopment, advertising, market research, management consulting, arange
oftechnical services, cleaning services, andprinting andpublishing. Issues raised bytheNAICS
might beofinterest totheMembers oftheCommittee inreviewing thecoverage ofthebusiness services
sector asawhole. TheNAICS points outthatservice industries havesometimes beendefined too
broadly inthepast,meaning thattheyhavecombined toomany disparate activities intoasingle industry
definition, which isoneofthereasons why, forexample, theNAICS hasdrafted aclassification for
Professional, Scientific andTechnical Services organised ontheprinciple ofhuman capital, knowledge
andskills ofemployees inthesub-sector.
30. Itmayalsobethecasethatactivities thatarguably should begrouped together under aparticular
heading arenotsogrouped. Inthecourse oftheservices negotiations, forexample, ithasbeenpointed
outthatsome important andprofessionally recognized activities suchassurveying services donothave
anindividual entry intheGATS classification andthatthewiderange ofservices typically supplied
bytheprofession -including measurement andmapping, operation oflandandgeographic information
systems, valuation oflandandproperty investment, andconstruction economics -arenotgrouped
together butaretobefound under various headings oftheGATS listandtheCPC.
31. Ageneral problem thatanyclassification system facesisthatrapid changes intechnology such
ascomputer services make itdifficult tokeeppacewiththerange ofservices traded. Intheprocess
ofrevising theCPC, amodel survey wascarried outinthecontext oftheVoorburg Group, which
hasledtoanumber ofrecommendations forchanges inthestructure anddescription ofitems relating
tocomputerservices(CPC84)including,forexample,theintroductionofadistinctionbetweenpackaged
andcustomized software andamore precise definition ofcomputer processing services.
Telecommunication services
32. TheGATS classification listcovers bothwhataregenerally considered tobebasic andvalue
added telecom services without specifically noting them assuch. Given therapid technological
developments inthesector, participants inthenegotiations hadtostrive tokeepthelistuptodateand,
asaconsequence, found thattheyneeded toinclude many services under the"Other" heading inW/120.
Examples ofsuchservices include: analog anddigital cellular/mobile services, mobile dataservices,
paging services, satellite services andnetworks andsatellite earthstations, tele-conferencing services,
video transport services andsoon.Furthermore, the"model schedule" usedbyparticipants inthe
bilateral negotiations specifies categories tohelpfurther define aservice thatisbeing committed.
Thecategories are,forexample, thedistinctions between: local, long-distance andinternational; wire-S/CSC/W/2
Page 10
based andradio-based; onaresale basis orfacilities-based; andforpublic useorfornon-public use
i.e.closed usergroups. Broadly speaking, theuseofaparticular category inlisting aservice depends
onthekindofservice being offered oronexisting limitations intheregulatory framework.
33. Itwould seemlikely thattheon-going experience ofthebasictelecommunications negotiations
willbetaken intoaccount when Members come toreview theadequacy oftheGATS classification
list.TheVoorburg Group hasalsoreviewed thetelecommunications partoftheCPC, partly based
onamodel survey, andwillberecommending certain changes including thegrouping ofcertain activities
intoa"private network service" category andthedisaggregation ofelectronic message andinformation
services. Members might alsowishtoexamine theapproach taken intheEuropean CPAwithrespect
totelecommunications-related services (CPC 754)forexample under "rental services": theviewis
thatinformer times these services mayhavebeenreserved fornational PTTs but,asthatisnolonger
thecase,theyareclassified where theyactually belong (e.g.renting oftelecommunications equipment
isclassified under "renting").
Distribution services
34. IfMembers decide toreview thissection oftheGATS classification, theymight wishtoconsider
theapproach taken byEurostat intransforming therelevant CPC elements intoCPA categories and
sub-categories. Oneproblem seemed tobethattheexplanatory notes totheCPCaresometimes not
clearandthereferences totransportable goods toobroad. Theexplanatory notes oftheCPAtherefore
trytodefine thedistribution service items bygiving amore detailed reference totheCPAcategories
oftherelevant transportable goods.
Financial services
35. Technical questions relating totheclassification offinancial services asdefined intheGATS
Annex onFinancial Services aredealtwithintheCommittee onTrade inFinancial Services15rather
thanintheCommittee onSpecific Commitments. Itisclear, however, thatthetechnical issues being
raised inthefinancial services forum withrespect totheclassification ofservices areverysimilar to
thesectorally broader concerns ofthisCommittee.
Tourism andtravel-related services
36. Tourism isnotidentified asaservice intheCPCandindrafting theGATS classification list,
GNS participants ineffect created anewdivision consisting ofdifferent components oftheCPC. At
thetime, participants considered including leisure services (i.e.entertainment andsporting and
recreational services) inabroader tourism grouping covering tourism, travel andleisure services but
itwassubsequently decided thatthelatter should formtheirownsector. Specific problems donot
appear tohavearisen during negotiations withrespect totheclassification oftourism andrelated services
butMembers maynevertheless wishtotakeaccount ofanumber ofdevelopments inthearea. One
concerns recommendations oftheVoorburg Group forthecreation ofanewsub-class of"tourist
information services" under CPC 747(Travel agency, touroperator andtourist guide services) and
that"hotel andmotel lodging services" under CPC 64(Hotel andrestaurant services) becombined
intooneclass. More generally, Members might wishtotakenoteoftheSICTA16classification which
classifiestourismactivitiesaccordingtowhethersuchactivitiesarededicatedtotourismorpartlyinvolved
intourism.
15SeeSecretariat Note Technical Issues Concerning Financial Services Schedules inS/FIN/W/9 .
16Standard International Classification ofTourism Activities developed bytheWorld Tourism Organization.
Itisderived from ISIC andisrelated totheCPC onwhich theGATS listing isbased.S/CSC/W/2
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Transport services
37. Maritime transport :Thenegotiations inthissector werebased onthree defined "pillars" of
themaritime transport sector: international shipping, auxiliary services andaccess toanduseofport
facilities. Insome cases theservice definitions usedinthedraftmodel schedule andtheGATS/CPC
classification were notthesame. Forexample, themodel schedule didnotinclude rental ofvessels
withcrew(CPC 7213), while theGATS classification doesnotlistcertain auxiliary services (such
ascustoms clearance andcontainer station anddepot services )andcertain portservices. Another
difference isthatintheGATS classification thesecond pillar -auxiliary services -isnotpartofthe
maritime transport sector persebutapartofthegeneral transport services category called services
auxiliary toallmodes oftransport .Inreviewing theclassification ofservices inthissector, Members
might wish toconsider whether further adjustment might benecessary inorder toarrive ata
comprehensive anddetailed nomenclature foruseinthenextround ofnegotiations.
38. Airtransport :TheGATS Annex onairtransport services doesnotapply GATS provisions
totraffic rights, however granted, ortoservices directly related totheirexercise; theGATS applies
onlytoaircraft repair andmaintenance services, selling andmarketing ofairtransport services and
computer reservations system (CRS) services .Asthese three services arerather precisely defined
intheAnnex, thequestion arises astowhether Members might wishtowork onsimilarly precise
definitions inother services sectors.
Newservices
39. Finally, anyclassification system should provide forcoverage ofnewservices thatmayemerge
inthefuture.IntheGATSclassification,thecategoryOtherprovidesforservicesnotspecifiedelsewhere
butitisimportant torevise classifications often enough sothatnewservices maybeputinmore
descriptive categories. Inthisrespect, Members mayneedtoconsider services thatarebeing traded
which donotappear intheGATS classification norintheservices partoftheProvisional CPC, such
asenergy services. Initsproposed revisions oftheCPC, theVoorburg Group appears tobeincluding
arecommendation thatanewenergy services category ofelectricity, gasandwater supply services
beincluded, which would cover anumber ofcategories previously included withthegoods partof
theCPC.
V. CONCLUSIONS AND ISSUES REGARDING FURTHER WORK
40. Thisnotehascovered inbroad terms anumber ofsignificant developments concerning the
revision anddevelopment ofinternational andregional systems forclassifying services. Thepreliminary
analysis would suggest thatafurther, more systematic examination ofthefullextent oftherevision
work should becarried out.Thescope ofsuchwork would needtobedetermined but,ataminimum,
itshould evaluate thedetailed recommendations which arebeing prepared bytheVoorburg Group
regarding theProvisional CPC, inorder tobeinabetter position toform aviewastowhether the
proposed changes andimprovements could form thebasis ofarevised GATS classification.
40. AnyevaluationexerciseshouldkeepinmindtheoverallobjectivesofthisCommittee,paramount
among which istheneedtoensure amaximum degree ofclarity inthesectoral description ofscheduled
commitments. Inattempting tomake improvements tothewayservices areclassified -forthepurpose
ofbetter negotiating andrecording commitments -anumber ofquestions arisethatwould seem to
require further discussion including thefollowing:S/CSC/W/2
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(i) Thepresent basis forclassifying services istheCPC. DoMembers agree thatthis
should continue tobeso?Ifso,whatimprovements arenecessary toensure abetter
definition ofthesectoral coverage ofcommitments?
(ii) Should theobjectives oftheexercise firstbeagreed byMembers (e.g.better coverage
ofalltraded services, higher degree ofdisaggregation, more detailed definitions to
better distinguish between services?).
(iii) Isthere agreement onatleastthemaindeficiencies ofthecurrent system ofusing the
Secretariat listbacked upwiththeCPC (e.g.lackofsufficient descriptive detail of
services, inadequate coverage ofaparticular service)? What should beconcluded from
thedepartures from thissystem thathaveoccurred inthetelecommunications and
maritimetransportsectors?Istherescopeforagreeingondetaileddefinitionsofservices
sectors andsub-sectors asintheairtransport annex?
(iv) Ifthere is,orcould be,agreement onthemain deficiencies ofthecurrent method of
classification,shouldtherevisionworkbegearedtocorrectingthedeficienciesorshould
itbebroader inscope andlooktomake recommendations forallservice sectors covered
bythemandate oftheCommittee? Which classifications should bestudied inaddition
totheCPC? Should thework should bedone intheCommittee orshould outside
expertise becalled upon?
(v) Inconsidering howtheGATS classification system could beimproved, would itbe
desirable orfeasible tointroduce anydistinctions according tothefourmodes ofsupply?
Distinguishing between themodes ofsupply wasnotaprime concern inoriginally
deciding thattheGATS classification fornegotiating purposes should bebased onthe
CPC, butMembers might wishtotakeintoconsideration theconcerns ofstatisticians
whoaregrappling with issues raised bydesigning astatistical framework that
corresponds totheGATS definition oftrade. (Indeveloping astatistical framework
which would meetGATS needs, theSecretariat acknowledges thatdifferent statistical
classifications -BOP, establishment trade, foreign direct investment, production -
correspond onlyinanincomplete waytothefourmodes concept oftrade andthat
significant improvements arerequired interms ofmethodology andstatistical systems.)
(vi) Finally, ifMembers dodecide togoahead andoverhaul thecurrent method of
classifyingservices,whatshouldberecommendedwithrespecttotheuseoftheresulting
classification? Currently, schedules differ considerably inthedegree ofdetail with
which theydefine thesectoral coverage oftheircommitments, mostusing theGATS
classification andtheCPCwhile others haveusedtheirowndefinitions. TheUruguay
Round showed inpractice thatmost participants have moved towards GATS
classification based ontheCPC, thereby facilitating comparability ofsectoral
descriptions inschedules. However, although Members areencouraged todoso,there
isnoobligation forthemtousetheGATS/CPC classification andthequestion arises
whether aneworrevised classification should haveadifferent status withrespect to
itsuse. Inother words, isthere ashared needamong Members tomove towards a
harmonized sectoral classification system and,ifsoorindeed ifnot,should theissue
beclarified before beginning anyrevision oroverhaul ofthecurrent classification
system?