RESTRICTEDWORLD TRADE
ORGANIZATIONS/CSC/M/17
24 November 2000
(00-5023)
Committee on Specific Commitments
REPORT OF THE MEETING HELD ON 4 OCTOBER 2000
Note by the Secretariat
1. The Committee on Specific Commitments held its seventeenth meeting on 4 October 2000.
The agenda for the meeting was contained in WTO/AIR/1378.  No points were raised under other
business.
2. The agenda was so agreed.
A. CLASSIFICATION
3. The discussions on the classification of services sectors had been held in informal mode
during a meeting on 3 and 4 October 2000, which preceded the formal session.  At the end of the
informal discussions the Chairman gave the following summary to the full formal Committee.
Production on a fee or contract basis
4. Delegations continued to exchange views on the basis of the Note prepared by the Secretariat
for the previous meeting and on a number of questions posed by the Chairman in the Annotated
Agenda for the meeting.  It was the general view that services supplied to manufacturers, as referred
to in question (a) of the Annotated Agenda, were services subject to the GATS and classified or
classifiable under W/120.  In contrast, many delegations felt that more discussions were needed on
questions (b) and (c) which related to “pure manufacturing” and services incidental to manufacturing
such as drilling.  A number of delegations stated in a preliminary manner that in their view pure
manufacturing and manufacturing on a fee or contract basis should not be classified as services underthe GATS.  In this respect some delegations expr essed concern that classifying these activities as
services might undermine the basic distinction between goods and services underlying the WTO
system and lead to the overlap of obligations between various WTO agreements.
5. One delegation argued that classifying manufacturing on a fee or contract basis as a service
would extend arbitrarily GATS obligations to non-serv ices activities and cited the example of Article
III:1 of the GATS, which would require the publication of all measures of general application.  This
delegation stressed the importance of considering the practical consequences involved with the
classification of manufacturing activities as services.  Some delegations argued that although in
principle the definition of services could not include manufacturing, the Committee on Specific
Commitments should not attempt to define services under the GATS in the context of its work onclassification.  Other delegations argued that the third category of services “incidental to
manufacturing” were services subject to the GATS.  Although a number of delegations suggested that
more substantive discussions were needed on the matters covered by questions (b) and (c) of the
Annotated Agenda, the point was made by others that a continuing general discussion on these issues
might not lead to productive results and that in the future it might be better to deal with productionservices on a fee or contract basis case-by-case.S/CSC/M/17
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Environmental services
6. The debate in this sector focused on the classification of “core services” rather than on
“clusters”.  Continuing their discussion of a proposal by the European Communities, delegations
focused on three main outstanding issues, which were identified in a recent Secretariat Note: (1) water
collection, purification and distribution services; (2) recycling services; and (3) operation maintenance
and repair services.  Regarding water distribution  services, it was the general view that, while the CPC
classified these services as goods under Division 18, the W/120 did not contain reference to it.  Many
delegations were of the opinion that it was desirable to classify water distribution as a service, but
some said that they were still reflecting on the best way to do this.  One delegation reserved its
position on this point, arguing that it was not clear that the CPC did not cover the whole of water
distribution.  Another delegation argued that water distribution services were a “cluster” of
distribution services rather than a new “core” sector.  Many delegations agreed that water distributionservices or at least some aspects such as “collection” and “purification” were relevant to the
environment and therefore could be classified as environmental services.  Some delegations, however,
expressed reservations on this point.
7. Two delegations said that “bulk water”, which related to the issue of exhaustible natural
resources, should be excluded from a possible classification of water distribution services under theGATS.  On recycling, delegations noted that it related to the broader debate on services incidental to
manufacturing; its classification as a service might depend on the outcome of this debate.  Onedelegation argued that recycling should probably be considered a service incidental to manufacturing
rather than manufacturing on a fee or contract basis.  Some delegations argued that recycling had a
wider reach than the environment and that therefore it should be moved to the cluster section.  One
delegation noted that even in the environmental context, recycling also related to other products than
aluminium and steel, such as plastic bottles and glass.  Regarding operation, maintenance and repair
services, several delegations noted that maintenance and repair were horizontal activities, alreadycovered by the W/120, and should therefore be moved to the cluster section. One delegation argued
that there was no reference to "operation” in the CPC provisional and that this activity might alreadybe covered by other “core” entries in the EC proposal, as there was probably no difference between
operating a facility and providing a service thereby.  Another delegation questioned the inclusion of
“public awareness programmes” and “services related to environmental impact assessment” in the
“core” and suggested that these entries be moved to the “cluster” section.
8. The EC expressed satisfaction at the fact that many delegations agreed that the W/120 did not
cover water collection, purification and distribution services.  They could not be considered as a
“cluster” of distribution services as three different activities were involved: collection, purificationand distribution.  The EC also agreed to move maintenance and repair services to the cluster section
and to give consideration to the other points made by Members in a revised draft proposal.
Legal Services
9. The Republic of Korea submitted a new informal paper on issues relating to the classification
of foreign legal consultancy services.  This proposal supported the idea of creating a new category forforeign legal consultancy services, but emphasized the need to clarify the concepts of international
law and consultancy.  International law could not involve aspects of domestic law and therefore could
not be deemed to include the law of international business transactions, which was a complex subject
touching upon several aspects of various domestic laws.  This position was based on the idea that a
lawyer should only practice laws for which he is qualified.  Representation and certification servicesshould be excluded form the concept of consultancy services.
10. Different views were expressed by delegations on the possible definition of these concepts
and it emerged that a single, detailed definition for GATS classification purposes was probably notS/CSC/M/17
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possible due to differences in the domestic law definitions of these concepts.  Some delegations
suggested that one solution might be a less detailed a pproach to the classification of this sector, where
Members would remain free to add details to sectoral entries in their schedules of specific
commitments.  Other delegations expressed a preference for the current simple W/120 entry on legal
services, which left Members free to elaborate on more detailed definitions.  One delegation notedthat the proposed classification, based on jurisdiction, touched upon questions of qualification
requirements, which were better addressed under Article VI of the GATS.  Another delegation said
that, although a new definition of legal services might be desirable, the definition of sections of law
based on jurisdiction varied substantially among Members, so that staying with the current
classification appeared as the most realistic option.  Another delegation noted that any new
classification of international law should take account of the differences between public international
law and private international law.  The same delegation underscored the difficulty of defininginternational law and distinguishing between international law and domestic laws especially in the
case where international law was incorporated into domestic law.
11. Those delegations who had put forward proposals on legal services reiterated that it would be
useful to reflect the current practice in the schedul es in new classification in order to ensure legal
certainty and predictability of commitments.
Energy services
12. Discussions on this sector continued on the basis of the proposal by the United States.  Some
delegations argued that the US proposal contained an excessive level of detail, which might create an
imbalance in the structure of W/120, and that energy activities described in Attachment A did not
reflect the market reality and the regulatory structure of this sector in all WTO Members.  It was notedthat the degree of state involvement and vertical integration in the energy sector differed among WTO
Members and that the level of disaggregation in the US proposal reflected the reality of a privatized
and deregulated market.  Other delegations questioned the energy-neutral approach adopted in the US
proposal and argued that a classification based on energy sources would probably better reflect
domestic market structures and regulatory distinctions.
13. Doubts were expressed on whether the activities included in some parts of the US proposal
were actually services covered by the GATS, given their close link with production activities.  Some
delegations noted that many of the activities included in the US proposal were not exclusive to the
energy sector and therefore would not require an amendment to the W/120.  One delegation
emphasized that the test for justifying any new classification should be whether it led to the creation
of sub-sectors in which a Member could undertake significant commitments, regardless of possible
linkages with other sectors.  Another delegation wondered whether the descriptions contained inAttachment A were only illustrative or were meant to be part of some future classification, as some of
them did not have a clear correspondence with the CPC.
14. The delegation of the US replied that the level of detail in their proposal aimed at describing
as accurately as possible all the activities involved in the energy sector, and that did not have to be
reflected necessarily in all schedules of commitments.  A detailed classification only provided for arange of activities a Member might commit, while different regulatory environments would be
reflected in the actual schedules.  On the point made by many delegations that the activities listed in
the first part of Attachment A were not exclusive to energy, the US agreed that these activities had a
relationship with existing entries in W/120.  This was exactly the reason why they had created a
matrix.  In fact, a preliminary examination had shown that all the activities listed in Attachment A oftheir proposal were already covered by the CPC and W/120 and, therefore, they would not require
new classification.  The US undertook to circulate the entire matrix for the next meeting.  The
activities in Attachment A, which related to production processes, were not “manufacturing on a fee
or contract basis” but rather services “incidental” to mining or manufacturing, thus covered by theS/CSC/M/17
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GATS.  The US also proposed to amend the W/120 in order to create a new sector for energy services.
This new sector would be created by moving the existing entries on “services incidental to energy
distribution”, “services incidental to mining” and “pipeline transportation” from their current location
in a new sector called “energy services”.  It was the general view that the debate on this sector would
continue on the basis of the US proposal.
Postal and courier services
15. Delegations continued to exchange views on the basis of a paper submitted earlier by the
European Communities and on a proposal made orally by the United States at previous meetings.
Various delegations commented on the reasons for creating a new classification category for express
delivery services as proposed by the US.  Was there any difference between courier and express
delivery services?  Would express delivery services become a new category in the W/120 or simply
substitute for courier services?  Delegations asked that United States provide more details concerningthe proposed classification.  One delegation suggested that some of the value added elements, which
according to the US characterised express delivery services, did not require a new classification nor
become the object of negotiations under Articles XVI and XVII, but instead might be relevant to
additional commitments under Article XVIII.  It was argued that justifying a new classification for
express delivery services on the basis of some technical additions to courier services contradicted theconcept of technological neutrality of the agreement.  This view was challenged by one delegation
which pointed out that this concept did not prevent Members from making distinctions in
classification which were based on the use of technology.  Another delegation argued that “express
delivery” described a process rather than being a service per se .
16. The United States replied that the proposed new category reflected a changed market reality.
Express delivery services differed from courier services on three main grounds: (1) time sensitivity of
delivery; (2) new technologies involved; and (3) inte grated nature of the service.  Express delivery
services should be a sub-sector of postal services in a new classification.  The United States also noted
that, in spite of differences in presentation, the EC proposal gave a definition of express delivery
rather similar to the one suggested in their proposal.  At the end of this discussion the United Statesundertook to provide more input on this matter, also in reference to the possible development of
additional commitments on regulatory principles in this sector.
17. Regarding the EC proposal, one delegation noted that, unlike the proposals on environment
and energy, it might be too aggregated.  It was not clear why it eliminated the distinction between
postal services and courier services.  Another delegation noted it should not be underestimated that in
many WTO Members, the State still maintained a monopoly on postal services.  The EC replied that
the proposal aimed at updating the current CPC and W/120 distinctions, which were based onactivities performed by national postal administrations (postal services) and activities performed by
private operators (courier services).  It was agreed that discussion would continue on the basis of the
proposals by the European Communities and the United States.
Construction services
18. Delegations continued to work on a proposal by New Zealand on construction services, which
aimed at identifying a new category for “integrated construction services”, similar to the existing
W/120 category on integrated engineering services.  The Secretariat informed delegations that the
United Nations technical sub-group on classification was holding a meeting on the coverage of the
CPC with respect to integrated construction services on October 16 and that hopefully some input
would be available on this matter for the next meeting of the Committee.  New Zealand summarizedits proposal, stressing that it aimed at a filling a gap in the W/120 and in the CPC.  Some delegations
supported the proposal, while others repeated their view that this proposed new sector was already
covered by the W/120 and the CPC.  One delegations informed participants that it was consulting withS/CSC/M/17
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its construction industry on this matter.  As it was clear that the New Zealand proposal referred to a
possible new “core” sector and not to a “cluster”, it was agreed to wait for more input from the UN
Statistical Office on the actual coverage of the CPC with respect to integrated construction services.
One delegation drew participants’ attention to the fact that UNCTAD had scheduled a meeting of
experts on construction for October 23 and that the outcome of this meeting might be relevant to theCommittee’s work on the classification of this sector.
* * * * *
19. After the Chairman’s summary of the classification discussions, the representative of  Canada
said that her delegation preferred to be identified with the positions expressed in the informal meeting
and therefore repeated for the record the statements she had made in the informal discussions on the
classification of the sectors.  On manufacturing on a fee or contract basis, she said that there were two
important issues involved.  The first concerned the relationship between GATT and GATS and their
possible overlap in this area and the second the relationship between old and new schedules if an
understanding was reached on the treatment of manufacturing on a fee or contract basis for GATSpurposes.  Her delegation was still considering all the three questions posed in the Chairman's
Annotated Agenda on this issue.
20. On environmental services, she said that, as in the case of some energy services, the
classification of water distribution services presented problems relating to possible overlaps between
GATT and GATS, and added that even if it were established that there was no overlap and that waterdistribution services were not already covered by W/120, her delegation did not support its inclusion
in W/120.  She pointed out that it was not clear that recycling services on a fee or contract basis
should be included under environmental services, since recycling could be conducted in different
sectors.  Recycling should therefore be moved to the cluster.  On operation, maintenance and repair,
she noted that it was not clear that operation was a service and that it might already be classified onthe goods side.  Since maintenance and repair could be conducted in various sectors, Canada agreed
with the EC that it should be moved to the cluster list.  Her delegation did not support the way the EC
proposal folded categories of W/120 together and renamed them under one heading (such as folding
refuse disposal services and sanitation and similar services together and renaming them
solid/hazardous waste management). It was not clear why such changes were absolutely necessary.
She noted that Canada has always maintained that, in order to maintain the legal stability of the
schedules, only changes to the W/120 that were absolutely necessary should be made.  She alsopointed out that “public awareness programmes” were probably better located under advertising or
management consulting services.  On the issue of the cluster list, she noted that Canada had no
position on this list and was only using it as a tool to better define the core list.
21. On legal services, Canada supported keeping the existing W/120 classification, which
provided adequate flexibility for scheduling commitments.  On postal and courier services Canadafavoured a classification, which did not prevent Members from scheduling limitations relating to
monopolies while expressing doubts about the need to create a separate sub-sector for express
delivery services, she was interested in more detailed information from the United States.  On
construction services, she repeated her delegation's position that integrated construction services were
already covered by general construction services and looked forward to hearing the reply of the UNStatistical Office to the question posed by the Committee on this point.  Finally, she reiterated that the
current classification should result in changes to the W/120 only where necessary and on the basis of
the CPC and emphasized the importance of linking statistical classification to the CPC and to the
W/120.S/CSC/M/17
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22. The representative of Venezuela made a statement on the classification of energy services for
the record.  She said that her comments were of a preliminary nature as her authorities had begun a
process of internal consultations with the representa tives of the industries involved with the objective
of developing a country position on this subject.  The classification of energy services should serve
three main objectives: (1) to give an adequate definition of the sub-sectors which are relevant to tradein energy services, taking account of the diversity among domestic markets and Members levels of
development; (2) to maintain the Uruguay Round balance of rights and obligations among Members;
and (3) to improve the transparency of negotiating instruments.  She pointed out that the energy sector
was of strategic importance for Venezuela and that its role was instrumental to development, to the
diversification of the economy and to strengthening the private sector.  In Venezuela the state
participated in the energy sector not only as regulato r, but also as an operator.  More than one third of
world trade in hydrocarbons originated from countries with a similar market structure.
23. Her delegation could not support the assumption behind the US proposal that the world
energy market was substantially liberalised and in the hands of the private sector.  She also questioned
the energy-neutral approach underlying the US proposal, arguing that the classification of energy
services should distinguish between different activities as well as between different sources of energy.
The level of activity-related disaggregation proposed by the United States was excessive;  it wasbased on a presumption of uniformity among energy markets of WTO Members, which in reality did
not exist.  She also expressed concern over a possible confusion between energy activities covered by
the GATS and activities which were relevant to trade in goods and therefore fell under the scope of
application of the GATT.  Finally, she emphasised that in revising the existing classification it was
important to ensure that a specific commitment undertaken in one sub-sector was binding only for thatsub-sector and not for others.
24. The representative of the European Communities stated for the record that her delegation was
among those who preferred to keep the current W/120 classification of legal services.
25. In the formal session of the meeting, the Ch airman invited delegations to make further
comments on the paper submitted by Poland on “classification issues”.  The delegation of Mexico
expressed appreciation for this contribution and emphasised the reference to “indispensable”
modifications to the existing classification in paragraph 12.  Brazil and Uruguay  echoed Mexico’s
comment and underscored that the question of clusters and related services was a negotiating issuewhich should not be taken up in the CSC, whose mandate was limited to technical aspects of
classification.  The representative of the United States emphasised another point in Poland's paper,
which referred to the use of the information gathered in the course of the information exchangeexercise.  He argued in favour of using that information, which in his view indicated that in someinstances a cluster approach was necessary although clusters had so far been discussed only in the
environmental sector.
26. Regarding the organization of work on classification, the Chairman
 reminded delegations that
the work programme for the first phase of the services negotiations, approved by the Special Session
of the Services Council last May, had set a best endeavour deadline for completion of the on-goingwork in the Committee on Specific Commitments at March 2001.  He emphasised that the time to
complete work on classification was rather limited.  Therefore, it was important that the Committee
organized its work in the most efficient manner.  For example, although the informal discussions on
classification held so far had touched upon some very substantive issues, he suggested that the
Committee should be able to channel this work into a final product, such as a revision of the existingclassification.  In this respect, he pointed out that it might be useful to start with the classification of
“core services”, which would require an amendment of the W/120, while continuing to discuss
clusters on a case-by-case basis in the Committee, with a view to creating separate negotiating tools at
a later stage.  With respect to the former aspect, he suggested that at one point in time, after theS/CSC/M/17
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December meeting, the Committee should ask the Secretariat to bring together proposals on the
classification of core services in a working draft, identifying possible amendments to W/120.
27. Some delegations agreed that work in the CSC should focus on core sectors as clusters were a
negotiating issue, which was better dealt with in the Special Session of the Services Council.  Other
delegations supported the Chairman’s approach, provided that this did not exclude discussions onclusters in the CSC, where applicable.  One delegation argued that, given the differences that still
existed among Members on the classification of sectors, it would be premature to give any mandate to
Secretariat to prepare a revised draft classification.  It was the general view, however, that the
Chairman’s idea of concentrating the classification work on “core services”, in order to attempt to
meet the best endeavour deadlines of March 2001, was a useful one.
B. SCHEDULING GUIDELINES
28. The Chairman introduced a first consolidated draft of the revised scheduling guidelines
(document Job No. 5415), which had been prepared by the Secretariat on the basis of the outcome of
previous meetings.  The discussion focused on three outstanding issues and further comments on the
entire text of the revised guidelines.  The three outstanding issues were (i) the  scheduling of measures
inconsistent with both Articles XVI and XVII according to Article XX:2 of the GATS; (ii) mode-fourcommitments without specified duration; and (iii) the illustrative list of national treatment restrictions.
29. Regarding measures inconsistent with both Ar ticles XVI and XVII, delegations continued to
discuss on the basis of a Chairman’s proposal, adding some new clarifying language to the scheduling
guidelines.  Brazil, Canada , the Philippines  and Uruguay  suggested that the Chairman’s proposal in its
current form required an amendment of Article XX:2 of the GATS and that the scheduling guidelines
could not be used to modify the Agreement.  Canada and the Philippines  also argued that there was an
intentional ambiguity in Article XX:2, which would have been taken away by the proposedChairman’s clarification in the revised Scheduling Guidelines.  Such ambiguity was desirable as it
allowed Members to make a minimum of disclosure in scheduling their specific commitments.  Other
delegations, including Argentina, Australia
, Chile , Guatemala , Hong Kong, China , New Zealand ,
Switzerland and the United States  supported the Chairman’s proposal on the basis that it had an
important clarifying purpose and that it was fu lly consistent with Article XX:2 of the GATS.
30. Hong Kong, China, supporting the Chairman’s proposal, expressed disappointment that some
delegations considered it desirable to have ambiguity in a legally binding Agreement.  Given its
position in the GATS framework (Part Four, which, interalia,  provided guidance to the scheduling of
commitments pursuant to Part Three), Article XX:2 could not possibly be meant to create ambiguity
and that therefore the ambiguity at issue was due to drafting.  The Chairman repeated that his proposal
was not inconsistent with Article XX:2 of the GATS and asked delegations to reflect further on this
issue in order to reach a common understanding.  He suggested to keep the square brackets and come
back to this issue at the next meeting.
31. On mode four commitments without specified duration, delegations discussed the alternatives
proposed in the draft text of the revised guidelines.  The United States proposed to replace the last two
sentences of paragraph 32 with paragraph 32/Add.1.  Pakistan expressed a preference for paragraph
32/Add.2, while other delegations were open to either alternative.  The Chairman noted a positive
spirit of cooperation on this issue and suggested th at delegations come back to it with a view to
finding a solution in informal consultations before the next meeting.
32. The delegation of the United States expressed concern regarding the illustrative list of
national treatment restrictions, arguing that there were a number of unresolved problems with the
listed examples and duplication with other examples included in the guidelines.  For these reasons itS/CSC/M/17
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might have been better not to attach the list to the guidelines, at least in its current form.  Other
delegations supported the inclusion of the list, which in their view was a helpful tool in scheduling
national treatment restrictions, although they agreed that there might be some duplication with other
examples included in the text of the guidelines.  The Chairman noted that there was still considerable
support for the list and said that a solution might consist of eliminating duplication and redrafting the
introductory paragraphs.  He suggested that delegations come back to this issue at the next meeting.
33. Members also commented on other parts of the revised scheduling guidelines, on which a
common understanding was emerging or which had not been previously discussed.  At the end of the
discussion the Chairman said that, following furt her informal consultations he might call, the
Secretariat would produce a revision of the draft guidelines for the next formal meeting, taking
account of all comments made.  Some delegations announced that they would send their comments in
writing to the Secretariat for circulation to Members.
C. REQUEST FOR OBSERVER STATUS BY THE UNIVERSAL POSTAL UNION (UPU)
34. The Chairman recalled that at the meeting held on 23 and 24 May 2000 the Committee had
received a request for observer status from the Universal Postal Union (UPU).  The request was
circulated to Members in document Job No. 3087.  At the previous meeting the Committee had agreed
to put this item on the agenda of this meeting for further consideration.
35. The representative of Pakistan pointed out that the General Council was still considering the
general issue of observership and that it was appropriate that the Committee on Specific
Commitments deferred consideration of this matter until clear directions were received from the
General Council.  The Chairman suggested therefore that the Committee suspend consideration of this
item for the time being.
36. It was so agreed.
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