RESTRICTEDWORLD TRADE
ORGANIZATIONS/C/M/28
20 July 1998
(98-2876)
Council for Trade in Services
REPORT OF THE MEETING HELD ON 24 AND 25 JUNE 1998
Note by the Secretariat
1. The Council for Trade in Services held a meeting on 24 and 25 June 1998.  The agenda for
the meeting is contained in WTO/AIR/860.  The Chairman raised a point under other business
concerning the Chairmanship of the Committee on Financial Services.  The delegation of theUnited States also raised a point under other business concerning the status of acceptances of the
Fourth Protocol to the GATS.
A. COOPERATION BETWEEN THE INTERNATIONAL TELECOMMUNICATION UNION
AND THE WTO
2. The  Chairman recalled that the question of a cooperation agreement between the ITU and the
WTO had been raised at previous Council meetings.  Members had requested further information on
the views and intentions of the ITU with regard to such an agreement.  The Chairman introduced
document S/C/W/41, containing a draft Coopera tion Agreement between the two organizations
prepared by the ITU Secretariat.  The text, which had not yet been approved by the ITU Council,
reflected only the views of the ITU Secretariat, and it had not been discussed between the ITU
Secretariat and the WTO Secretariat.  The Chairman asked delegations to provide any necessary
guidance or directives to the WTO Secretar iat in its future contacts with the ITU.
3. Although delegations agreed that a cooperation agreement in some form with the ITU would
be desirable, it was felt that in some respects  the draft submitted to their Council by the ITU
Secretariat went beyond what would be appropriate.  Questions were raised in particular about the
provisions relating to ITU participation in the WTO Dispute Settlement Body and about the extension
of technical cooperation by the Secretariat to countries not Members of the WTO.  It was stressed that
cooperation between the two organizations should be strictly focused on issues related to
telecommunications.  It was  also noted that the fo rm such an agreement might take was still a matter
for discussion.  It was agreed that further informal consultations should be held to allow the Council
to further clarify its position.  The delegation of the United States circulated informally a revised
version of the ITU draft, reflecting changes the US would suggest, for the Council's consideration.
B. REQUESTS FOR OBSERVER STATUS BY INTERNATIONAL
INTERGOVERNMENTAL ORGANIZATIONS
4. The Chairman reminded participants that the Council for Trade in Services had granted
regular observer status to only four organisation s:  the UN, UNCTAD, the IMF and the World Bank.
All other requests had been postponed until the conclusion of the ongoing consultations in the General
Council on observership.  However, according to  the Rules of Procedure, each WTO Council and
Committee was entitled to take its own decisions on the admission of observers.S/C/M/28
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5. The Chairman drew attention to document S/C/W/19/Rev.1 which contained an updated list
of the organisations which had requested observer status in the Council for Trade in Services.
Delegations agreed that although general rules on observership should be left to the General Council it
would be desirable to reach agreement in the Serv ices Council on the requests of some organisations
at the next meeting.  As the requests made to the Services Council had been outstanding for a longtime, the Chairman suggested that the Council take up this item in informal consultations with a view
to taking a decision on some of the outstanding requests at its next meeting.
C. STATUS OF ACCEPTANCES OF THE FIFTH PROTOCOL
6. The Chairman drew attention to document S/FIN/W/13, a Note by the Secretariat on the
status of acceptances of the Fifth Protocol.  Sin ce that note had been issued, Brazil had signed on
8th June subject to ratification and, Bahrain, Chile and Peru had accepted on 5th, l6th and 23rd Junerespectively.  The delegation of Japan informed the Council that the internal ratification procedure
was nearly completed and that Japan would be accepting the Protocol shortly.  The delegation ofIsrael informed the Council that the internal ra tification procedure was completed and that Israel
would accept the Protocol in the following days.  The Chairman suggested that the Council take note
of the statements made.
7. The Council took note.
D. PREPARATION FOR NEGOTIATIONS UNDER ARTICLE XIX - EXCHANGE OF
INFORMATION, SECTORAL DISCUSSION
8. The Chairman recalled that the purpose of the exchange of information exercise was to
facilitate the access of all Members, in particular developing country Members, to information
regarding laws, regulations and administrative guidelines and policies affecting trade in services.  He
suggested that in the sectoral discussions the Council focus on the manner in which the services in
question are traded and regulated.  These discussions should enable Members to identify in due course
negotiating issues and priorities.  The discussion fo cused on the following four sectors: Postal and
Courier Services; Audiovisual Services; Construction and Engineering Services; and Distribution
Services.  The Secretariat introduced the papers it had prepared on each of these sectors, in documents
S/C/W/37 to 40.
9. The Chairman stated that at the end of the discussions on the various sectors the Council
would not be seeking to agree on any particular conclusions.  He therefore encouraged delegations to
engage as much as possible into spontaneous exchanges.  It had previously been agreed that the
Council would conduct the discussions in informal mode and revert back to formal mode at the end ofthe meeting.  In the final formal session the Chairm an gave the following summary of the main points
raised during the informal discussions on each of the sectors:
(a) Postal and Courier Services
10. Although there are very few commitments on postal services and a limited though larger
number of commitments on courier services, the regulatory environment and market structure of these
sectors is changing, driven by deregulation and privatisation policies, and competing technologies and
consumer preferences.  It may be necessary to pursue more work to understand the nature of market
access and national treatment limitations in these sub-sectors.  Due to the multi-modal nature of
global courier service suppliers, classification issues arise concerning the relation between courierservices definitions and commitments and those for air and road transport services generally, as well
as the "transport of mail" sub-activities included within these two sectors. The corresponding UNCPC
definitions for postal and courier services may inadequately reflect the commercial service
transactions concerned and the way these businesses operate at present.S/C/M/28
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11. The extent to which the domestic market dominates the volume of postal letter mail points to
the importance of commercial presence in respect to postal services. For courier services, cross border
supply may have relatively greater importance, as may the presence of natural persons not only for
suppliers established in the market, but also for firms wishing to supply service into a market where
they have no  commercial presence.
12. There could be a need to further examine certain international postal service arrangements,
particularly in respect to possible MFN implications.  There may also be a need to improve
transparency in respect to these services. Some regu latory issues with important consequences for the
supply of these services may merit further examination: some such areas may include customs
practices and procedures, universal service requirements and other public policy considerations.
(b) Audiovisual Services
13. On Audiovisual Services, Members provided details of their own domestic regimes. The
importance of cultural issues for this sector, and the linkage between cultural issues and the large
number of MFN exemptions in place, was noted by  many speakers.  The economic importance of the
sector was noted, and attention was drawn to the large financial commitments required for film
production and distribution particularly. The point was made that GATS and the WTO system were ingeneral flexible enough to accommodate national policy objectives in this sector.  Several Members
stated that public financial support for the sector and the requirements of the GATS were not
incompatible.  Others observed that further examination may be required of the relevant subsidies
issues, as well as of the possible effects of MFN exemptions on market access.
14. Members observed that the rapid pace of technological change, especially the convergence
between the audiovisual and telecommunications sectors, created substantial challenges for regulators,
and raised additional classification issues.  The importance of intellectual property issues was noted,
and additional information requested from the relevant WTO divisions.
(c) Construction and Engineering Services
15. Several delegations introduced their existing domestic regimes and recent reforms and their
GATS commitments.
16. The importance of the construction sector for economic growth and development was
underlined.  It is an important sector for developing countries, not only for infrastructure development
and employment, but also for transfers of technology and know-how.
17. One question of classification raised was where to put "dredging services".  It was not clear
whether it belonged to construction services or transport services.
18. As a general point, it was stated that in liberalizing this sector, a balance needed to be struck
between safety and other public interest considerations and the need for effective competition.
19. In terms of commitments in Members' schedules, it was noted that commitments in mode 3
(commercial presence) were very  important for the sector, while mode 1 (cross-border supply) didnot appear to be particularly relevant.
20. Some of the market access and national treatment limitations identified were:  limitations on
the participation of foreign capital;  limitations on the types of legal entity;   limitations on the scope
of business activities of foreign construction firms;  nationality and residency requirements;
subsidies; and discriminatory tax and other requirements on foreign companies seeking approval.S/C/M/28
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21. It was stressed that limitations on the movement of natural persons at all skill levels have
particular relevance to this sector.  There was a need to elaborate on how the freedom of movement of
professionals and other personnel affected construction service suppliers.
22. It was pointed out that commitments made in other sectors, such as financial services,
business services and transport services also affect the construction sector.
23. Issues concerning domestic regulation, such as construction permits, qualifications and
licensing requirements to do certain work, and technical standards were also identified as relevant to
the sector.  There were also questions of transparency and competition policy.
24. Government procurement also plays an important role for this sector, requiring progress to be
made in other bodies of the WTO, including the Working Party on GATS Rules.
25. It was suggested that the relatively high quality of commitments made by Members,
particularly for mode 3, may enable Members to jointly undertake action in achieving a higher levelof liberalisation in the sector.
(d) Distribution Services
26. Members noted the economic significance of the sector.  The impact of technological
developments on distribution activities was highlighted.  Some noted the difficulties in coming togrips with the sector, particularly in light of statistical gaps.
27. The need was expressed for a closer examination of the adequacy of the existing classification
of distribution services and the description of covered activities. For instance, the question of how the
activities of certain fast-food restaurants and franchising should be classified may need clarification.
28. It was suggested by some that some questions pertaining to electronic commerce be
reformulated and the  responses be used as an input into work in the General Council.
29. The concern was expressed that only a few Members have commitments in the sector and
many had excluded particular sectors from the scope of their commitments.  Even though there were
few MFN exemptions explicitly for distribution services, other, more general, MFN exemptions may,
nevertheless, impact on the sector.  Furthermore, the presence of licensing requirements and ofeconomic needs tests could have a trade restrictive impact.
30. Certain liberalising measures taken by Members were described.  A particular interest was
expressed in certain questions, such as those pertaining to whether liberal access was granted to
foreign natural persons in the sector. Some however doubted the particular or immediate relevance of
competition rules for the distribution sector.
31. The point was made that in addition to restrictions on market access and national treatment,
domestic regulatory measures, such as those related to location and store-size, could also have apowerful effect on the ability of foreign suppliers to operate efficiently. The need for disciplines under
Article VI therefore needed to be explored.
E. REVIEW OF THE SECTORAL DISCUSSION EXERCISE AND DATES FOR FUTURE
MEETINGS
32. The Chairman noted that some useful suggestions were made during the sectoral discussions.
It was suggested that in structuring the discussions, a fifth question on the main barriers facing
Members' exporters of services in other markets, should be added to the four previously agreed.   ThisS/C/M/28
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would encourage Members to provide information not only on their own regulations but also on the
regulations of their trading partners.  It was also suggested that future sectoral papers by the
Secretariat should include questions of the types found in the Secretariat paper on Distribution
Services (S/C/W/37).  It was the view of some delegations that such questions would help focus the
discussions on matters related to future negotiations.  The Chairman pointed out that if the Council
asked the Secretariat to formulate such questions, it would not be reasonable afterwards to criticise
them for touching upon policy issues.  In this connection he emphasised that the content of these
papers by the Secretariat had no legal status.  One delegation suggested that at the next meetings of
the Council it might be useful to provide an opportunity for delegations to return to issues and sectors
discussed at the previous meetings.
33. The delegation of Japan made a proposal on the order of sectors to be taken up at future
meetings.  After a brief discussion Members agreed that in principle the Council would take up the
following services sectors at its meeting in July:  legal services, architectural and engineering
services, computer and related services, advertising services and environmental services.  Regarding
the order of the sectors to be discussed in the September, October and November meetings, the
Council agreed to come back to this issue in July.
F. OTHER BUSINESS
34. The Chairman drew attention to an informal note by the Secretariat (dated 24 June 1998),
which provided a revised account of the status of acceptances of the Fourth Protocol.  The delegation
of the United States said they remained concerned about the fact that some important WTO Members
had not yet accepted the protocol and urged all those Members to do so as soon as possible and by the
deadline of 31 July 1998.  The representative of Japan also urged the remaining nine Members to
accept the Protocol by the deadline.  The representative of European Communities informed the
Council that one of its Member States had recently accepted the Fourth Protocol and asked the
Council to include in its next agenda the re-opening the Second and Third Protocols for acceptance.
The representative of Poland informed the Council that its Parliament had passed the law authorizing
the President to ratify the Protocol and that acceptance would follow shortly.
35. The Chairman informed participants that his consultations on the appointment of a new
chairperson for the Committee on Trade in Financial Services were continuing.
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