RESTRICTEDWORLD TRADE
ORGANIZATIONS/CSS/M/12
28 November 2001
(01-6083)
Council for Trade in Services
Special Services
REPORT OF THE MEETING HELD ON 5, 8 AND 12 OCTOBER 2001
Note by the Secretariat
1. The Council for Trade in Services held a Special Session on 5, 8 and 12 October 2001.  The
agenda for the meeting is contained in document WTO/AIR/1636.  Under Other Business, a
representative of the Secretariat said that he would raise three points, relating to the symposium on the
movement of natural persons, technical cooperation, and the circulation of documents.
2. The Chairman proposed that the Council adopt the agenda as circulated, with the addition of
the items raised under Other Business.
3. The Council so agreed.
4. Before proceeding to the first item of the agenda, the Chairman recalled that, at the previous
Special Session, attention had been called to th e UNCTAD Expert Meeting on "Energy Services in
International Trade: Development Implications", held in Geneva from 23 to 25 July 2001.  The
representative of UNCTAD had asked if the report of that meeting could be made available to
Members, and he suggested that the Council agree to the request.
5. It was so agreed.
A. ASSESSMENT OF TRADE IN SERVICES
6. The Chairman recalled that, at its July mee ting, the Council had asked the Secretariat to
prepare a compilation of all statements and submissions relating to this agenda item.  In response to
the Council's request, the Secretariat had produced a note, contained in document S/CSS/W/104.
7. The representative of Pakistan introduced a joint submission by Cuba, Haiti, India, Kenya,
Pakistan, Uganda, Venezuela and Zimbabwe.  He expl ained that the paper, which was in four parts,
was intended to renew calls for the Council to conduct the assessment of trade in services mandated
by the GATS.  The paper first dealt with the objectives of the GATS, as stipulated in the Preambleand in Articles IV and XIX, as well as the objectives set out in the Preamble of the Marrakesh
Agreement establishing the WTO.  Second, the paper highlighted the reasons why the assessment
continued to be important, giving a brief outline of what was known on the effects of the GATS on
developing countries until then.  It then attempted to address the issues for the assessment by
suggesting a comprehensive set of criteria by which it could be conducted.  Finally, the paper gaverecommendations of a desired timeframe and a mechanism for such an assessment to be carried out.
8. He started by touching upon a few of the more  relevant provisions which could give a
direction to the membership.  Article XIX:3 stipulated that "for each round, negotiating guidelines and
procedures shall be established.  For the purposes of establishing such guidelines, the Council forS/CSS/M/12
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Trade in Services shall carry out an assessment of trade in services in overall terms and on a sectoral
basis, with reference to the objectives of this Agreement, including those set out in paragraph 1 of
Article IV".  Such an assessment had not taken place, even though developing country delegations
had repeatedly underlined the importance of such an assessment for them.  As regarded the Marrakesh
Agreement, he reiterated the commitment for an assessment and underscored the need to recall the
objectives set out for GATS and the WTO as a whole.  The Marrakesh Agreement establishing the
WTO recognized in its Preamble that trade and economic endeavour should be conducted with a view
to raising standards of living, ensuring full empl oyment and large and steadily growing volume of real
income and effective demand.  It also stated that there was a need for positive efforts designed to
ensure that developing countries, especially the least-developed among them, secured a share in the
growth in international trade commensurate with the needs of their economic development.  The
Preamble of the GATS also stated that multilateral rules in services should be established underconditions of progressive liberalization and as a means of promoting the economic growth of all
trading partners and the development of developing countries.  GATS Article IV on increasing the
participation of developing countries in services trade also set out clearly how that participation
should take place.  Furthermore, Article XIX:2 stated that the process of liberalization should take
place with due respect to national policy objectives and the level of development of individualMembers.  It was against this backdrop that the joint submission intended to look at the assessment.
9. The assessment continued to be critically important.  The submission contained references to
research studies carried out by international organizations, like UNCTAD, that they had made use of
and that hopefully the membership at large would have an opportunity to look at.  According to
UNCTAD's 1999 Assessment, developing countries had made substantial commitments under theGATS with respect to many service industries, often binding recently adopted legislation or pre-
committing future policies without having had much experience in their implementation, and had
undertaken a higher share of full bindings under the cross-border and commercial presence modes of
supply.  In contrast, they had not received concessions of any meaningful economic value under the
movement of natural persons.  As a result, most developing countries had a deficit in trade in services,except for tourism and travel and work remittances.  Hoekman had also pointed out that market access
commitments by high-income countries tended to be restrictive with respect to activities where
developing countries had a comparative advantage, both low and high-skill intensive labour activities,
that required either temporary entry or establishment or work permits.  In the same vein, a study by
the OECD of the assessment of the GATS, submitted to the Council by the delegations of Slovenia,
Bulgaria, the Czech Republic, Poland and the Slovak Republic, stated as one conclusion that
liberalization in trade in services within the GATS had not brought about specific tangible results for
transition economies.
10. As concerned the GATS implications and effects on domestic regulation, the continuing
concerns for developing countries regarding regulation also made it compelling to have an early
assessment.  Firstly, in the process of implementing the GATS, developing countries spontaneously
re-regulated to remove trade barriers in various areas.  However, as eluded to above, this spontaneityhad not been reciprocated to the same extent.  Developing countries had clearly not received the
benefits they had thought they would.  Developed countries continued to be heavily regulated in the
form of maintaining trade barriers, especially in several sectors of interest to developing countries.
Secondly, the regulatory initiatives taken by developing countries would already seem to be having a
negative impact on them, since many developing countries had adopted regulations which had turnedout to be more suited to the needs and level of development of service industries of developed
countries.
11. As for market power in services, many services markets were dominated by only a few large
firms from developed countries and a number of small players.  The top 20 service exporters were
mainly from developed countries.  In spite of the GATS, developed countries accounted for 80% ofworld exports of services and developing countries for 20%, even though they made up 90% of theS/CSS/M/12
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WTO membership.  It was therefore difficult, if not impossible, for developing country suppliers,
without the advantage of an early start, to catch up with the large firms.  Developing country
providers faced competition from large service multinationals with massive financial strength, access
to the latest technologies, world-wide networks and sophisticated IT infrastructure.
12. In Part III, the submission indicated what need ed to be done in order to move beyond the
stalemate in the assessment.  Many developing countries, at the time of the Uruguay Round, were
hesitant to negotiate the GATS given the non-existence of statistics.  However, they were reassured
that the problem would be addressed with urgenc y and ways would be found to gather meaningful
data, to match the directions of trade data in goods.  On the basis of these reassurances, GATS
negotiations went ahead and developing countries made concessions.  To date, however, substantive
assessment continued to be stalemated, in large part because too much emphasis had been placed on
the difficulties to obtain statistics.  Certainly,  work underway to obtain the long-desired breakdown in
Balance-of-Payment statistics as well as accurate statistical information in the various modes of
supply needed to continue;  however, it was time that urgent consideration also be given to other
elements to assess the effects of GATS.  In accordance with the objectives outlined in Part I, the paper
asked questions and laid out elements which could help carry out the assessment.  The list was by no
means exhaustive and work could continue to define and further refine it.  The questions dealt withthe general economy, trade in services, GATS commitments and rules and access to basic services.
13. Part IV of the paper dealt with a timeframe and mechanism for the assessment.  He reminded
the Council that the Special Session had decided that it would continue to carry out the assessment of
trade in services in overall terms and on a sectoral basis, with reference to the objectives of the GATS
and of Article IV in particular, that this would be an on-going activity of the Council and thatnegotiations would be adjusted in light of the result s of the assessment.  This decision had been taken
in March 2001.  In order for the assessment to be on-going, it needed, in the first place, to commence.
It was therefore imperative that an assessment be conducted, in order to ensure that the negotiations
proceed on an informed basis.  Furthermore, since it was to be continuing, there was need for an
objective framework for such an exercise to be conducted on a predictable and certain manner, at thesame time making it meaningful for future assessments.
14. The paper therefore made four recommendations.  First, the assessment had to be carried out
based on the comprehensive submissions made by Members and international organizations,
including the WTO, and making use of the Secretariat compilation contained in document
S/CSS/W/104.  Based on these elements, conclusions should be drawn by the end of March 2002, as a
first contribution under the mandate in Article XIX:3 as well as in paragraph 14 of the guidelines.
Second, further negotiations could only commence after conclusions from the first assessment hadbeen drawn;  negotiations would be adjusted in accordance with these conclusions, in line with the
letter and spirit of the negotiating guidelines and procedures.  Third, in accordance with paragraph 14
of the guidelines, assessments of trade in services would remain an on-going activity of the Council
and conclusions would be drawn at regular intervals,  for the negotiations to be adjusted accordingly.
Fourth, given the expertise and work of UNCTAD on issues pertaining to developing countries, theseassessments needed to be carried out with the assistance of UNCTAD and, if necessary, of other
relevant UN agencies.  Studies on national experiences could also be fed into this assessment process.
Demand-driven technical and financial assistance also needed to be provided for this purpose to
developing and, especially, least-developed countries.
15. The representative of India indicated that paragraphs 16 and 17 of the Secretariat document
were reflective of India's views.  He underscored the importance of the assessment of trade in services
and the need that it be addressed effectively, in order to evaluate the impact of the GATS on
developing countries and how developed countries ' commitments had helped developing countries
further their exports.  He strongly supported the thrust of Pakistan's intervention and said that, givenS/CSS/M/12
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the importance of the assessment to developing countries, it was important that this remained as a
standing item on the agenda of the Council.
16. The representative of Kenya associated his delegation to the statement by Pakistan.  He
indicated that his delegation had also submitted a proposal, circulated as document S/CSS/W/109,
which contained a reference to the assessment.  The document reflected the outcome of a nationalseminar, jointly organized by the Ministry of Trade and the UNCTAD Secretariat and involving the
participation of Kenyan stakeholders in the services industry, and highlighted Kenya's expectations
from the services negotiations.  He emphasised the important role of the Council with respect to the
assessment and stressed that the assessment would remain a standing item on the agenda of the
Special Session, as indicated in the negotiating guidelines and procedures.  He also recalled the
provision on technical assistance in paragraph 14 of the guidelines, which the Kenyan stakeholders
wanted to avail themselves of.  He stressed that failure to make progress on the assessment would callinto question the legitimacy of the whole services negotiations.
17. The representative of Cuba stated that the assessment should have been carried out before the
start of the negotiations.  Members needed to arrive at concrete results on the assessment and
developing countries were ready to participate in the process, as expressed by Pakistan;  the
participation of other international organizations, such as UNCTAD, could also be beneficial.  Theassessment had to identify the potential economic impact, social and environmental consequences of
services trade liberalization undertaken until then, and be an on-going process throughout the
negotiations for developing countries to evaluate the costs and benefits of any possible new
liberalization.
18. Commenting on the paper prepared by the Secretariat, the representative of the Dominican
Republic noted that more than a hundred documents had been listed as relevant to the assessment.  He
acknowledged that statistical and analytical problems existed, echoed the statement by Pakistan and
said that his delegation would subscribe to their joint submission.  He suggested that Members agree
to a proposal that his delegation had raised, as recorded in paragraph 107 the Secretariat note, namely
that the Secretariat compile the information contained in Trade Policy Reviews for discussion in theSpecial Session.  Further, he suggested that a symposium could be held on the issue, to give Members
the opportunity of discussing various aspects of the assessment of trade in services and to provide
inputs to the debate.  Other international organizations such as the World Bank, UNCTAD, the IMF
and the OECD could also participate in the event.
19. The representative of Indonesia underscored the importance of the assessment.  He
acknowledged that lack of data and analytical problems made it difficult to conduct an empirical
assessment, but stressed that this should not delay the discussion.  The assessment should identify the
costs and benefits which had accrued to developing countries as a result of the GATS and identify
sectors and modes of export interest to them, which should be further liberalized.  He called for the
collaboration between the WTO and UNCTAD Secretariats to continue, as their work was
complementary.  When analysing existing data, it was important to focus on the objectives of the
GATS, particularly those relating to developing countries, including the promotion of economicgrowth for all trading partners, increased participation of developing countries and the liberalization
of sectors and modes of export interest to them.  In order to achieve these objectives, efforts to
liberalize trade needed to be balanced with an adequate regulatory framework.  The key question was
whether the GATS had allowed developing countries to fully exercise their right to determine their
national policy objectives and the flexibility to pursue them through the types and means andregulations that they considered appropriate.
20. The representative of Turkey reiterated the importance of the assessment;  it was a legal
obligation and might provide a key input to the negotiations.  The submission introduced by PakistanS/CSS/M/12
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would help with the on-going work and the propos als by the Dominican Republic were useful and
worthy of attention.
21. The representative of Venezuela echoed the submission by Pakistan and considered it a useful
contribution to making the assessment of trade in services more than just a standing item on the
Council's agenda.  Even if Article XIX contained a reference to Article IV, the assessment was notonly a developing country issue, and was of importance to all Members.  She stated that the
assessment should have been carried out before the establishment of the negotiating guidelines;  given
that the guidelines had been agreed, whereas the assessment had not been concluded, all Members
needed to focus and put their best efforts into the is sue.  Useful elements could be extracted from the
submission presented by Pakistan, as well as from the compilation produced by the Secretariat.
22. The representative of Peru supported the proposals by the Dominican Republic.  The
assessment was important to determine whether liberalization commitments had promoted economic
growth and development.  The paper by Pakistan contributed to making the assessment operational
and his delegation would join and subscribe to Pakistan's submission.
23. The representative of the European Communitie s said that the assessment was an important
issue in the Council's discussion, particularly for developing countries, and restated his delegation's
willingness to participate and contribute to the debate.  A number of useful contributions had beentabled on the assessment, which included the Secretariat note.  He noted that the discussion until then
had focused on the lack of balance that developing countries perceived to exist between the level and
growth of exports and commitments undertaken by developed and developing countries.  Two
approaches had been attempted to conduct an assessment of trade in services.  A first approach, based
on aggregate statistical information, presented several limitations;  for example, the fact that servicestrade had not increased as expected by developing countries did not take into account the fact that
services were an important component of the domestic economy.  A second approach, that relied on
case and country-studies, was more helpful, as it permitted to draw useful lessons in terms of
Article IV of the GATS and to identify areas where developing countries' participation in services
trade could be enhanced or where they might need technical assistance to increase their domesticcapacity.
24. The representative of the United States noted that some of the previous speakers, who had
said that the assessment had not yet taken plac e and that it had to commence, held a different
prospective on the issue than his own delegation.  In the United States' view, and as the Secretariat
note demonstrated, the assessment had taken place and was on-going.  He would revert to the specific
suggestions put forward by Pakistan, but noted, in  response to Pakistan's intervention, that the
assessment should not be carried out only with respect to Article IV, as Article XIX, while containingan explicit mention of Article IV, referred to all of the objectives of the GATS.  He had found the
European Communities' suggestion about case-studies interesting.  He was also interested in
discussing the Dominican Republic proposal for a symposium, to see how this might be set up and
how it could contribute to the assessment.
25. The representative of Norway noted that the main emphasis in Pakistan's intervention was on
macro-economic approaches;  in this regard, he concurred with the European Communities and the
United States that more case-studies would be helpful to identify possible areas for liberalization.  The
undertaking that Members were involved in was to utilise liberalization globally to stimulate growth
globally.  His delegation had submitted two case-studies, in 1999 and 2001, on the SADC countries'
experience with services liberalization, the first analysing the effects of liberalization on producerservices and the second on information technology.  The papers showed that liberalization had helped
to create progress;  advances in information technology had tremendously reduced the cost of
transactions and substantially changed business ways.  Examples showed that regional supply chains
had emerged, such as in the textile and clothing sector;  that, in particular in South Africa, theS/CSS/M/12
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automotive industry was increasingly integrated into  the global industry;  that liberalization of the
telecommunications sector had led to unprecedented growth in the penetration of mobile phones and
access to the Internet.  Also, that inadequate and expensive transport services and infrastructure were
an obstacle to further integration of SADC comp anies in international production networks.  This
showed that it was important to look for obstacles as well as possibilities, for both variables wereequally important.  His delegation was ready to contribute further to the assessment and was of the
view that case-studies could be helpful supplements to the aggregate approach.
26. The representative of Morocco said that the assessment was important to evaluate the impact
of services liberalization on developing countries' economies, in terms of reduction of poverty,
creation of jobs and increases in GDP.  Possible conclusions from the assessment needed to be taken
into account in the negotiations and that was why it  had to remain a standing item on the Council's
agenda.  She supported the Dominican Republic's proposal for a symposium, underscored theimportance of continued co-operation with UNCTAD on the assessment and concurred that case-
studies could help to identify where developing countries might pursue services trade liberalization.
27. The representative of Canada said that work on the assessment had commenced and was on-
going, and recalled that, as part of the exercise, a seminar on services statistics had also been held in
2000.  As the effect of services trade liberalization varied from country to country, a country-specificassessment was more valuable than an overall one.  He had found the Dominican Republic suggestion
to hold a symposium on the issue helpful, and would revert to it.
28. The representative of Djibouti said that the assessment was essential to allow Members to
assess the results achieved and what they were trying to achieve.  He agreed that case-studies were
important to identify what the real needs of developing countries were.
29. The representative of Paraguay supported Pakistan's intervention and the Dominican Republic
suggestion to hold a symposium on the assessment.  He said that the parameter by which to measure
the capacity of developing countries to conduct an assessment of trade in services was the number of
negotiating proposals submitted, and the number of proposals submitted by developing countries
testified to their lack of capacity.  He suggested that the Secretariat might help Members carry outtheir own assessment by drawing up a list of issues  that they might wish to take into account when
conducting the exercise.
30. The representative of Brazil recalled the statement made on the issue by Uruguay, on behalf
of Mercosur, at the previous meeting.  He said that many inputs had been made to the assessment, but
that the discussion needed to focus more on the question of why developing countries had not been
able to extract benefits from developed countries' commitments and liberalization.  He stressed the
importance of the submission by Argentina in doc ument S/CSS/W/44 in this regard.  By way of
preliminary remarks on services statistics, he noted their importance not only for the assessment but
also for the overall functioning of the GATS, for example with respect to compensation under
Article XXI, the negotiations on emergency safeguards and subsidies, as well as for negotiating
purposes.  He drew attention to document S/CSS/W/81, reporting on the work of the Intra-Agency
Task Force on Statistics of International Trade in Services and especially on its adoption of theManual on Statistics of International Trade in Services, which was compatible with existing statistical
systems and especially the fifth edition of the Balance of Payments Manual.  He wondered whether
there might be margin for technical co-operation with respect to the adoption and implementation of
the Manual.
31. The representative of Argentina said that his delegation would examine the suggestions by
Pakistan and revert to them.S/CSS/M/12
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32. The representative of the UNCTAD Secretariat underscored the importance of continuing the
assessment of services trade to promote the development of developing countries;  he indicated the
readiness of the UNCTAD Secretariat to take part in the exercise, including in a possible symposium,
as directed by WTO Members.  UNCTAD had held several Expert Meetings in areas that developing
countries had indicated to be of interest, namely health, tourism, air transport, environmental,construction and energy services, which could complement the assessment work by providing case-
studies.  He said that lack of statistical information represented a problem, which, however, should not
prevent the measurement of the asymmetries in services trade.  The Expert Meetings provided useful
pointers to the kind of parameters that could be used in the assessment.  He said that UNCTAD was
preparing a handbook on services trade statistics, which would help Members approach statistics in
national accounts and explain how to start building up data and time-series based on the Intra-Agency
Taskforce Manual.  The publication of the Handbook was scheduled for October 2002.  He said thatthe UNCTAD Secretariat was ready to provide tec hnical assistance with the implementation of the
Manual on Statistics of International Trade in Services.
33. Summing up the discussion on this item, the Chairman said that the assessment was a high
priority for numerous delegations.  Leaving aside the question of whether the assessment had started,
many had expressed great frustration at the lack of progress.  There were intrinsic difficulties in theassessment, but this should not prevent deepening the exercise.  A number of suggestions had been
put forward in this regard.  There was a good deal of support for the Dominican Republic proposal
that a symposium be held on the issue;  he suggested that the Secretariat draw up an outline for the
event, allowing for both a quantitative and a qualitative assessment, in close contact with other
international organizations, such as UNCTAD.  The outline would be discussed at the followingmeeting.  The Dominican Republic had also suggested that the information contained in Trade Policy
Reviews be compiled, Paraguay had suggested that the Secretariat draw up a list of questions for
Members to consider when carrying out the assessment and a number of delegations had referred to
the usefulness of case-studies.  He proposed that the ideas be combined and that the Secretariat
prepare a list of issues that Members might wish to take into account when conducting their ownassessment.  He said that the assessment was and would remain a standing item on the Council's
agenda, and stressed the importance of making progress on the issue.
B. TREATMENT OF AUTONOMOUS LIBERALIZATION
34. The Chairman recalled that, at the end of th e special meeting on autonomous liberalization
held in July, the Council had asked the Secretariat to prepare a brief note summarizing the broad
views expressed by delegations on points raised in the "Annotated Checklist of Issues", circulated as
JOB(01)/65.  The Secretariat had accordingly prep ared a note, entitled "Treatment of Autonomous
Liberalization" and contained in JOB(01)/141.
35. A representative of the Secretariat said that the note, which was self-explanatory, was a tool
to structure the debate and did not represent a comprehensive account of the issues raised in the last
debate, which was instead reported in the minutes of that meeting contained in document
S/CSS/M/11.
36. The representative of Thailand offered general comments.  She said that JOB(01)/141 was a
useful document, but that she could not agree with its entire content.  It testified to a good degree of
convergence in Members' positions, for example with respect to section A on definitions.  She
concurred that Members seemed to agree on the issues raised in paragraphs 1 to 3, as well as on the
summary of the debate on the definition of liberalization measures eligible for credit in paragraph 6.However, she could not share the statements in paragraphs 7 and 8.  With respect to paragraph 7, she
acknowledged that many Members had said that the results of the extended negotiations should be
included, but noted that others had disagreed and th at no clear position had emerged on this issue.  On
paragraph 8, she said that this paragraph reflected the views of just one delegation, who hadS/CSS/M/12
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mentioned the particular example, and not those of the whole membership.  With regard to sections C
and D, she said that they contained interesting ideas that could be built upon, particularly
paragraph 17 in section C, containing helpful suggestions for criteria to assess the value of
autonomous liberalization, and section D, where the voluntary nature of notifications could be
discussed further.  However, with respect to the suggestion for model schedules in paragraph 17, shesaw no need to resort to such a modality and noted that alternatives did exist.  She underscored that,
whilst JOB(01)/141 contained useful pointers, it was important to focus the discussion on three
elements:  criteria for identifying the measures el igible for credit, criteria for assessing the value of
autonomous liberalization measures and transparency.  As concerned the issue of binding in section B
of JOB(01)/141, she said that this was a political issue which could possibly be left aside for the time
being.  She hesitated to ask the Secretariat to do more concrete work on autonomous liberalization, as
she was of the view that delegations still needed time to reflect and discuss.
37. The representative of Uruguay took note of the fact that JOB(01)/141 did not represent a
comprehensive account of the debate.  With regard to section A, he said that the liberalization
commitments in the Fourth and Fifth Protocols needed to be considered as autonomous liberalization
measures.  The extended negotiations were negotiations, but they were different from the Uruguay
Round ones, as only some, and not all, Members had participated.  The additional effort of thoseMembers had to be taken into account.  He also said that any unilateral liberalization, undertaken
outside a negotiating context and bound, was a clear example of autonomous liberalization and
needed to be recognized.  He then noted that , while Article XIX referred to all Members, the
treatment of autonomous liberalization was originally meant to favour developing countries, as had
been the case for goods, and therefore should only apply to developing countries.  Three-quarters ofservices trade was accounted for by developed countries;  this was an intrinsic difference that needed
to be taken into account.  The treatment of autonomous liberalization was meant to recognize the
liberalization efforts made by developing countries who had opened up their markets even in the
absence of adequate infrastructure.  He thus envisioned no problems with developed countries giving
each other credit, but serious difficulties with the idea of a developing country giving credit to adeveloped one.  Finally, he stressed that autonomous liberalization was different from the on-going
negotiations;  Article XIX referred to autonomous liberalization undertaken "since previous
negotiations", thereby distinguishing it from the on-going ones.  Members would be seeking
concessions in the current services negotiations, not credit.
38. The representative of India said that many developing countries had undertaken autonomous
liberalization and therefore attached great importance to credit being granted.  He echoed the
statement by Uruguay about the distinction between developed and developing countries with respectto autonomous liberalization.  The Council had to develop multilateral criteria for credit and
recognition, but it was not acceptable that this be made subject to binding.
39. The representative of Switzerland stressed that his delegation recognized efforts undertaken
by Members to liberalize their services markets.  He indicated that his delegation's position was as
contained in the report of the previous meeting, document S/CSS/M/11.  Turning to the Secretariatnote in JOB(01)/141, he said that it was a useful working basis.  With respect to section E, he said that
a bilateral context was preferable, as it allowed for a better evaluation of the value of autonomous
liberalization.  Autonomous liberalization was unde rtaken in a country's own interest and could also
be of value to a third country, but not to another.  For example, a country lacking computer software
specialists could have liberalized access for such natural persons;  whilst this could be of value to oneMember, it might be of no interest to another, who might also be looking to attract software
specialists.  Similarly, mode 3 liberalization might not necessarily be welcomed by already
established service suppliers facing increased competition.  He added that a bilateral context would
also allow for greater transparency, in that measures could be discussed in detail, and would also not
create an automatic right to credit being granted.  Tu rning to section A, he said that measures eligible
for credit were those susceptible of being scheduled, which should be dealt with in a request-offerS/CSS/M/12
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framework.  A two-stage approach should be follow ed, with the development of criteria first and of
modalities afterwards.  With respect to section B, he stressed that binding was important in order not
to create uncertainty in the system and in that regard he was strongly opposed to the view contained in
the last sentence of paragraph 11.  As concerned transparency, he said that notification did not create
an automatic right to credit.
40. The representative of Argentina said that Members needed to accept that there were limits to
addressing autonomous liberalization at a multilateral level, as in such a context it would be very
difficult to arrive at a solution that would satisfy all Members.  Multilateral work should be pursued as
far as possible, and from then onwards the issue was to be addressed bilaterally;  bearing this in mind
would allow for easier progress on the multilateral work.  In this respect, he felt that the Secretariat
note might already be sufficient and contain many of the necessary elements;  he therefore encouraged
delegations to focus on those elements which could be used as a multilateral guide to advance with theautonomous liberalization exercise and be taken into account in a bilateral framework.  He drew
attention, for example, to paragraph 15, which contai ned useful ideas to draw up a non-exhaustive list
of criteria.  He stressed the need to move the discussion to the next stage, and suggested that this
could be stimulated by a document on how to evaluate the value of autonomous liberalization.
Indeed, he was of the view that the issues raised in paragraphs 7 and 8 would be difficult to agreeupon at a multilateral level.
41. By way of general comment, the representative of Indonesia said that the treatment of
autonomous liberalization could result in fewer benefits than expected to the many developing
countries, like Indonesia, who had undertaken substantial autonomous liberalization when undergoing
structural and regulatory restructuring before the Uruguay Round was concluded, as they might begranted no credit and be subjected to greater requests.  He recalled that paragraph 13 of the
negotiating guidelines and procedures referred to account being taken and credit given in the
negotiations for autonomous liberalization undertaken by Members since previous negotiations.  In
this respect, his delegation believed that such measures should cover those taken before the
conclusion of the Uruguay Round and called on Members to consider broader notions of credit andaccount and different ways and means for giving such credit.  Giving credit for autonomous
liberalization undertaken by developing countrie s would induce further autonomous liberalization in
sectors of interest to developed countries.  He reserved his delegation's right to revert to the issue at a
later stage.
42. The representative of Malaysia echoed the statement made by Uruguay.  He said that all
Members should recognize that an asymmetry existe d in services trade and take account of the fact
that the autonomous liberalization undertaken by developing countries was different from the one ofdeveloped countries.  He noted that his delegation held a different view on paragraph 11 from the
delegation of Switzerland.  He then sought a clarification on paragraph 3 of the Secretariat note,
which seemed to suggest that autonomous liberalization in the context of economic integration
agreements should be granted credit only if bound and available on an MFN basis;  he noted that
parties to an economic integration agreements were permitted to liberalize trade in services amongstthemselves and that therefore an MFN issue did not arise.
43. Responding to the clarification sought by Malaysia, a representative of the WTO Secretariat
explained that paragraph 3 meant to exclude any liberalization undertaken in the context of an
economic integration agreement from eligibility for credit, unless such liberalization was extended to
all WTO Members.  It did not imply that such liberalization should be offered multilaterally;  rather,than only in those circumstances it would become eligible for credit.
44. The representative of Turkey concurred that only autonomous liberalization undertaken by
developing countries should be taken into account, or else its treatment would become too complex in
practice.S/CSS/M/12
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45. The representative of New Zealand said that the Secretariat note usefully encapsulated and
summarized the breadth of views that had been injected into the discussions on the treatment of
autonomous liberalization until then.  He believed that a certain degree of convergence in a number of
the issues highlighted in the note, such as certain parts of sections A, C and D, appeared to be
emerging.  He therefore looked forward to Memb ers further engaging on how to more fully and
effectively breathe life into Article XIX:3 because he was of the view that there were a couple of
areas where a multilateral solution was possible.  However, like Argentina, he believed that such a
multilateral solution could only go up to a point and that for some areas Members needed to recognize
that the bilateral angle would predominate.  He looked forward to resolving the issue because New
Zealand had undertaken a large amount of autonomous liberalization since previous negotiations and
therefore expected trading partners to recognize such liberalization in the context of the negotiations
on specific commitments.
46. With respect to the definition of autonomous liberalization, the representative of Jordan said
that her delegation was tackling the issue from a different perspective than other Members.
Article XIX of the GATS provided that "negotiati ng guidelines shall establish modalities for the
treatment of liberalization undertaken autonomously by Members since previous negotiations".  The
majority of views tended to be inclined toward s defining "liberalization undertaken autonomously" as
liberalization undertaken by individual Members unil aterally, outside a negotiating context, while
"previous negotiations" would refer to the end of the Uruguay Round, and might also include the
extended negotiations on movement of natural persons, basic telecommunications and financial
services.  Previous negotiations for a recent WTO Member would only be relevant to its accession
negotiations, which happened to be in the year 2000 for Jordan.  This left a time-gap between originalMembers and newly-acceded countries in assessing the value of autonomous liberalization undertaken
during the period of time following the conclusion of the Uruguay Round.  Original Members might
be entitled to obtain credit for liberalization undertaken autonomously in sectors in which a newly-
acceded country might have already liberalised as per its accession and for which it would now not be
supposed to be granted any credit.  In this context, she expected that the treatment of autonomousliberalization would take into consideration the level of liberalization and coverage of specific
commitments already existing in countries' schedules, with due respect to the level of development
and size of economy of individual Members.
47. As for the relationship between negotiations and autonomous liberalisation, her delegation
attached great importance to receiving credit for autonomous liberalization.  However, the concepts of
"credit", "account" and "recognition" still needed to  be further examined within the context of GATS.
As for the argument that credit would only be granted if the relevant autonomous liberalization wasbound in commitments in the framework of the negotiations, she stressed that binding was a
Member's own choice, taken with due respect for its national policy objectives, its level of
development and size of the economy.  Thus, credit should be given regardless of whether binding
had taken place.  Such an approach would contribute to progressive liberalization and encourage
Members to undertake further autonomous liberalization, which would benefit the liberalizingMember as well as its trading partners.
48. When it came to assessing the value of liberalization measures undertaken autonomously, she
said that the feasibility of establishing a mu ltilateral formula for transforming the value of
autonomous liberalization into credit needed to be further examined.  Any quantitative approach
needed to take into account the contribution of  the liberalized services sector to GDP and
employment, as well as other factors such as the importance of the sector concerned, whether it was
an infrastructural sector, the level of development of the Member concerned, and the size of the
market.  With respect to regulatory measures and administrative guidelines and procedures not
appearing in schedules that had restrictive trade effects, there was a need to further examine how such
measures would be treated in the assessment of autonomous liberalization.S/CSS/M/12
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49. As for transparency, Jordan was of the view that notification of autonomous liberalization
measures that a Member was seeking recognition or credit for should take place voluntarily;  it would
be sufficient to make the nature of the liberalization known to interested trading partners, and
consequently Members should not be bound by the notified measures.  As for the bilateral versus
multilateral treatment of autonomous liberalization, she said that a mixed approach, by which amultilateral framework would be set up, within which credit and recognition would be worked out
bilaterally or plurilaterally, might be a good starting point and she looked forward to further
examining this issue.
50. The representative of Japan concurred that the Secretariat note testified to many points of
convergence in Members' positions and echoed the thrust of the intervention by Switzerland.
Commenting on paragraph 11 of JOB(01)/141, he reiterated that, even if Members were free not to
bind their autonomous liberalization, this should be bound at some stage in order for credit to begranted at some point.  As for paragraph 12, he said that the granting of credit should be decided on
the basis of the value and contents of the autonomous liberalization undertaken, either bilaterally or
multilaterally, and that the idea that criteria be developed multilaterally was interesting but raised
questions as to its feasibility on a horizontal basis.  With respect to transparency, he stated that
Members had an obligation to notify at least under Article III:3 of the GATS.
51. The representative of the European Communities said that her delegation's views were as
reflected in the minutes of the July meeting of the Council, contained in document S/CSS/M/11.  She
stressed the importance of transparency, which was necessary for credit and recognition to be granted.
However, transparency had to be left up to individual Members, also as concerned the decision to
notify the whole Council or only individual Members in a bilateral context.  As concerned the issue ofwhen binding should take place, she said that it was necessary to identify what credit was being
sought and the value of the autonomous liberalization undertaken, for the Member to decide what to
bind on an MFN basis.  She felt that many of the points raised at the meeting could be turned into
multilateral elements.
52. The representative of Canada said that his delegation was open to discuss different
approaches and saw merit in considering the ideas put forward at the meeting.  He stressed two
elements.  First, he concurred with the European Communities that transparency and notification were
essential.  On the question of notification being bilateral or multilateral, he said that sequencing was
critical, given that, in the end, the results of the negotiations would apply multilaterally;  he therefore
felt that a multilateral solution might be preferable.  Second, on binding, he stressed the importance of
any credit granted being reflected by bound commitments.  He added that paragraph 13 of the
Secretariat note pointed to the compatibility of binding with progressive liberalization and wonderedif Members might consider the progressive entry into force of commitments, with phased-in
commitments, as Canada had suggested in its proposals on financial services and distribution services,
as a possible solution to arrive at an agreement.
53. The representative of Argentina supported the comment by Thailand that Members focus on
criteria for identifying measures eligible for giving credit, criteria for assessing the value of
autonomous liberalization measures and transparency.
54. The representative of Mexico concurred that two stages were necessary to deal with
autonomous liberalization:  the development of criteria first, followed by modalities.  He also shared
Argentina's view that the discussion should move to the next stage and that the Secretariat note,
JOB(01)/141, was a sufficient basis to elaborate criteria and modalities.
55. The representative of the Republic of Korea  said that assessing the value of autonomous
liberalization measures was a key concern.  His delegation's quantitative approach was not the sole
approach possible and, while he continued to believe that it had merits, he was of the view thatS/CSS/M/12
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additional ones existed, including qualitative ones, and encouraged delegations to submit concrete
proposals.  With respect to paragraph 15 of the Secretariat note in JOB(01)/141, he said that a
quantitative benchmark could be used for specific sectors and modes and might be a good gauge,
particularly for developing countries with limited bargaining power.  He felt that quantitative and
qualitative approaches were mutually supportive and indicated that his delegation would besubmitting a revised proposal in this sense, possibly at the following meeting.
56. The representative of Singapore said that the Secretariat note in JOB(01)/141 was a useful
document and that he looked forward to usin g it.  Commenting on Switzerland's intervention, he
recognized that the value of autonomous liberalization differed from Member to Member and that a
bilateral approach would be preferable, but was c oncerned and sought clarification on the example
given of mode 3 liberalization, which seemed to imply that, as already established suppliers might be
negatively affected by further liberalization, this autonomous liberalization might be considered"negative" and that a "debit", rather than a credit, might ensue.  He also said that, unlike Switzerland,
his delegation was not of the view that a bilateral approach was more transparent and less subjective.
57. Responding to Singapore's first comment, the representative of Switzerland said that the
interest of a single company was different from the public interest.  Liberalization was in the public
interest but it might not be liked by individual co mpanies;  he was not suggesting that a "debit"
existed for autonomous liberalization.  With respect to the second comment, he said that a two-stage
approach was necessary, and that, while criteria should be developed multilaterally, these would be
applied in a bilateral discussion.  In this regard, he was of the view that a bilateral discussion allowed
for a more objective evaluation of autonomous liberalization than a debate involving more than 140
Members, each with a different interest and point of departure.
58. By way of concluding remarks, the Chairman said that delegations had called for discussions
to continue and to move to the next stage;  he encouraged Members to submit proposals in this regard.
He said that the Council would take note of the statements made and revert to this standing item at its
next meeting.
C. ANNUAL REPORT OF THE COUNCIL FOR TRADE IN SERVICES TO THE GENERAL
COUNCIL  – D RAFT REPORT
59. The Chairman drew delegations' attention to document S/CSS/W/105, which contained a draft
of the Annual Report to the General Council on the activities of the Special Session of the Council for
Trade in Services.  He said that the report was factual and self-explanatory and proposed that the
Council adopt it.
60. It was so agreed.
D. PROPOSALS RELATING TO THE NEGOTIATIONS UNDER ARTICLE XIX OF THE GATS
61. The Chairman recalled that, after an initial discussion at the May meeting, the Council had
decided that a more detailed discussion of proposals relating to services sectors, modes of supply and
horizontal issues would be split between the July and October meetings.  Accordingly, the agenda for
that meeting dealt with those sectors which were not addressed at the July meeting and, as agreed at
the previous meeting, with the horizontal issues identified.
62. Since the July meeting, new proposals had been submitted by Mexico (S/CSS/W/103), by
Bolivia, the Dominican Republic, Ecuador, El Salvador, Honduras, Nicaragua, Panama, Peru and
Venezuela (S/CSS/W/107), by the Mercosur countries and Bolivia (S/CSS/W/108), by Kenya
(S/CSS/W/109), by Australia (S/CSS/W/110 to 112), by Japan (S/CSS/W/42/Suppl.3), and by BrazilS/CSS/M/12
Page 13
(S/CSS/W/113).  In addition, the Secretariat had compiled further sets of questions and responses with
respect to Members' proposals (JOB(01)/96/Add.2 to Add.9).
63. The representative of Uruguay, speaking on behalf of the Mercosur countries and Bolivia,
introduced a joint submission on postal services , circulated in document S/CSS/W/108 dated 26
September 2001.  As indicated in the paper, the proposal had been introduced for negotiating purposesand did not prejudge the position of either the Mercosur countries or Bolivia.  Similarly, the Mercosur
countries and Bolivia reserved their right to modify the proposal in the course of the negotiations.
The paper introduced a proposal for a new classification for postal services (CPC 7511) and courier
services (CPC 7512) under sub-sectors 2.A and 2.B of "Communication Services" in the services
sectoral classification list in document MTN.GNS/W/120.
64. Historically, postal activities in all countries were organized in the form of direct or indirect
provision, by the State itself, of services to society under a generalized monopoly regime, whichconstituted an obstacle to the operation of private companies in the market.  At the present time, as a
result of economic liberalization and the deregulation of the sector that had occurred in various
countries, the official postal services and the courier enterprises competed on equal terms in the postal
market for services considered not exclusive to the public operators responsible for universal postal
service provision.
65. The existing W/120 classification of postal and courier services was inadequate, given the
lack of any difference in the way in which both postal service operators and courier firms provided
postal services.  In support of this argument, postal and courier service provision might be evaluated
in relation to a number of aspects.  First, the time taken to deliver the consignment to the addressee
was a critical factor requiring, on the part of the operator, efficient organization, discipline, the use ofappropriate means of transport, and so on.  Postal and courier service operators currently provided
express services which were intrinsically sensitive to the variable of time, although this did not affect
their status as a postal service.  Second, the technology available enabled both postal and courier
service providers to introduce updated processes of collection, classification, transport and delivery,
as well as to modernize their management of the information generated through postal traffic, thusmaking it possible for them to offer services appropriate to the requirements of specific segments of
society.  Third, both postal services and courier operators offered various facilities to users, such as
practices and procedures to prevent delays and achieve the speedy release of consignments, possibility
of accompanying the consignment from point of origin to final delivery to the addressee, with
availability of information on the "status" and location of the item.  Fourth, postal and courier services
provided services with added value, such as collection at the address indicated by the sender, delivery
against signature by the recipient, guaranteed delivery at a specific time and confirmation of deliveryto the addressee.
66. It was therefore clear that there was no difference in nature between postal services and
courier services, bearing in mind that the objective of both was "to deliver the consignment to a final,
certain and specific address".  Both partook of the same essential quality of "correspondence", which
distinguished the postal service from other services.
67. From the regulatory standpoint, postal activity had been undergoing radical changes
throughout the world, the aim being to obtain a new institutional model which reflected the current
state of development of the postal market.  Generally speaking, it could be stated that some strategies
were common to various countries, including in particular the separation of the regulatory and
operational functions,  universalization, competition, and the importance of technology.  It could thusbe noted that the legal barriers which impeded the free exercise of trade in services by courier firms
had been or were being removed, and this would guarantee greater market competition, with a greater
supply of products and services to the population.S/CSS/M/12
Page 14
68. As for relations between the World Trade Organization and the Universal Postal Union
(UPU), they were expected to transcend mere ra pprochement between two international organizations.
Both institutions based themselves on the need to establish global international fora for the discussion
of issues concerned with specific activities, which, by their nature, transcended the borders of the
various countries.  It was clear that both organizations had in common sectors requiring theestablishment of relations, an objective which had been given its clearest expression at the UPU
Universal Postal Congress held in Beijing in 1999, which approved resolution C9 to promote
cooperation between the UPU and WTO for improved treatment of postal issues.
69. Finally, it also needed to be borne in mind that, by not developing into increasingly
generalized areas of market freedom and competition, postal activity would lose its key "public
service" aspect.  Furthermore, given the clear danger that such liberalization would end by affecting
services in non-profitable areas, the same Beijing Congress gave thorough consideration to the idea of"Universal Postal Service", as a special duty of States and of the international community for the
purpose of ensuring physical and economically effective access for every individual to high quality
postal services.
70. From the analysis carried out, it was clear that the current classification of postal services and
courier services was based on premises that were no longer valid, such as that of the single postaloperator not subject to market competition.  It had been shown that there was no justification for the
existence of separate classifications for postal services and courier services.  The conceptual
definition which included traditional postal services and courier services was possible and necessary,
and had to be based on the concept of the inviolability of correspondence recognized in Article 12 of
the Universal Declaration of Humans Rights.  The conceptual similarity between these services didnot prevent each of them from being distinguished by their different specific modalities, namely
agreed delivery times, value added to the service, follow-up technologies, and so on.  Therefore, the
Mercosur countries and Bolivia proposed the integrat ion of courier services (CPC 7512) into postal
services (CPC 7511), as set out in subsectors 2.A and 2.B of "Communication Services" in the
services sectoral classification list in document MTN.GNS/W/120, under the single heading of "Postal
Services".
71. With regard to relations between UPU and WTO, it was important to give priority, in all
international postal fora, to the relationship between the two organizations.  Accordingly, it was
important to promote discussion of topics common to both organizations and to strengthen the
machinery for coordination of activities, leading inter alia  to the mutual recognition of observer status
at relevant meetings.
72. The representative of Brazil introduced his delegation's submission, circulated as document
S/CSS/W/113, on construction and related services.  The proposal did not only cover construction
services as defined in the W/120 services sectoral classification but also related professional services,
given the relation between the supply of "physical" construction services and the supply of related
professional services, such as architectural services, engineering, integrated engineering, urban
planning and landscape architectural services.  Construction firms often provided all of these servicesin an integrated manner, as they were used throughout the development of an investment project,
including the stage of pre-investment, for example feasibility studies, project execution, for example
architectural and structural design, and project implementation, involving mainly physical
construction per se .  The paper contained a brief analysis of existing commitments and of the
remaining barriers identified.  These mainly concerned mode 3, such as limits on foreign equityparticipation, limitations on the type of legal entity, restrictions on land ownership, economic needs
tests, exclusive rights for construction, management and maintenance, discriminatory bidding,
licensing and qualification requirements and procedures as well as technical standards.  With regard to
mode 4, which was an important mode of supply, the main barriers concerned non-recognition of
qualifications and residency and citizenship requirements.  In addition, as mentioned in paragraph 12,S/CSS/M/12
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the proposal emphasised the crucial role played by subsidies in restricting access to foreign markets
for developing countries suppliers.  Subsidies also affected the conditions for developing country
firms to compete on projects within their own market.  Direct government subsidy and other policies,
which might indirectly subsidize industries, included, inter alia , direct financial aid, subsidies to R&D
costs, subsidies to bid preparation costs, export cred its for feasibility studies, export credits in the
form of financing, insurance and guarantees, government guarantees for private bank loans, tax
exemptions and public risk sharing, including the guarantee of a percentage of contractor profits, and
subsidies related to tied aid.  Developing countries did not have the means to match these subsidies or
incentives and this needed to be taken up in th e negotiations, possibly in the framework of the
mandate of Article XV.  Therefore, in the negotiations his delegation would be seeking increased
commitments in construction and in the related sect ors, the elimination of the remaining restrictions
identified, the recognition of qualifications under Article VII and the addressing of barriers related todomestic regulation within the development of disciplines under Article VI:4.
(i) Horizontal Issues
73. The Chairman recalled that, at the July meeting, it had been agreed that the discussion of
horizontal issues would be organized on the basis of the following six issues identified:  Article VII;
Article IV;  small and medium-sized service suppliers;  MFN exemptions;  transparency and otheraspects of domestic regulation;   and classification.  He opened discussion on these issues in that
order.
Article VII
74. The representative of Hong Kong, China said that his delegation was interested in this issue,
as it complemented work underway in the Workin g Party on Domestic Regulation and looked forward
to discussing it.  The representative of India also expressed an interest in this issue, which was of key
relevance to developing countries.
Article IV
75. The representative of India expressed his delegation's interest in discussing issues related to
Article IV of the GATS, which was very critical for developing countries.
Small and medium-sized service suppliers
76. Commenting on the submission by Canada on small and medium-sized enterprises (SMEs),
the representative of Turkey said that, although there were restrictions in Turkey, such as on
incorporation and capital requirements for non-resident suppliers, her delegation supported theinitiative taken in addressing the needs of SMEs while accessing foreign markets, stressing that the
work in this regard should not be limited to SMEs in professional services, but also cover the work in
other sectors of interest to developing countries, such as transport.
77. The representative of the United States said that the United States defined small firms as those
with less than 100 employees, and medium-sized ones as those employing between 100 and 499
employees.  In the United States, small businesses had provided nearly all of the twenty million net
new jobs added to the economy since 1992 and were expected to provide sixty percent of new jobs
through 2005.  Of the new jobs created, close to ninety percent were expected to be in retail trade orservices.  In the United States, small businesses were concentrated in information and high-
technology services, which were some of the fastest-growing business sectors.  Over the previous
several years, some of the fastest-growing small-business-dominated industries included computer
programming, software-development, management consulting and credit reporting.  Information
technology had created significant opportunities for SMEs in the United States, by allowing theS/CSS/M/12
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advantages of small scale to be combined with the economies of scale that were achievable through
the Internet and other tools of electronic commerce.  Even as the high-tech sector contracted, SMEs
were expected to benefit as more companies relied on outsourcing and consultants for their key
business services.  In the United States, SMEs also accounted for an important component of
international trade;  since 1990, the number of United States small businesses that exported had morethan tripled, and the value of small-business exports had increased three-hundred percent.  Overall,
SMEs accounted for more than 95% of the total number of United States exporters.  In the United
States, more than 96% of all firms that exported were SMEs, and more than half had less than 10
employees.  Non-manufacturing companies accounting for more than 60% of all exports by SMEs.
Based on domestic consultations, SMEs had identified reducing the cost of doing business overseas as
a particularly important concern relevant to the GATS negotiations, because compared to larger
companies small businesses had more limited access to investment capital and weredisproportionately affected by finance-related trade barriers.  Electronic commerce held great promise
for many internationally active SMEs;  economical Internet-based commerce was particularly
important to providers of information and technology services, as they were especially conducive to
that media.
78. The representative of Norway concurred with Canada that facilitating market access for small
and medium-sized suppliers was important and that careful attention needed to be given to the issue.
Liberalization should facilitate access for all suppliers, but no system should be created in the GATS
that discriminated between enterprises of different sizes.  This would only hinder competition and
result in an inefficient use of resources.  Market access for all businesses needed to be promoted
through the system and the process of liberalization in the WTO should not create more distortions.Nevertheless, he agreed with Canada that discriminatory, burdensome and non-transparent regulations
were particularly problematic for SMEs' ability to trade.  In this regard, he noted the importance of
developing disciplines on domestic regulation, as Norway had indicated in document S/CSS/W/59;
cutting red tape for business and increasing transparency were the key issues.  Mutual recognition
agreements could also contribute to reducing costs for SMEs and merited further exploration.  Newtechnologies were of significant importance to SMEs in all sectors, and particularly in business
services, given the financial constraints that often prevented them from establishing a commercial
presence abroad.  Mode 2 was also of great significance.  As concerned mode 3, he stressed the
importance of allowing sufficient flexibility for enterprises to choose their preferred form of
establishment, as the possibility of setting up joint-ventures was of consequence to SMEs.
79. The representative of Australia concurred with the importance of SMEs and the need to take
their role in service trade into account, but cautioned against this leading to fragmentation or
discrimination between different-sized suppliers.
80. The representative of Canada welcomed other delegations' interest and suggestions.  As had
been noted at the previous meeting, the definitions of small and medium-sized suppliers differed from
Member to Member and his delegation had never intended to suggest a "one size fits all" solution.
Canada's proposal just drew attention to the fact that SMEs faced particular concerns.  The figurespresented by the United States demonstrated the growing importance of SMEs.  The reason why his
delegation had proposed focusing attention on the needs of small service providers was that, while
many barriers affected all services suppliers, the magnitude of the effect was often greater for SMEs,
and hence the need to consider certain issues through an "SME prism", in order to address more
adequately the need of those suppliers that faced the biggest challenges in accessing foreign markets.He stressed that Canada's proposal was not suggesting that different rules be agreed specifically for
SMEs;  their needs could be addressed in a way complementary to the needs of all suppliers.  The
main elements highlighted in his delegation's proposal were the key role of regulatory transparency,
the importance of facilitating mutual recognition and of addressing mode-4 related barriers.  He
concurred with Turkey that, while the focus with respect to mode 4 was often on professionalservices, the issue was of relevance horizontally, as many other services sectors, such as the high-techS/CSS/M/12
Page 17
sector, were increasingly relying on this mode of supply.  He indicated that, in examining the
negotiating proposals, his delegation would look at the possibility of improving access for SMEs.
81. The representative of Venezuela noted the importance of the horizontal issues under
discussion.  She had found the information provided by different Members on SMEs in their domestic
economies useful, as it testified to the different definition and criteria used for SMEs.  Still, thecontext of the proposal by Canada and of the Council's discussion should be broader than just
definitions, as there was no need to arrive at a common definition of SMEs.  She noted that specific
commitments allowed for the strengthening of what each Member considered its SMEs, both at the
domestic and the international level.  She recognized that incentives for research and development
were necessary for these enterprises to consolidate their technological position and achieve a better
stance in the market.  It was important that SMEs not remain purely domestic actors but be converted
into international ones;  she felt that the negotiati ons could help towards this result, provided that they
focused on the national policy objectives of individual Members.
82. The representative of Mexico stressed the importance of transparency for small and medium-
sized suppliers, as well as of commitments on the movement of natural persons, and noted how this
would be valuable also for bigger suppliers.  Aside from transparency, he found it difficult to identify
measures which would specifically favour small and medium-sized suppliers when they competedinternationally, apart from any incentives which governments with financial resources, which was not
the case of Mexico, could grant them.  He was interested in discussing any such measures, even if no
specific ones had been identified until then.
83. The representative of India expressed his delegation's interest in the issue of small and
medium-sized suppliers, who played an important role in the Indian economy.
MFN Exemptions
84. The representative of Mexico presented his delegation's new proposal, contained in document
S/CSS/W/103.  The paper was meant to illustrate Mexico's position in relation to MFN exemptions in
the negotiations mandated by Article XIX of the GATS.  It started by recalling that the Most-
Favoured-Nation principle was one of the fundamental pillars of the multilateral trading system.  TheAnnex on Article II Exemptions allowed for a temporary deviation from the MFN principle, but
recognized that these exemptions constituted an irregular situation and that all Members would have
to eliminate them eventually.  In addition, paragraph 6 of the Annex provided for the possibility of
speeding up the elimination of these inconsistent measures through negotiation, by stating that "in any
event they shall be subject to negotiation in subsequent trade liberalizing rounds".  Mexico considered
that, in the course of the current negotiations, significant progress had to be achieved on the
elimination and reduction of MFN exemptions.  To that end, a commitment by all Members wasrequired, in order to agree on a programme to eliminate MFN exemptions.  A balanced negotiation
needed to recognize the capacity and level of development of the participants;  in this regard, he noted
that the largest share of exemptions had been listed by developed countries.  Mexico therefore
proposed that the agenda for the Special Session include the subject of MFN exemptions under the
heading "Termination of Exemptions: Follow-up ";  that Members agree, during the sectoral
discussions, on a work programme under which they would eliminate all their exemptions, with the
aim of completing their elimination during 2004, and not 2002 as indicated in the document;  at the
same time, that they agree on procedures for the no tification of early elimination of exemptions, and
thereafter carry out the notification provided for in paragraph 7 of the Annex;  and that due respect be
given to the flexibility provided for in the ne gotiating guidelines and procedures for developing
country Members.
85. The representative of Switzerland welcomed the quote from paragraph 6 of the Annex on
Article II Exemptions in paragraph 4 of the subm ission by Mexico, but noted that, differently fromS/CSS/M/12
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what was stated in paragraph 11 of that document,  the word "total" did not appear in the Annex.  He
said that the procedures proposed in that paragraph should not alter the legal substance of Members'
obligations.  He concurred with the importance of the services sector, as presented in part II of the
submission.  With regard to the proposals contained in part IV, in a preliminary manner he could
support the first one, noting that the proposed title appeared sufficiently broad, but wondering whetherthe reference to just "termination" would prevent addressing also the reduction of exemptions, which
would also be welcome.  As for the second suggestion, he said that, amongst other considerations, it
was not appropriate to fix a date for the elimination of MFN exemptions in the absence of a timeframe
for the negotiations as a whole, as the latter was a necessary precondition.  He could support the
proposal for early elimination, noting that procedures  were always welcome.  Finally, with respect to
paragraph 12, while agreeing that some Members had listed more exemptions than others, he stressed
that this could not be the criterion to measure their level of liberalization, as those Members withmore exemptions were also the ones with more commitments.
86. The representative of Chile shared the views contained in the proposal by Mexico.  With
regard to the first proposal in paragraph 13, she suggested that MFN exemptions be included on the
agenda of the Special Session as a permanent item.  As for the second proposal, she said that, in spite
of the fact that MFN exemptions were part of the negotiations, for which no deadline had been fixed,2004 was to be taken into account as the target date for their elimination.  She would welcome ideas
on the work programme suggested in that same paragraph.
87. The representative of Singapore echoed the comments made by Switzerland.  He said that the
submission by Mexico presented a number of interesting ideas, but referred to the comments his
delegation had made on the interpretation of paragraph 6 of the Annex on MFN Exemptions at theregular Council meeting held on 4 October 2001.  His delegation also had some reservations on the
proposed work programme for elimination of exemptions by 2004.  Singapore did not have a long list
of MFN exemptions, but the ones that existed had been taken for important reasons.  While
acknowledging paragraph 6 of the Annex on Article II Exemptions, he said that the proposal by
Mexico of setting a date for the elimination of all MFN exemptions amounted to a pre-negotiation,and noted the reference to "in principle" contai ned in the Annex.  As a preliminary comment, he
expressed reservations on the Mexican suggestion;  while his delegation was prepared to negotiate on
MFN exemptions, it was not ready to put an end-date to such negotiations.
88. While noting the importance of the MFN principle, the representative of Argentina also
underlined the importance of that principle coexisting with commercial reality and of taking into
account the extent to which MFN exemptions affected trade flows.  There existed around 380
exemptions, and many had been listed because of an erroneous understanding of the scope andapplication of the GATS, or for precautionary reasons, such as exemptions relating to economic
integration agreements.  Many exemptions preserved regional agreements, bilateral or plurilateral
ones or reciprocity conditions.  About two-thirds of  exemptions had been listed for transport services
and communication services:  in the former sector, they had been taken mainly for maritime transport,
mostly related to the UNCTAD Conferences that in practice were rarely applied, road transport and
inland waterways transport;  in the latter sector, essentially for audiovisual services.  Therefore, most
exemptions pertained to audio-visual and maritime transport services.  As for those exemptions taken
in financial services, he observed that their economic impact was limited, as they did not significantly
affect trade flows.  He stressed that these elements needed to be taken into account when looking at
the issue, as the systemic question should be considered along the actual effect of MFN exemptions.He agreed that Members should try to reduce their exemptions, but noted that some had been listed
because of political reasons and would be difficult to eliminate totally.  Turning to the proposal by
Mexico, he said that the paper contained some elements which were easier to share than others.  For
example, while he supported the proposal that MFN ex emptions be inserted as a standing item in the
agenda of the Special Session and suggested that an analysis of their actual commercial impact beS/CSS/M/12
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included in this item, he could not agree to the suggestion that they all be eliminated.  He noted that
his comments were of a preliminary nature.
89. The representative of Hong Kong, China concurred with Mexico on the fundamental
importance of the MFN principle, and said that the submission was an important contribution to
achieving the objective of eliminating all MFN exemp tions as early as possible.  He also supported
the general direction of the submission by Mexico, which sought to move forward on one of the
avenues for elimination of exemptions provided under the GATS, i.e. negotiations.  As for the
comments by Argentina, he noted that scope exis ted for eliminating those exemptions for which the
original rationale had ceased to exist, and added that elimination of exemptions through the review
process was also important as a complement to their elimination through negotiation.
90. The representative of the Republic of Korea welcomed the submission by Mexico and fully
supported the statement, in paragraph 12, that MFN exemptions be eliminated as soon as possible.
His delegation appreciated the initiative by Mexico and its willingness to contribute to a multilateral
exercise for the elimination of MFN exemptions, and invited other Members to join this initiative.  He
also supported the suggestion in paragraph 13 that the issue be inscribed as a permanent item on the
agenda of the Special Session.  He welcomed the work that the OECD had carried out on MFN
exemptions and asked that the Secretariat make available the paper that they had produced on theissue.  The Chairman said that the WTO Secretar iat would get in touch with OECD Secretariat to
make this paper available to Members.
91. The representative of Australia said that their position was as stated in paragraph 6 of the
Annex on Article II Exemptions, namely that MFN exemptions were subject to negotiation "in
subsequent trade liberalizing rounds", in the plural, and that the statement by Argentina set theframework for the discussion.
92. The representative of Japan said that the submission by Mexico, which focused on how to
move forward on MFN exemptions in the negotiations, was an important contribution and indicated
that his delegation supported its main thrust.  He agreed that MFN exemptions were an extraordinary
instrument of a temporary nature that had to be eliminated as soon as possible.  As for the suggestionsin paragraph 13 of the submission by Mexico, he supported the first one, was in favour of setting up a
work programme for the elimination of exemptions by 2004 or by the conclusion of the negotiations,
whichever was earlier, and said that procedures fo r notification of early elimination of the exemptions
needed to be set up in the context of the pro cedures being discussed in the regular Council.
93. The representative of New Zealand expressed support for the main thrust of the proposal by
Mexico.
94. The representative of the European Communities said that part II of the submission by
Mexico, in document S/CSS/W/103 was very relevant to the discussion on the assessment of trade in
services.
95. By way of preliminary comments, the representative of India said that three conclusions could
be drawn:  first, exemptions terminated on the date  indicated in the lists;  second, they should last in
principle 10 years, and the legal possibility existed of them lasting longer;  third, as stated in the
Annex, they were subject to negotiation "in subsequent trade liberalizing rounds", in the plural.  The
handling of MFN exemptions depended on the negotiations in general.  He called for due attention to
be given to developing countries in this respect and cautioned against prejudging the outcome of the
negotiations.  He reserved his position on the Mexican proposal for a work programme.
96. The representative of the United States echoed the comment by India on the provisions that
existed in the Annex on Article II Exemptions and said that they were reflected in a slightly differentS/CSS/M/12
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way in the submission by Mexico.  He welcomed the submission, and indicated that the United States
also had objectives on other Members' exemptions.  He said that the Mexican proposal should be dealt
with as other negotiating proposals and maintained under the same agenda item of the Special
Session.  He then sought a clarification from the delegation of Mexico.  In the United States view, it
was clear that MFN exemptions would be dealt with through negotiations;  he wondered how Mexicosaw that aspect of treating MFN exemptions, on the one hand, relate on the other hand to the proposed
deadline for terminating MFN exemptions, and wh ether the latter would jump ahead of or mesh
together with negotiations.
97. Responding to some of the comments made, the representative of Mexico noted that good
support existed for a work programme to discuss MFN exemptions, even if his delegation's proposal
went beyond just a work programme.  He said that some exemptions should not exist, while others
were political in nature;  he had no difficulties in recognizing this and establishing a deadline bywhich the latter type of exemptions would be at least reviewed.  With regard to Switzerland's
comment on the word "total" in paragraph 11, he concurred that it did not appear in the Annex on
Article II Exemptions and explained that that was the reason why that paragraph, which was not
meant as a quote from the Annex, appeared in the part of the paper dealing with "Objectives".  As for
the suggested date for elimination, he said that this was 2004, similarly to what had been suggested byJapan in their proposal;  he added that the paper by Japan contained a work programme that could also
be made use of.  He noted that 2004 coincided with the end of the 10-year duration of MFN
exemptions.  He had found Argentina's comments useful and felt that they represented the proper
context in which his delegation's proposal needed to be looked at.  With respect to the comment on
flexibility, he recalled that this concept appeared in the negotiating guidelines and procedures, but wasalso a matter for discussion in the work programme.  As for the question posed by the United States,
he said that the exercise for early termination of exemptions would be useful to eliminate any
unnecessary exemptions in the terms of the Anne x.  Any remaining exemptions were those up for
negotiations through the work programme, with the ultimate purpose of their total elimination.  This
was how the two proposals were reconciled.  He indicated that Mexico had listed some MFNexemptions and that, provided a joint elimination exercise was under way, would be willing to remove
them.
98. The Chairman said that the proposal by Mexico had raised significant interest and questions.
He noted that MFN exemptions were part of the horizontal issues under discussion and would
continue to be examined by the Special Session.
Transparency and other Aspects of Domestic Regulation
99. The representative of Canada stressed the importance of transparency to Canadian businesses
and services providers, who had indicated lack of transparency as a significant obstacle to trade.  The
fact that most barriers to services trade arose in the context of domestic regulatory action suggested
that the way in which Members regulated access to regulatory information had a bearing on efforts to
ensure open markets.  The GATS contained several provisions addressing transparency, such as the
Preamble, Articles III and VI:4, the Accountancy Disciplines, enquiry points.  Some of theseprovisions addressed transparency with respect to how WTO Members related to each other and
others with respect to how Members related to service providers operating, or hoping to operate, in
the relevant markets.  Both approaches of transparency had to be examined in the context of best
practices, to determine whether enhancement or additional provisions needed to be pursued.
Members were well-placed to make progress:  several proposals had been tabled in the Working Partyon Domestic Regulation on transparency and Members could also draw on the Accountancy
Disciplines and on the large body of work in organisations such as the OECD and APEC.  An
additional issue was the implementation of existing provisions.  She then responded to some of the
questions raised on her delegation's proposal.  As for Japan's question on whether the Canadian
proposals on regulatory transparency and the movement of natural persons included some elementsS/CSS/M/12
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that had already been addressed in Canada's sectoral proposals, she replied in the affirmative, as
transparency was of key importance in all sectors as well as in the horizontal context.  With regard to
the question by the European Communities on how Canada intended to tackle the objective of
improving the level of transparency for distribution services, she replied that this was an objective for
this sector as well as for other sectors, and said that, at a minimum, regulation affecting the sectorshould be publicly available.
100. Commenting on the United States submission on transparency in domestic regulation, the
representative of New Zealand sought an initial clarification, related to some of the exchanges on the
United States proposal on financial services, on whether the United States say their proposal fitting inwith the on-going work in the Working Party on Domestic Regulation.
101. The representative of Cuba said that issues such as transparency, which were being discussed
in the subsidiary bodies with the relevant mandate, should not be addressed in parallel in the Special
Session.  She expressed serious concerns, as any possible disciplines on transparency should imply no
legal or institutional changes;  Members' national sovereignty was recognized in paragraph 4 of the
Preamble to the GATS and in paragraph 2(b) of Article VI.  Still, the suggestions for a prior
notification process, changes in the application process for licences, as well as procedural review
would imply a load that the administrations of developing countries would not be able to bear, giventheir limited resources.  In her delegation's view, the GATS contained enough provisions on
transparency.  A different element of transparency was contained in Article IV:2, where developed
countries were required to establish contact points to facilitate the access of developing countries'
suppliers to information related to their respective markets, concerning commercial and technical
aspects of the supply of services, registration, recognition and obtaining professional qualifications,and the availability of services technology.  This issue had not been evaluated and had resulted in an
indication of good intentions, without concrete result s;  she suggested that the issue could usefully be
examined in the negotiations.  The information compiled by the Secretariat on notifications only
reported general references to the enquiry points communicated by all Members.  Even if it was up to
each Member to examine how this aspect had accomplished, she stressed that developing countriesdid not posses sufficient capacity to take advantage of this general and imprecise information, for
which they required further technical assistance that might be provided by the Secretariat.
102. The representative of Switzerland echoed the statement by New Zealand and stressed the
importance of taking into account the work underway in the Working Party on Domestic Regulation
in to order to move ahead coherently.
103. The representative of Uruguay said that transparency was a horizontal issue for all services
sectors.  He underscored the need to keep in mind the work in the Working Party on Domestic
Regulation, where Members had agreed to work horizontally.  His delegation was in favour of
transparency and concurred with its importance.  As for prior comments and notifications, he said that
the United States submission in document S/CS S/W/102 contained useful information on those
Members applying such practices, but it also made clear that other legal systems did not provide for
such practices.
104. The representative of India said that his delegation would revert to the United States
submission.  He noted that transparency was discussed in a horizontal manner in the Working Party
on Domestic Regulation.  Transparency was a crucial concept, but greater transparency should not
imply an additional burden for developing countries.  Whatever Members decided in this respect, it
needed to take into account the fact that differ ent legal systems existed and should not require any
changes to these systems.
105. The representative of Norway said that, as the level of market-access commitments rose,
domestic regulation would become an important aspect for further liberalization of trade in services.S/CSS/M/12
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Norway shared the view that transparent domestic regulation could create more efficient markets and
an active environment for investment and economic growth, by providing firm s with the information
necessary to evaluate their ability to access and operate in foreign markets.  In the United States
submission, reference was made to procedures of prior notification domestically in the decision-
making process.  Norway, which had a good experi ence with such notification procedures, could have
been added to the examples that were mentioned in the United States paper.  He agreed with the views
concerning the application process.  The process of applying for a new licence or authorisation needed
to be simple and clear, with the same requirements for both domestic and foreign applicants.  A
simplified application process could help reduce the start-up costs for new businesses, aiding both
domestic and foreign small and medium-sized enterprises.  In this connection, he indicated that
Norway was implementing a reform programme for the public sector, whose main goal was to make
public administration more suited to meet society's needs, to have less administration and betterservice delivery and greater freedom for local decision-making.  This reform programme seemed to be
meeting some of the same concerns as highlighted in the United States proposal.
106. By way of preliminary comments, the representa tive of Mexico said that transparency and
domestic regulation were increasingly important.  The GATS already contained sufficient provisions
in this respect, and further work was on-going in the Working Party on Domestic Regulation.  Hestressed the need to keep coherence in both proc esses, not to duplicate efforts and not to develop
additional provisions where existing ones were sufficient.  He noted that, while transparency could be
more important in some sectors than in others , it would benefit all Members, and particularly
developing countries.
107. The representative of the Republic of Korea  said that transparency could contribute to
economic growth by providing firms with inform ation on how to access and operate in foreign
markets.  His delegation attached great importance to increasing transparency in domestic regulation
and, in principle, shared the thrust of the submissions by the United States and Canada.  He indicated
that a prior comment procedure was in place in Korea and had contributed to increasing the
predictability and transparency of domestic regulation.  At the same time, he understood the concernsof developing countries with respect to additional administrative burden;  he said that the Internet
could help to reduce the costs of transparency and encouraged exploration of ways of addressing this
concern, such as a best endeavour provision or a peace clause, or transitional period, for developing
countries.
108. The representative of Hong Kong, China noted the importance of transparency, but also
indicated that Members might be addressing different "transparencies" and should focus on the
elements, amongst those raised in the United States submission, that were part and parcel oftransparency.  In this regard, he asked the United States delegation whether their suggestions for prior
notification and comment and the involvement in the application process were related to
accountability, rather than to transparency, and stressed that domestic regulation issues needed to take
into account the work of the Working Party on Domestic Regulation, which was the right forum to
address this issue.
109. The representative of Brazil restated what he had mentioned in the Committee on Trade in
Financial Services, namely that his delegation was still assessing whether there was a need to go
beyond what was already contained in the GATS with respect to transparency.  Commenting on the
United States submission in document S/CSS/W/102, he noted that the reference to many countries
administering some variation of prior comment process was taken from an OECD study that hadcovered only eight countries and that had found that practices varied widely amongst these countries,
and included significant exceptions.  He cautioned against generalising comments on Members'
practices and echoed Uruguay's comments about differences in Members' regulatory frameworks.  As
for the first sentence of paragraph 4 of the United States submission, he stressed that the right to
regulate was not being challenged and that all Members agreed on this point.  He found it comfortingS/CSS/M/12
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to see the reference to "all levels of government" in the indication that transparency would also apply
to the sub-federal level.  With respect to paragraph 8, he noted that some issues went beyond
transparency and were instead related to how regulations should be made;  for example, the
suggestions that any required examination be scheduled at reasonable intervals, or that fees charged in
connection with a license or authorization be fair and reasonable, and not designed to limitapplications, or that regulators provide sufficient explanation justifying denial of an application, or
that applicants be given the opportunity to resubmit or amend their applications, were more related to
necessity than to transparency.
110. The representative of the United States echoed the comment by Norway that, as commitments
increased, domestic regulation became more important, for all modes of supply and especially in
regulated sectors.  Transparency was important to give full value to liberalization commitments.  As
for the question raised by New Zealand, he said that Switzerland had mentioned the importance oftaking into account discussions in the Working Party on Domestic Regulation and of maintaining
coherence, but he noted that no bounds had been set in the Special Session with regard the submission
of negotiating proposals and that other questions were being raised also in other proposals with
respect to work on-going in the subsidiary bodies.  Turning to the clarification sought by Canada, he
said that transparency could be looked at from different prospectives:  current GATS provisions andnew ones;  transparency between Members and within Members vis-à-vis service suppliers and other
interested parties;  as well as work taking place outside the WTO context.  Mexico and Brazil had
pointed out the importance of transparency applying to all levels of government, at federal and sub-
federal levels, and he concurred with Mexico that, as stated in Article I, the GATS applied to all levels
of government.  As for Hong Kong, China's comment on prior notification being an accountabilityrather than transparency issue, he said that no clear line existed between the two and that the United
States was not proposing discussing accountability of governments, but also indicated that, in a
general manner, the United States considered transparency and how governments conducted
themselves to be an important part of accountability.  He acknowledged that differences existed
between legal regimes and that this issue had to be taken into account in the debate, but noted how theWTO had succeeded in applying GATS unitary provisions to different legal regimes, as well as
domestic transparency provisions in other WTO areas that went beyond those in the GATS.  He was
therefore hopeful for a common approach to transparency that would go beyond the current GATS
one and that would also take into account differences in legal regimes.  He expressed his delegation's
interest in continuing the debate, as a general recognition existed that regulations in services affected
market access and that transparency was important to ensure more open markets and the full
effectiveness of GATS commitments.
Classification
111. The representative of India reiterated his delegation's position that it was for the Committee
on Specific Commitments to look into classification issues, as it was there that the technical expertise
lay.  The representative of Pakistan concurred.
112. The representative of Venezuela noted that classification issues were referred to in nearly all
the negotiating proposals.  While classification might be more crucial in some sectors than in others, it
was the commercial reality that it had an impact on the commitments and how trade worked.  For the
sake of transparency and homogeneity of criteria, she called for a discussion on the opportunity of
adopting a uniform, agreed classification, to allow Members to set their objectives for the
negotiations as well as their national policies and regulations.  A clear classification would promoteprogressive liberalization, as it would help Members decide how far to liberalize and what conditions
to attach to their commitments and how to make th eir commitments effective.  The proposal by the
Andean Community in document S/CSS/W/89 was increa singly relevant in light of the discussion in
the Council.  It called for the possible elaboration of criteria to arrive at an agreement on a new or
revised classification.  In light of the proposals on the table, Members should analyse if commonS/CSS/M/12
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principles existed and if it was necessary to arrive at a common classification.  Paragraph 5 of
S/CSS/W/89 proposed three basic criteria, namely uniformity, specificity and disaggregation, which
her delegation was interested in discussing with Members.
113. The representative of Canada reminded Members of his delegation's comments on the
importance of classification and on the importance that any changes to the W/120 services sectoral
classification do in no way affect the legal certainty of commitments or create confusion between old
and new schedules.
114. The representative of Brazil indicated that his delegation's statement at the previous meeting
remained valid.
(ii) Education Services
115. The representative of Australia said that the Australian government was a strong believer in
the value of trade in education services and an advoca te of policies that encouraged such trade, which
recognized also the role of the public sector in the provision of education services and the rights of
governments to regulate in the development of education policy.  Their view was that trade in
education services generated significant benefits for both international and domestic students.  The
challenge for Members was to acknowledge those benefits while committing to a regulatory
environment that provided individuals with free and open access to a wide range of education andtraining options of their choice, regardless of where in the world the actual delivery might be.  Some
of the benefits of trade liberalization included facilitating access to education and training courses that
may not otherwise be available in the country of origin; providing a competitive stimulus to domestic
institutions with flow-on benefits to all student s; fostering knowledge and appreciation of other
cultures, societies and languages; facilitating the exchange of people, ideas and experiences, amongothers.  He said that a balance had to be achieved between trade liberalization and the right of
Member governments to finance, deliver and regu late the education sector within their domain.
Australia believed that Member governments should retain their sovereign rights to determine their
own domestic funding, regulatory policy and measures.  That balance was achievable and thus
Australia was one of the forty countries that had commitments for education services under theGATS; few of those countries had entered as many commitments on education as had Australia.
116. He added that research undertaken by the Australian Government had identified a number of
impediments to trade in education services across all four modes of supply.  Some of those
impediments were of particular interest to Australi a, such as the lack of transparency of regulatory
policy, funding frameworks, and the actual regulatory processes.  It was important that the regulatory
framework was transparent but also the decision-making processes needed to be transparent, public
accountable and open to discussion by and among those affected by them.  Additionally, asgovernments responded to the growing use of the internet for delivering education services, Members
needed to exercise caution in terms of the erection of new barriers for that mode of supply, which
could prevent effective cross-border supply of education services.  Australia enjoyed the benefits of a
relatively open education and training regime in terms of trade, which was reflected in a significant
number of commitments under the GATS in respect of secondary education, higher education andother education services.  All Members should consider entering commitments on education services
similar to those already entered by Australia.  That particularly applied to those Members who
previously had failed to take on any commitments for education services.
117. The representative of Venezuela said that in view of the importance of services trade and
bearing much in mind the context of gradual liber alization, Article XIX of the GATS, her delegation
was favourable to a debate on education services as the world was moving towards a knowledge
society.  Venezuela considered education to be a human right and a fundamental social duty and thus
it was regarded as a public service.  Those concepts were contained in the Venezuelan ConstitutionS/CSS/M/12
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and the Organic Law on Education in force.  In her country, private education was part of the national
education system and was governed by the National Constitution, as published in the Official Gazette
dated the 24 March 2000, Chapter 6 on cultural and educational rights, Article 106.  Such Article
provided that any natural or legal person, provided that he had demonstrated his capacity and
permanently met the ethical, academic, scientific, economic, and infrastructural requirements, as wellas others established by law, may found and run private education institutions under the strict
inspection and vigilance of the State, provided that the State agreed.  The requirements referred to in
Article 106 were preconditions that ensured or guaranteed a basic level of quality and preserved the
overall sovereignty, which governments must be able to maintain in that field, inline with the ideas
contained in Article VI:4 of the GATS.  Regarding the supply of education services, she said that
Venezuela needed such services but they had to be previously accredited by competent authorities in
her country.  In that regard there had been a couple of negative experiences concerning therecognition of titles issued by certain foreign institutions, whose accreditation did not fulfilled the
academic requirements demanded by her country at the postgraduate level.  Those experiences
suggested the need to study the harmonization of the various academic accreditation systems at the
postgraduate level of Member countries to facilitate trade.  Efforts in that direction had already been
made at the regional level.  Members should not loose sight that in the negotiations countries did notoperate at the same levels and developing countries would tend to be purchaser of services offered by
developed countries.
118. Regarding the proposal by United States, paragraph 10 stated that "In addition, some
obstacles, although not limitations on market access on national treatment per se,  may result from
regulatory provisions or other measures which make it difficult for foreign suppliers to market theirservices", and she asked the United States delegation to clarify what those obstacles refered to were.
Additionally, she asked for clarification of what was meant by "Inappropriate restrictions on
electronic transmission of course materials" referred to in the list of obstacles contained in the same
paragraph.  Regarding the proposal by New Zealand, paragraph 5 stated that certain education
services subsectors may be less subject to the sensi tivities relating to the divide between public policy
and commercial activity than others, and she asked what was meant by that and what those subsectors
were.  In paragraph 8, New Zealand suggested the possibility of adding to the current definition of
CPC 92400 the term "community education", and she wondered what was meant by that term and
requested clarification of its scope.  Similarly, she requested clarification of the term "education
agency services" contained in paragraph 9, as Venezuela's preliminary view was that the category
"Other commercial services" would appear more adequate.  Her delegation shared concerns about the
classification of the sector, in particular the scope of the category "e", i.e. Other education services, ofthe Services Sectoral Classification List, document W/ 120, as stated in paragraph 4 of the proposal by
the United States and in paragraph 6 of the proposal by New Zealand.  It was therefore necessary to
clarify the scope of each particular type of education.  In Venezuela, for instance, "Adult education"
was designed for the adult population who had had no access to the regular education system and
included all levels of education.  As regarded training, that was understood to be short courses in artsand skills taking place outside the formal education system.  As to the proposal by Australia, given
that such document had been distributed only in English her comments were of a preliminary nature.
Venezuela shared the ideas contained in paragraph 2 of the said document concerning the recognition
of the permanent role of the State in the financing and regulation of education and the importance of
education.  Similarly, she supported the principles which should govern the negotiations, as containedin paragraph 8, subparagraphs 8(a) and (b) of the proposal.
119. The representative of Cuba said that it was the duty of the government to guarantee real
access of all sectors of the population to teaching and that it should not be used for commercial
purposes because that would run the risk that part of the population without financial means would be
deprived of that right.  According to the Report on World Development 2000-2001 of the WorldBank, almost half the people of the world lived on $2 or less a day.  That situation was more acute in
developing countries and thus access to the knowledge economy was limited in most of those nations.S/CSS/M/12
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A true liberalization proposal, which would be to the benefit of the developing countries, would be for
the developed nations to provide the necessary resources to eliminate illiteracy in the poor countries,
which is one of the causes preventing the necessary social and economic development.  In many
cases, the privatization of education services had led to the sacking of teachers and reduced access of
the population to education.  Her delegation supported what was said in the Australian proposalregarding the right of each country to set its own educational policy objectives and keep public funds
for education, as well as statements on the sovereignty of states.
120. The representative of New Zealand found the prop osal by Australia to be much along similar
lines to the one presented by her delegation.  That was so particularly in respect of the points made
about the benefits flowing from trade in education se rvices and the idea that resumed negotiations on
education services did not prevent Members from establishing and meeting their own education policy
objectives.  Regarding the first question posed to New Zealand by the EC, she said that the first partof that question seemed to draw an explicit linka ge that was not made in the proposal between the
reduction of trade barriers and increased private sector participation in Members’ education markets.
The issue of increasing involvement of private services operators which might be charged with
carrying out national policy objectives, with a foreign or national origin, seemed to be an issue
relating to policy approaches to education, rather than to trade, and not the actual subject of theirproposal.  That issue had come up on a regular basis in dealing with New Zealand’s domestic
constituencies, particularly those critical of the GATS and its supposed reach into public service
provision; however, New Zealand was not alone in facing such domestic scrutiny.  If what the
European Communities meant to ask was whether New Zealand's proposal advocated the reduction of
the role of national education authorities in the development and implementation of domesticeducation policy objectives, in favour of an increased role for private sector providers in such areas of
public policy, through the reduction of barriers to trade in education services, the answer was no.
Their proposal did not seek to advise Members on the direction of their national education policy nor
the delivery by national authority of core education services.  New Zealand would not consider
limiting its own ability to regulate or provide education services and thus would be unlikely torecommend such a course of action to other Members.
121. The first question of the European Communities seemed to draw a simplistic linkage between
the reduction of barriers to trade in education services and a loss of sovereignty of state education
authorities to direct and implement national education policy objectives and continue as principal
providers of education.  As noted in paragraph 3 of its proposal, New Zealand did not consider that
reducing barriers to trade in education services had to mean that Members would end up with fewer
options for regulating and delivering education services.  Instead, increased trade resulting fromreduced barriers might support national policy objectives, especially in countries that had limited
infrastructure or resources for expanding certain aspects of their own education sectors.  Some
countries encouraged their students, including through subsidization and other support, to study
abroad in order to gain the skills and experien ces needed in their own home country.  That was an
example of the ways in which trade in education services could support Members’ national educationpolicy objectives.  As with trade in any other service sector, the right to regulate remained paramount.
The degree to which services trade might be permitted to support Members’ national policy objectives
and the standards which must be met by private education providers, when participating in foreign or
national education markets, remained in the hands of national regulatory agencies and were ensured
by the degree of market access and national treatment individual Members were prepared to commit.If the principle of the right to regulate was to have  any meaning in the GATS context, then there could
be no question of constraints on the ability to set and meet national policy objectives in respect of
education or of any other sector.  She said that New Zealand was interested in exploring the rationale
behind the question by the European Communities, specifically whether it was a theoretical issue or
whether there were practical examples that the European Communities was drawing on and couldprovide.S/CSS/M/12
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122. As to the second question posed by the European Communities, namely whether the
suggestion to modify current CPC definitions of education services would include changes to the
W/120 classifications, New Zealand simply sought  to flesh out the existing CPC definitions of
education services.  Doing so would provide Members with more certainty about the range of services
covered and more guidance when considering further commitments in the sector.  Her delegation’sspecific proposal on the CPC classifications was to explain the classification CPC 92400, i.e. Adult
education services not else were classified, and CPC 92900, i.e. Other education services.  Looking at
document W/120 and noting that it included broad subject headings, what had been proposed could be
achieved without making changes to the W/120 classification.  An additional suggestion was to
develop a classification for “education agent services”, which could fit within the existing W/120
structure under the existing unspecified heading, (e) Other education services.  Her delegation was
interested in the views of other Members on these suggestions.
123. As to the first question posed by Venezuela, namely the reference in paragraph 5 to certain
education services subsectors that may be less subject to the sensitivities relating to the divide
between public policy and commercial activity than others, she noted that further on the proposal
mentioned specifically Adult education services and Other education services.  New Zealand
considered those two areas to be less sensitive for Member economies because they tended to falloutside the formal state education system.  As to the second question on paragraph 8, i.e. the meaning
of “community education”, it was intended to embrace the services of education designed to be
accessed by adults, not within the formal system, and to supplement earlier learning.  Specifically, her
delegation had in mind the types of services offered by night school programmes.  As to the third
question, paragraph 9, the meaning of the term “education agent services”, New Zealand tried toconvey the message of services related to the placement and recruitment of students.  That related
mainly to mode 3 provision of education services where an agent in one particular country would
recruit and place students in institutions in a second country.
124. The representative of Norway said that prominent features in the three existing proposals
were the wish for further liberalization of higher and adult education and the recognition that
education largely was a government function.  The proposals also underlined that private education
and training would continue to supplement not di splace public education systems, which reflected  the
situation in most country.  In Norway, more than  95 per cent of children in primary and lower
secondary levels were given their education in public schools; the same was true for more than 90 per
cent of children in upper secondary levels; and more than 85 per cent of students in higher education
attended public universities and colleges.  To give equal opportunities for education was deeply
rooted in Norway’s tradition and the public sector played an important role in that respect.  Privateand public education coexisted to the mutual benefit of both systems.  As to trade in education
services, a clear benefit was the exchange of id eas and knowledge across boundaries.  The exchange
of methods of education and institutional development were also beneficial.  The Norwegian
Government deemed it important that the process of liberalization took place with due respect of
national policy objectives and the right of Members to regulate in order to meet those objectives.Education was one of the sectors with the least number of commitments under the GATS, perhaps
because cause many countries recognized that it was a field not suitable for pure market
considerations.  It was possible to combine the concerns of both the public and private sectors in the
field of education.  Therefore, Norway had made commitments in education.  They reflected that
primary and secondary educations were a government function and that private schools could beestablished in special conditions.  As to higher education, Norway did not have any other reservation
in the schedules than the horizontal limitations.
125. The representative of Switzerland said that given the importance of education services it was
quite appropriate that the sector be discussed during the negotiations.  Turning to the proposal by the
United States, he welcomed the fact that it was confined explicitly to education and training beyondthe primary and secondary levels.  His delegation also recognized that teaching was a task that neededS/CSS/M/12
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to be done by the State and that the aim was not to dislodge the public sector.  The United States
proposal meant that it was not necessary to discuss the question posed by Australia at the May
meeting regarding possible competition between public or private education providers, in relation to
Article 1:3(c) of the GATS.  In any case, there was no question of challenging the State's right to
make regulations to achieve national education objectives as stated by other delegations.  Switzerlandwas one of the few Members that had already made commitments for Modes 1, 2 and 3, for Higher
education and Adult education.  His delegation was prepared to take part in discussions to eliminate as
far as possible the greatest number of barriers, in particular, those mentioned by the United States in
its proposal.  Turning to the proposal by New Zealand, he noted that it also appeared to be confined to
the least sensitive sectors of education, namely higher education in general.  It would be very useful to
clarify the coverage of CPC 929.  One suggestion was that an indicative list could be drawn for that
purpose, but doing so raised the question of what activities would not be covered.  He wonderedwhether New Zealand could specify what education services should not be classified in that CPC
category.  Concerning paragraph 9 suggesting the creation of a new category, i.e. “Education agency
services”, the idea was interesting and would be assessed by his delegation.  He wondered whether
New Zealand considered introducing a similar category in other services apart from education.  In
paragraph 10, there was a suggestion about education services primarily concerned with recreationalmatters and its coverage under the Education services sector rather than under Sporting services.  In a
preliminary manner, he felt that services connected with the study of theoretical teaching of sports and
sporting activities could come under the heading of education services rather than sporting services.
Turning to the proposal by Australia, he found the list of obstacles to liberalization proposed in
paragraph 7 useful.  In a very primarily way, his delegation associated itself with the principlesoutlined in paragraph 8.
126. The representative of Thailand shared the view expressed that public education service could
be supplemented but not replaced by private educa tion.  Similarly, governments should have the right
to regulate and have proper domestic regulations in place for education services.  She registered
interest in a couple of aspects contained in th e proposals by the United States and New Zealand,
namely the suggestions for further disaggregating  education services classification.  Thailand’s
interest at the time was confined only to the classification aspect.  Her delegation shared the approach
presented by New Zealand on those issues and requested clarification of the terms “community
education” and “student placement services”.  In paragraph 10, New Zealand proposed to move one
classification CPC number into another, which would be considered in light of Thailand’s broad
approach to the classification issue, namely not to alter the present structure of the W/120 list.  As to
the proposal by Australia, she supported the principle advocated under item (b) in paragraph 8.
127. The representative of Korea stated that his delegation was analysing carefully the proposals
and would revert to them later.  He sought clarification on the term "educational testing services" as
contained in the proposal by the United States, in paragraph 6.
128. The representative of Japan stated that liberalization of education of services should be
examined from not only an economic perspective but also taking into consideration educational
concerns, such as the assurance of quality in education.  Even in the area of higher education,
Governments had to take into consideration the different backgrounds and systems of quality control,
such as a third party evaluation systems for the checking of quality of education provided by certain
educational institutions.  Regarding the proposal by the United States, he requested further elaboration
on the meaning of the terms "training services" and "educational testing services", in paragraph 6, andperhaps some examples.  The second question related to paragraph 9, on the possibility of additional
commitments on higher education and training, he wondered what kind of commitments the United
States was considering to take to better understand its expectations from other Members.  Turning to
the list of obstacles in paragraph 10, he requested clarification of the kinds of restrictions or measures
referred to as "inappropriate restriction on electronic  transmission of course materials".  Regarding the
distinction between public education and private education, without seeking in-depth discussion onS/CSS/M/12
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Article 1:3(c), he requested clarification of wh at was meant by public versus private education.
There were various distinctions that could be made based on the private/public nature of an
institution, on the compulsory/non-compulsory part of the education process in a given country, or on
the involvement of the State versus completely privatised education.  On the proposal by New
Zealand, he requested clarification on the term "community education".  On the proposal by Australia,paragraph 7, he requested clarification as to whether the order in which the impediments had been
listed represented any order of priority or the seriousness of the obstacles.  He sought clarification of
what was meant by "foreign exchange requirements regulating the free flow of international students"
referred to in the same list.
129. The representative of Malaysia noted that the sector was a very important and sensitive
subject, as reflected by the question from the European Communities to New Zealand.  His delegation
was still waiting for instructions from capital about the proposals, thus he would revert to them at asubsequent meeting.  A book on the GATS stated some important facts regarding education, i.e. the
United States was the leading exporter of those services, whose exports were estimated in 1996 to be
at US$7 million, which he felt was a substantial amount of money.  The exports had been mainly in
markets of Asia, India, Indonesia, Malaysia, and he noted that in trade liberalization his country
should get some credit for being quite open on that score.  Paragraph 3 of the proposal by NewZealand said that the reduction of barriers to trade in education did not equate erosion of the education
systems.  All proposals had referred to the right of all countries to have their national domestic
regulation to promote national objectives as far as education policy was concerned.  That had to come
in very clearly in the debate as education was a public service issue and civil society tended to believe
that commercial interest would take over public interest.  He stressed the fact that private educationwas to complement and supplement but not replace public education institutions.
130. Regarding some of the impediments that had been  referred to in the proposals, he said that
questions about the need for equity requirements and the requirement of establishment had been
raised over time in GATS discussions.  Having in mind the large amounts of money spent on
education services trade referred to previously, he argued that by requiring investment in educationservices in the country, e.g. commercial presence in Malaysia, there would definitely savings involved
because perhaps not that many students would go abro ad any longer.  In commercial presence, control
could be exercised through equity requirements to ensure that there would be benefits for the country,
and again the education providers would benefit as well.  Equity requirements were also important for
the transfer of technology as required by his country.  Malaysia had already education foreign
providers in the form of branch campuses and thus was relatively open, but there were other
stakeholders in the domestic market.  His delegation would have to make a balance in terms of theeconomic objectives as well as the social and educational objectives of the Government.  It was not a
question of making money, as commercial presence would have to take into account the social
responsibility as well.
131. The representative of Turkey said that her country was one of the few Members that had
commitments for educational services.  However, due to the public considerations her delegation did
not intend to make further commitments in the sector.  With the respect to the proposals, her
delegation did not favour changes in the classification of educational services.  Regarding the
proposal by the US, Turkey wondered what kind of additional commitments that delegation was
seeking for in education services.
132. The representative of United States said that there were similarities among the three
proposals.  He also noted an important difference in the Australian proposal, which seemed to cover
all levels of education rather than just tertiary education, adult education and other education services.
The same might also apply to the proposal by New Zealand, as he did not see any limitations by level
of education.  Turning to the questions raised by Jordan, Japan, Korea and Turkey about the additional
commitments that the United States referred to in its proposal, he said that the United States had inS/CSS/M/12
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mind issues concerning lack of transparency and unfairness in the administration of regulation, which
could be addressed as additional commitments.  Those would be explained in each country's schedule
of commitments.  Additionally, Jordan had asked about the list of obstacles in the sector, i.e. what
kind of taxes were being addressed in the proposal and how they related to those excluded by the
general exceptions under GATS Article XIV.  He said that the main purpose of the United Statesproposal was to seek market access and national treatment commitments from countries that had not
undertaken such obligations on education and training services.  The taxes to be addressed would be
those applicable to foreign entities which provided education and training services on a cross-border
basis, i.e. mode 1, or through establishment, i.e. mode 3.  Three examples had been included in the
proposal, namely, tax treatment that discriminated against foreign suppliers; excessive taxes or fees on
repatriation of earnings or currency conversion; and excessive taxes or fees on licensing or royalty
payments.  The general exception of Article XIV would still apply.  As an example of what might beexcessive taxes, he said that there was at least one country that charged 25 per cent taxes on revenue
earned by educational institutions if they did not incorporate in that country.  If an institution wanted
to incorporate, other hurdles might be even more expensive.  Japan and others had asked about the
kind of restrictions the United States referred to in mentioning "inappropriate restrictions on
electronic transmission of course materials".  He said that if the transmission consisted of nothingmore than education materials and general background of study materials on subjects such as history,
business and computer technology, it was very difficult to see any reason that restrictions of electronic
transmissions would be appropriate.  Appropriate restrictions might be those that were imposed for
reasons of public morals, to prevent the transmission of pornographic material, etc.  The term
"inappropriate" was used because there could be reasons that justified certain restrictions.
133. As to the proposal by Australia, his delegation supported the thrust of the proposal that
recognized the right to regulate, governments’ so vereign right, which was very important for quality
control of education.  As to the proposal by New Zealand, his delegation was willing to consider
classification changes and clarifications.  Regarding the suggested language for "Other education
services", it seemed quite broad but his delegation was still open minded about that aspect.  Regarding"student recruitment and placement services", he presumed that what New Zealand was referring to
was services that were not performed by the school itself, that would be outsiders who performed the
service.  He requested clarification of the term "community education" and whether that covered all
possible subjects being taught in the evening to adults.
134. The European Communities had asked several questions in writing about "training services"
and "educational testing services", he noted that there was a description of "training services" right in
the United States proposal.  It would be more job related subjects than academic one, mostly coursesthat did not lead to a degree.  For instance, the type of course that would be given to those who
wanted to learn how to use a computer, courses in management and executive leadership, and teacher
training.  Regarding Educational testing services, what his delegation had in mind was the tests that
were prepared usually by outside independent organizations to test whether the student had adequately
learned the subject matter of particular courses.  Those were outside organizations, which could bewithin a college or university or a commercial arm of a university, and they might prepare tests for not
just their own school but for others.
135. In responding to the question by New Zealand, the representative of the European
Communities said that his delegation’s question had not been motivated by any negative experience
with the commitments the European Communities ha d made.  It had been only for clarification
purposes.  The statements made thus far had been very important and useful, particularly in the light
of the concerns that existed around the issue.  His delegation took noted with interest that there were
some common elements in the proposals, namely, nobody was questioning the rights of governments
to regulate or to safeguard the organization of education systems and all agreed that international trade
in education was a way of complementing and supplementing, rather than displacing, nationaleducation systems.S/CSS/M/12
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136. The representative of Australia thanked delegations for the questions posed and stated that
replies would be provided in writing to the Secretariat for circulation to Members.  His delegation was
very encouraged by the extremely stimulating disc ussion that had occurred on the issue of trade in
education service.
(iii) Energy Services
137. In presenting the proposal, the representative of Japan said that the intention was that energy
services be included in the discussion for the negotiations on trade in services.  The proposal consisted
of two parts; the first one stated the importance of energy services and the issues to be taken into
consideration in the current negotiations, while the s econd raised issues necessary to be tackled in the
negotiations with a view to achieving a gradually higher level of liberalization.  Those latter issues
included classification, market access, national treatment and regulatory frameworks.  Regarding the
issue of classification, Japan proposed that the development of a new classification for the energyservices sector be considered for the sake of having comprehensive consultations in that sector.
Discussions should cover a series of energy services, from the wholesale of energy to the final
consumption by the consumer.  An initial focus should be placed on “core” energy services, namely,
all wholesale sales, transportation, and retail sales of energy.  The issue of classification of energy
resource production should be explained logically  at the Council for Trade in Services in Special
Session, in conformity with previous GATS discussions.  The services subject to consideration should
be energy neutral and irrespective of energy resources.  The issue of public ownership of natural
resources should be excluded from the discussions.  All Member countries should consider
negotiation on market access and national treatment to the greatest extent possible, taking account of
the public interest referred to in paragraph 9 of the proposal.  In some Member countries there weredifferences in market access and national treatment at the local government level.  In facilitating
business operations by foreign companies, the central government should ensure that local
governments improve market access and national treatment in the market as a whole.  In addition,
lack of transparency in domestic regulations may result in lack of predictability in business
operations.  Japan expected that appropriate consideration be given to that issue with the aim ofremoving such barriers.  Finally, he said that it would be useful to consider the effectiveness of
frameworks for domestic regulation, which would contribute to the creation of a competitive
environment.
138. The representative of Switzerland felt that the current negotiations would be an excellent
opportunity for Members to render justice to such a crucial sector of the economy, which had been
neglected in the last round of negotiations.  All the proposals had pointed to the importance of energy
related services for the economy, which his delegation fully endorsed.  He stressed the view thatMembers’ right to regulate for domestic policy purposes had to be preserved.  Accordingly, Members
remained free to adopt any regulations for the protection of the environment, protection of consumers,
regulations to ensure security of supply, and regulations related to public services interest.
Liberalization was not the same as deregulation.  In fact, liberalization entailed re-regulation, that was
different regulations which were adapted to market openings.  Nevertheless, it was indispensable inorder to ensure efficient functioning of markets that regulation be perfectly clear and transparent.  His
delegation supported the view that ownership of na tural resources did not fall into the framework of
the present negotiations.  He welcomed the large number of references made to sustainable
development and to the protection of the environment, which were particularly sensitive issues in
energy related services.  In general, Switzerland was in favour of market access on a non-discriminatory basis for services and service suppliers related to energy.  In relation to the second
indent of paragraph 8 of the proposal by the United States, as well as paragraph 55 of the proposal by
Norway, he said that Members had to take into account that countries were at different stages in the
market opening of the energy services sector.  Therefore, it had to be accepted that different degrees
of competition might result in different levels of commitments undertaken by Members.S/CSS/M/12
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139. Regarding classification, his delegation’s view was that the W/120 classification was not
adapted to the present conditions of the energy services market.  As stressed by Venezuela, in
paragraph 24 of its proposal, a more detailed classification of energy services adapted to the market
realities, as well as regulatory and technological situations, could facilitate possible future
commitments.  Careful consideration of the solutions proposed thus far was necessary.  Whatevermight be the solution adopted, it could be drawn up based on CPC Version 1.  The CPC had
undergone changes as compared to the provisional version of 1991, and some of those changes had
been introduced to better identify energy-related  services.  For example, there was a new division,
Energy 69, bringing together electrical, gas, water and steam.  His delegation was considering the
need for distinction based on energy sources and the “core” and “non-core” activities as proposed by
Venezuela.  In any case, what was important was to  avoid any overlap.  Switzerland favoured work on
the reference paper proposed by the United States, as such a tool would be useful in facilitatingefficient, transparent and non-discriminatory trade of energy related services.  The energy services
sector had several similarities with the telecommunications sector; however, there were differences as
well, which had to be borne in mind when appropriate.  First, the energy sector included a storage
activity, which was not the case in telecommunications.  The European Communities had included
storage services in its list of activities on en ergy, contained in paragraph 6 of document S/CSS/W/60,
but the same was not the case in the index contained in the United States proposal or the checklist in
the proposal by Norway.  He wondered whether the Un ited States and Norway considered that storage
services were implicitly included in other services, for example distribution services or transport
services.  Another major difference between telecommunication services and energy services could be
found in the environmental consequences.  In view of references to sustainable development andprotection of the environment contained in the negotiating proposals submitted thus far, any new
classification or any reference paper should include the supply related to the efficient use of energy.
Finally, he supported the suggestion made by Venezu ela contained in paragraph 19 of its proposal.
140. The representative of Argentina posed questions regarding the proposal by Japan, specifically
regarding paragraphs 12 and 13.  He said that on paragraph 12 Japan had stated that energy resource
production could be considered as goods production and that it should be dealt with at the Special
Session of the Services Council.  He requested clarification of such definition and the relation with the
classification of trade in services.  He wondered  how Japan drew the line between goods production
and services production.  In his view if energy activities were to be regarded as a goods activities,
they would not be part of the trade in services di scussion.  In paragraph 13, Japan had explained that
some services could be viewed as "non-core" energy services and that those should be taken up
separately in order to avoid overlaps with other sectors.  He requested further explanation of non-coreenergy services.
141. The representative of Turkey stated that her delegation supported liberalization efforts in the
energy sector.  Turkey was in a continuing process to complete the regulatory framework for several
energy sources.  Regarding the classification issue, a general classification without regard to the type
of energy source was not an appropriate approach since the various energy sources had differentcharacteristics.  For instance, several items in the proposed classifications might be irrelevant for solar
or geothermal energy.  Energy activities, which fell under the scope of the GATS, should be clearly
identified.  In respect to the proposal by the United States, she sought clarification of the reference to
technological neutrality.  As it was contained in the proposal, it was not clear whether that mean that
countries should not require a specific technology for granting the licences to service providers.Technology importing countries had to have the right to choose the proper technology to be imported.
Regarding the proposal by Norway, maritime cabotage transport servicing offshore petroleum
exploration and production was included in the draft checklist for energy services.  Turkey did not
support the inclusion of cabotage transportation in the GATS negotiations.
142. The representative of Cuba stated that the rights of access and use of natural energy resources
should not be negotiated.  The negotiations should be flexible enough for developing countries toS/CSS/M/12
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open fewer sectors, to liberalize fewer transactions, and to increase progressively access to their
markets according to their own interests.  The right of developing countries to regulate and to manage
the supply of energy services must be ensured.  The development of mechanisms to accomplish the
provisions of Article IV of the GATS, particularly regarding the transfer of technology, should be an
objective of the negotiations.  The strategic character of energy services made it necessary thatgovernments retain the right to condition access to their markets and establish public service
obligations. The negotiations should aim at facilitating access to energy services by consumers,
improving substantially the living conditions of people in developing countries.  The opening of the
markets resulting from the negotiations should contribut e to the growth of capacity and to the general
welfare of all Members.  The negotiations should promote the competitiveness of service suppliers of
developing countries and their access to technology on commercial basis.
143. Regarding the classification of energy services, it would be necessary to agree on a
classification based on sources of energy and identifying the different activities corresponding to the
various processes.  Regarding the proposal by Canada contained in document S/CSS/W/58,
paragraph 10, Cuba was of the view that negotiations on energy services should be confined to oil and
gas.  As to the proposal by Norway, document S/ CSS/W/59, Cuba shared the statement contained in
paragraph 55, that Members were in different stages of regulatory development and therefore theyshould adjust their commitments accordingly.  As to the proposal by Venezuela, Cuba supported the
general suggestions for classification.  However, she requested clarification of the point made under
paragraph 25(c).  Regarding the proposal by the EC, on the barriers to trade in paragraph 9, Cuba
drew attention to the fact that developing countries  might establish limitations in keeping with their
national policy objectives in order to promote their development.   Regarding the proposal by the
United States, paragraph 7, she said that it was obvious that developing countries should have a right
to limit the access to their markets and establish regulation to protect national interests.  As to
paragraph 8, her delegation took note of the interest in energy services open to private participation.
However, as part of the national policy in the energy sector some countries reserved certain activities,
which were closed to private capital.  As to paragraph 12, developing countries in defending theirnational interest might establish limitations without being discriminatory.  As to paragraph 13, the
definition of technological neutrality was not included in the GATS, as it had been introduced in the
negotiation on basic telecom in a very specific context.  Developing countries could consider when
that concept would affect their flexibility and their right to condition entry to their markets depending
on the technology to be used, and perhaps transferred.  As to paragraph 16, the stand of the United
States in the case of energy services aimed at a total liberalization and elimination of national
regulations.  Cuba could not agree with those principles, which were in some cases contrary toArticle IV of the GATS.
144. The representative of Australia noted that his delegation had provided some preliminary
comments on the proposals that had been on the table at the May meeting.  Australia was not yet in
position to provide detailed comments on the proposals in the sector based on the considered views of
our sectoral experts and industry, but the issues were under consideration.  The representative ofKorea shared the view of Members that the purpose of the energy services negotiation was to improve
trade liberalization and development of all nations.  At the same time, it was important addressing theenergy service issues concerning safety and environment.  A classification of the sector recognizing
the differences among the various energy sources was necessary.  Transparency in the regulation of
the industry was essential.  Regarding the proposal by Japan, he sought clarification as to whether thatdelegation was in favour of separate negotiations by energy sources.
145. The representative of Brazil emphasized that Governments’ right to regulate was not in
question and the fact that liberalization of the energy sector, as in any other sector, did not imply
deregulation but rather re-regulation in most cases.  Regarding the classification issue, it would be
essential to have some understanding of the definition of the sector before even considering marketaccess, and before considering any regulatory discip lines for the simple reason that those rules wouldS/CSS/M/12
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have to have a scope.  Regarding the proposal by the United States, paragraph 13, the United States
advocated that the commitments should incorporate a variety of principles aimed at ensuring the
greatest possible market opening, he requested clarification of the term "technological neutrality".
There were doubts as to the exact meaning of that term in regards to the energy sector given that there
seemed to be a number of different interpretations by delegations.  One specific meaning had beenattached to that concept in the negotiations on basic telecommunications, namely, that unless
otherwise specified in a Member’s Schedule the commitment would be considered to allow for all
possible technological means available for the provision of that service.  For example, it had been
decided in discussions on telecommunications that voice telephone services could be provided wire
based as well as through other means of technology.  In applying the said concept, the idea had been
that unless the Member indicated something different in its Schedule when a Member committed on
voice telephone services that service could be provided using any means of technology.  So given thespecificity of the concept, he wondered how it applied to the energy sector and the aim of the
proposal.  In the same paragraph 13, the second principle referred to the temporary entry of
equipment, tools of the trade.  He agreed that th e appropriate frame for that issue was the negotiations
in goods.
146. As to the proposal by the European Commun ities, specifically the issue of regulatory
disciplines, before any discipline could be disc ussed Members needed to gain clarity on how the
sector was going to be treated.  Such disciplines might not be necessary, as not all sectors needed to
have regulatory and competition disciplines.  Such disciplines might be relevant for energy activities
that required access to networks, which might not be the case in all energy subsectors.  On the issue of
classification, he noted that the European Communities had indicated the services for which it wouldbe seeking commitments, including as a first catego ry services related to exploration and production.
He requested clarification about the specific scope of such category.  On the proposal by Canada, he
noted its limited scope, i.e. oil and gas services, and thus excluding electricity.  He wondered the
reasons for that.  On classification, Canada stated in paragraph 10 that all services in the oil and gas
sector could be found in the W/120.  He felt that Canada might be referring to the category “servicesincidental to mining”, and if so, he wondered whether Canada could elaborate on how such category
covered all services related to oil and gas.
147. The representative of Jordan said that all proposals were being examined by the relevant
authorities in her country.  Regarding the proposal by Japan, paragraph 12, she requested clarification
on the main differences between wholesale and retail sales of energy and the distribution of energy, as
the latter might involve both wholesale and retail services within the context of the W/120
classification.  On paragraph 18, Japan had propos ed that it would be useful to consider the
effectiveness of frameworks for domestic regulations.  She wondered whether Japan could elaborate
more on that suggestion, in particular what aspects would be addressed.  Regarding the proposal by
Norway, paragraph 51, it was stated that energy services included all services involved in the
exploration, development, extraction, production, gene ration and others.  She sought clarification with
respect to production and generation, whether that meant, “services related to generation orproduction” or the production and generation themselves, which might be considered as goods
production rather than services.  She also sought clarification as to the scope of activities that would
be included under “consumption of energy, energy products and fuels”.
148. Regarding the first question by Argentina, the representative of Japan said that under the
GATT electricity and gas were considered goods.  However, more discussion was required as to
whether generation of electricity or gas re-gasification should be considered goods production or
services.  Regarding the second question on non-core services, in paragraph 13 Japan had given
examples, i.e. energy related engineering and construction services.  Engineering and construction
services were treated as a separate sector in the negotiations so that would create an overlap.
Regarding the question by Korea on separate negotiations on the various energy services, Japan felt itimportant to start the discussion in the energy service sector as a whole irrespective of the source ofS/CSS/M/12
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energy.  That would not exclude the possibility of negotiating by energy source.  As to the questions
by Jordan, the first one, i.e. on the distinction between wholesale and retail sales of energy and
distribution services, he said that retail and wholesale distribution services were included in the
W/120.  Retail and wholesale of energy services would be considered “core” energy services, and
distribution services were separate.  He would revert to her second question later.
149. The representative of the United States said th at there were a number of suggestions in the
proposal by Japan that her delegation found constructive for negotiating liberalization of the energy
services sector.  There were other areas, however, where her delegation would like to have
clarification.   Japan appeared to be open to negotiating the full range of energy services, with the
possible exception of activities that it classified as production, as well as issues concerning network
access and the movement of specialized equipment and personnel.  The suggestion to develop a new
classification for the downstream services and a checklist for upstream services was an interestingapproach to the classification issue, one that her delegation would be interested in exploring further.
However, she questioned an approach that would create a debate over what was a “core” versus “non-
core” activity, the answer to which might be largely subjective.  Her delegation was pleased with
Japan's focus on importance of regulatory transparency.  As noted in Japan’s proposal, the lack of
transparency in energy services regulations reduced  predictability for trade in the sector.  Her
delegation supported Japan's attention to that issue, which was fundamental to meaningful market
access.  The proposal correctly pointed out that many countries were at different stages of energy
development, with respect to natural resources and regulatory policy.  As indicated in the United
States proposal, her delegation recognized that that was an issue of concern to a number of nations in
the discussion on liberalization of energy services and thought it important to consider how suchdifferences could be addressed in the market access negotiations.
150. She requested clarification by Japan of its intentions in paragraph 9, which seemed to suggest
that WTO Members might maintain regulatory au thority by scheduling exceptions to any future
commitments.  She noted that the GATS already had a comprehensive set of general exceptions for
such purposes as set out in Articles XIV and XIV bis.  She wondered whether Japan had something
else in mind in that paragraph.  Additionally, it was possible to define commitments, for example
disciplines on non-discrimination and competitive access that were consistent with the need for
continued domestic regulation in the public interest, thus minimising the need to rely on exceptions.
She also sought clarification of statements on regulatory frameworks in paragraph 18, which appeared
to focus on the challenge between successfully introducing domestic regulation and maintaining the
competitive environment for energy services.  She wondered whether Japan was suggesting that a
reference paper might be helpful or whether Japan considered that Article XVI was sufficient toguarantee market access for wholesale and retail sales of energy.
151. The representative of Venezuela stated that his delegation was analysing the proposal by
Japan and that questions would be submitted in writing to that delegation in due course.  His
delegation had submitted detailed replies to the questions posed to Venezuela by other delegations,
which would be circulated to Members shortly.  As to the questions regarding the difference betweenenergy goods and energy services, Venezuela felt it important to clearly establish that commitments
taken for market access and national treatment under the GATS referred exclusively to services and
services suppliers.  Those did not cover any goods that might be required for the supply of those
services.  Any multilateral disciplines applicable to the import and export of such goods would be
those agreed to in the framework of the GATT.   The reference to activities corresponding to
production in paragraph 25(b) of the Venezuelan proposal, related to the stage where energy services
were required for the generation or extraction of the energy resource, corresponding to the upstream
phase of the energy business.  Regarding the rela tionship between energy services and development,
all the components of development required energy services as a crucial input and thus the linkage
was essential.  Regarding the negotiations, Venezuela had economic objectives that would contributeto its development in terms of growth of the economy, implications for employment, capital creation,S/CSS/M/12
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etc.  The highest interest was to pursue the development of small and medium sized services suppliers
locally and the possibility of exporting energy services.  Venezuela assumed that access to energy
implied access to modern and commercial energy services. Developing countries would benefit as
long as the negotiations set down favourable conditions for domestic and foreign investment in
installations for generation, transmission and distribution of energy.  The negotiations should alsopromote the growth of small and medium sized enterprises that deal locally, contributing to the
capacity building in developing countries.  To ac hieve those objective it was necessary to obtain a
good balance between market liberalization and preservation of the space for domestic companies.
Regarding the difference between "core" and "non-core" services, the starting-point was to recognize
that such a distinction was a convention based decision that was done for utilitarian purposes based on
an assessment of various aspects.  Venezuela considered an activity as "core" if, first, the service was
an essential part of the chain of supply of that sector, i.e. without that service the sector would not beable to function, and second, if the service was mainly an input for the energy chain, although it might
also be an input for other sectors.
152. Turning to classification, Venezuela had just submitted a proposal for classification of core
energy services, with the intention to facilitate negotiations of specific commitments in the sector.  A
first task could be to harmonize the various lists that had been submitted by Members and then dosome sort of correspondence of the list resulting from the harmonization with the CPC classification
and the W/120.  The outcome of that exercise, i.e. the list and correspondence with the CPC, would be
binding at least on those Members that had accepted it.  That outcome could also constitute sector
number 13 of the W/120.  The classification proposal referred to above had been prepared based on
certain criteria and conditions.  First, it was intended to cover services related to the petroleum andgas services.  Second, the upstream services included were those services necessary for the
exploration and production of petroleum and gas.  The downstream services were those services
necessary for the processing, that was refining, transport and distribution of energy once the resource
was available.  The upstream activities included construction of production facilities, while the
downstream activities included construction of plants and refining installations and the handling offuels until they were placed in the market.  Third, the classification was sub-divided into classes that
reflected the way in which the markets had been set up in reality.  Thus, a separate class would be
provided if there were suppliers that made the supply of a given service the main purpose of their
business, i.e. the object of their trade.  Fourth, it had been designed to ensure that market access and
national treatment conditions were defined and applied in accordance with the particular development
objective in each subsector.
153. Regarding the scope of the negotiations, Venezuela agreed with Mexico's assessment that the
basis of the concessions under the GATS was negotiated specific commitments.  He stressed that
pursuant to Articles XVI and XVII of the GATS Members had the right to place conditions on market
access and national treatment in those sectors where commitments had been assumed.  Those terms
and conditions could be a reflection of instruments and measures concerning trade policy, industrial
policy and technological approaches, as maintained by Members.  He reiterated the Venezuela wasparticipating in the negotiations with objectives that went beyond commercial interest and thus would
exercise all of its rights.  Turning to questions on the references to access to technology contained in
paragraphs 12-13 and 21 of the Venezuelan proposal, he said that those were fully in line conceptually
with Articles IV and XIX of the GATS.  His delegation was assessing various options in terms of
mechanisms to make the objectives of Article IV viable and compatible with a market approach andmultilateral disciplines.  Turning to question on el ectronic commerce, he said that those references
were aimed at supporting the analysis and exchange of information on the issue under the WTO work
program.
154. The representative of Norway said that his delegation’s main objective for the energy sector
was to contribute to a system that resulted in reliable and efficient energy services.  In turn, that would
result in lower energy prices, which constituted one of the fundamental requirements for social andS/CSS/M/12
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economic development in the world.  To meet such general objectives, the negotiations should cover
all energy services and should aim at increased commitments for market access and national
treatment.  It was vitally important that countr ies expressed readiness to negotiate to achieve
liberalization in the sector.  It was also important that countries expressed what the negotiations were
not about, namely, that liberalization did not mean deregulation and that negotiations were not aboutownership of natural resources.  The importance of environmental considerations had to be
underlined.  He supported suggestions for a structure debate in the Council, focusing on areas or
themes that had been given high priority by the proposals, such as market access, national treatment,
and regulatory issues, such as transparency and non-discriminatory access to networks.  The
Secretariat could be asked to assist in identifying themes that could focus the discussions in future
meetings.
155. Turning to the questions posed to his delegation, specifically the question on definition of
storage put by Switzerland, he said that there were two definitions of storage depending on the stage
of the chain, i.e. upstream or downstream.  In the upstream production of oil and gas, storage was part
of the production activities and should as such not be considered separate energy services.  As to
downstream oil and gas, considerations were ongoing as to whether storage activities should be
defined as a separate energy service.  As to the sector of electricity, the notion of storage would not berelevant either upstream or downstream.  As to the question by Turkey on inclusion of cabotage or
maritime freight transportation, he drew attention to paragraph 52 in the proposal that stated that "In
order to realize fully the benefits of efficient, competitive energy services and to make economically
meaningful commitments, we need to consider the entire chain of activities involved in resource
identification, production, transmission, transportation and distribution, sales and marketing,irrespective of whether the activities take place onshore  or offshore".  He noted that the whole of the
Norwegian production of oil and gas took place offs hore and thus Norwegian services providers had
developed competitive services.  Given the significance of the offshore activities in the world, it was
important that they be included in the deliberations.  As to the questions by Jordan, he had not been
able to fully capture the first one on the distinction between services and goods and requested it inwriting.  As to Jordan’s second question on the consumption of energy, he said that it referred to the
last element of the sales chain, i.e. sale of energy to end consumers.  His delegation had some
question regarding the proposals by other Members.  Regarding the proposal by the United States, he
requested clarification on the barriers to trade re ferred to in paragraph 7 originating from domestic
regulations that were highly discriminatory.  As to the proposal by the European Communities,
paragraph 11, the last sentence suggested that further discussion be held on how to improve and
facilitate the temporary movement of natural persons for the provision of specific services.  Herequested clarification of whether the European Communities proposed commitments on mode 4
relating to specific sectors and not horizontally.
156. The representative of Canada said that in reviewing the various proposals his delegation had
identified five major features of the negotiations on energy services.  First, the need for a definition of
energy services.  Based on Canada's experience they had concluded that the range of services required
for the production of energy was extremely broad.  There were services specific to the energy sector,
e.g. drilling services, and services that were common to other sectors, e.g. engineering services.  Thus,
it was necessary to make efforts to define the activities encompassed in the concept of energy
services.  Second, Canada made a difference between the scope of the definition of energy services as
related to disciplines and the classification of energy services.  The latter required consideration of anumber of technical points.  First, there should always be a link between the classification discussions
in the Council and in the CSC and an approach to classification for the recording of commitments
resulting from the market access negotiations.  Second, the link between core and non-core services
should be considered.  A third feature of the negotiations was the important issue of temporary
admission of goods necessary for the production energy services.  Fourth, the suggestion to considerwork on a reference paper, which his capital was considering.  Fifth, the need to distinguish between
goods and services to avoid an overlap with the GATT.S/CSS/M/12
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157. Turning to the questions posed by the European Communities on the reasons for the scope of
Canada's proposal being limited to oil and gas services, he said that the presentation of the proposal
on oil and gas services by Canada was without prejudice to the right to submit other proposals on
other energy services.  In other words, the scope of the proposal should not be read as a wish by
Canada to restrict the scope of the negotiations to oil and gas services only.  It was perhaps areflection of the stage of internal discussions and of the importance of those two sectors in Canada.
Regarding the electricity sector, internal discussion were not as advanced and Canada was undergoing
a process of regulatory reform, which needed to be completed before going any further.  On the
second question by the European Communities regarding the revision of the W/120, he stressed that
Canada's position on the issue contained in the proposal related strictly and only to the oil and gas
services sectors, where it considered that a revision of the W/120 was not necessary.  He referred
interested delegation to Canada's initial negotiating proposal.
158. The representative of Brunei Darussalam noted that the various proposals ranged from the
fully comprehensive form, as the United States proposal, to the more focused and specialised
approach, as the Canadian proposal.  Her delegation would only be focusing on the submission by
Canada in S/CSS/W/58, which dealt only with upstream oil and gas activities, such as exploration.
That proposal seemed to work on the premise that all services incidental and related to oil and gasactivities were found in the W/120 classification.  Thus, her delegation broadly shared that approach
in the negotiations on the sector.
159. The representative of the United States noted that the common elements present in all the
submissions had been pointed out in previous interventions.  Despite those elements, however,
Members were faced with a number of challenging issues in negotiating energy servicesliberalization.  She would focus on two of those issues and place them in a context of possible
negotiating objectives.  The first one was the lack of agreed definition of the activities or the scope of
the activities to be disciplined by GATS rules, and second, the issue of the official or de jure
monopoly.  In a number of countries the government retained ownership or control over the energy
resource or over some services in the chain of energy services.  How was the monopoly to beaddressed in the negotiations?  To help further discussion in an area where there appeared to be
agreement on basic principles, but some uncertainty over how to proceed with the actual negotiations,
her delegation suggested that Members consider the following broad negotiating objectives for the
energy services sector.  First, consider scheduling market access commitments for markets currently
open to foreign competition using existing GATS di sciplines.  Second, facilitate market entry for
foreign service providers where market access was currently permitted but where government policies
or practices effectively inhibited or restricted the provision of energy services by foreign serviceproviders.  Third, consider exploring opportunities for further liberalization where market access was
not permitted.
160. First, in considering the scheduling of ma rket access commitments for markets opened to
foreign competition, many of the benefits of the GATS could be accorded to energy service providers
already providing services in a foreign market by clarifying where the energy services could be foundwithin the GATS.  For instance, almost all nations permitted foreign services companies to upgrade,
maintain, repair and operate power plants and turbines; to lease out for rent power generation
equipment or to conduct energy audits and implement energy saving programs.  Similarly, most
nations permitted foreign service companies to provide oil field services, like evaluation, exploration,
drilling, development, and completion services.  Lack of clarity surrounding the classification of suchservices, however, created uncertainty over application of GATS rules.  That uncertainty which was
especially onerous for services involving the movement of costly capital equipment, such as oilrigs,
added significantly to the cost of doing business abroad.  Once the classification issues were resolved,
countries could then consider scheduling commitments to maintain market access and national
treatment, and continue to accord MFN trea tment for each of those types of services.S/CSS/M/12
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161. As to facilitating market entry for energy services providers where competition was currently
permitted, it appeared that two main categories could facilitate trade in energy services.  The first
would be securing a transparent system for the development, promulgation and application of
regulation affecting energy services, along the lines of the regulatory transparency proposals put
forward by her delegation; and the second, facilitating the temporary entry of energy servicepersonnel.  In addition, allowing the rapid and duty free temporary importation of tools of the trade
needed to perform energy services, which would have to be addressed in the goods context, would
facilitate trade in energy services.  The above issues tended to be crosscutting and might apply to
other service sectors as well.  However, unless the classification of energy services in the WTO was
clarified, addressing those issues in the WTO might not benefit energy service providers as much as
service providers whose activities were clearly classified in the W/120.
162. As to the third possible objective referred to above (i.e. exploring opportunities for further
liberalization), she suggested that it could be an important area for further discussion within the
Council.  That would include possibly disciplining monopolies through market access commitments
that triggered GATS Article VIII or through new commitments.  She noted that in her delegation's
view, GATS rules did not extend to privatization of existing monopolies.  While many countries had
broken up, or were in the process of breaking up, monopolies supplying energy services, a number ofcountries retained the monopoly as the sole provider of some or all segments of the energy chain of
activities.  Although her delegation was of the view that the competitive provision of those services
offered significant economic benefits to service providers and consumers alike, her delegation's goal
in the negotiations was not to break up the existing monopoly but to apply the appropriate GATS rules
to the current official monopoly or consider new commitments.
163. In the situation of an existing official monopoly, such as in certain segments of the electricity
sector, market access commitments might be scheduled as follows:  (1) the right to invest in an
existing monopoly, which represented elimination of foreign investment restrictions;  (2) to permit
investment in, or operation of, a competing service supplier after a date specified in the schedule,
which would be a commitment to a eliminate a cartel or existing monopoly rights;  (3) where marketaccess had been granted in some but not all energy market activities, discipline would be introduced
through Article 8 for an official monopoly provider abusing its monopoly position to gain competitive
advantage in a market outside the scope of its monopoly, for instance, through its control of energy
distribution networks;  (4) for transmission and distribution services, which were likely to function as
natural monopolies, GATS commitments could be scheduled, perhaps through a reference paper, to
provide access to and use of a central transmission or distribution facilities upstream and downstream,
and to include making available to international competition contracts to construct, which could be acommitment under construction services, and to operate the systems, which could be a commitment
under management service.
164. Where governments had decided to open a formerly closed energy services market to
competition, countries should be encouraged to schedule market access commitments.  For example,
marketing of energy was a service for which market access commitments could be undertaken.  Thosecommitments could be scheduled to include market access and national treatment commitments to
permit foreign firms to market power, gas or other fuels to large consumers and retail supply
companies.  In cases where certain percentage of liberalization was mandated, then that percentage
could be scheduled in a market access commitment.  Such scheduled commitments could also include
additional commitments or a reference paper that ensured non-discriminatory access to public energytransportation service facilities such as the power grid.
165. The representative of Peru felt that all proposals contained important elements that should
lead up to a further and better liberalization of the trade in energy services.  His delegation supported
the proposal by Venezuela, in particular the goals and basis for the negotiations and the points on
expectations by developing countries.  Peru, like other developing countries, had made importantS/CSS/M/12
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changes in its legislation over the past decade to introduce flexibility and promote foreign investment,
as a way of ensuring energy supply security.  A number of issues relating to the public interest were
also relevant in the regulatory environment for energy services, such as energy supply security, the
environment and the maintenance of public services.  He shared what had been said by Venezuela on
the close link between the provision of energy and development.  Peru was at the time undertaking anumber of initiatives, including on gas, that were bound to have a major and positive impact on the
energy sector and the economy as a whole.  Additionally, such initiatives were expected to make it
possible for Peru to provide cheaper, cleaner sour ces of energy for domestic industrial purposes but
also for exports.  His delegation would provide detailed comments on the proposals at a later stage.
166. The representative of the European Communities noted the importance of the sector and the
substantial interest by delegations, as shown by the proposals and the discussion.  Regarding the
proposal by Japan, his delegation would provide its questions in writing.  There were two majoraspects during the discussion; the first was under the chapeau of classification, which included
clarifying the scope of the negotiations in regard to activities that were to be considered as energy
services.  Several of the negotiating proposals submitted thus far contained some suggestions and
some lists of activities.  Delegations had to rely on those documents and on any possible future
contributions by Members in order to clarify the issues, as it was essential to know what was going tobe discussed during negotiations.  That first aspect of classification was important, as it was essential
for the scheduling of commitments.  The second aspect of the issue was the classification work in
technical terms, namely, possible improvements to the existing classification in the W/120.  On that
front, delegations had to keep in mind all aspects regarding the legal implications for existing
commitments.  The second big chapeau of the discussion had been regulations and disciplines.  It wasextremely important to keep in mind the importance of regulation in the sector and the fact that
liberalizing the sector might imply re-regulating it.  He reaffirmed the right to regulate of Members,
especially in the energy sector.  The process of developing possible disciplines for the sector had to
take into account all the experiences that existed in that area, which were quite diversified.  The
evaluation of disciplines under the GATS, and perhaps pro-competitive principles, was something thathad to be done once energy services had been clearly identified.
167. Turning to questions submitted to the Europ ean Communities, regarding the classification of
exploration and production, he said that such category would cover both the pre-excavation
(e.g. testing) and excavation (e.g. drilling) aspects.  However, final coverage needed to be identified
depending on the different structure of frameworks of Members.  Regarding the question of energy
neutrality, which was the classification approach that his delegation had followed in its negotiating
proposal, it consisted of a list of activities that applied to all energy sources.  For example, with regardto services related to exploration and production, those would cover oil and gas because those
activities were carried out in a manner that did not defer substantially in those two areas.  However,
where an activity was related to a specific energy source, for example the frequency control in the
area of electricity, some distinctions might be necessary.  Regarding the separation between goods
and services, and in particular electricity generation and gas production, actually manufacturingactivities, his delegations considered that those should not be addressed within the negotiations on
energy services.  That position was in line with discussions conducted in the Committee on Specific
Commitments.  Regarding the negotiating proposal by Japan, paragraph 9, he suspected that the
references to the different aspects regarding safety  and environment had been made for the purpose of
recalling the main principles of GATS, namely, the ri ght to regulate included in the Preamble and the
exceptions included in Article XIV.  He requested clarification on that point.  Regarding the proposal
submitted by Venezuela on classification of “core” energy services, he wondered whether the
intention was to cover comprehensively energy services regardless of the source or only oil and gas
energy services.
168. The representative of Malaysia stressed that there was recognition in all proposals that natural
resources, including energy, were held in trust for the public and therefore owned by the respectiveS/CSS/M/12
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governments.  It was important to recognize the right of WTO Members to regulate the supply of
energy services so as to meet national policy objectives, to increase the participation of developing
countries in international trade in services through the strengthening of their domestic capacity, and
the question of flexibility for developing countries to open fewer sectors.  Regarding the intervention
by the representative of the United States on the issue of monopoly, although further reflection on thatstatement was necessary, he said that when talking about the right of developing countries to regulate
the supply of energy services one should bear in mind that one of the development tools used was the
type of monopolies that the United States delegate had referred to.  His delegation would have to take
caution on what had been stated about that.  On the classification issue, it was a very important point
of departure and it would have to be ensured that delegations had a common understanding as to the
definition and the scope on what would be negotiated.  In formulating Malaysia's stand in respect to
the energy services sector, his delegation would have to consider a number of issues.  The first andmost important, the overriding concerns of the national development policies of the Malaysian
Government.  Malaysia needed to have some form of protection on energy resources and services to
ensure adequate and affordable supply.
169. The second issue was the question about the regulatory frameworks, which was very
important especially due to the added complexity of a competitive market in the energy servicessector. The regulatory regime would have to complement Malaysia’s existing policy and one that
protected the national interest.  The development of such a framework would take a long time and
needed to ensure that economic realities that would affect national development were taken into
account.  In looking at the underlying philosophies of the various proposals and statements given by
the developing countries concerning the regulatory framework, it was obvious that their approach andinterest were very different from those of developed countries.   Developing countries, like Malaysia,
had in mind how to pursue their development pol icy objectives when looking at the regulatory
framework, whereas developed countries looked at how to protect further liberalisation in a market.
Some balance would have to be achieved between both objectives.  The question of capacity building
was essential for Malaysia; in terms of the energy services sector, the question of human resourcedevelopment was important.  In liberalizing the market, it was necessary to ensure that the country
would gain by improving the domestic entrepreneurial capacity and competitiveness of domestic
suppliers, which could only be done by effective technology and knowledge transfer from the foreign
service providers.  Liberalization of energy services, if it had to take place, would have to be carried
out progressively in accordance with Malaysia’s social, economy and development policies.  At
present the sector was quite open to foreign participation, therefore Malaysia’s focus was on capacity
building and energy technology development with continuous protection by the Government and
encouragement thereon.  In that respect, he asked de veloped countries to reflect as to how to balance
and make compatible the kind of market access liberalization they were seeking with the benefits that
developing countries could gain in the process in terms of Article IV of the GATS.
170. The representative of Indonesia said that his delegation was very much concerned with the
proposals since Indonesia was a producer and exporter of oil and gas.  Discussion on the sector was an
important issue to his Government and sometimes a very sensitive one due to its strategic position.
Additionally, his Government had proposed draft legislation on oil and gas, whose approval ba the
House was expected sometime the following year.  His delegation was doing a serious assessment of
the proposals, with particular interest in those by Venezuela, Japan and the United States.  Based on
the proposals and discussions thus far, some issues required further discussions such as theclassification of the sector.  His delegation was looking forward to discussions with Members
especially in regard to sectors that were not covered by the W/120.
171. The representative of Brazil requested the United States delegation to distribute their second
intervention of that day.   Other delegations supported such a request.S/CSS/M/12
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172. The representative of Venezuela addressed some questions and reported on the Energy
Experts Meeting organized by UNCTAD.  In replying to the question posed by the European
Communities on the proposal on classification, i.e. whether it covered oil and gas only or whether it
could apply to other sources of energy as well, she stressed that the list only related to oil and gas
activities.  The activities listed in the proposal had been considered specific to oil and gas sectors;however, she stressed that her delegation did not want to give the impression that those headings of
the classification would not be relevant to other energy sources.
173. In reporting on the meeting of experts in energy services that had been organized by
UNCTAD from the 23 to 25 July 2001, she said that it was a first intergovernmental meeting on the
consequences for development of energy services and international trade.  The meeting had been
chaired by the permanent representative of Venezuela,  with the vice chairmanship of Finland and the
Russian Federation, and attended by 37 experts from developing countries, two from economies intransition and ten from developed economies.  There were also contributions from representatives
from other intergovernmental organization, experts and special guests of the UNCTAD Secretariat.
The discussion focussed on four main areas, where the experts had shared national and regional
experiences.  Discussions included an in depth analysis of energy markets, energy services marketing,
and obstacles encountered at the national level; a very interesting session conducted on the WTOnegotiations and the implications of new trends and the impact that those negotiations could have on
development.  The document containing the outcome of the meeting, which reflected the views
expressed by the experts, had been made available to the Members of the Services Council.  She
urged all Members to consider that valuable input.
(iv) Transport Services
174. The Chairman suggested that the discussion be organized by sub-sector, starting with
maritime transport services, followed by air transport services and then by all other transport services.
Maritime transport services
175. The Chairman indicated that, as had been agreed, the Secretariat had prepared an update of its
earlier note on the maritime transport sector, in document S/CSS/W/106, as well as an updated
compilation of Members' commitments and MFN exemptions in maritime transport services, which
was available in the room..
176. A representative of the Secretariat indicated that the compilation included those commitments
that were legally in effect at the date of the document and that Members had not followed an identical
approach regarding the classification and definitions of what was covered by maritime transport
services.  He stressed that the compilation should not be seen as attempt to interpret any questions
related to the coverage of the sector.
177. The representative of Australia introduced its proposal on maritime transport services.  He
recalled that 80 per cent of the volume of world trade and 90 per cent of the volume of Australian
trade were carried by sea, hence, the provision of safe, efficient, competitive and environmentally
friendly maritime transport services was essential for the world economy.  Australia indicated it had,
over the past two decades, pursued economic reforms in the maritime transport sector.  These reformsincluded corporatization of port authorities and the privatization of some ports, the licensing of
auxiliary and port services to the private sector and waterfront reform.
178. He noted that the experience gained during the negotiations conducted in the Negotiating
Group on Maritime Transport services (NGMTS) should not be lost and that negotiations should start
on the basis of the offers on the table in June 1996.  His delegation also welcomed offers by newparticipants.  He agreed that the three pillars approach (maritime transport services, maritime auxiliaryS/CSS/M/12
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services and access to/use of port services) should constitute the basis of the negotiations, but
multimodal transport could be included as a fourth pillar.  Flexibility in the negotiating methods was
desirable in order to achieve an agreement.  To this end, his delegation would be open to consider
alternative approaches, such as clustering and other approaches, if the need arose.  Although he
considered it premature to submit formal proposals in that regard, his delegation had alreadycirculated ideas in the APEC forum and was happy to share these with interested Members.  He also
suggested that work should focus on four main types of market access restrictions, namely:
restrictions on commercial presence;  restrictions on access to international maritime services;  non-
tariff measures and business practices that placed unreasonable burden on transporters and their
clients;  and lack of appropriate and transparent competition legislation for all three pillars and of
enforcement existing legislation.
179. As far as competition policy and liner shipping were concerned, the compatibility of the
regimes adopted was essential.  For its part, the delegation of Australia had reviewed its policy and
decided to retain the existing regime.  This allowed liner shipping conferences to collaborate as
conferences, subject to conditions designed to protect the interest of the users, exporters as well as
importers.  For example, failure to arrive at an agreement could result in the Australian Competition
and Consumer Commission (ACCC) investigating the dispute.  Furthermore the exemption had been
limited to liner shipping activities covering ocean transport and the loading and discharge operations
at the cargo terminal, including inland terminals.  Inland haulage was not covered under the
exemption.
180. The representative of Australia went on to say that as far as ports were concerned, they were
subject to competition rules.  Some initiatives ha d been taken to increase competitive pressure, such
as ensuring competitive neutrality and independent scrutiny of port authority prices.  During the 1990s
many port authorities had removed themselves from the provision of auxiliary (stevedoring,
warehouseman) and port (pilotage, towing) services.  Licence holders, providing outsourced auxiliary
and port services, were generally required to ensure a satisfactory standard and level of service and
exclusive licenses were often issued through public tender.  Competition in the Australian shippingmarket was further increased by providing foreign nationals access to port and auxiliary services,
provided they obtained leases or licences from regulatory authorities.  Australia thought that
implementation of similar measures by WTO Members under the forthcoming maritime transport
negotiations would bring more competitiveness to the maritime transport sector.  Those negotiations
could be conducted in parallel with the horizontal discussions on competition so that a possible lack
of agreement or delay in the horizontal negotiations might not block sectoral disciplines.
181. The representative of India recalled his delegation's opposition to any cluster approach and
therefore to the Australian proposal in this regard.  He expressed strong reservations towards the
proposal by Australia to introduce competition principles in the negotiations.  He agreed, in general,
with the Korean proposal but expressed reservations on multimodal transport.  In his view, this should
be excluded from the scope of the negotiation.  However, since this was proposed as a fourth pillar, he
considered that in-depth discussions on its classification and definitions should be conducted.  He alsopointed out that India had 1993 national legislation on the multimodal transport of goods independent
from the shipping legislation.  He indicated that his delegation would look for flexibility in
commitments, allowing for the reservation of bulk shipping, for example the transport of Liquefied
Natural Gas.  Like in any other sector, developing countries should retain the flexibility to liberalize
only the sectors they chose to and at a pace determined by them.
182. The representative of Norway welcomed the proposal by Australia and noted the numerous
similarities with its own proposal, such as:  existing or improved offers as the basis for negotiations;
use of the model schedules;  inclusion of multimodal transport in the negotiations. However,
regarding that last point, Norway indicated that it would like the model schedule to be based on three
pillars and would like to draw attention to the "draft checklist", an alternative approach they hadS/CSS/M/12
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already suggested.  This checklist was based on the fact that multimodal transport was a component of
land transport that was similar in essence to the "cluster" proposal in paragraph 7 of the Australian
proposal.  He thanked Australia for the clarifications given in its detailed intervention on competition
aspects and requested further precision on the services that would be covered by this proposal.  He
stressed that their own maritime pr oposal was part of a broader approach to the services negotiations.
He said that all GATS provisions applied to the maritime transport sector, except the MFN principle
for Members without commitments in this sector.  This situation would come to an end at the
conclusion of the negotiations.  The delegation of Norway was encouraged by the fact that numerous
countries, which had acceded recently to the WTO, had undertaken maritime commitments and
stressed again the importance of the 1996 decision, of the model schedule and of its checklist.
183. The representative of Korea agreed with the Australian delegation on the early resumption of
the maritime negotiations and emphasised the need to place priority on this sector.  He stressed the
need to start from previous offers, in accordance with the 1996 decision, using the model schedule as
a basis and the importance of a multimodal transport.  However, regarding that last point, he
considered that the scope of negotiations should be limited to multimodal transport with a blue water
leg, to the exclusion of maritime transport cabotage combined with land transport.  The inclusion of
the totality of multimodal transport would make an agreement very difficult to iron out, in view of theconflicting interests of Members.  On the inclusion of competition policy in the negotiations, Korea
considered that one needed to be extremely careful due to the sensitivity of the issue.  He indicated
that he would be willing to answer questions on the Korean proposal in a written form.
184. The representative of Hong Kong, China indicated that his delegation was in agreement with
many elements of the proposal by Australia.  He ag reed with the starting-point of the negotiations, the
three pillars, the addition of multimodal as a fourth pillar and the restrictions identified.  He was also
interested in the explanations given by the delegation of Australia on competition, although he was
not sure how the consideration of competition legislation or its enforcement could contribute to the
elimination of the market restrictions identified.  Hong Kong, China supported the early resumption of
the negotiations on the basis of the MFN principle, that is, the application of Article II of the GATS,and the removal of MFN exemptions in the sector.  He considered that the framework already
established by the GATS on maritime transport was satisfactory and provided sufficient flexibility to
address the regulatory and security concerns of Members.  He found the model schedule a useful basis
to work from and considered that flexibility might be exercised with regard to the introduction of any
new elements.  Allowing access to and use of consecutive intermodal activities on a non-
discriminatory basis could be the first step towards integrated transportation services.  Hong Kong,
China urged Members to consider favourably the checklist of logistics and related services set out inits proposal and encouraged Members to enter into market access and national treatment commitments
in as many sectors as possible.  Finally, he supported the views that Members should be allowed to
schedule their commitments according to their national policy objectives and level of development.
185. The representative of Singapore supported many of the elements in the proposal by Australia,
such as the objective of further liberalization, the usefulness of the work done in the past negotiations,
the previous offers as the basis for negotiations, the three pillars approach, and the need to include
multimodal transport.  He indicated that his delegation would be open to a cluster approach but felt
that this would have to be discussed further.  He also agreed on the list of restrictions drawn up by
Australia but noted that "preferential treatment of shipping service providers from specific
economies" was an MFN question and therefore subject to further negotiations.  Finally, he shared theopinion of some Members that competition policy was a sensitive issue, although his delegation was
not averse to discussing competition policy issues in the context of the maritime transport services
negotiations;  the broader picture of competition issues should, however, not be forgotten in that
regard.S/CSS/M/12
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186. The representative of New Zealand considered maritime transport services a priority in this
round of services negotiations.  An efficient and competitive maritime transport sector would benefit
all WTO Members, especially New Zealand which wa s remote from most of its trading partners.  He
supported the general thrust of the Australian proposal, such as the previous offers as the starting
point for the negotiations, the three pillars, and the need to include multimodal transport.  However,he requested further information regarding the sugge stion of the cluster approach mentioned in the
proposal by Australia.
187. The representative of the European Communities said he was encouraged by the eight
proposals tabled on maritime transport services and noted the strong similarities in terms of objectives
and approach.  At the same time, he noted that their differences were also extremely interesting, as
they provided different angles on how to address the question.  The European Communities shared the
views expressed in the proposal by Australia and welcomed clarification by that delegation on thecluster approach and the competition issues.  He supported the position expressed by the delegations
of Korea, Norway and New Zealand on multimodal transport and on the terms of the negotiations and
expressed interest in the proposal from Hong Kong, China on logistics services.  He considered
maritime transport services an essential facilitator of world trade, providing a cheap, reliable and
efficient transportation system and one where prices had decreased considerably over the last twentyyears.  Therefore, he felt it was important to address the issue of barriers preventing the efficient
delivery of those services.  Those barriers could be found in the three pillars, in multimodal activities
and even in other areas, such as documentation and liability regimes.
188. The representative of Cuba noted the limited number of commitments and their lack of
uniformity and said that further work was needed in this sector.  She indicated that she was not in
favour of resuming negotiations to increase commitments if the implementation problems of the
Uruguay Round were not addressed in this particular sector.  As the maritime transport sector was of a
strategic nature, a grace period for market openings in developing countries was necessary.  The
organization of the sector in Latin America and the Caribbean was characterized by bilateral
agreements within the region and with the main commercial partners.  A large part of the domesticfleet was state-owned and in many cases strategic.  These fleets did not necessarily operate in a
competitive environment.  All these characteri stics made an agreement on multilateral trade
liberalization difficult, which explained the caution shown by developing countries.  The delegation of
Cuba shared the view, expressed in the European Communities proposal, that multilateral
organizations, such as the International Maritime Organization, should continue their efforts to ensure
an appropriate level of safety and employment conditions.  Commenting on the proposal by Japan, she
stressed that in her view future negotiations on  MFN exemptions had to be dealt with in accordance
with the negotiating guidelines, and should provide greater flexibility for developing countries.  She
requested further information from Japan on how it intended to address developing countries'
concerns in that regard.  She also requested ad ditional information from Norway on how it saw the
treatment of developing countries in the negotiating process, as described in paragraph 39 of the
Norwegian proposal.  Referring to the proposal by Canada on horizontal negotiations, she agreed thatthe GATS could not be interpreted to place an obligation on governments to privatize or deregulate
any service.  This was also true for maritime tr ansport services.  Finally, commenting on the Chilean
proposal, Cuba requested further clarification on the significance and scope of the suggestion
contained in paragraph 1 to devise binding disciplines for domestic regulation.  Cuba expressed
disagreement with the point made in the proposal that maritime transport should be based oncompetition between shipping countries in the market with a minimum degree of regulatory
interference.
189. The representative of Morocco indicated that it had doubts on the cluster approach suggested
by Australia.  Morocco recalled that it had submitted an offer during the previous negotiations, but
had to withdraw it for obvious reasons.  However, Mo rocco still had an interest in this area and wouldS/CSS/M/12
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submit a proposal on the subject in the near future, based on the principle of progressive liberalization
as contained in the GATS.
190. The representative of Japan indicated that his delegation was looking for real and meaningful
liberalization in maritime transport services and was willing to start this process at the earliest stage
possible.  The model schedule, elaborated during the previous negotiations, was a useful tool and heconsidered that the offers, or improved offers, submitted by Members, as stated in paragraph 1 of the
1996 decision, should be the starting-point.  Members should consider how new elements, such as
multimodal or intermodal transport, could be addressed.  It would be necessary, in particular, to
discuss classification aspects before the start of the request/offer process.  He considered that the
definitions of multimodal transport also required further examination.  As multimodal transport was
particularly linked to containerization, the discussion should focus on that segment of maritime
transport. Commenting on the proposal by Norway, he  expressed interest in the checklist suggestion.
Japan also shared the Norwegian view that MFN exemptions could not provide a basis for counter
measures.  Regarding the competition issue, he thanked Australia for the explanation provided, but
thought that the matter required careful consideration, taking into account ongoing general work in the
WTO.  Japan would study the examples given, and further papers on the subject would be
appreciated.  He also thought that, in view of the se nsitivity of the issue, cabotage should be dealt with
at a later stage carefully and with experts.  With regard to the review of the effects of the continued
suspension of GATS Article II, foreseen by pa ragraph 4 of the 1996 decision, Japan suggested that
this review be an ongoing process during the negotiations rather than the object of a specific meeting
of the Council.
191. The representative of Thailand underlined the fact that, although her delegation had made
commitments on maritime transport during the Uruguay Round, their shipping sector was in a difficult
position due to foreign competition.  However, she did acknowledge that, according to the negotiating
guidelines, no sector should be a priori  excluded.  Therefore, she would not block the negotiations
and was ready to participate in them under the fo llowing two conditions:  fi rst, cabotage would be
excluded from the scope of the negotiations, and, second, there would be more clarifications onmultimodal transport.  Thailand could not see the advantages of multimodal commitments versus
commitments in the various individual modes of transport.
192. The representative of Switzerland underlined the importance of shipping for world trade and
its environmentally friendly nature and recalled that Switzerland had a fleet of over 1  million tons.
The negotiations should start in conformity with the 1996 decision, i.e. with the rest of the services
negotiations and on the basis of the work accomplished by the NGMTS.  Switzerland detected, from
the interventions in the meeting, an emerging consensus on the use of previous work, on the threepillars, on the model schedule, and on the importance of multimodal services.  Finally, regarding the
general objective of these negotiations, Switzerland supported the position of the European
Communities, as expressed in paragraph 29 of document S/CSS/W/41.  He agreed that the objective
was to considerably reduce any obstacles to trade while, at the same time, not affecting the quality of
services and the right to regulate for non-trade purposes such as safety and environment.
193. The representative of Turkey recalled that his delegation had undertaken commitments in
maritime transport services.  He supported the draft model schedule and the objectives covered in the
proposal by the European Communities.  He considered the issue of cabotage as being outside the
scope of the GATS and his delegation had no intention to negotiate cabotage rights.  Turkey disagreed
with Norway's suggestion that "provisions in bilateral agreements which are entered as MFNexemptions [would be] only recognized when bot h parties to the agreement take equivalent MFN
exemptions".  His interpretation was that no such provision existed in the Annex on MFN exemption.
He went on to explain that, for example, one Member of the bilateral agreement might want to extend
its effects to all Members, while the other may prefer to take an MFN exemption.S/CSS/M/12
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194. The representative of the United States recalled that, at the meeting held in May, his
delegation had provided comments on some negotiating proposals, and especially on the scope of the
negotiations.  He indicted that hid delegation might provide some comments and suggestions at a later
stage.
195. The representative of Hong Kong, China responded to questions from the delegations of the
United States and the European Communities by clarifying that multimodal logistics could be defined
as the planning, implementation and control of the movement and storage of raw materials, finished
goods and related information, in an effective manner conforming to customer requirements.  This
comprised integrated management of global a nd regional supply and distribution trends.  The
checklist contained certain services that formed the essence of logistics services and invited Members
to expand that list further.  A meaningful libera lization would imply commitments in as many services
on the checklist as possible.  As maritime transport services was part of that list, Hong Kong, Chinafelt that this was particularly crucial.  As long as commercially meaningful liberalization could be
achieved for logistics, his delegation remained open on the classification issues, bearing also in mind
the need to preserve legal certainty of existing commitments.  Hence, Hong Kong, China did not
consider it to be a pre requisite that Members agree that the different existing categories of transport
services must be negotiated under "logistic related services".  The rapid evolution of third-partylogistics (i.e. the extension from traditional transportation services and warehouse shipping
management to light assembly, order fulfilment, inventory management and door-to-door services)
had already well demonstrated the specificity of logistics services.
Air transport services
196. The representative of Brazil referred to the proposal by Norway advocating the inclusion of
transit, i.e. first and second freedom.  Brazil requested that, as the International Civil Aviation
Organization was intensifying its efforts to obtain  full adherence to the International Air Services
Transit Agreement (IASTA), Norway explain what would be the value of bringing first and second
freedoms within the scope of the GATS.
197. The representative of Brunei Darusalaam shared the general thrust of the New Zealand
proposal, in particular paragraph 12 on possible improvements in areas not mentioned explicitly by
the Annex and paragraph 14 on the ability of the GATS framework to handle the specificities of the
air transport sector.  He felt there was significant scope to improve commitments in the area of air
transport.
198. Commenting on the proposal by the European Communities, the representative of Venezuela
expressed her interest in the idea of including training services and requested further studies in that
regard.
199. The representative of the European Communities, responding to a question from Japan on
priority requests in terms of sectors and modes, indicated that all three sectors were important.
Airlines and consumers would benefit from a good and competitive supply of repair and maintenance
services on a non-discriminatory basis.  For this sector he considered mode 3 was essential.
Computer reservation services, sales and marketing were largely interrelated and so commitmentsunder mode 1, 2 and 3 should be sought.  Commitments would be a way to boost the airlines' sales,
particularly direct sales through on-line channels.  Finally, aside from the sectors explicitly mentioned
in the Annex, there was a series of supporting services such as ground handling and airport
management that should be taken into consideration for specific commitments.
200. The representative of Turkey indicated his delegation's support for the proposal by the
European Communities, except for the inclusion of cargo handling services and storage services.  In
this regard, his delegation felt there were several constraints, such as infrastructure and safetyS/CSS/M/12
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considerations that prevented the opening of those services in Turkey.  Commenting on the proposal
by Norway, he supported the view that any ag reement should to be in full conformity with
international standards and regulatory measures as established by ICAO and the European Civil
Aviation Commission (ECAC) . However, Turkey did not favour the suggestion that first and second
freedoms should be included in the scope of the GATS.  He agreed with the proposals from Japan andChile as far as the need  to clarify concepts, definitions and classifications was concerned.
201. The representative of the Dominican Republic underscored the link between air transport and
tourism.  He supported, without any reservation,  the proposal contained in section B.III of the
proposal from the European Communities which suggested the undertaking of commitments in
sectors such as ground handling, airport administ ration and baggage handling.  He also supported
paragraph 11 of the New Zealand proposal on the need to improve the number and quality of
commitments in air transport services.
202. The representative of New Zealand, responding to a question from the European
Communities on whether it had identified other "services directly related to traffic rights than self
handling", stated that its definition of the term "directly related to traffic right" did not focus on what
was excluded from the scope of the Annex but on what was included.  He said that his delegation
would further reflect on the question posted by the European Communities.  Answering anotherEuropean Communities question on how it would address the need to limit the number of suppliers in
case of limited space or concession, New Zealand considered that the GATS offered sufficient
precedents on the management of limited resources, especially in the area of telecommunications.
Finally he stressed that the inclusion of ground-based activities would not affect safety and security
measures as the GATS did provide a flexible framework to accommodate those non-trade concernsand foresaw the right to regulate in pursuit of national objectives.
203. The representative of Japan supported the positions expressed by the delegation of Brazil.
Traffic rights, including the first and second freedoms, as well as aviation security and safety issues
were well organized under the current Chicago regime governed by ICAO.  This regime, based on the
Chicago Convention, had worked effectively not only in safety and security areas but also ineconomic areas.  This system had greatly contributed to the development of international air transport.
He felt that the present coverage of the GATS, in which "hard rights" were comprehensively
excluded, should be maintained and efforts should be concentrated on the three existing areas
specified in the Annex.
204. Recalling the positions expressed at the previous meeting, the representative of the United
States pointed out that some negotiating proposals included activities that were currently excluded
from the GATS.  Hence he could not see how these topics could be taken up in the negotiations unless
and until the scope of the GATS was changed to include those activities.
205. The representative of Cuba noted that some proposals suggested the inclusion of first and
second freedom, airport services, air traffic control and general aviation.  Cuba considered that
overflight and air traffic control were directly linked to the exercise of first and second freedom.
These freedoms were regulated by a specific agre ement under the aegis of ICAO.  The delegation of
Cuba found that the provisions of this agreement had worked well for them, as experienced in a case
involving its routes to Canada.  He considered that the question of overflight should remain under this
agreement which, in addition, recognized the sovereignty of States over their airspace.  He concurred
with the Chilean proposal on the need to clarify concepts, definitions and classifications.
206. The representative of Argentina recalled that the exchange of traffic rights was taking place
under the Chicago convention regime.  Argentina was open to consideration of any elements that
could improve the present classification or coverage of certain activities in the air transport sector but
only under the present parameters indicated by the air transport Annex.S/CSS/M/12
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Other transport services
207. The representative of Switzerland provided some clarifications on its proposal on auxiliary
services.  In response to questions put forward by the European Communities, he indicated that one of
the main obstacles in the sector were licencing requirements.  Licences were very difficult, if not
impossible, to obtain and forced freight forwarders  to use intermediaries or form partnerships with
local providers.  This, in turn, reduced the efficiency of the service provided.  In addition certain
countries required foreign freight forwarders to pay a considerably higher deposit than was required
of local forwarders.  Those obstacles were affecting in particular small and medium sized companies.
Switzerland wanted this question to be addressed in a pragmatic and effective manner in the
negotiations to come.
(v) Tourism Service s
208. The representative of the Dominican Republic (also speaking on behalf of Bolivia, Ecuador,
El Salvador, Honduras, Nicaragua, Panama, Peru and Venezuela), introduced the revised annex
proposal.  He noted that there had been much talk in the WTO on sustainable development,
Article IV, etc., and stated that there was now a proposal addressing these issues.  The new proposal
reflected Members’ concerns expressed over the past year, including classification issues, questions
on the relevance of pro-competitive disciplines, concern over prejudicing the air transport negotiationsand concern over the relationship with market access issues.
209. The new proposal had a more restricted sectoral definition, based on what the World Tourism
Organization (WTO/OMT) termed “Tourism Characteri stic Products”, as specified in the Tourism
Satellite Account (TSA) adopted by the United  Nations Statistical Commission.  Environmental
services continued to be included, the representative noted.  The new proposal did not use the term“cluster”, and it clarified the objectives of the intended annex as well as the relationship with air
transport.  The revised introduction specifically stated that the proposal was not intended to prejudice
either the air transport negotiations or the liberalization commitments of specific countries.
210. The representative stated that the new proposal was seeking, through a regulatory approach,
to discipline a series of problems and practices that affected the sustainability of tourism, and couldnot be solved through a market access approach.   The detailed listing of cases of competition
problems, submitted by Francois Souty at the WTO Tourism Symposium, confirmed the relevance of
this approach.  The proposal sponsors were also working with the WTO/OMT and UNCTAD on the
documentation of competition problems.  Regarding air transport, there was concern over the
allocation of scarce resources.  Part 6 of the new proposal provided for access to air transport
infrastructure and ancillary services on a non-discriminatory basis.  Both developed and developing
countries were affected by access problems, the representative stated.
211. The representative of Uruguay (speaking on behalf of Mercosur) noted that international
tourism had considerable importance in terms of employment, trade volume and foreign exchange
earnings, and that, generally defined, it was the world’s largest industry.  Mercosur’s intention was to
further liberalization in this sector and, as a result, to increase the participation of developing
countries in services trade, as mandated under GATS Article IV and the Negotiating Guidelines.Under the present classification, there were four sub-sectors, including the “Other” category.   The
WTO/OMT has stated this classification was not sufficient, and indicated it would like to see
modifications.  In this respect, Members needed to bear in mind the Tourism Satellite Account, which
contained a listing of Tourism Characteristic Products.
212. Mercosur’s objective was to address specific commitments in tourism, as a complement to the
annex proposal.  Looking at the existing commitments, the representative noted that while there were
roughly 120 commitments, the WTO had 142 Members.  Of the sub-sectors, all the tourismS/CSS/M/12
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commitments included Hotels and Restaurants, but then the level dropped off sharply, with less than
100 commitments for Travel Agencies and Tour Operators, less than 60 for Tourist Guides, and less
that 20 under “Other”.  Only about one-half of the tourism commitments included 3 or more sub-
sectors.  In addition, the level of market access and national treatment varied considerably by the
mode of supply, the representative noted.
213. Among the limitations in Members’ schedules under Mode 1 were commercial presence
requirements (especially for tour operators), and the entry “unbound due to lack of technical
feasibility” (which in many cases could be questioned with the development of e-commerce and the
Internet).  Under mode 2 there were still some restrictions, as well as a lack of bindings.  Under
mode 3, scheduled restrictions included the requirement to be incorporated locally, foreign equity
limits, permits, licenses, ENTs, residency requirements, citizenship requirements, etc.  The ENTs
were required for restaurants, bars, and activities of tour operators and travel agents.  Conditions forENTs were sometimes specified, other times they were not specified.  For mode 4, there were
nationality and residency requirements, etc.  Generally, mode 4 was unbound.
214. In concluding, the representative said that the analysis of Tourism Characteristic Products
should be continued.  Nevertheless, there was also a considerable margin for improvement of the
existing tourism commitments.  He said that Mercosur might also make a written contribution.
215. The representative of Norway also observed that travel and tourism was among the world’s
largest and most rapidly growing industries, and an important source of foreign exchange for
developing countries.  The negotiating proposals were important for putting tourism high on the
agenda, he stated, and the European Communities proposal was in line with Norway’s view.  Barriers
specified in the European Communities proposal included licensing requirement, ENTs, equitylimitations, residency and nationality requirements, and restrictions on the movement of personnel.
The European Communities proposal also highlighted issues related to consumer protection and the
protection of historical areas.  Liberalization must coincide with measures to ensure these
requirements, the representative stated.
216. The representative of Kenya noted that tourism was very important to the economy, and that
Kenya had made substantial GATS commitments on tourism.  Kenya regretted, however, that the
GATS did not deal with anti-competitive practices, as recognized at the UNCTAD experts meeting.
The representative said that Kenya supported the annex proposal.
217. The representative of Mexico said they would be making a written proposal in the near future,
and noted that tourism was one of the top three foreign currency sources for Mexico.
218. The representative of India said that tourism was a sector where developing countries,
including India, had great interest.  He noted that India had no restrictive licensing practices in the
travel, tourism, and hospitality sectors, other than quality requirement approvals and other measures
in line with IATA-mandated practices.  India viewed as inappropriate the United States proposal for
the elimination of equity restrictions.  Environmental issues were best discussed in the CTE.  The
representative asked for more information on the United States reference paper proposal, including
which regulatory principles the United States wished  to address, why such issues could not be dealt
with in the WPDR, and whether the United States intended to address any anti-competitive practices
with the reference paper.
219. On the European Communities proposal, the representative stated that India supported the
existing W/120 classifications, not a cluster approach.  The representative requested that Indian
diplomas and tourism qualifications be recognized, and stated that Article VII recognition provisionswere very important in this regard.  India agreed with the Switzerland that competition issues shouldS/CSS/M/12
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not be addressed, and was hesitant with regard to Japan’s proposals on tourism guides and on hotel
and restaurant services.
220. The representative of Cuba said Cuba approved of the new annex proposal, but felt that air
and maritime transport should be discussed separately.  On the United States list of obstacles in the
tourism sector, the representative noted that the United States imposed restrictions on travel to Cubaas well as other blockade regulations, including on GDS.  On Switzerland’s proposal, he enquired as
to what types of liberalization were covered, and asked whether Switzerland allowed foreign guides to
operate.
221. The representative of Switzerland responded that they would look at Cuba’s question.  On the
European Communities written question, regarding ENTs, Switzerland believed that these should
either be eliminated or reduced to a minimum.  Such instruments should not be needed, the
representative stated, because well-functioning markets should be self-regulating.  Switzerland wasconsidering appropriate strategies regarding ENTs, but an initial step could be to require that ENT
economic criteria be further specified.
222. The delegation of Japan said they reserved their rights with respect to the new annex
proposal.  They noted that the events of September 11 in the United States had tragic consequences on
tourism, and said it was necessary to monitor the situation.  They also noted the 29 SeptemberWTO/OMT resolution on terrorism attacks.  Japan believed that tourism demand would shortly
recover, the delegation stated.  Japan welcomed all the tourism proposals, as they asked Members to
consider increased commitments.  Although the level of tourism commitments was generally high, it
was low for the sub-sector of tourist guides and attendants services, the delegation noted.  Japan
expected increased commitments on hotel and restaurant services, as well as on charter services.
223. The representative of the European Communities made preliminary comments on the new
annex proposal, saying that, overall, they remained to be convinced that an annex was necessary.  The
cluster still was very wide, she stated, and the sectors concerned did not share a common regulatory
structure.  Some of the annex issues were more generic, extending beyond tourism, and could be
addressed in other fora such as the WPDR.  There was also still a large focus in the new proposal onair transport.  The air transport review should be the framework for air transport discussions, the
representative stated.  On competition policy, the European Communities was seeking more
comprehensive negotiations, and believed this was the best way to address the competition issues
identified in the annex proposal.
224. The European Communities very much supported the need to ensure that the expansion of
trade in tourism services was consistent with sustainable development.  The representative also stated
that there needed to be a link to negotiating addi tional specific commitments in tourism services, and
that the European Communities fully supported Me rcosur’s intervention on the need for further
commitments.  She then asked how the annex proposal would actually link with negotiations on
specific commitments.  Regarding India’s comments,  she pointed out that the European Communities
was promoting use of a checklist, not changes in tourism classifications.  Regarding Japan’s written
question on safeguarding the ecological balance, the European Communities believed that anappropriate regulatory framework was necessary, and that this would set the context for trade
liberalization.  Another important aspect was opening up the market to foreign providers of high-
quality environmental services, the representative stated, which would contribute to the raising of
environmental standards and reduction of negative environmental impacts of tourism.
225. The representative of Venezuela stated they were aware of capacity of tourism services to
contribute to the general economy.  They believed that tourism statistics and methodologies should be
well-defined, and that homogeneous information was needed.  A special GATS annex would therefore
be useful, as part of the increased liberalization called for in GATS Article XIX.  There was also theS/CSS/M/12
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issue of compliance with existing agreements, including the provisions of GATS Article IV.  A
number of Venezuela’s government measures had contributed to increased tourism liberalization, and
Venezuela wished to open further negotiations.  The complexity of the sector necessitated a
multilateral approach, the representative stated.  On the European Communities proposal, regarding
classification issues, the representative asked whether this work should be undertaken by the WTO orother organizations.
226. The representative of the United States welcomed the new annex proposal, as well as the
intervention by Mercosur.  Regarding the annex proposal, the United States believed that the purpose
of the tourism negotiations should be to make it easier for visitors to travel to other countries, and for
other countries to attract visitors.  It was difficult to see how the new annex proposal would
accomplish this, the representative stated, and therefore it would be helpful to have examples of how
the annex would work if adopted.  For example, it was necessary show why measures regarding anti-competitive practices were needed, why existing bilateral mechanisms were inadequate, why
multilateral mechanisms were necessary and how these would operate.
227. On sustainable development, it would be helpful to have examples of the problems to be
solved.  Also useful would be to show how us e of environmental standards would help attract
businesses and increase the number of visitors.  The representative said he endorsed many of theEuropean Communities statements on broader issues, including on air transport and competition
policy.
228. There seemed to be some misunderstanding of what was sustainable development in tourism,
the representative stated.  Many believed this related to the environment, but others seemed more
concerned about “leakages” and the sustainable development of incomes.  The United States. proposalrecognized the need to address the impact of touris m on the environment and society, he  stated.  This
included giving those affected an opportunity to present their views on proposed tourism measures.
On classification issues, the United States endorsed the checklist approach.  Regarding Mercosur’s
proposal, the representative said it provided a workable framework for negotiations.
229. The representative of the Dominican Republic (also speaking on behalf of Bolivia, Ecuador,
El Salvador, Honduras, Nicaragua, Panama, Peru and Venezuela), said it had been a very useful
discussion, and noted that the negotiations were still in an early phase.  It was necessary to look at the
number of countries supporting the other negotiating proposals, he stated, including the support for
other sectoral proposals.  The representative fully endorsed Mercosur’s approach, saying it was a very
important part of the negotiations.  Members could easily draw up a model schedule of commitments
in tourism on the basis of Mercosur’s intervention, he stated.
230. Regarding Members’ questions on the earlier version of the annex proposal, the representative
said that the other proposals did not take up the issue of the sustainability of tourism and its
relationship to the “leakage effect” that prev ented compliance with environmental standards.
Environmental protection costs money, he stated.  If hotels received US$19 per person per night, for
example, he wondered how they could comply with environmental standards.  On the European
Communities points, he replied on a preliminary basis, saying he disagreed that regulatory issuescould be dealt with in the WPDR.  Regulatory issues in the annex proposal were negotiating issues, he
stated, and the Special Session was the only forum with a negotiating mandate.  The Dominican
Republic would not agree to discuss any the issues raised in the annex proposal in any forum other
than the Special Session.
231. With respect to air transport, the representative stated that it was included in the definition of
tourism, and noted that over 80 per cent of international tourists travelled by air.  He asked how
tourism could be considered without including air transport.  On competition policy, he hoped the
European Communities competition policy proposal could consider specific tourism issues.S/CSS/M/12
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Regarding the need expressed by the United States for examples, the representative said they would
be given.  On quality issues, tourists travelled to destinations with the highest standards, he stated, and
urged that multilateral mechanisms be strengthened.
232. The representative of Uruguay (speaking on behalf of Mercosur) said he was grateful for the
comments received on his intervention, and that Mercosur would be considering a written
intervention.
(vi) Environmental Services
233. The representative of Australia said that the environmental services sector was a burgeoning
industry, which had undergone considerable changes since the classification in W/120 had been
established.  Her delegation proposed to focus on classification and market access issues.  With
respect to classification, Australia supported, in principle, the approach proposed by the European
Communities in their communication S/CSC/W/25.  The proposed classification recognised thedevelopment of this sector and would extend the range of services covered without disrupting the
existing classification.  Moreover, with modest adjustments, it would capture a large portion of the
industry.  In their written communication, Australi a proposed that Members (i) agree to broaden the
sectoral classification of environmental services to bring the WTO classification of environmental
services into line with current practice in trade in  services, and to use this new sectoral classification
for negotiations in environmental services;  (ii) review any limitation on commercial presence with a
view to eliminating barriers that could not be ju stified;  (iii) ensure the implementation of GATS
Article I:3(a), in particular that government licensi ng and ownership regulations at all levels, central,
regional and local, were transparent and not unnecessarily restrictive.  Finally, the Committee on
Specific Commitments should be tasked to address environmental services classification issues raisedin negotiating proposals, with the aim of subsequently reporting back to the Special Session on how
this might be dealt with in the context of the negotiations.
234. The representative of Mexico said that environmental services represented an important
sector, which offered possibilities of increased access to environmentally-friendly technology.  The
availability of environmental services could help to  comply with environmental regulations at reduced
costs.  An extensive offer of environmental services had positive effects on economic activities,
including complementary services, local inputs or various forms of collaboration between national
and foreign suppliers.  Liberalisation of environmental services had to be compatible with national
environmental policies and priorities.  Moreover, environmental policies should not be used to enforce
protectionist trade measures.  According to Mexico, the classification of environmental services
contained in document W/120 had to be brought up to date because it had been overtaken by changes
that had occurred both in environmental policies and in the industry.  An adequate classificationshould list services systematically, according to the environmental media (water, air, noise, etc.) and
should include all relevant services.  In a revised classification, the disaggregation of the different
sub-sectors should be more detailed and should be agreed multilaterally.  A focus should be put on
technologies, which prevented environmental degradation, rather than on those based on "end-of-
pipe" control.  At the international level, Mexico had shown its interest in the protection of theenvironment by participating in various agreements, such as the Montreal Protocol or the Basel
Convention.  At the national level, Mexico had strengthened its regulatory and institutional
framework for the protection of the environment and the conservation of natural resources, and efforts
were still underway to improve regulatory coheren ce in this field.  The federal legal framework had
been gradually completed and adapted on the basis of the General Law on Ecological Balance.  In thefuture, Mexico would be making efforts to improve coherence in its standards, simplify administrative
procedures and improve regulatory certainty.  These efforts, which aimed at creating favourable
conditions for trade in environmental services, would predictably increase in the light of domestic
requirements.  However, Mexico did not consider it appropriate to make legislative modifications in
order to promote trade in environmental services.  Many of the decisions that affected conditions forS/CSS/M/12
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contracts, or concessions granted to suppliers of services, such as wastewater treatment, collection and
processing of waste belonged to local authorities.  Requirements for this type of services were quite
high and there was a growing interest by loca l governments in promoting private investments.
Obstacles to international trade in environmental se rvices should be eliminated.  However, a number
of additional considerations should be kept in mind, such as the distribution of competence in thethree levels of governments, social policy requirements, existing property regimes and access to
financial resources by local services suppliers.  Mexico considered it appropriate to include
environmental services in the negotiating agenda.  Discussions on the update of the classification
contained in W/120 were relevant and the proposal by the European Communities (W/38) could be a
good starting-point.  However, the detail of the s ub-groups, classes and services contained in each of
these groups would require a careful discussion on how to define them.  The category "Other
environmental and ancillary services" should be refined, to include attribute or general descriptions ofservices which might be included (such as studies for evaluation and decrease of environmental
impact or consultancy for environmental policy and management.  Subsectors related to the
environment, but which were included in other sectors, could be negotiated separately.  Some terms
used by the European Communities to describe the related sectors remained to be clarified (for
instance, the term "that include an environmental component").  In the cases of services such asconstruction, architecture or engineering, there should be criteria to "separate" the environmental end-
use from other uses.
235. The representative of Switzerland said that many objectives contained in the communication
presented by Australia were in line with the Swiss communication.  Replying to the first question
posed by Jordan, in JOB(01)/96/Add.8, he indicated that the classification proposed by Switzerlandhad the same basis as the EC's proposal, which was the ground work done by the OECD/Eurostat
Working Group.  The European Communities communication contained a precise description of the
sub-sectors in environmental services (p. 6-7).  Switzerland was, however, still reflecting on the
opportunity to include water distribution services.  Regarding the second question, Switzerland
referred to services like engineering, architecture, consulting, project management or urban planningservices with an environmental components.
236. The representative of Norway noted that all the written communications stressed the "win-
win" potential of liberalising environmental services.  The United States also explicitly underlined the
importance of environmental regulations.  His delegation was of the view that the current
classification of core environmental services was too limited and supported the European
Communities proposal in this respect because it better reflected the trade and sectoral realities.
Services related to environmental services, such as technical testing and analysis, scientific andtechnical consulting, engineering and construction services, should also be addressed.  Horizontal
issues, in particular horizontal barriers, had a considerable impact on trade in this sector and should be
discussed as well.
237. The representative of the Czech Republic said that his delegation fully supported the
liberalisation of environmental services.  A key element for the market access negotiations was the
revision of the current classification.  In that regard, his delegation supported the proposals made by
the European Communities and Switzerland.  Existing barriers should be removed, while preserving
Members' ability to regulate.
238. The representative of the European Communities said that the communication presented by
Australia was in line with proposal presented by her delegation.  She enquired which were the
"adjustments" that Australia thought should be made to the European Communities communication.
She noted that various delegations were in favour of revising the existing classification.  It was the
view of her delegation that discussions on classification should continue in the Committee on Specific
Commitments, but also in the Special Session since there was a link with the market access
negotiations.  In the view of the European Communities, a "cluster" or "checklist" was a usefulS/CSS/M/12
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negotiating tool which clarified and highlighted links between core environmental services and related
services; however, the idea was not to change the ex isting classification.  Addressing questions posed
by Jordan, on page 15 of JOB(01)/96, she said that "business services with an environmental
component" (paragraph 9 of S/CSS/W/38) covered architecture services and services related to
recycling on a fee or contract basis. Concerning the second question, the European Communitiesintended to address limitations to national treatment with respect to taxation measures listed as
horizontal limitations in a number of schedules.  These limitations were not related to tax measures
exempt from scheduling within the meaning of Article XIV(d) and (e).
239. The representative of Cuba noted that most written communication stressed that there was a
direct link between liberalization of environmental services and sustainable development.  Cuba was
not entirely convinced of the existence of such a link.  Her delegation needed to further analyse the
communications presented by the United States and by Canada.  Reduction of costs and introductionof new technologies were major factors.  She doubted that both exporters and importers would benefit
from increased liberalisation because she failed to  see how a market opening would result in a
reduction of costs for developing countries since trade in this sector was dominated by large
monopolies.  Cuba was of the view that special and differential treatment should be applied so as to
take into account the various levels of development and ensure technology transfer in favourableconditions.  This was a precondition for trade liberalization in environmental services.  Noting that
some WTO Members had not ratified important inte rnational environmental agreements such as the
Biodiversity Convention or the Ky oto Protocol, she wondered whether the true interest of some
developed countries was not simply to open new markets.  Although the existing classification
contained in W/120 was not perfect, it was not timely to extend the list of sub-sectors, beforeevaluating the effects of such an extension on the economies of developing countries.  The use of
"clusters" might be detrimental to the interests of developing countries.  Her delegation believed that
some of the so-called "barriers to trade" which we re identified were nothing but legitimate policy
requirements.  In this regard, it should be kept in mind that countries that might decide to open their
markets retained the right to establish the necessary environmental legislation.
240. The representative of New Zealand said his delegation supported the general thrust of the
communications presented by the European Communitie s, Switzerland and Australia, with respect to
ways to address the gaps in the current classification.  There were some difficulties with respect to the
"cluster" approach, one key concern being that this could lead to the fragmentation of existing
commitments.  Mexico had raised a number of pertinent questions in this respect.
241. The representative of Turkey enquired under which item the European Communities would
classify "natural disaster assessment services".  Her delegation did not favour the inclusion of
"biodiversity" in the classification (see item 6F) of the European Communities proposal.
242. The representative of India said that governme nts' right to regulate in order to take into
account national objectives and priorities, should not be questioned.  His delegation was opposed to
the "cluster" approach.  Classification issues were best addressed in the Committee on the Specific
Commitments and discussions in this respect should be concluded before the start of the marketaccess negotiations.  Developing countries should have more flexibility in undertaking specific
commitments.  India supported the proposal to hold consultations on how to improve mode 4
commitments, especially for developing countries, as well as Canada's proposal to remove restrictions
on entry and stay of services managers, professionals and experts.  There was a great need for
bridging the gap between developed and developing countries, in order to give a true meaning toGATS Article IV.
243. The representative of Brazil said that his country had export interests in some sub-sectors and
indicated that the national regulatory framework was being revised.  He noted that the sub-sectors
could have different regulatory and economic characteristics.  The following issues should beS/CSS/M/12
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discussed:  (i) the role of sub-national levels in regulating;  (ii) the importance of small- and medium-
sized enterprises;  (iii) transfer of technology;  (iv) the question of externalities.  The written
communications shared a number of common points, such as classification.  However, there remained
different views on water.  A distinction should be made between the different kinds of water involved
(drinkable, bulk water, etc.).  The legitimate objectives of social policy underlying regulatoryinterventions should be kept in mind.  Questions of competition should be addressed, because of the
long-term contracts, generally in the form of concessions, which characterised this sector.  He
enquired why none of the proponents had addressed the issue of regulatory disciplines.  With respect
to the proposal by Australia, he asked what the reference to "implementation of Article I:3(a) of the
GATS" meant.
244. The representative of Canada said that increased liberalisation in environmental services
would benefit all Members.  The current classification could form the basis for the negotiations.
Canada recognised the existence of related services, which could form the basis for a checklist.  With
respect to classification, discussions in the Special Session should focus on elements on which all
Members currently agreed.  For other elements, such as those mentioned by Brazil and Switzerland,
more work could take place in the Committee on Specific Commitments.  Classification and
scheduling issues raised questions going beyond the need to maintain the legal stability of the GATS.
245. The representative of Australia said that her delegation would respond in writing to the
question posed by the European Communities regarding the need for "modest adjustments".  With
respect to Article I:3(a), Australia had in mind local and regional levels, where environmental services
were delivered, and which had their own regulations that might, in some instances, be contrary to
specific commitments.
(vii) Financial Services
246. The representative of India agreed with Colombia  that this sector should be liberalized with
greater caution than any other, and national policies and level of development of individual Members
would determine the level of commitments to be undertaken in the ongoing negotiations.  He also
shared Colombia's views that liberalization of financial services through modes 1 and 2 should takeinto account financial, monetary and exchange rate policies of the individual Members.  Extreme
caution should be exercised on cross-border flows as they might lead to tremendous volatility.  It was
also possible that some Members would like to restrict market access under mode 3.  He also
supported Colombia's proposal to examine how to differentiate mode 1 from mode 2 in financial
services.  In principle, India had no problem with the removal of MFN exemptions in financial
services.  He also supported Colombia's proposal for effective implementation of Article VII:4 (b) of
the GATS on mutual recognition agreements.  He supported the use of the definitions in the Annex onFinancial Services for scheduling commitments.  On the United States proposal seeking common
commitments in all subsectors of financial services, he reiterated the need for developing countries to
have flexibility when making commitments, keeping in view their national policy objectives and
levels of development.  India was not in a position to support the removal of restriction on suppliers'
ability to establish any form of commercial presence, as foreign persons were not allowed through alltypes of legal entities.  India would like to retain this flexibility.  He reiterated the need for extreme
caution regarding the removal of restrictions on the suppliers' ability to supply financial services on a
cross-border basis.  India was not in favour of the complete removal of quantitative limitations on the
number of service suppliers, since it felt the need to control the expansion of foreign banks.
Unlimited expansion of foreign banks would adversely affect the domestic banks.  In addition, itwould be difficult to accept full national treatment in the application of laws and regulations.  India
did not see any reason to set up a separate negotiating group on financial services.  On the Japanese
proposal, India said that limitations on market access and national treatment could not be withdrawn
fully, but would be subject to negotiations with reference to other economic policy objectives.S/CSS/M/12
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247. Finally, as general comments, he agreed that credit should be given for autonomous
liberalization, based on the guidelines to be developed; and that the issue of domestic regulation
should be tackled on a horizontal basis in the Working Party on Domestic Regulation.  The issue of
transparency should also be dealt with horizontally.  He supported the request/offer approach as the
method for negotiation, as well as further liberalization of trade in financial services under mode 4.
248. The representative of Trinidad and Tobago noted that the general objectives of many
proposals submitted was to expand and strengthen market access and national treatment
commitments, and to further reduce barriers to trade in financial services.  The removal of barriers
and the introduction of foreign financial service providers were advantageous on two accounts: firstly,
they represented an important source of competition for a country's domestic market; and, secondly,
they were a source of innovation.  Progressive liberalization in this sector should take place with due
respect for national policy objectives; the level of development and the size of economies ofindividual Members.  In that regard, she endorsed Canada's proposal that the current round of
financial services negotiations should recognize the special needs and interests of developing
countries, by allowing these Members to phase in commitments over a specified period.  Freeing trade
in financial services was not a end in itself; it was desirable as long as it served the development of
the country's financial system, in line with the overall development strategy.  Therefore, it was theresponsibility of the national policy makers to devise the most appropriate strategy in freeing trade in
financial services.  In undertaking such a task, the following issues deserved attention: firstly, the
sequencing of trade in financial services liberalizatio n, in line with the requirements of the financial
development programme of the country; the development of capacity building programmes to help
developing countries establish the regulatory infrastructure needed to support the market openingcommitments; and thirdly, special consideration to the specific circumstances of individual countries,
recognizing that financial systems of small countrie s were still fragile.  Developing countries, and
small economies in particular, when promoting competition and allowing free entry of new financial
services suppliers, should do so in a phased manner, in order to allow for the adjustment of local
suppliers to increased competition.  On the United States proposal relating to transparency, althoughthere was room for the improvement of transparency in the application of prudential measures,
Trinidad and Tobago believed that the proposal was rather too ambitious.  Finally, Trinidad and
Tobago agreed with those proposals calling for the proper delineation of the boundaries between
cross-border supply and consumption abroad.
249. The representative of Singapore commented on the transparency issues raised in the United
States proposal.  Although Singapore did not require industry consultation as part of the policy-
making process, it had increasingly been consulting industry about proposed regulatory changes, andthose comments were taken into account in refining regulations.  Transparency in the development of
regulations brought several benefits, helping identify implementation problems and avoid unintended
consequences.  Transparency in the application of regulations could provide financial institutions with
greater certainty in their operating environment.  Singapore agreed with the main thrust of the United
States proposal regarding transparency in the application of regulations.  However, the principlesproposed concerning transparency in the development of regulations would need to be qualified
appropriately.  For example, apart from emergency circumstances, there were other instances where
advance publication of proposed regulations might not be desirable, including cases when regulations
might be market-sensitive or cases when the commercial interests of individual institutions might be
adversely affected.  Also, there was a need to be sensitive to developing countries' concerns thatgreater transparency would require more resources to be devoted to soliciting public comments on
proposed policies and to process such comments.
250. The representative of Venezuela said that, as a consequence of the new Constitution passed in
1999, new draft legislation for the financial sector - particularly for banking and insurance - was
prepared.  A new Central Bank Charter was also adopted.  She hoped that this proposed legislationwould be adopted shortly.  Turning to classification issues, Venezuela agreed that only oneS/CSS/M/12
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classification should be used in drawing up schedules.  Regarding liberalization under modes 1 and 2,
she agreed with the Colombian proposal that financial intermediation be excluded from the
liberalization process until allowance had been made of national financial, monetary, and exchange
rate policies; and until solid prudential regulation had been established.  On the Swiss proposal to
merge modes 1 and 2, Venezuela was of the view that issues related to electronic commerce deservedin-depth discussion, and supported the work programme in this area.  Venezuela agreed with Korea
that credit for autonomous liberalization in financial services should be granted, based on the
modalities to be developed.  On the proposals about transparency, she said that the Venezuelan
Constitution already contained mechanisms for part icipation and access to documentation of interest
to the community.  Additionally, Venezuela signed treaties providing for transparency, such as the
Treaty of the Group of Three and the Treaty of th e Andean Community.  In principle, Venezuela did
not see any need to take further commitments on transparency.
251. The representative of Thailand considered that, in the case of developing countries, the
current services negotiations afforded a good opportunity to address a more traditional contestability
agenda, focusing primarily on barriers affecting c onditions of entry and post-estab1ishment operation.
In the banking sector, foreign acquisitions of majority stakes had taken place as insolvent domestic
banks were nationalized, restructured, and sold off.  Although, in the case of Thailand, more transferof technology and know-how was expected, the private sector reported that in some cases the link
between a greater presence of foreign investors and recovery was weak.  In the insurance sector,
Thailand maintained a liberal regime.  Its life in surance market ranked third in Southeast Asia,
although only about 12 per cent of the country's 61 million people had life insurance.  Moreover, one
of the government plans was to promote mergers and acquisitions among small insurance companieswith a view to strengthen the financial stability and the competitiveness in the market.  Capital and
expertise constraints in smaller economies had caused the so-called "unnatural incompetitiveness".
Liberalization and deregulation processes took time.  Before embarking on further liberalisation, a
thorough assessment of the results of liberalisation thus far was required.  In the context of Article IV
of the GATS, developed country Members should help developing countries enhance their systems ofprudential supervision through proper technical assistance, and encourage them to phase-in
liberalisation over appropriate transition periods.  Some domestic measures could not simply be
eliminated because they sought to promote certain social or non-economic objectives, such as the
limitation of systemic risk or the protection of customers.  Regarding the horizontal issues, Thailand
observed that the concept of transparency proposed by the United States had to considered with
caution.  Finally, she expressed a particular concern about the provision of financial consultancy
services under Mode 4, due to problems arising with respect to effective control over natural personscoming into the market.
252. She finally added three points.  Firstly, she asked the United States and the European
Communities for further clarifications on the issue of grandfathering.  Secondly, referring to the
proposal submitted by Switzerland on modes 1 and 2, she asked what the implications were of
merging both modes of supply.  Lastly, on transparency, she said that the priority was to improve theapplication of existing rules.
253. The representative of Australia indicated that his country's schedule of commitments included
very few GATS-restrictive measures, reflecting the openness of the Australian market.  Previous
reforms by Australia had been guided by the principle that less intrusive regulation would make the
financial system more efficient and internationally competitive and would deliver improved choiceand quality of financial services for consumers.  Australia remained committed to providing foreign
financial institutions with an open and accessible domestic market.  In its negotiating proposal,
Australia identified a number of areas that could be addressed during the current round of
negotiations, such as the removal of foreign equ ity caps; the increase in the number of foreign
licences and branches permitted; and the removal of requirements to operate in specific regions or tolend to specific sectors.  He also supported regulatory transparency, and considered that harmonizingS/CSS/M/12
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regulatory structures, licensing, solvency and operating requirements, as well as reducing product by
product approval requirements, would further encourage foreign service providers to access Members'
markets.
254. The representative of Brazil said that emerging economies were subject to a much higher
degree of vulnerability to external shocks and fluctuations of volatile capital flows.  This particular
characteristic of the financial services sector was reflected in the Agreement, by way of the so-called
prudential carve-out in the Annex on Financial Services.  Brazil approached further liberalization in
financial services with extreme caution.  There were some common issues raised the proposals.
Firstly, regarding the limitations affecting mode 3, particularly the ones concerning types of legal
entity, he clarified that Brazil did not allow direct branching.  Secondly, he noted that the proposals'
level of ambition regarding cross-border supply of financial services differed.  In that connection,
these proposals raised several issues, such as the distinction between modes 1 and 2, and the scope ofnational treatment in mode 1.  Thirdly, regardin g the use of the Understanding on Commitments in
Financial Services, Brazil found it difficult to consider it at that stage.  Fourthly, the issue of
classification did not pose as many difficulties as  in other sectors, since there was already a common
classification contained in the Annex on Financial Services.  Fifthly, regarding the proposals to
strengthen transparency disciplines for the preparation and implementation of regulation, he said thatthe priority was to make the current disciplines on transparency more effective before considering
additional obligations in this area.  In fact, the costs could outweigh the benefits for developing
countries.  Another issue deserving attention was the mandate contained in Article VI:4 of the GATS,
which had two aspects - transparency and necessity.  Sixthly, Brazil considered that the issue of
grandfathering should be further clarified, particularly as regards its consistency with the MFNobligation.  Lastly, he supported the Korean proposal regarding the focus to be given to the
request/offer method of negotiation.
255. The representative of Norway said that his country's proposal put emphasis on the
liberalization of marine insurance.  The development of an open and competitive regime for insurance
relating to goods and ships would contribute to reducing the cost of trade and to promoting the exportpotential of all Members, particularly those located at some distance from their main markets.  Further
commitments would bring about increased market access, transparency and predictability, thus
stimulating trade in goods and overall economic development.  An open and competitive regime for
insurance related to ships and goods would also contri bute to a more efficient spreading of risk across
countries.  Norwegian insurance companies were among the leading companies in this sector.   Some
69 to 80 per cent of their premium income consisted of business conducted with foreign shipping
companies.  The Norwegian industry had identified several obstacles, such as economic need tests,demands that national flagged vessels be insured domestically, and overly burdensome licensing
requirements and procedures.  Norway advocated the adoption of the definitions contained in the
Annex on Financial Services and the Understanding on Commitments in Financial Services.
Regarding the insurance of risks related to tran sport in general, Norway encouraged Members to
inscribe in their schedules the relevant parts from the Understanding on Commitments in FinancialServices, namely paragraphs B.3 and B.4, even if the Member was not to schedule commitments on
the basis of the Understanding itself.  He also encouraged Members to make commitments on
insurance of risk related to offshore exploration activities.  The latter was similar to maritime shipping
in that both shared some common characteristics, such as the existence of highly professional players
in the marketplace; the fact that insurance contracts generally covered large risks; the spreading ofrisk through the reinsurance market; and the fact that insurers and intermediaries were already
operating world-wide.  Furthermore, host country prudential regulation did not play the same role in
these insurance sectors than in other life and non-life insurance sectors.  The lack of host country
regulation of insurance activities relating to the cross border provision should not constitute an
obstacle against scheduling Mode 1 commitments in the field of insurance related to goods, ships andoffshore exploration activities.  The characteristics mentioned before could make it unnecessary inS/CSS/M/12
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most cases to require nationally flagged vessels to be insured domestically, a restriction amounting to
a limitation on market access under mode 3.
256. The representative of Canada said that her country had four objectives in this area: to seek
greater market access opportunities; to clarify classification issues that might exist; to strengthen
transparency disciplines; and to allow for the phase-in of commitments.  She then replied to a questionposed by the European Communities regarding paragraph 8 of the Canadian proposal by saying that
Canada had no other "means" (apart from model schedules and request/offer) to suggest at that time.
The phrase was included in the proposal only to suggest Canada's willingness to consider other
suggestions.  She added that Canada supported expansion of commitments in mode 1 and 2, although
it did not indicate any specific details in the proposal.
257. The representative of Cuba considered that in the present economic situation, further
liberalization of financial services trade had to be accompanied by an appropriate and flexible
regulatory framework allowing the country to develop its economy and protect it from negative
effects.  As the Latin American and Caribbean experience had shown, deregulation and liberalization
of service markets gave rise to assets falling in foreign hands with greater competitive strength.
Therefore, foreign suppliers had greater possibilities to increase their market shares and constitute
quasi-monopolies.  In Latin America, the opening of financial sectors should have served to decreasethe costs of loans through a decrease in intermediation markets due to increased competition between
domestic and foreign banks; but reality showed that was not the case.  Intermediation margins in Latin
American banks remained high.  In the Cuban case, there was a sui generis  situation due to the
existence of restrictions to trade and development of financial services imposed by the United States.
Among these limitations, he mentioned the United States laws that prohibited the use of the UnitedStates dollar in trade transactions, as well as the impossibility of obtaining credit lines from United
States banks.
258. He also made comments on the proposals submitted thus far.  Although the European
Communities proposal stated that the presence of foreign firms could contribute to the establishment
of an efficient financial sector through well functi oning institutions, Cuba was of the view that that
was not the case for developing countries, where the presence of foreign firms had given rise to
monopolies crowding out national institutions with the purpose of profit seeking.  As to national
savings, although the European Communities said that they could be channelled through national
markets that function in competitive regime, that again was not the case for emerging economies.  The
latter did not have sufficiently developed domestic capital markets in order to face competition from
foreign financial services trans-nationals when these were established in the country.  Also in the
same proposal, although it was said that liberaliza tion could foster capital flows which would be less
distorting, Cuba thought that the unrestrained liberalization of the financial sector gave rise to all
types of capital flows, including speculative ones.  This in turn gave rise to vulnerability in the
financial system of developing countries, paving the way for new financial crises.  Regarding the
Norwegian proposal, although it was said that the presence of foreign firms  could give rise to an
increase in efficiency and stability of the financial system, Cuba thought that when the levels ofdevelopment of the countries concerned were rather similar then competition could have positive
effects, giving rise to increase in efficiency.  However, that was no the case when there were
significant differences in the levels of development, because the stronger party had an advantage in
terms of resources, knowledge, and experience, which would allow it to dominate the financial market
of the weaker countries.  Commenting on the Australian proposal, he said that the right to regulatewas one of the main tools that developing countries had in order not to give up their autonomy.  In
addition, Cuba thought that the Colombian proposal  was very important since it recognized that, due
to vulnerabilities arising from imbalances in the fina ncial sector, liberalization of this sector should be
pursued with more caution than in any other sector.  Cuba was of the view a gradual approach was
necessary.  Regarding the United States proposal, Cuba thought transparency of national regulationswas positive as a matter of principle.  However, in this particular case, the flexibility in grantingS/CSS/M/12
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licences and information in general terms should not give rise to onerous or burdensome situations for
developing economies, so that the administrative burden did not constitute an additional problem.
259. The representative of the United States said that her country's proposal set out two
complementary elements, namely benchmarks that would constitute common commitments on
fundamental liberalization (traditional market access issues), and principles relating to transparency indeveloping and applying regulations.  She noted the fair amount of shared purpose expressed in the
proposals submitted thus far.  Many proposals stressed the consideration of a comprehensive range of
financial services sectors, including banking, securities, and insurance.  Some proposals, including the
one from the US, also highlighted other tradable sectors, such as pension fund management.  Many
Members also emphasized the benefits that could be derived from further liberalization of trade in
financial services, including commercial presence and –for some sectors-, the cross-border supply.
Many countries, including the US, had pointed out that the discussions were without prejudice to theprovisions contained in paragraphs 2 and 3 of the Annex on Financial Services.  She then replied to
questions received about the United States proposal.  First, the additional principles on regulatory
framework issues, including transparency, were not intended to involve the WTO in setting standards
in regulation.  The United States proposal was only intended to focus on some process issues related
to the development and application of regulations or measures of similar effect.  The United Statesbelieved that given the needs of financial markets for transparency, financial regulators might already
be fairly familiar with such concepts.  For example, many WTO Members, as part of their work with
international financial institutions on good governance and financial architecture issues, were engaged
in opening and making more transparent the processes for developing and applying regulations.  Such
enhanced transparency could be a way of minimi zing unintended consequences of regulation that
could have adverse effects for the financial services sector.  Second, on the relationship between the
transparency issues raised in the United States proposal on financial services and the activities of the
Working Party on Domestic Regulation, the United States believed it useful that delegations remained
open to the discussion of how these transparency issues would apply to the financial service sector.  It
was useful to have a separate discussion of how these principles would apply to the financial servicessector.  This would be useful for the following r easons: (i) the financial services sector was highly
regulated, hence the issues of transparency in the regulatory process was extremely crucial in terms of
ensuring that the market-access commitments were supported by adequate principles; (ii) a separate
discussion on transparency for the financial services sector would enable Members to consult with
and draw upon the expertise of financial services regulators; and (iii) it was important to remember
the important relationship of this sector with the stability of national economies and the particular way
the disciplines on financial services had been framed in the GATS.  Third, on the use ofUnderstanding on Commitments on Financial Services, the United States expressed flexibility since
the Understanding itself was a particular scheduling mechanism.  The United States was flexible as to
the forum where to pursue the discussions, although it continued to regard the Committee on Trade in
Financial Services as a useful body to discuss certain technical issues, some of which might be related
to the negotiating proposals.  Finally, the United States expressed a preference to pursue the issue ofgrand-fathering bilaterally or plurilaterally with those countries who had expressed an interest.
260. The representative of Honduras supported the Colombian proposal, particularly paragraph 5.
Further commitments in this sector should be based on the recognition of the autonomous
liberalization process under way in several countries.  In addition, flexibility should be given to
developing countries when assuming new commitments.  Regarding commitments under modes 1and 2, Honduras was concerned about aspects related to consumer protection.  Further attention
should be given to paragraph 3 of the Annex on Financial Services.  He wondered why some
delegations thought that differences between modes 1 and 2 tended to disappear in the case of
financial services.  In his view, both modes of supply seemed to imply very different circumstances.
He asked the European Communities why restrictions on mode 2 should be justified.  On paragraph22 of the European Communities proposal, he considered that discussions on Article II exemptions
should be in line to what had been discussed in the Council for Trade in Services on this issue.S/CSS/M/12
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Regarding the Swiss proposal, he asked what having certain coherence when scheduling commitments
under modes 1 and 2 meant.  Finally, on the proposals to eliminate restrictions on the type of legal
form, he considered that national systems varied and there was a need to keep in mind the objectives
set by regulatory bodies regarding rights and obligations of investors in financial institutions.
261. The representative of Japan encouraged Members to make commitments based on the
Understanding on Commitments in Financial Services.  Commitments on commercial presence should
be improved, removing restrictions on the participation of foreign capital, on the form of
establishment, and on the number or geographical scope of establishment.  Nationality or residency
requirements for executive and employees, as well as limitations on the number of foreign employees,
should also be eliminated.  Regarding the distinction between modes 1 and 2, he considered that WTO
Members should be kept informed of the work be ing carried out by international-standard setting
bodies with regard to cross-border transactions and electronic finance.  In that regard, liberalizationshould be improved progressively in such activities that could be less problematic from the point of
view of consumer protection and other security requirements.  Touching upon regulatory aspects, he
said that developments in the international standard-setting organizations should be respected.
Finally, Japan considered that domestic regulatory processes should be as transparent as possible.
262. The representative of Uruguay raised two questions concerning the Swiss proposal.  He first
asked the merger of modes 1 and 2 meant.  On paragraph 20 of the Swiss proposal, he sought further
information about the proposed clarification of prudential measures in the GATS.  He also asked for
further information on the scope of the European Communities and United States proposals regarding
commitments under mode 1.  He also asked those two delegations what grandfathering meant.  He
asked delegations advocating the use of the Understanding on Commitments in Financial Serviceshow the issue of mode 1 would be resolved, si nce according to the Understanding only certain
subsectors were supposed to be liberalized under such a mode.  Finally, commenting on the United
States proposal on transparency, he said that not all legal systems allowed for prior comment, which
was something to be borne in mine when looking at this issue.
263. The representative of Hong Kong, China said that several common issues had been raised in
the proposals.  Firstly, the relationship between modes 1 and 2 in the context of electronic transactions
should be further explored.  In that regard, he thought it essential to clarify the scope of modes 1 and 2
in the case of financial services.  The regulatory implications of commitments under mode 1 and 2
should also be taken into account, particularly whether and how transactions and institutions engaging
in electronic finance should be subject to different regulatory regimes of individual Members.
Secondly, he supported the removal of restrictions on the form of commercial presence, geographical
restrictions, as well as restrictions on the scope of business.  He also supported the elimination ofeconomic need tests, and state insurance agencies.  Hong Kong, China showed readiness to examine
barriers to national treatment with a view to relaxing or removing them.  Hong Kong, China also
appreciated the importance of disciplines on transparency in domestic regulation, and agreed with the
United States that work on transparency in financial services might provide useful cross-fertilization
for the work of the Working Party on Domestic Regulation at a horizontal level.  He also recognizedthe importance of the movement of natural persons, and expressed his readiness to explore whether
and how commitments under mode 4 could be further improved.  He also supported the removal of
MFN exemptions.  Finally, he supported the idea of allowing commitments to be made in accordance
with the level of development of individual Member s, while expressing interest in hearing views on
the possibility of phasing-in commitments.
264. The representative of the Republic of Korea  said that proposals touched primarily on the
following five issues: (1) prudential regulations, (2) sectoral classification, (3) liberalization of cross-
border transaction, (4) e-finance and (5) adoption of Understanding.  He then commented on each of
them.  On prudential regulations, transparency should be enhanced to prevent possible abuse in
restraining market access of foreign suppliers or in reducing the range of their operation.  It wasS/CSS/M/12
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therefore desirable to take into account the disc ussions of the WPDR, and reflect upon the uniqueness
of financial services, rather than simply heeding them in preparing domestic regulation.  However,
Korea did not believe that additional disciplines, except for GATS Article VI, would be necessary in
order to enhance the transparency of the domestic regulations, because the autonomy of financial
authorities of member countries should be ensured.  The liberalization of cross-border transactionsmight bring about a sudden increase in capital flows, which could lead to a financial crisis.  Members
should take a prudent approach on this issue.  Liberalization in this sector needed to take into
consideration the developmental stage of capital markets and the economic conditions of each
country.  Korea suggested that Members undert ake liberalization of cross-border transactions
gradually, limiting it in the first instance to sector s with relatively smaller capital movements, such as
investment advisory and credit rating businesses.
265. Regarding e-finance, given that discussion on this issue was at a preliminary stage, the
Committee on Trade in Financial Services should conduct more in-depth and comprehensive
discussions to address issues such as the question of likeness and cross-border services supply.
Therefore, in Korea's view, it would be premature to  discuss about liberalization of e-finance at this
stage.  Finally, Korea considered that the adoption of the Understanding of Commitments on
Financial Services would be difficult for some Members, because new financial services that did notexist in the domestic market required prior concessions.  Before introducing new financial services,
there should be examination of their impact on the domestic financial market, including supervisory
aspects.  Korea would like to see further discussion on this issue.
266. The representative of Korea also answered questions posed by Thailand on his country's
proposal.  Regarding paragraph 6 of Korea's pr oposal, he emphasised that the main method of
negotiation should be the request/offer approach, although he did not preclude the possibility of using
cluster or formula approaches that might be developed during the negotiations.  Even if a formula
were developed, Korea had only suggested that it would be necessary for this approach to take into
account the financial situations of all Members, including developing countries.  However, it was not
Korea's intention to suggest any specific approach at  this stage.  With respect to the meaning of the
phrase "they should not aim at reducing the range of operation of foreign supplier" in paragraph 16 of
the Korean proposal, he said that regulations, including prudential ones, could affect the commitments
of market access under Article XVI of the GATS.  Therefore, Korea believed that those prudential
regulations should not impair or nullify the market access commitments already made, but there was
no suggestion of adopting specific courses of action on the issue, such as a negative list approach as
implied by Thailand.
267. The representative of Switzerland supported the idea of giving special attention to developing
countries.  Switzerland was ready to find a solution to ensure that these countries' concerns would be
properly addressed in the current negotiations.  On the questions posed by Brazil and Uruguay on the
possible merger of modes 1 and 2, he said that Switzerland was not proposing to merge both modes,
but that the Committee on Trade in Financial Services analyze a possible merge of two modes.  On
the questions posed by several delegations about the cross-border provision of financial services andthe concept of sophisticated customers, he said that Switzerland was encouraging Members to
undertake more commitments in modes 1 and 2 in a general manner.  However, a priority could be
given to products targeted at sophisticated customers, that is, those that were well informed about the
implications of the services being used.  The following professionals, among others, should qualify as
sophisticated customers: financial departments of corporate institutions; professional pension fundmanagers; profession portfolio managers.  In other words, wholesale, corporate, and investment
banking services should - to a large extent - be included in the commitments.  Turning to the questions
on prudential regulation, he noted that some schedules of commitments contained a number of
limitations relating to prudential regulations.  From contacts with these Members, Switzerland got the
impression that they felt uncomfortable to rely on the Annex on Financial Services' paragraph onDomestic Regulation.  That provision was too broadly defined and constituted a kind of black box.  ItS/CSS/M/12
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was sometimes difficult to know whether a particular concern fell in or out of the provision.
Therefore, Switzerland believed that a more precise definition of what prudential regulation actually
was could help remove reservations from the schedules, without changing the substance of
commitments.  This would greatly increase the transparency of schedules in financial services, as well
as enhance the transparency of the whole sector.  He stressed that a more precise definition ofprudential regulation did not mean narrowing either the scope of prudential regulation or the margin
of manoeuvre of governments to implement necessary regulations.  Finally, it would be useful, as a
first stage, to gather information and to see what  had been accomplished in different fora.  In this
respect, he believed that the briefing session by international standard setting organizations that had
taken place on 10 October was extremely useful.
268. The representative of the European Communities on ly referred to their main objectives.  The
European Communities was encouraging a greater use of the classification contained in the Annex on
Financial Services, as well as the use of the Understanding on Commitments in Financial Services.
Commercial presence (mode 3) remained a priority for the EC, that was seeking the elimination of
existing barriers.  The European Communities al so sought an increased number of commitments
under modes 1 and 2.  In fact, modes 1 (cross-border) and 3 (commercial presence) were
complements and not substitutes.  The European Communities was also seeking more transparency in
domestic regulation.  Answering some of the questions posed to the Communities on this issue, he
said that discussions in the Working Party on Domestic Regulation were relevant for all services
sectors, including financial services.  The relation ship between future disciplines and the so-called
prudential carve-out was something that needed to be considered and discussed.  Regarding a question
about the potential problems arising from the use of different classifications by different Members, theEuropean Communities considered that it was crucial that Members used the same classification in
order to facilitate the interpretation and comparison of commitments.  On the question about the
relationship between the relaxation of tax measures mentioned in paragraph 10 of the European
Communities proposal with Article XIV of the GATS, he noted that a number of Members had
scheduled restrictions on national treatment due to taxation in the horizontal part of the schedules.The European Communities intended to address these measures during the negotiations.  In his view,
these limitations had no relation with the tax measures covered by Article XIV.  Finally, on whether
there was any difference in terms of legal secur ity between commitments undertaken pursuing to the
Understanding and those undertaken on the basis of the traditional scheduling approach, he said there
was no difference at all.  The use of the Understanding, however, would facilitate a more coherent set
of commitments.
269. The representative of Indonesia said that his country had undertaken already far-reaching
commitments in financial services.  Further liberalization should be based on the level of development
and the national policy objectives of different Members.  On the issue of transparency, Indonesia
found it difficult to discuss it if discussions were to touch on the issue of prudential regulations.
Regarding the modalities for negotiations, he said that negotiations should be done based on the
request/offer approach.  Indonesia agreed that liberalization of financial services could bring benefitsto Members, but developing countries were more vulnerable.  Therefore, he hoped that, when asking
for further liberalization of this sectors, Members considered the costs to developing countries.
270. The representative of Jordan put questions to some of the delegations that made proposals.
On the Korean proposal, he wondered what could be  the geographical and historical reasons justifying
the retention of MFN exemptions as proposed in paragraph 11.  Secondly, how a specific capitalmovement could be measured and judged as being large or small.  Thirdly, what are the main
economic activities referred to in paragraph 14 that were assisted by cross-border transactions.
Fourthly, what was meant by a formula approach.  On the proposal submitted by Colombia, he asked
whether it would be possible to use a single classification, given the differences in terms of the level
of development and the regulatory regimes (paragraph 10 of the proposal).  He then asked the UnitedStates what were the acquired rights that needed to be protected when talking about grandfathering.S/CSS/M/12
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In particular, he asked whether that included all existing investments or only certain among them.
Secondly, regarding the United States proposal on transparency, he sought further information of what
could be regarded as emergency circumstances and what was meant by "public" and whether that
included WTO Members.  Finally, he agreed with Switzerland that the Committee on Trade in
Financial Services could analyze the impact of the growth of electronic commerce on financialservices, and in particular how electronic commerce was affecting the relationship between modes 1
and 2.
271. The representative of Argentina said that there were three major issues being debated.  The
first one related to market access, including the elimination of various restrictions and limitations.  In
that regard, he saw a trend for a lifting of certain restrictions and therefore the improvement of market
access.  The second type of issues was of a more technical nature, such as the possibility of improving
certain GATS provisions.  In particular, he failed to see what the problem was regarding the overlapbetween modes 1 and 2.  In his view, mode 2 implied the movement of the consumer to consume a
given service, and he saw no relation with the increasing use of new technological means.  There did
not seem to be enough pieces of information so as to justify a discussion on this issue.  The third set
of issues seemed to be more relevant and included the proposals to review provisions related to
prudential measures.  There might be confusions in the interpretation of the scope of measures takenfor prudential reasons, but one thing was to take those measure off the schedules, since they were
covered by paragraph 2 of the Annex, and another one to affect the regulatory capacity of competent
authorities.  Regarding transparency, he agreed with the comments made by Brazil.  In that regard, in
his view, the priority was to analyze to what ex tent the current disciplines on transparency were
insufficient in covering any specificity of the financ ial services sector.  Initiatives in this area might be
somewhat premature.  Commenting specifically on the transparency elements contained in the
proposal submitted by the United States (S/CSS/W/27), he noted that there was a certain overlap
among the provisions (e.g.  between sections I.C and II.J; and between section II.E and the second
sentence of III.B).  These provisions seemed to be going farther than necessary at that stage of the
GATS development.
272. The representative of Kenya said that his country's experience with liberalization showed that
local firms were facing stiff competition from foreign firms.  This led in some instances to the closure
of the local firms, and the loss of jobs, and that was contrary to the objective of poverty alleviation.
While  a sound and efficient financial sector was essential for the functioning of an economy, Kenya
was hesitant to undertake further liberalization in this sector before the capacity of national regulatory
bodies could be enhanced.
273. The representative of Malaysia said that paragraph 5 of the proposal submitted by Korea
provided an insight into Malaysia's thinking about the negotiations on financial services.  Malaysia's
objective was to strengthen its financial system, taking care of its development needs and the
strengthening of  its domestic capacity.   In the context of that sequencing, Malaysia would perhaps be
able to look favourably at the liberalization of its financial market.  He added that, the issue of
modes 1 and 2 deserved further study in order to be aware of its impact in the context of electronictransactions.  Another issue of importance in these negotiations related to regulatory aspects, which
featured prominently in most proposals.  In that regard, Malaysia found disconcerting that some
Members might be proposing a prescriptive methodology for the development and application of
regulations, that would affect the right to regulate in pursuance of national policy objectives.
Referring to the proposal submitted by Switzerland, he said that Malaysia did not want to introduceany changes to the so-called prudential carve-out contained in the Annex on Financial Services.
Otherwise, the balance achieved in the Uruguay Round on that matter would be lost.  Finally, he
asked Colombia what was meant by paragraph 11 of the proposal submitted by this country.
274. The representative of the Philippines  said, referring to the proposal submitted by the United
States, that privatization was a matter left to the discretion of the national authorities.  He also said, inS/CSS/M/12
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relating to the proposals addressing domestic regulatory issues, that the provisions on prudential
measures contained in the Annex on Financial Services were sufficiently clear and reflected the
balance achieved in the Uruguay Round negotiations.  He noted with concern the over-ambitious
approach taken by the United States in the attachment to its proposal, providing for additional
principles on transparency and other principles for the regulation of financial services.  He consideredthat although some of the principles could be considered as ideal, they had to be reconciled with
reality, with the administrative capacity of the comp etent authorities, and with what the market could
actually bear.  He also shared other Members' concerns about the scope of acquired rights that were
supposed to be covered by the proposals on grandfathering.  In addition, he was not convinced by the
explanation provided by Switzerland on the scope of its proposal to clarify the meaning of prudential
measures under the Agreement.  He also expressed his concerns about the implications of the Swiss
proposal regarding the possible merger of modes 1 and 2.
275. On the other hand, he saw merit in certain provisions regarding the situation of developing
countries contained in the proposals submitted by Canada and Korea.  For instance, the opposition to
clarify the scope of prudential measures as covered in the Annex on Financial Services, or the
possibility to allow developing countries to phase in commitments over a period of time.  He
supported Korea's views that developing countries should be given additional time to strengthen theirfinancial markets in preparation for further liberalization, that is, the idea of sequencing in accordance
with the levels of development of financial markets and supervisory systems of Members.  He also
agree with the Korean approach to the liberaliz ation of cross-border trade.  Finally, while the
Philippines was not completely opposed to any further liberalization in this sector, he encouraged
Members to consider the particular sensitivities of developing countries.
(viii) Recreational Services
276. The delegation of New Zealand reiterated so me key points of their proposal on sporting
services.   They noted that the recreational, cultural and sporting services sector had not previously
received much coverage in discussions in the Special Session, but that it was an expanding element in
international trade.  New Zealand’s proposal asked Me mbers whether it would be useful to “fill in the
gaps” in the current classification structure, especially regarding services which fell between the
current education and sporting services classifications.   In this way, the proposal could help Members
to identify their interests, as well as any trade sensitivities, in this sector.
277. The representative of Australia stated that  their delegation was also examining sporting
services.   The representative of the European Communities asked whether New Zealand could clarify
their proposal with respect to the distinction between health and sporting services, especially in regard
to drug testing services.   He also asked for furt her clarification regarding the intended coverage of
instruction in coaching and training of sports or health, leisure and fitness activities.
278. The representative of Brazil said they had intere st in this sector, particularly with regard to
mode 4 in respect to coaches and players.   Brazil was especially interested in the overlap with
educational services, as discussed in paras 9 a nd 10 of the New Zealand proposal, and would have
questions at a later date.
279. The representative of Switzerland noted their government had taken commitments without
restrictions for modes 1, 2 and 3 under CPC category 9641 for sporting services, and therefore
welcomed efforts by other Members to continue liberalizing these services.   The CPC category 96419
(Other sporting services) should be further specified, he stated.   The representative also said that the
present classification for sporting services was very brief and succinct, and it would be appropriate toadapt it to the current market situation.S/CSS/M/12
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280. The delegation of Pakistan said they were examining the New Zealand proposal, and found it
very interesting.   The representative noted that sporting events were becoming a very significant
industry.   He said that Pakistan supported the general thrust of the proposal.
281. The representative of Thailand said her government expressed interest in New Zealand’s
proposal on sporting services, and added that Thailand was interested in discussions on recreational
and cultural services as well.   Like Brazil, her government looked forward to further discussions on
para 9 and 10.  With respect to the third and sixth bullet points under para 11, she asked for New
Zealand’s view on the differences between the these suggestions and the existing descriptions for
CPC categories 96412 and 96413.
282. The representative of Argentina concurred with New Zealand’s reference to the importance of
the sporting services sector, and observed that they were closely linked to other important and
sensitive sectors, notably audiovisual services.   Argentina supported New Zealand’s initiative.
283. The delegation of New Zealand said they would reply in writing to the specific questions
received, but offered some preliminary comments.   Regarding the European Communities question
on the differences between sporting and health services, it was New Zealand’s view that drug-testing
services could “stand alone”, rather than be part of the traditional health classification.   Regarding
instruction in coaching and training, there was a gap between the current classifications for educationand sporting services.   Academic teaching about sports could be considered as education, in New
Zealand’s view, while other aspects of instruction regarding the practice or performance of a sport,
including the training of coaches, could be considered as sporting services.   Regarding Thailand’s
question concerning the relationship between the proposed and existing classifications, the New
Zealand representative said that, in their view, commercial aspects, particularly for such areas asgyms, health clubs, were not fully taken into account in the existing classification.
284. By way of conclusion of the discussion on item D, the Chairman said that the Council would
take note of the statements made.  He encouraged Members having raised questions on the proposals
to have them circulated in writing before the next m eeting;  the replies should also be circulated to the
membership.
E. WORK OF SUBSIDIARY BODIES – REPORTS BY CHAIRPERSONS
285. In keeping with what had been agreed concerning the regular reporting from the subsidiary
bodies to the Special Session, the Chairman invited the chairpersons of those bodies to present their
oral reports.   He also recalled that, since the pr evious meeting of the Special Session in July, the
Committee on Specific Commitments had not held any formal meetings.
286. The Chairman of the Committee on Trade in Financial Services, Mr.  Jan Peter Mout of the
Netherlands, reported that the Committee had met the day before and had addressed the following
issues:  acceptance of the Fifth Protocol to the GATS;  sectoral classification of financial services;
recent developments in financial services trade;  and other business.
287. Under the item on the acceptance of the Fifth Protocol, the delegation of the Dominican
Republic had informed the Committee that the domestic ratification procedures were completed and
that it would soon be in a position to accept the Fifth Protocol.   It was agreed that, once a formalcommunication had been received by the Secretariat from the Dominican Republic, arrangements
would be made for the re-opening of the Protocol.   He hoped that it could be done at the following
Council meeting.   The Committee had also heard updates on the status of domestic procedures from
the delegations of Brazil, the Philippines, and Uruguay.   Some delegations expressed concerns about
the delays in ratification of the Protocol on the part of certain Members, and encouraged them to makeevery effort to accelerate those internal procedures.S/CSS/M/12
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288. Regarding the sectoral classification of financial services, the delegation of Japan indicated
that classification issues might become important in the course of the negotiations on financial
services, and that it remained unclear whether the Annex on Financial Services already covered
certain activities that relied heavily on new communications technologies.   However, Japan clarified
that it was not its intention to insist on this issue at that stage, but reserved the right to revert to it inthe future.  In the light of that statement, and in the absence of new contributions regarding
classification issues, the Committee decided to set the issue of classification aside, and to maintain a
general item called "Technical Issues".
289. As for recent developments in financial services trade, the delegation of Argentina presented
an informal paper entitled "Argentina and the Intern ational Financial Architecture", in  JOB(01)/151,
which addressed recent initiatives to deepen ongoing reforms in the Argentine financial sector.   The
delegation of the United States explained the process followed to develop final regulations for theimplementation of the Gramm-Leach-Bliley Act, incl uding the mechanisms in place for interacting
with interested parties.   The representative of the United States further suggested that Members could
take advantage of this agenda item to exchange information on their national experiences regarding
the rule-making process.  The European Communities also made a presentation on the recent adoption
and implementation of a Community Directive that regulated the establishment and operation of creditinstitutions.  Finally, the delegation of Canada informed the Committee of the passage of the Financial
Services Reform Bill in late June 2001.   In order to allow for a more interactive discussion under this
agenda item, it was decided that the Committee would revert to those presentations at its next
meeting.  It was understood that Members remained free to approach the issues raised in those
presentations as they wished, or to raise any other issue related to developments in financial servicestrade.
290. Under Other Business, the delegation of Panama made a statement regarding the so-called
financial services "black lists", and expressed its concern about discriminatory measures adopted by
certain Members in their tax legislations.
291. Finally, the Committee decided to hold its next meeting during the next cluster of services
meetings.
292. The Chairman of the Working Party on GATS Rules, Mr.  Hugo Cayrus of Uruguay, reported
that, since the previous Special Session, the Working Party had held one formal meeting on 3
October, at which it had considered the three issues on its agenda:  safeguards;  subsidies;  and
government procurement.   The Working Party had also held an informal meeting on 25 September to
pursue the discussions on emergency safeguard measures.
293. The Working Party devoted most of its attention to the topic of emergency safeguard
measures.  On 25 September, it held an informal meeting at which it considered the ten topics
included in the Chairperson's checklist in Job No.  1979/Rev.1.   It also discussed a non-paper by
Mauritius on "Emergency Safeguard Measures", in JOB(01)/143, and a non-paper by Venezuela on
"Negotiations on Emergency Safeguard Measures:  Causal Link", in JOB(01)/101/Add.1.   Under his
own responsibility, in early August he had also circulated a "Synopsis", in JOB(01)/122, as agreed atthe formal meeting in July.   This synopsis, prepared  with the invaluable help of the Trade in Services
Division, was intended to provide a structured overview of the various options put forward by
Members on core elements of a possible safeguard mechanism.   It sought to capture the main thrust
of the proposals and comments made by Members, w ith a view to facilitating further analysis and
study.  It was without prejudice to the questions of feasibility and desirability of a possible emergencysafeguard mechanism, nor to the form that such a mechanism could take, nor was the synopsis a draft
text:  it was simply a snapshot of the current state of play in the safeguards negotiations.S/CSS/M/12
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294. At the informal meeting on 25 September, further non-papers were received on the safeguards
issue:  a non-paper by New Zealand on "Situations  Justifying an Emergency Safeguard Action", in
JOB(01)/146, and a non-paper by Argentina on "Eleme nts for Establishing an Emergency Safeguard
in Services" JOB(01)/148.   On 2 October, the United States circulated a formal submission entitled
"Desirability of a Safeguard Mechanism for Services:  Promoting Liberalization of Trade in Services",in document S/WPGR/W/37.   These three contributi ons were discussed at the meeting on 3 October.
295. Taking into account that the time-limit for negotiations on emergency safeguard measures
expired on 15 March 2002, the Working Party agreed to meet informally on 23 November to consider
how to organize its work until 15 March, including the possibility of working on a text.
296. With regard to the issue of subsidies, there were no statements at the last formal meeting.
297. Lastly, with regard to government procuremen t, a number of delegations expressed the view
that this was an important issue for trade in services and in the work of the Working Party, withoutduplicating the work of the Working Group on Transparency in Government Procurement.   A
delegation also suggested discussing the scope of the mandate under GATS Article XIII.
298. The Chairman of the Working Party on Domestic Regulation, Mr.  Scott Gallacher of New
Zealand, reported that, since the previous meeting of the Special Session, the Working Party had held
one formal meeting, on 2 October.   Discussion at that meeting was based largely on a newChairperson’s Note contained in Job/(01)/130, dated 14 September 2001.
299. With respect to the discussion of concepts relating development of regulatory disciplines
under GATS Article VI:4, there were a range of general and specific issues that the Working Party
was focussing upon, and he would briefly provide an overview of the key points from such
discussions.   Many Members emphasised the importance to come to a better understanding of therange of regulatory issues that related to Article VI:4 and agreed that it would, in this regard, be useful
if Members could bring forward additional examples of the types of measures to be addressed by
regulatory disciplines under Article VI:4.   On the relationship between Article VI:4 and Articles XVI
and XVII, the Working Party had another productive exchange of views with there now being general
acceptance that there could be no overlap between the types of trade restrictions covered byArticle VI:4 and Articles XVI and XVII.   The relationship between these various provisions was
accepted as being one of “complementarity”, whereby they dealt with trade restrictions, albeit of a
different nature.   In this regard, it was acknowledg ed that licensing systems, for example, could be
composed of both Article VI:4 and Article XVI and XVII measures.   There were also some
constructive exchanges on the range of other general issues before the Working Party, most notably
the scope of Article VI:4 and the application of any disciplines that might be developed by the
Working Party in relation to specific commitments, as  well as the federal and/or sub-federal levels.
The issues of necessity, transparency, equivalence and international standards generated further
comments by Members, all of which deepened the Working Party’s understanding of these more
specific issues.
300. As for the development of disciplines for professional services, it was again suggested that
Members could “jump start” the work on professional services by focusing on a small group ofprofessions, namely architecture, engineering, and land surveying.  Many Members, however,
indicated that they preferred a more horizontal approach for the time being as the time was probably
not yet ripe for the Working Party to start focusing upon specific sectors.  That said, Members
continued to recognise that the work on professional services and the work on more horizontal
disciplines were not mutually exclusive, but were, in fact, quite complementary. Two additionalwritten reports on domestic consultations with professional organisations, regarding the applicability
of the accountancy disciplines to other professions, were received from Members since the previousS/CSS/M/12
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meeting.  Nonetheless, Members continued to recogn ise that, in overall terms, the level of reporting
remained very low in terms of the membership as a whole.
301. The representative of Canada sought Members' views on the possibility that these reports be
posted on the WTO web-site as early as possible, in order to improve transparency.  The
representative of India said that the rules on the de-restriction of documents should be followed.  The
representative of Mexico said that he had taken note of the suggestion made and would revert to it.
The representative of Canada noted that summaries of past meetings up until March 2001 were
already posted on the web-site.
302. The Chairman suggested that the Council take note of the reports and of the statements made.
F. ORGANIZATION OF FURTHER WORK
303. The Chairman recalled that, as part of the work programme that Members had agreed at the
stock-taking in March, the Special Session was to hold further meetings in December andMarch 2002.   It had also been agreed that the possibility of holding an additional meeting in
February 2002 would be left open.  At the meeting in May, the Council had taken up discussion of all
negotiating proposals;  subsequently these had then been split, for more detailed discussion, between
the session in July and this session.   It needed to be noted, however, that some new proposals, due to
the timing of their submission, were not taken up for detailed discussion at the relevant session.
304. With the conclusion of that meeting's discussions under item D, the Council had come to the
end of its work plan.   Therefore, delegations needed to consider under this agenda item what next
step to take.  Members did realise that the services negotiations were not taking place in a vacuum;
they were in fact linked with other processes taking place in the WTO, in particular, the convening of
the Fourth Ministerial Conference, the outcome of which would no doubt determine the pace of workin the following year.  It was therefore difficult at that juncture to take a long-term view of the
Council's work.  That was why he thought that it might be more appropriate for Members to limit
their discussion at that meeting to the organization of the December Special Session, leaving the
planning of further work to be decided upon at the end of that meeting, in the light of the outcome of
the Ministerial.
305. Provided that delegations found this to be a reasonable proposition, he indicated how he
thought the December meeting might be organized.   The Special Session would naturally consider
the standing items on its agenda, namely the assessment of trade in services, treatment of autonomous
liberalization, reports of the subsidiary bodies and the outline of the Chairman's report to the General
Council.  The discussion of the negotiating proposals would cover all those submitted until then in all
sectors as well as mode 4 and other horizontal issues.   In terms of sectoral coverage, the discussion
would be similar to that of the May meeting of th e Council.   However, it needed be qualitatively
different, particularly in terms of sharpening the focus on the important issues raised;  it would be
particularly important to structure the discussion in a way that would facilitate such focus.   One way
of achieving this was to agree on a set of items around which delegations would structure their
interventions.  In other words, such elements would constitute the headings under which Members
would express their positions in relation to each of the sectors.  Those elements could be:classification issues;  market access and national treatment commitments;  regulatory issues;  issues
relating to the implementation of Article IV;  any other issues, including MFN exemptions.
306. Those elements would be used as a tool to structure Member's interventions on each of the
sectors.  Delegations would not be invited to take the floor on each of them separately, but rather, on
each sector, make one intervention structured around those elements.   As in previous discussions,mode 4 would be taken up first, to be followed by se ctors, in the order in which they appeared in the
sectoral classification list in document MTN.GNS/W/120.S/CSS/M/12
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307. He hoped that Members would agree that the discussion of sectors as well as mode 4 could be
structured according to those elements, whereas this might not be the case for the proposals on other
horizontal issues, such as MFN exemptions, small and medium-sized enterprises, transparency, and so
on.  Therefore, he suggested that, as had been done at that meeting, these issues be taken up separately
at the outset and not be discussed according to the structure of the elements.   He stressed that all theabove was without prejudice to the submission of any new proposals.   If Members found the proposal
acceptable, he warned that it would be unavoidable that the December meeting be a lengthy one:  he
therefore suggested that at least four days in the week of 3 December be reserved for the Special
Session of the Council.   The Secretariat would also produce a supplement to the synopsis of
proposals contained in JOB(01)/63 and Add.1 to cover new proposals.
308. The representative of Mexico asked that the possibility of referring to the negotiating
proposals be retained.   The Chairman assured him that this would be the case.
309. It was so agreed.
G. OUTLINE OF THE CHAIRMAN 'S REPORT TO THE GENERAL COUNCIL
310. Based on Members' discussion over the previous days, the Chairman indicated that, in his
report to the General Council, he would state that the Council for Trade in Services in Special Session
had met on 5, 8 and 12 October 2001.  With respect to the item on the assessment of trade in services,the Council had agreed to task the Secretariat with the preparation of an outline of a symposium on
the assessment of trade in services, and a list of issues that Members might wish to take into
consideration when conducting their own assessme nt.  Under the item on the treatment of autonomous
liberalization, Members had discussed the Secretariat note contained in document JOB(01)/141.
Many delegations had stressed the need to move the discussion to the next stage and Members wereencouraged to submit proposals in this regard.  The Special Session of the Council had also adopted
its Annual Report to the General Council, as was contained in document S/CSS/8.  Members had
continued the second detailed discussion of the negotiating proposals submitted to the Special Session
of the Services Council.   At the meeting they had addressed the horizontal issues identified and the
following services sectors:  education services, energy services, transport services, tourism services,environmental services, financial services and recreational services.  New proposals had been tabled
under this item by the delegations Mexico;  by Bolivia, the Dominican Republic, Ecuador, El
Salvador, Honduras, Nicaragua, Panama, Peru and Venezuela;  by the Mercosur countries and
Bolivia;  by Kenya;  by Australia;  and by Japan.   The debate had been very substantive and several
comments had been raised with respect to different elements of the proposals;  several Members had
submitted their questions and answers in writing in advance of the meeting and more had been
encouraged to do so.   As for the organization of further work, he would make a brief reference towhat had been decided under agenda item F.
H. 
OTHER BUSINESS
311. A representative of the WTO Secretariat recalled that, at the Special Session in July,
Members had decided in principle to hold a symposium on the movement of natural persons in the
first half of 2002.  He indicated that, if this was still the Council's intention, Members needed to agreeon a programme, a date and the duration of the even t.  He also informed the Council that the WTO
Secretariat had been in contact with the World Bank, who had also been planning to hold a seminar in
spring 2002 addressing regulatory and economic aspects of the movement of natural persons.  He had
thought of the possibility of having a joint event which would benefit from the World Bank's research
and financial resources, and wondered whether Members could agree to the suggestion.
312. The representative of Pakistan supported the proposal for collaboration with the World Bank.
As for the time of the symposium and its duration, he suggested early 2002, possibly during the lateS/CSS/M/12
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half of February, and a duration of at least one-and-a-half days.   He called for an interactive event,
bringing together academics, private sector representatives, policy-makers and negotiators.   He said
that further studies could be commissioned and suggested that regulators and policy-makers discuss
issues related to immigration and labour laws.   As for the structure, the symposium could start with
the basic legal context for mode 4 trade, then address the economic angle and the implications ofmode 4 trade on home and host countries, current policy regimes and national experiences, and
present the regulators' views in the home and host country.
313. The representative of the European Commun ities noted that the tourism symposium had
lasted two days and called for the event on mode 4 to be of similar duration.   She could support the
symposium taking place early in 2002, either before or after March, as well as the collaboration with
the World Bank, who possessed a broader experience and whose resources could be used to fund the
participation of speakers from developing countries, but stressed the need to consult with them on theprogramme.  She wondered whether research papers were already available or had to be
commissioned.   She suggested that Members might agree on an outline for the event, to be drawn up
in consultation with the World Bank, by written procedure.
314. The representative of the Philippines supported the comments made by Pakistan and the
European Communities.   He could agree to the symposium being held either before or after March, as
long as it was in the first half of the year.  He supported the idea of a joint event with the World Bank
and said that an outline of the programme could be drawn up by the Secretariat in consultation with
the World Bank and any interested Members.
315. The representative of Australia echoed the statements of previous speakers and concurred
with the European Communities on the need to expe dite the process.   She favoured the symposium
being held in late February, before the March cluster of meetings, the collaboration with the World
Bank, a duration of the event of one-and-a-half days, in order to leave time for other meetings and the
Secretariat preparing an outline of the agenda.   She stressed the importance of the event being
interactive, with the participation of capital-base d experts from regulatory agencies, professional and
industry associations.
316. The representative of India stressed the crucial importance of mode 4 for developing
countries.  He suggested that an informal meeting be held to discuss the draft outline programme to be
drawn up by the Secretariat in consultation with the World Bank.  He was in favour of a two-day
symposium which would involve the participation of UNCTAD, and was flexible on the timing of the
event.
317. The representative of Mexico could support the collaboration with the World Bank, a two-day
event and the Secretariat drawing up a draft programme to be discussed by Members.  His delegation
wished to reflect further on the composition of the participants.  He stressed that the house rules on
symposia should be followed, namely that the event be informal, have no link with formal WTO work
or the negotiations, and that no formal conclusions be drawn.
318. The representative of Uruguay could support collaboration with the World Bank, a two-day
event to be held in early 2002 and the Secretariat drawing up a draft programme for the event.   He
suggested that the tourism symposium could form  a useful basis for the format of the event.
319. The representative of Turkey welcomed the suggestions and comments made, was pleased to
see convergence emerging on the organisation of the symposium, but stressed that the event had to be
informal and not linked to the negotiations.
320. The Chairman concluded that Members were in favour of having a joint WTO/World Bank
symposium on mode 4, which would last two days, be an informal event tentatively held back-to-backS/CSS/M/12
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with the March cluster of meetings.   The Secretariat would circulate a draft outline programme for
comments, and no meeting on the issue would be held unless necessary.
321. A representative of the Secretariat made two further announcements.  First, he informed
delegations that the Secretariat was drawing up plans for its technical assistance activities in 2002 and
invited interested developing countries to communicat e their needs for that year to the Secretariat by
mid-November 2001.  This was not intended to be a straightjacket, but only to provide some
predictability to technical assistance activities.  At the same time, no guarantee existed that all
indications of interest would be met.   Second, he indicated that most proposals were being submitted
to the Special Session as unrestricted documents and therefore suggested that, for the future, the
Secretariat would assume that, in the absence of any indication, the delegations' wish was for the
relevant submissions to be issued unrestricted.
322. Commenting on the latter suggestion, the representative of Mexico said that he would revert,
while the representative of India asked that the Secretariat's proposed change to the procedures for
circulation of documents be presented in writing.
323. The representative of Australia supported the second Secretariat suggestion, and the
representative of the European Communities said that the proposal did not imply any changes to the
procedures for the circulation of documents and that her delegation should not have to ask for other
Members' permission to issue a document unrestricted.
324. The representative of the Secretariat recalled that the rules adopted by the General Council for
the circulation of documents stipulated that all documents issued in the S/CSS/W/ series must be
circulated as restricted.  Therefore, the Secretariat would be proceeding accordingly, unless the
delegation making the submission requested that the document be issued as unrestricted
325. Responding to the first issue raised by the Secretariat, the representative of Thailand
wondered whether flexibility would still exist with  respect to requests for technical assistance made
after the mid-November deadline.   The Chairman responded in the affirmative, but called on
delegations to communicate their technical assistance needs to the Secretariat as far as possible bymid-November.
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