RESTRICTEDWORLD TRADE
ORGANIZATIONWT/REG/M/23
2 August 1999
(99-3252)
Committee on Regional Trade Agreements
Twenty-Third Session
NOTE ON THE MEETINGS OF 1-2 JULY 1999
Chairmen:  Mr Krirk-Krai Jirapaet (Thailand) and
Mr Andrew Stoler (United States)
A. ADOPTION OF THE AGENDA
1. The Twenty-Third Session of the Committee on Regional Trade Agreements (CRTA) was
convened in Airgram WTO/AIR/1118, dated 21 July 1999.
2. The following Agenda was adopted:
A Adoption of the Agenda
B. Systemic Implications of Regional Trad e Agreements for the Multilateral Trading
System and Relationship between them
C. Examination of Regional Trade Agreements
I. Status Report on the Examination of Agreements
II. Free Trade Agreement between Turkey and Hungary
III. Free Trade Agreement between Turkey and Romania
IV. Free Trade Agreement between Turkey and Israel
V. Free Trade Agreement between Turkey and Lithuania
VI. Free Trade Agreement between Turkey and the Czech RepublicVII. Free Trade Agreement between Turkey and the Slovak Republic
VIII. Free Trade Agreement between Turkey and Estonia
IX. Free Trade Agreement between Hungary and Israel
X. Free Trade Agreement between Israel and the Czech Republic
XI. Free Trade Agreement between Israel and the Slovak RepublicXII. Euro-Mediterranean Agreement be tween the European Communities and
their member states and Tunisia
XIII. Free Trade Agreement between Slovenia and Estonia
XIV. Free Trade Agreement between Slovenia and Latvia
XV. Free Trade Agreement between Slovenia and LithuaniaXVI. Free Trade Agreement between Croatia and Slovenia
XVII. Free Trade Agreement between the Republic of Estonia and the
Czech Republic
XVIII. Free Trade Agreement between the Republic of Estonia and the
Slovak Republic
XIX. Free Trade Agreement between the Republic of Latvia and the
Czech Republic
XX. Free Trade Agreement between the Republic of Latvia and the
Slovak RepublicWT/REG/M/23
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XXI. Free Trade Agreement between the Republic of Lithuania and the
Czech Republic
XXII. Free Trade Agreement between the Republic of Lithuania and the
Slovak Republic
D. Other Business
3. The Chairman said that before dealing with th e first substantive agenda item, he had three
issues of a "house-keeping nature" to bring to the consideration of the Committee.  First, he sought the
Committee's confirmation on the ad hoc  observership granted to the Latin American Integration
Association (the LAIA).  The Committee agreed that LAIA would retain this status during the next
meeting.
4. The Chairman said that at the forthcoming 24th session of the Committee scheduled for
22-24 September and 15 October 1999, the Committee would discuss the contents of and
subsequently adopt the 1999 Committee's Report to the General Council.  He invited delegations to
submit, either to the Secretariat or to himself, their views in that respect.  Also, in order to facilitate
the Committee's discussion on this subject, he proposed that the Committee ask the Secretariat to
prepare and circulate a draft report, of a purely factual nature, for the September meeting.  The
Committee agreed.
5. The Chairman thanked the parties of six agreements (the CARICOM; the Central American
Common Market; the Czech-Slovak Customs Union, and the Agreements between EFTA and the
Czech Republic, the Slovak Republic and Turkey) for their efforts in submitting to the WTO their first
biennial reports in conformity with paragrap h 11 of the Understanding on the Interpretation of
Article XXIV of GATT 1994. These, sometimes quite voluminous, reports were being processed by
the Secretariat and would be duly circulated to Members.  He also invited the parties of other
agreements included in the Schedule for the Su bmission of Biennial Reports in 1999, which was
approved by the Committee at its 20th Session, to ensure that these reports reached the Secretariat in
due time as this was an important transparency element in the Committee's area of work.
B. SYSTEMIC IMPLICATIONS OF REGIONAL TRADE AGREEMENTS FOR THE MULTILATERAL
TRADING SYSTEM AND RELATIONSHIP BETWEEN THEM
6. The Chairman recalled that during its 22nd session, a useful exchange of views on the paper
submitted by Hong Kong, China (WT/REG/W/34) had taken place.  At that meeting it was agreed that
the discussion be pursued at the 23rd Session.  He drew the attention of the Committee to
two additional submissions in this respect: a Non-Paper by Japan, commenting on document
WT/REG/W/34; and an Informal Paper by H ong Kong, China, expanding on its earlier
communication.  He invited the representatives of Japan and Hong Kong, China to introduce their
respective papers.
7. The representative of Hong Kong, China said that the working paper had covered many
questions on all the paragraphs in GATS Article V but that there were further questions which had
been raised by other delegations.  In the informal paper they had focused on three elements of the
Article which caused them concern:  The first was the relationship between "substantial sectoral
coverage" and "substantially all discrimination".  In this respect they had suggested that thesetwo provisions could be related or inter-related in at least two ways.  One was that a sector could be
considered as covered for the purposes of Article V:1(a) if it met the test in sub-paragraph V:1(b)
concerning the "absence or elimination of substantially all discrimination".  A second interpretationWT/REG/M/23
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was that the test in Article V:1(a) was designed to determine what proportion of sectors or subsectors
etc. would fall under the liberalization provisions of an Economic Integration Agreement in
Services (EIAS) and that Article V:1(b) introduced a separate test.  In his delegation's view, a literal
reading of the provisions would favor the second interpretation, which also better fitted the language
in Article V:1(a) and (b).  As far as the question of "substantial sectoral coverage" was concerned, hisdelegation was of the view that this could be determined on a sector-by-sector basis rather than a
subsector-by-subsector basis or on a completely disaggregated basis.  Another related question was
whether an EIAS could exclude a sector and still pass the test of "substantial sectoral coverage".  He
particularly drew attention to the transport sector which was substantially carved out of the GATS
because of the Annex on Air Transport Services  and the Annex on Negotiations on Marine Transport
Services  and wondered what implication this had.  The third issue addressed in the paper was the
definition of "substantially all discrimination".  This informal paper was a follow up in more detail onthree of the areas which caused his delegation particular concern and he hoped that it would stimulate
Members to take these subjects into consideration.
8. The representative of Japan said that  her delegation also agreed that there was a lack of clarity
in the provisions of GATS Article V. She made reference to Japan's submission on "Regional
Integration" (WT/GC/W214) to the General Council, as part of the preparation process for the 1999Ministerial Conference, in which it was stated that "the lack of progress in the examination of regional
trade agreements should not … become a source of distrust for maintaining the primacy of the
multilateral trading system"  and proposed "that the work to qualify the meaning of the provisions of
Article XXIV of the GATT and Article V of the GATS … be included in an appropriate manner in the
next negotiations".  Especially with regard to Article V of the GATS, her delegation had highlightedthe examination of two issues: "substantial sectoral coverage" of Article V:1(a) and "absence or
elimination of substantially all discrimination" of Article V:1(b).  In this context, her delegation
wished to make some preliminary comments on Hong Kong, China's paper (WT/REG/W/34)
paragraph by paragraph. She would not cover paragraphs 3,5,6,7,8, and 10, on which her delegation
had already commented during the previous Session of the CRTA.  With regard to paragraph 9, theJapanese delegation agreed with Hong Kong, China that further discussion on the list of exemptions
provided in Article V:1(b) of the GATS might be useful, since they considered that this was not an
exhaustive list.  The preamble of the GATS referred to "the rights of Members to regulate, and to
introduce new regulations, on the supply of services within their territories in order to meet national
policy objectives"; thus some additional measures might need to be recognized as a part of the
exception list.  However, this did not mean that an excessively wide range of exceptions should be
permitted concerning the role of the EIAS as a vehicle for promoting service trade liberalization.Although it might not be easy to draw a line, perhaps what was covered by the GATS obligations
under the National Treatment Clause should not be added to the exception list.  Her delegation was
also interested in other delegations' views on further points they had raised regarding paragraph 9,
including Recognition, Emergency Safeguard Measures, Government Procurement, Subsidies, and
Air Traffic Rights.  With regard to paragraph 11, a wider process of economic integration could beapplied not only to the  elimination of barriers to tr ade in service but also to the elimination of barriers
to trade in goods and harmonization of domestic regulatory measures.  However, she noted that the
consistency of regional trade agreements with GATT did not directly result in its consistency with
GATS in the area of services.  On paragraph 12, concerning "flexibility", specified in Article V:3(b),
the provision should be applied with the understanding that the purpose of Article V:3(a) was toconsider the situation of developing countries that had a lower competitiveness in international trade
in services.  With regard to paragraph 13, though the shortage of statistical information in services
could be an obstacle, it would to some extent be possible to evaluate the level of barriers by utilising
the data from sources such as balance-of-payments (BOP), stocks of foreign direct investment and
domestic industries in individual Members.  With regard to paragraph 14, the degree of favourabletreatment granted to juridical persons owned or controlled by the natural persons of a party should be
interpreted in a flexible way with the understanding that the purpose of Article V:3(a) was to consider
the situation of developing countries that had a lower competitiveness in international trade inWT/REG/M/23
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services.  The Japanese delegation had also raised some points which were not mentioned in
Hong Kong, China's paper.  First, they were of the view that the definition of a developing country
with respect to Article V:3 warranted consideration.  Second, unlike the treatment of goods in
Paragraph 11 of the Understanding on the Interpretation of Article XXIV of the GATT 1994, which
stated that "Customs unions and constituents of free trade areas shall report periodically to theCouncil for Trade in Goods", reporting the operation of EIAS's was not under any legal obligation in
the GATS.  It was worth considering the necessity of such reporting.
9. The representative of Australia said that his delegation had tabled a proposal on RTAs
suggesting "two bodies of work to cover issues of importance to WTO Members to be completed
within three years, in line with the time-frame agreed for key negotiations on agriculture and services.
This would ensure that outcomes of these negotiations [were] not undermined by even greater
derogation from MFN obligations as RTAs [continued] to be established". His delegation was also ofthe view that it was important to develop ways to measure "the level of duties and other regulations of
commerce" and "level of barriers".  His delegation understood that the absence of some meaningful
statistics could be an obstacle to this.  He did note with interest the suggestion by Japan on other data
sources such as BOP and domestic industries.  The Committee also needed to decide whether
agreements covered by the 1979 Decision on Differential and More Favourable Treatment,Reciprocity and Fuller Participation of Developing Countries should be subject to the disciplines of
GATT Article XXIV or GATS Article V.  His delegation was of the view that clarification of various
articles, or provisions in these articles, was extremely important.
10. The representative of Korea recalled that at the previous meeting his delegation had made
some preliminary comments on the Hong Kong, China paper and hoped that his delegation would
come back to each point reviewed at a later stage.  He also expressed his delegation's appreciation for
the second paper submitted by Hong Kong, China, noting that it represented an effort to expand on the
discussions the Committee had heard at the previous meeting.  His delegation also wished to come
back to the points raised by the Non-Paper from Japan at a later stage.  Regarding the last part of the
paper suggesting that the Committee review the definition of a "developing country" with respect toArticle V:3, he noted that in the WTO the categorization of a developing country had been done on
the basis of self-election.  Therefore, the review of the definition of a developing country was not
really relevant at the CRTA.
11. The representative of the United States said that, for the time being, his delegation wished to
comment only on the last item note in the Japan paper which read: "reporting the operation of
Economic Integration Agreements are not under any legal obligation of the GATS.  It is worth
considering the necessity of such reporting".  He wondered whether Japan meant that the Committeeshould reconsider the renegotiation of GATS provisions to accord such an obligation on the Members.
He was of the opinion that the CRTA should focus on existing obligations within GATS Article V and
not be projecting out.  The General Council would evaluate the possibility of a negotiation in the
services area.  His delegation was not convinced that Article V needed to be opened for renegotiation.
12. The representative of India said that his delegation was also in the process of preparing a
written response to some of the issues raised in Hong Kong, China's paper .  He suggested that a
special, possibly an informal, meeting of the Committee be held on Article V of the GATS in order to
make an analysis of the inputs so far received and help the process move forward.  He expressed
support for Hong Kong, China’s view  on the issue of “substantial sectoral coverage," and reiterated
that any approach other than establishing the criteria by a sector-by-sector test would meet difficulties,notwithstanding some of the questions that would sti ll need to be answered.  For example, if a sector
was only partially liberalized, how would it be treated for the purposes of sub-sectoral coverage?
Concerning the issues raised in the Non-Paper by the Japanese delegation in response to paragraph 7
of the Hong Kong, China paper, while entirely in agreement that "agreements should not provide for a
priori exclusion of any mode of supply", his delegation wished to examine in greater detail theWT/REG/M/23
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ramifications of the second subparagraph of the Japanese delegation's comments as far as movement
of natural persons was concerned.  It had been his delegation's view that any Economic Integration
Agreement on Services necessarily needed to provide for labour mobility for natural persons
employed by firms supplying services, or for natural persons with established contracts to supply
services.  His delegation supported the Japanese proposal on paragraph 13 concerning the possibleevaluation of the level of barriers by utilising data from other sources.  He agreed with the Australian
delegation that the Committee could expand later on this issue.
13. The representative of the European Communities (EC) said that  his delegation supported the
view expressed by the United States on Article V of the GATS and emphasized that the Committee
could only use the current text in the discussion of systemic issues.  A proposal to review the
architecture of the GATS, possibly in the next round of services negotiations, should be made in the
Council for Trade in Services or in the General Coun cil.  Referring to the section of the Non-Paper by
Japan which raised the question of "prompt notification", he said that the Council for Trade in
Services had found it impossible to determine a specific time-frame when defining the meaning of
"prompt," and had concluded that such a determination would have to be made on a case-by-case
basis.  Regarding India's suggestion to hold a special meeting on the GATS with services experts, he
said that these issues were also being discussed in the Council for Trade in Services.  It would beuseful to have a linkage at the Secretariat level so that delegations were aware of both discussions.  He
presumed that there would not be any difference in what delegations put forth in one or the other
body.
14. The representative of Argentina  agreed with the delegations of the United States and the
European Communities that perhaps the papers under discussion contained elements and proposals for
which the CRTA was not the appropriate forum.  For discussions on the systemic implications of
Article V, the CRTA was the appropriate forum while the General Council was the appropriate forum
to present proposals for changes to Article V.
15. The representative of Australia stated that discussions on systemic issues and the clarification
of issues such as "substantially all trade" were appropriate subjects for the CRTA.  His delegation
supported India's suggestion to schedule a meeting to specifically discuss issues related to Article V of
the GATS.
16. The representative of Canada said that her delegation had made some comments at the last
Session and was still studying the Hong Kong, China paper.  Her delegation would not want the
discussions on GATS Article V to interfere with the completion of the consideration of reports that
had already been underway for a long time.  The CRTA was not the appropriate forum to develop
interpretations of Article V of the GATS, yet her delegation welcomed a discussion on this articlesince it played an important role in the context of RTAs.  The CRTA was the appropriate body to
discuss broader policy questions but not the interpretation of specific elements.
17. The representative of Hungary supported the views expressed by Canada with respect to the
Hong Kong, China paper and related proposals.
18. The representative of Hong Kong, China, res ponding to one of the comments from Argentina,
drew attention to the second paragraph of the working paper (W/REG/W/34) which said that issues
raised were without any prejudice to the positions of WTO Members on these subjects.  Secondly, as
regards the mandate of the Committee and whether it should be considering changes to Article V, the
terms of reference were clear and it was well within the scope of what the Committee should be
considering.  Point (d) of paragraph 1 of the Terms of Reference mandated the Committee to"consider the systemic implications of such agreements and regional initiatives … and make
appropriate recommendations to the General Council.”  This phrase could not be limited to saying that
the current text was fine.  His delegation had in addition submitted a proposal to the General Council,WT/REG/M/23
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but the CRTA had a mandate to take these matters further.  Regarding the last section of the
Non-Paper from Japan, his delegation would support the Korean view on self-election for developing
country status.  His delegation was of the view that the second point made by Japan, concerning the
reporting of the operations of EIAS's, warranted consideration.  His delegation also supported the
Indian suggestion to hold a special session of the Committee on Article V of the GATS.
19. The Chairman proposed that the Committee take note of the interventions made under this
item and he wished to convey some views regarding the work of the Committee under this agenda
item.  Despite continuing discussions the Committee found itself at a low ebb within this debate
without a clear formula for moving the work forward.  During the previous Session, the Committee
had agreed to instruct the Secretariat to prepare a "synoptic paper" which would summarize, on a
factual basis, the discussions that had already taken place on these issues.  This "synoptic paper"
would be ready for consideration during the September Session of the Committee.  However, hewished to exhort delegations to give, before the September Session, some thinking to the question of
how the CRTA should address the second part of item 1(d) of the Committee's terms of reference;
namely to "make appropriate recommendations to the General Council".  As there were no comments
made, he said that the Committee would revert to this issue after the summer break.  He hoped that
some of the representatives attended the seminar organized by the Secretariat in collaboration with theWorld Bank and the International Monetary Fund under the coherence mandate.  He had attended
most part of the seminar and found it very useful. The Committee could consider points raised during
the seminar as input for the preparations on item 1(d) of the Committee's Terms of Reference.
20. The Committee took note of the interventions made.
C. EXAMINATION OF REGIONAL TRADE AGREEMENTS - STATUS REPORT ON THE EXAMINATION
OF AGREEMENTS
21. The Chairman said that as of 2 July, when the Council for Trade in  Goods would transmit
seven newly notified agreements for examination, th ere would be 72 RTAs under examination at the
Committee.  The overwhelming majority of these RTAs were agreements in the area of goods (onlyseven agreements referred to trade in services).  For 30 out of the 65 agreements being handled within
the Committee, the examination was still at its fact-finding stage, where information was being - or
should be in the near future – exchanged between Members and the corresponding parties, orally or in
a written form, and comments were registered in formal CRTA meetings.  For some of these
agreements included in the Agenda for the 23
rd Session, these factual examinations could probably
come to an end. For others, the Committee could possibly progress and with the cooperation of all
delegations concerned, finalize this process at the next Session.  For another 33 agreements, thefactual stage of the examination had in principle ended. Under its terms of reference, the Committee
now had to adopt agreed reports on these examinations .  As most delegations already knew, in the last
year or so (and even before in some cases) the Committee had been holding a series of informal
meetings devoted to the discussion of draft reports on examinations.  As recently as the Monday
before, under the Chairmanship of Ambassador Chul-Ki Ju, informal consultations had taken place toattempt to settle a number of outstanding issues on the draft reports of six agreements: a continuation
of these consultations was scheduled for the following Monday, 5 July 1999.  Some progress had been
made; however, even in these relatively advanced cases a considerable number of divergences
remained and efforts to reach consensus on the texts had not yet been fruitful.  However frustrating
this exercise might be, he hoped very much that, with goodwill by Members, it would yield results
soon and that the CRTA would be able to report to the Ministerial meeting that it had fulfilled its
mandate in regard to these agreements.  In any case, he thanked all those participating in this
endeavour. He recalled that if the Committee was to report to the General Council any success in
concluding examination reports, time was short.  Apart from the following Monday's informalWT/REG/M/23
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consultations on the subject, there would possibly be another meeting scheduled towards the end of
the month and an additional one by mid-September, before the 24th Session.  He therefore stressed the
urgency of the matter.
22. (The minutes of the examination of Agreements listed under agenda items C.II-XXII are
being distributed as separate documents.)
D. OTHER BUSINESS
23. No items were raised under Other Business.
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