RESTRICTEDWORLD TRADE
ORGANIZATIONTN/S/M/3
17 September 2002
(02-4950)
Council for Trade in Services
Special Session
REPORT OF THE MEETING HELD ON 23 JULY 2002
Note by the Secretariat1
1. The Council for Trade in Services held a Special Session on 23 July 2002.  The agenda for the
meeting is contained in document WTO/AIR/1865.
2. The Chairman indicated that, under Other Business, he would make a statement regarding the
organization of the Special Session in October and tentative dates of meetings for 2003.  He would
also inform Members of a communication on GATS issues received from the Union Network
International on behalf of the Global Union Federations.  He proposed that the Council adopt the
agenda as circulated, with the addition of the items of Other Business he had just referred to.
3. The Council so agreed.
A. ASSESSMENT OF TRADE IN SERVICES
4. The Chairman recalled that, at the June meeting, the delegation of Pakistan had introduced, on
behalf of a few Members, a new submission on the assessment of trade, which was later circulated as
document TN/S/W/3.  The communication had generated a number of preliminary reactions and
several delegations had indicated that they would revert to it.  The delegation of Thailand had also
announced that they were planning to submit a contribution on the assessment of trade in services.
They had indeed done so, and their communication, dated 22 July 2002, was contained in document
TN/S/W/4.
5. The representative of Thailand introduced the submission, contained in document TN/S/W/4,
by saying that it represented a preliminary study on the assessment.  She highlighted that the paper
was based on available statistical information, from the Bank of Thailand, to allow for international
comparability.  She also stressed that the paper was not a complete study but only presented some
aspects of Thailand’s experience with services trade.  It focused on mode 3 trade in the case-study onthe retail sector and on cross-border trade in the case-study on financial services;  the two sectors had
been chosen in view of the availability of data an d in order to be able to focus on these two modes of
supply.  The study was in four parts:  the first part examined statistical data relating to services, the
second and third sections presented the two case studies, on retail trade and financial services
liberalization respectively, and the last part discussed the main conclusions.
6. Focusing on this last section, she said that, given the importance that services and trade in
services played in the Thai economy, in terms of  FDI, employment, export revenue and the growth of
imports, Thailand would not turn its back on the liberalization of trade in services.  However, in light
                                                     
1 This document has been prepared under the Secretariat's own responsibility and without prejudice to
the positions of Members and to their rights and obligations under the WTO.TN/S/M/3
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of the problems experienced with liberalization in the retail and financial services sectors, it was fair
to conclude that liberalization was not easy to achieve and that progressive liberalization was the
preferred path.  Liberalization should be commensurate to a country’s development, economic and
social needs.  It had to be undertaken and implemented with caution, and the same went for the
implementation of the regulatory measures.  At the same time, the domestic industry had to be readyto meet the more competitive environment that came  with liberalization, so that capacity building was
essential.  The public also had to recognize the benefits of services liberalization.  At the same time,
the government needed to be mindful of the downsides of liberalization.  In conclusion, liberalization
was the way forward, but only if undertaken at a pace commensurate with a country’s economic
situation.
7. The representative of Switzerland welcomed the submission by Thailand and added that he
might revert to it in detail.  He said that the study would help Thailand with its own negotiating
position and help all Members to see what could be done with regard to the assessment and what
results this pointed to.  He was of the view that the conclusions reached in the paper were very useful,
showed a commitment to liberalization and drew attention to what was necessary in terms of
regulatory framework for liberalization to be successful.  He could share the overall thrust of the
paper, and noted that Switzerland’s own experience with the liberalization of the financial servicessector had also proved positive.  He added that Thailand’s was the kind of submission that could
contribute positively to the discussion on the assessment.
8. The representative of Australia concurred with  Switzerland that the submission by Thailand
was well structured and that it usefully outlined the role and importance of services trade in the
country.  He particularly shared the conclusion reached in the case-study on retail trade about theimportance of having an appropriate and sound regulatory framework in place to accompany trade
liberalization programmes, agreed with the sy nergies between competition policy and trade
liberalization and with the fact that liberalization would entail both positive and negative effects, but
stressed that Australia was convinced of the value of its own services liberalization process and the
contribution it had made to the well-functioning of the economy.  He also concurred that it was on thebasis of contributions like the one submitted by Thailand that the assessment should proceed.
9. The representative of the European Communities echoed the statements made by previous
speakers.  Commenting on the paper submitted by a number of developing countries in document
TN/S/W/3, she felt that it drew a rather negative picture of their experience with services trade
liberalization until then.  It referred very strongly to the statistical picture that undoubtedly showed the
still relatively small share of developing countries in global trade in services.  However, her
delegation was of the view that a slightly different approach might also be adopted.  One should lookfor instance at the share of services in the overall exports of a country.  On average, this was about
20%, and the share was significantly higher in the case of certain developing countries.  This showed
the importance of services exports for developing countries probably better than just looking at their
share in global trade flows.  In that context, she gave the example of the EC, where services imports
from developing countries had grown annually between 10 and 15 % over the previous few years.That was also a worthwhile perspective, which w ould show higher growth for developing countries
than for most developed countries.
10. Her delegation was also of the view that Members should focus much more on the qualitative
elements of the assessment, along the lines that Thailand seemed to be taking.  She did naturally agree
with sections 5 and 6 of the paper submitted by Pakistan, which stressed that liberalization had to beunderpinned by the appropriate regulations and possibly by regulatory reform.  In that context, the
long-term perspective of GATS commitments had to be acknowledged:  their economic benefits
would neither be automatic nor short term.  But it was important to see the role of commitments in
contributing to a more predictable and transparent framework for potential exports and for potential
investors.  She hoped to see more contributions like the one submitted by Thailand, which constitutedTN/S/M/3
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the kind of assessment to be undertaken throughout the negotiations to educate Members in the
process.
11. The representative of Norway welcomed the communication submitted by Thailand.  It was a
substantial and comprehensive contribution to the assessment, laying out the importance of the
services sector in the Thai economy, of adequate regulation and of progressive liberalization.  He alsowelcome the latest contribution from the Secretariat, showing that, when it came to exports of
commercial services, the growth rate was higher for developing countries than for industrialised
countries.  He reiterated that liberalization of tr ansport services had been shown to lower prices,
which was extremely important to developing countries.  Telecommunication liberalization had
resulted in considerable growth in many developing countries, as documented also by his delegation.
Energy services liberalization could lead to simila r results under appropriate conditions.  Education
had an enormous potential.  Financial services were likewise important, for instance by improving anextending insurance coverage and making investments in developing countries more attractive.  All
these items were crucial for the agenda of the negotiations and their outcome, an outcome that should
help promote the interest and participation of developing countries in trade in services.
12. The representative of Pakistan thanked the delegation of Thailand for their submission, shared
their conclusion that progressive liberalization was the preferred path and said that he would revert to
the paper in detail.  With regard to the commen t by the European Communities that their submission
in document TN/S/W/3 depicted a negative assessment, he said that they had not given a
preconceived opinion on the assessment but had carried out an assessment based on objective
analysis.  If the conclusions reached were negative, it was because that was the situation in reality.  As
for the growth of developing countries’ services exports to the European Communities, he said that
the message was positive but that his hope was that this increase would be higher in the future.  He
sought more information from the EC with regard to the sectors and modes in which this increase had
taken place.  He underlined that their submission was based on statistical information and that it had
always been stressed that the assessment had to be based on data;  now however, they were being told
that their paper was too focused on statistics.  In his opinion, any analysis was valuable, whetherquantitative or qualitative, as the assessment was not to be an academic exercise, but a result-oriented
one.  He added that developing countries had been complaining about the need to operationalize
Article IV and that they were not encouraged by the requests submitted until then.
13. The representative of Indonesia said that he would revert to the submission by Thailand, but
he was grateful for the work they had undertaken, which helped other Members in carrying out an
assessment of trade in services.  He shared the concerns expressed in the concluding section of the
paper, especially with regard to liberalization taking place within the appropriate regulatoryframework and having both positive and negative effects.  He fully shared the analytical work carried
out in the two case-studies presented by Thailand and hoped for more contributions on the assessment
from other Members, especially from developing countries, focusing in particular on sectors that
benefitted economic development.
14. Commenting in a preliminary manner on the submission by Thailand, the representative of
Mexico said that his first impression was that it was a very useful contribution.  The conclusions it
reached made him reiterate that any assessment would be based on Members’ individual situationsand evaluations.  In Thailand’s case, their assessment had led to the conclusion that liberalization was
positive if carefully and progressively undertaken and that it was still the way forward.  His delegation
shared this conclusion:  an economy needed efficient services to benefit consumers.  These had to beprovided in a competitive framework that was properly regulated, which was something the GATS
allowed for.  Mexico was therefore convinced that services liberalization was beneficial.
15. The representative of South Africa said that her delegation wanted to invite James Hodge, a
researcher from the University of Cape Town who had analysed the economic impact of servicesTN/S/M/3
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liberalization in Southern Africa, to give a presentation to the Special Session in October.  Mr. Hodge
had co-authored a paper with Norwegian researchers that had been introduced by the delegation of
Norway under the assessment discussion in 1999 and had also been invited, but had been unable to
attend, the symposium on the assessment held in March 2002.  She said that his presentation would
give stimulus to the discussion and contribute to the assessment and sought Members’ accord.  TheCouncil so agreed.
16. The representative of Pakistan suggested that South Africa make the presentation available in
advance, so as to favour an interactive discussion.
17. The representative of the Philippines thanked Thailand for the great effort put into their
submission.  He was certain that developing countries would benefits from the lessons drawn from
Thailand’s experience.  From a preliminary reading of the paper, he had deduced certain lessons,
which could probably apply to the Philippines in the context of the services negotiations.  Hehighlighted in particular paragraphs 29, 34 and 40 and 44 in the case-study on retail trade
liberalization.  He said that the presence of foreign retailers had benefitted the consuming public in
Thailand, but he had also taken note of the impact of this liberalization on the traditional retailers,
wholesalers and middlemen.  He referred in particul ar to how certain retail shop owners had been by-
passed and marginalized.  Liberalization obviously elicited some concerns on their part, primarilybecause of the consequences they had faced.  At the same time, he had taken note of the various
measures adopted by the Thai government to help domestic small retailers, such as training on
modern managerial skills and marketing techniques, which provided an illustrative lesson of the
safety nets that could be put in place, preferably before liberalization was undertaken.
18. Turning to the case-study on financial services liberalization, mindful of the similar
experience which the Philippines and Thailand had had with the financial crisis, he had taken note of
the Thai experience as enunciated in paragraph 58 where “new financial and debt instruments were
created that made surveillance and devising appropriate regulation almost impossible” and in
paragraph 63 of the fact that liberalization “should have been planned as a process and implemented
in steps rather than being set out as an objective to be achieved thought incoherent policy measures”.These were lessons that would be useful to other developing countries.  With regard to the
conclusions reached in the paper, he concurred that, while liberalization had positive effects,
progressive liberalization was the most appropriate way forward for developing countries, who should
be given space and time to put adequate regulatory frameworks in place to achieve successful
liberalization.  He called for other contributions similar to the one tabled by Thailand.
19. The representative of the United States thanked Thailand for their paper, to which his
delegation would revert, and for sharing their experience with services liberalization with Members.
Turning to the paper submitted in June by a number of developing countries in document TN/S/W/3,
he said that it presented these delegations’ views on the assessment, some of which his delegation
shared and some it did not.  Turning to the results they had reached on pages 2 and 3, he agreed with
those in paragraphs 5 and 6, as he understood that developing countries should consider services
liberalization and GATS commitments as part of their development strategy.  However, he noted thatit was true for all Members that liberalization had to fit in a country’s domestic interests and strategy.
He strongly disagreed with paragraph 1 with regard to the United States experience, as the US could
count in tens of thousands the entrants under their mode 4 commitments from developing countries
alone.  With regard to paragraph 2, he said that statistics could also tell a different story.  Whilst he
was not disputing the data presented in that section, he also called upon Members to focus on otheraspects, such as the increase in market share in  services trade by developing countries and the
changing composition of participation to services trade.  Little liberalization had been achieved in the
GATS until then with the Uruguay Round and to some extent with the extended negotiations, so that
this had to be the agreed objective of these negotiations.  He therefore felt that it was premature to
arrive at the conclusions in paragraphs 2 and 4.  As for paragraph 3, he said that some could viewTN/S/M/3
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imports as negative, but recalled that in mode 3 imports could generate employment opportunities and
invited these delegations to reconsider the contention that imports were necessarily negatively
affecting the domestic industry.
20. The representative of Malaysia said that the paper submitted by Thailand reflected also
Malaysia’s concerns on the impact of liberalization, particularly in the case of retail trade services.
She believed in all that service liberalization stood for, but stressed that it should not come at the
expense of domestic providers, most of which were small-sized businesses.  Liberalization would
have to move in tandem with capacity building of domestic providers, who did not have the resources
to face foreign competition head on, and be undertaken in a progressive manner at a pace that
developing countries could sustain, within an enabling regulatory framework and in line with national
economy objectives.
21. The representative of Venezuela said that the submission in document TN/S/W/3, particularly
in paragraphs 5 and 6, and the one in document TN/S /W/4 shared some similarities.  She said that it
was difficult to call into question the benefits of services liberalization, but stressed that the success
stories presented in the assessment discussion showed  that some pre-conditions had to exist in order
for liberalization to be beneficial, such as pro-competitive regulation, appropriate preparation of the
domestic industry and full conscience of the steps which needed to be undertaken.  She recalled thatparagraph 14 of the Guidelines mandated that the assessment be on-going and that the negotiations be
adjusted in light of the results.  The market access negotiations had started, initial requests had been
tabled and the submission of offers was forthcoming;  hence, reaching conclusions on the assessment,
both sectorally and horizontally and both at domestic also and multilaterally was necessary in order to
be able to analyse requests and offers.  The assessment had to continue and Members’ individualexperiences were certainly useful contributions to the discussion;  however, given that the GATS was
new, a reflection of the fact that services liberalization was also relatively recent,  regulatory
frameworks were also new, and time was required to put them into place properly.  She concurred
with the United States comment that mode 3 imports  could be beneficial in light of the employment
opportunities they could generate, but also noted that opening to foreign investment had to focus onthose sectors of crucial importance for the domestic economy.  It also had to be based on adequate
pre-conditions, to ensure that this foreign investment generated employment and favoured joint-
ventures with local suppliers, thereby facilitating their development.  She stressed that the assessment
had to be an instrument for the negotiations.
22. The representative of India reiterated the importance of the assessment for the negotiations,
the submission of requests and offers and to prepare the domestic industry and constituency for
further liberalization.  He stressed that the fact that the assessment was on-going did not imply that no
initial conclusions could be drawn or that it should merely be an academic exercise.  He welcomed the
submission by Thailand and their initial conclusions on the assessment and said that his delegation
would revert to it.
23. Commenting on the submission in document TN/S/W/3, the representative of Brazil said that
his delegation shared some of the ideas presented about the importance of the assessment for
developing countries to be able to identify sectors and modes of export interest to them.  The focus of
the discussion had to shift from what were the benefits of liberalization, which were for each
individual Member to evaluate on the basis of its own experience, to how developing countries’
services exports could be increased.  He concurred with the observations made about inflows of
foreign investment being imports under mode 3, but noted that the benefits of liberalization were notautomatically realized and depended on individual countries’ situations.  There had also been negative
implications from increased inflows of foreign inve stment;  this had, for instance, been discussed in
the Working Group on the Relationship between Trade and Investment, where the Secretariat had
produced a paper on the effects of FDIs on the Balance-of-Payments, focusing on what could
sometimes be the perverse effects of investment cycles.TN/S/M/3
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24. The representative of China welcomed the submission by Thailand and hoped that a similar
study could be undertaken for China’s experience with services liberalization as, in spite of its recent
accession to the WTO, they had started opening up in the late seventies.  She shared some of the
conclusions reached in the paper by Thailand, and she highlighted three in particular.  First, that
services liberalization was the way forward because, as the paper demonstrated, it led to economicbenefits.  Second, that liberalization had to be undertaken progressively, as had been the case with
China’s gradual opening since 1978.  Third, that a competitive environment was very important.
Competition policy was necessary to ensure that competition worked effectively and to prevent
monopolistic practices, especially in sectors where suppliers were small and could not compete with
large multinational enterprises.
25. The representative of Uruguay said that he would revert to the submission by Thailand.  He
concurred that liberalization had to be undertaken progressively, and underlined that, given that this
was one of the main principles of the GATS, all Members should agree to it.  He reiterated that, in
order to effectively implement Article IV of the GATS, it was necessary to have concrete requests
identifying the barriers and obstacles to be removed in order to facilitate the participation of
developing countries in services trade.
26. The representative of Thailand was thankful for the comments received and looked forward to
further reactions.
27. By way of concluding comments on this agenda item, the Chairman said that the Council had
held a substantive and focused discussion, particularly stimulated by a new submission tabled by
Thailand, to which many delegations said they would revert, and an earlier communication submitted
by several developing country Members.  The Council had also welcomed South Africa’sannouncement that they would be making a contribution to the assessment discussion in October.  A
number of common themes had emerged from the discussion.  First, services liberalization was
generally considered to be beneficial.  Second, it was stressed that liberalization had to be undertaken
progressively and that the context and timing with which it was carried out were of crucial relevance.
Third, its relationship with competition policy had been underscored.  Fourth, further studies on theassessment, such as the one carried out by Thailand, were called for.  He suggested that the Council
take note of the statements made and revert to this item at its next meeting.
28. It was so agreed.
B. TREATMENT OF AUTONOMOUS LIBERALIZATION – PROGRESS REPORT BY
THE CHAIRPERSON
29. The Chairman reported that, pursuant to what had been agreed at the previous meeting of the
Special Session, he had convened an open-ended informal meeting on 8 and 9 July in order to address
the draft modalities for the treatment of autonomous liberalization.
30. The discussion focused on the main substantive issues raised in his report to the previous
formal meeting of this Council, contained in docu ment JOB(02)/75.  These issues were:  first, the
situation of recently acceded Members;  second, the scope of the modalities, particularly with
reference to developing country Members;  third, the possibility of obtaining credits throughconcessions on trade in goods;  and, fourth, the relationship between autonomous liberalization and
bindings.
31. Additionally, a group of 23 developing-country Members circulated an informal document, in
JOB(02)/77, highlighting their interests and containing suggestions to amend the current draft text of
the modalities.TN/S/M/3
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32. The meeting held on 8 and 9 July was useful.  Although no new elements emerged, it helped
clarify the various positions on each of the issues mentioned earlier.  The document submitted by a
group of developing country Members proved to be very useful in that regard.  He considered that
paper as a "position paper", and not as definitive drafting suggestions.
33. He had to admit that he had not perceived as much flexibility as he would have hoped for
during the meeting, although it was only fair to re cognize that some indications of flexibility were
expressed.
34. There were still serious gaps among delegations.  A change in positions was definitely
required if the objective was to agree on the modalities sooner rather than later.  It seemed to him that
Members should all focus on what they could live with, and not simply on their preferences.  No draft
could please everybody at the same time.  In fact, they should look for an equitable, reasonable and
acceptable dissatisfaction on all sides.
35. In terms of procedure, he would continue the process of consultations, meeting delegations
individually and in groups.  He would meet with Members at their own request, and also at his own
initiative.  He warned delegations to be prepared, as he would be seeking flexibility on all sides.  In
the light of these consultations, at an appropriate time he would submit a new draft under his
responsibility, but only provided he had those additional elements of flexibility.
36. He said that, in the view of many delegations, this was a matter of a certain urgency.  He
considered it desirable if Members could reach an agreement by October.  Finally, he said that at the
last meeting of the Trade Negotiations Committee, a number of Members referred to the issue of
modalities for the treatment of autonomous liberalization.
37. The Council took note of the statement and agreed to proceed as suggested.
C. MODALITIES FOR THE SPEC IAL TREATMENT FOR LEAST -DEVELOPED COUNTRY MEMBERS
38. The Chairman recalled that Article XIX of the GATS mandated the Council for Trade in
Services to establish modalities for the special treatment for least-developed country Members.  At its
June meeting, the Council had held a first extensive discussion on the establishment of these
modalities, also on the basis of the proposal tabled by least-developed countries (LDCs) in documentJOB(02)/30.  The debate had revealed a widespread willingness amongst Members to fulfil this legal
obligation under the GATS as promptly as possible, but also a need for further rounds of discussion
before the Council could usefully move to a more concrete drafting stage.
39. The representative of Zambia, speaking on behalf of LDCs, as their coordinator, thanked all
delegations who had spoken in favor of the LDC proposal on modalities, and particularly developed
countries who had recognised the special needs of LDCs in the services negotiations.  Least-
developed-countries wanted to derive benefits from the services negotiations and modalities were away of ensuring this.  He then provided initial reactions to Members' comments.  First, he said that
taking into account LDCs concerns meant establishing modalities as presented by them.  LDCs were
proposing a flexible framework and benchmarks for the negotiations;  the final outcome of the
negotiations would be worked out bilaterally by each LDC through the guidance of the modalities.
Second, the proposed modalities would not be rendered academic by the deadline for requests, whichwas at the end of July, because this date only referred to initial requests.  They were calling for
modalities to be adopted before the submission of initial offers in March 2003;  time was therefore
sufficient.  Third, in terms of their proposal on limiting the number of sectors to be opened to four, he
explained that LDCs needed more experience in  order to be able to draw lessons from past
liberalisation and the impact of foreign.  That was why they needed a special mechanism throughwhich to negotiate.  Fourth, in terms of comments regarding item (ii) of their proposal, he said thatTN/S/M/3
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negotiations needed to result in real commercial ga ins.  Hence, they needed to know the commercial
interests of their trading partners.  Fifth, seve ral comments had been made regarding technology
transfer being a private sector issue and one that governments could not control.  He explained that
what they were asking for was a mere translation of what was stated in Article IV and the Annex on
Telecommunications about technology transfer to LDCs, and hence they were only asking forimplementation of what was contained as rights for LDCs in the GATS.  They looked forward to
engaging with trading partners in the establishment of the modalities on the basis as soon as possible,
since Members had agreed in principle to their establishment by March 2003.
40. The representative of Hungary said that his delegation recognized that Article XIX:3 called
for the establishment of modalities for the special treatment of LDCs and was ready to work with the
representatives of LDCs and other Members to give effect to this mandate.  His delegation believed it
to be of great importance that LDCs participate actively in the negotiations and that the outcome ofthe services talks in the areas of market access and in the rule-making work reflect their interests.
Turning to the possible content of the modalities, as put forward in JOB(02)/30, he felt that the
suggestions in paragraph 6 had to be considered fully.  Reacting to some of the elements in this
paragraph, he recalled that the process of progressive liberalization had to take place, in accordance
with Article XIX:2, with due respect to the level of development of individual Members, both overalland in individual sectors.  In relation to LDCs, this  should translate into real flexibility to open fewer
sectors and liberalize fewer types of transactions than any other WTO Member.  He was not sure
whether the number of sectors they should open up could be agreed.  Liberalization under appropriate
conditions, in particular in the physical and human infrastructure sectors, such as telecommunication,
transportation, financial services, education services, could generate economic growth andmodernization.  His delegation was therefore of the view that putting an artificial limitation on the
number of sectors in which to undertake liberalization commitments might have effects that would be
contrary to development goals.  He also noted that investment decisions of service providers were in
most cases beyond governments and therefore t hose commitments by Members on investments were
not within their reach.  Attention should also be paid to the interests of LDCs on the export side andhe urged them to indicate these sectors of export interest in more detail.  His delegation looked
forward to working with LDCs and others on these modalities;  it was imperative to put the time and
effort necessary to consider all the suggestions made and establish the modalities as soon as possible.
Hungary would be agreeable to setting a targ et date for the completion of this work.
41. The representative of the European Communities echoed the statement made by Hungary.
Members had a mandate under Article XIX:3 which committed them to establishing such modalities
and her delegation was very committed to that mandate, as well as to supporting the effectiveparticipation of LDCs in the negotiations.  Her delegation would take their special situation,
constrains and difficulties in the negotiations into account as far as possible.
42. She moved on to provide more specific comments on the LDCs proposal in JOB(02)/30.  On
the first item, restricting the number of sectors to be liberalized, she said that the flexibility of the
GATS already allowed Members to open fewer sector s if their development situation did not allow
them to go further.  Therefore, flexibility already existed and LDCs in particular should make use of
it.  However, if LDCs felt that restricting the number of sectors to be committed was one way of
responding to their particular difficulties, and as long as this was only indicative and did not represent
a straightjacket, her delegation was open to discussion.
43. The second item referred to something that the European Communities also considered
important, namely that requests reflect commercial interests, regardless of the Members to which they
were presented.  However, and as noted by the previous speaker, governments did not make
investment decisions, as these were purely business decisions.  Still, commitments were one way of
giving clear signals to investors and contributed to creating a predictable framework for access, even
if in the end investment decisions were taken by private operators.TN/S/M/3
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44. On the third item, her delegation understood the in terest of LDCs in encouraging transfers of
know-how, technology and training opportunities.  She thought that commitments in mode 3 in
particular would contribute to encouraging and facilitating this kind of transfers.  However, there was
a thin line between commitments which provided a signal to investors and attaching too many
conditions to such commitments, which might actually discourage investors.  It was thereforeimportant to think of how much should actually be included in the modalities in terms of these
provisions.
45. With regard to the fourth item, her delegation was open and was looking forward to receiving
requests indicating sectors of interest to LDCs.  In the end, however, commitments would be taken on
an MFN basis, so that it would be difficult to inte grate the suggestion of the paper in its current form.
46. As for the fifth item, she doubted if statistics were the right proof of implementation of
commitments.  Statistics might show if suppliers were making use of the opportunities provided, butthey were definitely not the tool for checking on the implementation of commitments.  The GATS
could provide some possibilities to ensure this implementation.
47. On the sixth element, she agreed that LDCs were the first ones to need effective assistance in
the negotiations, and the European Communities was fully committed to the various mechanisms in
place and was open also to further looking into that issue.
48. The very last item referred to the outcome of the negotiations being evaluated.  While she
agreed that this  should be done, she recalled that the Guidelines already provided for this obligation,
for the overall negotiations.  The special situation of LDCs could therefore be taken into consideration
in this context, so that it would not be necessary to establish a separate evaluation exercise.
49. The representative of Uruguay stressed two issues that his delegation considered important.
First, all delegations agreed that the modalities we re a legal obligation in Article XIX:3 of the GATS.
Second, the delegation of Zambia had expressed an interest in establishing the modalities before the
benchmark for the submission of initial offers on 31 March 2003.  The suggestion was logical and
reasonable, and in order to give it effect, he was of the view that a draft text of the modalities was
necessary.  He therefore asked the delegation of Zambia if they were willing to make a contribution inthis sense before the October meeting.  He added that his delegation was ready to contribute actively
to this process and wished for the modalities to be agreed as soon as possible.  The Chairman noted
that Members could also have informal consultations, which would allow him to elaborate a draftunder his own responsibility.
50. The representative of Thailand said that her delegation was still looking at JOB(02)/30, but
that it recognized that a mandate existed to establish the modalities and that it wanted to give serious
consideration to the proposal.
51. The representative of Uganda supported the statement by Zambia.  He said that the modalities
were a legal obligation and that the deadline suggested for their establishment was reasonable.  As for
Uruguay’s comment, he said that informal consultations by the Chairman would be useful.  With
regard to comments made on point (iii) of their proposal, about transfer of technology being in private
hands, he said that governments could nevertheless still do a lot to encourage such transfers, forexample by providing incentives.
52. The representative of Venezuela echoed the statement by Uruguay about what needed to be
done to agree on the modalities and welcomed the Chairman’s suggestion to hold consultations.  She
said that the Guidelines for the negotiations were an important starting-point to fulfil the mandate in
Article XIX and recalled that paragraph 3 of Article XIX mandated that negotiating guidelinesestablish modalities for LDCs.  Members had not accomplished this mandate with the Guidelines, butTN/S/M/3
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these contained many elements that were also of interest to least-developed countries.  Therefore one
way of solving the problem could be the creation of an addendum to the Guidelines containing
modalities for the special treatment of LDCs.  Sh e called on Members to take the Guidelines as a
starting-point to decide what could be adde d in terms of special treatment for LDCs.
53. The representative of Zambia thanked Members for their positive responses to the proposal of
LDCs and said that they could agree with the suggestions raised to arrive at a draft text of the
modalities, which could be produced either by LDCs themselves or by the Chairman.
54. By way of concluding comments, the Chairman said that the GATS contained an obligation to
establish modalities for the special treatment for LDCs. Least-developed countries had provided
additional clarifications on the proposal they had submitted in JOB(02)/30 in light of the discussion
held at the June Special Session.  These had revealed that, while LDCs could be flexible with regard
to the content of the modalities, these had to be established as soon as possible, and at the latest before31 March 2002.  It was stressed that modalities were very important to ensure the effective
participation of least-developed countries in the negotiations.  In order to accelerate the process, he
suggested to hold open-ended consultations on the basis of which he would be producing a draft text
of the modalities, for Members’ consideration.  He also proposed that, in order to structure and
facilitate the debate, Secretariat produce a checklist of the issues raised in the discussions until then.
55. The Council so agreed.
D. WORK OF SUBSIDIARY BODIES – REPORTS BY CHAIRPERSONS
56. In keeping with what had been agreed concer ning the regular reporting from the subsidiary
bodies to the Special Session, the Chairman invited the chairpersons of those bodies to present their
oral reports.
57. The Chairperson of the Committee on Trade in Financial Services, Mr. Syed Habib Ahmed of
Pakistan, reported that the Committee had met on 22 July and addressed the following issues:
Acceptance of the Fifth Protocol to the GATS;  Technical Issues;  Recent Developments in Financial
Services Trade;  Preparations in connection with pa ragraph 18 of the Protocol on the Accession of the
People's Republic of China;  and Other Business.
58. Under the item on the Acceptance of the Fifth Protocol, the Committee heard updates on the
status of domestic procedures from the delegations of Bolivia, Poland and Uruguay.  Poland indicated
that it would be in a position to accept the Protocol soon.
59. No particular issue was raised under the item on Technical Issues.  However, it was
understood that this agenda item was broad enough to allow for the discussion of any technical issue
that Members might want to raise, including those arising in the requests that Members had recently
submitted to trading partners.  In fact, the delegation of Thailand indicated its intention to make use ofthis particular agenda item in the future to address technical issues raised during the ongoing bilateral
negotiations.
60. Under the item on Recent Developments in Financial Services Trade, the Committee heard
very interesting presentations by Chinese Taipei, Mexico and Canada, on recent regulatory reform
initiatives.  These three presentations – including an informal document submitted by Canada –focused not only on the substantive content of the regulatory framework being put in place, but also
on the process of regulatory reform itself, with part icular reference to the application of transparency
to regulatory making procedures.  The Committee would continue discussing these presentations at
the next meeting.  The Chairman highlighted the im portance of using this agenda item to discuss this
type of issues, which were of extreme relevance to the negotiations, since they provided an idea aboutTN/S/M/3
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the context in which financial services trade took place.  He encouraged other Members to come up
with similar presentations and to engage in these discussions.
61. Regarding the Preparations in connection with paragraph 18 of the Protocol on the Accession
of the People's Republic of China, no agreement had yet been reached on the date and additional
matters related to the conduct of this review.  Therefore, he would continue his consultations on thisissue, and Members would be informed in due course about the outcome of these consultations in
order to allow for the best possible preparation in advance of the review meeting.
62. Under Other Business, the delegation of Canada suggested that the World Bank be invited to
present two recent documents entitled “Finance for Growth”, and “Globalization, Growth and
Poverty”, which could be useful for Committee members.
63. The Committee would meet again during the next cluster of services meetings, at the end of
October.
64. The Chairperson of the Committee on Specific Commitments, Mr. Niklas Bergström of
Sweden, reported that, since his previous report in June, the Committee had held one informal
meeting on 27 June to exchange views on the subject of incorporation of new commitments into
Members' schedules, and one formal meeting on 17 July to address two substantive items:
Classification Issues, and Matters relating to the Scheduling of Commitments.  He would report on theoutcomes of both meetings simultaneously and along the line of the substantive items of the current
agenda.
65. Regarding classification issues, Members reiterated their interest in resuming discussions to
clarify individual positions on the various classification issues that had been identified until then.  To
that effect, the Committee requested the Secretariat to prepare a compilation of all classificationproposals that had been submitted to the Committee and to the Special Session.  The idea was to have
a tool to facilitate discussions on the various proposals.  At the same time, such an exchange of views
would provide an opportunity to raise classification questions that might arise in the context of
addressing requests and preparing offers.  Additionally, the European Communities brought to the
attention of the Committee its proposal submitted to the Special Session on computer and relatedservices, in document S/CSS/W/34/Add.1, with a view to promoting discussion in the Committee to
reach a common understanding on the definition of the sector, as presented by CPC 84.  As explained
by that delegation, the issue did not require a change in the said classification but rather clarification
of its scope.
66. Under the item on Matters relating to the Scheduling of Commitments, two issues were
normally addressed in the Committee’s deliberations:  incorporation of new commitments into
Members' schedules, and approaches to the scheduling of additional commitments underArticle XVIII of the GATS.
67. The former topic was the focus of the Committee's informal discussions on 27 June.  On that
occasion a number of comments were offered and questions were raised regarding the Secretariat
Note on this matter, document S/CSC/W/33.  This discussion revealed some specific issues requiring
further reflection, such as the relationship betw een new and old commitments and the desirability of
having recourse to pre-existing schedules in case of controversies in the future.  The need to secure
that existing commitments would not be undermined in the process was emphasized and supported by
all those who spoke.  It was suggested that the consolidation exercise include a stage of verification of
consolidated schedules at the multilateral level.  As to the approach to be followed, all statements
made informally supported following a consolidation approach and there seemed to be tacit consensusthat offers to be submitted by 31 March 2003 should be presented on the basis of draft consolidated
schedules.  To that effect, an early decision on the approach to follow was deemed necessary.  ToTN/S/M/3
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facilitate a decision in principle on the approach, the Committee requested a Note from the Secretariat
addressing practical procedures of consolidatin g schedules, which was circulated as JOB(02)/88.
68. The Chairman was pleased to report that at the formal meeting held the previous week, the
Committee had decided in principle to follow a consolidation approach, that implied that each
Member would submit at the end of negotiations a single schedule containing existing commitmentsand the new ones resulting from the present negotiations.  At that meeting the Committee requested
the Secretariat to prepare a draft consolidated schedule for each Member, unless a Member indicated
otherwise to the Secretariat by 31 July 2002.  The Secretariat was to submit to Members the draft
consolidated schedules in December 2002.  These draft schedules were to be used by delegations in
the preparation of their offers to be submitted by 31 March 2003.  While this constituted the first step
towards defining how the results of the current ne gotiations would be incorporated into Members'
schedules, further work was necessary to resolve some issues that had emerged.  A number of viewsconcerning the relationship between old and new commitments;  the editorial conventions to be used
in the offers to indicate changes;  and the need for a multilateral verification process of schedules
were expressed.
69. The Committee also requested the Secretariat to organize a scheduling workshop late in 2002,
to provide an opportunity to address technical issues re lating to the preparation of offers in the form of
draft consolidated schedules.
70. As to the second topic, namely approaches to the scheduling of additional commitments under
Article XVIII of GATS, discussion was postponed to the next meeting in October as the Committee
wished to further consider a Note prepared by the Secretariat on this matter.
71. The Chairperson of the Working Party on GATS Rules, Mr. Thomas Chan of Hong Kong,
China, reported that, since the previous meeting of the Special Session, the Working Party on GATS
Rules had held a formal meeting on 15 July, during which it had addressed the following issues:  work
programme for the Working Party, emergency safeguard measures, subsidies and government
procurement.
72. He recalled the communication from the Chairperson of the Working Party on GATS Rules
transmitting the draft Fourth Decision on Negotiations on Emergency Safeguard Measures, which
stipulated that “the Chairman will carry out cons ultations to establish a programme structuring future
work of the Working Party”.  At its meeting of 3 June 2002, the Working Party agreed to include in
these consultations work programmes for negotiations on subsidies and government procurement as
well.  On the basis of a number of informal consultations he had held since April, he had issued a
draft work programme under his responsibility, in JO B(02)/82, setting out what he saw as the possible
elements for the work programmes on emergency safeguard measures, subsidies and governmentprocurement.  During the meeting of 15 July, some modifications were suggested to the text to
alleviate the remaining concerns of some delegations.  At that meeting, the Working Party decided to
adopt the revised text of the work programmes for the three subjects of negotiations, which was now
set out in JOB(02)/82/Rev.2, on an ad referendum basis.  In the absence of objections to the text by
close of business the previous day, i.e. Monday 22 July, the adoption of the text was considereddefinitive.
73. On emergency safeguard measures, Members gave further consideration to the
Communication from the European Communities and Their Member States on Modal Application of
an Emergency Safeguard Measure, as well as to the Communication from Australia on Elements for a
Possible "Core Mechanism" for Temporary Suspension or Modification of Commitments.  Australiaalso circulated a new communication on Temporary Suspension of Commitments.  In addition,
Members continued their exchange of views on possible common elements and main differences ofTN/S/M/3
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the various approaches that had emerged from existing proposals for an emergency safeguard
mechanism.
74. On subsidies, Argentina, Chile and Hong Kong, China circulated an informal paper,
containing a simplified version of the questionnaire on subsidies prepared by the Secretariat in 1997.
The objective of the three delegations was to make  it easier for Members to exchange information on
all subsidies related to trade in services, as mandated in Article XV.  More and improved information
on services subsidies was viewed as a necessary first step before examining the need for specific
disciplines in this field.  It was felt that Members should be a major source for providing such
information and they were invited to utilise the simplified questionnaire.  At the same time, the
Secretariat could also contribute with factual information and Members agreed that a background note
on information contained in WTO Trade Policy Reviews would also be updated.
75. On government procurement, the European Communities tabled a proposal on a framework
for rules for government procurement of services.  It proposed to examine general rules which could
apply to procurement in services, as well as sector-specific rules, where necessary.  It also proposed
that Members make commitments as regards access to, and national treatment in respect of, services
procurement in sectors of their choice and within the model of the current system of GATS schedules.
Several delegations indicated their interest in further discussing these suggestions.  At the same time,several other delegations maintained their view that Article XIII excluded from the negotiations the
obligations of most-favoured-nation treatment, market access and national treatment.  These
discussions would continue at the next meeting of the Working Party.
76. The next formal meeting of the Working Party would be held during the next "services
cluster", which was scheduled to start in the week of 21 October.
77. The Chairperson of the Working Party on Domestic Regulation, Mr. Sergio Santos of Brazil,
reported that, since his previous report to the June meeting of the Special Session, the Working Party
had held one formal meeting, on 16 July.  Discussion during the meeting focused primarily on the
examination of regulatory measures based on a new Chairperson’s Note and a revised paper from the
Secretariat.
78. As for the development of regulatory disciplines under GATS Article VI:4, and the discussion
of concepts relating to the development of disciplines, at the meeting in June, Members had supported
the suggestions in a Chairperson’s Note regarding a methodology for the examination of examples of
regulatory measures, with the objective of subsequently arriving at common elements that could form
the basis or indicate the general shape of any possible future horizontal disciplines on domestic
regulation.  This was an important element in satisfying the Negotiating Guidelines mandate aiming
for the completion GATS Article VI:4 negotiations before the end of market access negotiations.
79. At the 16 July meeting, Members began the actual examination of the regulatory measures
listed in a revised Secretariat paper, in JOB(02)/20/Rev.1, according to procedures suggested in a new
Chairperson’s Note in JOB(02)/81.  Among the i ssues raised during discussions were whether
residency requirements should be regarded as exclusively being Article XVII measures, and whether
additional transparency disciplines beyond those under Article III would be required.
80. As concerned the setting of a best-endeavour timeframe for completing the initial stages of
the examination of regulatory measures and arriving at some common elements for future disciplines
it still was not possible to achieve consensus.  He had proposed March 2003 to that effect and would
continue with consultations on the issue.
81. With respect to the development of disciplines for professional services, some progress was
made.  Members initiated a review of the Secretariat paper in JOB(01)/162,  and delegations appearedTN/S/M/3
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to be close to agreeing on a new best-endeavour deadline for the Secretariat to initiate its
consultations with international professional associations on the Disciplines on Domestic Regulation
in the Accountancy Sector to other professional services sectors.  In addition, the Working Party
agreed to have the Secretariat prepare a sample letter for Members’ comments regarding consultations
with international professional services organizations.
82. Members agreed the next meeting would be held in October, as part of the next “Services
week”.
83. The Council took note.
E. PROPOSALS RELATING TO THE NEGOTIATIONS UNDER ARTICLE XIX OF THE GATS
84. The Chairman said that, since the June meeting, only one new proposal had been submitted to
the Council.  It was the proposal tabled by the European Communities and its Member States on
computer and related services, circulated as docum ent S/CSS/W/34/Add.1.  He then drew delegations’
attention to the latest Secretariat compilation of questions and responses with respect to Members'
proposals, contained in document Job(01)/96/Add.21, and to the synopsis of the negotiating proposals
updated by the Secretariat to include all proposals received until then, which was contained in
document JOB(01)/63/Add.4.
85. The representative of the European Communities presented her delegation's proposal on
computer and related services, which had to be read as an addendum to their previous proposal on
business services in document S/CSS/W/34.  The proposal had been submitted for two main reasons.
First, computer and related services were a sector of growing importance and were fundamental for
any economic activity.  They were a tool for economic development because of their role in building
infrastructure and creating employment, both in developing and developed countries.  Second, thespeed of technological development had to be taken into account.  Computer services were becoming
more varied and complex;  for instance, services such as web hosting were a combination of various
sub-sectors of CPC chapter 84.  It was therefore increasingly difficult to distinguish between the
different sub-headings of CPC 84 and sometimes even between the services covered under CPC 84
and a neighbouring service, such as telecommunications.
86. The proposal presented the European Communities’ negotiating objectives for the sector.
They were seeking to obtain full commitments because they considered that this sector was necessary
for the development of other sectors.  Commitments  should be consistent for all sub-headings under
CPC 84, in order to minimize the risk of confusion in seeking to determine whether a particular
computer and related service had been committed to when the service actually offered involved
services covered by a number of the different sub-headings.  Ideally, therefore, they would wish to see
commitments being scheduled at the two digit level.
87. The proposal also underlined the need to clarify the scope of coverage of CPC 84, in order to
avoid possible misunderstanding as to whether the scope of the commitments made under CPC 84
covered technologically evolved services such as web hosting.  They were not seeking the re-
classification of computer and related services, nor did they wish to negotiate an Annex to the GATS
with a list of services covered under CPC 84.  Their sole objective was to reach a clear understandingon the scope and coverage of CPC 84, on the basis of a functional definition to be agreed
multilaterally.  This would give legal certainty and help to identify which of the so called “new ”
computer and related services were actually covered by CPC 84 and which were not.  Her delegation
had noted that a number of other negotiating proposals on this sector raised similar concerns and were
therefore interested in the views of other Members on this issue.TN/S/M/3
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88. The representative of Switzerland said that the proposal by the European Communities was
timely and that his delegation understood the concern about commitments becoming obsolete because
of technological progress.  He sought a clarification with regard to the suggestion in paragraph 7 as he
wondered to what extent the proposal contributed to clarifying the coverage of CPC 84.  With regard
to paragraph 10, his delegation shared the desire for transparency and clarity in commitments, whichwas why it was attached to the positive listing principle;  he therefore called for further reflection on
the EC suggestion, as the coverage of the heading “other” would not be very clear.  He shared the
statement in paragraph 11 and noted that the distinction between transactions under modes 1 and 2
were an issue which applied also to other sectors.
89. The representative of Mauritius said that computer and related services were a sector of
crucial importance for his delegation, but added that, as a small economy, Mauritius had difficulties to
which special consideration should be given.  As to the speed of technological change, he called forthe concerns of developing countries with regard to the provisions in Article IV about facilitating
transfers of technology to be taken on board.
90. The representative of Japan shared the Euro pean Communities interest in reaching a common
understanding with regard to the scope of coverage of the computer and related services sector.  His
delegation was seeking maximum liberalization in all sub-sectors in this area, as well as progress inthe discussions on classification of new types of services.  He sought a clarification with regard to the
suggestion that a common understanding be reached on definitions, and wondered how the European
Communities intended to advance this work.  He also asked what content they had in mind with the
reference in footnote 4.
91. The representative of the United States said that the computer and related services sector was
of great importance for the effective participation in world markets and that it was relevant to all
modes.  These services helped small suppliers to reach new markets and overcome geographic
restrictions.  He agreed that it was in Members’ interests to seek and provide full commitments in this
sector.  This would provide certainty with respect to coverage of commitments, especially as
technology advanced and services were performed in different ways, both in developed anddeveloping countries.
92. The representative of Canada said that, in her delegation’s view, the computer and related
services sector was a vital part of the new knowledge-based economy, requiring careful consideration
by WTO Members in the GATS negotiations.  In Canada's view, the EC proposal correctly
recognized that there existed some need for cl arification regarding the application of the W/120
classification and CPC to a variety of so-called new or emerging computer and related services,
particularly those which might be delivered electronically.  She also agreed that such a clarificationexercise needed not involve a revamping of the existing classification system.  What might instead be
needed was a better appreciation of the types of service that were often offered together, by means of
the provision of a particular service.  Given Canada's strong interest in further pursuing work in this
area, she wondered whether the EC had given any consideration to the most appropriate venue for
those discussions, and in particular to the usefulness of the Committee on Specific Commitments.She also sought the EC views on whether their su ggestion for ensuring consistency between mode 1
and 2 commitments was necessarily the best means of dealing with the ambiguity that currently
existed with respect to whether electronic delivery represented cross-border trade or consumption
abroad.  Given the likelihood of some inconsistency in commitments between mode 1 and mode 2 in
Members’ schedules, greater legal certainty in this area would seem to still be required.
93. The representative of the Republic of Korea said that his delegation was in favour of efforts to
improve clarity where grey areas existed, but also believed that the rapid pace of technological
developments had to be taken into account.  He sought a number of clarifications from the European
Communities.  First, he asked why they believed that scheduling commitments at the two-digit levelTN/S/M/3
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would increase the clarity of commitments.  Second, he wondered whether alternative solutions
existed and echoed Switzerland’s comments in this regard.  He added that his delegation would revert
to the proposal by the European Communities.
94. The representative of Argentina shared the Euro pean Communities’ interest in clarifying the
scope of the computer and related services sector and increasing the clarity and legal certainty of
commitments.  He sought further information with regard to footnote 4 of the EC submission, and
wondered, with respect to paragraphs 6 and 7, if they were planning to submit a list of what they
considered to be the scope of computer services and how they intended to pursue work in this area.
The representative of Mexico said that his delegation sought clarifications similar to the ones
mentioned by Canada, the Republic of Korea  and Argentina.
95. The representative of Pakistan said that the computer and related-services sector was evolving
and expressed his delegation’s interest in working in this area.  He concurred with the need for
clarification with regard to the way in which it was classified and echoed Argentina’s suggestion that
the European Communities could present their view s on how this might be done.  The representative
of India said that the computer and related-servi ces sector was one of the fastest-growing sectors in
India and an important generator of employment.  He would revert to the submission of the European
Communities.
96. The representative of Brazil said that this was a sector of export interest to his delegation, as
testified by the submission jointly tabled by the MERCOSUR countries and Bolivia, and that, while
he would revert to the proposal tabled by the European Communities, he was also interested in further
clarifications on footnote 4.  The representative of Uruguay echoed the statement by Brazil and added
that he had taken note of the statement that technological changes might affect the classification of
services.  The representative of Bolivia recalled that her delegation had co-sponsored the
MERCOSUR proposal on this sector and said that  she would revert to the European Communities
submission.
97. By way of preliminary answers to some of the questions raised, the representative of the
European Communities said that they intended to follow up on their proposal, also in light of the
number of other proposals mentioning the need to clarify the scope of the sector, and were of the view
that the Committee on Specific Commitments woul d be a good forum to have such technical
discussions, but that they were also open to debating the issue in any other fora, such as the Special
Session or their bilateral consultations.  With regard to the question on why scheduling commitments
at the two-digit level would increase clarity, she said that it was important to have a common
understanding of what were covered by CPC 84 firs t, and then scheduling on a two digit level should
make sure all services were covered, including those which evolved with technology.  On the questionregarding footnote 4, she said that it was necessary to distinguish between the actual computer and
related service, which could be delivered electronically, and the content that might be delivered
through such a service.  For instance, a banking service delivered via a certain application clearly
remained a financial service and did not become a computer service just by being delivered through
that means.  As for producing a list of what they thought should be or was covered under CPC 84, herdelegation would reflect on the suggestion but she hoped that in particular those Members also having
made proposals on computer and related services would contribute to that debate by putting forward
their understanding of the sector.
98. The representative of Cuba said that they w ould revert to the submission by the European
Communities.  He then replied to the questions that had been raised by Canada in June on Cuba’s
submission of tourism and related services in document TN/S/W/1, adding that their responses would
also be circulated in writing.  With regard to the question on the fourth bullet point of paragraph 12,
he explained that in order for tourist destinations, pa rticularly those in developing countries, to fulfil
their sustainable development requirements, it was es sential that their governments, in undertakingTN/S/M/3
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commitments, guarantee that both national and foreign suppliers abide by the relevant national
legislations.  This could in principle be achieved through additional commitments, as developed in the
course of the negotiations.  The negotiations should assist and strengthen the ability of smaller
developing countries to withstand the negative pr essures of international economic powers that run
counter to the interests of sustainable development in these tourist destinations.
99. As for the question on the fifth bullet point of paragraph 12, he said that the reference was to
Cuban personnel travelling abroad to work for fo reign tourist companies.  Cuban enterprises co-
operated with foreign investors in order to promote culture and other attractions that Cuba possessed
as a tourist destination as part of the services they offered.  Specialized personnel was essential to the
supply of such services.  Chefs, cooks, musicians wo rking in such establishments promoted Cuba as a
tourist destination and carried the local flavour abroad to attract more tourists.  The efficient
functioning of these establishments was hampered by lengthy immigration procedures and the factthat this personnel was treated as if they were employment-seekers.  Many other developing countries
had encountered barriers similar to those faced by Cuba.  In the course of the negotiations on this
sector, solutions should be found so that immigration authorities in developed countries grant these
suppliers treatment similar to commercial personnel, thereby promoting the increasing participation of
developing countries in services trade.
100. The representative of Canada thanked the delegation of  Cuba for their answers, which would
be passed on to their tourism experts.
101. The representative of Chile said that the existence of subsidies in diverse services sectors
could distort commercial flows and thus should be a source of concern to all Members.  In spite of
this and of the fact that the GATS included an article on subsidies, no significant progress had beenmade in dealing with this issue.  Members were now beginning a process of market access
negotiations in services.  As established in Article XIX, the aim of these negotiations was "to achieve
a progressively higher level of liberalization".  In accordance with paragraph 15 of the Doha
Ministerial Declaration, the initial requests of specific commitments in services began at the end of
June 2002 and the presentation of offers was set for the end of March 2003.  In this context, the issueof whether or not there were subsidies was not irrelevant.  In fact, the Negotiating Guidelines for the
services negotiations had given a new impulse to the mandated negotiations on subsidies under
Article XV of the GATS, establishing that Members would seek to finish the negotiations on
subsidies, among other topics, “before the conclusion of the negotiations on specific commitments”.
Furthermore, this was an important issue for developing countries that should be considered in order
to increase their participation in world trade services.
102. The relation between the achievement of increased liberalization and the negotiations on
subsidies made economic and trade sense.  Increased market opening implied increased competition.
While prepared to face this challenge, it was also necessary to ensure that competition was increasing
and that markets were not being distorted.
103. The start of the request process had led her delegation to pose two issues.  On the one hand,
when requesting access to certain markets, they felt that it was necessary to verify whether or not thepossible existence of subsidies in those markets would impair the access gained.  On the other, when
making the decision concerning the level of openness of their domestic markets, they thought that it
was necessary to verify if the service or the foreign supplier of a service received a subsidy that could
create, as a consequence of that opening, a distortion in the national market.   What had become clear
was that the information available on subsidies in  services did not provide the answers to these
questions and thus reduced the level of ambition of liberalization.
104. The Working Party on GATS Rules had made efforts to deal with this lack of information.  In
1997 a questionnaire concerning subsidies in services was circulated to all Members, yet only fourTN/S/M/3
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countries answered.  The deficit of information concerning subsidies in services continued, hampering
progress in the negotiations.  Her delegation wished to be an active participant in the services
negotiations.  More information regarding existing subsidies and the distortion that they eventually
generated could lead Members to a wider and more ambitious participation.  The real challenge faced
at that stage of the negotiations was to achieve increased transparency, and not to question thelegitimacy of subsidies.  In short, if the objective was real liberalization of the services markets, the
issue of subsidies had to be addressed with increased transparency.
105. Article XV established that “For the purpose of such negotiations, Members shall exchange
information concerning all subsidies related to trade in service that they provide to their domestic
service suppliers”.  Considering this mandate, as well as the arguments just presented, it would prove
helpful if Members’ requests were accompanied by information regarding subsidy programs in the
requested sectors.
106. Her delegation proposed that the exchange of information be carried out on the basis of the
simplified questionnaire circulated at the last m eeting of the Working Party on GATS Rules.  The
information on subsidies could be shared with all Members in the Working Party, which was the
natural forum for carrying out this interchange.
107. In short, their initiative sought to increase tran sparency in subsidies so as to achieve a higher
level of liberalization than that which could be ob tained in the absence of this vital information.
108. The representative of Mexico said that, with in the framework of the work ongoing in the
Working Party on GATS Rules, his delegation had made several interventions on the practices
relating to subsidies in the services sector, both in the supply and in as the export of services.  While it
was very difficult to demonstrate with concrete numbers their existence due to lack of information, hebelieved that transparency in this field was of utmost importance and that was why he believed that
the statement made by Chile was very important.
109. That was why in the Working Party he had stated that his delegation would like to know to
what extent subsidies existed, for example in the construction sector, either with concessional loans to
companies of certain countries which carried out construction work in their own countries or outsidetheir national territory.  Also, it would appear that there were some subsidies for satellite-launching as
well as for satellite services.  However, not enough information was available to be able to make
judgements on these situations.  As Chile had said, in order to make better commitments it was
important to be certain that there were no subsidies in the relevant sectors in order to make
concessions.  Similarly, this information was necessary in order to negotiate effectively, both on the
export and import side.
110. If such a transparency exercise was launched, on the basis of the simplified questionnaire
referred to by Chile and through multilateral examination, either in the Special Session or in the
Working Party, which already had a work programme on this issue, a first step could be made towards
dealing with this area of negotiations.  He look ed favourably at the Chilean suggestion.  More
transparency was important to achieve increased participation in trade in services, both on the export
and import side.  He wondered whether one or several sectors could be considered on a trial basis tosee to what extent subsidies were discouraging trade at the international level both for developing and
developed countries.
111. The representative of Paraguay echoed Chile’s concern with regard to the transparency of
subsidy programmes in the area of services and expressed an interest in progress being made on this
subject.  She concurred that subsidies could distor t trade flows and therefore that the issue should be
of concern to all Members.  Paraguay was aware of the existence of subsidies and of the fact that they
would have an impact on the result of the negotia tions, as the two issue were linked.  She said thatTN/S/M/3
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greater liberalization would increase competition, provided that markets were not distorted by
subsidies, but that the information on subsidies which was available at that stage was insufficient, and
transparency should be achieved at the multilateral level.  Her delegation could support the statement
by Chile in the understanding that this would not prejudice the legitimacy of subsidies and would not
be an obstacle to the examination of requests and eventual offers.  She also stressed that transparencyshould be non-discriminatory and therefore information should be shared at the multilateral level.  She
indicated her delegation’s readiness to answer the simplified questionnaire circulated by Argentina,
Hong Kong, China and others in the Working Party on GATS Rules.
112. The representative of Hong Kong, China thanke d Chile for its initiative to call for more
subsidies-related information.  He stressed that it was an obligation upon all Members to provide
information on all subsidies related to trade in services.  His delegation shared Chile’s frustration with
the low response rate in respect of the questionnaire circulated in 1997.  With the onset of the request-offer stage and with the adoption of the work programme on subsidies by the Working Party on
GATS Rules, he believed it timely to take this issue forward in a more serious manner.  He shared
Chile's view that more and improved information on subsidies was essential to the on-going
negotiations and that the issue was of great importance, not least to developing countries, who were
understandably less able to make such subsidies available.  While the trade distortive effects ofsubsidies in services were still under discussions, the effects of subsidies in other areas were well
recognized.  He therefore believed that early work on this issue was essential.  In light of the mandate
in paragraph 7 of the Guidelines, he urged Members to provide information on subsidies in an
expeditious way so that work in the Working Party on GATS Rules could be taken forward.
113. The representative of Peru said that Chile’s statement was a correct diagnosis of the situation
Members were in at present and reflected the need to abide by all aspects of the Doha Ministerial
mandate and the services Guidelines.  He highlighted a few of the issues in the Chilean statement.
First, the main idea of their intervention was to ha ve a political commitment to re-start the work on
subsidies.  He said that Members had to try to attain minimum levels of competition in services
markets to achieve one of the objectives of the GATS that developing countries increase theirparticipation in services trade.  Second, he high lighted the importance of transparency for developing
countries.  They often did not have the capacity to subsidise and therefore needed to be clearly aware
of what subsidies existed in which sectors.  Third, he underlined the link which existed between
subsidies and article IV of the GATS.  His delegation could support the thrust proposal but reserved
the right to revert to it.
114. The representative of Uruguay shared the thrust of Chile’s intervention.  He stated that
Members had a mandate in Article XV of the GATS, which they had to follow through, as well as in
paragraph 7 of the Guidelines and he recalled that the Working Party on GATS Rules had just
approved a work programme to make progress on the negotiations on subsidies.  He then sought a few
clarifications form the Chilean delegation.  First he asked them to elaborate on the statement that “the
information available on subsidies in services doe s not provide the answers to these questions and
thus reduces the level of ambition of liberalization”, especially with regard to the lower level ofambition of liberalization.  Second, he wondered if Chile could tell Members which were the four
countries who had answered the 1997 questionnaire on subsidies.  Third, with regard to the
recommendation that Members present information on subsidy programme in their requests, he said
that a practical way of addressing this issue was for those Members who had problems due to
subsidies in given markets to indicate this in their bilateral consultations.
115. The representative of Brazil stressed the importance of transparency with respect to subsidies
and other trade-distortive practices, and recalled that his delegation had defended that position with
regard to the rule-making work since before the Se attle Ministerial in 1999.  Brazil's view was that the
mandates in Articles VI:4, X, XIII and XV had to be accomplished before the start of the market
access negotiations.  In the Guidelines Members had decided that the rule-making work would beTN/S/M/3
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pursued in parallel with the market access negotiations.  Since the adoption of the Guidelines, the
Doha timeframe had been adopted and his delegation had made significant efforts to submit requests,
in line with the parameters set in Doha.  Against this background, he sought a clarification from the
delegation of Chile with regard to their link between obtaining more information on subsidy
programmes and Chile's level of participation in the negotiations.  He said that it would be a source ofconcern if a link was established between having this information and participating actively in the
market access negotiations, as the Guidelines mandated that the rule-making and market access
negotiations should proceed in parallel.  As to the possibility of subsidies creating trade distortions in
markets of those Members to whom requests were being made, his preliminary view was it was for
those Members to present evidence that subsidies granted by Members requesting market opening
were producing distortions.
116. The representative of Argentina underscored the importance of transparency at that stage in
the negotiations, not only in light of the mandate in Article XV but also because transparency would
raise the quality commitments.  Therefore the Chilean statement about information on subsidies was
crucial, to allow Members to take informed decisions which would be reflected in better
commitments.  He considered the link that Chile had established between more information on
subsidy programmes and greater participation in the negotiations as logical.  With regard to the ideaput forward in the Working Party on GATS Rules, he said that Members which had difficulties should
raise them in that forum.  However, it was also impor tant to prevent difficulties that might arise in the
future and that Chile's suggestion was aimed at prevention, by asking that Article XV be
implemented.  He added that efforts to participate in the request phase of the negotiations, and
especially in the offer phase, would be enhanced by greater information on subsidies.
117. The representative of Pakistan said that the issue raised by Chile was important and that
subsidies could distort access to markets.  He underscored the importance of transparency and said
that, without prejudice to the outcome of the discussions in the Working Party on GATS Rules, he
could support the thrust of the suggestion by Chile.  However, he sought a clarification with regard to
how the exchange of information in the market access negotiations, which were a bilateral and mostlyconfidential process, could inter-relate with the mandate under Article XV.  He then reiterated his
delegation's concern with the mention of the word "deadline" in relation to paragraph 15 of the Doha
Ministerial Declaration, and said that this was not appropriate given that the Declaration referred to
initial requests and offers.
118. The representative of the Philippines saw Chile's rationale in establishing a parallel between
the work on subsidies and the market access negotiations, but at the same time sought two
clarifications.  First, their first recommendation did not accurately reflect Article XV, as the term"such negotiations" in that article referred to the negotiations on subsidies, and not to the market
access negotiations.  Still, his delegation was not fundamentally averse to discussing this issue.
Second, he wondered how the suggestion that Memb ers' requests be accompanied by information
regarding subsidy programmes in the requested sectors would be made operational and who would be
presenting this information, whether the Member submitting the request or the one to whom therequest was being presented.
119. The representative of Canada provided a few comments and sought some clarifications with
regard to the statement by Chile.  First, he said that there appeared to be two seemingly equivalent
processes, which were however not the same, as the negotiations to develop disciplines were different
from the access negotiations.  Second, he wondered why the issue had been raised in the SpecialSession, also given that the Guidelines stated that existing subsidiary bodies should be used to their
maximum extent.  The fact that the subsidy negotiations were mentioned in the Guidelines did not
justify moving the issue to the Special Session.  In the Working Party on GATS Rules, Members were
working on transparency to assist in the development of subsidy disciplines and Article XV referred
to the negotiations on the development of such discipline s, so that this issue had to be dealt with in theTN/S/M/3
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Working Party.  Third, with regard to transparency  for the market access negotiations, he noted that
these were mostly a bilateral process and that subsidy-related concerns would be raised in such a
context.  Yet, the Chilean proposal seemed to try to  multilateralize an essentially bilateral, and often
confidential, process of exchange of information.  His delegation would reflect further on the proposal
by Chile;  if its aim was to further the market access negotiations, then Members would have to focuson the bilateral process, whereas if it was aimed at accomplishing the mandate in Article XV, then this
issue was for the Working Party on GATS Rules to address.  He was concerned about moving issues
from one committee to another and noted that the rule-making discussion involved three other areas of
work which should not be undermined.  Canada would be looking at the Chilean proposal in terms of
two different processes, the bilateral request-offer one aimed at furthering market access under
Article XIX:3 and the process to develop subsidy disciplines where an emphasis was placed on their
trade-distortive effects.
120. Thanking Members for their support, the representative of Chile provided responses to the
questions and comments made.  First, with regard to their statement that "the information available on
subsidies in services does not provide the answers to these questions and thus reduced the level of
ambition of liberalization", she explained that with insufficient information, one would tend to act
more conservatively.  Second, she said that the Members who had replied to the subsidy questionnairecirculated in the Working Party on GATS Rules (WPGR) were New Zealand, Norway, Poland and
Hong Kong, China.  Her delegation had circulated a simplified version of the questionnaire, hoping
that this would encourage more Members to submit answers.  Third, with regard to the text of Article
XV, she concurred that the reference was to the subsidy negotiations, but also noted that these were
linked to the market access ones, and that this parallel was established also in the Guidelines.  Fourth,with respect to Canada's point on there being two processes, the subsidies negotiations in the Working
Party and the market access negotiations, she explained that their proposal had been submitted to the
Special Session because the market access negotiations could be important to increase transparency
on subsidies and therefore could reinforce the negotiations in the Working Party.  Fifth, as to how the
information on subsidies obtained from the request-offer process would be shared, she said that forher delegation the WPGR was the forum for the de velopment of disciplines, while the forum to
increase transparency were the market access negotiations.  They were therefore proposing two
possible avenues:  either the information provided would be unilaterally distributed to all Members, or
the Member receiving this information would shar e it with all Members without attributing it the
Member it had obtained it from.  Finally, she said that Chile would participate actively in the
negotiations, had presented proposals and would submit requests, but this did not detract from the
crucial importance of the issue of subsidies.
121. Responding to Canada's procedural point, the representative of Mexico said that, while it was
a valid concern, it was important to stress that the is sue of subsidies was pertinent to discussions in the
Special Session, as the negotiations were taking place pursuant to Article XIX.  Bilateral consultations
would lead to the exchange of information, including on subsidies, to complement requests.  He added
that no one could be opposed to a Member seeking this kind of information bilaterally, and toconsequently adapting its requests and offers on the basis of the information it did or did not receive.
He stressed that this process was different from the development of disciplines in the Working Party
on GATS Rules and that no contradiction exited.
122. The representative of Hong Kong, China said th at, in order to enable a meaningful discussion
on the trade-distortive effects of subsidies and how these could be eliminated, it was necessary to have
sufficient information first.  This was, in her delegation's view, the meaning behind the mandate in
Article XV.  Hong Kong, China looked forward to horizontal work on subsidies advancing in the
Working Party on GATS Rules and was open to how this goal could be furthered.
123. Concluding the discussion on this item, the Chairman said that a new submission had been
tabled by the European Communities on computer and related services, which had generatedTN/S/M/3
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substantial debate.  The delegation of Cuba had also provided clarifications to questions raised on the
proposals they had previously submitted.  The delegation of Chile had presented recommendations on
increasing transparency with regard to subsidy pr ogrammes in services, to support the objective of
increasing liberalization.  The work of the Working Party on GATS Rules had been acknowledged,
and the mandate in Article XV of the GATS and the Guidelines for the negotiations had been recalled.There was widespread support for the idea, but some procedural doubts were also expressed.  The
Council will revert to this issue at its next meeting.
124. The Council took note.
F. OUTLINE OF THE CHAIRMAN 'S REPORT TO THE TRADE NEGOTIATIONS COMMITTEE
125. Based on Members' discussion over the previous two days, the Chairman indicated that, in his
report to the Trade Negotiations Committee, he would state that the Special Session of the Council for
Trade in Services had held one formal meeting, on 23 July 2002.
126. Under the item on the assessment of trade in serv ices, he would report that the Council had
held a substantive and focused discussion, particularly stimulated by a new submission tabled by
Thailand and an earlier communication submitted by several developing country Members.  A
number of common themes had emerged from the discussion.  Services liberalization was generally
considered to be beneficial, but it was stressed that it had to be progressive and that the context andtiming with which it was carried out were of crucial relevance.  Further studies on the assessment,
such as the one carried out by Thailand, were called for.  The Council also welcomed South Africa’s
announcement that they would be making a contribution to the assessment discussion in October.
127. With respect to modalities for the treatment of  autonomous liberalisation, he had reported to
the Council on the informal open-ended meeting held on 8 and 9 July to address the draft modalities.The discussion at the meeting had focused on the main substantive and outstanding issues identified in
document JOB(02)/75.  There were still a few areas of divergence amongst Members, and a change in
position was definitely required if the objective was to agree on these modalities sooner rather than
later and, if possible, at the next cluster of services meetings to be held in October.  Consultations on
this issue would continue;  in light of these consultations, and provided additional elements offlexibility were shown by delegations, he would submit a new draft under his responsibility in due
course.
128. Under the item on modalities for the special treatment for least-developed country Members,
LDCs provided additional clarifications on the proposal they had submitted in JOB(02)/30.  These
revealed that, while they could be flexible with regard to the content of the modalities, these had to be
established as soon as possible, and at the latest before 31 March 2003.  It was decided that, in order
to accelerate the process, he would hold open-ended consultations.  The Secretariat was tasked withproducing a checklist of the issues raised to help structure the debate.
129. As for the discussion of negotiating proposals,  a new submission was tabled by the European
Communities on computer and related services, which generated substantial debate.  The delegation
of Cuba provided clarifications to questions raised on the proposals they had previously submitted.
The delegation of Chile presented recommendations on increasing transparency with regard tosubsidy programmes in services.  There was widespread support for the idea, but some procedural
doubts were also expressed.  The Council will revert to this issue at its next meeting.
130. The Council took note.TN/S/M/3
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G. OTHER BUSINESS
131. The Chairman said that, under this item, he would make a statement regarding the
organization of the next Special Session in Oc tober and inform Members of a communication on
GATS issues received from the Union Network International on behalf of the Global Union
Federations.
132. As for the next services cluster, the Council was scheduled to meet during the last two weeks
of October.  He also recalled that, at the previous Special Session in June, Members had discussed
how to organize meetings in such a way as to faci litate bilateral consultations and the participation of
capital-based experts.
133. A number of useful comments had been made, and on that basis his suggestion was that the
October cluster be organized in the following way.  As always, the subsidiary bodies, and possibly
also the regular session of the Council, would meet during the first week of the cluster.  As for thesecond week, he proposed that the Special Session m eet at the beginning of the week to dispense with
its regular items, namely assessment, autonomous liberalization, modalities for LDCs, the reporting
by the subsidiary bodies and the negotiating proposals.  The Special Session would thereafter be
suspended, to allow for bilateral consultations, and be resumed at the end of the week for a “wrap-up”
session.  In this connection, he proposed that an item be added to the agenda in October, called“Review of Progress in Consultations by Participants”,  to be addressed in the “wrap-up” session at the
end of the week, when the Special Session  would resume its meeting.  This item would promote
transparency in the negotiations and allow the Special Session to fulfil its function as the body
responsible for the oversight of the negotiations.  It would also allow Members to bring up any issues
of concern that might have arisen in the course of their consultations, as well as provide them with anopportunity to communicate their impressions on how the negotiations were progressing.
134. As for the participation of capital-based experts, he suggested that the Secretariat be asked to
help by performing a sort of “clearing-house” function.  This implied delegations informing the
Secretariat of the sectors for which they intended to bring experts to Geneva well in advance of the
October meeting, for example by mid-September.  The Secretariat would compile the informationreceived and soon thereafter inform Members of those sectors for which the greatest numbers experts
would be present in Geneva during the October cluster.  This would in no way constrain delegations’
choices, but it would provide, he thought, useful guidance.
135. Also, the Secretariat had distributed a paper containing tentative dates for meetings in 2003.
These were indicative dates, but it would be nevertheless important to book some dates in advance in
light of the difficulty of finding meeting rooms.  The tentative dates were:  24 February to 7 March;
12-23 May;  1 to 11 July;  13-24 October;  1-12 December.
136. The representative of Uruguay said that his delegation had intended to suggest that an item be
included on the agenda to allow for an exchange of information on bilateral consultations.  He could
therefore agree to the Chairman’s suggestion, but proposed that the item be called “Review of
Progress in Negotiations by Participants”.
137. With regard to the suggested new item to be in cluded in the agenda of the Special Session for
Members to bring up issues arising from their bilaterals, the representative of  Venezuela said that her
delegation already had an issue to raise.  She said that, up to that point, her delegation had receivedtwelve requests, from Members at different levels of development.  The requests had been
acknowledged and would be passed on to capital;  for that purpose, her delegation had asked that they
be forwarded also in electronic format.  However, apart from one Member indicating that this was notpossible, they had not received any other reply.  This was creating difficulties for her delegation and
was compromising Venezuela’s ability to participate effectively in the negotiations, therebyTN/S/M/3
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contravening the mandate in Article IV.  The Chairman urged Members to comply with Venezuela’s
request.
138. The representative of the Republic of Korea said that the proposal for the October meeting
was agreeable but he suggested that, when compiling names of experts coming to Geneva, the
Secretariat also include the contact points of the missions in Geneva to facilitate the organization ofmeetings.  The Chairman said that the proposal was useful and he suggested that the Secretariat
prepare a template for delegations to fill in for that purpose.
139. The representative of Mauritius asked that the Secretariat circulate contact addresses for
Geneva and capital-based delegations for all Members, regardless of whether they had tabled requests.
140. The representative of Thailand wondered if at the Special Session foreseen in February 2003
Members expected a stock-taking session to take place.  The Chairman said that no stock-taking
session had been agreed for 2003, but that Members were of course free to have one if they so wished.
141. The representative of India said that he would revert to the proposed dates.  The Chairman
explained that they were indicative and had been put forward for organizational.
142. The representative of Malaysia said that scheduling five clusters for 2003 was too ambitious.
The services negotiations should not be looked at in isolation given that the Ministerial Declaration
had established a single undertaking.  In addition, Members needed to be realistic about the allocationof resources.  It was not easy to get many experts to come to Geneva, and scheduling three meetings
in the first half of the year, especially with only one month interval between May and July, might not
allow for sufficient time to consult domestically.
143. The Chairman said that, given that the discussion was taking place under Other Business, no
binding decision would be taken on the issue of da tes.  He however indicated that his proposal had
been motivated by purely organizational reasons, namely the importance of ensuring availability of
rooms, and without prejudice to any decision that might be taken later.  He added that the point about
proximity of dates would be taken into account in light of the availability of rooms.
144. The Council took note.
145. As for the second item of Other Business, the Chairman informed Members that the
Secretariat had received a communication on GATS issues from the Union Network International on
behalf of the Global Union Federations, with the re quest that it be made it available to Members.  He
trusted that there would not be any objections to the Secretariat distributing this communication to
delegations.
146. No objection was raised.
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