RESTRICTED
PREPARATORY COMMITTEE PC/SCS/M/3
FOR THE 20October 1994
WORLD TRADE ORGANIZATION
(94-2130)
SUB-COMMITTEE ONSERVICES
REPORT OFTHE MEETING HELD ON21SEPTEMBER 1994
Note bytheSecretariat
1. TheSub-Committee onServices helditsthirdmeeting on21September 1994. Theagenda
forthemeeting iscontained indocument PC/AIR/22. Inaddition, theChairman indicated thatthere
would betwostatements under "Other Business": onthequestion relating toArticle IVoftheGATS
(Increasing Participation ofDeveloping Countries) raised bytheJapanese delegation attheprevious
meeting oftheSub-Committee; andoncontacts oftheSecretariat withspecialized international bodies
inProfessional Services.
ItemA:Issues relating tothescope oftheGATS
2. TheChairmanrecalledthatatthesecondmeetingoftheSub-Committeeworkhadbeenconcluded
ontwoofthefivetypesofmeasuresreferredtointheNotebytheSecretariat(MTN.GNS/W/177/Rev.1),
namely measures relating tojudicial andadministrative assistance andmeasures relating toentry and
stayofnatural persons. Ontheother three types ofmeasures, heindicated thatfurther informal
consultations hadtaken place.
3. Onmeasures relating tosocial security, theChairman saidthatdiscussions hadfocused on
howsuchmeasures mayrelate toArticle IIoftheGATS (Most-Favoured-Nation Treatment) andArticle
XVII (National Treatment). Withrespect toMFN themainproblem seemed tobewithbilateral social
security agreements which constitute thebasis forextending more favourable treatment tonationals
ofcountries withwhich suchagreements existthanthatextended tonationals ofother countries. Most
delegations hadmaintained thatbecause bilateral social security agreements require adegree of
compatibility between thesocial security systems ofthecountries concerned, andthespecific terms
ofeachagreement reflect thecircumstances oftheparticipating countries, multilateralization ofsuch
agreements isnotfeasible. Ifsocial security measures wereheldtobesubject totheMFN obligation,
since theterms ofsuchagreements aretailored tothecircumstances oftheparticipants, itcould in
anycasebeextremely difficult todetermine which wasthemost favourable treatment among them.
Onthese grounds itwasargued thatmeasures relating tosocial security should beexempt from the
MFN obligation. Other participants argued thattheproblem isnotthedenial ofsocial security benefits
persetoservice suppliers ofacertain Member butrather thedistortion ofconditions ofcompetition
between service suppliers. They maintained thatincases where there isdiscrimination andwhere it
affects conditions ofcompetition between service suppliers, thediscrimination should beeliminated.
Thatwould notnecessarily require themultilateralization ofsocial security benefits butrather the
equalization ofconditions ofcompetition. Those participants alsomade thepoint thatefforts should
bemade topromote theconclusion ofmore bilateral social security agreements between Members of
theGATS, aswithmutual recognition agreements under Article VII.Theyconcluded thattheexclusion
ofmeasures relating tosocial security from thescope oftheGATS isnotanacceptable option.PC/SCS/M/3
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4. InsofarasNational Treatment isconcerned, most participants were oftheview thatthe
extension ofsocial security benefits tothenationals ofallother Members onanational treatment basis
isnotaviable option. They stressed thepoint thatsocial security systems arebased ontheassumption
thattheyapply topermanent residents andtherefore could notreasonably beextended topersons who
aretemporarily residing inaterritory forthepurpose ofsupplying aservice. Thepoint wasalso
made thatapermanent resident andatemporary resident would notbeconsidered likesuppliers and
that,therefore, theNational Treatment provision would notapply. Other participants wereoftheview
thattheproblem withtheNational Treatment provision is,also,notabout theextension ofthesame
social security benefits onanational treatment basis, butabout equalizing conditions ofcompetition.
This could beachieved, forexample, byexempting foreign service suppliers notentitled tobenefits
under thesystem from social security contributions.
5. TheChairman saidthatitwasgenerally feltthatprogress hadbeenmade towards abetter
understanding ofthecomplex issues involved, butthatfurther discussion wasneeded before anypractical
solutions could beaddressed. Hewould carry outfurther consultations onthismatter andwould
report totheSub-Committee atitsnextmeeting.
6. TheSub-Committee tooknote.
7. Onmeasures relating tosettlement ofdisputes pursuant tobilateral investment protection
agreements, theChairman indicated thatsome progress hadbeenmade towards abetter assessment
ofthepotential effect thatsuchmeasures mayhaveontrade inservices. Itseemed tohimthatmost
participants feltthatthistypeofmeasure wasnotlikely togiverisetoanysignificant problem inrelation
tothesupply ofservices. Headded, however, thatthedebate hadnotyetreached astage where a
specific decision could bemade. Hehoped tobeinaposition toreport aconclusion totheSub-
Committee 'snextmeeting.
8. TheSub-Committee tooknote.
9. Onmeasures relating totheentry andtemporary stayofnatural persons pursuant tocertain
bilateral agreements, suchasseasonal agricultural workers, working holidays andyoung workers '
programmes andother programmes suchasthose concerning theexchange ofuniversity professors
andschool teachers, theChairman indicated thatmostparticipants hadexpressed theviewthatwith
thepossible exception ofseasonal agricultural workers, none ofthose islikely togiveriseto
discrimination affecting thesupply ofcommercial services. Some progress hadthusbeenachieved.
However, some delegations felttheneedtoreflect further before making anydecisions. TheChairman
hoped thatatthenextmeeting hewould beinaposition toreport aspecific conclusion.
10. TheSub-Committee tooknote.
ItemB:Subsidies andtaxes atsub-federal level
11. TheChairman recalled thatattheprevious meeting oftheSub-Committee anumber of
participants hadexpressed interest inhaving multilateral consultations onthesubject matter ofthe
Communication fromtheUnited States dated 30June1994(PC/SCS/W/4) concerning thescheduling
ofmeasures relating tosubsidies andtaxes atthesub-federal level. TheChairman hadindicated that
hewould organize suchconsultations afterthesummer break. Hisintention hadbeentodosoprior
tothepresent meeting oftheSub-Committee soastoprovide anopportunity toreport onthe
consultations. Unfortunately, thathadnotbeenpossible, butconsultations would nevertheless take
place shortly. Hewould report onthem totheSub-Committee atitsnextmeeting. Thedelegation
oftheUnited States introduced thecommunication andindicated itsreadiness toparticipate inthe
consultations withaviewtoproviding anyclarifications sought byother participants.PC/SCS/M/3
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12. TheSub-Committee tooknote.
ItemC:Guidelines fornotifications under theGATS
13. TheChairmanrecalledthatatthefirstmeetingoftheSub-Committee,on19May1994,Members
asked theSecretariat toproduce anotetobeusedasabasisfordiscussion onguidelines fornotification.
Inresponse tothatrequest, theSecretariat hadproduced aninformal notedated 13September 1994
entitled "Guidelines forNotifications". Thisnoteidentified theArticles oftheGATS thatcontain
notification requirements andthepossible content ofsuchnotifications. Attached tothenotewasa
draft common format thatcould beusedtonotify relevant measures. TheChairman invited any
comments which might assist inrevising thenote.
14. Anumber ofdelegations saidthattheformat attached tothenoteneeded tobeexpanded to
provide more details. Duplication ofinformation should beavoided. They alsothought thatmore
attention inthediscussion oftheGuidelines should begiven tonotifications pursuant toArticle III
(Transparency) inorder toensure thattheywillcontain information atasufficient levelofdetail. One
delegation suggested thatthelegal basis ofthenotified measure should beoneoftheelements of
information provided forintheformat. Some delegations wereoftheviewthatitmight notbedesirable
orfeasible tohaveonesingle format forallnotifications under theGATS. However, itwasnot
suggested thattherevision ofthenotewould contain more thanoneformat. Inrelation tonotifications
pursuant toArticles V(Economic Integration) andVII(Recognition), some delegations expressed doubt
about whether itwould benecessary tonotify thefulltextofaneconomic integration orrecognition
agreement, suggesting thatitwould suffice tonotify thefactthatsuchanagreement existed. Itwas
alsosuggested thatnotifications pursuant toArticle XII(Restrictions toSafeguard theBalance of
Payments) should beaddressed totheGeneral Council oftheWTO andneednotbediscussed inthe
Sub-Committee. TheChairman indicated thattheSecretariat would revise thenoteonthebasis of
thediscussion andcirculate therevised version fordiscussion atthenextmeeting oftheSub-Committee.
15. TheSub-Committee tooknote.
ItemD:Participation ofobservers
16. TheChairman recalled thatattheprevious meeting oftheSub-Committee thequestion of
participation ofobservers intheNegotiating Groups hadbeenraised andtheSecretariat hadbeenasked
toprovide background information ontheparticipation ofobservers during theUruguay Round
negotiations, aswell asontheparticipation ofnon-governmental andregional organizations.
Accordingly, theSecretariat hadprepared theNotedated 15September 1994 (PC/SCS/W/5), which
inaddition totheinformation requested bytheSub-Committee provided information onthecurrent
situation intheSub-Committee andtheNegotiating Groups insofarasparticipation ofobservers is
concerned.
17. Onedelegation drewtheattention oftheSub-Committee tothediscussions taking place inthe
Sub-Committee onInstitutional, Procedural andLegal Matters onthequestion ofparticipation of
observers. Since those discussions aimed atsetting criteria fortheparticipation ofobservers other
thangovernments, itmight beappropriate fortheSub-Committee topostpone discussion ofthisquestion
untilgeneral principles hadbeenlaiddown bytheSub-Committee onInstitutional, Procedural and
Legal Matters. Another delegation wasoftheview thatitwould stillbeappropriate fortheSub-
Committee onServices toaddress questions ofparticular relevance toservices, suchasthecriteria
fortheparticipation ofinternational organizations innegotiating groups. Onesuchcriterion wasthat
thecompetence oftheobserver organization should bedirectly related tothesubject-matter ofthe
negotiating group. Itwasunderstood thatinaddition toanygeneral criteria, requests forobservership
would stillhavetobeconsidered onacase-by-case basis. Anumber ofdelegations expressed theviewPC/SCS/M/3
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thatobservership status should continue tobeextended onlytointer-governmental andnottonon-
governmental organizations.
18. Before concluding consideration ofthisitemoftheagenda. theChairman drew attention to
thecommunication bytheInternational Chamber ofCommerce expressing interest inbeing associated
withthework oftheSub-Committee. Henoted thatthecommunication wasnotatthisstage arequest
forobservership butrather anexpression ofinterest. TheChairman suggested that,atthisstage,
theSub-Committee should takenoteofthecommunication.
19. TheSub-Committee tooknote.
Other business
20. TheChairman recalled thatattheprevious meeting oftheSub-Committee thedelegation of
Japan hadraised aquestion inrelation toArticle IVoftheGATS (Increasing Participation ofDeveloping
Countries) anditscompatibility withArticle II(Most-Favoured Nation). Article IVestablished
obligations onthepartofdeveloped countries toextend certain benefits todeveloping countries only,
andthereby departed fromtheruleofnon-discrimination inArticle II.Thequestion raised waswhether
suchinconsistency would require anyaction either intheformofadecision bytheCouncil forTrade
inServices (analogous totheEnabling Clause oftheGATT), oraformal decision bytheSub-Committee
totheeffect thatArticle IV,inthisinstance, would override Article II.TheChairman saidthathe
hadconsulted withtheSecretariat andreached thefollowing conclusion: Article IIoftheGATS (Most-
Favoured-Nation Treatment) isageneral provision which setsaprinciple ofgeneral application. At
thesame timetheGATS, likemany other international agreements, contains alsospecific provisions
which areapplicable incertain circumstances andmaycontain exceptions fromthegeneral principles.
Forexample,ArticleV(EconomicIntegration),ArticleXIV(GeneralExceptions)andnotablyArticleIV
(Increasing Participation ofDeveloping Countries) provide forexceptions ordepartures fromthegeneral
principle ofMFN. This, however, would notrepresent anylegalproblem. Asageneral rule,where
aninternational agreement contains ageneral provision andatthesametimeother specific provisions
containing departures orexceptions from thegeneral provision, thespecific provision would always
override thegeneral wherever itmaybeapplicable. Therefore, theprovisions ofArticle IV,where
applicable, would override those ofArticle II.Hesuggested thatonthebasis ofthatconclusion no
further action wasneeded.
21. TheSub-Committee soagreed.
22. With respect tocontacts oftheSecretariat withspecialized international bodies intheareaof
professional services, theChairman invited therepresentative oftheSecretariat togiveaprogress report.
TheSecretariat saidthatduring thesummer there hadbeencontacts withtheInternational Federation
ofAccountants inconnection withaquestionnaire which theFederation hadsince addressed toallof
itsmember countries. Theinformation derived fromthequestionnaire would, heunderstood, bemade
available toGATS Members asaninputtotheforthcoming work programme onmultilateral disciplines
onmarket access intheaccountancy sector.
23. TheSub-Committee tooknote.