RESTRICTED
PREPARATORY COMMITTEE PC/SCS/M/2
FOR THE 2August 1994
WORLD TRADE ORGANIZATION
(94-1564)
Sub-Committee onServices
REPORT OFTHE MEETING HELD ON15JULY 1994
Note bytheSecretariat
1. TheSub-Committee onServices helditssecond meeting on15July1994. Theagenda for
themeeting iscontained indocument PC/AIR/11. Thepurpose ofthemeeting wastoreview progress
ofwork inareas ofactivity under theSub-Committee.
Progress report oninformal discussions onissues relating tothescope oftheGATS
2. TheChairman informed theSub-Committee thathehadheldinformal consultations onthe
issues relating tothescope oftheGATS which areraised intheNoteprepared bytheSecretariat dated
4November 1993(MTN.GNS/W/177/Rev.1). Onmeasures relating tosocial security, theChairman
saidthatsome delegations were oftheview thatalthough suchmeasures mayaffect conditions of
competition incertain situations, sucheffects arelikely tobeinsignificant. Since subjecting these
measurestothedisciplinesoftheAgreementwouldalsoraisemanypracticalproblems,thoseparticipants
wereoftheviewthatsuchmeasures should beexcluded fromthescope oftheAgreement ontheground
thattheireffect ontrade inservices isminimal. Other participants heldtheviewthatitwould not
bepossible toexclude apriori anycategories ofmeasures since itwould notbepossible todetermine
inadvance whattheireffect ontrade inservices might be.TheChairman stated thatitseemed tohim
atthatstage thatthemajority viewwasthatmeasures relating tosocial security should beexcluded
from thescope oftheAgreement. Ontheother hand, some delegations didnotaccept anyapriori
exclusions. Therefore, nospecific conclusion could bedrawn sofar;more detailed examination of
theissues wasnecessary. Heindicated thatdiscussions would continue afterthesummer break with
afocus onspecific types ofsocial security measures, suchasmedical care,employment injury benefits,
unemployment benefits andpensions, withaviewtoarriving atabetter understanding ofhowsuch
measures mayaffect trade inservices.
3. TheSub-Committee tooknote.
4. Onmeasures relating tojudicial andadministrative assistance, theChairman recalled thatthere
isalready anagreement byparticipants intheGNS, reflected intheChairman 'sStatement dated 6
December 1993(MTN.GNS/W/177/Rev.1/Add.1) thatsuchmeasures willnotbesubject totheMFN
obligation oftheGATS. Theremaining question waswhether thesame logicbywhich suchmeasures
were excluded from theapplication ofArticle II(MFN) oftheGATS could beextended toapply to
thewhole Agreement. TheChairman saidthathisconsultations ledhimtobelieve thatthiswould
beanacceptable conclusion andsuggested thatsuchaconclusion could beformalized byameans of
adecision bythefuture Council forTrade inServices based onarecommendation from theSub-
Committee.
5. TheSub-Committee soagreed.PC/SCS/M/2
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6. Withrespect tomeasures relating tothesettlement ofdisputes pursuant tobilateral investment
protection agreements, theChairman saidthatsome delegations were oftheviewthattheeffects of
suchmeasures ontradeinservices would beinsignificant andthatonthisground theyshould beexcluded
fromthescope oftheGATS. Some participants alsofeltthatthetreatment provided forunder bilateral
investment treaties cannot beextended toallother GATS Members withwhom nosuchbilateral treaties
exist. Therefore those participants would liketosecure alegalcoverage fortheirbilateral agreements.
Otherswereoftheviewthatsuchmeasures,wheretheyprovideanalternativeforumforsettlingdisputes,
could result indiscrimination against service supplier towhom thealternative isnotavailable. They
weretherefore unable togoalong withanydecision toexclude suchmeasures from thescope ofthe
GATS, since theymight haveeffects ontradeinservices. Itseemed cleartotheChairman thatfurther
discussions areneeded before anyconclusions canbedrawn.
7. TheSub-Committee tooknote.
8. Onmeasures relating toentry andstayofnatural persons, theChairman recalled thatthemain
question toaddress inthatrespect was:onwhatbasiswould adistinction bemade between "temporary"
and"permanent" residency andemployment. Thisissue wasraised during theUruguay Round
negotiations inanattempt toclarify commitments byparticipants intheareaofmovement ofnatural
persons. Amore general question raised atthattimewaswhether suchclarifications should emerge
fromacommon interpretation ofthose terms astheyappear inparagraph 2oftheAnnex onMovement
ofNatural Persons, orwhether itissufficient thateachparticipant stateclearly initsschedule of
commitmentscriteriaforpermanentandtemporaryresidence.TheChairmanstatedthathisconsultations
revealed ageneral viewthatwhat appears inschedules issufficiently clear andthat,atleastforthe
present, there isnoneedforfurther multilateral work onthisissue.
9. TheSub-Committee soagreed.
10. TheChairman indicated thathealsohadpreliminary discussions onmeasures relating toentry
andtemporary stayofnatural persons pursuant tocertain bilateral agreements relating toseasonal
agricultural workers, working holidays andyoung workers 'programmes aswellasother programmes
fortheexchange ofuniversity professors andteachers. Thediscussions hadnotledtoanyagreed
conclusions andwork would havetocontinue onthose issues.
11. TheSub-Committee tooknote.
Theestablishment ofanInterim Group onFinancial Services
12. TheChairman recalled thatinthefirstmeeting oftheSub-Committee heldon19Mayhehad
indicated thathewould beconsulting onthequestion oftheestablishment ofanegotiating group on
financial services. Following consultations henowproposed thatanInterim Group onFinancial Services
should beestablished withthefollowing terms ofreference:
"AnInterim Group onFinancial Services isestablished tomonitor theprogress ofthe
negotiations under paragraph 1oftheDecision onFinancial Services, untiltheentry
intoforce oftheWTO Agreement andthecreation oftheCommittee onTrade in
Financial Services. TheGroup shallholditsfirstmeeting nolaterthan15October
1994."
13. TheSub-Committee soagreed.PC/SCS/M/2
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Progress report onnegotiations onbasic telecommunications
14. Intheabsence oftheChairman oftheNegotiating Group onBasic Telecommunications, the
Chairman oftheSub-Committee stated thattheNegotiating Group onBasic Telecommunications had
heldtwomeetings on6Mayand11July. Sofar22delegations hadannounced theirintention to
participate inthenegotiations and17delegations hadparticipated asobservers. TheGroup hadalso
approved requests forobservership bytheITUandUNCTAD. Adecision isyettobetaken bythe
Group onarequest forobserver status bytheAsia-Pacific Telecommunity. Initsmeeting on11July
theGroup finalized aQuestionnaire oncompetition andregulatory issues. Itwasagreed thatthe
Questionnairewillbedistributedtoparticipantsandthatthedeadlineforreplieswouldbemid-September.
Itwasalsoagreed thatreplies fromgovernments withobserver status intheGroup would bewelcomed.
Onfuture work, theGroup agreed thatitsnextmeeting willbegin on24October andcontinue for
twoorpossibly three days, asneeded. Atthatmeeting theGroup intends toconduct anexchange of
information, wherein participants willhavetheopportunity toreview andseekclarifications ofresponses
totheQuestionnaire. Participants willalsobegin todiscuss outstanding technical andconceptual issues.
15. TheSub-Committee tooknote.
Progress report onnegotiations onmaritime transport services
16. TheChairman oftheNegotiating Group onMaritime Transport Services stated thattheGroup
helditssecond meeting on13July1994. Sofar,34delegations hadannounced theirintention to
participate inthenegotiations and16delegations hadparticipated asobservers. TheGroup hadalso
approved arequest forobserver status byUNCTAD. Initsmeeting on13JulytheGroup considered
thedraftmodel schedule which hadbeenrecirculated on10June, andagreed thatparticipants would
submit written comments onthedrafttotheSecretariat, withtheintention thatthese comments would
bediscussed atitsnextmeeting, which willtakeplace intheweek beginning 17October 1994. It
wasalsoagreed thattheSecretariat willprepare aQuestionnaire onmarket structures andregulatory
regimes inthemaritime transport sector. Itishoped thatthiswillbecirculated toparticipants bythe
endofJulyandthatresponses willbereceived from allparticipants intimeforconsideration atthe
October meeting. Itwasalsoagreed thatobservers should beinvited toanswer theQuestionnaire.
TheGroup alsoagreed thattheSecretariat prepare acompilation ofoffers made inthemaritime transport
sector, inaddition tothecompilation already circulated ofcommitments appearing inschedules. The
newcompilation would comprise offers tabled before theconclusion ofthenegotiations inDecember
butnotmaintained inthefinalschedules. Itwillbebased essentially onoffers formally tabled, but
willalsocover, withtheagreement ofthedelegations concerned, some offers which atthatstage were
tabled informally.
17. TheSub-Committee tooknote.
Dates forfuture meetings
18. TheChairman recalled thatitwaspreviously agreed thattheSub-Committee might holdthree
formal meetings during theperiod September-December 1994. Heproposed thefollowing dates for
suchmeetings: 21September, week of17October andweek of28November.
19. TheSub-Committee soagreed.PC/SCS/M/2
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Other business
20. Anumber ofdelegations referred tothecommunication bytheUnited States dated 30June
1994 relating tothescheduling ofsub-federal taxes andsubsidies (PC/SCS/W/4) andmade thepoint
thatthere isaneedformultilateral consultations onthesubject matter ofthatcommunication. Some
expressed concern inrelation tothe30-day period. TheChairman oftheSub-Committee clarified
thatthe30-day time-frame isfortheinitiation ofconsultations andnotfortheirconclusion. Therefore,
itwould besufficient fordelegations toinitiate theconsultations atthisstage. TheChairman indicated
thatinaccordance withtheinterest expressed byanumber ofdelegations hewould beorganizing
consultations onthecommunication from theUnited States afterthesummer break.
21. Therepresentative ofJapan raised aquestion inrelation toArticle IVoftheGATS (Increasing
Participation ofDeveloping Countries) anditscompatibility withArticle II(Most-Favoured-Nation
Treatment). Hestated thatArticle IVestablishes obligations onthepartofdeveloped countries to
extend certain benefits todeveloping countries only. Therefore, hesuggested thattheSub-Committee
should consider whether arecommendation should bemade totheCouncil forTrade inServices to
adopt adecision analogous innature totheEnabling Clause oftheGATT, orwhether theSub-Committee
itselfmight conclude formally thatArticle IVwould inthisrespect override theMFN obligation. Other
delegations expressed theviewthatthisisanissuethatwould needfurther examination. Onedelegation
made thepoint thatbefore anyfurther work isdoneonthisissue, more clarity isneeded onwhatthe
problem is.TheChairman saidthathewould consult informally onthismatter.
22. Therepresentative ofCanada made thepoint thatthere isaneedtoconsider theorganization
ofwork intheSub-Committee andintheCouncil forTrade inServices overthenexttwelve toeighteen
months. Hesuggested thatintheSeptember meeting theSub-Committee might consider assigning
anorder ofpriority todifferent taskswhich needtobecarried out.Some delegations wereoftheview
thatsuchadiscussion hadalready taken place during thefirstmeeting oftheSub-Committee andthat
bytheSeptember meeting there would beverylittletoaddinthatrespect. Itwasalsopointed out
thattheNoteprepared bytheSecretariat dated 11May1994(PC/SCS/W/1) contains alistoffunctions
oftheSub-Committee onwhich some priorities weredecided; itwassuggested thatitwould beuseful
tohave, asastanding itemontheagenda oftheSub-Committee, areview ofprogress oneachofthem.
TheChairman saidthatthiscould beastanding itemontheagenda.
23. Therepresentative oftheEuropean Communities raised theissueofparticipation ofobservers
inNegotiating Groups, requesting further information ontheparticipation ofobservers during the
Uruguay Round negotiations, aswellasontheparticipation ofnon-governmental andregional
organizations. Onerepresentative suggested thatwhile theparticipation ofobservers inNegotiating
Groups istobedecided upononacase-by-case basis, itwould nevertheless beuseful toagree oncertain
criteria onthebasis ofwhich those decisions canbemade, suchasthemembership oftherequesting
organization anditstechnical expertise. TheChairman indicated thathewould beconsulting further
onthisissue onthebasis ofbackground information tobeprovided bytheSecretariat.
24. TheSub-Committee tooknote.