RESTRICTEDWORLD TRADE
ORGANIZATIONWT/REG3/M/7
19 June 1998
(98-2491)
Committee on Regional Trade Agreements
Seventeenth Session
EXAMINATION OF THE ENLARGEMENT OF THE EUROPEAN COMMUNITIES:
ACCESSION OF AUSTRIA, FINLAND AND SWEDEN, SERVICES
Note on the Meeting of 5 May 1998
Chairman:  Mr. Claude Bouah-Kamon (Côte d'Ivoire)
1. The Committee on Regional Trade Agreements took up the examination of the Enlargement
of the European Communities (Accession of Austria, Finland and Sweden), Services, under AgendaItem C.VI of its Seventeenth Sess ion, as found in Airgram WTO/AIR/831.
2. The Chairman said that the last examination of the services aspects of the Enlargement of the
European Communities (EC) had taken place in mid-July 1997.  At that time, it was agreed that
outstanding issues would be pursued bilaterally and that another meeting would be convened later on.
In December, the Committee concluded the factual examination of the EC Enlargement in the area ofgoods.  It was his hope that the clarifications made by the EC, both bilaterally and through document
WT/REG3/2/Add.4 recently distributed would allow the Committee to conclude at that date the
factual examination of the services aspects of the EC Enlargement.  The discussion would be
organized around that latter document.
3. The representative of the European Communities said that document WT/REG3/2/Add.4
responded in a grouped manner to outstanding questions raised by Members.  Since the last services
examination, she had not been contacted bilaterally by any Member.  The first four answers of thedocument related to the existence of reciprocity or market-access clauses in the banking, satellite and
ground-handling directives.  The answers could be summarized by saying that these clauses were not
enforced against WTO Members, mainly because either they were not part of the GATS or the EC
had taken a full m.f.n. exemption with respect to financial services.  The same applied to the
investment régime in the three new Member States, where no restrictions had been added as a resultof the Enlargement.  On the general question con cerning the changes in the EC's m.f.n. consolidated
list, the EC had answered all questions posed and no additional question had been received despite the
fact that some Members said at the last session that that might be the case.  Also, the EC had received
questions from Switzerland, Canada, Japan and the United States on the consolidated Schedule of
commitments and all these have been answered, discussed and recorded in the minutes.  Herunderstanding was that two questions remained to be replied;  they concerned the conditions related to
leasing and rental of aircrafts and space transport.  Concerning the former, she said that the condition
according to which only aircrafts which were registered in the EC or that complied with certain
nationality conditions could be rented, with waivers being possibly granted for short-term leasing, had
been included in the EC Schedule, but not in that of Austria.  Austria had now to comply with such
condition as it was a part of the EC.  Upon reflection, that condition applied to inputs and she was not
sure that it had to be scheduled altogether.  Nevertheless, it was listed because it was a rather specific
condition which placed some limitations on the business of a rental and leasing company established
in the EC.  That condition however did not alter th e commitments with respect to requirements for
establishment in Austria.  That change had therefore to be introduced in the EC's Schedule.  IfWT/REG3/M/7
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Members thought that the level of access in Austria had been modified as a result of the addition of
such condition, the EC would like to know specifical ly to which extent Members' rights had possibly
been affected.  Concerning space transport, while Austria had made a commitment on it, that was
neither the case of the EC(12) nor of Finland and Sweden.  For reasons of coherence of EC's policy
and given the fact that so few, if any, WTO Members had made commitments in space transport, theEC had preferred not to maintain such commitment in Austria.  She recognized that that could
possibly affect Members interested in space launching into or from Austria, and she would like to
know who that could be and to what extent they were affected.
4. As regards how the EC intended to explain or  justify changes in its m.f.n. exemptions, she
had invited Members to explain in detail where changes had occurred.  Many of the exemptions were
listed both in the EC and in the new Member States Schedules, although sometimes with different
terminology, and they had simply been incorporated in one single document.  There were a number ofm.f.n. exemptions that would apply to a larger geographical area, but they remained the same.
Despite the fact that the EC were of the view that they had not changed their measures and not
affected Members' rights, they were ready to listen to further views on whether Members had
established that in doing so the EC had affected their rights.  Members would have to judge whether
the application of an unchanged measure to a larger geographical area raised barriers.  If that was thecase, the situation would have to be evaluated in its totality in terms of the trade facilitation brought to
all WTO Members by enlarging the EC from twelve Member States to fifteen and by applying the
same measures to a larger geographical area.
5. Referring to the Chairman's introductory remarks,  the representatives of the United States and
of Japan said that their delegations were not prepared to conclude the examination at that date, as they
had just received the replies.  They would revert to them in the July session of the Committee.
6. The representative of Japan said that her delegation was not satisfied with the explanation
given by the EC on the rental/leasing of aircrafts and space transport services in Austria.  Her
delegation wanted to register its concern that Austria had made a modification of its specific
commitments on rental/leasing services of aircrafts and a withdrawal of its commitment on spacetransport following its accession to the EC without following the required procedures of GATS
Article V:5.  Her understanding wa s that, though those seemed not to have affected service suppliers
in any Member, a Member wishing to modify or withdraw a specific commitment had to go through
the procedures of Article XXI of the GATS, for the sake of the GATS legal stability.
7. Responding to the EC's request to demonstrate whether overall barriers to trade had been
raised as a result of the changes in m.f.n. exemptions, the representative of the Australia said that,
according to his delegation, that question was irrelevant with respect to the m.f.n. exemptions, which
needed to be dealt with under different legal provisions.  If the EC was correct and there were no new
m.f.n. exemptions and the consolidated Schedule simply brought together existing measures, then the
question  whether barriers to trade had been raised was equally irrelevant in that sense.
8. The representative of the Korea said that his delegation had a serious concern with the
question of m.f.n. exemptions.  After the EC Enlargement, m.f.n. exemptions were automatically
extended to Austria, Finland and Sweden, and that was totally contrary to the GATS.  Third-countries
were facing higher trade barriers.  His delegation was of the view that, in accordance with the
requirements of Article XXI of GATS, compensation or other procedures had to be engaged to
compensate for that.  Supporting the statements made by the two previous speakers, the representative
of Canada said that he was concerned about the suggestion that Article V might be used as a vehicle
to changes to m.f.n. exemptions.  There were WTO procedures for making those changes and his
delegation believed that those were important.  Concerning the automatic extension of measures
which might adversely affect third-countries, the representative of the Japan noted that, in the goodsWT/REG3/M/7
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area, his delegation had repeatedly objected to the EC's view that they were allowed to act in that
manner because it was simply the extension of a geographical area.
9. Referring to the EC's specific commitments and to the fact that Japan had indicated that it was
not satisfied with the explanation given, the representative of the  European Communities said that the
EC were ready to deconsolidate the measures.  In light of the fact that the changes had to be made, she
invited Japan and any other affected Members to  indicate to the EC their concerns, so that
compensation could be provided for the service suppliers affected by that possible change.  Turning to
the m.f.n. exemptions, she said that Australia's intervention appeared logical.  As she had already said,
the measures taken were not new m.f.n. exemptions but the same exemption applied to a larger area,
and that seemed not to be much contested.  Members had said that the EC had to use the relevant
provisions, and she presumed that those were the ones contained in the GATS Annex.  However,
those provisions required the granting of a waiver for new m.f.n. exemptions.  She also noted thatKorea had said that the question could also possibly be addressed on the basis of Article XXI.  Since
the EC had not taken new m.f.n. exemptions, she suggested that the issue be addressed in its totality,
with Members looking  into whether they had been affected both with respect to specific
commitments and m.f.n. exemptions.  There seemed to be possibly a loophole in the GATS, as the
situation was that the measures covered under the existing exemption had not been changed but justbeen expanded to three new Member States of the same Member, which negotiated its own
commitments.  They did not have to go through a waiver, and the EC was ready to hear Members'
views on whether the level of discrimination had been affected.  If that was the case, the debate could
be pursued.
10. The representative of New Zealand said that his delegation also shared concerns about the
automatic extension of m.f.n. exemptions to the ne w Member States.  His delegation was of the view
that adjusting the scope of an exemption to include three new countries created an exemption of an
entirely different character to the one that was originally scheduled.  In looking to the question on
whether the exemption was new or was continuing, the real test was what were the implications of
that exemption.  The implications were, in effect, that it would extend its geographical scope to threenew countries.  If that was accepted as a practice throughout the WTO system, there could be very
significant implications for the obligations owed to  WTO Members, which might be confronted with a
number of entirely new exemptions, simply as a result of expanding membership of regional
integration agreements on services.  That was a serious issue that needed to be looked at very
carefully.
11. The representative of Korea said that the automatic extension of m.f.n. exemptions meant that
third-countries could not benefit from the same access to the new Member Sates.  That meant that the
commitments taken by the those countries were modified or withdrawn, and that was typical of an
Article XXI case.  Consultations with interested Members should have started before the application
by the new Member States of the m.f.n. exemptions, so that compensation could be granted.
Concerning the specific commitments and the related question posed by the representative of the EC
to Japan, his delegation was not in favour of a detailed discussion on their actual or potentialimplications, since under the WTO any Member which had a potential interest or benefited from the
commitments  could raise the issue.
12. The representative of Japan stated that her delegation's position was similar to that of
New Zealand and Korea with respect to m.f.n. exemptions.  Also, the main point on rental/leasing of
aircrafts and space transport in Austria was the legal stability of the GATS; there was the need to gothrough the required process.
13. Clarifying his delegation's position, the representative of the Australia said that, concerning
the m.f.n. exemptions, the question of whether barriers had increased was totally irrelevant and the
Committee was not the right place to discuss that issue.  There were two scenarios that applied to theWT/REG3/M/7
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m.f.n. exemptions.  If, as argued by the EC, the m.f.n. exemption was the same measure, then the EC
had no obligation to ask other Members whether they thought that trade barriers had been raised,
because it was the same measure and there had been no change.  However, if the measure was not the
same, as argued by New Zealand, because the expans ion of its scope resulted in a new measure, then
neither the Committee was the place to discuss that issue, which needed to be addressed elsewhere,nor Article V was relevant.
14. The representative of the European Communities said that her delegation would reflect on the
reactions heard.  She regretted that only one procedural reaction was made with respect to specific
commitments.  If, in accordance with Article V:5, they  were in an Article XXI format, she hoped that
Japan and any other Members would indicate where they had been affected, as her delegation would
not engage into an Article XXI exercise just for the sake of the procedures.  She needed more
guidance on that before she could decide on the next step.  Since some Members had requested moretime to consider the answers given, Japan and possibly other Members could also reflect on that
question before she could position herself with respect to Article V.  She could not position herself
more straightforward than that in the context of Ar ticle V:5.  Concerning the m.f.n. exemption list, she
noted that there were two kinds of interventions.  First, that it did matter whether the barriers had been
raised or not, because it was not only a question of actual but also of potential discrimination, and she
certainly did not contest that at all.  But that implied an argument on whether had barriers been raised
or not.  While the EC was of the view that they had not been raised, she had invited Members to
reflect upon.  Second, that the question on whether barriers had been raised was totally irrelevant, and
that it was outside the scope of Article V.  In that case, however, she had not heard where they would
be.  She had said that the question did not concern paragraph 2 of the Annex on Article II, but if she
followed Korea's reasoning, then it would possibly be related to an Article XXI procedure.  If that
procedure had to be pursued, she would like to do that for all the measures that Members felt had
affected them as a result of the Enlargement.  She reiterated her invitation to Members to indicate to
what extent they had been affected by the Enlarg ement, either with respect to specific commitments
or m.f.n. exemptions, and on the basis of that she could see whether there was the need for launchingan Article XXI procedure, which the EC were certai nly not saying they did not want to do.  She was
still needing a more clear positioning from the Members on whether barriers had been raised and if
yes how Members had been affected or, alternatively, on where the issue should be dealt with, if it
was neither an Article V nor a Committee's issue.
15. Indicating that that day's discussions had been completed, the Chairman proposed that written
questions be submitted to the EC through the Secretariat by 15 May and that written replies be
submitted by 15 June, so that the document would be ready in time for the July session, when thework on this agreement would continue.  The representative of the United States proposed, and it was
agreed, that the period for presenting questions be extended until the end of May but that the delay for
the replies remain as the one proposed by the Chairman.
16. The Committee took note of the comments made.
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