RESTRICTEDWORLD TRADE
ORGANIZATIONS/C/W/37
10 June 1998
(98-2354)
Council for Trade in Services Original:  English
DISTRIBUTION SERVICES
Background Note by the Secretariat
I. INTRODUCTION
1. This note has been prepared at the request of the Council for Trade in Services.  It provides
background information on the distribution sector for discussion in the Council as part of the
information exchange programme.  Due to the limite d time available for its preparation, this note is
best seen as a first step in the examination of issues relevant to trade in distribution services.
2. In modern market economies, the distribution sector is the crucial link between producers and
consumers.  The performance of the sector, inevitably, has a strong influence on consumer welfare.
Increased efficiency and competition in the distribution system can lead to lower price levels,
particularly since distribution margins are a significant fraction of the price of final products, and
reduce distortions in the price structure.  Furthermore, the provision of a wider variety of productsresponds to consumers' desire for diversity.  The distribution sector is not, however, a conveyor of
goods alone nor is its role unidirectional.  It supplies consumers with a range of complementary
services (accessibility of location, assurance of product delivery, information and ambience) which
can lead to more informed choices and greater convenience in shopping.  At the same time, it provides
producers with much of the information they need to tailor their decisions to the pattern of consumerdemand.  Failures of the distribution sector to perform its role adequately can lead to a significant
misallocation of resources and economic cost, as witnessed in many centrally planned economies.
3. The realization that enhanced competition, both domestic and foreign, can improve the
performance of the distribution sector is leading to increased deregulation and liberalization of the
sector.
1 At the same time, the scope for international trade in distribution services has grown rapidly
through the expansion of foreign direct invest ment and the development of new technologies,
especially in telecommunications.  The Uruguay R ound negotiations on distribution services reflected
a first attempt to consolidate this market-opening trend and to advance the process of progressive
liberalization.  But there can be little doubt that there remains considerable scope for further
liberalization and for its translation into multilateral commitments.
4. This paper begins, in Section II, with a brief description of the distribution sector, its
economic importance and its structural characteristics.  Section III looks at the pattern of trade in thesector.  Then Section IV describes the relevant features of national trade and regulatory regimes and
Section V examines the existing liberalization commitments under the GATS.  Section VI addresses
some issues which may be relevant to an assessment of the current situation and the directions in
which further work may be needed.  Finally, Section VII lists some other sources of information.
                                                     
1 Detailed information on these and other aspects of the distribution sector is to be found in Pilat
(1997), for the OECD countries, and the European Commission (1997), for the European Union.  Certain
sections of this paper rely on the information in these studies.S/C/W/37
Page 2
Since the purpose of the paper is to facilitate discussion, each section ends with a set of questions
rather than conclusions.
II. THE DISTRIBUTION SECTOR:  DEFINITION, ECONOMIC IMPORTANCE AND
INDUSTRY STRUCTURE
Defining Distribution
5. In the Services Sectoral Classification List (MTN.GNS/W/120) developed during the
Uruguay Round, and largely based on the United Nati ons Provisional Central Product Classification
(CPC), the distribution sector is defined to includ e four major services:  commission agents' services,
wholesale trade services, retailing services, and franchising.2 Commission agents are distinguished
from the other categories in that they trade on behalf of others, i.e. they sell products that are supplied
and usually owned by others to retailers, wholesalers or other individuals.  Wholesale trade services
consist in selling merchandise to retailers, to industrial, commercial, institutional or other professionalbusiness users, or to other wholesalers.  Retailers sell goods for personal or household consumption.
Franchisers sell specific rights and privileges, for instance, the right to use a particular retail format or
a trademark.
3
6. The CPC notes that "the principal service rendered by wholesalers and retailers may becharacterised as reselling merchandise, accompanied by a variety of related, subordinated servicessuch as:  maintaining inventories of goods;  physically assembling, sorting and grading goods in large
lots;  breaking bulk and redistribution in smaller lots;  delivery services;  refrigeration services; sales
promotion services rendered by wholesalers; and services associated with retailers' businesses, e.g.
processing subordinated to selling, warehousing and garage services."
4 In confining its attention to the
distribution of merchandise and related services, the CPC chooses to ignore the distribution ofservices per se .  Does this matter?  In the case of many services production and distribution are not
separable, and the supplier of the service necessarily supplies both.
5 But one can conceive of certain
storable services (e.g. customized software on a diskette) where there is scope for an independent
distribution activity.  The empirical importance of su ch situations, and hence of the CPC exclusion, is
not immediately clear.
                                                     
2 Although the use of the Services Sectoral Classification List is not mandatory, most Members have
used it as a basis for scheduling their commitments.  For each of the four subsectors, there is a reference to the
United Nations Provisional Central Product Classification (CPC):  commission agents' services (CPC 621),
wholesale trade services (CPC 622), retailing servi ces (CPC 631+632+6111+6113+6121) and franchising (CPC
8929).  More detailed description of the sub-sectors is to be found in United Nations (1991).  Of the 36Members who have made commitments on distribution services, only 4 have made no reference to the CPC, buteven these 4 have referred to the classification in MTN.GNS/W/120 .  An analysis of the recently developedCPC Rev. 1 can be found in the document entitled "A Qualitative Assessment of the Relevance of the Changes
Resulting from CPC Rev. 1 for Trade Negotiating Purposes" (S/CSC/W/9/Add. 3 of 9 October 1997).
3 Although franchising is classified in document MTN.GNS/W/120 as part of distribution services, it is
qualitatively different from the other three components.  It is more a description of the type of contractualarrangement through which a distributor is allowed to use a retail format or a trademark.
4 In a recent dispute (see, for instance, European Communities - Regime for the Importation, Sale and
Distribution of Bananas, Complaint by Mexico, Report of the Panel, document WT/DS27/R/MEX) the
definition of wholesale services was an issue.  It was argued by the EC that, in the banana trade, wholesaletrading starts only after the ripening process is completed and that any activity prior to ripening should not bedefined as wholesaling of bananas, but rather as part of their production process.  The Panel noted theappropriate CPC category did not make any distinction between green and ripened bananas and that thedistribution of both types of bananas fell within the scope of the category.
5 Article XXVIII(b) of the GATS states, "'the supply of a service' includes the production, distribution,
marketing, sale and delivery of a service."S/C/W/37
Page 3
7. In practice, the distinctions between categories of distributors may be blurred.  Many
enterprises perform several functions, or manufacturers may carry out distribution functions
themselves.  Furthermore, the definition of the distribution sector may understate the increasingly
wide role of many operators in the sector.  Fo r instance, the change in manufacturing to tightly
managed production techniques means that the distribution chain is becoming more sophisticated, anddistributors are performing functions such as credit advance, quality control and administration, in
addition to activities like inventory maintenance, advertising, and packaging, which the CPC
definition anticipates to some extent.
Possible questions:
Are the existing definitions adequate, or is there a need to clarify the definition of:
- distribution services or of any of the sub-sectors of distribution services,
- the modes of supply with respect to certain distribution services, such as franchising?
The Distribution Sector in the Economy
8. In all countries for which data are available, the distribution sector, i.e. wholesale and retail
trade taken together, accounts for a significant part of economic activity.
6 The contribution of the
sector to GDP ranges from around 8% in Germany and Ireland to over 20% in Hong Kong and
Panama (Table 1).  In many economies, the sector is only second to manufacturing in its contributionto GDP, and ahead of other sectors such as agriculture, mining, transportation, telecommunications
and financial services.  Table 2 presents more detailed information for the OECD countries.  The
contribution of the sector to economy-wide employment is usually even greater than that to GDP,
reflecting the relatively high labour-intensity of the sector.  Retailing invariably accounts for a much
greater share of employment than wholesale trade.  An index of the importance of distribution inbusiness activity is the share of enterprises in distribu tive trades in all enterprises in the economy:  this
share ranges from less than 20 per cent in the United States, Denmark and Iceland, to 40% in Greece
and Portugal.  The relatively large number of distribution enterprises in some countries is related to
small scale of the typical retail enterprise in these countries.
9. The distribution sector has grown in absolute size in most OECD countries over the years
1979-1994, with the fastest growth recorded in Japan and the Republic of Korea.  Employment in the
sector has also grown in most countries (with the exception of Belgium, Denmark, Finland and
Sweden).  Since output growth has generally out paced employment growth, labour productivity also
seems to have grown over the period, most notably in Japan, Denmark and Sweden.  Only a few
countries have data that allow decomposition of output and employment growth in wholesale and
retail trade, and no clear pattern emerges.
                                                     
6 Data for commission agents and franchising services is not explicitly mentioned but is presumably
included in figures for the distribution sector as a whole.S/C/W/37
Page 4
Industry Structure
10. The structure of the distribution sector varies with the level of development of the country.
The situation in many developing countries may well resemble that in early 20th Century United
States:  the dominant marketing channel is a general store in small towns, and in larger cities, small
conveniently located stores specialize in a narrow range of items with perhaps a few large departmentstores selling a much wider range of goods.  However, the pattern of development is not uniform. It
depends on the structural characteristics of a country, such as population density and the degree of
urbanization, as well as the tastes of its population (for instance the preference for proximate outlets).
The nature of public policy (for example zoning laws and restrictions on large stores) also influences
the evolution of the sector.
11. Despite differences between countries in the levels of development, structural characteristics
and policies, it is still possible to make some broad generalizations about the distribution sector.  First,in most countries the bulk of retail enterprises consist of a single shop and are sole proprietorships.
However, independent stores are less dominant in terms of total retail turnover than they are in
employment terms, especially in the case of countries with well-developed retail systems.  Secondly, a
large part of the sector is engaged in food retailing both in terms of the number of enterprises and
retail turnover.  Other important sales categories are textiles, clothing and footwear, householdequipment and motor trades.  Finally, the sector is usually characterised by relatively low wages, and
employs a large number of relatively low-skilled workers.  However, changes in consumer
preferences and technology, reflected in the increased sophistication of products, is creating a move
towards higher service quality and hence increased demand for higher-skilled workers.
12. Significant changes are currently taking place in the distribution sector, especially in the more
developed countries (see, for instance, European Commission, 1997).  These changes are affecting the
structure of individual sub-sectors of distribution as well as the relative importance of each sub-sector.
First, the distribution sector is becoming more concentrated.  This is manifested both in terms of the
emergence of a number of large operators, and in terms of closer links between manufacturers,
wholesalers and retailers, particularly through the cr eation of networks.  In retailing, in particular,
traditional shops selling basic products are being replaced by larger chain stores.  Furthermore, the
average size of shops is generally increasing, bot h in terms of turnover and employment, and the
density of retail outlets is declining.  In some cases, small shops have not disappeared but have re-
emerged as part of a large chain of shops or are cooperating in franchise agreements, often oriented
towards more specialized segments of the market.  Secondly, there is a general reduction in the role of
traditional wholesalers, with the most dramatic impact in the "low-price, high frequency" (i.e. non-
durable consumer goods) segment of the market.  However, some forms of wholesaling remainstrong, such as specialist operators who focus on specific end-users such as schools and hospitals,
providers of complete packages in areas such as high-value consumer goods (e.g. consumer
furnishings), and wholesalers in the traditional areas of raw materials and bulk products.  These
developments are evidently related.  For instance, the pressure on traditional wholesalers is a
consequence of the manufacturers' wish to control distribution themselves or the large retailers'practice of upstream extension or both.
7
13. Even though it is difficult to make generalizations, it would seem that despite the tendencytowards increased concentration, the markets for distribution services tend to be fairly competitive.
                                                     
7 A large number of retailers and manufacturers in certain countries, apparently seek to take control of
distribution formerly carried out by traditional wholesalers, and subsequently outsource the physical componentof these activities to suppliers of logistic services.  This  is illustrated by figures on market shares of consumer
good distribution in France (European Commission, 1997).  The figures for retailers and wholesalers have
changed only slightly between 1985 and 1992, but while wholesaler share declined from 43 per cent to 31 per
cent, that of logistic services increased from 6 per cent to nearly 18 per cent.S/C/W/37
Page 5
This is because in many cases the optimal scale of operation remains small relative to the size of the
market.  Even when it is not, and there is a fairly high degree of concentration, the few large
distributors in the market may still behave competitively - as evidenced by the grocery market in
several developed countries.  This does not, of course, preclude the existence of localised
monopolistic power, which may work to the advantage of a petrol station in a remote area, a largedepartment store in a small town or a corner shop late in the evening.  In general, the conditions of
entry are perhaps the most important determinant of market performance.  The enhanced benefits of
scale have certainly increased the fixed costs of entry and the increase in land and property prices in
many countries has further accentuated the situation.  However, the growing opportunities for mail-
order service and electronic commerce (discussed in the next section) have reduced the costs of entry
in individual markets.  How these opposing developments affect the contestability of markets for
distribution services remains to be seen.  The role of policy in this respect, and the importance ofvertical relations, are examined in a subsequent section.
Possible questions for discussion:
- Does the tendency towards increased concentration in distribution services
merit concern, or is the optimal scale of operation small relative to the size of
the market?  Are there differences between the sub-sectors, products andcountries?
- How important are fixed costs (the price of land) and sunk costs (entry fees), and
other non-policy barriers to entry?
- In the light of the importance of the sector as an employer of relatively low-
skilled workers, what are the implications of the changing scale and format ofdistribution outlets and the use of new technologies?
The Impact of Electronic Commerce
14. The growth of electronic commerce can be expected to bring about changes in the distribution
sector as a whole.
8 Developments such as electronic data interchange (EDI) have for some time been
important elements of business-to-business commerce.  But now similar developments are affectingretailing:  a first wave of cybermalls has been followed by more successful specialized retailers, and,
more recently, multi-product megastores have appeared.
9 Online-vendors of flowers, books, cars,
music, computers or software, and even groceries have been making some inroads into traditional
retailing through specialization on certain items or product lines.  What advantages do online-vendors
possess?  Internet shops hope to thrive on lower search, transactions and storage costs, wider selection
of products, more rapid turnover, cheaper suppliers, and better market information.  For instance,
electronic purchases of books and other products allow an easy tracking of buying patterns, andsellers can target advertising and information to customers on the basis of their revealed preferences.
Projections for online sale of customized products are, therefore, particularly optimistic.
15. In attempting to measure the scale of electronic commerce, it is necessary to define what
should be counted under this term.  The narrowest definition includes only products which can be
delivered electronically, while wider definitions also include products which are advertised, orderedor paid for electronically.  The degree to which these functions can be performed electronically will
determine the manner in which the distribution of specific products is affected.  For instance, if the
                                                     
8 This section relies on the more detailed discussion in Bacchetta, et al. (1997).
9 The Economist, 1 November 1997.  Despite the success of some specialized retailers, many online
shops and shopping malls have been struggling with low profitability in the past. New attempts to capture a
larger share of the retail market are being made through megastores (The Economist, 1 November 1997).S/C/W/37
Page 6
product can be adequately displayed electronically, the need for costly show-room space diminishes.
In many cases, considerable cost savings can result when products are not only ordered and payed for,
but also delivered electronically.  Online sale and downloading of software ranks first among all
goods and services retailed on the Internet. Other sectors with potential for online distribution include
publishing of newsletters, newspapers and magazines. Music and films (which have started to be soldonline but delivered in a conventional manner) may soon be downloadable directly onto one’s
computer or multimedia system at home.
16. Using a relatively wide definition of electronic commerce, one set of projections suggests that
by 1999, 13 per cent of all consumer shopping will be conducted electronically, and that this share
will double by the year 2007.
10 However, for the moment it is in business-to-business transactions that
electronic commerce has proved most dynamic.  Forrester Research projects a 100-fold increase for
this type of electronic commerce from $0.6 billion in 1996 to $66.5 billion in 2000, as companiesincreasingly find the online purchase of supplies profitable.   Retail shopping, however, is expected to
remain largely in the hands of traditional (physical or electronic) outlets: Forrester Research projects
consumer retail online in the United States to reach only $7.2 billion by 2000.
17. However, much uncertainty remains as to the type of Internet shopping which will ultimately
prove successful. But this is hardly surprising given the relative novelty of Internet shopping.Consumers may react very differently from what is pr edicted, and decide that they prefer the shopping
experience of physical stores and malls to the anonymous world of cyberspace. On the other hand,
new technology may even accelerate the shift towards online transactions if major savings are
involved in terms of money and time, and if the Internet instills a new sense of having fun with
shopping.
Possible questions:
- How is the emergence of electronic commerce, and its impact on the costs of
entry and delivery, likely to affect the structure of the distribution sector?
- Are there policy barriers inhibiting the development of electronic commerce?
- Are there barriers to trade in distribution services which are being rendered
redundant by the development of cross-border electronic commerce?
- Is there need for additional regulation to deal with the phenomenon of
electronic commerce?
III. TRADE IN DISTRIBUTION SERVICES
18. Trade in distribution services takes place mainly through both commercial presence and
cross-border supply.11 The two major components, wholesale trade and retailing, are supplied
primarily through the commercial presence mode, but this may change in the light of recent technical
                                                     
10 Financial Times, 3 September 1997;  The Economist, 10 May, 1997.
11 Consumption abroad of distribution services may,  however, not be insignificant because purchases
by frontier populations in neighbouring countries fall under this mode.  It is interesting to note that under theGATS, the purchases (net of the wholesale price of the product) by Swiss consumers from the Swiss Migroschain located in France constitute consumption abroad of distribution services, while the sales (net of the
wholesale price of the product) of the Migros in France constitute supply of distribution services through
commercial presence.S/C/W/37
Page 7
developments discussed in the previous section.12 Trade in franchising is usually undertaken on a
cross-border basis, whereas commission agent services are supplied cross-border and through
commercial presence (USITC, 1996, 1997).
19. Commission agents are usually individuals or small businesses whose sales are difficult to
capture in national data surveys.  Therefore, trad e data on commercial agent services are unavailable.
Cross border trade data for most distribution services are also generally unavailable.  An exception is
the data for cross-border supply of franchising services for the United States, measured by the
exchange of royalties and fees.  In 1995, US exports of franchising services were $324 million with
Europe, the largest market, accounting for 48% of US exports of these services.  The fastest growth in
US franchising operations in recent years is being recorded in some of the South American markets,
such as Argentina, but these markets still account fo r a relatively small share of total US franchising
exports.  There is evidence to suggest that franchising is particularly important in the retailing ofautomobiles and petrol.
13
20. It is also possible to obtain a rough estimate of the importance of cross-border trade using thestatistics provided by three EU countries (Ireland, Netherlands and Sweden) on turnover of
distribution enterprises attributable to deliveries of goods and services outside the country of
operation.
14 The proportions for extra-Community deliveries are low (less than 3 per cent) for all three
countries.  The proportions for intra-Community deliveries are also low for Ireland and Spain (less
than 4 per cent), but 15 per cent of the turnover of enterprises based in the Netherlands is attributable
to intra-Community deliveries, suggesting that there is already considerable scope for the use of the
cross-border mode.
21. Two sources of information are available for trade in distribution services through foreign
affiliates.  Until recently, the United States was the only country which collected such statistics on a
regular basis,15 but now the Statistical Office of the European Communities has also begun work in
this area - the first results of which are described below.
22. The US data suggest that wholesale trade is the largest single component of distribution
services and accounts for a significant proportion of all services trade through affiliates.16 Wholesale
services sold to foreign persons by affiliates of US firms were nearly $15 billion in 1995, representing
9 per cent of total US sales of services through affiliates (Table 3A).  Wholesales services bought by
US persons from affiliates of foreign companies were over 9 billion dollars in 1995, which amounted
to 7 per cent of total US purchases of services fro m foreign affiliates (Table 3B).  Services provided
by retailers constitute a much smaller proportion of total trade in services.  In 1995, US sales and
purchases of retailing services through affiliates amounted to only $1.1 billion (less than 1 per cent of
services sales) and $0.6 billion (less than one-half per cent of services purchases), respectively.  The
                                                     
12 Wholesale trade services incidental to the whol esaling of merchandise are indistinguishable from
merchandise trade data, and only non-wholesaling services provided by wholesalers are captured in official
trade data.  This has the effect of understating the im portance of trade in wholesale services, in particular,
through the cross-border supply  mode.
13 Betancourt (1993) reports that in 1970, US companies operated 156 franchised foreign outlets while
there were 3,400 foreign outlets in the US;  by 1988, US companies were operating 354 franchise outlets outsidethe US while foreign companies where operating 35,000 franchise outlets in the US.  More than half of these
franchises were for automobile and truck dealers, around 15 per cent for petrol and service stations, 10 per cent
for restaurants, and 4 per cent for non-food retailing.
14 It must be kept in mind that turnover measures the aggregate sales of the sector and not trade in
distribution services  per se , but the share of deliveries outside the country of operation in total turnover may,
nevertheless, provide some idea of the relative importance of cross-border trade.
15 See the document "A Review of Statistics on Trade Flows in Services" (S/C/W/27 of 10 November
1997) for details.
16 See footnote 12.S/C/W/37
Page 8
most important markets for the US in wholesale trade, were Japan and Germany but in retail trade the
United Kingdom replaced Germany.  A large part of the sales of US affiliates arise from sales of
professional and commercial equipment and supplies, in particular, related to computers.  Affiliates of
Japanese and United Kingdom companies provided the largest amounts of wholesale services in the
US, whereas those from Germany and the United Kingdom were the most important in retail trade.
23. The Statistical Office of the European Communities has recently presented the first foreign
affiliates trade (FATS) statistics which prov ide information on demographic, employment and
financial aspects of foreign affiliates operating in wholesale and retail trade in the European Union.17
Perhaps not surprisingly, the enterprises of all countries are largely nationally owned (Table 4A).While seven of the nine countries have less than 2% foreign-owned enterprises, Ireland and Italy have
a much larger proportion (17% and 16%) respectively, but this may be explained by the fact that both
countries supplied figures only for the larger enterprises.  It emerges that 58% of the non-nationalenterprises were owned by companies or individu als from other EU countries, though in the United
Kingdom, the owners of 63% of foreign-owned ente rprises belonged to countries outside the EU.
24. In the EU, foreign-owned enterprises are more important in their share of employment
(Table 4B) than in numerical terms, suggesting th at foreign enterprises are on average much larger
than national enterprises.
18 About one million persons in the EU, around 9% of the total, were
employed by enterprises owned or controlled by in terests outside the country in which the enterprise
operated.  In most countries, with the exception of the Netherlands and the United Kingdom, the
larger part of foreign ownership was located in the EU.
25. Foreign-owned enterprises account for a sign ificant share of the total turnover of the
wholesale and retail trades (Table 4C).  If we ignore the different periods covered, total turnover inthe nine reporting States was ECU 2089 billion, of which ECU 369 billion (17.6%) represented the
activity of foreign-owned enterprises.  In the aggregate, turnover is greater for foreign enterprises
owned by extra-EU countries than those owned by ot her EU countries, but this reflects the importance
of non-EU enterprises in the United Kingdom and the Netherlands, and is not the pattern in other EU
countries.
26. Two other measures of foreign involvement are relevant.  Foreign-owned distributors
accounted for 12.5 per cent of the total sectoral value added in eight EU countries of ECU 312 billion,
with roughly equal shares of intra- and extra-EU  enterprises (Table 4D).  Clearly, value-added
provides a closer approximation of trade in distribution services per se  than turnover, but value added
figures tend to be less reliable.  Furthermore, foreign-owned enterprises accounted for 16% of the
ECU 30 billion of gross investment in tangible goods in the eight countries providing data.
                                                     
17 Statistical Office of the European Communities (1997).  Several qualifications to the data must be
noted.  First, the period covered in national statis tics varies according to the timeliness and frequency of
inquiries.  Secondly, not all countries have used the same  criterion to establish the origin of a supplier:  some
have produced information on the basis of the first foreign owner (first shot) while most have used the conceptof the ultimate beneficial owner.  Thirdly, results for some countries are influenced by survey coverage:  forexample, Irish and Italian figures included only ente rprises with more than 30 and 50 employees respectively,
which might lead to an exaggerated view of the degree of foreign ownership.  Finally, the definition of the
sector differs from the MTN.GNS/W/120 definition in also  including the repair of motor vehicles and personal
and household goods (NACE 52), and some countries have also included figures for hotels and restaurants(NACE 55).
18 Available evidence suggests that an average foreign-owned enterprise had 86 persons employed
compared with 6 for a nationally-owned enterprise.  This is not surprising since national enterprises include a
large number of small domestically owned traders in addition to the large enterprise groups, whereas the non-
national figures include global organizations which are unlikely to invest overseas in small units.S/C/W/37
Page 9
27. Unfortunately, no comprehensive statistics exist for the importance of affiliates trade in other
parts of the world.  Some anecdotal evidence for Asia and the Pacific is provided in USITC (1997)
and for Latin America in USITC (1996).  There is apparently considerable investment in Asia and the
Pacific from US companies such as J.C. Penney, Toys "R" Us, Price Club, Compaq Computer, Wal-
Mart, Levi Strauss, Tower Records, Ace Hardware, McDonald's, Kentucky Fried Chicken, IBM andKmart.  Other major companies established in the region include Marks and Spencer, HMV, Virgin
(United Kingdom), Siemens (Germany), Makro (N etherlands), Gucci (Italy), Carrefour and
Delifrance (France), and a number of Japanese wholesalers such as FamilyMart.  Companies, such as
Wal-Mart, J.C. Penny, Makro and Carrefour, are also reported to have established a presence in
several Latin American countries like Argentina, Brazil and Chile.
28. The enterprises mentioned above provide an interesting spectrum of reasons for the
internationalisation of distribution services.  Some  of these companies, such as Compaq Computer
and Levi Strauss, are better known as manufacturers, and their emergence as exporters of distribution
services is likely to derive from their competitive edge in the manufacture of the underlying products.
Compaq Computer's entry into distribution probably reflects the advantages of vertical integration for
manufacturers of consumer durables for which pre- and post-sales service are important.  Levi
Strauss's decision to market its own products may stem from the desire to eliminate the negative"vertical externality" arising from the successive mark-ups charged when the distribution chain is
made up of independent enterprises.  McDonalds and Kentucky Fried Chicken provide restaurant
services, but their sales of food not consumed on the spot constitute distribution services.  Their
competitive advantage is related not only to the underlying product, but also to the manner in which
the sales are made, involving attributes such as speed and simplicity.  Companies such as Marks and
Spencer have successfully developed retailing brand-names which perform a quality-certification
function for consumers.  Finally, there are the companies, like Wal-Mart, whose advantage derives
primarily from their retailing format, i.e. the manner in which they offer products for sale and conduct
sales.
19
29. Among the world's top 10 retailers (measured by sales), three are of US origin, five are
German and two are Japanese (Table 5).  Apparently, for most of the internationally oriented
European retailers, the domestic market still accounts for two-thirds or more of total turnover
(European Commission, 1997).  Difficulties in internationalization have been attributed to differences
in tastes and in national legislation.  International moves of European retailers are reported to be
taking place in roughly equal measure through internal growth, mergers and acquisitions, and joint
ventures.  Joint ventures are the preferred means of intra-EU internationalization, while mergers and
acquisitions are most commonly used for expansion outside the EU.
Possible questions:
- Is it possible to identify the pattern of trade in distribution services on the
basis of the limited evidence that is available?  How is the modal pattern of
trade likely to change in future?
- Is it possible to identify the determinants of potential comparative advantage
in distribution services?
                                                     
19 European Commission (1997) defines the retail format as the set of strategic decisions relating to the
organisation of retail stores.  The four main aspects of the retail format  include the relation with the consumer,
the choice of store format, the choice of location, and finally, multi-store management and co-ordination.S/C/W/37
Page 10
IV. TRADE RESTRICTIONS AND REGULATORY STRUCTURE
30. Trade barriers may arise from explicit restrictions on foreign services or suppliers,
excessively burdensome domestic regulations, or the non-enforcement of domestic laws, such as those
which concern competition policy.
Explicit Barriers to Trade in Services31. As discussed above, among the four distribution services, wholesalers and retailers rely most
heavily on the freedom to establish a commercial presence.  Hence, barriers which limit the ability of
firms to establish a commercial presence and to employ nationals from their home country affect these
distribution services more significantly than franchising and commission agent services.
32. The general foreign investment regime crucially affects conditions of market access in many
countries.  Limitations on foreign investment, including those on the extent of foreign ownership (for
instance, limiting foreign equity ownership to specific levels), on the type of legal entity required(such as the requirement to incorporate locally), on the ownership of specific assets (such as land),
and on the scope of operations (restrictions on number and location of outlets) also have a strong
affect on this sector.  Similarly, the requirement to form a joint venture with local suppliers curtails
the freedom of foreign suppliers to decide on the optimal business arrangement.  More generally, the
application of economic needs tests to determine whether new entry will be allowed, reducesregulatory transparency and leaves administrators with a high degree of discretion.
33. Given the high labour intensity of distribution (especially in retailing), the sector is affected
by limitations on the movement of natural persons.  Nationality requirements for staff prevent firms
from minimizing labour costs through international recruitment.  Residency requirements for
managers and directors de facto  disadvantage foreign suppliers even when the requirements are
imposed on all distributors.  Immigration policy, visa restrictions, and levies and charges for social
security also impact on the sector.
34. Discrimination against foreign firms can also be through taxation or subsidization, though tax
incentives sometimes also favour foreign investors.   Performance and local content requirements can
have the effect of modifying competitive conditions against foreign investors.  Discrimination againstforeign workers can also be through taxation or subsidization, denial of access to benefits and
amenities, restrictions on the rights of dependents and unfair treatment in the workplace.
35. Limitations on cross-border trade of distribution services include measures such as
discriminatory taxation of goods delivered by mail.  Consumption abroad is typically constrained by
limitations on foreign currency and spending abroad imposed on travellers, and sometimes by travel
restrictions.
36. There are, however, liberalizing trends in a numbe r of countries, mostly with regard to foreign
investment, of which two examples are provided here.  For instance Korea had a permit system which
restricted floor space and the number of stores for foreign investment.  In January 1996 these
restrictions were lifted and the permit system was changed into a notification system (Industrial
Structure Council, 1998).  In Indonesia the law on foreign investment barred entry of foreign firms in
the distribution sector.  By Presidential order, a foreign trading house was only allowed to set uprepresentative office for agency activities and could not conduct sales or marketing.  However, in
January 1996 a deregulation programme was announced, allowing foreign export traders to deal in
any product, and to establish 100 per cent foreign-owned import traders to supply areas like export
processing zones.  Furthermore, since June 1996, foreign manufacturers were allowed to directly
conduct wholesale activities of their own products and to buy complementary products from relatedS/C/W/37
Page 11
companies abroad for wholesale.  Since March 1998, similar liberalization steps were taken in
retailing (Industrial Structure Council, 1998).
Possible questions:
- What are the measures which restrict trade in distribution services?  Are some
measures more frequently employed than others?  Are some modes morefrequently subject to restrictions than others?
- Has there been significant liberalization of trade in distribution services in
recent years?  What are the policy considerations which have caused some
countries to liberalize?  What has been the experience of these countries?
- Are there Members which grant relatively liberal access to foreign natural
persons in the distribution sector?
- Would it be useful to rank measures affecting trade in distribution services in
order to facilitate an exchange of commitments?
Domestic Regulation
37. The distribution sector is also affected by a wide range of other government regulations.
These exist for a variety of reasons, including health and safety, urban planning and environmental
protection, as well as for economic motives.  In many cases, regulations are designed, at least inprinciple, to remedy market imperfections.  However, where regulations are more burdensome than
necessary to achieve the objective in question, they can cause an excessive increase in costs and hence
prices, and unduly reduce consumer choice.  Inefficiencies can arise both because regulations inhibit
existing distributors from making socially optimal choices, as well as because regulations inhibit
competition  - either between existing firms or from new entrants.  The key question in assessing aparticular regulation is whether the stated objectives can be met by policies which have smaller
economic costs.
38. Several types of regulation have received attention, in particular restrictions on large-scale
outlets, shop opening hours, and zoning and planning laws.  Other relevant legislation concerns
vertical restraints, restrictions on pricing and promotion, and labour market legislation.
20 Here we
focus on the legislation on large-scale outlets and competition policy.  It is notable that many of the
regulations that affect the distribution sector are implemented by local governments and
municipalities, who have a powerful influence on the authorization of new stores and the conditions
of operation.21 Distributors are therefore confronted not only with national differences in policy, but
also divergent regional and local attitudes.
Legislation on Large-Scale Outlets
39. Several countries, including Japan, France, Italy, Belgium and Spain, have - or have had until
recently - specific national legislation concerning the establishment of large-scale retail stores.22 In
some of these countries, incumbent retailers are in volved in the implementation of such legislation
                                                     
20 Pilat (1997) provides a comprehensive review;  see also European Commission (1997).
21 See, for instance, European Commission (1997), p. 168.
22 See European Commission (1997), Maruyama (1993), Messerlin (1993), Pellegrini and Cardani
(1993), and Pilat (1997).  The main regulation concerning large stores in Japan is the Large Scale Retail Storelaw (Daiten Ho), first enacted in 1974, in France, the Loi Royer, introduced in 1973, and revised in 1991 (Loi
Dubin) and 1996 (Loi Raffarin),  in Italy, law no. 426, enacted in 1971, in Belgium, the 1975 Business Premises
Act (Loi Cadenas or Second Padlock Law), and in Spain specific legislation enacted in 1996.S/C/W/37
Page 12
and can impede the establishment of large stores.  In many other countries, the establishment of large
stores is controlled in the context of regional or local planning.  These restrictions are based on
several concerns. It is feared that since large stores tend to be situated outside city centres, they could
give rise to urban problems (drawing consumers away from the city centre and potentially threatening
inner cities) and to environmental deterioration by occupying a large area in the countryside and
inducing more people to use cars.  Furthermore, restrictions on large stores are sometimes explicitly
designed to protect small shops from competition, to pursue an employment objective and to ensure
proximity of outlets to individual consumers.
40. Recent analyses at the OECD suggest that restrictions on large outlets have had a significant
impact on density of retail outlets in certain countries leading to a smaller average store size.   It has
also been shown that large stores can reap economies of scale and scope, offering consumers more
variety at lower prices.  Since the efficiency of the distribution system is closely linked to the averagesize of stores, restrictions on large stores may have contributed to low productivity in the distribution
sector.  Furthermore, complex establishment procedures, especially the requirement to obtain
approval from incumbents, are in themselves likely to have deterred entry of both local and foreign
competitors.
23 The resultant market power enjoyed by existing large stores, which control the
relatively scarce assets of location and space, inevitably translates into higher prices and may alsolimit choice.
41. These concerns have led to efforts to reform legislation on large stores in countries like
Japan.
24 The reforms are based on the view that the goals of earlier legislation can be met through
other less distortionary means.  Non-economic goals like urban and environmental protection are
being integrated in local and regional planning.  Furthermore, the employment concerns are beingalleviated by the fact that some modern retail formats tend to be quite labour-intensive.  For instance,
the US distribution sector, among the most advanced in the world, has continued to show rapid
employment growth over the past 15 years.
Possible questions:
- Is the structure of the distribution sector likely to be socially optimal in the
absence of regulation - in terms of the density of outlets (proximity to
consumers), size of outlets (employment effects), location of outlets
(environmental effects), etc.?
- If not, what are the necessary regulatory interventions?
- Are the existing regulations the most efficient means of achieving the
relevant objectives?  How far are the existing regulations an unnecessary
barrier to trade in distribution services?
- Are restrictions on the size of the retail outlets and on opening hours,
measures within the scope of Article XVI or are they only covered by the
disciplines of Article VI?
                                                     
23 The Italian monopoly commission studied the effects of Law 426/71 on competition and argued for
the liberalization of entry rules to the sector, e ssentially by arguing for the abolition of Law 426/71.
24 The few empirical studies of the impact of libera lization of restrictions on large stores are mostly
focused on Japan.  Reform of the LSRS law over the recent years appears to have a significant effect on thecosts of distribution in Japan.  Prices of distribution services are estimated to have fallen by about 2% perannum, contributing to a 0.1 to o.2% fall in the overa ll price level and real income gains to consumers of as
much as $45 billion (or 3/4% of GDP) (OECD, 1995).  The Economic Planning Agency has estimated that the
deregulation of the Large Scale Retail Store law has create annual new demand of 4.7 trillion Yen (1% of GDP)
(EPA, 1996).S/C/W/37
Page 13
Competition Policy
42. Several competition policy-related concerns arise in the distribution sector.  The most
important issue has pertained to the possible anti-competitive consequences of vertical relations
between manufacturers and distributors.  Some have argued that vertical relations (ranging from full
integration to certain vertical controls) serve primarily to improve internal efficiency of the verticalstructure while others have pointed to possible anti-competitive effects from vertical foreclosure, but
the debate has produced few clear conclusions.
25 In the trade context, tensions have arisen because of
the perceived negative effect of vertical relations between domestic manufacturers and distributors on
market access for foreign goods.26
43. In the present context, it is more relevant  to examine whether such relations could have
inhibited entry and competitive conditions in the distribution sector.  The arrangements which have
aroused concern include selective distribution, exclusive dealing, exclusive territories and retail pricemaintenance.  In each case, anticompetitive consequences may be offset by other benefits.  For
instance, although selection of distributors by the manufacturer can create barriers to entry in
distribution, the exercise of quality control over distributors can provide benefits to consumers in
terms of both pre- and post-sales service.  Similarly, exclusive dealing may lead to a loss of returns to
scale at the retail level, but it gives a manufacturer an incentive to provide promotional services for aproduct without fear that the retailer will allow other manufacturers to appropriate the benefits.  Even
the restriction of competition at the retail level implied by exclusive territories and retail price
maintenance may provide benefits when horizontal externalities exist in the provision of pre-sales
services like advertising and demonstrations for the product.  Since a retailer who incurred the costs of
the service would have to charge a higher price th an other retailers who do not, the consumer would
have an incentive to acquire the information from first retailer and buy from the second.  This could
give rise to a public good problem with information to the consumer being undersupplied.
27
44. The impact on conditions of competition in the distribution sector depends on whether andhow competition authorities intervene.  On balance,  competition authorities have tended to adopt a
relatively permissive approach towards non-price based vertical arrangements, especially in the case
                                                     
25 The former views are most strongly associated with the University of Chicago, and an example is
Bork (1978).  Expressions of the latter view are to be found in Ordover, et al. (1990) and Salop (1993).  Most
recent research concludes that the overall economic cons equences of vertical relations are complex.  For
instance, Scherer (1995, p. 30) writes:  "Vertical re straints are recognized by both economists and competition
policy authorities to have both benefits and competition-impeding costs.  It is difficult to draw neat linesbetween those that should be allowed and those that should be prohibited."
26 Claims that Japanese distribution channels are skewed to the disadvantage of imported products have
been a source of chronic tension between the United States and Japan.  On 16 May 1995, the United States
Government announced that it would levy 100 percent tariffs on 13 imported Japanese luxury car models unlessUS manufacturers products gained enhanced access to Japa nese show rooms for finished vehicles and original
vehicles and repair markets for parts.  The dispute was resolved and the tariff threat was withdrawn through lastminute negotiations.   On 18 May 1995, the Eastman Kodak company filed a complaint with the US government
alleging that Fuji and its network of domestic wholesalers and distributors sustained anti-competitive practices
to limit the Japanese market access of Kodak films and print paper.  This issue was the subject of a dispute at theWTO (see Japan - Measures Affecting Consumer Photogra phic Film and paper, Report of the Panel, document
WT/DS44/R of 31 March 1998).
27 Under these circumstances, a manufacturer would have an incentive to impose competition-reducing
restraints like exclusive territories which protect retailers  from unfair competition.  In so far as these restraints
allow retailers to supply valuable information to the consumers, they may lead to an increase in product demand
and be both privately profitable and welfare enhancing.S/C/W/37
Page 14
of consumer durables like cars.28 This has probably dampened intra-brand competition, but may not
have affected inter-brand competition adversely.  The attitude to price-based arrangements has
changed over time.  For instance, in the United St ates, the exemption of retail price maintenance from
anti-trust penalties, was intended to prevent chain stores and discount houses from undercutting
branded good prices specified by manufacturers and charged by smaller retailers.29 However, the
erosion of resale price maintenance, first in practice and then legally, has certainly been a factor
behind the emergence of chain-stores, discount houses and large retail outlets.
Possible questions:
- Do private practices create welfare-reducing barriers to trade in distribution
services?  If so, is there a case for developing certain pro-competitive
regulatory principles of the kind contained in the Reference Paper for basic
telecommunications?
- Or may excessively stringent competition policy norms themselves inhibit the
development of efficient distribution arrangements?
Spillovers from Barriers to Trade in Goods
45. Since distribution services have a close relationship with trade in goods, the trade regime for
goods inevitably has an effect on the distribution sector.  While the liberalization of trade in goods hasfacilitated the growth of trade in distribution services, the persistence of certain barriers to trade in
goods has a negative spillover effect on trade in distribution services.  Restrictions in the form of
complex customs clearance procedures, differences in product standards, burdensome practices for
certification and testing of products are among the non-tariff barriers which adversely affect the
distribution trade.  There is evidence to suggest that technical harmonization and the removal ofbarriers caused by differences in national product regulations and the elimination of border controls
can greatly encourage the internationalization of distribution.
30 Furthermore, just as the increased
protection of intellectual property rights has benefitted retailers and franchisers who rely on
trademarks or brand names, weaknesses in such protection are believed to have had an adverse effect
(USITC, 1997).  It is also the case that where intellectual property rights allow a segmentation ofmarkets through the prevention of parallel imports, trade in goods and hence distribution services may
be affected.  While many of these "spillover" issues are unlikely to fall within the purview of the
GATS, restrictions on trade in goods may nevertheless be relevant to GATS obligations if they affect
trade in distribution services.
31
                                                     
28 For instance, in the European Communities, certain distribution practices in the motor vehicle
industry were excluded from the application of Article 85.1 EEC by an exemption under Article 85.3 EEC.  Theexemption, granted in Commission Regulation (EEC) No. 123/85 expired on 30 June 1995 and was replaced by
Commission Regulation (EC) No. 1475/95 which "contains several adjustments to stimulate competition in the
car sector"  (European Commission, 1995).  The implications of the exemption for trade are discussed in Mattooand Mavroidis (1995).
29 The original exemption in the United States was granted in the 1937 and repealed in 19975 (see
Scherer, 1995).  Similar considerations have arisen in the distribution of books in the United Kingdom.
30 European Commission (1997) provides compellin g evidence from the recent experience of the
European Union.
31 For instance, in a recent dispute (European Communities - Regime for the Importation, Sale and
Distribution of Bananas, Complaint by Mexico, WT/DS27/R/MEX), the question arose of whether measuresregulating the importation of trade in goods could be deemed to be a measure affecting trade in services.  ThePanel concluded that there was no legal basis for an a priori exclusion of measures within the EC banana import
licensing regime from the scope of the GATS.  At the risk of oversimplification, the Panel's ruling in the
services context could be seen as questioning, not the measure restricting imports of goods per se , a tariff quota,S/C/W/37
Page 15
Possible questions:
- Are some barriers to trade in goods more critical to trade in distribution
services than others?  How are these barriers best addressed?
- In what circumstances may the protection of intellectual property rights
benefit/ impede the development of trade in distribution services?  What arethe implications for policy, if any?
V. ANALYSIS OF EXISTING COMMITMENTS
46. How far have the commitments of Members captured the liberalization of trade in distribution
services and how far do the commitments reflect the restrictions still in place?  These questions are
relevant, first, because Members' policies may be more liberal in practice than their commitments and,
secondly, because Members are not obliged, even in sectors included in their schedules, to specify all
the restrictions in place.  In the following discussion, focusing on limitations in Members' schedulesin distribution services, it must be kept in mind that the Members under scrutiny have at least
undertaken commitments in this sector, whereas many other Members have not made commitments at
all.
47. In examining the level of commitments, three distinctions can be made. These are between
full bindings , representing full coverage of the sector and a "none" entry against a particular mode of
supply with respect to both market access and national treatment, denoting the absence of any
limitations;  no bindings , which are designated "unbound" against the relevant mode, with respect to
both market access and national treatment or with respect to market access only;  and the intermediate
case of limited bindings , which refer to those entries which are conditioned in some way by a
limitation.  The limitation may be on coverage (geographical, sectoral, or modal), or in the form of arestrictive measures (which can be one or more of the six types of restrictions listed in Article XVI or
any measure inconsistent with the national treatment obligation in Article XVII).
48. Commitments on at least one sub-sector of distribution services are to be found in the
schedules of 36 WTO Members (Table 6).
32 Most have undertaken commitments on both wholesale
(34) and retail (33) services, and a smaller number on commission agents services (21) andfranchising (23).  Even though many WTO Members have not made commitments in any of these
sectors, Members with commitments account for, on average, around 90 per cent of the GDP of all
Members (Table 7A).
49. Tables 7A and 7B present the results of a numerical analysis of the schedules.  Since there is
little sector-specific variation from the uniformly low level of commitments with respect to mode 4
(the presence of natural persons), the following analysis focuses on the first three modes.
33 There are
significant differences between participating Members in the extent of the binding and therestrictiveness of scheduled commitments.  Fully liberal commitments on all three modes are rare.
Out of the 34 Members who made commitments on w holesales services, only 4 (Burundi, Mongolia,
Panama and Senegal), together accounting for less than 1 per cent of participants' GDP, promised
fully liberal access.  Similarly, only  Burundi and Panama in commission agents services, Burundi in
                                                                                                                                                                    
but rather the manner in which the quota was allocated to national and foreign distributors operating in the EC
market.
32 Since the schedules of Austria, Finland and Sweden have not yet been integrated into that of the
European Community and its Member States, they are counted independently.
33 The commitments on the presence of natural persons are discussed in the section on horizontal
limitations.S/C/W/37
Page 16
retailing, and Panama in franchising have bound fully liberal access with respect to the first three
modes.
50. With respect to cross-border supply and consumption abroad, the largest proportion of liberal
commitments are for franchising services and wholes ale trade.  It is worth noting that commitments
on the first two modes would include the right to offer and sell goods over the internet.34 In the case of
commercial presence, the largest number of fully liberal commitments (5) have been made in
wholesale services.  Unbound entries are relatively  frequent for the first two modes but rare for
commercial presence.
51. In certain respects, Table 7A paints an excessively gloomy picture in consigning a large
number of commitments to the "limited category" (shaded area in Table 7A).  Table 7B takes a closer
look at the nature of limitations.  It emerges that the reason for many commitments being classified as
"limited", even when there are no market access and national treatment limitations, is that Membershave frequently chosen to exclude the distribution of certain types of products from the scope of their
commitments.  There is considerable variation in the scope and type of exclusions, ranging from a
narrow class of products which arouse security concerns to much wider sectoral exclusions (see
Table 8).  The most commonly excluded products belong to the categories of arms, ammunition and
explosives;  pharmaceutical, medical and orthopaedic goods;  agricultural raw materials and liveanimals;  food, beverages and tobacco;  precious metals and motor vehicles.  Furthermore, some
Members have chosen to exclude distribution services at public wholesale markets or commodity
exchange markets, while others have excluded goods subject to import authorization from the scope
of their commitments.
Limitations on Market Access and National Treatment52. Sector-specific measures inconsistent with market access and national treatment have not
been specified for consumption abroad, and only rarely for cross-border supply.  With respect to the
first two modes Members usually enter "none" or "unbound".  Among the few instances of market
access limitations on cross border supply are citizenship requirements;
35 the requirement to have
commercial presence;36 the need for ministerial approval;37 and the need to be in conformity with the
industrial property code to be eligible for royalty payments.38 Some Members have limited the scope
of their cross-border commitments in retailing only to mail-order services.39 The few national
treatment limitations on cross-border supply include registration and licensing for non-residents,
residency requirements, and differential indirect tax treatment for delivery by mail of goods.40
53. The commercial presence mode is rarely unbound,41 but there are many more instances of
limitations being specified than in the case of the first two modes.  The most frequently observed
                                                     
34 For a more detailed discussion, see Bacchetta, et al. (1998).
35 This requirement would seem to imply that this mode can only be used by citizens of the Members
located abroad, and is to be found for wholesale trad ing of amusement machines in Québec, Canada, and for
franchise operations at the retail level in Panama
36 Found in Canada for wholesale trading of amusement machines in Québec, motor vehicles in
Saskatchewan, automobile and salvage dealing in Newfoundland, and for itinerant sellers (Ontario and Québec)and direct sellers (Nova Scotia and British Columbia).
37 In Nova Scotia, Canada, residents require ministerial approval to enter into agreements with non-
residents.
38 This requirement is specified in Brazil's schedu le for cross-border trade in franchising services.
39 Australia, EC and the Slovak Republic.
40 These measures are to be found in Canada's schedule and apply either in specific provinces or at the
country-level.
41 Among members who have made commitments on these sectors, only Mongolia and Senegal have
left market access for commercial presence unbound in retailing, and Bulgaria and Lesotho in franchising.S/C/W/37
Page 17
measure is the requirement of an economic needs test  (3 instances in wholesale trade and 5 instances
in retailing).42 It is applied variously to the whole distribution sector, for particular products
(pharmacies, motor fuel, used cars, clothing, shoes and foodstuffs), for particular types of sales outlets
(department stores or temporary stalls), or for large outlets.  Interestingly, unlike in the case of other
sectors, the criteria for the economic needs test have been specified by several Members.  Theseusually include the adequacy of current levels of service, the effect of new entrants on public
convenience, the number of and impact on existing stores, population density, geographic spread and
impact on traffic conditions.  However, it is not clear to what extent the specification of criteria
reduces administrative discretion and enhances the predictability of the regime.  There is also the
question of how an economic needs test would need to be applied when a Member has undertaken to
provide full national treatment.
43
54. Licensing requirements  have been specified by two Members for specialized wholesale trade
and retailing, and for the establishment of co mpanies for trade in imported goods, respectively.44 It
should be noted that a licensing requirement must be scheduled either if it is used to implement a
quantitative restriction (i.e. a market access restriction within the scope of Article XVI), or if it
discriminates between national and foreign suppliers (i.e. is inconsistent with the national treatment
obligation in Article XVII).  The only instance of explicit numerical quotas  on certain types of stores
was temporary and to be phased out by the beginning of 1996.45 Explicit prohibitions  are rare and for
one Member pertain to a specific product,  and for another to certain types of stores.46 The only
instances of state monopolies are for tobacco and matches.47
55. Investment restrictions  are only to be found in two instances:  in one case it is specified that
trade unions and cooperative stores do not allow foreign investment for certain products, and in theother case that no more than 25 per cent of the shares of a franchisee can be held by the mother
company.
48 Two Members have indicated that there are restrictions on the sales area , in one case at
the national level and in the other at a cantonal level.49 There are only two other types of restrictions,
                                                     
42 In wholesale services, Bulgaria applies an econo mic needs test to the whole sector;  in the ECs
schedule, wholesale pharmacies are authorized in Fran ce according to the needs of the population;  and in the
Republic of Korea, the test applies to wholesale market s and stores above a certain floor size, used cars, gaseous
fuels and foreign trade services.  In retailing, Bulgaria  applies an economic needs test to department stores;
Canada, a public convenience and necessity test for retail sales of motor fuel; in the EC, Belgium, Denmark andItaly, for any new department stores, and France and Portugal, for larger department stores;  in the Republic ofKorea, for retailing services of used cars and gaseous fuels;  and in Sweden, individual municipalities may apply
such a test to temporary trade in clothing, shoes and foodstuffs that are not consumed at the point of sale.
43 It could be argued that if an origin neutral licensing requirement or economic needs test is stipulated
under Article XVI, and a Member has committed to providing national treatment, then entry into the marketmay be limited, but this must be done in a non-discriminatory manner.  That is, foreign suppliers must haveequal competitive opportunities to obtain the limited entry slots.  This, of course, raises the further question ofhow quotas can be allocated in a non-discriminatory fashion.
44 Bulgaria requires licensing for specialized wh olesale trade and retailing, while Poland requires
licensing of establishment for wholesale trade in imported consumer goods.
45 In the Republic of Korea's schedule, such quotas applied to foreign-owned and joint venture retail
outlets of less than a certain size, and were to be phased out by 1 January 1996.
46 In British Columbia, Canada, mobile fish buyers licenses are not issued to foreigners while the
Republic of Korea's schedule states that department stores and shopping centres are prohibited.
47 In the ECs schedule, Spain, France, Italy and Portugal, for wholesale of tobacco, France for
wholesale of matches, and Spain, France and Italy for retailing of tobacco.
48 The former is to be found in Mexico's schedule for the retailing of certain products, and the latter in
the schedule of the Netherlands Antilles.
49 Liechtenstein's schedule specifies that there are re strictions on sales area in both retail and wholesale
trade, while Switzerland's schedule states that some cantons have restrictions on sales area in both these sub-
sectors and for commission agents' services.S/C/W/37
Page 18
both for franchising:  one, the requirement to have a local attorney for service in legal documents and
the other, the requirement to be a citizen to carry out franchise operations at a retail level.50
56. National treatment limitations  are surprisingly rare.  There is only one instance of a measure
inconsistent with national treatment:  the requirement to have 2 years prior residency for managers
and the majority of the board of a company.51
Horizontal Limitations
57. Horizontal limitations impact heavily on commercial presence, but have little effect on the
first two modes (Table 7B). In some instances, how ever, all payments and transfers abroad require
authorization and this may affect trade through all four modes.  The main horizontal restrictions on
commercial presence which impact on the dist ribution sector include approval requirements,
economic needs tests, limitations on the purchase or rental of the estate, restrictions on equity
holdings, residency requirements for directors, and tax and subsidy measures.  Members'commitments on the presence of natural persons are mostly limited to business visitors, and certain
categories of intra-corporate transferees, such as managers, executives and specialists.  Even these
limited commitments are sometimes accompanied by   quotas and invariably by limitations on the
length of stay of foreign nationals.  There are virtually no commitments which would cover relatively
low-skilled staff which make up the bulk of the employment in the retail sector.
MFN Exemptions
58. Only two Members (Liechtenstein and Switzerland) have listed MFN exemptions which
apply specifically to distribution services.  Both reserve the right to grant work permits to employees
of locally established enterprises, engaged in commerce in goods, of member countries of the
Convention establishing the European Free Trade A ssociation (EFTA).  The intended duration of the
exemptions is indefinite and the exemptions have been justified as "flanking measures" to the
provision on free trade in goods under the EFTA Agreement.  It is possible that other, more general
MFN exemptions also have an impact on trade in distribution services.
Possible questions:
- What are the reasons for the frequent exclusion of certain product categories from the
scope of Members' commitments?
- How far have the commitments of Members captured the liberalization of trade in
distribution services?
- How far do the commitments reflect the restrictions still in place?
VI. CONCLUDING ISSUES
59. The distribution sector is of considerable importance in the economy, not only in terms of its
direct contribution to output and employment, but also in terms of its crucial role in domestic andinternational trade.  There is evidence that international trade in distribution services is growing from
previously low levels, due to the liberalization of trade in goods and foreign investment regimes, and
the development of new technologies, especially in telecommunications.  However, there remains
much scope for further liberalization and for improved commitments in distribution services,
                                                     
50 The former is to be found in Canada's schedule (for Alberta) and the latter in Panama's schedule.
51 For retailing services in Norway.S/C/W/37
Page 19
especially with regard to the presence of natural persons.  There is little doubt that the GATS
represents an effective framework of rules to deal with quantitative restrictions and discriminatory
measures.   However, it is less clear that adequate disciplines exist (under Article VI) to deal with
origin-neutral domestic regulations, such as licensing requirements, which are also perceived to
restrict trade in distribution services.  This situation may be due to the fact that quantitativerestrictions and discriminatory measures are easy to identify and target, while other trade-restrictive
measures are more elusive.
Possible questions:
- How much liberalization has been accomplished already?
- How much can be achieved within the existing framework of scheduling
commitments?
- Is there need to clarify the respective scope of Articles VI, XVI and XVII with
respect to measures affecting trade in distribution services?
- What trade-restrictive measures are not adequately addressed by current disciplines?
- In order to further the process of liberalizing trade in distribution services,
how much emphasis needs to be placed on deepening GATS disciplines
dealing with origin-neutral domestic re gulations, i.e. in pursuing the Article
VI: 4 mandate?
VII. OTHER SOURCES OF INFORMATION
60. Some other sources of information are the following:
OECD:  Apart from the work already referred to in the paper, the OECD Trade Directorate
has embarked on a project to identify barriers to trade in services.  The distribution sector isamong the first sectors to be examined.
UNCTAD:  The MAST database contains some information on measures affecting trade in
distribution services for 14 countries.
Two private companies provide data:
Corporate Intelligence on Retailing (www.cior.com), which mainly provides data on
European retailing;
Euromonitor (www.euromonitor.com), which covers global consumer markets and also
provides global statistical publications.S/C/W/37
Page 20
BIBLIOGRAPHY
Bacchetta, M.,  Low, P.,  Mattoo, A., Schuknecht, L.,  Wager, H. and Wehrens, M. (1998), Electronic
Commerce and the Role of the WTO, Special Studies 2, WTO, Geneva.
Betancourt, R.R. (1993), An Analysis of the U.S. Distribution System, OECD Economics Department
Working Paper No. 135, OCDE/GD (93)169, OECD, Paris.
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Page 22
Table 1:  Share of the Distribution Sector in GDP in Selected Countries
CountriesShare of value added in
wholesale & retail trade
in GDP (%)Year CountriesShare of value added
in wholesale & retail
trade in GDP (%)Year
Australia 18 1994 Japan 13 1994
Austria 12 1994 Rep. of Korea 8 1992
Bangladesh 9 1994 Kuwait 8 1992
Belgium 15 1994 Luxembourg 14 1991
Bolivia 8 1992 Netherlands 12 1994
Canada 10 1992 Nigeria 17 1994
Cayman Isl. 15 1991 Norway 9 1991
Colombia 10 1992 Panama 24 1994
Cyprus 10 1994 Peru 10 1994
Czech Rep. 11 1993 Philippines 14 1994
Denmark 11 1994 Poland 9 1993
Ecuador 19 1992 Romania 12 1992
Estonia 16 1994 Seychelles 15 1991
Finland 8 1994 Spain 14 1992
France 12 1994 Sri Lanka 20 1992
Germany 8 1994 Sweden 9 1994
Greece 11 1994 Macedonia 7 1993
Hong Kong, Ch 21 1993 Thailand 16 1994
Hungary 11 1993 Turkey 17 1994
Iceland 9 1993 United States 16 1993
India 11 1994 Uruguay 9 1991
Ireland 9 1993 Venezuela 15 1994
Italy 15 1994
Source:  Compiled by the WTO Secretariat
Note:  Countries included here are those which publish separate statistics for the core distribution services.S/C/W/37
Page 23
Table 2:  Share of, and Growth in, the Distribution Sector in OECD Countries
Country Percentage share of the distribution sector Growth in the distribution sector,
 1979-1994
Employ-
ment in total
GDP, 1993Retailing
employment
in total, 1990Enterprises in
distributive
trades in total,
1990Value-
addedEmployment Labour
productivity
U.S.115.5 11.4 17.9 3.84 1.76 2.04
Japan 18.4 10.4 30.7 4.74 0.58 4.14
Germany 11.3 8.3 28.0 2.22 0.96 1.24
France 13.8 9.3 27.7 1.84 0.18 1.65
Italy219.3 10.3 36.5 2.47 1.46 1.00
U.K.217.1 11.3 27.3 2.53 0.72 1.80
Canada 16.4 10.4 n.a. 2.86 1.51 1.33
Australia220.8 13.1 n.a. 1.94 1.97 -0.02
Austria314.4 7.5 30.5 3.13 1.31 1.80
Belgium215.9 7.3 20.3 0.82 -0.11 0.93
Czech Rep. 16.4 13.6 n.a. n.a. 3.13  n.a.
Denmark 10.8 7.8 19.4 2.20 -0.96 3.19
Finland212.5 6.7 21.3 0.89 -1.10 2.02
Greece415.5 9.3 40.0 1.61 3.15 -1.50
Hungary 12.4 11.5 n.a. n.a. n.a. n.a.
Iceland 11.9 6.4 13.8 n.a. 1.51 n.a.
Ireland 14.3 11.8 30.0 n.a. 1.70 n.a.
Korea422.0 n.a 39.8  7.42 4.50 2.80
Luxembourg 15.9 9.7 29.8 3.46 1.40 2.02
Mexico414.9 n.a. n.a. 1.12 1.28 -0.16
Netherlands 16.2 12.3 26.7 3.42 1.61 1.79
New Zealand 12.4 10.0 n.a. n.a. n.a. n.a.
Norway 13.9 6.0 29.6 n.a. 0.40 n.a.
Poland 16.4 5.2 n.a. n.a. n.a. n.a.
Portugal 13.2 9.8 40.0 1.55 0.42 1.13
Spain1 16.7 11.0 33.3 1.93 1.36  0.56
Sweden 11.9 6.9 24.6 2.79 -0.64 3.45
Switzerland 13.9 10.6 23.4 n.a. n.a. n.a.
Turkey 12.5 4.8 n.a. n.a. n.a. n.a.
1 Distribution and retail trade include restaurants.
2 Distribution GDP includes repair services
3 Includes machinery and equipment rental and leasing
4 Distribution GDP includes restaurants and hotels.
Source:  Pilat (1997).S/C/W/37
Page 24 Table 3A:  Sales of Services to Foreign Persons by  Foreign Affiliates of US Companies, 1995
(millions of dollars)
All
countriesCanada Europe Latin Am.
and other
Western
HemisphereOther countries
Total Of which: Total Of which:
France Germany Nether-
landsSwitzer-
landUnited
KingdomAustralia Japan
Wholesale trade 14,977 746 8,491 741 535 857 774 926 2,071 3,669 658 1,075
Retail trade 1,133 138 761 (D) 251 10 30  100 57 177 (D) 4
Source:  Survey of current Business 1997.
(D) Suppressed to avoid disclosure of data of individual companies.
Table 3B:  Sales of Services to US Persons by  US-based Affiliates of  Foreign Companies, 1995
(millions of dollars)
All
countriesCanada Europe Latin Am.
and other
Western
HemisphereOther countries
Total Of which: Total Of which:
France Germany Nether-
lands Switzer-
landUnited
KingdomAustralia Japan
Wholesale trade 9,364 105 3,202 41 2,339 213 293 249 5 6,051 0 5,885
Retail trade 576 41 207 26 0 41 4 85 48 279 0  125
Source:  Survey of current Business 1997.S/C/W/37
Page 25
Table 4A:  Number of Enterprises in the Wholesal e and Retail Sector in Selected EU Countries
Country Year Total Percentage of Total
National Non-national
Total Intra
EUExtra
EU
Denmark 1994 91274 99.3 0.7 0.5 0.2
Spain1 1992 368730 99.8 0.2 0.1 0.1
France 1994 523668 99.3 0.7 0.5 0.2
Ireland 1994 392 82.7 17.3 12.0 5.3
Italy21994 1897 83.6 16.4 9.9 6.5
Finland 1995 50759 98.8 1.2 0.9 0.3
 Sweden 1995 65086 98.3 1.7 1.0 0.7
United
Kingdom1994 381475 99.3 0.7 0.3 0.4
1 On the basis of first foreign owner rather than ultimate beneficial owner.
2 Includes data for hotels and restaurants.
Source:  Eurostat (1997).
Table 4B:  Number of persons employed in the whol esale and retail sector in  selected EU countries
Country Year Total Percentage of Total
National Non-national
Total Intra
EUExtra
EU
Denmark 1994 405753 89.3 10.7 6.4 4.3
Spain11992 1591758 96.8 3.2 2.7 0.5
France 1994 2870972 92.3 7.7 5.0 2.7
Ireland 1994 55186 74.3 25.7 22.5 3.2
Italy21994 355653 73.8 26.2 16.9 9.3
Netherlands 1994 620236 79.8 20.2 9.7 10.5
Finland31995 100464 81.8 18.2 12.1 6.1
Sweden 1995 406881 88.4 11.6 6.3 5.3
United
Kingdom1994 4027944 91.4 8.6 3.3 5.3
1 On the basis of first foreign owner rather than ultimate beneficial owner.
2 Includes data for hotels and restaurants.
3 Excludes repair services.
Source:  Eurostat (1997).S/C/W/37
Page 26
Table 4C:  Turnover in the Wholesale and Retail Sector in Selected EU Countries
(millions of ECU)
Country Year Total Percentage of Total
National Non-national
Total Intra
EUExtra
EU
Denmark 1994 90781.6 80.9 19.1 9.8 9.3
Spain11992 220037.4 92.5 7.5 6.3 1.2
France 1994 647139.0 87.1 12.9 8.3 4.6
Ireland 1994 12890.9 72.4 27.6 22.6 5.0
Italy21994 110290.2 64.4 35.6 22.4 13.2
Netherlands11994 142504.4 68.4 31.6 10.6 21.0
Finland31995 42179.5 80.0 20.0 11.5 8.5
Sweden 1995 114261.0 79.9 20.1 9.7 10.4
United Kingdom 1994 709000.0 81.3 18.7 5.3 13.5
1 On the basis of first foreign owner rather than ultimate beneficial owner.
2 Includes data for hotels and restaurants.
3 Excludes repair services.
Source:  Eurostat (1997).
Table 4D:  Value-added at factor cost in the wholesale and retail sector in selected EU countries
(millions of ECU)
Country Year Total Percentage of Total
National Non-national
Total Intra
EUExtra
EU
Denmark 1994 21529.0 77.2 22.8 10.7 12.1
Spain11992 34679.0 93.4 6.6 5.3 1.3
France 1994 92617.0 88.5 11.5 7.2 4.3
Ireland 1994 1906.0 66.7 33.3 25.8 7.5
Netherlands11994 20461.3 67.3 32.7 13.1 19.6
Finland21995  5434.4 76.1 23.9 15.3 8.6
Sweden 1995 15416.3 80.3 19.7 10.2 9.5
UnitedKingdom1994 120343.5 92.2 7.8 2.4 5.4
1 On the basis of first foreign owner rather than ultimate beneficial owner.
2 Excludes repair services.
Source:  Eurostat (1997).S/C/W/37
Page 27
Table 5:  The World's Top 20 Retailers, by Sales in 1994
Companies Main type of trade Home country Sales 1994
(billion US
dollars)Annual
average %
change
1988-93
Wal-Mart Discount United States 82.5 26.7
Metro Int. Diversified Germany  55.0 19.1
Tengelmann Supermarket Germany 36.5 8.2
Kmart Discount United States 34.0 5.6
Edeka Zentrale Supermarket Germany 32.4 8.2
Sears, Roebuck Department United States 29.5 0.5
Rewe Zentrale Supermarket Germany 26.3 13.2
Ito-Yokado Diversified Japan 26.01 19.4
Aldi Supermarket Germany 25.0 23.9
Daiei Diversified Japan 24.9 10.5
Carrefour Hypermarket France 24.6 16.0
Kroger Supermarket United States 22.9 3.3.
Leclerc, Centre Hypermarket France 22.5 11.1
Intermarché Supermarket France 21.8 12.0
Dayton Hudson Discount United States 21.3 9.5
J.C. Penny Department United States 20.4 4.2
Ahold (+Stop&Shop) Supermarket The Netherlands 18.9 14.5
American Stores Supermarket United States 18.4 0.3
J. Sainsbury Supermarket United Kingdom 17.5 12.2
Promodès Hypermarket France 17.0 15.6
Karstad Diversified Germany 16.7 n.a.
(1)  1993 figure
Source:  European Commission (1997).S/C/W/37
Page 28
Table 6:  Summary of Specific Commitments in Distribution Services
COUNTRIES 04.A 04.B 04.C 04.D 04.E TOTAL
Argentina X X X 3
Australia X X X X 4
Austria X X X X 4
Brazil X X X 3
Bulgaria X X X X 4
Burundi X X X 3
Canada X X X X X 5
Czech Re public X X X 3
Ecuador X 1
European Community X X X X 4
Finland X X X X 4
Gambia X X X X 4
Hong Kong X 1
Hungary X X X 3
Iceland X X X X X 5
Japan X X X X 4
Korea, Republic of X X X X 4
Kuwait X X X 3
Lesotho X X X 3
Liechtenstein X X X X 4
Mexico X X 2
Mongolia X X 2
New Zealand X X X 3
Norway X X X 3
Panama X X X 3
Peru X X 2
Poland X X 2
Romania X X X 3
Senegal X X 2
Slovak Republic X X X 3
Slovenia X X X X 4
South Africa X X X 3
Sweden X X X 3
Switzerland X X X X 4
Thailand X 1
USA X X X X 4
Total 21 34 33 23 2 113
Legend:
04.A. Commission Agents' Services
04.B. Wholesale Trade Services
04.C. Retailing Services04.D. Franchising04.E. OtherS/C/W/37
Page 29Table 7A:  Numerical Summary of Commitments on Modes 1,2 and 3 in Distribution Services
(Number of Members and % share of GDP)
Sector Members with
commitments
(% share of
GDP of all
Members)Members with
full
commitments
on modes 1, 2
& 3Cross-border supply
(Mode 1)Consumption abroad
(Mode 2)Commercial presence
(Mode 3)
Full Limited Unbound Full Limited Unbound Full Limited Unbound
Commission
agents21
(86%)2
(0.04%)3
(0.04%)14
(97%)3 + 1
(3%)3
(0.04%)16
(98%)1 + 1
(2%)2
(0.04%)19
(99.96%)0
(0%)
Wholesale trade 34
(92%)4
(0.06%)9
(2%)19
(93%)5 + 1
(5%)11
(35%)18
(60%)3 + 1
(5%)5
(0.1%)29
(99.9%)0
(0%)
Retailing 33
(92%)1
(0.004%)6
(2%)19
(92%)7 + 1
(6%)7
(2%)22
(93%)4 + 1
(5%)1
(0.004%)30
(99.98%)1 + 1
(0.02%)
Franchising 23
(89%)1
(0.03%)10
(4%)13
(96%)0
(0%)10
(5%)11
(92%)1  + 1
(3%)1
(0.03%)20
(99.9%)1 + 1
(0.06%)
Note: Full:  complete sectoral coverage, no market access or national treatment limitations;
Limited:  incomplete sectoral coverage or market access/national treatment limitations;Unbound:  both market access and national treatment unbound or market access unbound.
Unless otherwise indicated (as in the second column), percentages for each subsector are calculated as a share of GDP of all Me mbers with commitments in the sector.
Table 7B: Numerical Analysis of the Limitations Maintained by Me mbers in Distribution Services (figures in shaded columns in ab ove table)
(Number of Members and % share of GDP)
Sector Limitations on
sectoral
coverage
applying to
modes 1, 2 & 3Cross-border supply
(Mode 1)Consumption abroad
(Mode 2)Commercial presence
(Mode 3)
Only horizontal
limitationSector-specific limitation Only
horizontal
limitationSector-specific limitation Only
horizontal
limitationSector-specific limitation
MA NT MA NT MA NT
Commission
agents14
(46%)1
(31%)1
(6.8%)0
(0%)2
(2.1%)0
(0%)0
(0%)3
(31%)1
(1.3%)1
(0.7%)
Wholesale trade 23
(98%)0
(0%)3
(38.5%)1
(2.4%)1
(0.05%)1
(29%)0
(0%)7
(3.1%)8
(48.5%)1
(0.05%)
Retailing 24
(98%)1
(0.2%)4
(36%)3
(35%)2
(0.3%)0
(0%)1
(0.6%)7
(2%)8
(21.9%)1
(0.6%)
Franchising 11
(60%)4
(33%)4
(6%)1
(3%)4
(32%)0
(0%)0
(0%)11
(39%)4
(4%)0
(0%)
Note:  Some members have maintained limitations on sectoral coverage as well as horizontal and sector-specific limitations.  Th e figures in the rows do not, therefore, add up to the the number of Members with limitations.
Percentages for each subsector are calculated as a share of GDP of all Members with commitments in the sector.S/C/W/37
Page 30Table 8 :  Products Excluded from Commitments on Wholesale  and Retail Trade
Country Exclusion from Wholesale Trade Exclusion from Retail Trade
Australia Agricultural raw materials and live animals (6221), food, beverages and tobacco
(6222)Motor vehicles (6111), parts and accessories of motor vehicles (6113), motorcycles
and snowmobiles and related parts and accessories (6121), pharmaceutical, medical
and orthopaedic goods (63211)
Austria Pyrotechnical goods, ignitable items and exploding devices , firearms, ammunition and military equipment, tobacco and tob acco products, pharmaceutical products,
medical and surgical devices, toxic substances, certain medical substances and objects for medical use
Brazil Solid, liquid and gaseous fuels and related products (62271) Motor vehicles (6111), parts and accessories of motor vehicle s (6113), motorcycles
and snowmobiles and related parts and accessories (6121)
Bulgaria Tobacco and tobacco products (62213, 62228), alcoholic beverages (part of 62226); pharmaceutical, medical and orthopaed ic goods (part of 6225); weapons,
munitions and military equipment;  precious metals, precious stones and articles thereo f (part of 62265); petroleum and petrole um products
Grain, oilseeds and oleaginous fruits, seeds and animal feed (62211);
intermediate products other than agricultural, waste and scrap and materials for
recycling (6227)
Services supplied at commodity exchange markets operated on a permanent basisBeverages not consumed on the spot (63107)
Canada Agriculture and live animals in 6221;  fisheries products in 62224;  alcoholic
beverages in 62226;  musical scores, audio and video recordings in 62244; and
books, magazines, newspapers, journals, periodicals and other printed matter in62262; and 62251 of pharmaceutical and medical g oods and 62252, surgical and
orthopaedic instruments and devicesLiquor, wine and beer sales in 63107;  music scores, audio and video records and
tapes in 63234;  books, magazines, newspapers and periodicals in 63253; and
pharmaceutical, medial and ort hopaedic goods in 63211 and printed music in
63251
Czech Re public Arms, ammunition, explosives, some chemical products, and drugs and precious metals
EC Arms, chemical products, explosives and precious metals
Motor vehicles (61111)? Pharmaceutical, medical and orthopaedic goods (63211)
Finland Arms, alcoholic beverages and pharmaceutical products
Iceland Arms, alcoholic beverages, tobacco  and pharmaceutical pr oducts
Japan Petroleum, petroleum products, rice, tobacco, salt, alcoholic beverages, and those supplied  at Public Wholesale Market - i.e. a market established under national or
local government approval for commission agents' services and wholesale trade services of fresh foods including vegetables, fru its, marine products, meats and other
daily foods, and flowers, with auction or bidding hall, parking lot and other facilities n ecessary for trade and disposal of above goods, which is operated on a permanent
basis.
Rep. of Korea Firearms, explosives and swords;  works of art and antiques;  and the establishment and operation of, and distribu tion services at the public wholesale markets for
agricultural, fishery and livestock products, which are officially  designated by the local authorities as public wholesale mark ets.
Grain in 62211, raw milk in 62222, meat, poultry and game (62223), red ginseng
and farinaceous products in 62229, and fertilizers in 62276Dairy products and eggs (63102), meat (incl. poultry) and meat products (63103),
bread and flour confectionery (63105), sugar confectionery (63106), beverages not
consumed on the spot  (63107), tobacco products (63108), animal feed, livestockand other animals in 63295
Liechtenstein Goods subject to import authorization, pharm aceutical pr oducts, toxics, explosives, weapons and ammunition, and precious metals
Mexico Petroleum-based fuels, coal, firearms, cartridges and ammunition (622), motor
vehicles (6111), part and accessories of motor vehicles (6113)Sales in specialized establishments of combustible liquid gas, charcoal, coal and
other non-petroleum based fuels, paraffin and fuel, gasoline and diesel, firearms,
cartridges and tractoline ammunition.S/C/W/37
Page 31Country Exclusion from Wholesale Trade Exclusion from Retail Trade
New Zealand Agricultural raw materials and live animals (6221), food, beverages and tobacco
(6222), and such services relating to wool and animal hair (2613 – 2615)Retail sales of motor fuel (613)
Norway Alcohol, arms, pharmaceutical, fish and grain Pharmaceutical products, alcohol and arms
Peru Waste and scrap and materials for recycling (62278), machinery, equipment and
supplies (6228)Non food products (632), motor vehicles (6111), part and accessories of motor
vehicles (6113), motor cycles and snow mobiles and related parts and accessories(6121)
Poland Beverages (62226), tob acco products (62228), pharmaceutical and medical g oods
(62251), surgical and orthopaedic instruments and devices (62252)Beverages not consumed on the spot (63107), tobacco products (63108),
pharmaceutical, medical and orthopaedic goods (63211), motor vehicles (6111),part and accessories of motor vehicles (6113), motor cycles and snow mobiles and
related parts and accessories ( 6121)
Romania Arms, ammunition, explosives, narcotics and medicines cont aining narcotics, tobacco products and paper for cigarettes, a lcohol and spirits
Senegal Motor vehicles (6111), part and accessories of motor vehicles (6113), motor cycles
and snow mobiles and related parts and accessories (6121)
Slovak Rep. Arms, ammunition, explosives, some chemical products and drugs and precious metals
Slovenia Pyrotechnical goods, ignitable articles and blasting de vices, firearms, ammunition and military equipment, toxic substa nces and certain medical substances
Motor vehicles (61111) Pharmaceutical, medical and orthopaedic goods (63211)
Sweden Trade in arms and retail sale of alcoholic beverages and pharmaceutical products
Switzerland Goods subject to import authorization, pharm aceutical pr oducts, toxics,
explosives, weapons and ammunition, and precious metals Goods subject to import authorization, pharmaceutical products, toxics,
explosives, weapons and ammunition, and precious metals
United States Firearms and military equipment Alcoholic beverages, firearms and military equipment
__________