Production on a fee or contract basis
The Chairman asked delegations to address the following issues as outlined in the Chairman’s Note for the meeting: (a) various services, that are supplied to manufacturers, are subject to the GATS and are classified or classifiable under W/120; (b) pure manufacturing should, however, not be classified as services, even if it is carried out on a fee or contract basis; (c) services incidental to manufacturing, such as drilling, should be treated on a case-by-case basis.
He also invited delegations to voice their views on how best to treat this item in the future, that is whether the general debate should continue, or whether it would be better to make a preliminary conclusion at this stage and leave questions on future work to be dealt with on a sector-by-sector basis.
From the joint reading of the CPC and ISIC it emerged that all economic activities, including manufacturing on a fee or contract basis, could be classified as services with the exception of mining and agriculture,
In sum, it would be more appropriate to address the following issues in this debate: (1) Members should consider the possibility that all manufacturing activities may actually be subject to the GATS, if performed on a fee or contract basis; (2) if there are subsidies to certain manufacturing activities, care must be taken, unless those subsidies are listed in the national schedule; (3) if a foreign investment is made in a company producing on a fee or contract basis in the manufacturing sector, relevant GATS provisions and mode 3 commitments can apply; (4) attention must be given to the MFN obligation; this obligation is applied without any commitment in the schedule; (5) tariffs imposed on goods manufactured on a fee or contract basis may restrict the cross-border supply of a service.
Some delegations questioned the view that the CPC approach to “manufacturing on a fee or contract basis” should prevail, arguing that the CPC classification was originally prepared for statistical purposes and that, although it could be used by Members for scheduling commitments, it neither constituted an agreed method of scheduling nor did it have any legal influence on the scope of application of the GATS.
This delegation, however, noted that “services incidental to mining” covered energy related as well as some non-energy related activities and that a possible improvement would be to divide this entry between “services related to the production or extraction of energy products” and “services related to the production or extraction of other products”.
The same delegation proposed that in order to clarify whether international laws with the effect of domestic laws (due to internal ratification) were excluded from the scope of FLCs’ opinions, the following sentence be added to the definition of international law: “International laws include treaties, conventions, protocols and other bilateral or multilateral agreements which have come to have the effect of domestic laws in each individual country”.
The second issue, concerning services related to recycling, prompted two questions: (a) whether recycling could be considered as a service covered by the GATS, or whether it should be considered as an act of manufacturing and, therefore, placed outside the scope of the GATS; and (b) assuming that recycling was a service, whether it should be considered as part of the environmental services sector.
Could these unbundled services be considered "new" services or should "new" services be only those which had been "invented" since the end of the Uruguay Round?
Regarding the proposal that services incidental to manufacturing be dealt with on a case-by-case basis (c), she asked whether different approaches would be developed for different sectors or whether a general approach would be developed from the analysis of various sectors and whether such case-by-case work would take place before or after the request and offer process and by which body.
In addition, such classification should distinguish between “core” energy services, which intervened directly in the energy valueadded chain and services which relate to processes, which are incidental to the valueadded chain.
Measures inconsistent with both Articles XVI and XVII
The Chairman said that his current proposal provided Members with a certain flexibility to make clear whether a limitation inscribed in the market access column was also meant to apply as a national treatment limitation.
Some delegations suggested softening the language in the Chairman’s proposal, by changing “should” into “could” or “are encouraged to” in line 2 and adding the words “for the sake of clarity” after “Members could/are encouraged to indicate” in the same line.
Illustrative list of national treatment restrictions
The Chairman recalled that at the previous meeting the delegation of the United States had proposed to fully delete attachment 1, which contained the illustrative list.
In the interim, the Chairman and the Secretariat had received a useful suggestion from the delegation of Uruguay whereby the list would be retained, provided that the chapeau was expanded by making the following three points very clear: (a) that the measures on the list came from Members' schedules; (b) that the list did not prejudge the position of any Member with regard to the interpretation of Article XVII of the GATS; (c) that the list remained of an illustrative nature and was by no means exhaustive.