WORLD TRADE RESTRICTED S/FIN/M/61 4 March 2010 ORGANIZATION (10-1193) Committee on Trade in

REPORT OF THE MEETING HELD ON 2 AND 9 NOVEMBER 2009

Note by the Secretariat1

1. The Committee on Trade in Financial Services held a meeting on 2 and 9 November 2009, under the Chairmanship of Mr. Sudhir Sooklal (South Africa). The proposed agenda is contained in airgram WTO/AIR/3464.

2. The representative of Ecuador requested its country to be included as co-sponsor of the proposal on "The Financial Crisis and Related Matters" mentioned under item E of the agenda.

3. The agenda was adopted with that addition.

A. ACCEPTANCE OF THE FIFTH PROTOCOL TO THE GENERAL AGREEMENT ON TRADE IN SERVICES EMBODYING THE RESULTS OF THE FINANCIAL SERVICES NEGOTIATIONS

4. The Chairperson recalled that three WTO Members had yet to accept the Fifth Protocol, namely: Brazil, Jamaica, and the Philippines. He informed the Committee that he had received a written communication from the Philippines indicating that there was no significant development to report regarding the domestic procedures for the acceptance of the Fifth Protocol; and that the Executive Branch was working with the Senate to secure Philippine's acceptance as soon as possible. The Chairperson then invited Brazil and Jamaica to provide information on the status of their domestic processes.

5. The representative of Brazil said that the domestic procedures had not been concluded yet.

6. The representative of Jamaica said that, regrettably, he had not received any update from Jamaica's financial regulators as to when the ratification would be finalized. He added that the issue was under consideration and reaffirmed Jamaica's commitment to the ratification of the Protocol.

7. The Chairperson thanked these delegations for their updates, and encouraged the three Members concerned to accelerate their internal procedures for the acceptance of the Protocol, which contained promises made more than 10 years ago.

8. The Committee took note of the statements made and decided to revert to this agenda item at the next meeting.

B. TRANSITIONAL REVIEW UNDER SECTION 18 OF THE PROTOCOL ON THE ACCESSION OF THE PEOPLE'S REPUBLIC OF CHINA

9. The Chairperson recalled that the Committee was mandated to conduct this review pursuant to section 18 of the Protocol on the Accession of the People's Republic of China. For this year's

1 This document has been prepared under the Secretariat's own responsibility and without prejudice to the positions of Members and to their rights and obligations under the WTO.

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review, written communications had been received in advance from the following Members: the European Communities (S/FIN/W/70); Japan (S/FIN/W/71); and the United States (S/FIN/W/72). He also drew Members' attention to the notifications made by the People's Republic of China to the Council for Trade in Services under Article III of the GATS, circulated as documents S/C/N/529 to 534, which contained relevant information regarding trade in financial services.

10. The representative of China addressed first the questions raised by the European Communities, Japan, and the United States on banking services.

11. She said that the introduction of overseas investors in Chinese was still at an initial stage. The 20 per cent cap on equity investment by a single foreign financial institution in a Chinese- funded financial institution reflected a viable policy orientation in light of the level of development of the Chinese banking industry. This requirement afforded both Chinese banks and their foreign stake- holders considerable latitude for further cooperation. Besides, the current financial crisis revealed that there were many imperfections in risk management and operation modes in the global financial system. She reaffirmed that China would not change the 20 per cent equity cap for the time being.

12. Turning to the question raised by the European Communities on the 25 per cent foreign equity investment threshold, she said that this base limit was incorporated in the horizontal section of China's schedule of specific commitments.2 Both Chinese and foreign banks were subject to the same supervision legislation, namely, the Law on Regulation and Supervision of Banking and the Commercial Law. She explained that the regulation of Chinese and foreign-funded banks only varied in some specific measures, the main reason being that, within the WTO framework, foreign- funded banks should comply with China’s specific commitments on the scope of banking services, conditions for market access, and restrictions on national treatment. Meanwhile, China still needed to take some prudential measures that were different from those applicable to Chinese banks in light of the risk features of foreign-funded banks, especially their branches, so as to protect the rights and interests of Chinese depositors and maintain financial stability in China.

13. In response to the question raised by the European Communities about the establishment and monitoring of foreign bank branches, she said that China had removed the geographic restrictions and service target limitations on foreign banks’ operation in RMB business on 11 October 2005, which symbolized the elimination of all non-prudential requirements for foreign banks. She explained that foreign banks were allowed to submit applications for establishing sub-branches simultaneously in several cities, such as Shanghai and Beijing.

14. Regarding the question raised by the European Communities on the treatment of foreign bank branches as separate legal entities (and not as a consolidated network), the representative of China explained that although it relevant regulations required that "where a foreign bank establishes two or more branches in the territory of the People’s Republic of China, the head office or the authorized headquarters shall designate one of these branches as a management branch", in practice, as the branches of various foreign banks were in different development conditions and their head offices gave different authorizations to the branches, most of these branches were relatively independent in carrying out business. The management branch mainly played the role of a "page boy", i.e. taking in charge the tasks of collecting information and reporting to the head office. In addition, legally speaking, the branches established by a foreign bank in the territory of China did not have the obligation of mutual succession in creditors’ rights and debts. Therefore, in order to increase the

2 "On 1 December 2009, the Treaty of Lisbon amending the Treaty on European Union and the Treaty establishing the European Community (done at Lisbon, 13 December 2007) entered into force. On 29 November 2009, the WTO received a Verbal Note (WT/L/779) from the Council of the European Union and the Commission of the European Communities stating that, by virtue of the Treaty of Lisbon, as of 1 December 2009, the European Union replaces and succeeds the European Community."

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branches’ capacity of risk prevention as much as possible, China implemented stricter prudential requirements for these branches, including separate assessment of branches of foreign banks. At the same time, China evaluated and monitored the overall risks of all the branches of a foreign bank in the territory of China. In her view, many other Members took similar or even stricter measures in this area.

15. She then turned to the questions posed by the European Communities and the United States on electronic payments. The Chinese government had never stated that it permitted China Union Pay to monopolize electronic payment transactions. The Chinese service market was open to both foreign and domestic banks. China Union Pay had gained its market share by providing its clients with lower fees and quality services. There was no monopoly in this case. China Union Pay had cooperation ties with international bank card institutions. The Chinese government encouraged mutual opening up on the basis of reciprocal benefits and fair play. She added that, as indicated in previous transitional reviews, China had not made commitments to opening RBM bank cards, and the clearing and settlement market to foreign-funded institutions.

16. Regarding question 10 by the United States, she said that foreign banks had been allowed to provide electronic payment services in China in accordance with its accession commitments. For more details, she drew Members' attention to the Administrative Regulations on Foreign-funded banks and the Circular on Issues Concerning Bank Card Business of Wholly-foreign Owned Bank and Sino- foreign Joint-venture Banks, issued by the China Banking Regulatory Commission (CBRC) in June 2007. At present, bank cards issued by foreign banks in China could be used within the territory of China, while RMB cards and foreign currency cards could also be used outside the territory of China. As per China's market access commitments, foreign banking institutions were able to issue bank cards of their choice, which were necessary for transactions in China, provided that they complied with Chinese laws and regulations as well as industry standards for payment services.

17. She further considered that both the European Communities' and Japan's assertions with regard to the location of data systems were incorrect. As China had expressed at the previous review, there was no "relocation" or "discrimination". In her view, this policy was not inconsistent with China’s commitments. It had always been a consistent bank card policy of the People's Bank of China and other relevant regulatory authorities that bank card data processing systems and core payment systems must be located in China. This requirement was introduced in accordance with the prudential principle, for the purpose of maintaining financial information security, strengthening risk management, and protecting clients’ rights and interests. As Japan noted in its submission, this requirement "is applied equally to both foreign-funded and Chinese banks". Finally, she said she had never heard that, as indicated by Japan in question 8 of its submission, locally-incorporated banks would be required to install and make operational core payment systems by March 2011.

18. In addition, in her view, Japan's questions on RMB retail business (i.e. "whether China intends not to allow consumers to choose in which banks to deposit RMB"), seemed to twist the objective and significance of this policy. WTO rules did not prevent Members to introduce prudential measures. Since a large number of foreign banks operating in China were transnational institutions with global presence, and since their branches in China were not legal entities, China as a host country was unable to monitor, control and isolate the risk from the overseas parent bank with branches in China, and faced difficulties in protecting depositors effectively. In fact, China had such an experience before. In 1991, the Bank of Credit and Commerce International (BCCI) suddenly had gone bankrupt, leading to the unexpected close of its Chinese branch in Shenzhen. In this process, however, neither BCCI nor its branch in Shenzhen had notified any risk alert to the Chinese supervisory authority. This, together with what had happened with Lehman Brothers during the current financial crisis, spoke in favour of this requirement, which was, in her view, necessary and appropriate. If foreign-funded banks wanted to engage in local RMB business, they could choose to conduct a full range of RMB business through their subsidiaries. As stated previously, the aforesaid

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policy aimed at protecting the rights and interests of depositors. She considered that a RMB liquidity crisis, which was a cause of concern for Japan, would be neither caused simply by this factor nor solved by this measure. For instance, improper management or unreasonably high deposit- ratios might be a more direct cause of liquidity crisis. Nevertheless, this transitional review was not the appropriate forum to discuss this issue, and she suggested that the Japanese authorities discussed it with their Chinese counterparts bilaterally.

19. The representative of China turned then to the questions on insurance services. In reply to the questions raised by Japan, the representative of China explained that article 11.2 of the revised Regulation on Administration of Reinsurance Business was still a draft, and it was not possible to indicate a specific date for its entry into force. Contrary to Japan's opinion, the requirements in that draft article did not pose problems to risk management by insurance companies. The purpose of this provision was to better manage the potential risks posed by the reinsurance business.

20. In addition, she explained that according to Article 23 of the said draft Regulation, as long as foreign insurance companies followed the requirements set out in the Implementation Rules for Examining and Approving Reinsurance Transactions between Foreign-capital Insurance Companies and their Associated Companies to process the approval formalities with the China Insurance Regulatory Commission (CIRC) for reinsurance transactions with their affiliated enterprises in the fourth quarter of each year, they were allowed to conduct such business with their affiliates after obtaining such approval. The approval information was transparent and could be obtained from the CIRC's website at www.circ.gov.cn.

21. She further said that the Interim Measures on Administration of the Training of Board Members, Supervisors and Senior Managerial Personnel of Insurance Companies had been issued on, and implemented as of, 15 April 2008. These Measures were promulgated to promote team building among board members, supervisors and senior management, to regulate the behaviour of insurance companies' management personnel, to enhance the sense of risk, innovation and integrity, and to promote the regulated operation of insurance companies. She confirmed that in implementing this measure, the Chinese regulators would conduct research on the reasonable concerns raised by various parties.

22. Turning to the concern raised by Japan that the dissolution of foreign-funded insurance companies was not permitted for a certain period after establishment, the representative of China explained that the conditions of dissolution were different for property and casualty insurance companies and for life insurance companies. She added that interested Members might refer to the following laws and regulations for further information: the Bankruptcy Law of the People's Republic of China, the Insurance Law of the People's Republic of China, the Regulation on Administration of Insurance Companies, and the Regulation on Administration of Foreign-Funded Insurance Companies, together with the detailed implementation rules. These laws and regulations set out clear procedures and requirements for dissolution of insurance companies, and applied equally to both Chinese and foreign-funded insurance companies.

23. Turning to the concerns raised by the European Communities and the United States regarding the approval of branch insurance companies, she explained that China had always granted approval according to its commitments, relevant provisions and procedures, and that the same regulations applied to domestic and foreign-funded companies. The application requirements, materials needed, and approval procedures for applications, as well as the laws and regulations governing the approval of branch insurance companies, could all be found CIRC’s website, and the applicant was able to obtain feedback during the application process. Besides, she added that, while performing its commitments, China was gradually opening and promoting the development of its insurance market. The promulgation of the new insurance law and relevant regulations provided for a healthier and

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better regulated market environment. She suggested Members should contact the relevant Chinese authorities in case of specific problems.

24. In reply to the questions raised by the United States on the operations of China Post Life Insurance, she explained that the company started its operations on 9 September 2009. As an insurance company, it was regulated by CIRC, and not by the State Post Bureau or other authorities, and was subject to the same regulatory requirements as other insurance companies. Its service target market was constituted mainly by farmers and low-income groups in urban and rural areas. China Post, not China Post Life Insurance, had obtained a license for concurrent-business insurance agencies, approved by CIRC. Commercial insurance companies, including foreign-funded insurance companies, were allowed to establish agent relations with China Post by signing an agent agreement. She suggested that interested American companies should get in touch with China Post for any specific business matter.

25. Making reference to the draft Measures on Administration of Equity of Insurance Company, the representative of China said that applying relevant qualification requirements to foreign investors was in compliance with the principle of risk prevention and prudential supervision. At present, the Measures were being subject to the public opinion solicitation process. The competent authority would further study the opinions expressed by various parties.

26. The representative of China said that the management of assets by insurance institutions was subject to the following regulations: Provisional Measures Governing Insurance Asset Management Companies, Provisional Measures for the Administration of Overseas Investment with Insurance Funds, Provisional Measures for the Administration of Bond Investments of Insurance Institutional Investors, Notice on Issues Related to Bond Investment, Notice on Regulating the Stock Investment Business of Insurance Institutions, Notice on Investing the Insurance Funds in the Infrastructure Debt Investment Plans, Notice on the Investment on Equity of Commercial Banks by Insurance Institutions, Notice on the Investment on Subordinated Term Debts of Insurance Companies by Insurance Companies and Insurance Assets Management Companies, and so on. All rules were accessible on the CIRC website. The qualifications required for managing assets of insurance institutions were contained in the Provisional Measures Governing Insurance Asset Management Companies and the Provisional Measures for the Administration of Overseas Investment with Insurance Funds.

27. The representative of China referred then to the questions raised by the United States on "group annuities" and "enterprise annuities" services. In that regard, she denied the existence of a pilot programme for the supply of "group annuities" services. In the case of "enterprise annuities", she said that the existing fund management agencies had been able to meet the operational needs, so no relevant qualification applications would be accepted in the near future. As a qualified practitioner in China, a financial institution, whether foreign-funded or domestically-funded, could submit an application and such application would be accepted equitably, provided the institution met the requirements stipulated in the Interim Measures for the Qualification Accreditation of Enterprise Annuity Fund Management Institutions. She added that the application would be reviewed by experts, and the enterprise obtaining more than half of the votes would be granted the appropriate qualification. However, it was impossible for all applicants to be approved, as mentioned in the submission by the United States. For information on the specific procedures, Members should refer to the Interim Measures.

28. She then said that in accrediting the qualification of enterprise annuities fund management institutions, the Ministry of Human Resources and Social Security (MOHRSS) would discharge its duties strictly in accordance with the provisions of the Administrative Licensing Law of The People's Republic of China. In so doing, the Ministry would solicit opinions from CBRC, CSRC, and CIRC. Contrary to what had been indicated by the United States in its submission, these three agencies had never held up an application. At the same time, China was mindful of its obligations under the WTO.

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29. The representative of China then turned to the questions on securities. She said that her country had not approved new quotas or products since 2008, due to the impact of the financial crisis and other factors. Quota reviews and approvals would return to normal when the international economic and financial situation improved.

30. According to the Trial Measures for the Administration of Overseas Securities Investment by Qualified Domestic Institutional Investors (CSRC Order No. 46, released on 18 June 2007), and other laws and regulations, foreign financial institutions were allowed to provide Qualified Domestic Institutional Investors with investment consulting, asset custody, securities trading and other services. A number of foreign asset management companies, custodian banks, and brokerage firms were already providing Qualified Domestic Institutional Investors with those services.

31. Finally, the representative of China addressed the questions on transparency. She said in that regard that China had faithfully honoured its obligations and commitments on transparency since its accession to the WTO. Prior to the promulgation of trade-related laws regulations or rules, the Chinese government and its subordinated agencies, including CIRC, CBRC, CSRC and MOHRSS, put great emphasis on opinions solicited from all parties by way of public hearings, symposia, internet notices, etc. to ensure transparent policy making.

32. Replying to the last question raised by the United States, she said that since the establishment of capital markets in China, the competent authority had always attached importance to public opinion solicitation on draft laws, regulations and rules. The CSRC had set up a systematic mechanism for public opinion solicitation, and public opinion solicitation had become a general principle of law making. All the CSRC rules must be subject to public opinion solicitation by way of letter inquiries, symposia, feasibility study meetings, and on-spot research and investigation. The process included all interested parties, such as central government agencies, local government, stock exchanges, brokers, securities firms, futures firms, listed companies and investors, both domestic and foreign.

33. Article 72 of the Legislation Law of the People's Republic of China provided that "with regard to a matter that falls within the limits of power of two or more departments under the State Council, the State Council shall be requested to formulate administrative regulations, or the departments concerned under the State Council shall jointly formulate rules." Therefore, for regulations involving other regulatory agencies, CSRC would solicit opinions from relevant departments in the drafting stage, or draft the regulations jointly with relevant departments, then seek comments alone or in conjunction with other departments, and finally co-sign and co-release the regulations. In her view, this showed CSRC’s determination to enhance transparency.

34. The representative of the United States said that it would be helpful to obtain a copy of the Chinese statement since it was not entirely clear that all the questions raised had been answered. He added that he did not have any specific follow-up question, but looked forward to reviewing the detailed response provided by China.

35. The representative of Japan also requested that the responses be provided in writing. As a follow-up, she asked a question regarding the training of senior staff of insurance companies. She took note of China's comments about that matter, but expressed concern about the implementation of those requirements, especially regarding language for training. She asked whether the requirements could be implemented in a flexible manner in the case of foreign-funded companies, taking into account their language constraints.

36. The representative of the European Communities also requested that the statement be distributed in writing. She said that the European Communities were not convinced of the explanations put forward by China, in particular with regard to the plans to lift the limitation on equity investment by a single overseas financial institution in a Chinese-funded financial institutions, and the

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responses to questions contained in paragraphs 6 and 7 of the submission by the European Communities.

37. The representative of China said that her country was not obliged to provide Members with any written responses, but was nonetheless willing to provide a list of the laws and regulations mentioned in her statement. She took note of Japan's concerns, and confirmed that the CIRC would take them into consideration. Any company operating in the territory of China must comply with the relevant administrative regulations of China. Senior management must have a very good understanding of the laws, regulations, and market condition of the country where they were doing business. In her view, that was quite understandable.

38. In response to a clarification requested by the representative of the United States, the Chairperson confirmed that the report of the meeting would contain all statements made.

39. By way of conclusion, the Chairperson invited the Committee to take note of the statements made. Secondly, he requested the Secretariat to prepare a report, to be presented to the Council for Trade in Services. It would be a factual report, stating basically that:

(a) pursuant to section 18 of the Protocol on the Accession of the People's Republic of China, the Committee conducted a review of the implementation by China of the WTO Agreement and of related provisions of the said Protocol, in the meeting held on 2 November 2009;

(b) written communications had been received from three Members, namely the European Communities, Japan, and the United States; and

(c) the details of the discussion, including all the interventions made at the meeting, would be found in the meeting report, to be issued as document S/FIN/M/61.

40. The Committee so decided.

C. DEDICATED DISCUSSION ON ISLAMIC FINANCE

41. The Chairperson recalled that this dedicated discussion on Islamic finance was based on a decision by the Committee on 24 June 2009. As stated in document Job(09)/158, issued under the Chair's responsibility, the purpose of this dedicated session was to build on previous discussions on this topic and to explore and identify the potential trade-related aspects of Islamic finance that might warrant further consideration by the Committee. He drew attention in that regard to document Job(09)/7 and Corrigendum 1, on the basis of which the Committee had started to explore the trade- related aspects of Islamic finance.

42. On the basis of document Job(09)/7, the Chairperson had identified four topics that would constitute the framework for this dedicated discussion:

(a) Market overview. What are the prime markets for Islamic finance? What are the main Islamic financial products available in different jurisdictions? Who are the main suppliers of Islamic finance?

(b) Regulation and supervision of Islamic finance in different jurisdictions. What are the main mechanisms and structures? How do they differ from the regulatory and supervisory arrangements for traditional finance? Are there specific prudential regulatory issues raised by Islamic finance?

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(c) Market access and scheduling issues. Have Members encountered restrictions on the supply of Islamic financial services in other Members? More generally, does Islamic finance raise any particular scheduling issues?

(d) Classification issues. Does Islamic finance raise any particular classification issue?

43. He said his intention was to take up these issues together during the discussion that would follow the initial presentations. He proposed to organize the session as follows. Firstly, the floor would be given to the two guest speakers, Mr. Muhammad bin Ibrahim, Assistant Governor, Bank Negara ; and Mr. Mahmood Shafqat, Senior Joint Director, Banking Policy and Regulations Department, State Bank of . After their presentations, the floor would be offered to delegations. With the aim of making the discussion as interactive and informative as possible, he encouraged all Members to participate, and provide their views on the different topics.

44. After that introduction, the Chairperson invited Mr. Muhammad bin Ibrahim to start off the dedicated discussion.

45. Mr. Muhammad bin Ibrahim said that Islamic finance was introduced in Malaysia in 1983, and had gone through three phases since then. During the first phase (1983-1992), the institutional foundations were laid, including the establishment of the first Islamic bank and company; the enactment of the Islamic Banking Act, the Takaful Act, and the Government Funding Act; as well as the establishment of the Islamic Capital Market. The aim of the second phase, from 1993 to 2000, was to improve competitiveness. Conventional banks were allowed to offer Islamic banking services via "Islamic windows". Other important developments included the establishment of the Islamic Inter-bank money market in 1994, and the formation of Shariah Advisory Councils at Bank Negara Malaysia and at the Securities Commission of Malaysia. In 2001, Islamic finance entered into a process of liberalization and international integration. Three Islamic banking licences were issued to foreign banks, and the existing "Islamic windows" were transformed into Islamic subsidiaries of the banks concerned. Banking products and services could no longer be offered through "Islamic windows". In 2002, Malaysia became the host of the Islamic Financial Services Board (IFSB), responsible for international standard setting in the area of Islamic finance. In 2006, the Malaysia International Islamic Financial Centre (MIFC) was established.

46. He then provided an overview of regulation and supervision of Islamic finance in Malaysia. Malaysia had a dual financial system, with conventional and Islamic finance running in parallel. It was important to ensure that there was no regulatory arbitrage and that both systems remained innovative and competitive. In 2009, section 60 of the new of Malaysia Act gave Bank Negara Malaysia (BNM) the role of developing Malaysia as an international Islamic financial centre. The BNM's Shariah Advisory Council (SAC) was the highest authority for the ascertainment of Islamic law in Islamic financial business. In that regard, section 56(1) of the said law made it clear that the court or arbitrator shall take into account published rulings of the BNM's Shariah Advisory Council and to refer any Sharaih questions to the SAC for rulings. The rulings of SAC were final and binding on Islamic financial institutions, courts or arbitrators.

47. The Islamic banking regulatory framework in Malaysia had distinct features. For example, corporate governance principles were peculiar to Islamic finance, and risk management was based on unique risks, such as Shariah risk, rate of return risk, displaced commercial risk, and equity investment risk. Capital adequacy standards were determined on the basis of risk profiles and exposures determined based on the underlying Shariah contracts. There were separate accounting, clearing, and settlement systems, as well as separate prudential requirements. Malaysia also had a specific Islamic deposit protection insurance scheme.

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48. Malaysia's regulatory standards had been harmonized with international standards issued by the Islamic Financial Services Board (IFSB) in order to ensure regulatory convergence. The main standards issued by the ISFB were the following: Capital Adequacy Standard; Guiding Principles on Risk Management; Guiding Principles on Corporate Governance; Transparency and Market Discipline; Supervisory Review Process; Capital Adequacy Requirements for , Securitisation, and Real Estate Investment; and Guiding Principles on Governance for Islamic Collective Investment Schemes.

49. The Islamic financial industry in Malaysia was diversified, with financial institutions offering a wide range of products and services. The were 17 Islamic banks – 11 domestically-owned and 6 foreign-owned – as well as three international Islamic banks. The Takaful sector (i.e. Islamic insurance sector) was composed of eight takaful operators, three re-takaful suppliers (the equivalent of reinsurance companies), and one international Takaful operator, which was allowed to do Takaful in non-ringgit currency. Additionally, there were eight approved Islamic fund management companies, 35 fund management companies with Islamic mandates, and 144 Islamic unit trust funds. There were more than 100 types of Shariah-compliant products offered by banking institutions.

50. He then turned to the second part of his presentation, focusing on WTO-related matters. Malaysia maintained a level playing field between local and foreign players as regards market entry requirements. In addition, no restrictions were placed on the number of licenses for international Islamic banks (IIBs) and international Takaful operators (ITOs) wishing to conduct Islamic banking business or Takaful in international currencies. The application for IIB and ITO was open to any qualified foreign and Malaysian financial institution which was well capitalized, reputable, had a sound track record, adopted best international practices set by the international standard setting bodies, and was regulated and supervised by a competent home regulatory authority. The current regulatory regime allowed up to 70 per cent foreign equity in existing domestically-owned Islamic banks, subject to a minimum paid up capital of US$1 billion (except for the three International Islamic banks already operating in Malaysia); up to 70 per cent foreign equity in existing Takaful operators; up to 100 per cent foreign equity in IIB, ITO, and retakaful operators; and up to 100 per cent in Islamic mega banks.

51. Additionally, there were no restrictions on the number of branches and on the location of off- site automated teller machines (ATMs) for locally-owned players. The number of branches, as well as the location of off site ATMs of foreign players, was subject to approval by the BNM. The main reason for this requirement was to ensure that banking services offered by foreign financial institutions were also available beyond urban areas, and to encourage the national agenda of financial inclusion. Malaysia also implemented a liberal policy regarding expatriates. No distinction was made between domestically-owned and foreign-owned entities in the application of prudential standards, including minimum capital requirements.

52. He shared some of the lessons learnt from Malaysia's financial sector opening. First, sequencing and managed liberalization was necessary in order to speed up market opening. Second, authorities needed to engage with local stakeholders, giving them ample time to prepare for future competition. Third, it was important to show to policy makers and the relevant stakeholders that the net benefits for market opening were very significant. Finally, foreign institutions wishing to enter the domestic market should be mindful of the national agenda and aspirations.

53. He explained that the new liberalization measures announced in 2009 focused on three areas, namely, issuance of new licences, increases in foreign equity limits, and allowing greater operational flexibility. Two new licences would be issued to mega Islamic banks with minimum paid capital of US$1 billion each, and to new family takaful operators. Many applications had been received by the closing date, in end-October. Foreign equity limits in domestic Islamic banks subject to paid up capital of at least US$1 billion, and in takaful companies, were increased up to 70 per cent. Takaful

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companies were also given greater flexibility to enter into strategic tie-ups with foreign partners, in order to strengthen the resilience and competitiveness of the domestic industry. Greater operational flexibilities were introduced, allowing foreign takaful companies with subsidiaries in Malaysia to establish branches nationwide with no restriction, and to enter into "bancatakaful" arrangements with banking institutions.

54. Turning to scheduling issues, he considered that Islamic finance fell comfortably within the definition of financial services in the GATS, and that the current classification of financial services raised no problems in that regard. However, the supply of Islamic financial services depended on Members' coverage of financial services commitments. Malaysia did not have to adopt a specific classification for Islamic financial services in its agreements outside the WTO. Malaysia took additional commitments under free trade agreements reflecting GATS-plus obligations.

55. With a view to strengthening global inter-linkages, Malaysia signed seven memoranda of understanding (MOUs) with other key financial centres, such as London and Hong Kong, China. The areas covered by these agreements included capacity building and human capital development, information exchange, and harmonisation of standards and documentation for cross-border Islamic financial transactions. Malaysia's efforts to export Islamic financial expertise had manifested in two fronts, namely Sukuk issuance and talent development initiatives. Multilateral financial institutions were allowed to issue Ringgit-denominated sukuk in Malaysia. Also, the investor base had been widened through the issuance of non-Ringgit denominated sukuk, such as the Emas dollar sukuk by Petronas. The International Centre for Education in Islamic Finance (INCEIF) had entered into 46 MOUs with both local and foreign education service providers to further collaboration in Islamic finance education.

56. The Chairperson thanked Mr. bin Ibrahim for his presentation and invited Mr. Mahmood Shafqat, from the State Bank of Pakistan, to make his presentation.

57. Mr. Mahmood Shafqat said that his presentation would provide a global overview of Islamic finance in different jurisdictions and focus on regulatory issues. Islamic finance had been growing at a 30 per cent average annual rate since 2000. According to different sources, the asset base of Islamic finance ranged from US$700 to 1,000 billion, and was estimated to reach US$1,600 billion by 2012. Half of the world's Muslim population – currently 1.4 billion – would opt for Islamic financial products in the near future.

58. Pakistan had developed Islamic banking since 1980. There were three categories of financial institutions: full fledged Islamic banks, commercial banks with Islamic banking subsidiaries, and commercial banks with Islamic banking branches. The liabilities of those branches were separated from the commercial side of the bank.

59. The prime markets for Islamic finance were located in the Middle East (Bahrain, Iran, , , Qatar and Kuwait); South East Asia (Pakistan, ); the far East (Malaysia, , Brunei, and Singapore); Africa (Sudan, Egypt); and Europe (mainly the United Kingdom, but potentially France and Germany). The UK had made a lot progress in order to turn London into a hub for Islamic financial services.

60. Islamic financial products were designed on the basis of different Islamic financial modes. A basic distinction could be drawn between deposit products and financing products. Deposit products could be based on Mudarabah (profit sharing), Wadiah/Qard, and Wakalat ul Istithmar. The Mudarabah-based deposits could be restricted or unrestricted. In the restricted mode, the funds must be invested as determined by the customer, and all the profits and losses from that venture were shared between the depositor and the bank. The unrestricted Mudarabah deposits allowed the banks to invest at their discretion, with profits from those investments being distributed among depositors.

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Under the Wakalat ul Istithmar mode, the bank gathered deposits from customers, and invested them as an agent of the customers, receiving a fee for that service.

61. Financing products took basically two forms: participatory and debt-based. Under the participatory mode, profits from the venture were shared between the bank and the customer. Participatory modes included Mudarabah, Musharaka, diminishing Musharaka, and Musaqat. Diminishing Musharaka was a variant of Musharaka in which the customer and the bank invested jointly in a property or venture, with the customer gradually buying out the share of the bank, and profits being shared between the two. Musaqat was basically based on profit sharing. Debt-based modes included Qard and Wadiah.

62. Trading contracts, which formed the major part of Islamic banks' balance sheets, included mainly Murabahah, , Salam, Istisna’a, Bai Bithaman Ajil, Istijrar, Bai Inah, and Tawaruq. Other modes included Wakalah (or agency agreement), Hawalah (assignment of debt), Kafalah (basically a guarantee), Ujrah /Service Charges, and Rahnu (mostly practiced in Malaysia).

63. These was a basic distinction between Islamic financial services and commercial financial services insofar as in the former the needs of the customer dictated the appropriate financial solution. Additionally, the risks faced by the financial institutions were different as well. In Musharakah, for example, both sides made a joint contribution to the capital of the project, and shared in profits and losses.

64. Islamic financial products were based on the different modes outlined before. For example, current accounts could be organized on the basis of Quard; savings accounts could be offered on the basis of Mudarabah; and term deposits/investment accounts were normally based on Mudarabah. Islamic banks also offered , e.g. trade finance, working capital, or structured finance. Trade finance could be organized, for example, on the basis of Murabahah, Musharaka, or other applicable mode. Islamic banks also offered different solutions for consumer finance, small-and- medium sized enterprises finance, agriculture finance, and microfinance.

65. Islamic insurance, or Takaful, also involved risk-sharing. Takaful companies offered a wide range of products, such as family Takaful (equivalent to life insurance), banca Takaful for customers and/or banks and financial institutions. He explained, for example, that if a bank entered into a Murabahah contract with a customer, the bank had to purchase the commodities in the market, and then re-sell them to the customer at a price agreed by both parties. In the intervening period, between the purchse and the sale to the customer, the bank had to bear all the risks. It might seek coverage of those risks with Takaful companies.

66. Other Takaful products included group Takaful products for companies, health Takaful products, general Takaful products, marine Takaful, and Takaful for micro enterprises.

67. Islamic capital markets comprised two main sectors: Islamic equity and the Sukuk sector. The Islamic equity sector included Shariah-compliant shares, which were an essential reference for Muslim investors. The availability of Shariah-compliant shares led to the introduction of the Islamic equity index, which facilitated the tracking and benchmarking of the performance of listed Shariah- compliant shares. The Islamic capital market was also composed of Islamic tradable securities or , Islamic mutual funds (which could invest in Sukuk, shares or the interbank market), and Islamic Real Estate Investment Trusts (REITs).

68. The main suppliers of Islamic finance were multinational banks (e.g. HSBC, Standard Chartered, Citibank, and UBS); as well as local and international players, such as Kuwait Finance House, Al Rajhi Banking Corporation, Al Baraka Banking Group, Bank Islam Malaysia, Dubai Islamic Bank, Noor Islamic Bank, and CIMB Islamic Bank.

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69. He further noted that the consulting firm Oliver Wyman had analyzed the market potential for products, distinguishing between "core markets", "immediate adjacencies", and "strategic bets". Core markets, such as Saudi Arabia, UAE, Kuwait, Qatar, and Bahrain, were highly penetrated, and benefited from high disposable income. Immediate adjacent markets, such as , India, Pakistan, Egypt, and Indonesia, were populous markets, with lower Islamic banking penetration. Finally, "strategic bets" included countries with medium-sized populations, but where the share of Muslims was high (e.g. Albania, Azerbaijan, Kazakhstan, and Tunisia).

70. The infrastructure for Islamic finance included institutions such as the Islamic Financial Services Board, the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI), the International Islamic (based in Bahrain), the General Council for Islamic Banks and Financial Institutions (CIBAFI), also based in Bahrain, and whose main function is capacity building, the International Islamic Rating Agency (also based in Bahrain), and the Islamic Development Bank (IDB). The IDB was established in 1974, and was composed of three subsidiaries: the Islamic Research and Training Institute, the Islamic Corporation for Development of Private Sector (ICD), and the Islamic Corporation for Insurance of Investment & Export Credit (ICIIEC).

71. The Islamic Financial Services Board was an international standard-setting body for the Islamic banking and finance industry. It had issued the following standards or guidelines so far: Guiding Principles for Risk Management; Capital Adequacy Standards; Guiding Principles on Corporate Governance; Issues in Regulation and Supervision of Takaful; Guidance on Key Elements on Supervisory Review Process; Disclosure to promote Transparency and Market Discipline; Capital Adequacy Ratio (CAR) for Sukuk, Securitisations, and Real Estate Investment, Guiding Principles on Governance for Islamic Collective Investment Schemes; Technical Note on Issues in Strengthening Liquidity Management of IIFS (the development of Islamic money markets); and Guidance Note in Connection with the CAS (recognition of ratings by ECAIs on Shariah-compliant financial instruments). Additionally, the IFSB had issued drafts on Guiding Principles on Governance for Islamic Insurance (Takaful) Operations; Guiding Principles on Shariah Governance Systems; and Conduct of Business for Institutions offering Islamic Financial Services (IIFS).

72. Islamic financial service suppliers had developed an export interest over the years. Examples of internationalization included the Pakistani alBaraka Islamic Bank, and the UAE's Dubail Islamic Bank, which had opened branches or subsidiaries abroad. Some companies, for example, in Bahrain, Dubai, and Pakistan, were also developing software solutions for Islamic financial institutions, which by their nature required specific IT support. Islamic finance training was another area of export interest for countries such as Pakistan. Islamic financial suppliers were also specialized in the issuance of Global Sukuk.

73. The Chairperson thanked Mr. Shafqat for his presentation, and gave the floor to Mr. Muhammad Iqbal Azad (General Manager, Operations Department, International Islamic Trade Finance Corporation), to speak on behalf of the Islamic Development Bank, organization that had been especially invited to attend the discussion.

74. The representative of the Islamic Development Bank said that the institutions had been established in 1974, and had 56 members. The IDB had set up the International Islamic Trade Finance Corporation (ITFC), as the trade financing arm of the IDB, and whose main task was the promotion of regional and international trade. The ITFC, which had started its operations on 8 January 2008, had two divisions: Trade Finance, and Trade Promotion and Development. It had an authorized capital of US$3 billion, and was composed of 55 members (38 countries and 17 banks from member countries). The IDB and the ITFC had a high level of Shariah Board, composed of renowned experts, and which was responsible for examining and ensuring the Shariah compliance of financing products used by IDB. The main Islamic financing products used by the IDB and ITFC

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were the following: Murabahah (purchase and resale contract for the trade operations); Mudarabah (pulling of resources for financing of trade on a profit sharing basis); Istithna (advance payment for manufacturing of capital goods); Ijarah (leasing of equipment and machinery); Musharakah (equity participation); and Sukuk (Islamic bond). In addition to these modes, the ITFC was developing other modes of financing, such as Ja'ala, for the financing of service transactions.

75. Apart from the ITFC, the IDB had a number of affiliates, such as the Islamic Corporation for Insurance and Export Trade (ICIET), the Islamic Corporation for Private Sector Development (ICB), and the Islamic Research and Training Institute (IRTI).

76. After these presentations, the Chairperson opened the floor for discussion.

77. The representative of Australia said that his country was interested in the development of Islamic finance. There had been a number of joint initiatives by government, industry and academia with a view to developing Islamic Finance, including the establishment of a masters programme on Islamic banking and finance by one of Australia's universities. He said that the Australian government was committed to an open and competitive financial system, and to a socially inclusive environment for all Australians. The Islamic finance industry in Australia had the potential to make a very positive contribution in achieving both objectives. Although Australia did not have a large Muslim population – some 400,000 at the moment – its geographical position presented an important window into the Islamic finance sector. There were therefore trading opportunities in this area for Australia. Last year, the Australian government had established a forum in order to promote the Australian financial services sector internationally, and Islamic finance had been raised as an area with increasing potential.

78. As had been outlined in the previous presentations, Islamic finance raised specific regulatory and taxation issues. Australia welcomed the discussion of these issues at the Committee. In his view, Australia's regulatory framework was flexible enough to facilitate Islamic finance. He agreed with the opinion that there was no need to make any changes to the current classification and scheduling practices. In concluding, he asked what role the Shariah councils or boards had, and how they were composed.

79. The representative of the United States said that Islamic financial products could be offered in her country within its financial structures and laws. A number of companies in the US were already offering Islamic financial products, such home financing, trust funds, lease purchase, joint venture business finance, and trade finance. She asked the presenters whether they had information about the relative rates of return on capital of Islamic Institutions and conventional institutions offering comparable products in Malaysia and Pakistan.

80. The representative of Turkey said that, according to Turkish Banking Law, the financial institutions supplying Islamic banking services were classified as banks, and called "participation banks". In other words, all banking services, including the Islamic and the traditional ones, were subject to the same legislation. Like traditional banks, "participation banks" were allowed to supply financial services by establishing in Turkey, provided they obtained a license and permission to be called "participation bank" from the banking and finance supervision agency. After establishment, and with a separate license, they could also open up branches and representative offices abroad. "Participation banking" was based on Islamic banking, and was therefore different from conventional banking. Unlike conventional banks, which had deposits on the liability side of their balance sheets, "participation banks" had "participation funds" as liabilities. The asset side of the balance sheets was composed of in both cases. The main difference between the two types of banks was that "participation banks" collected funds and lent them under Islamic rules, and did not perform forbidden activities and transactions. From a supervisory perspective, from the licensing stage through to liquidation, no difference was made between participation and conventional banks.

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81. She further explained four "participation banks" were operating in Turkey, with total assets amounting to 4 per cent of banking sector's assets. She added that the share of foreign capital in three of these "participation banks" was over 50 per cent. She finally considered that Islamic financial services fell within the classification of financial services contained in both the Annex and document MTN.GNS/W/120, and that there was no need to schedule these services separately.

82. Replying to the questions raised, Mr. bin Ibrahim said that the Shariah Advisory Council was the highest authority to interpret the Shariah, and was responsible for deciding whether a particular product proposed by a Islamic financial institution was consistent with Shariah principles. He explained that Malaysia had a two-tier structure: there were Shariah Advisory Committees in each financial institution (e.g. banks, takaful companies, and stock broking companies), and a Shariah Advisory Council at the Central Bank, which acted as an arbitrator, issuing final rulings and fatwa in case of doubts about Shariah interpretation at the Committee – second tier – level. The Shariah Council and Committees were composed of scholars and industry participants. Turning to another question, he said that the return on equity of Islamic banking institutions did not differ much from that of other banking institutions. In Malaysia, the return on equity ranged from 20 to 30 per cent.

83. Mr. Shafqat said that Pakistan also had a two-tier structure. There was a Shariah Board at the State Bank of Pakistan, which was composed of at least five individuals – two Shariah scholars, one expert in accounting and financial matters, one legal expert, a representative of banks, and a representative of the State Bank of Pakistan. In addition, Islamic financial institutions had Shariah advisors, which were appointed by banks after obtaining clearance from the State Bank of Pakistan. In other jurisdictions only the Islamic financial institutions had their own Shariah Boards, but not the Central Banks. Return on capital was almost similar for Islamic and non-Islamic banks.

84. The representative of Brazil asked what relationship the Islamic Financial Services Board (IFSB) had with other international standard-setting organization, such as the Basel Committee on Banking Supervision (BCBS) and the International Organization of Securities Commissions (IOSCO).

85. The representative of Korea said that Islamic finance had grown significantly over the last years and was expected to reach more than US$1 trillion in total assets by the end of 2010. Many financial service companies in Korea had expressed interest in using Islamic finance instruments, such as Sukuk. The Korean government had set up a task force to review the standards and regulations applicable to Islamic finance. As part of that review, Korea had hosted various seminars and workshops on Islamic finance. An International Conference on Islamic Finance would be held in Seoul on 19 November, with a view to further reviewing the experience of other jurisdictions, such as Malaysia, and the state of Islamic financial products and structures worldwide. Korea's objective was to expand financial transactions with Islamic countries through the use of Islamic finance.

86. The representative of Egypt said that, although Islamic finance had been introduced in his country 30 years ago, there were only two Islamic banks in Egypt at the moment, namely Faisal Islamic Bank of Egypt and the Egyptian Saudi Finance Bank. In addition, conventional banks had established Islamic outlets in response to the increasing demand for these services. Islamic banking was subject to the same supervisory and regulatory regime applicable to conventional banks, albeit with slight modifications to take account of specific features of Islamic banking activities and products. There was therefore only one banking law applicable to both Islamic and conventional banks. He further explained that Egypt did not have specific market access limitations on Islamic banking. Egypt's specific commitments on financial services applied to conventional and Islamic banking activities. Turning to classification issues, he considered that Islamic financial services fell within the classification contained in both the Annex on Financial Services and document MTN.GNS/W/120, and hence there was no need to amend the current classification. In his view, Members should specify in their schedules of commitments the types of activities that were

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liberalized, and not the type of institutions allowed to provide these activities, unless some types of institutions were not allowed.

87. The representative of China asked two questions. He first inquired about the reasons behind Malaysia's decision to request foreign financial institutions to convert the Islamic windows into subsidiaries. Secondly, he wondered how and what type of firewalls were erected between Islamic and non-Islamic financial services provided by the same institutions in order to avoid arbitrage.

88. Replying to the questions raised, Mr. bin Ibrahim said standards issued by the IFSB and other international standard-setting bodies covered similar grounds (e.g. risk management, governance, transparency, supervisory review). There were, however, differences related to the specific nature of Islamic finance. He cited as an example the IFSB guiding principles on governance for Islamic Collective Investment Scheme. Those guidelines established several principles related to Shariah- related governance. Capital requirements needed to be adapted to the types of financial products. Transparency and disclosure requirements were also more stringent in the IFSB guidelines to take account information asymmetry between the depositor, who invested money, and Islamic banks.

89. Turning to another question, he said that banks were requested to convert their Islamic windows into subsidiaries in order to facilitate regulation and supervision, and in light of the size reached by the Islamic finance business in the last ten years. Subsidiary structures made it easier for the regulator to enforce capital- and other governance requirements. In other words, subsidiaries were easier to supervise and regulate than Islamic windows.

90. Mr. Shafqat explained that the IFSB kept regular contact with the BCBS and IOSCO, the main objective being to complement the standards and guidance issued by the latter to take account of the specific features of Islamic finance.

91. Referring to the issue of "firewalls" between Islamic business and conventional business, he explained that Pakistan had introduced the concept of dedicated Islamic banking branch. These branches were obliged to segregate their business from the , keeping separate balance sheets. Deposits made by Islamic depositors could not be used by the commercial side of the bank, but had to be used in a Shariah-compliant manner by the Islamic banking branches. These branches were also required to appoint a Shariah advisor to ensure that their structures and products were Shariah-compliant. In case of dispute between the bank's Shariah advisor and the State Bank of Pakistan's Shariah Board, the latter's decision prevailed.

92. The representative of the European Communities said that the EC was open to Islamic finance. As pointed out in the presentations, one of the main financial centres for Islamic finance was indeed located in Europe. She also confirmed the EC's view that the definitions in the Annex on Financial Services and in document MTN.GNS/W/120 were sufficient to include all aspects of Islamic finance, and that no additional classification was required.

93. The representative of Switzerland said that Islamic finance was also growing in his country. Swiss banks were active in the Islamic financial market in Switzerland, particularly in the area of asset management. Geneva was also host to one full-fledged Islamic bank. The existing supervisory and regulatory framework in Switzerland provided for an open access for all kinds of Islamic financial services and service suppliers. He was of the view that the classification contained in the Annex on Financial Services was comprehensive enough to encompass Islamic financial services.

94. The representative of Japan said that there was growing interest in Islamic finance in his country. On 11 November, for example, Japan would host an Islamic Finance Symposium, with the participation of more than 340 experts and practitioners in this field.

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95. In closing the discussion, the Chairperson thanked the delegations of Malaysia and Pakistan for having volunteered to contribute such distinguished guest speakers to this dedicated discussion. In his view, the exchange had been very useful, allowing Members to improve their understanding of Islamic finance, and providing answers to many of the issues that had emerged in the Committee's previous discussions on this topic.

96. The Committee took note of the statements made.

D. TECHNICAL ISSUES

97. The Chairperson said that there were two proposals to consider under this agenda item – one from the United States on non-life insurance services, and another one from Pakistan on e-finance.

98. Before turning to these proposals and the next agenda item, the Chairperson informed Members that, as concluded at the previous meeting, he had conducted informal consultations with interested Members on these two proposals and on the proposal made by Argentina, Ecuador, India, and South Africa under the following agenda item, in order to refine the content and organization of the work envisaged. Unfortunately, it had not been possible to reach a consensus on the proposals submitted by the United States, and by Argentina, Ecuador, India, and South Africa.

99. In his view, the topics raised in all proposals were relevant and timely, and would constitute a very good basis for work in the Committee. They covered issues that were in accordance with the mandate of the Committee and required therefore serious consideration. He expressed his hope that all delegations would show the necessary flexibility to allow the Committee to make progress in the consideration of these topics in the interest of all Members.

100. Having said that, he turned to the proposal by the United States to carry out an information exchange program on trade in non-life insurance services. He reminded Members that at the end of the June meeting of the Committee, the United States had agreed to revise its original proposal with a view to taking on board the comments and suggestions made by Members. The revised proposal had been circulated as a room document on 29 September 2009, and considered by Members for the first time at the meeting held in October. In his view, the revised proposal was an improvement, and constituted a good basis for the organization of such an information exchange.

101. The representative of the United States recalled that he had given an overview of the revised proposal at the previous meeting, when some delegations had said that they needed more time to consider it. He asked for those delegations' views.

102. The representative of Chile noted that the revised proposal reflected the concerns and observations made by various delegations with regard to the first version. He supported the revised proposal.

103. The representative of India said his authorities were still considering the proposal. On a preliminary basis though, he remarked that the proposal had implications for market access and was – in their view – uncomfortably close to market access issues. Discussing non-life insurance issues, even for the purposes of exchanging information, would have a bearing on the negotiations. He had not a definite view to provide on the proposal – since domestic consultations were still ongoing – but reiterated this preliminary impression which made his delegation feel uncomfortable.

104. The representative of South Africa said that the revised proposal was an improvement over the original one, thought he had still reservations about the market access side. Having said that, his main concern was to keep a balance in terms of presentations and views. He reserved his right to come back with a definite position at a later stage.

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105. The representative of the United States said that in her view the revised proposal moved away from a focus on market access issues, and hoped that a satisfactory solution could be found in the coming weeks.

106. The Chairperson said that it was clear that further consultations were needed on this proposal.

107. The Committee took note of the statements made and decided to revert to this proposal at the next meeting.

108. The Chairperson turned to the proposal made by Pakistan, entitled "Impact of technological developments on regulatory and compliance aspects of banking and other financial services under GATS" (document Job(09)/107). He recalled that while many delegations supported the ideas put forward by Pakistan, others had expressed the need for more time to review them.

109. The representative of Pakistan said that, unfortunately, he had not obtained further replies from his authorities to the concerns raised by some delegations at the previous meeting. He promised to address those issues at the next meeting, and welcomed any further observations, comments or questions that Members might have on the proposal.

110. The representative of Thailand said that e-banking was a means of supplying services and not a new service. Technological developments had simply facilitated the supply of financial services. Examples raised in the Pakistan's proposal, such as paragraph 2a), b) and c), had generally been well captured by the current regulatory and supervisory framework. The question could be raised, therefore, as to whether such technological developments would prove a real challenge to current regulatory frameworks.

111. The representative of Chinese Taipei said that e-banking was fundamental to the development of e-commerce. According to the assessment of Chinese Taipei's financial service suppliers, the cost of a transaction in a physical bank branch could be 40 times higher than the costs of an e-banking transaction. Therefore, although the benefits arising from e-banking might be high, risks involved might be high as well. A challenge faced by regulators was to protect consumers participating in e- banking transactions. Chinese Taipei's regulators divided e-banking transactions into different categories depending on the level of risk involved. Given these regulatory challenges, an in-depth discussion and information-sharing exercise could be useful to enhance Members awareness of these issues. He supported the idea of having a dedicated discussion on this topic. However, there did not seem to be a pressing need to modify the current classification of financial services. It would be useful, thus, if Pakistan could provide concrete examples calling for a modification.

112. The representative of the European Communities reiterated her delegation's support for the proposal in principle, and looked forward to engaging in the discussion. Nevertheless, she requested Pakistan to further elaborate on the specific elements of the proposal, and suggested that the Committee follow developments in the recently resumed work programme on e-commerce under the General Council's aegis, in order to avoid duplication of work.

113. The representative of Chile said his delegation supported the discussion proposed by Pakistan. Adding to what had been said by the representative of the European Communities, he considered that this Committee had an important role to play in the reinvigoration of the work programme on e- commerce.

114. The representative of India said his delegation supported the proposal by Pakistan, including the drafting of a background Note by the Secretariat. He saw no problem in discussing classification issues, but cautioned that it might not be possible to amend the classification – if necessary – in a timely manner.

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115. The representative of Canada said that the proposal by Pakistan raised some very important questions about how regulation might be affected by technological change, particularly in a cross- border context. Referring to the proposal to task the Secretariat with writing a background Note, she asked Pakistan what data would be used for developing such a factual paper. Turning to the proposal to discuss classification issues, she expressed doubts as to whether there was a real need to amend the current classification of financial services. In Canada's perspective, it was not clear that a modification was actually necessary, given that the issue at hand was the means of delivering particular services, and not whether a particular activity in itself was different or new. It would be useful in that regard if Pakistan could provide specific examples of service activities to consider.

116. The representative of Brazil said that Pakistan's proposal was timely and pertinent. He drew Members' attention in that regard to a submission made by Brazil in June 2005 (JOB(05)/103), which partially addressed this issue. He suggested that, in pursuing this discussion, the Committee invited representatives from IOSCO and the Basel Committee on Banking Supervision in order to take advantage of their expertise and experience in this field. Finally, he stressed that the work in this Committee should focus on the implications of technology for trade in financial services, in order to avoid overlapping with the work carried out in those international standard-setting bodies.

117. The representative of Pakistan took note of the issues raised and comments made by Members, and said he would provide detailed answers at the next meeting.

118. The Chairperson said that Members had a very interesting discussion on the proposals submitted by Pakistan and the United States, which would contribute to the work of the Committee. He also encouraged other Members to submit proposals or raise issues for discussion at the Committee.

119. The Committee took note of the statements made and decided to revert to these proposals at the next meeting.

E. RECENT DEVELOPMENTS IN FINANCIAL SERVICES TRADE

120. The Chairperson said there was one proposal under this agenda item, entitled "Revised Discussion document by Argentina, Ecuador, India, and South Africa on the financial crisis and related matters". This proposal had been circulated as a room document on 3 November 2009.

121. The representative of Argentina said that Argentina, India, South Africa had tabled an initial proposal on 17 September 2009 on the implications of the financial crisis for trade in financial services. This document had been discussed in detail at the informal meeting of the Committee on 23 September, when Members had made comments and suggestions. The proponents had responded to many of those questions at the formal meeting held on 8 October. While the steps envisaged in the proposal were welcomed by many Members, others suggested that their questions should be addressed in writing as well. Consequently, on 26 October, the proponents had circulated another room document, including those clarifications and suggested steps. During the informal consultations held on 30 October, many Members welcomed those clarifications in writing. However, there was a request to submit a revised proposal. The document circulated on 3 November was a response to that request. He clarified that the previous room document remained valid.

122. He then referred to some of the issues raised in the new room document. Firstly, any wording suggesting that the work envisaged could lead to a legal analysis of measures by Members, or their consistency with GATS, had been deleted. Secondly, more detail was provided regarding the three suggested steps, together with the original steps. There were no changes in essence concerning these steps. He clarified that the proposal was without prejudice to Members' position in the Doha Round of multilateral negotiations and to the rights and obligations of Members in the WTO. The new paper

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also clarified that the analysis would be a non-attributable one, and that no individual Member would be named.

123. The representative of the European Communities said her delegation was still unclear about the purpose of the suggested steps. The financial crisis might have originated in the financial sector, but it had affected the global economy. Consequently, the measures taken by Members in response to the crisis also expanded to the entire economy. That was the reason why the EC was unsure as to why the exercise suggested by the proponents should take place within the framework of this Committee. In her view, the proposal was not so much about the origins of the crisis, but about the response to it. And such a response was not restricted to financial service providers, but horizontal. Therefore, any analysis should be done in a body dealing with trade in a horizontal manner, such as the Trade Policy Review Body (TPRB). This had been the EC's position since the beginning of this discussion, and there was nothing new in the revised proposal that would call for a reconsideration.

124. Phase 2 of the proposal included the suggestion that the Secretariat eventually determine whether measures taken by Members were trade distorting. In the EC's view, that was not the job of the Secretariat. If the proponents considered that measures taken by any Member had caused a distortion to trade in financial services, then they had to produce evidence to this effect. It was up to Members to provide this evidence, and not for the Secretariat. Even if a discussion among Members on a particular measure was necessary, the Committee was not the appropriate forum. Rather, such discussions should take place bilaterally or, if subsidies were concerned, in the Working Party on GATS Rules (WPGR). The EC had fundamental concerns about the aims of this proposal in general, and could not agree to the steps set out in the revised proposal.

125. The representative of South Africa associated himself with the views expressed by the representative of Argentina. The proposal had been significantly amended from its original version in an effort to accommodate as many views as possible. It was important that Members moved together in unison, with a view to better understanding the impact of the financial crisis on trade in financial services. South Africa's concerns related to how developing countries were being impacted by the global economic crisis. Specifically, his delegation was concerned about how the various stimulus measures in the largest economies were affecting the real economies of developing countries such as South Africa. Together with Argentina and India, his delegation had tabled this proposal in writing to the Committee in September 2009, outlining concrete steps in terms of research that seemed warranted. Based on the feedback and questions received from Members, the three delegations had provided written answers and, more importantly, amended the proposal to take account of the concerns raised.

126. He explained that South Africa was one of the countries actively and constructively engaged in multilateral efforts to tackle the crisis, for example, by proposing (in various sub-committees of the G20, and along with other developing countries) that unsecured credit derivative transactions be subject to regulatory scrutiny. He recognised the valuable work that various international organizations were carrying out in order to devise a sustainable, effective and stronger international monetary and financial regulatory framework. He also believed that the WTO, and this Committee in particular, had a specific role to play in that regard. South Africa, unlike some developed countries with vast resources, did not have the luxury of financial support programmes such as bail-outs and stimulus packages. Instead, it relied on the rules-based multilateral system to level the playing field and to produce credible global rules in international financial governance and trade in financial services. The globalisation of trade in financial services demanded global action in different multilateral fora that examined the crisis from different angles consistent with their mandates.

127. He then turned to some of the comments made on the proposal. It had been asserted that the work called for in the proposal was beyond the expertise of the Secretariat. He recalled in that regard that this was the same Secretariat that had recently completed major reports on Trade and

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Environment, and Trade and Employment, with UNEP and the ILO, respectively. The proposal made it very clear that, in conducting its analysis, the WTO Secretariat would draw on the expertise and research of the relevant international organisations. Consequently, it was difficult for South Africa to accept that research on the implications of the financial crisis on trade in financial services was beyond the capability of the Secretariat.

128. Another assertion was that Members did not need the WTO to inform them of the research conducted by other multilateral organizations on the economic crisis. This was also difficult to accept. Since the launch of the Doha Round, there had been several events at the WTO and other fora where representatives from the business sector, research organizations and the Bretton Woods institutions made presentations extolling the effects of further liberalization in the financial sector, and how these would benefit developing countries. That practice had been actively supported and encouraged by the very same Members who were now arguing that they did not need the WTO to tell them about research being done by other organizations.

129. Another claim that had to be rejected was that the exercise proposed led to a duplication of resources. His delegation viewed this exercise as an integral part of the work of the Secretariat, to address systemic challenges that had been presented to Members by the global financial crisis. As the representative of Argentina said, the purpose was not to "finger point" or to undertake a legal consistency analysis. Rather, what was envisaged was an economic examination of the extent to which trade in financial services was affected by financial support programmes. Further, this exercise must be seen in the context of the GATS and the obligations thereof, which had been accepted by all Members.

130. He recognised that, while this Committee had historically not dealt with issues related to market access negotiations in financial services, no indication had been given that the "demandeurs" would moderate their market access demands. In his view, such moderation would take account of the dramatic changes that had taken place in the sector since the DDA had commenced. He saw an imbalance in that regard: on the one hand, continued aggressive market access demands were made in the midst of a crisis, while, on the other hand, some Members appeared to have little appetite to engage in efforts that would help the whole Membership understand the extent to which trade in financial services was being affected by financial support programmes. Market access demands continued to be aggressively advanced without due regard for the regulatory reforms undertaken as a starting point. In concluding, he said that the three steps called for in the proposal were simple and clear. They were meant to throw light on some of the most important challenges that all Members were confronted with, either directly or indirectly.

131. The representative of Brazil said that, as expressed on previous occasions, the Committee should not refrain from analysing the impacts of the current crisis on trade in financial services, notwithstanding the systemic importance of some recent governmental measures to diminish its effects. Members should assess to which extent trade in financial services had been effected by the measures taken. In his view, the scope of this joint proposal fell within the Committee's mandate. It was his understanding that the revision incorporated the great majority of concerns raised by Members. The proposal was balanced and had an appropriate scope. Besides, the proposal already took account of the work undertaken by other WTO bodies. This avoided duplication, and added value by focusing on trade in financial services. He shared the view that the proposed work should maintain a broad and systemic perspective, rather than starting a finger pointing exercise.

132. The representative of Chile said that the revised proposal had incorporated most of the concerns expressed by Members on previous occasions. His delegation supported this initiative, since Committee had a responsibility in this area. He then addressed the criticisms advanced by some Members with regard to the proposal. The point had been made by the representative of the EC that the objectives were not clear. In his view, the objectives in the revised paper were sufficiently clear.

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It had also been said that, in order not to duplicate work, this discussion should remain within the TPRB. He reminded Members that in TPRB meetings, the EC had stated that the effects of measures should be considered in the relevant WTO subsidiary bodies. And this was exactly what the proposal was aiming at – to analyse these measures as they affected trade in financial services, and in light of the GATS.

133. In his view, the counter-arguments put forward by some Members were somewhat weak. This led him to think that other reasons were motivating the delegations concerned. The two phases proposed in the proposal were interesting. The first phase was further divided into three different steps. He saw no valid reasons for the Committee not to develop those steps, including the organization of a sort of seminar to discuss the measures taken to face the financial crisis, a Note by the Secretariat explaining the provisions of the GATS that were of particular relevance to financial services, and a literature review by the Secretariat describing the analyses carried out by other organizations on different aspects of the response to the crisis. He reminded Members that his delegation had previously expressed some concerns regarding the scope of the activities envisaged in phase two of the proposal, as originally drafted. However, these concerns had been taken care of to a great extent by the reassurance provided by the proponents that the examination would be of a non- attributable nature, and would look not only at the negative effects of these measures, but also at the positive effects on the financial sector and the economy as a whole. In his view, the Committee was the competent body to carry out such work.

134. The representative of Japan said that his delegation was ready to go ahead with the initial steps outlined in the so-called phase one. However, his delegation had some reservations on paragraph 11(e), which might lead to some overlap with the work of other international organizations. He suggested that the proponents refocus only on phase one, to avoid giving the impression that there were two consecutive phases, which had caused concern among some Members.

135. The representative of the United States continued to have serious reservations about many of the elements in this proposal. The US was sympathetic to the effects of the financial crisis on developing Members, and was willing to discuss bilaterally any specific measures that might have adversely affected financial services in other Members' domestic markets. However, it was impossible to distinguish the effects of measures in the financial sector from the effects of other – fiscal – measures. As pointed out by Chile, under the agenda item on recent developments, Members could elaborate on their specific experience regarding the effects of the crisis and related mitigation efforts, rather than task the Secretariat to do an examination. Members could start sharing their experiences at the next meeting.

136. The representative of Ecuador supported the statement made by Argentina. The revised room document, which was co-sponsored by his delegation, represented a constructive approach that took into account the concerns of some Members. In his view, the Committee was the appropriate forum to carry out this exercise. The first phase was essentially informative or academic, and should not give rise to concern.

137. The representative of the Philippines welcomed the revised proposal, which was more balanced. He endorsed implementation of phase one.

138. The Chairperson said that he had been asked by the representative of Malaysia, who could not stay for the remainder of the meeting, to convey her delegation's support of the proposal.

139. The representative of Switzerland said his delegation supported phase one of the proposal. He expressed some concerns regarding phase two, particularly paragraph 11(e), as the issue raised was not within the scope of trade in services as defined in the GATS. Like Japan, he felt that the issue

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of international credit lines was better dealt with in other international organizations such as the International Monetary Fund.

140. The representative of India reacted to some of the comments made. He acknowledged, as some Members had said, that the response to the crisis had gone beyond the financial sector. However, the Committee could restrict its analysis to the measures taken in the financial sector. Also, as proven by the analyses conducted by the WTO Secretariat with UNEP and the ILO on trade and environment and trade and employment, respectively, its competence was not in question. In addition, the Committee certainly was the appropriate forum to deal with these issues. When they had been raised at the TPRB, the EC had been of the opinion that the appropriate forum was this Committee. This had motivated India and the other proponents to bring these issues to the Committee. There would not be any duplication of work with other bodies. He took note of the suggestion made to take part of this discussion to the Working Party on GATS Rules. In addition to the sector-specific work carried out in this Committee, the issue could certainly be taken to the WPGR in the context of the latter's discussion of a definition of subsidies. He hoped that Members would not oppose such a discussion in the WPGR either. Noting the concerns of some Members with regard to phase two of the proposal, he suggested that the Committee began work on phase one, without prejudice to Members' position on phase two. He would appreciate specific comments from Members on what was exactly acceptable.

141. The representative of Norway reminded Members that his country also supported a discussion in the Committee of how trade in financial services was affected by measures adopted during the financial crisis. Noting the concerns of some Members, he agreed with Switzerland and India that work could start on phase one. Afterwards, Members could assess the situation, and consider whether it was possible to continue with the other phase.

142. The representative of Canada also expressed some concerns with the second phase of the proposal, in particular with regard to paragraph 11(e). In her view, the economic impact of the measures taken in response to the financial crisis might not be specific to financial services, nor might they be necessarily negative. There would be merit in looking also at the positive impact of measures on the overall economy. She considered that the Committee might not necessarily be the appropriate forum for discussing that larger issue. However, that being said, Canada did not have any concerns with the specific work outlined in phase one of the proposal. , As suggested by Switzerland, India and Norway, one solution might be to focus on phase one, which seemed to enjoy greater support among the Membership.

143. The representative of Australia supported phase one of the revised proposal, and suggested that phase two be postponed for the moment, pending developments on phase one. Relevant work would benefit from an element of discussion, along the lines suggested by the United States that Members exchange information on their respective experiences. The appropriate occasion might be the event foreseen in paragraph 11(b) of the proposal. It would be useful therefore that sufficient time be allocated for discussion in this Committee.

144. The Chairperson observed that there seemed to be an emerging view that the Committee could perhaps consider embarking on phase one of this proposal. He sought Members' views regarding the idea of initiating this phase.

145. The representative of the European Communities said her delegation could envisage proceeding with phase one, but had still some concerns regarding phase two. Also, she did not feel entirely comfortable with the references made to phase one, because these implied the existence of a second phase. She would appreciate further discussion on some aspects of phase one, such as the topics for discussion, the experts to be invited, and the sequence of steps. She thought that the

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Secretariat paper on GATS provisions would come first, followed by the literature review, and then the discussion with experts.

146. The representative of the United States did not want to see this as a "phase one/phase two" process because, as noted by the EC, this implied the existence of a second phase. The steps outlined in the first phase should constitute a stand-alone exercise. There might be an additional first step which, as suggested earlier by the United States, would imply a discussion among Members of their respective experiences. In addition, it was necessary to clarify the terms of reference for the literature review, and for any future workshop or event, before agreeing to proceed with these elements. Finally, as said at the previous meeting, there was no need for a paper outlining what provisions in the GATS were relevant to financial services.

147. The representative of South Africa said a discussion among Members, not only about process but also about the substance, had always been envisaged as part of this proposal. He felt encouraged by the consensus that started to emerge on the ideas included in paragraphs 11(a) to (c) of the proposal. He suggested that Members called those ideas "initial steps". The Committee could later consider, after carrying out those steps, how to take the process forward.

148. The representative of Chile was pleased with the idea of focusing on the first three elements, contained in phase one of the proposal. The suggestion by the United States that Members exchanged information on their experiences could be included in some way into these initial steps.

149. The representative of Argentina said that there would no problem in replacing the title "phase one" by another formulation making reference to this initial exercise. Concerning the sequence of ideas, he said that, as suggested by the United States and the EC, the event could take place at the end of this first phase. Although the terms of reference of the literature review appeared to be clear, he was prepared to further discuss them. Turning to the suggestion made by Australia, he said that a discussion among Members had indeed been envisaged at the very end of the process, as described in paragraph 11(f) of the proposal. However, he saw no problem in Members sharing their respective experiences as part of phase one. The Committee could take a decision on the first three steps without mentioning the rest of the proposal, and agreed that the details of each of step would be discussed in consultations among Members.

150. The representative of India supported the idea of agreeing to undertake the first three steps, and adding the experience-sharing exercise suggested by the United States. The details could be worked out in consultations.

151. The representative of the United States did not see the need for a paper from the Secretariat outlining which GATS provisions were relevant to financial services. Rather, it would be useful if Members discussed their specific experiences. This should be the first step. Second, the United States could not agree to a literature review without seeing its terms of reference. Finally, the United States was not ready to join a consensus for an event without clarifying the need for and content of such an event.

152. The delegate then clarified what was meant by sequencing. The first step should be the exchange of experiences among Members. That would help determine how the literature review could be framed, and how the event would be organized – if Members decided to have one. In summary, the US delegation was prepared to go ahead with this exercise, without calling it phase one, and under the assumption that each step was conditioned upon the previous one.

153. The Chairperson gave the floor to the Secretariat to share its perspective on how to take these issues forward.

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154. A representative from the Secretariat said that an appropriate sequence could be as follows: first, the paper on relevant GATS provisions, then the literature review and finally, the event. The Secretariat had not yet prepared a Note on the GATS provisions of particular relevance to financial services trade, but these issues were usually discussed as part of the Secretariat's regular technical cooperation activities. The event should come last, since it would take time to organize. In preparing this event, as it was usually the case, the Secretariat would seek more specific information from Members regarding the objective, the potential scope and the contributors. Members would provide the Secretariat with a clear set of parameters for the organization of such an event. He envisaged a consultative process before taking a final decision in that regard. The Secretariat would develop an outline and circulate it to Members for comment. It would be natural to include a debate among Members, in addition to their deliberations at the Committee. The literature review would require some guidance from Members with regard to its objectives, and issues for discussion. The terms of reference would be drafted accordingly. He did not think that the review would be controversial.

155. The Chairperson asked whether the United States representative could agree to the Secretariat preparing a background Note on the relevant GATS provisions.

156. The representative of the United States said it might be better to ask the whole Membership rather than one particular delegation. The need for such a paper was still unclear. In the absence of specific information on the problems Members had in understanding how the GATS applied to financial services, the United States had reservations about this.

157. The representative of Argentina said that it would not be the first time a Committee requested the Secretariat to write such a Note. He had never heard the United States delegation expressing objections to that kind of exercise. Though some delegations had expressed concerns, that the exercise might go beyond clarifying the relevant GATS rules, the Secretariat Note would actually help Members frame and structure the discussion.

158. The representative of South Africa echoed the views expressed by the representative of Argentina. The Secretariat had already prepared Notes on computer and related services, construction, and other sectors, and as repetitive as they might be, they had always been useful for Members. He was confident that the Secretariat would conduct this exercise in a manner consistent with its role and mandate.

159. The representative of Chile requested the United States to reconsider its position on this specific matter. A Note by the Secretariat would be to the benefit of all Members, developed and developing alike. He hoped that this Note would be the first step of this work programme.

160. The representative of Ecuador expressed surprise and concern about the US position. A Note by the Secretariat would allow Members to focus their discussions.

161. The representative of India said that the whole Membership had agreed on the Secretiarat preparing sectoral and modal papers. Financial services was one of the sectors included in that exercise. From that perspective, he did not see the need for another mandate to the Secretariat to prepare a paper on financial services, since the sectoral paper would certainly include elements on GATS provisions, the Annex on Financial Services, and he Understanding on Commitments in Financial Services. It was not clear to him what objections could be raised against something all Members had agreed upon. Instead of further discussing the Secretariat paper, he suggested that the Chairperson held consultations on other suggestions made, including the US idea of experience sharing. He reminded Members that there was already a timetable foreseen for the circulation of all sectoral papers. The paper on financial services would achieve the same objectives as the one envisaged in this proposal. He suggested that the circulation of that particular paper be brought forward.

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162. The representative of South Africa reminded Members that of the origins of the idea to task the Secretariat with drafting a Note on GATS provisions specifically relevant to financial services. It had emerged as a reply to questions raised by some Members, including the United States, regarding the relevance of the GATS for the broader exercise that South Africa and others were proposing.

163. The Chairperson said that a Secretariat Note would help Members structure their presentations when sharing their experiences, as proposed by the United States. Many contributions would certainly be prepared and delivered by finance officials who were not as familiar with the GATS as trade officials. He then asked Members whether they could agree on him holding consultations on the sequence of these initial steps, the terms of reference for the literature review and, ultimately, the event itself.

164. The representative of the United States said that the exchange among Members foreseen in the US suggestion was to take place within the Committee and not as an event that included outside participants. If, the Committee later chose to organize such an event, that would require a different decision. It was important that the Committee itself did some work in this area, rather than tasking the Secretariat and others. The Committee served precisely as a forum for Members to present their concerns and interests. Interested Members could explain at a future meeting how they had been affected by the crisis and by the measures taken in response to it. That would the appropriate first step. Members could then decide whether additional information was necessary and whether to proceed with a literature review.

165. The representative of India took note of the comments just made by the United States delegation. The same reasoning should apply to all other proposals for work submitted to this Committee, including the proposal by the United States on non-life insurance. He wondered in that regard why the Committee should ask outsiders to come and present their experiences with barriers in Members' markets, rather than doing that work tself. In his view, this was difficult to understand.

166. The Chairperson said that it might not be possible to resolve this issue at this meeting. Noting the suggestion made by India concerning the financial services paper, he asked the Secretariat what the timetable was for the release of such a paper.

167. A representative from the Secretariat recalled that the sectoral discussions originally scheduled for November had been moved to the first cluster of 2010 because of unforeseen developments and Members' desire to have more time available for DDA-related activities in the run up to the Ministerial Conference. The dates for the following clusters of service meetings would be discussed later that week at the Special Session of the Council for Trade in Services. However, as envisaged thus far, the sectoral paper on financial services had not been scheduled for discussion at the first cluster of service meetings in 2010. The intention was that the next meeting of the Council for Trade in Services addressed the papers on audiovisual services, mode 3 and energy services. A decision had still to be taken on the actual dates of the next cluster.

168. The sectoral paper on financial services could also be used for the purpose of whatever discussion Members might want to have in this Committee. As the representative of India had said, relevant GATS provision would naturally be part of such a sectoral paper, taking into account that the GATS contained specific instruments that were of particular relevance for financial services, including – but not limited to – the Annex on Financial Services and the Understanding on Commitments in Financial Services. The paper would normally be available for the second cluster of meetings, in April or May 2010. If that was the case, Members should expect the paper to be circulated four or five weeks prior to the meeting.

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169. The representative of the United States said that that the idea of the sectoral paper as suggested by India was a good way forward. Such sectoral papers were expected for financial and other service sectors.

170. The Chairperson asked Members whether an indication should be given to the Secretariat to bring the circulation of the paper forward so as to allow for an earlier discussion.

171. The representative of Chile said that waiting until the second cluster of 2010 would be too long, and that it would be better to discuss the paper in the February cluster.

172. A representative from the Secretariat said that he could envisage circulating the paper around mid-January, but it would not be possible to guarantee the availability of the paper in the three official WTO languages by that time. The French and Spanish versions would inevitably have to be circulated later. He reminded Members that the actual dates of the February cluster had not been decided yet, and that those dates would determine the actual time available to review the paper. He stressed that it would be very difficult to produce it before mid-January.

173. The Chairperson said that the sectoral paper on financial services would serve a useful purpose in taking the Committee's work forward. He expressed satisfaction that Members had managed to identify one area of commonality in that regard and added that he would hold consultations on all the other issues raised at the meeting.

174. The Committee took note of the statements made and decided to revert to these issues at the next meeting.

F. OTHER BUSINESS

175. There was no issue raised under this agenda item.

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