Forwarded at the request of Joe Hillings:

Joe Hillings: -- The notes look great.  I have made a couple of technical
corrections to the document, which I am attaching as a separate file.

To all -- everyone here at Hills & company hopes you have a wonderful
holiday!

Bob Fisher (Hills & Company)


___________________________________________________________________________
Dear Friends: Please review, correct, make additions and return. Joe


The Energy Services Coalition (please note that we are no longer using
US
WTO ESC) met at the request of Carol Balassa of USTR to get her
perspective
on energy services negotiations of the WTO and what our coalition needs
to
accomplish as well as a time perspective.

Present from the USG were Carol Balassa (USTR), Josephine Ludolph and
Richard Boll (DOC), Russ Profozich (DOE), Patricia Norman (DOS) and a
regular from the ITC.

Joe Hillings, Christina Bolton, Bob Fisher, Steve Burns, Brian Petty and
Chris Long represented the ESC.

Carol conducted an extensive and excellent briefing listing several
phases
of activity. She started the session by telling those present that the
lack
of action at Seattle was not a negative on what we need to accomplish
this
coming year. We are on track and need to produce various position papers
as
early as the end of January.

Articles 19 of the GATT requires that the WTO make progress on
agriculture
and services issues although it does not identify a date certain to
achieve
agreement..

Ambassador Barshefsky is committed to beginning services negotiations
beginning in January.

A Committee on Specific Committments is charged with the responsibility
to
draft issues. The USTR wants to have a definition of issues from the ESC
by
the end of January to be submitted to the USG representatives on the
Committee.

A second significant group in the process is the Working Group On
Domestic
Rights.This group is chaired by Peter Collins. Peter needs to know what
are
the domestic regulatory issues that could be raised by other WTO members
as
reasons not to liberalize various sectors. This information is to be
supplied in the first half of 2000.

In late spring after group one and two have done a significant part of
their work the USTR will be deciding what additional principles are
needed
to be tabled in the negotiation. They expect these working groups will
begin to meet at the WTO by the end of next summer.

Three basic columns headed by (1) Market Access, (2) National Treatment,
(3) Additional Committments (Could be proposed annex such as the process
Tim Richards has proposed in our Electricity Working Group listing
examples) is the format to be developed for the two groups.

Carol advised us that whatever we develop should be with the intention
of
getting Less Developed Countries (LDCs) supporting our basic principles
in
case a multilateral negotiation is not launched. We should work the
current
liberalization process being prosecuted in the APEC and FTAA
negotiations..

The next phase of Carol's presentation addressed the recent response
USTR
received to the questions they submitted to DG 17 (it no longer exisits
under the new commission) asking the EU to address their feelings about
the
liberalization of energy services.

We have not been given a copy of the EU response and Carol has asked Ms.
Klinkers of the EU if the response can be shared with the ESC to secure
industry responce. Carol and others from the USG attending the meeting
are
trying to ascertain just who drafted the responses which they
characterized
as "confusing and not indicating a real understanding of the current
practices and developments in the energy services sector."  We do know
that
the USG has called this office to ask how they need to respond to the EU
response that electricity is a good and not a service. Our immediate
response is that this is a matter of some disagreement among EU members
and
the EU staff. The movement of electricity across national boundries may
be
a good but the sale and trading of electricity is definately a service.

The EU response we were told makes the agrument that in their view that
many of the items raised in the October paper of the USTR were GAT
covered
such as construction, engineering, etc and therefore, may not need to be
raised in the services negotiations although these items will at least
need
some sort of annex to make sure they are included.. The EU believes that
if
you own or operate electricity producting  then its a good but if you
operate an IPP to sell electricity to various parties, its a service.

We were told that the EU response does not seem to understand or cover
renewables such as wind and solar both of which are important in
Europe's
plan to diversify and develop green energy.  They also believe that
price/risk management should be considered under finance services not
energy services.


The session was then open to general discussion. Bob Fisher commented
that
the EU does not seem to understand the scope of today's energy services
industry. That we now have a seemless web of energy services that has
been
developed. What about environmental services? Again, the EU response is
confusted and incomplete. Apparently they feel that environmental
services
can be considered elsewhere in the negotiation.

Who from the EU drafted this paper? The staff has changed and we don't
know
how "high" in their heirarchy this was considered. Carol Balassa
responded
that she is trying to determine who drafted the response..  Brian Petty
advised that his intelligence is that energy services is being discussed
and considered at the highest levels of the Commission.


Carol told us that she is trying to get everything together before
"talking" to the EU in January when she hopes to specifically respond
and
discuss their current returned response. Therefore, she is asking the
Energy Services Coalition to complete the work of our four Working
Groups
which will allow the Hills people to develop the definition and basic
negotiating position papers.

The DOS representative then suggested that we engage in some"capacity
building." This was defined as an outreach program to brief WTO member
delegations on the meaning of energy services. Carol suggested that
after
her January meeting the EU could be agreeable to having our industry
group
meet with their representatives to explain how energy services has
evolved
and what is included in energy services.


We moved to a discussion of the definitions paper itself. Bob Fisher
reminded those present that the current matrix developed for the APEC
process was still an excellent guide to definitions although items such
as
renewables, heating and certain trading and financial services would
need
to be added. To meet some EU concerns that they are not a party to APEC
and
therefore suspicious of any such document, we should remove the
reference
to APEC.

Our group pointed to the Tim Richards paper developed for our
Electricity
Working Group which gives a broad definition but then contains a
footnote
known as the illustrative list which lists the various items that we
believe constitute energy services under that heading. Bob Fisher said
that
this was the likely format we would ultimately adopt in the material
prepared for USTR and others in the WTO process.  Bob said that once
negotiators agree on the need for liberalized energy services they can
"fit" whatever they want under the broad definition.

The last question raised was what happens to the ATL (accelerated tariff
liberalization) which also covers some energy matters which WTO
countries
had contemplated being approved in Seattle. Carol said that she did not
know.

The meeting then adjourned.


The ESC needs to complete the Working Group process and complete the
questionaire at the earliest possible time to allow the Hills people to
prepare the basic document. Working Group chairs are to be asked to
complete this process by mid January.


Dear Reviewers: Please review at your earliest opportunity, make
corrections, additions and whatever and return to me for distribution.
Distribution will be to our ESC Executive Committee first and then to
our
entire membership of 45 (not to those who have not signed on as members)
and to USG participants.


 - ESC~Balassa~briefing~memcon~12-99.doc