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Section 4.1.2.3, definition of {member type definitions} states: "If {variety} is union for any Simple Type Definition components resolved to above, then the that Simple Type Definition is replaced by its {member type definitions}. " See http://lists.w3.org/Archives/Public/www-xml-schema-comments/2001AprJun/0204.html
An erratum E2-1 was added that corrects the grammatical error.