RESTRICTEDWORLD TRADE
ORGANIZATIONS/WPGR/M/26
20 April 2000
(00-1623)
Working Party on GATS Rules
REPORT OF THE MEETING OF 24 MARCH 2000
Note by the Secretariat
1. The Working Party on GATS Rules held its twenty-sixth meeting under the chairmanship of
Mr. Siva Somasundram of Singapore.  The age nda for the meeting was contained in WTO/AIR/1242.
It consisted of five items:  negotiations on safeguards under Article X of the GATS;  negotiations on
subsidies under Article XV of the GATS;  negotiations on government procurement under
Article XIII of the GATS;  date of the next meeting;  and other business.  The agenda for the meetingwas adopted.
2. The Chairman drew attention to an informal Note (Job No. 782, 11 February 2000) he had
circulated to assist delegations in their preparation for the meeting.
A. NEGOTIATIONS ON SAFEGUARDS UNDER ARTICLE X OF THE GATS
3. The Chairman thanked the ASEAN delegations for the effort they had made in tabling a so-
called "Concept paper" on emergency safeguard measures (ESMs) (S/WPGR/W/30).
4. The representative of Thailand, speaking on behalf of ASEAN, presented the ASEAN
Concept paper.1
5. The representative of Egypt said the Concept paper was comprehensive and included all
elements which could lead the Working Party to an agreement on ESMs.  The references made to
provisions of other WTO agreements, such as Anti- Dumping or Safeguards would facilitate work.  A
number of issues, such as "like and directly competitive service", definition of "domestic industry",injury, causality and acquired rights, needed more effort to be solved.
6. The representative of Hungary shared the premise, expressed in para. 1 of the Concept paper,
that, if Members were able to agree on the availability of an ESM, a standard set of rules was then
needed for its application.  As to the object and purpose, it should be made explicit that an ESM was a
safety valve for unforeseen circumstances and that possibility of abuse should be prevented.  Hewondered whether there was a need to selectively quote from the preamble of the GATS (para. 2), and
to define an ESM (para. 3), noting that there was no such definition in the GATT nor in the
Agreement on Safeguards (AS).  In paras. 3 and 14, the word "withdrawing" should be replaced with
"suspending", to make clear that the measure was only temporary.  The Working Party should focus
on the potential implications of the application of an ESM in the context of mode 3 and, in particular,on the definition of "domestic industry".  The issues raised in the annex to the Concept paper deserved
in-depth discussion.  Hungary was of the view that an ESM should be taken on behalf of the
"domestic industry", which should include all establ ished foreign suppliers and, thus, that an ESM
should apply only to new foreign entrants;  this would avoid problems with the MFN obligation.  He
                                                     
1 The statement by the ASEAN Members in contained in annex I to this Note.S/WPGR/M/26
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noted that companies established in Hungary were regarded as domestic enterprises, irrespective of
their ownership;  there was, thus, no legal possibility to take safeguard action against wholly or partly
foreign-owned companies.  With respect to Part IV , Hungary considered that an ESM should only be
available in cases of unforeseen developments.  Safeguard measures were taken in situations of fair
competition and as a result of an obligation undertaken.  The authorities should have discretionwhether or not to resort to an ESM.  He enquired why para. 8 referred only to the "increase in supply
or consumption" of a given service in general terms and did not specify whether there was an increase
in imported services.  As to the conditions of application, he recommended examining the potential
applicability in the services context of the footnote to Article 2 of the AS, referring to customs unions.
Comparing para. 28 with Article 9.1 of the AS, he noted that the latter contained an additional
condition for the non-applicability of an ESM against products originating in developing countries,
namely that the collective share of small suppliers should not account for more than a specifiedpercentage of total imports;  this condition should be examined in the context of services.  As to
para. 29, Hungary could accept the first option but had problems with the second option exempting
developing countries from the obligation to maintain substantially equivalent levels of concessions or
to offer compensation
7. The representative of Uruguay said his country's position was open on this issue.  With
respect to the Concept paper, he supported the approach to use the AS as a working basis whenever
possible.  As to the definition of "domestic industry", no distinction should be made between national
and foreign suppliers, as was the case in Uruguay's legal system.  Thus, an ESM should apply only to
new foreign suppliers, without affecting companies th at were already present.  "Acquired rights" had
to be protected, taking into account the importance of foreign investment, in particular for developingcountries.  Any possible application of a safeguard measure should respect the principle of non-
retroactivity.  Finally, it was important that the concept of special and differential treatment of
developing countries (S&D) be included.
8. The representative of Hong Kong, China noted th at he remained to be convinced that an ESM
was desirable from a trade liberalization point of view.  Nevertheless, his delegation was ready to
contribute to the Working Party's mandate in working out the details of a possible ESM, and then
decide whether or not it was appropriate.  The way to make progress was to focus on some
fundamental issues and get agreement on them before tackling the more detailed concepts.  Among
those fundamental issues were "national" vs. "domestic" industry, and "acquired rights".  "Domestic
industry" should cover foreign established enterprises.  He noted that in GATS Article XXV III, the
definition of "national" included joint ventures;  if a foreign company had 49 per cent of a domestic
firm, it might not be affected by an ESM whereas it would be affected if it had 51 per cent.  There wasno MFN problem as long as withdrawal or modifications of market-access commitments were applied
to services and services suppliers from all other Members.  Nor was there a problem in taking action
against suppliers from Members covered by an MFN exemption:  if the country was still able to offer
an MFN exemption, it could be asked whether there was a real emergency situation.  On the question
of "acquired rights", Hong Kong, China was firmly against any measure that could lead todisinvestment.  What remained to be considered was the right to expand.  As to flexibility for
developing countries, he felt that some of the options contained in the Concept paper might not be
appropriate given that in GATS there was scope for fewer commitments from developing countries.
9. The representative of Japan recalled that the question of desirability of an ESM still remained
to be solved.  With respect to the Concept paper, Japan recalled that an ESM was meant to cope with
unforeseen circumstances.  In that regard, para. 2 put too much emphasis on strengthening domestic
services and enhancing competition in services industries in developing countries.  Relatively less
emphasis was placed on issues associated with increased volumes of imports and unforeseen
circumstances.  Moreover, the preamble of the AS did not make such reference to developing
countries.  Japan considered that the concept of " unforeseen development" was an important condition
for invoking a safeguard measure.  The Working Party should further discuss the appropriateness ofS/WPGR/M/26
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using the concept of "supply and consumption".  Was it possible to restrain consumption by
modifying the behaviour of consumers?  The definition of "domestic industry" should include
established foreign suppliers.  To the extent that a measure applied to all new entrants, there should
not be an MFN problem.  He enquired what the terms "irrespective of its mode of supply" meant in
this context (para. 11).  Japan would oppose discrimination among Members in the application of asafeguard measure, but needed to reflect on selection of modes of supply.  Applicable measures
(para. 14) should not go beyond what was really necessary.  Further consideration should be given to
the treatment of subsidies and domestic regulation disciplines under an ESM.  In Japan's view, some
reference points should be introduced (as in Article 5.1 of the AS).  Due to data problems in services
trade, it might be difficult to establish the appropriate level of compensation.  It could be appropriate
to create rules for arbitration (para. 16).  The duration of a safeguard measure should be as short as
possible.  The concept of provisional measures should be approached with caution.  With respect toS&D, it was not appropriate to exempt developing countries from compensation obligations as this
might lead to abuse.
10. The representative of Mexico noted that the Concept paper relied to a large extent on the
provisions of the AS, which was positive because it contributed to ensuring coherence between the
goods and services areas.  Various aspects required further analysis in order to determine whether anESM was applicable in services.  With respect to para. 2, she felt that a reference to the preamble of
the GATS could be sufficient.  An ESM was a means, not an objective as such.  The definition of
"domestic industry" was linked to the decision which would ultimately be taken with respect to
established foreign suppliers.  For Mexico, acquired rights had to be respected and maintained.  The
concept of "like and directly competitive services" had to be further analyzed;  in services, two ormore sectors could provide the same service without necessarily being in direct competition.  A
safeguard measure should not be applied to services which were not directly competitive.  A measure
should be based on three conditions:  (i)  an investigation had determined the increase in
consumption;  (ii)  injury or threat of injury had been established;  (iii) a causal link existed between
(i) and (ii).  Investigations should follow transp arent procedures, including a maximum timeframe for
completion.  An option, which was not in the Concept paper and should be discussed, was whether an
investigation could be initiated de officio , i.e. at the initiative of the investigating authorities.  The
criteria to determine injury had to be objective and quantifiable;  considering the paucity of data in
services, a certain amount of flexibility and creativity would be needed.  Mexico agreed that
applicable measures included the suspension of specific commitments under Articles XVI, XVII
and XVIII.  It should be made clear that these commitments would be "suspended" and not
"withdrawn".  When applying a safeguard measure, the four modes of delivery should be considered.
The duration of a safeguard measure should be short, with a possibility of extension and flexibility for
developing countries.  Mexico was also considering the concepts of degressivity and of a period of
non-application for a service which had already been the object of a safeguard measure.  Consultation,
transparency and notification requirements should be included in a possible agreement, as they were
in the AS.  The same applied to S&D for developing countries, similar to the AS, even though itmight sometimes be difficult to determine the origin of a service.
11. The representative of Australia said that an ESM should be limited to unforeseeable
developments which caused genuine injury.  Australia was concerned about the possibility of
suspending the right of retaliation for three years (para. 17 of the Concept paper).  The possibility of
determining specific timeframes (paras. 18 and 19), as well as the concept of degressivity were useful.The concept of provisional safeguard measures should be further discussed with a view to preventing
abuse.  With respect to developing countries, Australia supported option 1 of para. 29;  however, S&D
should not mean that developing countries were given a lower threshold.  To promote future work, it
might be useful, as Hong Kong, China had suggested, to assess the major issues in a structured
fashion.S/WPGR/M/26
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12. The representative of New Zealand considered that a safeguard measure, as envisaged by
GATS Article X, would focus on assisting services suppliers that were faced with unexpected, and
even adverse, developments arising from obligations under the GATS.  As noted for instance by the
Appellate Body in the recent case Argentina – Safeguard Measures on Imports of Footwear , it was
clear that the object and purpose of a safeguard measure was to deal with matters out of the ordinary.A difficult issue was the application of a safeguard measure to different modes of supply, and, in
particular, to mode 2.  In relation to domestic industry, New Zealand preferred the first option in
para. 5.  Footnote 5 of the Concept paper, addressing the issue of "like or directly competitive"
services, was a useful start.  "Unforeseen developments" was a relevant concept.  Section V
underlined the need for criteria and indicators to quan tify injury and help to determine causality in the
absence of reliable statistics in services.  Job No. 5295/Rev. 1 should be used in future discussions.
With respect to para. 14, measures should be "suspended" instead of "withdrawn".  Section VIIIcontained important procedures provisions concerning degressivity and duration, which should be part
of an ESM.  Option 2 of Section XI tended to leave too much scope for potential abuse.  New Zealand
was of the view that the Chairperson's idea of ex ploring a "necessity-test" in relation to an ESM
(para. 7(a) of Job No. 782) was useful.  An important  aspect, not covered in either paper, was the link
between liberalization commitments and an ESM.  Arguments in favour of an ESM tended to bebased on the notion that, by providing a safety valve, it would enable Members to accept a higher
level of liberalization than reflected in current schedules.  The Working Party should explore this link
in practice.  Possibilities included an ESM that would only be available for new commitments, or an
ESM governed by horizontal procedural disciplines that might only apply if the opportunity to use an
ESM had been negotiated with other trading partners as part of liberalization commitments.
13. Commenting on the Concept paper, the representative of the Republic of Korea said that he
would prefer safeguard measures which focused on protecting the national rather than the domestic
industry.  Acquired rights of established foreign suppliers should be protected and there should be no
forced disinvestment.  As a compromise, it coul d be examined whether juridical persons could be
included into the domestic industry concept on the basis of ownership, within the meaning of GATSArticle XXVIII.  Adopting the domestic industry concept might cause problems with the MFN
treatment since new entrants might be discriminated.  The concepts of "supply or consumption" of
services (para. 3) had to be further developed.  Th e concept of "like or directly competitive" services
should be interpreted on a case-by-case basis and, thus, there was no need to define it.  The concept of
"unforeseen development" was unclear and difficult to prove:  it should thus be excluded as a
condition for the application of a safeguard measure.  Para. 9 should be clarified because, in its
current form, it gave a panel wide discretion in interpreting whether a safeguard measure was"necessary to prevent or remedy the serious injury …".  There was a need to clarify that the injury
criteria and indicators were illustrative only;  guid elines could be adopted in this respect to prevent
abuse of an ESM.  As to compensation, it was reasonable to maintain an equivalent level of specific
commitments.  Provisional safeguard measures should in principle be included, in a manner similar to
Article 6 of the AS, to cover cases where delays would cause irreparable damages;  however, suchmeasures should be confined to exceptional situations and made subject to strict requirements to
prevent abuse.  With respect to para. 8 of the Chairperson's Note, Korea was not sure that it was
possible to single out the relevant criteria.
14.   The representative of Switzerland said that the question of desirability and feasibility of an
ESM was still unresolved for her delegation.  With respect of Section II of the Concept paper, it
would be more appropriate to make a general reference to the objectives listed in the GATS.  An ESM
should not be used by a Member to meet national policy objectives, nor to make the economy more
competitive.  An ESM was an emergency mechanism to overcome temporary difficulties.  It allowed
for structural adjustment, but was not meant to directly enhance competition.  As to the definition of
"domestic industry", Switzerland supported option 1 of para. 5.  The maximum duration should be
mentioned in the draft.  With respect to the de termination of serious injury or threat thereof
(paras. 13.1 and 13.2), a list of the relevant indicators should be part of the draft:  Venezuela'sS/WPGR/M/26
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proposal should be developed further.  Switzerla nd could not, at this stage, support a temporary
withdrawal or modification of additional commitm ents under Article XVIII.  For further discussions,
it might be useful to think about a list of commitments that should be exempt from for emergency
safeguard measures.  Turning to compensation, Switzerland considered that the wording contained in
para. 15 (" … shall endeavour to …") was not strong enough.  She enquired about the reasoningbehind para. 17.  She supported the idea of a progressive adjustment process, as mentioned in
paras. 19 and 20, but was not sure about the need for provisional measures (para. 22).  Concerning
developing countries, she was not convinced that measures contained in para. 29 were necessary.
With respect to the points raised in the annex to the Concept paper, Switzerland was of the view that
"domestic industry" included the suppliers as a whole of like or directly competitive services,
operating within the territory of the Member;  therefore, foreign suppliers should have the right to
invoke a safeguard measure.  Switzerland could not agree with an approach that would give nationalsuppliers the right to use a safeguard against established foreign suppliers.  The concept of "acquired
rights" had to be respected to enable investors to plan strategic activities many years ahead.
Switzerland supported a dynamic interpretation of the concept of "acquired rights":  a foreign
company established in a country should have the right to expand its business activities.
15. The representative of India said that safeguard measures should be available to protect
national suppliers vis-à-vis  any foreign supplier.  This was especially important for developing
countries opening up their service sectors under mode 3.  It should therefore be possible to apply a
safeguard measure to established foreign suppliers.  In order to protect acquired rights, a solution
would be to prevent any further increase, not onl y of new entrants, but also to put a cap on the
activities of existing foreign suppliers.  However, an ESM might not lead to actual disinvestment by
existing foreign suppliers.  India supported option 2 of para. 5 of the Concept paper.  The ESM should
apply to all modes of supply;  however, specific provisions for each mode might be necessary, in
particular with respect to mode 4, to protect the interests of developing countries.  The concept of
S&D was also relevant for this mode which was of special importance to developing countries.  With
respect to the determination of serious injury to dome stic industry or threat thereof, India agreed with
the investigation procedure laid out in the Concept paper.  Additional flexibility could be needed for
the use of injury indicators in services as compared to goods.  India supported the temporary
withdrawal or modification of specific commitm ents undertaken pursuant to Articles XVI, XVII
or XVIII, as proposed in the Concept paper.  Compensation should not be required from developing
countries invoking an ESM (option 2 of para. 29) and there should be no right for affected Members
to suspend equivalent commitments.  An ESM should be a temporary measure, which should be
phased out at regular intervals if the situation improved.  India supported the proposed provisionsconcerning consultation, transparency and notification.
16. Commenting on the Concept paper, the representative of Brazil said that his delegation
supported option 1 (para. 5) concerning the definition of "domestic industry".  Brazilian legislation
did not distinguish between foreign- and domestically-owned companies.  The definition of "domestic
industry" was crucial in order to clarify questions related to MFN, national treatment and acquiredrights.  On para. 13, Brazil enquired why the term "imported services" had not been used.
17. The representative of the European Communities said her comments on the Concept paper
were without prejudice to the Communities' position on the question of feasibility.  On Section II, she
wondered to what extent a safeguard measure could be necessary to meet national policy objectives.
Moreover, since a safeguard was temporary by nature, it did not fit well with the objectives set out inparas. 2.2 and 2.3.  The concept of "unforeseeable development" should be included in this Section.
The EC had difficulties to figure out how an ESM co uld be applied to different modes, in particular
mode 2.  Predictability was essential in the context of mode 3, given the impact on investment.  A list
of illustrative measures applicable mode by mode should perhaps be envisaged.  The idea of
"suspension" of commitments was preferable to "w ithdrawal".  More thought should be given to the
concept of "supply or consumption" of a service.  A clear definition of "domestic industry" wasS/WPGR/M/26
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needed and the EC favoured option 1 in para. 5.  With respect to footnote 5, she had doubts
concerning the substitutability and end-purposes of services and thought that more work was needed
to define a "directly competitive" service.  As mentioned by previous speakers, there were difficulties
with data and statistics in services.  "Serious injury" had to be clearly defined, but "threat" of serious
injury might prove difficult without reliable statistics.  A safeguard measure should always be appliedon an MFN basis, but might vary across modes of supply.  Determination of serious injury should be
the result of an in-depth investigation.  Section V might have to be expanded to explain the different
steps of an investigation (minimum rights for defense, treatment of confidential information,
deadlines for investigations, etc.).  The interests of the wider public, including consumers, could also
be given consideration.  The notion of proportionality (least trade-restrictive measure) should be
examined with respect to the applicable measures and a list of relevant measures could be elaborated.
With respect to compensation, she wondered how a "substantial level of equivalent commitments"
could be calculated.  Some arbitration procedure should be available in case there was no agreement
on the level of compensation.  The EC had doubts about the denial of compensation during the first
three years and about the concept of provisional measures.  The envisaged duration had to be as
clearly stated as possible.  Finally, a set of rules on emergency safeguard measures should apply in a
non-discriminatory manner to all Members, including developing countries.
18. The representative of Argentina said that, ac cording to Argentinian legislation, any company
established in the country was a domestic firm.  In the context of mode 3, the definition of "domestic
industry" would influence the range of measures available to a country wanting to resort to a
safeguard measure.
19. The representative of Guatemala said her de legation supported a horizontal ESM, whose
existence would be important in the negotiation of specific commitments.  The object and purpose as
described in Section II of the Concept paper were appropriate.  A safeguard measure was a temporary
intervention, contrary to Article XXI.  Safeguard measures should not be used as protectionist
instruments.  In Section XI, it would be relevant to include provisions demonstrating, as a pre-
requisite for the application of a safeguard measure against a developing country, that a substantivepercentage of domestic industry suffered from injury or threat thereof.  Finally, she wondered what
form a possible agreement on safeguard could take.
20. The representative of Norway said that the Concept paper covered essentially what needed to
be discussed.  When stating the object and purpose, care should be taken not to rewrite the preamble
of the GATS.  The concept of "unforeseen deve lopment" was important and should be further
discussed.  Established foreign suppliers should be covered by the definition of "domestic industry".
Acquired rights should cover the whole spectrum of the rights related to the provision of services,including equity holdings at the time of ESM enfo rcement.  An ESM should be applied only to the
extent necessary to prevent or remedy serious injury.  If the problem was an increase in cross-border
supply, the ESM should not encompass, for instance, a freeze on foreign equity acquisition under
mode 3.  An ESM had to be applied on an MFN basis, irrespective of the modes of supply.  There was
already a bias between countries that supplied services through commercial presence and thosesupplying the same service through mode 1 or 4.  Thus, putting a lid on mode 1 but not on mode 3,
could be seen as a violation of MFN.  However, it  seemed that the supply of individual services was
in fact linked to certain modes of supply, which, in turn, might imply that the violation of MFN might
not be such a problem after all.  Norway considered that the concept of "like or directly competitive
service" needed further discussion.  Turning to th e specific time-limit for the application of an ESM,
she noted that this issue was linked to the question of S&D;  an ESM was not really necessary, and at
least not for developed countries, because the GATS already offered sufficient flexibility.  Seeking
longer time-frames for developing Members would perhaps mean looking for a very short time-frame
in the general provisions.  Applying S&D only in the context of least-developed countries might be
another option to explore.  She doubted whether the suspension of commitments should also includeadditional commitments under Article XVIII, in particular if these involved regulatory issues.  A linkS/WPGR/M/26
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could be made here with the work on subsidies in the Working Party.  Compensation was important to
ensure that an ESM would not be misused.  It was important to have clear procedural criteria for a
provisional ESM.  Such measure could be implem ented, for instance, after the investigation was
completed, but before consultations.  Norway thought, like the EC, that an illustrative list of
measures, but also of injury criteria, would be useful.
21. The representative of Canada wondered in what circumstances an ESM would be appropriate,
given the structure of, and existing commitments under, the GATS.  He also expressed concern that
this mechanism would be used for purposes other than the alleviation of emergencies.  Canada had
already forwarded a number of questions and comments to the ASEAN Members and would be
pleased to share them with the Working Party.  The Chairman suggested that these questions be
circulated to Working Party Members.2
22. The representative of the United States said his delegation was still sceptical about the need
for an ESM.  However, the recent start of a new round of services negotiations was a good
opportunity to renew work on this subject, and see how a safeguard could be applied in sectors for
which improved market-access commitments were being considered.  The United States was still in
the process of analysing the Concept paper as well as other countries' submissions on this subject.  He
noted that some delegations had made specific references to the contribution of an ESM to furtherliberalization; this was the case, for instance, in  Egypt's answers to questions relating to an ESM
(S/WPGR/W/15/Add.5) where it was stated that "d esigning a safeguard clause should encourage
countries to become more forthcoming with substantiv e offers to liberalize".  The United States would
also renew the call for concrete examples of situations that would require application of a safeguard
measure.  More domestic industry input into the negotiations might help in this regard.  The WorkingParty should also keep in mind alternative ways which countries had chosen to address structural
adjustment concerns;  for instance, the 1997 telecom negotiations and certain recent accessions had
included a phase-in of commitments, as necessary.  With respect to para. 2.3 of Section II of the
Concept paper, the United States noted that many of the structural adjustment goals might also be met
by scheduling more flexibility for the phase-in of ne w commitments in schedules, rather than erecting
procedural hurdles at a later date via an ESM.  A major concern for the United States was to avoid
abuse.  Transparency played a key role in the application of safeguard measures, and further
information was needed on exactly how an investigation could be carried out.  Some elements
regarding due process in investigations appeared to be missing.  The United States shared the concern
already expressed with respect to option 2 of Section III;  more details were needed as to how the two
options related to various modes of supply, for instance, how juridical persons established in foreign
countries would be treated under option 2.  With respect to conditions of application anddetermination of injury, he enquired how terms such as "increase in supply or consumption of
service", injury and causal link, would be measured, in the absence of detailed statistics.  Like the EC,
the United States would find a list of potentially applicable measures very useful.  He was very
concerned about proposals for extending application of safeguard measures to additional
commitments of a regulatory nature pursuant to Article XVIII;  the obvious example was basictelecommunications.  On S&D, his authorities were not convinced that the concepts taken from the
AS were appropriate in a services context.  Job No. 5294/Rev.1 needed further reflection, there was
an impression that the criteria and indicators discusse d related mostly to injury rather than identifying
objective criteria for determining whether imports had actually increased.  On the Chairperson's Note
(Job No. 782), he agreed that it would be useful to examine further alternatives to the traditional
safeguard remedy, restrictions on market access, including looking at domestic subsidies, and
supported further work on transparency (para. 6).  Regarding S&D, he felt that, in practice, statistical
problems might make it difficult for developed countries, in applying a safeguard measure, to avoid
adverse impacts on trade of developing countries.
                                                     
2 Canada's questions and comments can be found in annex II to this Note.S/WPGR/M/26
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23. The representative of Poland noted that the lack of statistical data was the main obstacle.  A
key question was whether an ESM should include a compensation requirement.  For Poland, the
purpose of an ESM would be to encourage Members to undertake more liberalization, by providing a
possibility for temporary withdrawal or modi fication of commitments without the need to
compensate.  With compensation, an ESM would become similar to the procedure of modification ofschedules under Article XXI.  Definitions contained in the Concept paper needed to be further
specified, such as the concept of "like or directly competitive service", "domestic industry".  The
application of an ESM to mode 2 raised several questions.
24. The representative of Mauritius said that the ASEAN Concept paper was a valuable
contribution to the work of the Working Party.  It raised a number of questions needing clarification.
He regretted that, due to other meetings taking place in parallel, African countries were not able to
attend this meeting.  An ESM was a means to be resorted to in unforeseen and unforeseeablecircumstances, and not en end in itself.  The issu e of S&D was central to developing countries.  More
contributions and proposals should be made by Members, in particular by those who had the
necessary experience in the services sector.
25. The Chairman noted the range of questions raised regarding the Concept paper.  A first
question was why the notion of "supply or consumption of a service" was found preferable to that of
"import".  Second, Japan had enquired what "irrespective of its mode of supply" (para. 11) meant.
Switzerland wanted to understand the reasoning behind para. 17.  Canada had also posed several
questions.  The Chairman would welcome Thailand at tempting preliminary answers to some of these
questions.
26. On a preliminary basis, the representative of Thailand explained that the terms "supply or
consumption" were used instead of "imports" because the latter term would not cover all possible
scenarios in services trade, in particular mode 2.  "Supply or consumption" had been referred to in
many papers of the Working Party.  ASEAN was aware, nevertheless, that the concept of "imports"
needed to be captured;  "supply or consumption" had been used in conjunction with the idea of
"service of another Member" (see for instance paras. 3, 8 or 13) so as to ensure that only foreign – orimported – services were taken into account.  The terms "irrespective of its mode of supply" (para. 11)
was meant to indicate that MFN treatment would apply across all modes of supply.  Para. 11 was
currently between square brackets because the issu e of MFN had to be solved first.  For instance,
there were uncertainties whether exempting some foreign suppliers under mode 3 might constitute a
violation of the MFN principle.  The terms "operating in the territory" (para. 3) meant that there
should be a physical presence of the service supplier in the territory of the Member invoking an ESM.
Para. 17 addressed the legitimate concern that an ESM should not be too burdensome for the invokingMember as compared to Article XXI.  The concept of "unforeseen developments" had not been
included in the Concept paper because, even though the ASEAN Members had been advocating it,
they did not believe that a consensus could be reached on it.  However, ASEAN remained open to
further discuss this issue.  The question remained whether a fourth condition should be included,
relating to the circumstances in which an ESM could be invoked.  If so, what criteria should be used?Should there be a reference to "unforeseen developments", as in the goods area, or to "unforeseeable
developments", as suggested by some Members?
27. The Chairman said that Working Party Members had to consider how to structure future
work.  He intended to put forward a very short list of themes which could allow a more focused
discussion on some key issues.  This – non-exhaustive – list could include, for instance, the questionsof defining "domestic industry" and "acquired rights", applicable measures, indicators and criteria,
compensation, etc.  He intended to hold an informal meeting on 7 April, at which a draft list could be
discussed, and first comments be made on the issues of "domestic industry" and "acquired rights".
When preparing for this meeting, delegations coul d usefully refer to the ASEAN Concept paper, as
well as document S/WPGR/W/27/Rev.2, and various points made during this meeting.S/WPGR/M/26
Page 9
28. The representative of Canada suggested that the issues of statistics and data, "like or directly
competitive products", MFN and national treatment, S&D be included in the list.  The representative
of the European Communities felt that the application of an ESM to individual modes should be
discussed as well.
B. NEGOTIATIONS ON SUBSIDIES UNDER ARTICLE XV OF THE GATS
29. The Chairman noted that little progress had been made under this agenda item in 1999.  This
was largely due to the fact that the Working Part had not received, apart from a submission by
Hong Kong, China, empirical information on Members' subsidy programmes.  There had been no
discussion of issues raised in previous Chairperson's Notes and Secretariat's papers.  Nor had any
information been submitted, pursuant to a proposal by Norway, on subsidy-related problems
encountered in foreign markets.  The two submissions for this meeting – Poland's reply to the subsidy
questionnaire and a communication presented by Argentina and Hong Kong, China – might representa new dawn of this subject-matter.  The Chairman thanked the delegation of Poland for having
provided its responses in the context of the information exchange (S/WPGR/W/16/Add.4).  Poland
was only the fourth Member to answer to the que stionnaire the Working Party had agreed to and
circulated in 1997.  He encouraged all delegations to submit responses since there was very little the
Chair or the Secretariat could do to advance the wo rk of the Working Party without concrete inputs
from delegations.
30. The representative of Poland said the notification presented by his delegation covered
subsidies applied in the service sector during 1997-1998.  Poland expected to submit further
information on the application of these subsidy programmes in 1999, as soon the data would be
available.  The data submitted had already been presented, in a slightly different format, in theCommittee on Subsidies and Countervailing Measures.  The notification contained in W/16/Add.4
covered three subsidy programmes:  (i) loans and grants from so-called EFSAL funds, a credit line in
the International Bank for Reconstruction and Development;  this programme was not concentrated on
the services sector only;  (ii) direct grants aimed at lowering the prices of some services in order to
make them accessible to specific social groups;  the support was available under the same conditionsfor national and foreign suppliers operating in Poland;  (iii) various programmes for restructuring,
transforming and developing the banking sector, and allowing it to operate in a market economy.
31. The representative of Hong Kong, China said that the communication his delegation was
presenting jointly with Argentina (S/WPGR/W/31) was aimed at stimulating the debate on this subject
and the rules that might be considered.  His delegation did not have fixed views as to what the final
outcome might be.  An analysis of the available data showed a great paucity in this area, which was an
issue to be tackled;  Members were therefore strongly urged to complete the 1997 questionnaire andto come forward with any issue of interest or concern they had met.  Subsidies did exist in many
areas, some supported "normal" government activities and might not be considered to be subsidies in
governments' mind.  Other subsidies might have trade-distortive effects (such as export-enhancing or
import-substituting), some might have none at all.   Argentina and Hong Kong, China considered that
no firm conclusion could be drawn from currently available data and, therefore, suggested that theSecretariat be asked to do additional work in this ar ea (para. 9).  With respect to para. 9(d), the idea
was that the need for some MFN exemption related to subsidies given in those particular sectors;  the
notion of developing disciplines in subsidies – which might well include box-type approaches – could
assist in the joint aim that "such MFN exemption should not exceed a period of ten years".  Para. 10
set out a number of areas the Working Party should further consider.  Argentina and Hong Kong,China did not have answers to many of the questions posed, nor any fixed ideas on the end-product.
They accepted that all governments provided subsidies in many areas, particularly in social sectors.
There was, thus, no intention to categorise all subsidies as not legitimate or not allowed, but to discuss
how those subsidies with trade-distortive effects could be tackled.S/WPGR/M/26
Page 10
32. The representative of Argentina supported what had been said by the delegation of
Hong Kong, China.  The communication was without prejudice to Argentina's position on this theme,
but sought to stimulate the debate by presenting, in a different manner, themes which had been
already tackled in the Working Party.  The first problem to be addressed in this area was the lack of
information.  In this regard, the exchange of information on the basis of the questionnaire might beuseful, although it should not necessarily be limited to the questionnaire.  The remarks contained in
the first part of the communication were tentative since they were based on unsystematic information.
The communication thus proposed that the Secretariat looked for additional data.  Para. 9(e) pointed
to the only two regional agreements which specifically referred to subsidy disciplines in some
services sectors;  it would be useful to gain a better understanding of this experience.  The second part
of the document proposed themes for discussion.  The objective was, as mentioned in para. 15, to
address trade-distortive subsidies.
33. The representative of Chile supported the proposal that the Secretariat update document
S/WPGR/W/12, since the number of regional trade agreements (RTAs) had nearly doubled
since 1996.  An update would give a better picture of how RTAs had dealt with this topic.  The
preliminary conclusions contained in para. 6 of W/31 were interesting, and the proposed update could
consider these elements as well.  The Secretariat should be called upon to contact and seekinformation from other bodies, such as UNCTAD.  The Working Party should also look at some
sectoral subsidies on which information might be available in more specific organizations, such as
ITU, WHO or ICAO.  Any analysis should take into account the needs of developing countries and
the link with national policy objectives.
34. The representative of Norway noted that the available information did not allow to draw
conclusions and agreed that the Secretariat's papers S/WPGR/W/12 and S/WPGR/W/25 should be
updated.  Norway had doubts as to how much information the analysis of subsidy-related entries in
Members' specific commitments would yield, since specific commitments undertaken during the
Uruguay Round did not necessarily reflect the current situation.  There might be a need to more
closely define "subsidy" because it was difficult to reply to the questionnaire as there was noagreement on a definition.  The definition in the Agreement on Subsidies and Countervailing
Measures (SCM) could be used as a working definition for the time being.  The Working Party had to
be careful when discussing subsidies with social objectives (health, education and social welfare),
which were part of governments' responsibilities in many societies.  It should not be presumed at the
outset that these areas were wholly within the scope of the GATS.  The creation of a green box
implied defining what was an "allowable" subsidy.  The Agriculture Agreement and the SCM
Agreement adopted a different approach in that regard, and the Working Party might want to discusswhich approach it wanted to adopt in the area of services.  The consequences of having a different
approach than the SCM Agreement would need to be looked at since goods and services seemed to be
increasingly integrated in many sectors.
35. The representative of the United States noted that, based on contributions made to this
Working Party, it was still unclear whether Members considered subsidies as posing significant
problems to further services liberalization or to th e stability of the commitments already made.  This
did not mean that additional work and study would not be productive.  The SCM Agreement provided
guidance but it was not clear whether its concepts could or should be directly transposed into the
services context.  The best lesson to be drawn from the SCM Agreement was the need to pursue
subsidy rules in an evolutionary manner, based on a continuous assessment in the context of services.This might be particularly appropriate for GATS in that many services providers were involved in
infrastructural activities which served broad societal needs.  This idea was reflected in the joint
communication by Argentina and Honk Kong, China.  There might also be other reasons for special
treatment on a sector-specific basis.  As noted in the Chairperson's Note, certain obligations already
existed in the GATS framework (MFN, national treatment), which provided some discipline forparticularly trade-distorting subsidies.  The GATS  approach to MFN and national treatment allowedS/WPGR/M/26
Page 11
countries to maintain socially desirable subsidies or  other forms of assistance.  However, it needed to
be further explored how these obligations related to mode 1 and 2 commitments and this issue could
have far-reaching implications for the work on subsidies.  His comments should not be construed as
favouring a toleration of practices which might be manifestly trade-distorting.  However, the standard
of "trade distortion" had to be gauged in the services context, and it should not simply be presumedthat the standards applicable for goods could be readily transferable.  The United States had started a
process of domestic consultation and hoped to provid e the Working Party with more considered views
in a near future.  With respect to W/31, he supported the proposals made in paras. 9(a), (b) and (e), but
needed further clarification as to what was intended in paras. 9(c) and (f).
36. The representative of Argentina replied that the idea underlying para. 9(f) was that the
Secretariat could examine investigative work done by other international organizations in the area of
services subsidies.  For instance, the OECD worked annually on a programme entitled "public supportto industry", which covered nearly all economic activities.  Other delegations had said that it would be
interesting to gather sectoral information, which, however, would entail a great amount of work for
the Secretariat.  Thus, the idea was to deal with international organization of a general nature, such as
OECD, UNCTAD, and maybe some regional bodies, such as APEC.  With respect to 9(c),
S/WPGR/W/13 could be updated in order to include commitments on basic telecommunications andfinancial services.  The representative of Hong Kong, China added that a number of countries had
acceded to the WTO since S/WPGR/W/13 had been done, and could be usefully be included.
37. The representative of the United States noted that his delegation had no problems with
updating W/13 on the basis of what had been done in telecommunications, financial services and
recent accessions.  However, it was not for the Se cretariat to interpret the schedules of commitments.
38. The representative of Switzerland supported the proposal to update factual data.  The second
part of the W/31 (para. 10) should be used as a basis for future work.
39. The representative of Japan agreed with the Chairperson's Note that the problem with
subsidies was not their existence as such, but their trade-distorting effects.  Some subsidies served
good social purposes.  Attention should be paid to GATS Article XIV, in addition to Articles I.3(c)
amd XIII.  As a mechanism to justify subsidies was not necessarily covered by these provisions, but
could still be considered necessary for social goods, Japan was interested in exploring the idea of a
"green box".  He agreed with the analysis made in paras. 4 to 8 of W/31 and supported paras. 9(a), (b)
and (c);  his authorities wanted to further consider (d).  The issue raised in para. 10(d) was important
but perhaps premature to address at this stage.  On para. 10(e), Japan believed, like the United States,
that there was a need to clarify the implications of national treatment, especially in relation to modes 1
and 2.
40. The representative of Canada said it would be worth examining whether government
assistance in the services sector distorted trade within and across modes.  Other open issues revolved
around the definition of subsidies in the services context, and the appropriateness of countervailing
duties as a remedy.  Canada would welcome further el aboration of the possibility of a "green box".  At
this time, it was not clear how the consideration of social objectives related to certain modes ofsupply.  Finally, he sought further information on the envisaged sources for data gathering and the
kind of work involved.
41. The representative of Thailand, on behalf of  ASEAN, said that the ASEAN Members were
still reflecting on the communication presented by Argentina and Hong Kong, China.
42. The representative of New Zealand welcomed Poland's paper as an example to be followed by
other Members.  With respect to the communication by Argentina and Hong Kong, China, he
appreciated that the paper managed to revisit a number of Secretariat's papers, in particular W/9,S/WPGR/M/26
Page 12
which the Working Party had not fully addressed.  He supported para. 9 and agreed that the
Secretariat undertake what was proposed in sub-paras. (c) and (f).  New Zealand, in conjunction with
Australia, did not have a definitive response for sub-para. (e).  Article XV contained the clear mandate
to identify those subsidies which had trade-distortive effects and, from there, seek to determine what
disciplines might be appropriate.  The experience with subsidies in the goods area had led to the SCMAgreement and to the "traffic light" approach.  New Zealand was of the view that countervailing
measures were not very likely to work in the services area.  Thus, the approach of capping and
reducing subsidies, used in the Agriculture Agreement, could usefully be considered (paras. 15, 20-22
of W/9 contained a discussion in this regard).  Better empirical information was needed on the
incidence and types of subsidies occurring in the services sector.  Members had to come forward with
information, which needed not necessarily be limited to the questionnaire.  The Chairperson's Note
contained useful ideas in this regard.
43. The representative of Uruguay said that the proposals contained in the communication by
Argentina and Hong Kong, China would help to move  work ahead.  With respect to para. 12 of the
Chairperson's Note, the fact that there had not been a debate so far on "export-enhancing" subsidies
did not mean that there was no problem.  First, there was no factual information to indicate that
"export-enhancing" subsidies did not have trade-distortive effects.  Second, export subsidies wereprohibited in the goods sector because they were problematic.  They were the most trade-distorting
type of subsidisation.  He was thus not prepared to endorse statements suggesting that such subsidies
would not be a problem in the area of services.  The Chairman explained that, in para. 12 of his Note,
he had tried to indicate that, to date, the Working Party had not received any factual information withrespect to export subsidies but this was not an attempt to suggest that export subsidies were not aproblem.
44. The representative of Australia noted that a number of issues raised in W/31 were being
discussed in her capital with industry and other government agencies.  She agreed that the Secretariat
undertake a data gathering exercise under para. 9.  It was also important to have more contributions
from Members before considering disciplines.  Like New Zealand, Australia was still considering theproposal that the Secretariat work on ANZCERTA and her delegation might be able to revert to this
issue at a future meeting.
45. The representative of Brazil said that the communication presented by Argentina and
Honk Kong, China provided a useful input in the Working Party's discussion on subsidies.  Brazil
agreed with the proposals for further data gathering.
46. The representative of Mexico noted that there remained an important amount of work to be
done on the subject.  Some fundamental issues had not been fully looked into, for instance, the
identification of possible trade-distorting effects of subsidies in services.  The structure of any
particular disciplines would necessarily be complex, due to the specificity of services.  One difficult
problem was, for instance, the national treatment implications of granting a subsidy under mode 3
which might have distortive effects for modes 1 and 2.  It would be important to consider a definition
of "subsidy" or decide whether the same definition used in goods could be applied in services.Mexico supported the proposals made in paras. 9(a) and (b) of W/31.
47. The representative of the Republic of Korea said there was a need to discuss which subsidies
were subject to Article XV, in light of Article I.3 of the GATS.  The interlinkages between goods and
services had to be kept in mind, in particular possible indirect trade-distortions.  There was also a need
to think of subsidies with respect to mode 3, considering that a lot of countries were trying to attractforeign capital.  Referring to para. 10(b) of W/31 and para. 14 of the Chairperson's Note, Korea would
like to discuss the extent to which subsidies having social objectives fell under Article XV.  With
respect to the need for disciplines (para. 10(c) of W/31), the applicability of the existing SCM
Agreement to services subsidies, in particular key concepts contained therein (such as specificity),S/WPGR/M/26
Page 13
might be considered.  In addition, the Working Party should examine whether to consider modal or
sectoral specificity in order to take into account the characteristics of services.
48. The representative of the European Communities noted they were still in the process of
analysing the communication presented by Argentina and Hong Kong, China.
49. The representative of Poland said that the concept of a "green box" for subsidies would seem
to imply the possibility of countervailing measures.  The Working Party ought to bear in mind that,
during its five-year existence, the concept of non-actionable subsidies proved inapplicable in the SCM
Committee and was not prolonged.  However, the concept of "specificity" contained in the SCM
Agreement could be interesting.  In Poland's understanding, so-called social subsidies would not be
specific as they would be available under the same conditions to all suppliers.
50. The representative of Hong Kong, China expr essed doubts whether it was possible to apply
the goods' definition of subsidies.  In W/31, it had been clearly stated that funds used in the context of
normal government activities were deemed to be legitimate.  A lengthy discussion on a possible
definition might not be productive at this stage.  With respect to Canada's question concerning the
concept of a "green box", he noted that New Zealand had raised different options to be considered.
51. In summing up, the Chairman noted that most delegations seemed to want the Secretariat to
undertake further background work, as suggested in para. 9 of W/31.  He felt that there was a
consensus for the suggestions in sub-paras. 9(a), (b) and possibly (c), provided that it was merely an
update of what had been done in the financial services and basic telecommunication negotiations. He
proposed that the Secretariat be mandated to carry out this work, with the objective of having this
information ready for the next meeting, or soon thereafter.  It was so decided.
52. The Chairman suggested that paras. 9(d), (e) and (f) be taken up at a future meeting.  The
Working Party could have, by that time, a clearer indication from the authors of W/31 of the type of
institutions referred to under 9(f).  On 9(e), he understood that Australia and New Zealand would
come back to the Working Party.  A number of s ubstantive issues had been raised in relation to
possible disciplines, which would deserve further consideration:  the need to define subsidies, the
importance of focusing on trade-distorting subsidie s, the applicability of existing GATT disciplines,
the treatment of subsidies aiming at social objectives, the relevance of countervailing measures, and
the increasing interrelationship between goods and services.  In future meetings, the Working Party
should come back to the proposal made by Argentina and Hong Kong, China, and in particular its
para. 10 which could form a checklist of issues that needed to be considered.  Members would, of
course, be free to add any other pertinent issues that they considered should be taken up under GATS
Article XV.  It was so agreed.  The Chairman encouraged delegations to present information on their
respective experiences with trade-distorting subsidies in services.
C. NEGOTIATIONS ON GOVERNMENT PROCURMENT UNDER ARTICLE XIII OF THE GATS
53. The Chairman recalled that for most of the past year the Working Party had focused its work
under this agenda item on the issue of definition.  At the previous meeting, however, a number of
delegations indicated that they were ready to begin considering, in parallel, the scope for and structure
of possible multilateral disciplines.  Accordingly, he proposed to start by addressing the issue ofdefinition – based  in particular on the paper made available by the delegation of Japan (Job No. 6789,
12 November 1999).  Delegations could then exchange views on disciplines and, in particular, a
possible institutional framework.
54. In introducing the submission, the representative of Japan indicated that the proposal
regarding the treatment of privatized entities under the Government Procurement Agreement (GPA)
had been presented to the Committee on Government Procurement in the context of the on-goingS/WPGR/M/26
Page 14
review of that agreement.  The GPA had a provisio n stipulating objective criteria for determining the
range of public entities deemed to conduct government procurement, Article XXIV:6(b).  According
to that Article, a party could exclude an entity from the application of the agreement on the grounds
that government control or influence over it had been effectively eliminated.  The exercise of this
right could be frustrated by the lack of clear criteria of what would constitute effective elimination ofgovernment control or influence, including privatiz ation.  The basic idea behind the proposal was that
a privatized entity would be considered not to c onduct government procurement when it operated in
circumstances where market disciplines prevai led, endowed with independent management, not
subject to any government control or influence.  To determine whether market disciplines prevailed
two criteria were relevant: (i) government interven tion in the entity should have been removed, and
(ii) its operations made subject to competition.
55. The representative of Canada expressed concern whether the wording put forth in the
submission from Japan would achieve its objectives.  In her view, the proposed criteria might not be
sufficient to ensure that an entity was no longer under government influence and control.  Conversely,
it would preclude the possibility that there might be other features of a privatized entity.  She inquired
about the role of "market opening effects" of a privatization.  The proposed criteria to identify
privatized entities whose withdrawal would not be subject to compensation were difficult to apply inpractice.  In case of the proposed para. (b), she felt that a requirement that half the board of an entity
consist of non-government appointees was insufficient to ensure the removal of influence and control
by the government.  She sought further clarification with respect to para. (c).  The wording did not
appear to preclude the existence of a significant level of government ownership of an entity when
privatized, which would be inconsistent with the concept of removal of government influence andcontrol.
56. With respect to para. (c), the representative of Japan acknowledged that there might be room
for minor share holdings by the government, but the intention was to rule out significant government
holdings in the entity concerned.  He reiterated that the proposal was relevant for the discussion in the
Working Party, particularly in relation to what constituted a public enterprise.
57. The representative of the United States said that the submission addressed a very specific
provision of the plurilateral Government Procurement Agreement, relating to its coverage;  its
applicability to the work of the Working Party was therefore unclear.  The GPA coverage was based
on scheduling of specific entities rather than a generic definition of procurement.  In seeking to define
the meaning of privatization, Japan's paper might have some relevance for the discussion on definition
of procurement, with respect to the references in Article XIII:1 to "governmental agencies" and
"governmental purposes".  However, if that was the intention, he could not agree with the proposedtest.
58. The representative of Thailand, on behalf of  ASEAN, reiterated suppo rt for a parallel track
approach to the work on definition and disciplines.  More time was needed to reflect on the suggestion
contained in the Chairperson's note, as well as on the Japanese proposal.
59. Turning to the points raised in paras. 22 to 25 of his Note, the Chairman recalled that a useful
starting-point regarding possible disciplines migh t be New Zealand's non-paper of 30 September 1997
(Job No. 5446).  The paper referred to the responses given to the procurement questionnaire of
2 April 1996.  In his view, there appeared to be  two broad options for a framework of possible
disciplines (irrespective of their content).  Under the first option – the most ambitious one –
government procurement disciplines would apply to all services sectors included in a Member'sschedule.  Under the second option, Members would undertake disciplines on government
procurement in specifically selected areas.  In tu rn, two alternatives seemed to be possible under the
latter approach, one modelled on the Understanding on Commitments in Financial Services (UC), the
other on the telecommunications Reference Paper (RP).  Under an UC-type approach, MembersS/WPGR/M/26
Page 15
would indicate the sector(s) they were prepared to subject to the commonly negotiated disciplines and,
if relevant, any departure therefrom.  Under an RP-type approach, Members would, on the basis of a
"reference procurement paper", specify the disciplines they were willing to accept in the sector(s)
concerned.  He invited delegations' views on these  issues.
60. The representative of Canada indicated that more discussion was required before a decision
on the most appropriate approach could be taken.  It would be worth exploring first the issues raised
in the New Zealand paper, as the concepts of non-discrimination and elimination of discriminatory
provisions required substantive discussion.  It was also necessary to more fully examine the
implications for non-discrimination of the proposed terms of "full and fair opportunity for domestic
suppliers".  It was premature to go beyond basic disciplines to consider modalities such as those
described in paras. 23 to 25 of the Chair's note
61. The representative of New Zealand said that, given the resumption of services negotiations,
the Working Party should look into what could be achieved in the area of government procurement in
the services area.  Therefore, he agreed with the Chairperson's Note that it was time to look at a full
range of questions, including those related to market access and national treatment.  In relation to
para. 23, he was aware that the GATS positive list approach raised questions with regard to the
sectoral coverage of government procurement in services.  It was nevertheless desirable, from theliberalization standpoint, to define services procurement as comprehensively as possible.  He
welcomed the clarification contained in para. 24 that the envisaged result were general solutions,
which might be applied on a sectoral basis.  He believed that the second option given in the Note
offered a possibility to make progress in this area.
62. The representative of Hong Kong, China expressed his authorities' interest in achieving
comprehensive commitments in government procurement of services.  What needed to be developed
was a common view on the extent to which Members were prepared to commit on government
procurement in relation to the specific commitments  they already had.  The two possible options set
out in the Chairperson's Note, i.e. an RP-type or an UP-type approach, were very similar in nature
since both allowed for derogations.  His delegation was flexible in this regard but wanted to cover asmany sectors as possible, subject to negotiations.  He hoped the Working Party could move
discussions forward by taking up definition and disciplines in parallel.
63. The representative of the United States considered that the Chairperson's questions regarding
the feasibility of horizontal disciplines were legitimate.  He suggested that horizontal disciplines
might be appropriate on issues such as transparency, but perhaps less so in relation to the
liberalization of market access.  All efficient public systems would apply the same transparency
requirements across all sectors.  His delegation was not opposed to exploring sectoral approaches forgovernment procurement disciplines under the GATS that could include the negotiation of market-
access commitments;  to be effective, such commitments would have to be based on transparency
disciplines.  This was closely related with the on-going discussions in the Working Group on
Transparency in Government Procurement, and coordination between the two fora was therefore
necessary.
64. The representative of the European Communities suggested that, if work on horizontal
disciplines was undertaken, both transparency and non-discrimination should be addressed.
65. In summing up, the Chairman noted different views on how to proceed with the discussion of
possible disciplines.  Some delegations thought it premature to talk about a framework, while others
would find this discussion useful.  It was also said that the Working Party should be focusing on thekey concepts of national treatment and most favoured nation as they related to government
procurement.  He felt that the New Zealand paper remained relevant and could guide further work;
this would not preclude discussion on the scope of di sciplines.  He suggested discussing definitionalS/WPGR/M/26
Page 16
and conceptual issues (non-discrimination, transparency, horizontal disciplines applicable to all
sectors vs. horizontal disciplines applicable on a sectoral basis), in parallel at the next meeting.  He
urged Members to present submissions on these issues.
D. DATE OF NEXT MEETING
66. The Chairman indicated that the next formal meeting had been scheduled to start on 4 May, in
the afternoon, and to continue in the morning of 5 May.  Then, the formal meetings of the Working
Party would, to the extent possible, be alig ned with the meetings of the Services Council.
_______________________S/WPGR/M/26
Page 17
ANNEX I
Statement by the ASEAN Members to intro duce the ASEAN Concept Paper on ESMs in
Services at the meeting of WPGR on 24 March 2000
Mr. Chairman,
1. It is an honour and privilege for the ASEAN Members of the WTO (namely, Brunei
Darussalam, Indonesia, Malaysia, Myanmar, Philippines, Singapore, and Thailand) to be given the
opportunity today to introduce to the Working Party on GATS Rules a proposal pertaining to the
negotiating mandate under Article X of the GATS on emergency safeguard measures for trade in
services.   This proposal has kindly been circulated to the Members by the Secretariat at our requestunder reference S/WPGR/W/30 dated 14 March 2000.
2. At the outset, I must state that it is not our intention to submit an ASEAN position paper on
this important topic.   This Concept Paper is a docum ent intended for assisting the WP in its search for
a way forward.   The primary objective is therefore to produce a paper which has a widest possiblebasis for acceptance by Members, based on the results of the work conducted so far by the WP.   This
objective should, in our view, help explain the time it has taken the ASEAN Members to produce the
paper.
3. Also, with this same objective in mind, ASEAN has opted for a Safeguards Agreement
approach , as opposed to the approaches followed in Article V of the Agreement on Agriculture and
Article VI of the Agreement on Textiles and Clothing.   Indeed, the meeting reports of 1999 clearly
show that a large majority of the Members are in favour of a safeguard mechanism based on prior
investigation  and establishment of causal link  between injury and increased supply or consumption of
foreign services.
4. Before I go into details, it is important to underline that, since we are very much still in the
conceptual stage, many of the time-frames referred to in the paper are not just as yet specified, but
rather left open to discussion.
With your permission I now wish to briefly go th rough the important points contained in the paper.
5. First, the object and purpose of a possible set of rules to govern ESMs in services.   Here, we
try to stay as much as possible within the framework of the GATS.   The reasons are, inter alia, to
recognize the particularities of the area of services, as opposed to that of goods, when it comes to
applying safeguard measures.   These are reflected in paragraphs 2.1 and 2.2 of the paper.   The
reference to "structural adjustment" and "competition" in paragraph 2.3 is intended to underline thefact that ESMs are not to be used for protectionist purposes - a point of concern formally voiced by a
large number of Members.
6. Next, the definitions.   As a general rule, we try to refer to Article XXVIII of the GATS to the
extent possible and relevant to the application of ESMs in services.   Also, where applicable, we try torefer to other provisions of the GATS, or otherwise to those of other WTO covered agreements that,
in our view, may be translated into the services context without too much distortion.   These are, for
example, Article 4.1 of the Anti-Dumping Agreement and Article 4.1 of the Agreement on
Safeguards.   We feel that the Members would be more comfortable with this approach since we are
not trying to depart from some of the well-established notions in the WTO system.
7. A notable exception is perhaps the notion of "like or directly competitive services" we have
attempted to define in footnote 5.   Here, there is no GATS definition to refer to, and the practices inS/WPGR/M/26
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goods remain vague.   Moreover, the WP has never really discussed this concept.   We feel however
that it would be useful to include it in the paper at this stage.   We wish to encourage comments and
suggestions both on the "like services" and the "directly competitive services" ideas, as well as
whether Members should attempt to define these terms.
8. One important point remains the definition of the domestic industry.   Here, we have decided
to propose two options, due to the fact that a large number of Members are still reflecting on this
important question, and also because there are still some key technical issues which are yet to be
resolved among the Members before any sound decision may be made.   In the Annex to the paper, we
have tried to compile these issues in a systematic way in order to facilitate future discussions.   We
also believe that the Members should arrive at a common understanding on these issues as soon as
possible.
9. The first option in the definition of domestic industry includes foreign suppliers established in
the country through commercial presence, by using th e criterion of "operation" within the territory of
the applying Member, which indeed implies a physical presence of some sort by the supplier in that
territory.   The second option includes only "national" suppliers of the invoking Member - the"nationality" criteria being those contained in GATS Article XXVIII.
10.  The main difference between these two options lies indeed in mode 3.   In the first option, the
idea is to protect from an ESM foreign suppliers established in the country through commercial
presence before  the safeguard action, or at least not to make them target of these measures.   Their
"acquired rights", it goes without saying, will be protected.  In other words only new entrants would
be affected by the safeguard measure.  In the second option, these companies will be affected by the
ESMs in the same manner as all other foreign comp anies.  The issue remains, however, as to the
definitions of "acquired rights", "new entrants", as well as other relevant concepts.  They are
addressed in the Annex.  ASEAN does not, at this stage, believe that it is in a position to resolve allthese issues on behalf of all other Members.
11. With regard to the conditions of application of the ESMs, we believe that paragraphs 8 to 11
cover the views of a large majority of the Members as expressed on the WP so far.  One important
point to note is that we use the notion of "increas e in supply or consumption" instead of "increased
import" as is the case for goods.  This is because in our view, and in many Members’ view, the notion
of "import" would not be suitable for the services context.  Also, paragraph 11 is kept betweenbrackets, although we accept the notion that MFN is part of the principle of non-discrimination as
mandated by GATS Article X.  This is because, in our view, the applicability of MFN in this context
is very much dependent on the resolution of the issues raised in Section B of the Annex.
12.  With regard to the determination of serious injury or threat thereof, we use as basis the
relevant provisions in the Safeguards and AD Agreements, with some "innovations" designed to adapt
these provisions to the services context.  We therefore propose in Section V a three-step approach for
the investigation.  The invoking Member must, first, demonstrate an increase in supply or
consumption of foreign services;  second, the existence of a serious injury or a threat thereof;  and
finally, establish a causal link between the injury and the increase.  We believe that this is well inkeeping with the work of the WP so far.  A thoug ht worth considering even at this point is the
advisability of drafting detailed rules for the in vestigation in the same fashion as the AD or the
Subsidies Agreements.  In this case, elements of Job no.  5294/Rev.1, and future work on it, may be
incorporated into the text.  We are prepared to develop this point further in the future.
13. With regard to the applicable measures, three categories of these are identified in Section VI.
We believe that these measures cover all the possible sub-categories of specific measures as discussed
so far in the WP.  Discussion should indeed continue and focus on specific measures such as subsidies
or those affecting regulatory disciplines, such as the Telecom Reference Paper.  These specificS/WPGR/M/26
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measures, however, could and should be addressed in the context of the three types of measures
identified here.  But there would be no need to include an exhaustive list of specific applicable
measures in the text.
14. I now turn to the issue of compensation.  This issue is still very much under debate in the WP.
Some delegations have expressed doubt about the utility of such a provision in the context of services.
Others, on the other hand, find it relevant.  Here, we have taken the language from the Agreement on
Safeguards in order to stimulate debate.  Members may however wish to consider how relevant such a
compensation provision would be in the context of the different modes of services trade.
15. Section VIII deals with the issues of duration and review of the ESMs.  It is intended to
reflect the principles of "temporary basis" (paragraph 18), "degressivity" (paragraph 20), and "limitedfrequency of use" (paragraph 21).  So far, as far as we know of, no Member has expressed objection
to these principles.  With regard to the question of extending an ESM, in keeping with our general
approach, we believe that the rules should provide for this possibility, subject to a procedural restraint
(a new investigation), and a substantive condition (evidence of adjustment of the industry concerned).
16. Paragraph 22 deals with provisional measures.  This is an important issue.  We need to find a
balance between the necessity of providing Members with the scope to deal with critical
circumstances and the legitimate concerns that arise in respect of provisional measures given the
peculiarities of services trade.  Provisional measures, on the condition that they are used under strict
disciplines and with transparency, would allow the investigating Members to reasonably respond tocritical circumstances pending conclusion of the investigation.
17. Section X deals with notification, consultation, publications of legal texts, and
communication of information.  The aim is to ensure transparency which is one of the best tools that
we know of for preventing abuse in the application of ESMs.  These rules would moreover be inkeeping with the object and purpose of the GATS and the WTO Agreement.
18. Next comes the issue of developing countries.  In this regard, it has been suggested that
perhaps there would be no need for provisions on special treatment for developing countries, since all
Members already have the opportunity to assess their commitments under the GATS.  We believe
however that, with the overall objective of progressive liberalization in mind, developing countries
may need some protection in the process.  The proposed provisions in the paper are designed to assistdeveloping countries in their endeavours to realize this objective.  Moreover, as pointed out by some
delegations, developing countries may be less capable, from the technical point of view, to assess the
implications of commitments made.  Also, the capac ity of adjustment of their domestic industry may
prove to be less than that of developed countries.
19. Paragraph 28 sets the threshold for non-application of ESMs to a service of a developing
country Member.  Paragraph 29 allows them to extend the period of application of an ESM beyond
the period provided under paragraph 18.  Option 2 of paragraph 29 also exempts developing countries
from the compensation obligations.
20. Paragraph 31 deals with dispute settlement.  It simply refers to the DSU, including Article 22
which allows, subject to authorization by the DSB, suspension of concessions or obligations under the
GATS or under another WTO covered agreement – the so-called "cross retaliation".  This is a
principle to which so far no Member has expressed objection.
21. Finally, I turn to the issue of review of these proposed rules.  Since this is a new matter, a
review of the rules after a certain period of application would be a logical step to take.  With this
possibility, Members should be more comfortable to agree upon the possibility of using ESMs in
services.S/WPGR/M/26
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22. Let me conclude by saying that, with its limited knowledge and expertise, ASEAN has tried
its best, with good faith, to contribute to the Working Party’s recent progress in ESM negotiation, by
coming up with this concept paper.  It is ASEAN’ s belief that, for the months to come, the paper
should provide a most suitable basis on which the WP may continue its endeavour to bring to asuccessful conclusion its negotiating mandate under GATS Article X.
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ANNEX II
Canada Comments/Questions on ASEAN Safeguard Concept Paper
Meeting of WPGR on 24 March 2000
1. Regarding definitions, paragraph 3 suggests that ESMs apply to both supply and consumption
of services, and across modes of delivery.  It would be helpful to understand how an ESM could be
applied in a mode 2 consumption abroad scenario, i.e., how does one deal with situations where the
consumer moves abroad to consume a service.  What type of safeguard is being contemplated here?
Canada believes that the GATS applies broadly to the supply, not consumption, of a service.  Do
ASEAN Members have a different view?
2. In paragraph 5 under option 1, it is not clear what "operating within the territory of a
Member" means.  Does the paragraph only apply to modes 1, 3 and 4?  Does it cover mode 2?  Also,
how is domestic industry to be defined; does it include foreign owned, domestically established firms?
Clarification of these issues would be central to a proper determination of injury.
3. In paragraph 6, it is not clear whether a determination of serious injury is to include, as in the
case in GATT Article XIX, an examination of the causal link and, in particular, the examination of
other factors that may impact on injury.
4. In terms of the section relating to "Conditions of Application", it is not clear from reading
paragraphs 8 through 11 together, whether an ESM is intended to apply across modes, or solely within
a given mode.
5. Regarding the section relating to determining se rious injury, paragraphs 12 and 13 appear to
set out a framework for establishing the existence of serious injury.  The provisions, however, do not
provide guidance on how a determination of serious  injury would actually be made.  The framework
raises the issues of: (i)  what kind of quantifiable data would be required to establish serious injury;
and, (ii) how would such data be collected.  Also, it would be helpful to have further guidance on
indicators and criteria which in particular may be relevant for services.
6. The section on applicable measures raises the issue of whether an ESM is to apply across
GATS undertakings on market access, national treatment and other areas (i.e., GATS Article XVIII),
or whether its scope is to be limited to a particular case; (e.g., where market access commitments are
at issue, would market access to a particular sector be suspended?).  What kinds of remedies would be
contemplated?
7. The section dealing with compensation level of  commitments raises the issue of whether the
level of commitment refers to the trade value of  the commitment, or does the level of commitment
remain the same if one commitment is exchanged for another commitment in another sector?
8. In terms of the section on provisional measures, the paper appears to selectively draw on the
Safeguard Agreement.  The process for applying provisional measures appears to circumvent such
procedural considerations as the affect of an increase in imports, and a preliminary investigation.
9. With regard to paragraph 16 on compensation, is the approval of the Council on Trade in
Services (CTS) required before suspension of equivalent benefits by Member affected by the ESMcan be implemented?  Is there an imbalance here since approval of the CTS is not required to impose
an ESM?  Also, how does the requirement for a CTS approval under paragraph 16 affect members'
rights under GATS Article XXI?
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