RESTRICTEDWORLD TRADE
ORGANIZATIONS/WPGR/M/41
12 March 2003
(03-1390)
Working Party on GATS Rules
REPORT OF THE MEETING OF 25 FEBRUARY 2003
Note by the Secretariat1
1. The Working Party on GATS Rules held its forty-first meeting under the chairmanship of
Mr. Thomas Chan, from Hong Kong, China.  The agenda for the meeting was contained in
WTO/AIR/2031.  It included six items:  negotiatio ns on emergency safeguard measures under GATS
Article X;  negotiations on government procurement under GATS Article XIII;  negotiations on
subsidies under GATS Article XV;  date of the next meeting;  other business;  and appointment of the
Chairperson.  The Chairperson drew attention to the Annotated Agenda (JOB(03)/30) in which he
proposed themes for discussion.  The agenda for the meeting was adopted.
A. NEGOTIATIONS ON EMERGENCY SAFEGUARD MEASURES  (ARTICLE X OF THE GATS )
2. The Chairperson recalled that the following documents, requested by Members at the meeting
of 3 December 2002, had been circulated by the Secretariat:  (i) a Compilation of References Made by
Delegations to Safeguard-Type Provisions , in JOB(03)/20;  (ii) a revision of the note on Core
Elements Contained in Members' Proposals – Overview of the Synopsis , in JOB(02)/200/Rev.1;  and
(iii) a note on Safeguard-Type Provisions in Economic Integration Agreements  in
S/WPGR/W/4/Add.1.  He drew Members' attention to a previous note by the Secretariat on Economic
Needs Tests  (S/CSS/W/118) which included a compilation of ENTs found in Members' schedules of
specific commitments.  Following on the informal meeting held on 29 January 2003, he invited
delegations to continue their deliberations on concrete examples of situations in which a safeguard
measure would be needed and how it could be applied in practice.  In that regard, Members'
contributions, whether actual or hypothetical, were essential.  Members might wish to refer to the
matrix presented at the informal meeting on 29 January 2003 as a possible way of structuring thediscussion of relevant examples.
2  With respect to the identification, elaboration and consolidation of
elements of a possible ESM, Members might also wish to revert to other issues previously discussed,
including their intention:  (i) to identify possible common elements for an ESM based on the Synopsis
(JOB(01)/122 + Add.1);  (ii) to discuss the id ea of creating a procedural framework or core
mechanism or combining different models that had been proposed; and (iii) to further addressprocess-related issues, such as transparency, notification, consultation, surveillance provisions and
expedited dispute settlement proceedings.  Members might also wish to continue deliberations on the
issues of desirability and feasibility.  During the last meetings, some delegations had put forward their
views on these issues, but more guidance was needed.
3. He recalled that, according to the work programme on emergency safeguard measures,
3 the
Chairperson would circulate a note by 15 March 2003 "to report on the results of work under item (a)
[of the work programme], identifying areas of convergence and divergence among Members, with a
view to providing a basis to facilitate further nego tiations".  Item (a) referred to Members' task "to
                                                     
1 This document has been prepared under the Secretariat's own responsibility and without prejudice to
the positions of Members and to their rights and obligations under the WTO.
2 Summary of Comments Made During the Informal Meeting of 29 January , Note by the Secretariat,
JOB(03)/21.
3 S/WPGR/7.S/WPGR/M/41
Page 2
identify elaborate and consolidate elements for an ESM and to address the question of feasibility and
desirability of ESM".  Obviously, Members' inputs and contributions were crucial in that regard.  His
current assessment was that the Working Party had not gone very far and that the work on these two
issues had not brought forth any tangible results so far.  There was very little convergence on the
fundamental issues, and many basic questions remained open;  different views had been expressed asto whether these should be addressed and, if so, how.  He observed that, even if the Working Party
were to decide to start drafting an emergency safeguard mechanism, there would appear to be no
common basis among Members on how to proceed.  For instance, there seemed to be no consensus on
the very fundamental issue of the form of a possible ESM or on the question of whom should be
protected by an ESM.  It was his duty to report on this state of play.
4. The representative of the European Communities said his delegation fully supported the
Chair's proposal to base discussions on the examination of concrete examples, and welcomed the
matrix presented by New Zealand at the last informal meeting.  Indeed, experience gathered in
implementing the GATS had not brought any concrete example of emergency situation, and
Article X:2 had never been used.  In addition, no concrete example had been identified on a
hypothetical basis in the written contributions submitted to the Working Party.  The EC was looking
forward to any examples that ASEAN or other interested Members like Brazil or Uruguay could sharewith the Working Party.  His delegation had observed some confusion regarding the scope of the
mandate given by Article X.  It was therefore timely and necessary to recall the legal framework of an
emergency safeguard measure within the context of GATS.  Should there be a group of "friends of
fair trade" or a group of "friends of legal certainty", all WTO Members would ask to be included.
Contrary to antidumping measures that constituted a reaction to unfair trade, an emergency safeguardmeasure was a reaction to fair trade and challenged legal certainty.  Friends of fair trade and of legal
certainty would therefore consider that an emergency safeguard measure could not be a Pandora’s
box.  With respect to the scope of an ESM, the EC wished to focus on the words "question" and
"emergency", both contained in Article X.
5. First, Article X expressly referred to "emergency" safeguard measures.  A safeguard measure
that was in conformity with the wording and spirit of Article X needed to be based on a situation of
emergency, which was characterised by its extraordinary nature and intended to deal with unforeseen
developments as had been clearly indicated by ASEAN in WPGR meetings in November and
December last year. Such characteristics were not met by the mere increase in trade and stiffening
competition that was inherent in any liberalisation commitment.  The mandate set out in Article X was
not intended to allow Members to introduce new general exceptions into the GATS, nor to carry out
structural adjustments or to protect infant industries. The GATS had provisions dealing with generalexceptions, set out in Articles XIV and XIV bis.  As regards structural problems, which by their very
nature were not extraordinary, the bottom-up architecture of the GATS afforded Members enough
flexibility to fully take them into account when undertaking commitments.  Also, Article XXI
provided for a procedure to deal with situations where Members decided to modify or withdraw their
commitments in whole or in part.  The infant industry argument was based on alleged (expected)future comparative advantages and had nothing to do with rapid (surge) market disruption.  This had
been clearly illustrated by Professor Messerlin du ring the informal seminar on ESM that ASEAN had
organised in Nyon last year.  Furthermore, situatio ns of emergency related to capital movements that
could seriously compromise the balance of payments or the monetary policy of Members were
already contemplated by the GATS.  Article XII provided a remedy for serious balance-of-paymentsand external financial difficulties or threat thereof.  As regards capital movements causing serious
difficulties for monetary policy, no specific remedy was needed since, by application of the Annex on
Financial Services, the GATS did not cover the ac tivities conducted by a central bank, a monetary
authority, or any other public entity in pursuit of monetary or exchange rate policies.
6. Second, Article X clearly stipulated that negotiations would address the "question" of
emergency safeguard measures.  At the time of c oncluding GATS negotiations, notwithstanding theS/WPGR/M/41
Page 3
existence of a precedent in the goods area, no agreement had been reached on an ESM in services
because the question of its feasibility and desirability had not been solved. This explained the
language in Article X, as was clearly indicated in document S/WPGR/W1.  The contributions
submitted to the WPGR, which, in the absence of concrete examples of emergency situations, were
based on abstract considerations, showed that this question remained unresolved.  Most of theproposals, whether they directly referred to feasibility and desirability or were made without prejudice
to that question, had identified a number of issues  showing the difficulties of applying an ESM to
services (legal certainty of commitments, modal application, protection of acquired rights,
applicability of the principle of non-discrimination, etc.).  In all circumstances, the application of a
safeguard measure to any of the four modes of supply, taking into account inter-modal relations,
raised important concerns already identified by the European Communities
4, which had not been fully
addressed by the WPGR.  For the European Communities, a positive conclusion on the question ofESM presupposed therefore:  (i) the identification, in case they existed, of concrete examples of
emergency situations in the services area that had not already been addressed by GATS provisions;
and (ii) the demonstration that an ESM would be feasible and desirable to deal with the identified
situations (i.e. that the difficulties and concerns that had been raised in respect of ESM could be
overcome in practice).  His delegation was considering the possibility of submitting a contribution tothe WPGR along the lines of this statement.  This input should be taken into account by the
Chairperson in the preparation of his report.  Turning to the Note by the Secretariat on Safeguard-
Type Provisions in Economic Integration Agreements ,
5 he said that, although the note clearly stated
that it did not purport in any way to prejudge the measures covered by Article X, it indicated that the
provisions reproduced in the document were comparable to GATT Article XIX.  His delegationprofoundly disagreed with that affirmation.  All the provisions contained in the so-called Europe
Agreements concluded with Central and Eastern European countries, were infant industry provisions
and, therefore, not comparable with Article XIX of GATT.  They should be compared with
Article XVIII of GATT, a provision that it had no t been deemed necessary to introduce in the GATS.
7. The representative of Thailand, speaking on behalf of the ASEAN Members, referred to the
negotiating history of GATS Article X and recalled that discussions on possible safeguard actions in
services during the Uruguay Round took place in the Group of Negotiations on Services (GNS).
Document MTN.GNS/W/70, dated 13 September 1989, summarised the principal points which had
been made at the time with respect to safeguard concepts and provisions.  Safeguard-related issues
were raised in several sectoral discussions,  including basic telecommunication, construction,
engineering design, transport, and tourism.  A number of grounds were given for invoking an
emergency safeguard measure.  For example, for telecommunications, construction and engineeringdesign services, possible grounds for invoking safeguards were protection of infant industries,
physical infrastructure and national culture as well as significant increase in imports and the
prevention of abuse of market power (including cross-subsidisation and the monopolization of
information).
6  Under transportation and tourism, possible grounds for safeguards included protection
of environment (including prevention of traffic congestion), dumping of services products,infrastructure development subsidies, and prevention of excessive market access of foreign providers;
natural disasters were mentioned for tourism.
7  At that time, grounds for safeguards and general
exceptions were discussed together and participants in the GNS recognized that some of these cases
could be better dealt with under general exceptions.  However, the general impression remained that
possible grounds for invoking safeguard provisions in the context of trade in services could still benumerous and that the need for safeguard action might differ from sector to sector.
8  A concrete
attempt by UR participants to address the issue of safeguards could be found in the draft services
                                                     
4 S/WPGR/W/38.
5 S/WPGR/4/Add.1.
6 MTN.GNS/W/70, paragraph 17.
7 Ibid., paragraph 19.
8 Ibid., paragraphs 20 and 18.S/WPGR/M/41
Page 4
agreement presented by the EC on 18 June 1990 (MTN.GNS/W/105), which contained a provision
entitled Article XI – Emergency Safeguard Measures :  "[I]f a given service is being imported into the
territory of a party in such, substantially increased quantities [in absolute or relative terms] or a party
is faced with such a major external cause of disturbance of its market for a given service as to cause or
threaten to cause serious injury to domestic providers of like or directly competitive services, theparty shall be free, subject to the conditions and procedures laid down in paragraph 2, to, suspend, in
whole or in part, a liberalization commitment under this Agreement ...".  Therefore, a rationale for
invoking an emergency safeguard, as proposed by the EC, was the "major external cause of
disturbance of its market for a given service as to cause or threaten to cause serious injury to domestic
providers".
8. In her view, the UR negotiating history also revealed that negotiators had found inspiration in
a number of existing agreements, for instance, the Rome Treaty establishing the EEC, the Conventionestablishing the EFTA and the OECD Code of Liberalisation of Current Invisible Operations.
Safeguard-related provisions were not designed exclusively for services, as the agreements did not
distinguish between goods or services. They simply provided for protective measures in cases where
implementation of commitments led to serious economic difficulties in sectors, areas or region, or, as
in the OECD Code, "serious economic or financial disturbance" in the country concerned.  TheSecretariat had already compiled a number of documents giving details on safeguard provisions in
regional trade agreements (S/WPGR/W/2, S/WPGR/W/4 and S/WPGR/W/4/Add.1). These
agreements called for various comments.  First, many of them comprised at least one developed
country member.  For example, NAFTA, EFTA and various agreements concluded by the EC with
several Central and Eastern European countries contained safeguard provisions which could affecttrade in services.  Few of these agreements had on ly developing country members.  Second, safeguard
provisions that could affect trade in services were being agreed upon under various regional
agreements.  The most recent example was the Consolidated Version of the Convention Establishing
the EFTA, concluded in June 2002, and the Agreement between the EC and Slovenia, concluded
in 1999.  Grounds for invoking safeguard measures under these agreements were numerous.  None ofthem required "emergency" as a prerequisite for safeguard action.  ASEAN recognized that certain
peculiarities of these FTAs might have necessitated these safeguard measures and it would be useful if
parties to these agreements could give further clarif ication to the Working Party in this respect.  For
instance, parties to an agreement between the EC and one country "may introduce measures which
derogate from the provisions of this Chapter as regards the establishment of Community companies
and nationals if certain industries:  are undergoing restructuring;  or are facing serious difficulties,
particularly where these entail serious social problems in (…);  or face the elimination or a drasticreduction of the total market share held by (…) companies or nationals in a given sector or industry in
(…);  or are newly emerging industries in (…)".  Under other agreements, the most common ground
for invoking a safeguard would be "serious difficulties" which could be economic, societal or even
environmental, while under NAFTA, the criteria were more specific to the financial sector.
9. She said that two examples of safeguard mechanisms could be found under the GATS
framework.  The first example was a measure in the schedule of Japan, under freight transport
services, mode 3.  No specific situation justifying invocation was provided.  The commitment merely
stated "Emergency safeguard measures concerning the limitations on the number of service suppliers
and on the number of service operations or on the quantity of service output".  The second case was
the Bulgarian transitional service safeguard  approved in the accession process, which had since
expired.  Under these provisions, Bulgaria had been allowed to "impose a suspension of its
commitments to permit a foreign service supplier to establish an initial or an additional commercial
presence in Bulgaria in order to address specific adjustment concerns"  (WT/ACC/BGR/5, para. 88).
No other specific criteria were required for Bulgaria to invoke the measure, nor were there criteria to
determine what would constitute "specific adjustment concerns".  In her view, the aforementionedcases indicated that the context of a safeguard action could be broad and not particularly specific.
Many of these measures had been envisaged even to facilitate domestic adjustment, as in theS/WPGR/M/41
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Bulgarian safeguard case, or nurture infant industr ies, as in the agreemen ts between the EC and
various countries.  In the WPGR, discussions on the "context" seemed to be more specific.  The
ASEAN Draft Agreement on Emergency Safeguard Measures proposed that "an emergency safeguard
measure may be applied to trade in services only if the applying Member has determined, in
accordance with the provisions of this Agreement, that, as a result of the effect of its specificcommitments undertaken under Part III of the GATS, there is an emergency where there is an increase
in supply of the service concerned by a supplier or suppliers of another Member, [or consumption
thereof,] either, in absolute terms or relative to domestic supply [or consumption of such domestically
supplied service], which is causing or is threatening to cause serious injury to the domestic industry
that supplies like or directly competitive services" (Article 11:1).
10. ASEAN wished to offer the following hypothetical example in retail services as a possible
situation that justified a safeguard action.  Take the case of Shangri-La, a developing country with alargely agrarian society where the population was scattered across small villages.  Like in many other
countries, the distribution sector was an important component of the domestic economy.  Many
workers were low-skilled, received relatively low-wages, worked mainly on a part-time basis and the
percentage of women was higher than men.  The retail sector acted as an entry point into the labour
market for many of these workers.  The structure of the distribution sector reflected what might bedescribed as the early 20
th century United States experience:  the dominant marketing channel was a
general store in small towns;  in larger cities, sma ll conveniently located stores specialized in a narrow
range of items with perhaps a few large department stores selling a much wider range of goods.9  The
fact that the level of development of a country affected the structure of its distribution sector was also
confirmed by an OECD study.10  The livelihood of low-wage people depended a lot on small
independent stores in villages and small towns which not only acted as major employers, but
performed a vital role in providing food, basic amenities, etc.  Then, Shangri-La liberalised its
distribution sector, both wholesale and retail, and granted full market access and national treatment in
modes 1 to 3.  Within  months, foreign majority-owned retail chains opened vast numbers of retail
outlets.  They had direct impacts on the small independent shops.  People began to buy more fromdiscount or superstores in the suburb areas, forcing small shops to close down.  At the village level,
independent small shops lost customers to 24-hour service shops and began to vanish.  Few of the
former employees could immediately get a job in the modem 24-hour shops as these often required
higher education levels, such as computer skills.  As a result, in a short period after full liberalization
small independent shops collapsed across the country and a large number of unskilled workers in rural
areas were out of work.  The combined market share of foreign-owned retail businesses jumped
dramatically.  She said that this example was a first attempt to illustrate a situation in which asafeguard measure could be needed.   ASEAN was still reflecting upon this example and reserved its
right to revert to, and elaborate on, it.  Her delegation was interested in hearing other Members'
comments and contributions in this debate.
11. The representative of Canada shared the concerns by the European Communities regarding
the underlying economic reasons for an ESM, in particular the references to structural adjustment.
There was a need for concrete examples.  NAFTA could not be considered as an example of a
conventional safeguard.  The historical account made by the delegation of Thailand was interesting,
but an ESM should address circumstances not taken into account when a commitment had been
undertaken.
12. The representative of Brazil said that the EC argument that an ESM would impair legal
certainty was difficult to reconcile with the EC proposal of a safeguard in agriculture.  In his view, the
best starting-point was to discuss what an ESM should be.  Reference to technical problems was not
an excuse.  Provisions such as GATS Articles XIV and XXI did not obviate the need for an ESM.
                                                     
9 S/C/W/37, page 3.
10 Pilat, Dirk (1997) Regulation and Performance in the Distribution Sector, OECD, Paris.S/WPGR/M/41
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The historical account given by Thailand was useful.  Members had never used Article X because
there was no framework, but this did not mean  that they would not need it in future.
13. The representative of the United States said that the distinction, introduced in the Overview of
the Synopsis, between "domestic industry" and "acquired rights" would be useful for examining the
modal application.  She agreed with the Chairperson that a reality check was needed and agreed withthe points raised by the European Communities;  the introduction of an ESM was not a decided issue,
and concrete examples were needed.  Articles XII or XIV bis, for instance, addressed relevant
concerns.  In her view, the problem raised in the example given by ASEAN could be solved through
regulatory measures in the sense of Article VI.  The modal application of the various elements
contained in the Overview of the Synopsis should be  looked at.  It would be interesting to know
whether positions had changed regarding the definition of "domestic industry".  The creation of an
ESM did not hinge only on political considerations , but very practical concerns, including concerns
with regard to mode 4.  The "demandeurs" had to provide examples, and demonstrate desirability and
feasibility of an ESM.
14. The representative of Switzerland thanked the European Communities for their statement.  He
noted that the EFTA Convention covered many sectors, not only services.  Moreover, the level of
obligations undertaken under that agreement was very high, full market access and national treatmentwere extended to all sectors across the board.  It provided for the free movement of natural persons
and abolished all restrictions on capital movements.  The EFTA Convention also contained provisions
on government procurement beyond the WTO Agreement on Government Procurement.  The GATS,
on the other hand, was based on the principle of progressive liberalization.
15. The representative of Japan said that the safeguards-type provisions listed in
S/WPGR/W/4/Add.1 obviously contemplated a very hi gh level of liberalization.  Hence, comparison
with the GATS was not helpful.  He further noted that many economic integration agreements did not
contain any safeguard mechanism.  Types and policy objectives of the measures concerned were
different;  some related more to balance of payment restrictions, others to prudential measures or
Article XIV-type measures.  Discussions under Article X had to take into account the generalstructure of the GATS itself.  He agreed with others that concrete examples should be discussed and,
in that regard, he would welcome indications as to how competent authorities would apply a
safeguard measure under mode 3.  Turning to the ASEAN example of liberalization in the retail
sector, he enquired how injury would be measured, whether it would force disinvestment or prevent
new investments.  It should also be borne in mind th at foreign stores would employ local people.  The
emergency safeguard measure in the Japanese schedule aimed at ensuring a stable supply of services
on a non-discriminatory basis.  It did not aim at protecting the Japanese suppliers, and did notrepresent an economic needs test.  It was, therefore, not a safeguard-type measure.
16. The representative of Argentina noted that Article X:1, second sentence, stipulated that "the
results of such negotiations shall enter into force …".  This implied that there should be a result.
Moreover, it was difficult to reconcile the idea that an emergency situation should be unforeseen with
the assertion that the GATS provided sufficient flexibility at the time of scheduling to take intoconsideration all possible problems which could arise as a result of a commitment.  Recalling that the
GATS called for progressive liberalization, he enquired whether a safeguard measure would be
desirable when the multilateral system had reached the level of liberalization of economic integration
agreements.  He wished the delegation of Japan could give more details on how the emergency
safeguard measure contained in the schedule would be applied.
17. The representative of the European Communities said that a distinction should be made
between safeguards-type provisions and emergency sa feguard measures.  The fact that paragraph 2 of
Article X had not been invoked so far was a reason to ask the "demandeurs" to provide concrete
examples.  An ESM could not be used to address structural problems.  The negotiating history ofS/WPGR/M/41
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Article X indicated that, during the Uruguay Round, attempts had been made to set up an ESM, but it
had been found unfeasible.  The distinction between a "safeguard" and an "emergency safeguard
measure" had not been understood.  If retail distri bution suffered from structural problems, an ESM
would not be the right answer.  The European Communities was in favour of introducing a safeguard
for agricultural products because it was possible to implement safeguard measures in goods trade.Some economic integration agreements, such as the agreement between the EC and Mexico, or
between the EC and Chile, did not contain an ES M.  On the other hand, the EEA included such a
mechanism, but entailed a higher level of commitments.
18. The representative of Australia agreed that progress on the question of an ESM had been
limited and that there was little convergence on fundamental issues.  The proposal by New Zealand to
use a matrix to discuss concrete examples deserved further consideration.  Work could proceed on a
sectoral basis which might allow for a clearer assess ment of relevant situations.  He enquired whether
any Member had tried to fill the matrix.
19. The representative of Thailand, speaking on behalf of the ASEAN Members, said that the fact
that an ESM had not been needed so far did not mean that it would not be needed in future as further
liberalization was underway.  The application of a safeguard measure would amount to the temporary
withdrawal of a specific commitment under Articles XVI, XVII or XVIII.  The fact that Membersscheduled limitations under these provisions implied that they believed it was possible to enforce the
corresponding restrictions.  Questioning the enforcement of a safeguard measure amounted in fact to
questioning structure and functioning of the GATS.
20. The representative of Switzerland said that the EEA had entered into force at the same time as
the results of the Uruguay Round.  Despite a high level of commitments, no safeguard measures had
been invoked, and there appeared to be no case in which an ESM would have been desirable and
feasible.  He enquired whether the "demandeurs" of an ESM would contemplate the liberalization of
government procurement, as the EFTA agreement did.  Both hypothetical and actual examples of
situations where an ESM would be needed had to be discussed.
21. The representative of Canada said that more discussion was needed on how "further
liberalization" could justify an ESM.  Circumstance s that might not have been contemplated at the
time a commitment was undertaken could include changes in technology or in the regulatory
framework.
22. The representative of Brazil said that the absence of any real liberalization so far in services
explained why it was difficult to find actual examples.  Hence, only hypothetical examples could be
discussed for the time being.  Should there be a real liberalization, governments ought to be able to
suspend commitments, without resorting to a unilateral interpretation of what a safeguard was.
23. The representative of New Zealand welcomed  the example mentioned by ASEAN.  The
matrix presented by his delegation at the January informal meeting might provide a framework for
further discussion.  He recalled that the matrix would contain two columns.  A first column could
describe examples of factual circumstances that might justify the imposition of a safeguard measure,
ordered according to the modes of supply.  These examples could draw on factual circumstances that
had arisen in practice or on hypothetical situations.  A second column would contain possible
legislative or regulatory responses in these factual circumstances.  Thus, the example introduced by
ASEAN would appear in the first column, and possible measures would be listed in the second one.
If, for illustrative purposes, the matrix were ap plied to the goods sector, the first column would
describe an unexpected situation and remedial measures, such as a tariff increase, would be in thesecond column.  Some examples could be found in the compilation prepared by the Secretariat in
JOB(03)/20.  He concurred that more specific examples were needed.S/WPGR/M/41
Page 8
24. The representative of Guyana said he was concerned with the current situation.  The overall
intent of these negotiations was simply to establis h rules governing the use of an ESM.  One example
of a situation justifying a safeguard action could be a terrorist act.  Measures taken after such an event
might affect services providers across the four modes and in various sectors (tourism, transport,
health, etc).  Guyana called for the completion of the negotiations on emergency safeguard measures.
25. The representative of the Republic of Korea said that an ESM was necessary if further
liberalization was contemplated.  The difference between GATS and economic integration agreements
was not particularly significant:  a "none" listed  in a sector meant full liberalization.  The ASEAN
example was a pertinent one.  In this case, employees could move to a big shop, but not the
employers.  Regulation discriminating foreign suppliers would be considered a violation of national
treatment.  To the extent that withdrawal of commitments was possible under Article XXI, it should
be possible also to contemplate a temporary suspension of commitments.
26. The representative of the European Comm unities said that a full commitment under the
GATS was still different from lib eralization under an economic integration agreement to the extent
that the latter went further in terms of regulatory harmonization and precluded possibilities to
withdraw commitments.  An ESM was not the response to a structural problem.  The "results" referred
to in the second sentence of Article X:1 could take three possible forms:  (i) should the WPGR be ableto identify situations justifying an ESM and demonstrate the feasibility and desirability of an ESM to
deal with them, the result could be an ESM agreement;  (ii) should the WPGR have identified such
situations, but failed to prove feasibility and desirability of an ESM, the result could be making
Article X:2 permanent;  and, (iii) should the WPGR be unable to identify such situations, this would
suggest that there was no need for an ESM.  Measures taken in response to a terrorist act would bejustified under Articles XIV or  XIV bis.  Examples to be discussed should be concrete and specific,
whether real or not.
27. The representative of the United States said that a terrorist act was a completely inappropriate
example.  In any case, measures taken in the aftermath of such an event would fall under Article XIV
or XIV bis.  Article X:1 referred to negotiations on the "question" of an ESM and did not assume any
particular end result.  A way of moving forward was to discuss examples.  She wondered what kind of
safeguard measures would be contemplated in  the ASEAN example.  The response should be
discussed mode by mode.
28. The representative of Chinese Taipei said that an ESM should not be used to address
structural problems.  Nevertheless, a measure to address temporary problems was needed.  The
concept of unforeseen developments had been used in the context of disputes.  More concrete
elements were necessary to define concepts such as domestic industry and to better understand themeaning of causation.
29. The representative of Chile agreed with Switzerland regarding the difference between the
GATS and economic integration agreements.  The latter involved a higher level of liberalization for
both goods and services.  The example mentioned by ASEAN could be addressed in the context of the
matrix proposed by New Zealand.
30. The Chairperson noted that the discussion had focused on situations justifying an ESM.  The
concrete and hypothetical example presented by the delegation of Thailand, on behalf of the ASEAN
Members, had prompted an interesting debate. Delegations had referred to the need for additional
concrete examples, both actual and hypothetical, referring to possible situations where safeguard
action were needed.  There was no need to draw a hard and fast distinction between actual andhypothetical examples as today's hypothetical could be tomorrow's actual example.  He reminded
Members that examination of examples is just one aspect of the work on ESM.  Regarding references
to safeguard-type provisions in regional trade agreements, Members pointed to the differencesS/WPGR/M/41
Page 9
between the GATS and economic integration agreements.  Some referred to the background and
mandate of GATS Article X which had been debated before, and perhaps there was no need for
another debate at this juncture.  The issue of structural adjustment was not new, and had been
highlighted in the Synopsis.  He proposed to take note of the statements made and revert to these
issues at the next meeting.  With respect to the work programme on emergency safeguard measures,he recalled that the Chairperson had to circulate a note by 15 March 2003.  He would take into
account the discussion during the meeting.
B. N
EGOTIATIONS ON GOVERNMENT PROCUREMENT  (ARTICLE XIII OF THE GATS )
31. The Chairperson drew Members' attention to the work programme on government
procurement agreed by the Working Party.  He recalled that Members were encouraged to put forward
submissions as early as possible before 31 March 2003, and that it had been agreed to continue work
on the basis of submissions and materials available.  Following on the discussion at the informalmeeting on 29 January 2003, he suggested that delegations focus, inter alia , on desirability and
feasibility of developing disciplines for government procurement in services and on other related
issues.  Discussion of these issues would be withou t prejudice to Members' ability to raise questions
concerning the scope of negotiations.
32. The representative of the European Communities said that an interesting debate had taken
place during the informal meeting on 29 January.11  One conclusion had been to discuss desirability
and feasibility of services procurement rules.  The EC written communication12 indicated that
liberalization of government procurement could benefit developing countries.  At the last informal
meeting, various delegations had stressed the importance of transparency and procedural rules.  There
was a preference to concentrate first on horizontal disciplines before considering the need for sectoralrules.  Transparency disciplines could apply to the criteria used to assess tenders, for instance.  He
suggested that the Secretariat be asked to undertake a compilation of transparency rules and
procedures contained in bilateral and plurilateral agreements.
33. The representative of Australia said that the EC contribution dealt with various issues under
consideration in the Working Group on Transparency in Government Procurement (WGTGP).
Initiating a discussion on similar issues in this Working Party would duplicate work.  The WGPR
should delay consideration of these issues pending a result in the WGTGP.
34. The representative of the Philippines said that  the mandate contained in Article XIII excluded
negotiations on market access and national treatment.  Moreover, the same issues should not be
addressed in two different bodies.  His delegation had serious objections to the desirability of rules for
services procurement.
35. The representative of the United States preferred that transparency issues be addressed in the
WGTGP.  The Chair of the WGTGP would be welcome to share information with the WPGR, but it
was not necessary to establish a formal structure for that purpose.  The Chair of the WPGR could also
seek coordination on his own capacity.  Information could be provided on the type of issues which
were being discussed in the WGTGP since 1996.  The presentation should be balanced and remain
oral.
36. The representative of Norway was in favour of a coordination of work with the WGTGP and
supported the suggestion that its Chairperson informed  the WPGR.  He also supported the EC request
for a compilation of transparency disciplines to be undertaken by the Secretariat.
                                                     
11 See Summary of Comments Made During the Informal Meeting of 29 January , Note by the
Secretariat, JOB(03)/21.
12 S/WPGR/W/38.S/WPGR/M/41
Page 10
37. The representative of Chile said that transparency was an important theme, and that
duplication between the WPGR and the WGTGP should  be avoided.  It would be useful if the
Chairperson of the latter Working Party could provide information.  Her delegation supported
information on transparency disciplines in economic integration agreements.
38. The representative of the Republic of Korea said that it was not desirable to duplicate work.
She enquired what kind of information Members were interested in.
39. The representative of Venezuela wondered whether the compilation contemplated by the
European Communities would concern only ratified agreements or include draft agreements.  The
representative of the European Communities said that only ratified agreements should be taken into
account.  The representative of the United States said that her delegation would be pleased to provide
transparency provisions in agreements which would soon be ratified, such as the US–Chile and
US-Singapore agreements.
40. The Chairperson noted the emphasis by Members to avoid overlap of work between the
WPGR and the WGTGP, and some had indicated a preference for issues relating to transparency to be
addressed in the latter.  Regarding the compilation of information as proposed by the European
Communities, the Secretariat would first check whether the requested information was already
available in the WGTGP and would report to the WPGR at the next meeting.  With respect toinformation on relevant activities in the WGTGP,  he proposed that the format and content of an
information exchange should be left flexible and should not be prejudged for the time being.  He or
his successor could consult the Chairperson of the WGTGP on an informal basis to see how
information exchange could be arranged, whether it  would be a briefing by the Chair or another
means.
C. N
EGOTIATIONS ON SUBSIDIES  (ARTICLE XV OF THE GATS )
41. The Chairperson recalled that, according to the work programme on subsidies, Members were
encouraged to put forward submissions as early as possible before 31 March 2003.  It had also been
agreed to continue discussion on the basis of submissions from Members and materials available.
Following on the discussions at the informal meeting on 29 January13, which had focused on the
submission by the delegation of Poland14, he suggested that delegations continue their debate on the
issues raised at that meeting, including definition of subsidies in services, categorisation of such
subsidies, scope of "actionable" subsidies, and possible parallels between the GATS and the SCM
Agreement.  In this regard, Members might wish to consider whether and, if so, how the Checklist on
Subsidies15 should be revised with a view to structuring future discussions.  The Chairperson recalled
that, in November last year, a delegation had dr awn attention to an UNCTAD seminar on audiovisual
services during which the issue of subsidies in the audiovisual sector had been raised.  The UNCTADSecretariat had circulated a summary of the seminar to the Special Session of the Council for Trade in
Services last December.  Should the Working Part y wish to obtain more specific information on
subsidies, it could agree to invite a representative from UNCTAD to make a presentation at the next
meeting.  He had also been informed, on an informal basis, that UNCTAD would be ready to share
information on subsidies in other services sectors as well (such as tourism, energy, construction).Delegations were invited to give their views on this issue.
42. The representative of the United States said that in the communication on audiovisual and
related services, presented in the Special Session in December 2000, her delegation had proposed to
                                                     
13 Summary of Comments Made During the Informal Meeting of 29 January , Note by the Secretariat,
JOB(03)/21.
14 JOB(02)/207.
15 Job No. 4519/Rev.1, 6 October 2000.S/WPGR/M/41
Page 11
consider developing an understanding on subsidies in this sector.16  It might be confusing to further
discuss audiovisual services in the WPGR.  Her de legation would, however, be interested in other
delegations' opinion and would like to see releva nt papers before deciding on whether UNCTAD
should be invited to make a contribution.
43. The representative of Hong Kong, China said that his delegation was in favour of updating
the Checklist.  The definition of "subsidy" could be based on the SCM Agreement;  an alternative
definition for the authority granting the subsidy co uld refer to Article I:3(a).  It would also be
interesting to further discuss categorisation of subsidies, and the criteria and parameters for granting
subsidies.
44. The representative of the European Communities said that UNCTAD had already made a
presentation on the seminar on audiovisual services at the Special Session.  With respect to
information concerning other services sectors, her delegation was not in a position to take a decisionwithout having seen the relevant documents.  It was primarily up to Members to bring subsidy-related
information to this Working Party.
45. The representative of Argentina agreed with Poland that a definition of "subsidy" could
include some basic elements of Article 1 of the SCM Agreement.  Three elements were essential:
(i) the existence of a financial contribution, which was  (ii) granted by a public authority,  and(iii) conferred a benefit.  GATS Article I:3(a) was broad enough and could be used as a basis for
identifying entities granting the subsidy.  Other im portant concepts included the need for a subsidy to
be specific, the potential trade-distorting effects and consideration of public policy objectives.  The
exclusion of some sectors might be envisaged.  Possible criteria for establishing a categorisation
should be discussed.  Any information that UNCTAD could submit would be welcome.
46. The representative of Brazil supported the comments just made by the delegation of
Argentina.  The WPGR should not preclude any source of information and a contribution from
UNCTAD was welcomed.  UNCTAD might send written material to the Working Party.  The
representative of Mexico said that the Working Party should be open to any source of information.
The Secretariat should seek information in contac ts with other international organizations.  The
representative of Canada expressed some doubts regarding the opportunity to invite UNCTAD to
present information.  His delegation wished to k now what type of information UNCTAD intended to
submit.  The representative of Chile supported a contribution from UNCTAD.  The Working Party
needed to answer the questions posed by Poland.  The issue of categorisation of subsidies should beincluded in the Checklist, as well as the question of whether countervailing duties could be applicable.
The representative of Chinese Taipei said her de legation was studying the applicability of the SCM
definition and how the concept of specificity could apply to services.  More information on subsidies
was needed.  However, it was difficult to notify them without an agreed definition.
47. The representative of Australia said her delegation felt that there were three key areas.  First,
the issue to whom a subsidy was granted was not regulated in the SCM agreement;  the test was rather
whether a subsidy implied a benefit, but did not depend on whether the service was supplied on a
commercial basis.  Second, specificity could be defi ned by mode of supply;  a subsidy granted to all
providers within a given mode would not be specific.  Third, the question of whether the concept of
trade-distortiveness should be part of a definition depended on the underlying intention.  Members
might also want to consider whether some subsidies should be prohibited and, if so, on what basis.  It
should also be examined how trade distortive effects could be measured.
                                                     
16 Communication from the United States on Audiovisual and Related Services , S/CSS/W/21,
18 December 2000.S/WPGR/M/41
Page 12
48. The representative of the United States said that her delegation was in favour of transparency.
There was a need for better defining what the Working Party meant by "subsidy" before considering
types of information.  Her delegation wished to ha ve a look at documentation before it was formally
presented;  appropriate time should be left to coordinate with relevant services experts.
49. The representative of Indonesia said that the contribution by Poland was a useful basis for
further deliberation.  Indonesia supported an update of the Checklist.  Information from other
international organizations was welcome.
50. The representative of Switzerland said that the first step in this negotiation was to have a
common understanding on the definition of a subsidy.  GATS Article I referred to measures "affecting
trade in services", which meant that the negotiations on services subsidies were limited to those
subsidies which effectively affected trade.  Among trade-distortive subsidies, his delegation
considered that those subsidies having effects on third markets, i.e. export subsidies, should be givenpriority.  He noted that other delegations shared the view that subsidies granted in the pursuit of social
or other public policy objective were a sensitive issue and should be dealt with appropriately.
Members' right to resort to such instruments must not be affected.  National schedules of
commitments offered a way to preserve public prerogatives in fulfilling policy objectives.  For
instance, the Swiss schedule of specific commitmen ts limited the scope of commitments in education
services to private education;  as a consequence, measures concerning public education, including
subsidies, were not covered by the commitment.
51. The representative of Thailand said her delegation was confused with regard to what
constituted a subsidy.  A definition was needed.  Thailand was apprehensive of any kind of subsidy
since, as a developing country, it was short of financial resources.  Some public policy objectives hadto be kept in mind.  Her delegation was open to considering contributions from UNCTAD or any
other organization.
52. The representative of China said that the contribution by Poland provided a valuable input.  It
was crucial to identify subsidies and their nature .  The information exchange provided for in GATS
Article XI was important.  China supported a contribution by UNCTAD to enhance information inrelevant sectors.
53. The representative of Norway recalled that his delegation had responded to the 1997
questionnaire.17  He agreed that the SCM Agreement was a useful reference point.  Rules for services
subsidies should coincide to the extent possible with that Agreement.  Legitimate social objectives
should not be affected by subsidy disciplines.
54. The representative of Poland said that the contribution from his delegation was a first step,
which concentrated only on definition.  He agreed that other issues, such as specificity, policy
objective, had be to considered, and his delegation was prepared to join other in further work.  With
respect to the comment by Australia, he doubted whether specificity should be determined according
to the mode of supply.  His delegation supported an update of the checklist but considered it might be
premature to revise it now, since the Working Party was still struggling with the first item, i.e.
definition of subsidy.
55. The representative of Australia said that there was a difference between firm-specific and
industry-specific subsidies.  A subsidy applied to a ll industries within a given mode of supply would
not be specific.  The representative of Poland said that the SCM Agreement contained the concept of
industry specificity, but modes of supply did not exist.  A subsidy was not specific if all industries, nomatter the mode, received it.
                                                     
17 S/WPGR/W/16 and S/WPGR/W/16/Add.1.S/WPGR/M/41
Page 13
56. The representative of the Republic of Korea supported an update of the Checklist, as well as
contributions from international organizations.
57. The representative of UNCTAD indicated that the sectoral reports referred to were not
focused on subsidies per se , but contained subsidy-related information.  Her organization would be
ready to point out the relevant information, which could be used as "raw material".  All documentswere publicly available, but quite voluminous.  UNCTAD could extract the relevant information
without prejudice to any issue under negotiation in this Working Party.
58. The Chairperson noted that delegations were interested to continue their debate on the
definition of services subsidies.  This issue included two different aspects which could be
distinguished in future discussions: (i) the generic definition of subsidies in the services context,
including the relevance of the definition contained in the SCM Agreement; and (ii) the meaning of the
concept of trade-distortive or "actionable" subsidies.  With respect to the latter, Poland and otherdelegations had referred to concepts such as specificity, public policy objectives, nature of the
subsidies, permissible or non-actionable subsidies, etc.  On the suggestion by Members to update the
Checklist, he suggested including the issues of categorization of subsidies and concepts relevant to
what should be regarded as trade-distortive subsidies.  Information exchange concerning all subsidies
related to trade in services, pursuant to Article XV, should be continued.  No delegation seemed tohave difficulty as a matter of principle with information submitted by UNCTAD or another
organization.  The Secretariat would request UNCTAD to provide a list of relevant documents before
inviting them for a presentation of the relevant information.  Moreover, interested delegations could
get in touch directly with UNCTAD.
D. D
ATE OF THE NEXT MEETING
59. The Chairperson said that the next formal mee ting of the Working Party was expected to take
place during the next cluster of services meetings, which had been tentatively scheduled from 12 to
23 May 2003.  The Working Party would meet during th e first week of the cluster and the exact date
would be communicated to delegations in due time.
E. OTHER BUSINESS
60. Nothing was raised under this agenda item.
F. APPOINTMENT OF THE CHAIRPERSON
61. The Chairperson said that, in accordance with the rules of procedure for meetings of the
Council for Trade in Services (S/L/15), the election of a new chairperson should take place at the first
meeting of the year and take effect at the end of that meeting.  However, the Chairperson of the
Council for Trade in Services was still consulting on the slate of chairs for the subsidiary bodies.  As a
consequence, the election of the new Chairperson would take place at the beginning of the nextmeeting.
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