RESTRICTEDWORLD TRADE
ORGANIZATIONS/WPGR/M/35
7 December 2001
(01-6241)
Working Party on GATS Rules
REPORT OF THE MEETING OF 28 NOVEMBER 2001
Note by the Secretariat
1. The Working Party on GATS Rules held its thirty-fifth meeting under the chairmanship of
Mr. Hugo Cayrus, from Uruguay.  The agenda for the meeting was contained in WTO/AIR/1674.  It
consisted of five items:  negotiations on safeguards under GATS Article X;  negotiations on subsidiesunder GATS Article XV;  negotiations on government procurement under GATS Article XIII;  date of
the next meeting;  and other business.  The agenda for the meeting was adopted.
A. NEGOTIATIONS ON SAFEGUARDS UNDER ARTICLE X OF THE GATS
2. The Chairperson recalled that the Working Party had held an informal meeting on
23 November to discuss issues related to emergency safeguard measures.1  He intended to continue
this debate in informal mode.2  Delegations so wishing could nevertheless make formal statements.
3. The representative of Turkey said that foreign suppliers established in his country were
considered as national suppliers, regardless of any foreign equity ceiling.  Foreign established
suppliers (FES) should therefore be included in the definition of "domestic industry", which would
also solve problems related to "acquired rights".  Mode 3 should not be excluded from an emergencysafeguard mechanism (ESM).  Schedules of specific commitments indicated that more restrictions
were listed under modes 1 and 4 than under mode 3, which meant that liberalization under the latter
mode was more likely to cause injury.  As long as "acquired rights" were protected, any Member
wishing to take a safeguard measure in order to restrict new entrants should be entitled to do so.
There should be a compensation requirement in order to prevent abuse of an ESM.  However, in view
of the difficulty of implementing and withdrawing compensation, a short period of time should be
determined during which no compensation was required.  Turkey was in favour of a horizontal ESMbecause the concept of a scheduled safeguard was not compatible with the unforeseen nature of an
emergency situation.  There was no basis in GATS Article X to support the argument that safeguards
should apply only to new commitments.  He noted that the specific commitments referred to in
paragraph 2 of Article X, which Members were ent itled to modify or withdraw, clearly referred to
Uruguay Round commitments.
4. The representative of Brazil said, with respect to the Non-paper presented by New Zealand
3,
that having to demonstrate the existence of a relevant "circumstance" (unforeseen developments)
amounted to introducing a fourth condition.  The link made, in the paper presented by the United
States4, between a safeguard measure and increased liberalization should solve the question of
"desirability".  Nevertheless, his delegation found it difficult to agree with the conditions proposed bythe United States.  In fact, the link between an ESM and increased liberalization worked the other way
round:  Members would feel comfortable having an ESM before making additional specific
                                                     
1 See JOB(01)/164.
2 See JOB(01)/168.
3 Situations Justifying an Emergency Safeguard Action , JOB(01)/146.
4 Desirability of a Safeguard Mechani sm for Services:  Promoting Libe ralization of Trade in Services ,
S/WPGR/W/37.S/WPGR/M/35
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commitments.  An ESM should not be limited to new commitments.  He enquired what would be the
conditions of application of a scheduled safeguard.  Without a minimum of agreed conditions, there
was a risk of ending up with many different safeguards in different sectors.
5. The representative of Mexico said that "emergency" should be an element to be considered,
but should not be a fourth condition.  The issue of "desirability" involved political and technical
aspects, and both should be considered.  Mexico's  reading of the US contribution was that an ESM
would be less undesirable if it were scheduled, but not that it was desirable per se.  He noted that
application of an ESM to mode 4 might raise difficult questions.  Application to modes 1 and 2 should
also be discussed more seriously.  Concrete, practical examples might be useful in that context.  A full
assessment of the potential impact of an ESM, in particular on investments, should be made.
6. The representative of India said that an ESM should apply only to scheduled measures.  The
application of the concept of "unforeseen developments" would introduce an additional element
which, given the problems of statistics in services, might make an ESM unworkable.  No mode of
supply should be excluded a priori  from an ESM, but decisions should be made on a case-by-case
basis.  The definition of "domestic industry" should include only national suppliers.  "Acquired rights"
of FES should be protected, but this should not entail the right for them to expand.  "Acquired rights"
under mode 4 should be protected as well.  The investigating authority should look actively for allrelevant information relating to the establishment of injury, but should retain discretion in establishing
the list of relevant criteria.  The safeguard measure should take the form of a temporary suspension of
specific commitments and should not be more trade-restrictive than necessary.  Article 7.4 of the
Agreement on Safeguards (AS) could be used as a model.  Provisions on special and differential
treatment should be included.  Transparency and notification requirements were key.  Article 13 of theAS could provide a model for a surveillance mechanism.
7. The representative of Australia said that, during the last three years, there had been little
progress towards common ground.  Members remained far apart on the definitions and elements of an
ESM.  The same questions and answers were being constantly recycled.  Her delegation welcomed the
efforts made recently by some Members to explore ways to refocus the debate in more productivedirections.  Australia was particularly interested in suggestions that Members focus on a procedure to
handle possible safeguard actions, rather than on the "desirability" and "feasibility" of a safeguard
action itself.  The Non-paper by Argentina was a good step in that direction.  Australia agreed that,
should Members decide that an ESM was desirable – an ESM and not a safeguard action -, such a
mechanism should be as simple and as transparent as possible.  Her delegation doubted that trying to
address every possible issue underlying a safeguard action was the most efficient way to approach the
development of a GATS mechanism.  If such a mechanism was abused, remedial action would beinitiated.  Besides, Members could always insert a clause mandating regular review of the
effectiveness of the ESM.  Referring to the wish of some Members to exclude mode 3 and/or mode 4
from the coverage of an ESM, she wondered whet her it would be worthwhile to devote time and
efforts to develop a mechanism applying only to modes 1 and 2.  It might then be better to develop a
horizontal mechanism and let Members decide – if and when a safeguard action took place – whethersuch action was justified given the circumstances, without predefining in great detail what was
justifiable, what were the right circumstances, etc.  Not having a mechanism would not necessarily
prevent action given the flexibility of the GATS.  Without prejudging Australia's position on the issue
of "desirability", having a mechanism could, on the other hand, provide a structure to enhance
transparency of any safeguard action and to allow for peer review and surveillance.  She noted thatArticle XXI provided for permanent withdrawal of  commitments.  A similar type of mechanism for
temporary withdrawal might perhaps be explored.  In any case, the Working Group should aim at a
decision on this matter by 15 March 2002, and that decision should then be carried out as quickly as
possible so as to allow Members to focus on request/offer negotiations.S/WPGR/M/35
Page 3
8. The Chairperson suggested to turn to the organisation of future work.  He informed that, on
19 and 20 November, he had held informal consultations, which had allowed him to hear some thirty
delegations on this issue, including on the question of whether or not work should start on a draft text.
This issue had also been raised during the informal meeting of 23 November.  The result of those
consultations was the following:  while some delegations would like to start working on a draft text,others considered it was premature to engage in su ch a work because, in their view, positions were
still far apart on some fundamental issues.  A third group of delegations had indicated their flexibility.
He concluded that there was no consensus for the time being to work on a draft text.  He stressed that
the process was in Members' hands and that neither the Chairman nor the Secretariat were in a
position to move the process ahead.  He noted that delegations had made various suggestions on how
to pursue discussions on substance, for instance:  (i) continue analysis on the basis of the Synopsis
and/or the Checklist of issues in order to compare the different approaches (a proposal had been madeto revise the Synopsis);  (ii) discuss concrete situations in which a safeguard measure might be
needed;  (iii) deepen understanding on basic concepts;  (iv) make an inventory of points where there
was convergence of views and points where positions differed.  These suggestions were not mutually
exclusive and could in fact be combined.  On 23 November, he had made two suggestions that
delegations could take into account in the preparat ion of future meetings:  (i) with respect to the
different elements contained in the Synopsis, delegations might want to examine where, in their
views, there was possible common ground and where positions differed;  (ii) delegations might also
want to consider which elements might be common to both an horizontal and a scheduled safeguard.
Work could then focus on these common elements, if any, that would need to be defined regardless of
the precise context in which a possible ESM might later be used.  He would prepare an Addendum tothe Synopsis, which would include the new written contributions.  Moreover, he intended to hold a
two-day informal meeting on 17 and 18 January 2002 and another one in February (dates to be
confirmed).
9. The representative of Brazil said that his delegation would have preferred engaging in
drafting but could nevertheless accept the proposal just made by the Chairperson.  Efforts should be
made to avoid repetition.
10. The representative of Philippines, speaking on behalf of the ASEAN Members, recalled that
the ASEAN Members were keen to start working on a draft text.  At the very least, the Working
Group should start examining areas of common ground, which would facilitate a platform for
subsequent drafting.  Should this not be possible, then it would clearly indicate a lack of political will.
Moreover, discussions would go in circles.  At this point in time, the ASEAN Members did not want
to ask for an extension of the deadline.  The representative of Australia wondered when a decision
would be made.  The Chairperson replied that these decisions were in the hands of Members.
11. The representative of Indonesia expressed concern that, after seven years, the negotiating
deadline would, again, not be respected.   The representative of Paraguay suggested to hold a meeting
i n  D e c e m b e r  s o  a s  t o  m a k e  p r o g r e s s .   T h e  r e p r esentative of Mexico considered that a meeting in
December did not leave delegations with enough time to prepare.  The representative of the Republic
of Korea supported the Chairperson's intention to prepare an Addendum to the Synopsis.  He stressed
the need to make progress.
12. The representative of Pakistan stressed that work should move forward.  The Working Group
was unfortunately facing the risk of another extension of the deadline, which would send a bad
political signal.  The issues on the table had already been discussed many times in the past.  Theproblem was that there was a lack of political will to make progress.  Therefore, he wanted to
formally propose to start working on a draft text.  The representatives of Paraguay and Cuba
supported the proposal made by Pakistan.  The representatives of the European Communities, Canada ,
the United States, Japan  and Switzerland  said that there was no sufficient basis to start working on a
draft text.S/WPGR/M/35
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13. The Chairperson concluded that there was no consensus to start drafting and suggested to
continue work on the basis of the proposal he had just made.  It was so agreed.
B. NEGOTIATIONS ON SUBSIDIES UNDER ARTICLE XV OF THE GATS
14. The Chairperson said that, in the absence of new contributions, delegations were invited to
address the issue of subsidies on the basis of the Chairperson's Checklist contained in Job
No. 4519/Rev.1 (6 October 2000).  Delegations  could comment on any point of that list.
15. The representative of Brazil said that it was important to negotiate disciplines on trade-
distortive subsidies.  He noted that several sectoral proposals circulated in the Special Session touched
upon this subject.  The representative of Argentina indicated that his delegation intended to submit a
contribution at the next meeting.  The representative of Hong Kong, China said that her delegation
continued to attach great importance to this agenda item.  Members, especially those who had raised
subsidy-related issues in their sectoral proposals, should share their experience in this field.
C. NEGOTIATIONS ON GOVERNMENT PROCUREMENT UNDER ARTICLE XIII OF THE GATS
16. The Chairperson proposed that delegations should continue their general exchange of views
on any aspect of government procurement of services.
17. The representative of the European Communities sa id that this agenda item was important for
her delegation.  She hoped to be in a position to inject new thoughts in the discussion next year.
D. DATE OF THE NEXT MEETING
18. The Chairperson indicated that the next formal meeting of the Working Party would take
place in the week of 11 March 2002, i.e. in the services "cluster".
E. OTHER BUSINESS
19. Nothing was raised under this agenda item.
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