RESTRICTED  WORLD TRADE  
ORGANIZATION  S/WPGR/M/49 
27 October 2004 
 (04-4567) 
Working Party on GATS Rules  
  
 
REPORT OF THE MEETING OF 20 SEPTEMBER 2004 
 
Note by the Secretariat
1 
  
1. The meeting of the Working Party on GATS Rules was chaired by Ms. Clare Kelly, from 
New Zealand.  The agenda for the meeting, contained in WTO/AIR/2375, included the following 
items:  government procurement, em ergency safeguard measures, subsid ies, date of the next meeting 
and other business.  To assist de legations in the preparation of the meeting, the Chairperson had 
prepared an annotated agenda, contained in JOB(04)/ 129.  She noted, in response to previous queries, 
that UNCTAD's study on services subsidies had not yet been completed.  The agenda was adopted
.   
I. NEGOTIATIONS ON GOVERNMENT PROCUREMENT (ARTICLE XIII) 
2. The Chairperson  suggested that delegations pursu e their discussion of the latest 
communication from the European Communitie s on a proposed framework under GATS for 
government procurement in services (S/WPGR/W/48).  A number of questions had been put forward, 
as reflected in the report of the last meeting, cont ained in S/WPGR/M/48.  A few of the issues raised 
were mentioned in the annotated agenda prepared for this meeting.  She noted that a number of 
delegations had reiterated their vi ews on the scope of the negotiating mandate or had reserved their 
positions for the time being.  Also, the delega tion of Hong Kong, China had recently submitted an 
informal communication (JOB(04)/130), which raised some questions in relation to the proposal from the EC.  She also recalled that the Working Party had requested the Secretariat to expand upon earlier 
work on government procurement-related provisions in economic integration agreements (EIA).  The 
new Note was circulated as S/WPGR/W/49.   
3. A representative from the Secretariat
 explained that the document elaborated upon the earlier 
Secretariat Note of June 2003 on the same subject (S/WPGR/W/44).  It provided an overview of the 
main types of provisions across agreements, and hi ghlighted some similarities and differences.  The 
Note did not attempt to simply replicate all relevant  content of the agreements, since this would have 
led to an unreasonably long document.   Nevertheless, it reproduced a significant number of relevant 
provisions.  The representative stressed that a few impo rtant caveats had to be kept in mind, as spelled 
out in Part I of the Note.  For instance, no attempt had been made to assess the scope and coverage of the various agreements, for example their definition of procurement, the sectors covered, etc.  This 
obviously called for caution in assessing the impact of the provisions reviewed.  Part II of the Note 
highlighted key observations.  It underscored, for ex ample, various similarities across the agreements 
reviewed, which tended to include, in addition to  rules on non-discrimination, procedural rules 
relating to such issues as transparency, fair a nd open procurement procedures, accountability and due 
process.  At the same time, differences between agreem ents also existed, mostly in terms of the types 
of provisions included and the level of detail or comp rehensiveness.   Indeed, the rules contained in a 
good number of agreements approached in their comprehensiveness - and in some instances went 
beyond - those contained in the WTO's Government  Procurement Agreement (GPA), while other 
                                                     
 
1 This document has been prepared under the Secret ariat's own responsibility and without prejudice to 
the positions of Members and to their rights and obligations under the WTO.  S/WPGR/M/49 
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 agreements provided for a less extensive or detailed set of procedural rules.  Part III of the Note 
contained information on the rele vant government procurement provi sions, and sought to make it  
easily accessible.   
4. The representative of Hong Kong, China
 said that he would share observations on the 
Secretariat Note at a later time.  The informal communication from his delegation elaborated on 
questions that he had raised at the previous me eting about the EC's proposal, and he hoped that it 
would lead to constructive discussions in the Working Party.   
5. The representative of th e European Communities  thought that the Note from the Secretariat 
contributed to a better understanding of provisions re lating to government procurement in EIAs.  The 
Note showed that such agreements had been  signed by many Member s, both developed and 
developing, as well as by signatories and non-signatories to the GPA.  This showed that agreements 
on government procurement were in the interest of all Members, notwithstanding their size or level of 
economic development.  Many Members were parti es to various regional, b ilateral or plurilateral 
agreements, and the relevant procurement commit ments were fully compatible.  A framework for 
government procurement in the GATS could thus also be perfectly compatible with other agreements.  
It would provide a multilateral point of referen ce for future bilateral or regional agreements on 
government procurement.  The Note also highlighted  similarities of provisions across agreements, and 
he thought that this could provide inspiration for developing appropriate procedural rules for 
government procurement in the GATS.   
6. The latest communication from his delegation (S/WPGR/W/48), which provided examples of 
government procurement commitments that could be  made in the GATS, underscored the practical 
feasibility of the proposed framework, and he wished to recall its key principles.  The objective was to 
use to the maximum the flexibilit y of the GATS to develop an agreement allowing each Member to 
undertake government procurement commitments in the sectors it wished to open to international 
competition, and within the limits it wished to se t, so as to suit its needs in matters of public 
investment and development.  Since such co mmitments would be taken sector-by-sector, his 
delegation was not proposing that the national treatme nt obligation apply horizontally.  Given that the 
GATS' MFN obligation applied to all sectors, he wondered whether this obligation should, with 
respect to government procurement, also apply in an horizontal manner or only to sectors where 
commitments were made.  He was open to further discussions and thought it was up to the Working 
Party to determine this issue.  With respect to  the relationship between the GPA and a future GATS 
framework on government procurement, his delegatio n had suggested the inclus ion of an exception to 
the GATS' MFN obligation that would preserve the rights and obligations of parties to the GPA, 
including reciprocity requirements.  He noted that  certain GPA Members had signalled their interest 
in jointly elaborating a provision addressing th e relationship between the two agreements.   
7. In response to questions raised by delegations on modal application, he drew attention to the 
fact that government procurement commitments in  the Understanding on Commitments on Financial 
Services only covered mode 3.  Accordingly, there already was a pr ecedent for government 
procurement commitments limited to one particular  mode of supply.  With respect to contracts 
covering various services sectors with different levels  of commitment, he did not think this was a new 
issue.  It already existed in sectors which in the GPA were not subject to the same regime, as well as 
for the supply of services involving clusters of se ctors in the GATS.  The representative noted that 
many questions had also been raised regarding th e conventions to be used in scheduling government 
procurement commitments under the GATS.  For exam ple:   Should the conventions used for the 
scheduling of commitments pursuant to Article XVI and XVII be used or those for the scheduling of 
additional commitments under Article XVIII?  Ho w should government procur ement commitments be 
read in the light of commitments under Articles XVI  and XVII?  It would be useful to develop 
scheduling guidelines for this purpose and the latest  communication from his delegation could help to 
identify some elements in that regard.  Me mbers could jointly develop such guidelines.   S/WPGR/M/49 
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 8. The representative of India  recalled past discussions about th e mandate in Article XIII and 
underscored, in that regard, that his delegation had not accepted the type of approach contained in the 
EC's proposal, in particular the fact that it provide d for market access and national treatment.  It might 
also be useful for the Working Party to keep in mind that, pursu ant to the July Package, the 
uncertainty regarding the Singapore issues had largely b een resolved, with the i ssue of transparency in 
government procurement being dropped from the ne gotiating agenda.  This had occurred after long 
and difficult discussions, where a large number of Members had raised objections to the inclusion of transparency issues relating to government procuremen t.  Note should be taken of that experience.  
The Working Party was currently discussing not only transparency, but also market access issues.  
The approach proposed by the EC even linked the issue directly with Article XIX.  Delegations 
needed to keep in mind the decisions taken as part of the July Package and determine how to address 
the mandate in Article XIII, as this was central.         
9. In considering the latest communication from the European Communities, the representative 
of the United States
 said that the attention of her delega tion focused on the substance of government 
procurement policies, rather than on the specifi c sectors involved or the modes by which services 
were supplied.  This reflected the policy reality, since procurement policies were not elaborated in 
view of the services sectoral classification list (MTN.GNS/W/120), the GATS' modes of supply, or a 
distinction between goods and services.  Rather, proc urement policies were developed with the more 
general purpose of providing broad guidance to ma ny diverse government agencies on how to meet 
their individual needs.  She thought that the exam ples provided in S/WPGR/W/48 reinforced the fact 
that procurement policies tended to  be more cross-cutting.  The examples suggested that commitments 
might be based upon some threshold value of contract s, that there might be reservations relating to 
certain domestic laws and practices, or that the scope of commitments might be limited solely to 
central, as opposed to local, government entities.  But there was no indication that policies were 
inherently more relevant to one sector than anot her, such as architectural  services, as opposed to 
telecommunication services.  Similarly, example 5 provided by the EC shed some light on how 
government procurement rules could be crafted to excl ude certain modes of supply, such as mode 1.  
While such an approach was conceivable, it seeme d unlikely that it would be applied on a sector-
specific basis.  Scheduling commitm ents in the form of a GATS schedule seemed rather ill-suited to 
the objective.  She indicated that her delegation questioned whether an approach to government 
procurement based upon GATS scheduling of specific commitments would not be unduly complicated.  Currently, there were few, if any, sector al or modal distinctions in procurement policies.  
But if governments were to be presented with a list of sectors in which to liberalize procurement and 
given the opportunity to distinguish between four m odes of supply, this could result in an untenable 
level of complexity that ultimately might be less lib eralizing than a more horizontal approach, such as 
in the GPA.  The end result could be procurement polic ies that tried to affect specific sectors or modes 
of supply in response to political pressures.     
10. She appreciated that the communication from th e European Communities pointed to the need 
for careful consideration of MFN implications.  As  noted by the EC, Article XIII could be read to 
exclude government procurement from the scope of Article II, as well as Articles XVI and XVII.  The 
communication therefore suggested that, should proc urement disciplines be developed, Members be 
given the opportunity to list relevant MFN exemptions .  Her delegation also appreciated the fact that 
Part III of the paper recognized that extending any new GATS rules to procurement on an MFN basis 
could undermine the value of commitments under the GP A.  She took note of the invitation, in Part IV 
of the communication, to discuss procedural rules.   In particular, her delegation agreed that 
transparency in bidding procedures was an important issue.  She thought that the Note by the Secretariat might constitute a useful reference doc ument for the Working Part y's discussions in that 
regard.  While still examining the information contai ned, she observed, in a preliminary manner, that 
the provisions reviewed did not appear to differe ntiate between goods and services.  Her delegation 
had already indicated in the past that drawing su ch distinctions seemed difficult.  The Note also 
demonstrated that there did not appear to be sectoral variations.  While most if not all of these S/WPGR/M/49 
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 agreements allowed for inclusion or exclusion of selected sectors or products through annexes, the 
provisions themselves did not appear to vary by  sector.  She looked forward to a more detailed 
reaction from the EC to the questions raised, including those included in JOB(04)/130.   
11. With regard to the Note by the Secr etariat, the representative of Canada
 observed that many 
EIAs included government procurement provisions, a nd that participants to these agreements were 
both developed and developing countries.  He also  thought that the document highlighted a fairly 
extensive commonality of procedural rules in the various agreements, which the Working Party could 
usefully build on.  Regarding the proposal by the EC, he hoped to further pursue discussions on issues previously raised, for example scheduling appro aches.  For more detailed discussions, government 
procurement experts from capital might have to prov ide specific inputs or attend the meetings.  With 
respect to comments made by the delegation of India, he hoped that the representative could clarify 
the relationship implied between the July P ackage and the mandate in Article XIII.   
12. The representative of Brazil
 expressed support for the Indian delegation's position regarding 
the mandate and scope of Article XIII of the GATS.  In the view of her delegation, the mandate did 
not provide for negotiations on market access and national treatment, but only on transparency.   
13. Without prejudice to the negotiating ma ndate, the representative of Singapore  recalled the 
questions raised in the informal communication fro m his delegation, circulated as JOB(03)/216.  A 
critical issue to discuss was the interface betwee n the GPA and the proposed Annex on Government 
Procurement in the GATS.   He drew attention to  the question raised in paragraph 2(e) of his 
delegation's communication, which noted that the annexes to the GPA contained specific non-application or reciprocity conditions among parties to  that agreement, relating for example to sectors 
and thresholds.  How could such conditions apply in the GATS context?  This key question was also 
raised in JOB(04)/130.  If one wanted to follow th e precedents of the GPA, what had been suggested 
by the EC might not be sufficient.  Regarding the No te by the Secretariat, he noted, in a preliminary 
manner, that the trade agreements concluded by Singapore were comprehensive and covered a wide 
set of trade issues.  The government procurement chap ters should not be seen in isolation; they were 
negotiated as part of an overall package.  G overnment procurement represented between 10% and 
15% of GDP in a number of countries and there was therefore a trade rationale for including chapters 
on government procurement in Singapore's free trad e agreements.  Among othe r benefits, government 
procurement disciplines helped to attain value for money for taxpayers, and benefited governments 
and consumers alike.  The procurement provisions in these agreements were comprehensive and largely based on the GPA.  They also took into account technological developments.  Information on 
Singapore's government procurement regime could al so be found in a communication circulated to 
this Working Party in 1997 (S/WPGR/W/11/Add.16).           
14. The representative of Peru
 underscored that, despite the participation of some developing 
countries in the EIAs reviewed in the Note by the Secretariat, the nature and scope of procurement-
related provisions seemed limited.  This reflected the complexity of the issue in particular for 
developing countries.  He noted that the Doha Ag enda was supposed to benefit in a greater manner 
developing countries and considered that includi ng the issue of market  access in government 
procurement in the negotiations would directly affect  the interests of developing countries.  He wished 
to support the interventions made by the delegati ons of India and Brazil.  His delegation was, 
however, willing to discuss the issue of transp arency in government procurement.   
15. The representative of Indonesia  reiterated the reservations of  his delegation regarding the 
scope of the mandate contained in Article XIII, wh ich was limited to transparency issues and did not 
include MFN, market access or national treat ment.  The representative of Chinese Taipei , like the 
delegations of Singapore and the United States,  highlighted that government procurement 
encompassed a wide range of issues, including good s, which were not covered by the GATS.  With 
respect to the proposal by the European Communities,  she thought that certain aspects remained to be  S/WPGR/M/49 
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 clarified and she therefore appreciated the questi ons circulated by the delegation of Hong Kong, 
China.  She wondered, in particular, whether the delegation of the EC coul d provide more concrete 
examples to illustrate how government procurement commitments applied across different modes of 
supply.  Concerning the intervention by the delegation of India, she sought clarification on the relationship established between the Singapore issue of transparency in government procurement and 
the mandate in the GATS.   
16. The representative of Venezuela
 expressed concerns with respect to these negotiations.  Her 
Minister had stressed, at the Ministerial Conferen ce in Cancun, the need to incorporate development-
related elements that would involve the population in its entirety.  Tellingly, paragraph 15 of the Doha 
Ministerial Declaration stated that the negotiati ons on trade in services should be conducted with a 
view to promoting the economic growth of all trad ing partners and the development of developing and 
least-developed countries.  Her delegation consid ered that asymmetries between countries had 
increased.  Developing countries still exported tr aditional services, while developed countries 
exported modern services.  The importance of an assessment of trade in services for developing 
countries also had to be kept in mind.  Asymmetrie s in levels of developm ent between Members were 
evident and underscored the unsuitability of negotia tions on issues which could negatively affect the 
economies of developing countries.  Government pr ocurement was a necessary public policy tool to 
foster equitable, democratic and environmentally sustainable development.  Regarding the proposal 
from the EC, she supported the interventions by the delegations of India and Brazil.  The General 
Council had decided not to pursue negotiations on tr ansparency in government procurement under the 
Doha Agenda.  It  thus seemed illogical to raise the same issue in the GATS' context.  Before 
discussing possible modalities for the adoption of government procurement commitments, Members 
should clarify the mandate under Article XIII of the GATS, as the second paragraph of Article XIII 
did not specify the scope of the negotiations.   
17. The representative of Australia  said that, since the Note by the Secretariat mentioned 
agreements to which his country was party, it was be ing further examined by his authorities.  He was 
particularly interested in comparing the way govern ment procurement chapters  were framed in EIAs 
with what the European Communities were proposing.   In relation to S/WPGR/W/48, he indicated 
that, like Canada, his delegation was interested in  discussing the appropriate procedural rules.   
18. The representative of Hong Kong, China  said that his delegation ha d engaged in substantive 
discussions on the proposals submitted, but this was w ithout prejudice to the question of the mandate.  
A discussion of the mandate did not appear fruitful at this stage and the scope of the negotiations 
would partly be defined in the course of the ne gotiations themselves.  A key question was how to 
reconcile the MFN obligation, as well as proposed  MFN exemptions, with reciprocity provisions 
under the GPA.  Taking a commitment approach to  government procurement in the GATS meant that 
such commitments would guarantee a minimum level of treatment that had to be accorded to all 
Members.  MFN exemptions would only allow to gran t to some Members better treatment than that 
provided for in the scheduled commitment.  He was not yet sure how such an arrangement would fit 
with existing reciprocity arrangements under the GP A and sought further clarification.  Regarding 
modal application, he sought clarification on the proposal that government procurement commitments 
be read together with market access and national treatment commitments already inscribed in Members' schedules.  Questions (d) and (e) in JOB(04) /130 related to that particular issue.  He took 
note of the intervention by the delegation of the Un ited States regarding the relevance of the GATS' 
scheduling approach to government procurement.  In that regard, it might be useful if the Secretariat 
prepared a summary of the type of approaches ta ken in EIAs with respect to the undertaking of 
commitments on government procurement.  This might help clarify some scheduling issues.   
19. The representative of Switzerland
 thought that the Note prepared by the Secretariat provided 
an important background for the discussion on procedur al rules.  Procedures were important to ensure 
effective competition in government procurement.  She noted that Switzerland was party to some S/WPGR/M/49 
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 agreements reviewed in the Note, including the EFTA-Mexico Agreement and the EFTA Convention.  
In the framework of the EFTA Convention (Article  37), Member States reaffirmed their rights and 
obligations under the GPA and broade ned the scope of their commitments with a view to liberalizing 
public procurement markets in acco rdance with the relevant annex to  the Convention.  The underlying 
purpose was to equalize the level of obligations with  that of the bilateral agreement on government 
procurement between Switzerland and the Europ ean Communities.  Regarding the EFTA-Mexico 
agreement, she noted that the relevant provisions  were found in Articles 56 to 68, as well as in 
annexes XII to XVII, and was uncertain about the in formation contained in the table on page 5 of the 
Note.  The recent contributions from the EC pr ovided a good basis to deepen discussions on 
government procurement; the proposed approach was easily understandable and interesting.  She 
recalled her delegation's interest in discussing how situations where a contract covered sectors with 
different thresholds would be handled.   
20. The representative of Malaysia
 expressed reservations regarding the mandate on government 
procurement in the GATS in the light of the July  Package, which had dropped transparency in 
government procurement from the Doha Devel opment Agenda.  In the Working Group on 
Transparency in Government Procurement, de veloping countries had strongly opposed negotiations 
on this issue on the grounds that it might ultimately affect market access.  Developing countries were 
not ready to negotiate, as government procurement was a key tool for development. 
21. According to the representative of the Republic of Korea , the Note by the Secretariat 
suggested that procedural rules were  very important elements in deve loping a procurement agreement.  
Without a common understanding on procedures, co mmitments might not achieve their initial 
purpose.  She was interested in detailed answers from the delegation of the EC to questions listed in 
JOB(04)/130.  Turning to S/WPGR/W/48, she thought, in a preliminary manner, that the proposal to add an additional column for government procur ement commitments might not be as simple as 
envisaged.  Factoring in the different governmental  entities and different thresholds for each sector in 
regard of which a Member would assume commitments , as well as issues relating to the application of 
the MFN obligation and the relationship with the GPA, increased complexity.  She wondered about 
the costs and benefits of having another agreemen t in addition to the GPA and the regional trade 
agreements.   
22. Reacting to the intervention by the delega tion of India, the representative of Japan
 believed 
that the mandate in paragraph 2 of Article X III did not preclude negotiations on market access and 
national treatment.  And it was not affected by d ecisions on the Singapore issues.  Turning to the 
communication from the European Communities, he t hought that the proposed approach to scheduling 
commitments was interesting and clear.  At the sa me time, he understood the concerns expressed by 
the delegation of the United States and was open to other approaches.  Regarding procuring entities, 
paragraph 4 of the EC communication proposed to incl ude those covered by Article I:3 of the GATS.  
However, such entities were different from t hose covered by the GPA.  He hoped for more 
elaboration from the EC on that point.  Further, he  was wondering what the EC's intentions were with 
respect to the development of procedural rules.  Were they aiming at something similar to the 
disciplines found in the GPA or something different? 
23. The representative of Egypt  lent support to India's intervention regarding the scope of the 
mandate under Article XIII.  For various countries, especi ally those that had chosen not to be part of 
the GPA, government procurement regulations did not differentiate between goods and services.  It 
was thus difficult to accept the approach propo sed by the EC.  The representative of South Africa  
indicated that she preferred not to enter into discu ssions on this issue without first determining the 
scope of what was to be included.  Clarity should be sought, beforehand, on the objectives to be achieved and the scope and extent of these negotiations .  She agreed with the delegations of India, 
Brazil, Peru and Venezuela that the market access and national treatment obligations proposed by the 
EC did not fall within the ma ndate of Article XIII.    S/WPGR/M/49 
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 24. In a preliminary manner, the representative of China  felt that the Note by the Secretariat 
highlighted the complexity of government procurement issues.  She shared the reservations expressed by previous speakers on the scope of the mandate in  Article XIII.  Turning to the communication from 
the European Communities, she thou ght that the proposed approach to scheduling commitments was 
difficult to understand since negotiations on specific commitments proceeded pursuant to Article XIX, 
while negotiations on government procurement we re dealt with under Article XIII.  Reacting to 
previous interventions, the representative of the United States
 said that discussions on the scope of the 
mandate in Article XIII should not be confused with  decisions taken on Singapore issues in the July 
Package.  Delegations needed to be cautious not to  mix up different issues and mandates.         
25. With respect to the Note by the Se cretariat, the representative of Chile  said that the 
information contained was being further studied a nd stressed that government procurement disciplines 
in EIAs were negotiated in a broader context, as part  of a trade-off.  Her delegation therefore did not 
necessarily want to see such disciplin es transposed in another context.  While she did not agree with 
some of the views expressed on the scope of th e mandate, she acknowledged that concerns existed 
and hoped to discuss them further.  Turning to th e communication from the EC, she agreed with the 
delegation of the Republic of Korea that, while straightforward at first sight, the proposal involved 
complex technical issues that required detailed anal ysis.  A better assessmen t and understanding of the 
costs and benefits of the proposed approach w as needed, especially for developing countries.  
26. The representative of the Philippines  recalled that his delegation had expressed reservations 
on the scope of the mandate under Article XIII.  He  thought that paragraph 2 of Article XIII was 
necessarily limited by paragraph 1 of the same Ar ticle.  The Vienna Convention on the Law of 
Treaties clearly allowed to deduce that the scope of the negotiations was limited to transparency 
issues, and did not cover market access, MFN or national treatment.  He thus wondered whether the 
mandate was affected by the July decision of the General Council.  A possible view was that, since 
the Singapore issue of transparency in government procurement did not make a distinction between 
goods and services, the decision might also have an effect on the mandate on transparency in 
government procurement for services.  One might th en wonder the extent to which Members should 
continue their work in this Working Party withou t a clearer indication of whether the mandate in 
Article XIII had been somewhat modified.  He did not wish to suggest a particular position, but 
thought that delegations had to bear this aspect in  mind.  If the delegation of the EC continued to 
believe that the mandate in Article XIII covered market access as well, it might be useful to examine the appropriate form for a continued discussion of such issues.   
27. The representative of India
 wished to clarify his position.  He noted the continued wide 
divergence of views about the scope of the mandate.  In addition, the implications of the July Package 
had to be considered.  On the one hand, there was th e legal aspect alluded to by the delegation of the 
Philippines.  The second aspect, which his delegation ha d tried to highlight, was the need for a reality 
check.  After a prolonged period of discussion, the issue of transparency in government procurement 
had been dropped because of strong reservations voi ced by a large number of Members.  And that 
development had to be taken into account.   
28. The representative of Canada  felt that some of the options just outlined by the delegation of 
the Philippines were not options that  his delegation had considered and he did not think that they were 
accurate.  He supported the suggestion made by the delegation of Hong Kong, China for further work 
by the Secretariat on the scheduling approach es used in EIAs.  The representative of Cuba  wanted to 
associate her delegation with those that had reserva tions about the scope of the mandate under Article 
XIII.  An acceptable understanding between Member s should be a precondition for more technical 
discussions on a multilateral framework.  Market access a nd national treatment issues were not part of 
the mandate.  She reserved the right  to come back to these issues. S/WPGR/M/49 
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 29. The representative of the United States
 shared the assessment of the delegation of Canada 
regarding what she viewed as theoretical questions put forward by the delegations of the Philippines 
and India.  She stressed that the mandate under Ar ticle XIII had always exis ted independent of any 
other mandates, including those concerning the Singa pore issues.  Her delegation had registered many 
times its interest in exploring the scope for pr ogress with respect to the Singapore issue of 
transparency in government procurement, but neve r put any conditions or made legal linkages with 
the work under Article XIII.  In the past, she simply had drawn attention to comparisons between 
proposals in this Working Party and what already had been committed by Members of the GPA, and 
the interest in exploring how one could proceed wi th transparency in government procurement in a 
broader sense in the WTO.  Her delegation had al so noted the difficulties in making distinctions 
between services and goods when examining pro posals under Article XIII or obligations assumed 
under EIAs or the GPA.  But this had nothing to do  with the legal status of any of those mandates, 
which stood on their own.  She could not accept, c ontrary to some views expressed, that Ministers 
could in any way have modified the mandate in Ar ticle XIII of the GATS.  This certainly had not 
been the intent of those who took the decision in July.    
30. The representative of Japan  agreed that Members had decide d in the July Package that no 
further work towards negotiations on three Singapor e issues would take place within the WTO under 
the Doha Agenda.  However, at the same time, Annex C to the July Package mandated Members to 
intensifying efforts to conclude negotiations in four rule-making areas, including the negotiations 
pursuant to Article XIII.  The mandate under Article  XIII thus continued to exist after the July 
Package.  While acknowledging that delegations had different views about its exact scope, he 
disagreed with suggestions that it had been modified.  The representative of Chinese Taipei  supported 
the views just expressed by the delegations of Japan and the United States.  She also called attention 
to the fact that the services section of the July Pack age called for intensified e fforts in negotiations on 
Article XIII.  Although her delegati on was particularly interested in discussing procedural issues 
relating to government procurement, it was not clear,  in the light of previous interventions, how the 
Working Party would approach this ag enda item in future meetings.   
31. On the issue of the negotiating mandate, th e representative of the European Communities  said 
that no delegation had the authority to modify Artic le XIII; rather the WTO membership would need 
to amend the agreement.  He agreed that Article XI II had to be interpreted according to the Vienna 
Convention, but did not share the interpretation pu t forward by the delegation of the Philippines.  
Paragraph 2 of Article XIII said, literally, that th ere should be multilateral negotiations on government 
procurement, not that there should be multilatera l negotiations on transparency in government 
procurement.  The paragraph also provided for ne gotiations to take place under the GATS, and not in 
a different context.  He agreed that paragraph 2 had to be read in its proper context, together with 
paragraph 1.  Doing that revealed that all pr ovisions of the GATS already applied to government 
procurement, except Articles II, XVI and XVII.  He wondered why Memb ers would negotiate on 
issues already covered by the agreement, although it w as possible to build on existing obligations.  If 
the intent had been to exclude Articles II, XVI and XVII from negotiations, the Article would have 
been drafted differently: it would first have pr ovided for negotiations and, second, excluded Articles 
II, XVI and XVII.  Further, negotiations on governme nt procurement were consistent with the GATS' 
objective of progressive liberalization.  Since gove rnment procurement was important in numerous 
services sectors, many commitments would have little value if it was excluded.  It thus made sense 
that government procurement commitments be undertaken in as many sectors as possible.   
32. He wished to associate himself with the comme nts of the US, Japan and Chinese Taipei on 
the relationship between the July Package and Ar ticle XIII.  How could the General Council have 
decided that efforts should be intensified in the services rule-making areas, including procurement, if, 
according to some, the mandate in Article XIII was lim ited to transparency an d, at the same time, 
negotiations on transparency in government procurem ent pursuant to Article XIII had been dropped?   
Why then would the reference to Article XIII have been kept in the services part of the July Package?     S/WPGR/M/49 
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 If such interpretations were true, reference to Ar ticle XIII in the July Package would have been 
deleted, unless the General Council implicitly agreed that the mandate in Article XIII was not limited 
to transparency.  Regarding the link between procur ement and development, he said that the proposal 
from his delegation provided sufficient flexibility to take into account the level of development of 
every Member.  It was difficult to rule out, from the outset, that a government taking commitments on 
procurement would not get better value for money and foster the development of its own service 
suppliers.  Lack of competition might simply perpet uate existing inefficiencies.  Some developing 
countries exported computer services under mode 4,  which was an area where extensive government 
procurement occurred.  The countries concerned mi ght wish to see some government procurement 
commitments under relevant modes.  The proposal also provided for sufficient flexibility in 
scheduling commitments.  He hoped for further clarif ication from the delegation of the United States 
regarding comments that the GATS' modes of supp ly and the services sectoral classification list were 
not well suited for government procurement.   
33. The proposed additional column for government procurement commitments served to indicate 
whether the award procedure for contracts was open to foreigners or not.  Once access to the award 
procedure was provided, the market access and nationa l treatment limitations, if any, applied to the 
supply of the service.  A separate column for gove rnment procurement made it easier for operators to 
assess market opportunities.  On the question from the delegation of Switzerland on how to schedule the absence of government procuremen t commitments, he noted that his delegation was open to either 
inscribing an "unbound" or leavi ng a blank entry.  That could be discussed and agreed upon in 
eventual scheduling guidelines for government proc urement.  Concerning questions on procurement 
contracts covering many services sectors, he did not  see this as something new or as posing technical 
problems.  Such situations occurred under othe r agreements on government procurement as well as 
within the GATS.  Many services were combinations  of different services.  Determining the main 
object of each contract, based on the value of individual parts, was of key importance.  The Note by the Secretariat listed various provisions in EIAs on th e valuation of contracts and this might help to 
provide a solution.  With respect to questions on wh ether the thresholds for the two sectors mentioned 
in example 6 of S/WPGR/W/48 would be added up, he thought that the answer depended on whether 
the two contracts could be separated.  If so, each th reshold would apply to th e relevant part.  If the 
contract could not be separated because the various elements were closely linked, the main object of 
the contract would need to be determined.  Rega rding the question on the procurement entities to be 
covered, his delegation proposed to use Article I: 3 of the GATS as a reference.  Any entity falling 
under the Article could be covered although, of course, each Member could take commitments with 
respect to a more limited number of entities, excludi ng for example the sub-federal level.  He then 
turned to a question from the delegation of Chin ese Taipei on whether a Member could violate, 
through measures relating to government procurement,  the obligations of Article VI of the GATS that 
applied to sectors where specific commitments were undertaken.  In his view, the Article VI applied 
to government procurement since it was not excluded  by Article XIII, although provisions in that 
Article often applied only to the extent that a comm itment had been undertaken.  Insofar as there were 
no commitments on government procurement at this time, there was room to manoeuvre in applying 
Article VI to government procurement.  Concerni ng a question on whether it was necessary to list the 
covered entities for the purpose of establishing lega l certainty, he emphasized that his delegation's 
proposal provided ample flexibility in terms of scheduling.   
34. Regarding the question by the delegation of Chinese Taipei on a hypothetical scenario where 
a Member had inscribed "unbound" in the market ac cess column and "none" in the national treatment 
and government procurement column s, he wondered about the practical value, in such cases, of 
making commitments on government procurement.  The issue could be addressed in negotiations, 
nevertheless.   Regarding a ques tion from Hong Kong, China on the interaction with the GPA, he was 
open to working with interested delegations on an annex on government procurement and did not 
foresee any significant technical problems.  With respect to the definition of procurement, he referred to the definition contained in Article XIII:1.  Rega rding the definition of what was being procured, he S/WPGR/M/49 
Page 10  
 
 thought that this would be defined on a case- by-case basis by each procurement contract.  On 
questions put forward by Japan on scheduling issues, he recalled that it might be useful to jointly 
develop relevant conventions.  With respect to entities covered, he agreed that the coverage of Article 
I:3(a) of the GATS was different from the GPA,  but noted that the proposal provided ample 
flexibility.  Article I:3(a) was only a starting point.  On whether the EC was aiming at procedural rules 
similar to those found in the GP A or more flexible provisions, his delegation was not opposed in 
principle to having more flexible rules under the GATS.   In concluding, he i nvited delegations to put 
their questions in writing and have them circulated  sufficiently in advance of the next meeting to 
allow for the preparation of appropriate answers.  His delegation was surprised to see the issue of the 
mandate being raised again; issues of political w ill should not be mixed up w ith interpretations of 
Article XIII.  Ministers had agreed that  work under this mandate be pursued.   
35. The representative of the Philippines
 said that the delegation of the European Communities 
should not be surprised about disagreement with rega rd to the mandate in Article XIII.  Reservations 
to that effect had continuously been expressed.  Para graph 2 of Article XIII must not be interpreted in 
isolation, but in the context of paragraph 1.  He saw paragraph 1 as a provision of a permanent nature 
which informed the interpretation of paragraph 2.  On the relationship betw een the July Package and 
the mandate under Article XIII, he merely sought to better understand other de legations' views.  He 
had not wished to put forward a particular interpre tation.  The mandate in Article XIII pertained to 
transparency in government procurement, and he ha d not objected to proceeding in the Working Party 
in accordance with that mandate.  If proponents e ndeavoured to focus on transparency rather than 
market access issues, the membership mi ght better appreciate this issue.    
36. The representative of the United States  thanked the delegation of the Philippines for the 
clarification.  Given time constraints, she indi cated that she would pursue discussions with the 
delegation of the EC on a bilateral b asis.  The representative of India  said that, even though he had 
mentioned that there was a divergence regardi ng the mandate, he had not put forward a legal 
interpretation suggesting that the mandate in Ar ticle XIII was dead.  Discussions had proceeded on 
the basis of other delegation's interpretation of what  the delegation of India had said.  He had simply 
indicated that Members should recall the experience in  the July Package in terms of the EC proposal, 
which related not only to transparency, not only to ma rket access, but also had a link to Article XIX.   
37. The representative of Pakistan  noted that asymmetries between developed and developing 
countries, as reflected in the context of the July P ackage, needed to be kept in mind when discussing 
government procurement in the Working Party.   The representative of Hong Kong, China  expanded 
upon his proposal for further work from the Secr etariat.  The discussions today had highlighted 
various options of how government procurement commi tments could be undertaken.  In that context, 
the Secretariat could provide some summary observati ons on how EIAs addressed this issue.  Was it 
done on a sectoral or modal basis?  Was a distin ction drawn between goods and services?     
38. In summarizing key points of the discussion, the Chairperson  noted that a range of views had 
been expressed on the interpretation of Article X III.  A number of delegations had reiterated their 
position that paragraph 1 affected the scope of the negotiating mandate a nd wondered whether the 
July Package had further implications for these negotia tions.  Others had held the view that paragraph 
2 of Article XIII did not preclude the discussion of  market access issues and failed to see linkages 
between the July Package and discu ssions in the Working Party.  Sh e noted that there had been a 
useful technical discussion of the latest comm unication from the European Communities.  Issues 
raised included the issue of MFN treatment, MFN exem ptions, and the relationship to the GPA.  Some 
concerns were also raised on the applicability of the GATS' scheduling approach to government 
procurement commitments.  These issues warranted further discussion.  She noted that delegations 
generally felt that the Secretariat Note contai ned in S/WPGR/W/49 provided useful background 
information.  It showed that many EIAs had pr ocurement disciplines, although some delegations had 
noted that commitments exchanged under such agre ements were part of a more comprehensive  S/WPGR/M/49 
 Page 11 
 
 
 package and that this context had to be kept in  mind.  Further, pursuant to the proposal by the 
delegation of Hong Kong, China, she said that a Note by the Secretariat summarizing how EIAs addressed issues relating to scheduling approaches s hould be a helpful contribution to discussions.  
She proposed that the Working Party take note
 of statements made.   
II. NEGOTIATIONS ON EMERGENCY SAFEGUARD MEASURES (ARTICLE X) 
39. The Chairperson  suggested that the Working Party pursue  its discussion of issues raised in the 
informal communication from Brunei Darussalam, I ndonesia, Malaysia, Myanmar, the Philippines 
and Thailand, contained in JOB(04)/4 .  This could be assisted by questions compiled in the Note from 
the Chairperson (JOB(04)/49) as well as by points rai sed at the informal meeting of 11 June, some of 
which had been mentioned in the annotated agenda .  She thought that all de legations would benefit 
from a thorough examination of these issues, including  the technical aspects involved.  She noted that 
the group of Members from ASEAN had made av ailable a room document providing answers to 
questions raised on their proposal.    
40. The representative of the Philippines  apologized for the late circulation of these preliminary 
answers.  Rather than discussing the room document in detail, he wished, given time constraints, to 
focus in particular on issues mentioned in the annotat ed agenda.  On acquired rights and the definition 
of expansionary activities, he recalled that the gr oup of delegations for wh ich he was speaking had 
originally suggested that certain expansionary ac tivities not be covered by the concept of acquired 
rights, namely: establishment of additional branches or subsidiaries; acquisition, merger or consolidation with any other service supplier, whether foreign or national; supply of additional 
capacity of the relevant service to the domestic market; infusion of additional capital; and acquisition 
of additional equity.  Upon presenting JOB(04)/4, th e group of delegations had indicated that the list 
of examples could be refined.  He thought that th e acquisition of new facilities, new hiring, expansion 
of consumer base or new strategic alliances also seemed to be expansionary activities, which should 
be restricted during the safeguard period.  Of course, nuances were necessary.  For example, replacements of existing staff should not be consider ed an expansionary activity.  All these activities 
would further enhance an established foreign service suppliers’ market share at a time when their 
dominance was a factor contributing to the injury  being suffered. Allowing such expansionary 
activities would appear to perpetuate or aggravate th e situation.  He considered that such items as 
increases in turnover or profits would fall within  the ambit of acquired rights, rather than 
expansionary activities.  A firm established in a particular market would endeavour to maximise 
profits, and that was an acquired right of any fi rm.  However, increases in product range and in 
regional representation were expansionary activities. 
41. On the question of whether discriminatory restri ctions would be consis tent with bilateral 
investment treaties (BITs) providing for national tr eatment of established foreign producers, including 
service suppliers, he said that to the extent that an emergency safeguard measure might affect the 
more favourable treatment accorded to a particular  Member under a bilateral investment treaty, the 
invoking Member might either (i) exempt the other Member from the application of the safeguard, 
thus respecting in full the acquired rights of service supp liers of that other Member , or (ii) subject it to 
the non-discriminatory application of the safeguard me asure.  In the latter case, the invoking Member 
precluded certain expansionary activities of service  suppliers of the other party to the BIT and 
assumed the risk of a legal challenge under the dis pute provisions of that treaty.  A fundamental 
question was the extent to which Members wanted bilateral treaties to prevail over their multilateral 
treaty obligations.  He thought, from a precautionary perspective, that it might be preferable to 
preclude potential litigation between parties to a BIT by opting against a non-discriminatory 
approach. Adopting a discriminatory approach, on the other hand, would appear to perpetuate a 
particular MFN exemption-type situation. Recent jurisprudence under BITs might suggest an increasing pattern for tribunals to interpret MFN cl auses in a broad manner.  He referred to the 
decision in Maffezzini vs. Spain , which could be found on the World Bank website (ICSID Case No. S/WPGR/M/49 
Page 12  
 
 ARB/97/7).  Of course, this was not to suggest th at this particular deci sion would have probative 
value in any dispute under WTO law.  With respec t to questions on the implications of different 
definitions of domestic industry for a determination of injury or for the definition of acquired rights, 
the group of delegations for which he was spea king had thought that Article XXVIII of GATS 
provided ample guidance.  But several delegations  had expressed concerns because their domestic 
definitions were different.  To avoid such problem s, it might be left to each Member to define 
domestic industry in accordance with its own legislation.  The possible uncertainty of such an approach would be avoided if each Member notified its national definition of domestic industry to the 
Council for Trade in Services.  In case of a safe guard measure, any affected Member might examine 
whether the threshold established in the notified defin ition had been met.  On the type of statistics to 
be used, he considered that national statistical office s, as well as the relevant regulatory authority for a 
particular sector or sub-sector, would be the fi rst recourse. When not sufficient or adequately 
disaggregated, statistics kept by international orga nizations might provide a useful alternative or 
supplement. Statistics maintained by relevant prof essional associations might also be pertinent.  He 
acknowledged that services trade statistics would not be consistently available in a disaggregated 
manner according to the four modes of supply.  Othe r information might need to be provided as part 
of the determination of injury. 
42. Regarding the mode-specific use of safeguard meas ures, he indicated, in the case of mode 3, 
that a Member should not seek to fully restrict fu rther entry of foreign service suppliers as a first 
option.  Where appropriate, a Member might impose additional conditions for establishing a 
commercial presence.  In the case of Shangri-La, fore ign service suppliers might be required to enter 
into joint-venture arrangements with smaller local reta ilers.  In mode 2, in the example of ship repair 
and maintenance, measures might range from the imposition of fees and charges to outright prohibition so as to discourage or restrict the prope nsity to consume abroad.  A Member seeking to 
invoke a safeguard measure should contemplate less trade restrictive policy approaches.  In that 
particular case, the imposition of fees and charges might be a less trade restrictive option and, if 
resources were available, it could be complemented  by subsidies.  Concerning the concept of 'limited 
window', he considered that there was no justifi cation or precedent for making distinctions between 
those commitments providing for actual liberalizati on and those merely binding existing policies.  
There seemed to be little value-added in further comp licating the issue by drawing such distinctions.  
The link between the proposed ESM and liberalizati on should not be overly formalized.  An ESM 
would make it easier to convince domestic constituen cies to accept greater liberalization.  His group 
was open to ideas on how to further elaborate this concept.   
43. The representative of Japan
 said that he needed more time to study the room document.  On 
acquired rights, he thought  that activities such as the establishment of new branches or acquisition and 
mergers formed part of the initial business plan of a company investing in a foreign country.  Such 
activities were essential to recoup the initial cost of i nvestment and generate re venue for shareholders.  
Permitting Members to stop such activities would dete r foreign investment.  Concerning the definition 
of domestic industry, he doubted that defining dom estic industry on the basis of the percentage of 
foreign capital participation would help achieve the objectives of the proponents. 
44. The representative of Hong Kong, China  said that he would further reflect on the room 
document.  On situations justifying safeguards, th e examples hitherto provided - Shangri-La and the 
optometrists - had not clarified the more fundamental issue of why an ESM was called for.  At best, 
the examples depicted situations where some Memb ers might want to use an ESM, but not situations 
where the use of an ESM would be justified.  For in stance, in the Shangri-La example, what had been 
unforeseen at the time of undertaking commitments?   Why would an ESM be needed when it was 
acknowledged that other policies would have to be adopted to address a situation that was primarily 
structural in nature?  On the example of optometri sts, he remained uncertain  about the real cause of 
the problem.  On the one hand, the main professi onal services provided by optometrists, i.e. eye 
examination, were not subject to any commitment and were not affected by the influx of foreign  S/WPGR/M/49 
 Page 13 
 
 
 services.  On the other hand, the business of prepar ing and selling glasses, the most lucrative part of 
the business, was covered by the liberalization co mmitment under retail services and might have been 
foreseen in the first instance.  An analogy might be drawn with pharmacists, where very often the 
dichotomy between their services of advising on th e need for medicine and the more lucrative 
business of selling medicine called for regulatory r esponses, such as the institution of professional 
standards to ensure that the sale of medicines was accompanied by a certain degree of professional 
expertise, including for consumer protection.   
45. On the link to progressive liberalization, he  did not consider that the room document 
suggested a concrete, substantive a nd positive linkage to liberalization.  The question was whether the 
membership would benefit overall in terms of progr essive liberalization.  On the one hand, an ESM 
would allow roll-back of liberalization commitments on a temporary basis, but on the other hand there 
might not be any substantive improvement to the p ackage that was being negotiated.  He noted the 
analogy being drawn with the history of the goods safeguards, but recalled that his delegation had 
serious misgivings about this mechanism.  Perhap s a more appropriate analogy was a positive effect 
that might be expected in the market access negotiati ons, but that did not appear to be the case so far 
in services.  Finally, regarding the concepts of ac quired rights and domestic i ndustry, he did not think 
that these were entirely new issues given the exis tence of various economic needs tests (ENTs) in 
each mode of supply.  Even though they served a different purpose, ENTs did not specify the type of quantitative limitation that could be imposed as a result.   It might be useful to draw on the experience 
of Members that had ENTs.  What type of measure s did they impose to stop new economic activities?   
46. The representative of China
 wished to comment on the point made by the delegation of Japan 
regarding the effect of an ESM on investment.  Article XXI of the GATS allowed a Member to 
withdraw its commitments permanently, which certainly  had an effect on investment.  Therefore, she 
did not think that an ESM could be said to be un necessary or undesirable because of its effects on 
investment.  Since a permanent withdrawal of comm itments was feasible, it should also be feasible to 
have an ESM to suspend commitments temporarily.   
47. The representative of th e European Communities  signalled that he would come back to the 
written answers at the next meeting.  He could not agree with the suggestion to leave it to each 
Member to determine its own concept of domestic i ndustry.  On situations justifying a safeguard, his 
delegation considered that neither of the two examples justified a saf eguard.  Such situations could 
either be dealt with through domestic regulation or  have been foreseen at the time of undertaking a 
commitment.  There also remained  the option of withdrawing a commitment through Article XXI.  On 
the link to progressive liberalization, he thought, assu ming that an appropriate example of a safeguard 
situation could be found, that a pos itive linkage would have to be dem onstrated.  He failed to see that 
a Member having made commitments subject to quantita tive restrictions or othe r limitations should be 
able to invoke a safeguard.   
48. The representative of Canada  hoped to come back with questions at the next meeting.  
However, he wondered why the room document only focused on the questions listed in the 
Chairperson's annotated agenda.  His authorities thought  that it would be useful to address other issues 
raised in past meetings.  For example, his dele gation had asked a question on the role that domestic 
regulation and capital markets would play in restori ng equilibrium in the absence of an ESM.  He 
hoped to get a response from the group of ASEAN Members.  The Chairperson  explained that the 
room document from the group of ASEAN Members was in response to the compilation of questions 
contained in JOB(04)/49, which was an indicative list of questions raised.  Delegations might of 
course want to raise further questions.   
49. The representative of Chile  expressed concerns with the approach proposed for the definition 
of domestic industry.  A problem with the applicati on of trade remedy law in the goods area related to 
the degree of discretion implied.  Proposing that domestic industry be defined by each Member and S/WPGR/M/49 
Page 14  
 
 linking such a definition to the determination of in jury resulted in a high level of discretion, which 
was a concern to investors and service exporters.  In  the case of optometrists, consumer interests were 
highly important since liberalization led to lower prices.  She also wondered whether the proponents 
had thought of an example of safeguard situa tion for mode 1 and wondered about the type of 
measures envisioned.  While she recognized that th ere might be difficulties in distinguishing between 
commitments providing for actual liberalization and those binding the status quo, she thought that the 
approach proposed posed problems with respect to  the concept of unforeseen circumstances or the 
length of the 'limited window'.  In addition, she shared concerns expressed by others regarding the 
definition of expansionary activities.  Finally, with respect to mode 4, she had concerns about a quota 
being imposed on top of a quota and about how the num ber of suppliers below the average level of a 
recent representative period would be defined.  How could it be calculated in the first two or three 
years of liberalization if entry of supp liers had not been allowed before?   
50. In a preliminary manner, the representative of Australia
 thought that the example of 
optometry services was not entirely convincing.  It was difficult to distinguish between foreign and domestic suppliers when both were supplying the service from the same territory.  A Member making 
a commitment on retail services still had the option of  qualification and licensing measures to regulate 
who could perform certain types of activities.  He had strong reservations about the idea of leaving it 
to each Member to define domestic industry.  Allo wing a Member to unilaterally change its definition 
would have implications on the type  of safeguard measures imposed.  
51. The representative of Switzerland
 said that she would come back to the room document after 
further examination.  On acquired rights, the gro up of ASEAN Member had tried to address previous 
criticism about adverse effects of an ESM on legal cer tainty and predictability of market liberalization 
undertaken in negotiations based on a balanced exchange of concessions.  A number of countries 
wanted to ensure that investment conditions for entering their market were liberal, and the GATS was 
the main instrument for concretizing that policy, as it was multilateral and legally binding.  However, 
an ESM would conflict with such policy approach by making the legal environment much less certain, 
both for pre-established foreign service suppliers and for those that wanted to enter new markets.  
Second, on the link to progressive liberalization, she did not think that the room document addressed 
the issue of a positive linkage.  She had suggested  that the proponents identify the particular 
commitments that an ESM might prompt them to undertake and which they would not have undertaken otherwise.  She hoped that the group of Members from ASEAN could elaborate in this regard.   
52. The representative of Japan
 disagreed with the argument made by the delegation of China 
regarding Article XXI.  Commitments could be modifi ed if a certain procedure was followed.  Such 
procedures provided for a certain degree of legal stability.  It would be much easier to modify commitments under the proposed ESM.  A key diffe rence between trade in goods and trade in 
services pertained to mode 3, where the importan ce of legal stability was even greater.  When 
investing in a foreign country, a longer-term outlook was necessary.  The fact that safeguard measures 
were allowed in goods did not pr ovide justification for safeguards in services.  Each Member could 
inscribe certain conditions in its schedule.  This was a matter for negotiation, like ENTs.  It would be 
harmful to investments to have an agreement on safeguard measures.   
53. The representative of Brazil
 wished to emphasize the importance, especially for developing 
country Members, of having more flexible mech anisms to modify commitments in emergency 
situations.  The possibility to use an ESM, which w ould be more flexible than Article XXI, would 
provide a safer regulatory context and even a more st able legal context, with clear rules applying only 
to emergency situations.  This c ould stimulate countries, especially de veloping ones, to schedule more 
commitments.  The representative of China  did not think that it could be said that an ESM was not 
needed because it would have an effect on investme nt.  Permanent withdrawal of commitments under 
Article XXI had larger effects on investment.  While  certain procedures needed to be followed under  S/WPGR/M/49 
 Page 15 
 
 
 Article XXI, certain rules and procedures, still to be  negotiated, would also need to be followed under 
an ESM.  
54. The representative of the Philippines  wondered whether questions ra ised at this meeting could 
be compiled in another Note from the Chairperson so as to facilitate the provision of answers.  On the 
comments from Japan, he said that the list of e xpansionary activities provided was preliminary and 
was intended to spark discussions.  He welcomed  comments to the effect that mergers and 
acquisitions were part of the normal business plan of companies and indicated that the group of delegations he was speaking for would continue to reflect on these issues.  Where certain established 
foreign service suppliers had caused injury, allo wing these suppliers to establish new branches or 
make acquisitions during that critical period of time might aggravate the situation.  They should thus 
be precluded from expansionary activities in the rele vant period.  Outright prohibition of entry or 
participation in the market should be the last  resort, as other measures should be examined 
beforehand.  Turning to another comment from the delegation of Japan, he said that if a Member 
defined domestic industry as includi ng all established suppliers, wh ether foreign or national, the 
foreign suppliers already established could continue  to merge, expand, or make acquisitions.  The 
only effect of a safeguard measure would then be  on foreign service supplier who had not yet entered 
the market.  The situation would be different if a Member defined domestic industry as including 
solely domestically-owned suppliers.  In that situ ation, established foreign service suppliers would be 
subject to a safeguard measure, keeping in mind th at certain acquired rights would be protected.  The 
notion of expansionary activities was relevant in th at context.  With respect to Article XXI, he 
underscored that an ESM would provide for a temporary modification or withdrawal of commitments, 
whereas Article XXI provided for a permanent one.  Article XXI required compensation to be offered, 
and that was a key distinction with the proposed  ESM, where no compensation was required during an 
initial period of three years.  A degree of legal stability and certainty was nevertheless maintained.  
There would be more instability in an Article  XXI situation in which there was continued 
disagreement on the level of compensation to be granted.   
55. Turning to questions from the delegation of H ong Kong, China, he indicated that in the 
Shangri-La example the authorities might not have foreseen, in making the co mmitment, the pace and 
extent of foreigners' impact on the domestic market .  By way of example, the authorities might have 
anticipated that foreign suppliers would reach a ma rket share of 50% over 5 years, but they actually 
reached 60-70% over a period of three years.  Regarding the link to progressive liberalization, he indicated that domestic consultations had suggested  that an ESM might contribute to undertaking 
more liberal commitments.  He was open to liste ning to delegations on how to formalize such a 
linkage.  On comments made to the effect that th e Shangri-La example represented a problem of a 
structural nature that could not be addressed by a saf eguard measure, he felt it was not fruitful to try to 
define a 'structural problem'.  He also wondered w hy a temporary reprieve in the form of a safeguard 
measure could not form part of a broader policy package undertaken to address any such problem.  
Regulatory responses were not always sufficient.  On comments by the delegation of Australia, he 
considered that fears relating to Members unilatera lly changing their definition of domestic industry 
could be addressed by a notification procedure.  An  additional requirement could prohibit safeguard 
measures from being imposed during a given period of time after a change in the definition of 
domestic industry.  On the question put by Canada, he  noted that there would be a role for regulatory 
authorities in addressing the situation.  Indeed, his group of delegations advocated a procedure 
prompting Members to see whether less trade-rest rictive policy tools, such as domestic regulations, 
were available.  If such regulatory measures were no t sufficient, or not deemed sufficient, safeguard 
measures could be used as a complement.  He hope d to be able to provide further written answers 
upon receiving questions in writing.   
56. The Chairperson
 urged delegations to forward their questions to the group of Members from 
ASEAN.  A decision on whether to draw up a new list c ould be taken at a later time, if necessary.    S/WPGR/M/49 
Page 16  
 
 57. The representative of Japan
 wished to react to statements from the delegations of China and 
the Philippines.  He underscored that a Member c ould only modify commitments pursuant to Article 
XXI if an agreement had been reached with affected Members or if an arbitration had been made.  In 
the case of a waiver, a decision by the Ministerial Conference was needed.  Under the proposed ESM, 
however, commitments could be modified and affected Members could only see if this was done 
properly after the modification had occurred.  This  was a key difference from Article XXI or Article 
IX of the Marrakesh Agreement, and it ha d implications for legal stability.   
58. The Chairperson  said that the room document from the group of delegations from ASEAN 
helped to focus discussions.  Areas that could usefu lly be pursued further included issues of domestic 
industry and acquired rights, situa tions justifying safeguard actions , and links between an ESM and 
progressive liberalization.  She invited the Working Party to take note  of the comments made.   
III. NEGOTIATIONS ON SUBSIDIES (ARTICLE XV) 
59. The Chairperson  suggested that delegations focus th eir attention on the recent communication 
from the delegation of Hong Kong, China, contained in JOB(04)/127.  It put forward some thoughts 
and proposals on the possible way forward on such asp ects as the information exchange, the definition 
of subsidies or trade distortions.  As requested, the Secretariat had produced an update of previous 
Notes on subsidy-related limitations in schedules, circulated as S/WPGR/W/13/Add.2.  The Note, 
covering the period from June 2000 to the present, w as brief and self-explanatory.  Pursuant to a 
query from delegations at the last meeting, it ob served that no definition of subsidies could be 
identified in schedules.  Delegations might also wa nt to further comment on issues raised in past 
communications from Chinese Taipei on the definiti on of subsidies and from Chile on the list of 
examples of subsidy programmes, or to pursue past discussions on export subsidies.   
60. The representative of Hong Kong, China  believed that the nego tiations on subsidies had 
picked up momentum over the last year and welcomed  contributions by a number of delegations.  The 
communication from his delegation was intended to cont ribute to this process.  He did not wish to 
initiate a procedural debate; the negotiations shou ld be driven primarily by contributions from 
Members.  Discussions on subsidies had so far focused on four main aspects.  The first was the 
information exchange required under Article XV.  The second was the information on subsidies from 
other sources, as a supplement to the informati on exchange.  The third was the discussion on the 
definition of subsidies, which partly responded to th e views of some delegations that the lack of a 
definition might have hampered the informati on exchange as well as further discussions on the 
development of any necessary disciplines.  The fo urth, which was more recently introduced by a 
contribution from Chile, related to the trade distortiv eness of subsidies.  On the information exchange, 
he noted that Article XV:1 provided that all Me mbers should exchange in formation concerning all 
subsidies related to trade in services that they provide to their domestic service suppliers.  The 
mandate was sufficiently clear.  So far, only four  Members had provided such information, despite 
efforts by various delegations to facilitate the in formation exchange through the preparation of a 
revised questionnaire, the use of alternative definitions  of subsidies, or the gradual provision of partial 
information.  Lack of engagement in the inform ation exchange was a cause for concern not only 
because it amounted to an unfulfilled mandate, but al so because it perpetuated the existing lack of 
transparency.  Delegations that had not yet shared  information could provide  an indicative timeframe 
for that contribution.  He also suggested that Members explain the difficulties encountered so that 
these could be addressed.  Members that had listed li mitations relating to subsidies in their schedules 
could explain what subsidy programmes were covered by such limitations.  He noted that information 
on subsidies should in any event be readily availa ble upon request through enquiry points pursuant to 
Article III.  Members that had subsidies identified in their trade policy reviews, as compiled by the 
Secretariat in S/WPGR/W/25 and addenda, could share information about such programmes.  He emphasized that, should the information exchange  remain unsuccessful, it would be necessary to  S/WPGR/M/49 
 Page 17 
 
 
 request the Chairperson to highlight such failure in  her report to the Special Session of the Council for 
Trade in Services, with a view to seeki ng further guidance on how to proceed.    
61. Concerning other sources of information on subs idies, he hoped that the Chairperson could 
continue to report on the status of work being do ne by UNCTAD and that the Secretariat could keep 
the Working Party informed of any other sources re lating to subsidies in services.  Members could 
also draw the Working Party's attention to any in formation of relevance.  On the definition of 
subsidies, the contributions from Members had provid ed a good basis for further discussions.  In order 
to move forward, Members that had subsidy-rela ted limitations in their schedules could share the 
definitions that they used or the scope of such limitations.  Members that were parties to economic 
integration agreements containi ng provisions on services subsidies, as reflected in S/WPGR/W/46, 
could also indicate the definitions used for such purpo ses.  If the definitions used in schedules or EIAs 
were not deemed relevant for the purpose of the negotiations under Article  XV, delegations could 
explain why.  He also wished to suggest that the Secretariat compile, on the basis of previous 
contributions and discussions, a composite note on issues to be considered for a definition of 
subsidies.  On the issue of trade distortion, Memb ers with subsidies identif ied in their trade policy 
reports, as well as those that were parties to EIAs  containing disciplines on services subsidies, could 
share their views on whether such subsidies were trade distortive and on why they had wanted to 
include relevant disciplines in EIAs, and how su ch disciplines were operationalized.  In providing 
information pursuant to the information exchange , delegations might comment on the possible trade 
distortive effects and on the need fo r disciplines.  In that context,  Members might wish to provide 
information on the policy objectives behind subs idy programmes and whether such objectives 
impinged on consideration of trade distortiveness.  He also invited those Members that had raised 
subsidy-related issues in negotiating proposals to  Special Sessions of the Council for Trade in 
Services to elaborate on these issues and indicate whether and how Article XV negotiations might be relevant.  Delegations might also want to comment  on subsidies that played a particular role in 
relation to the development progra mmes of developing countries.   
62. In a preliminary manner, the represen tative of the European Communities
 wished to clarify a 
few points.  He agreed that Article XV:1 contai ned an obligation to exchange information, but, as 
previously indicated, he did not think that exchanging information was tantamount to notifying all subsidies.  It was not appropriate to start with  a general notification exercise.  Regarding the 
suggestions made in JOB(04)/127, he noted th at the questionnaire had not been very popular, 
including for those that had proposed it.  The re ference in paragraph 12 of the communication from 
Hong Kong, China to the information provided by the European Communities on its own regime for 
state aid should be considered as falling under the exchange of information, and not under other 
sources of information.  A communication from the European Communities, circulated as Job. 4302 
from 6 July 2000, had responded to his delegation's obligation to exchange information with other 
WTO Members.  If the ambiguity between notific ation and exchange of information could be 
resolved, many more Members might make similar contributions.  He noted that paragraph 9 of 
JOB(04)/127 suggested that the Chairperson of the WP GR raise the issue at the Special Session of the 
Council for Trade in Services.  He was not convinced  that such process was the most appropriate, as 
this issue pertained to implementation more th an to negotiations.  Such reports might more 
appropriately be made to the Regular Session of th e Council for Trade in Services.  On the definition 
of subsidies, he thought that Members with subsid y-related limitations in their schedules would most 
likely provide the broadest possible definition of such limitations.  For obvious reasons, nobody 
would want to create problems with respect to the inte rpretation of its schedule.  He was not sure that 
suggestions regarding defin itions of subsidies in EIAs would necessarily be very useful, at least as far 
as the European Union was con cerned, since the relevant ag reements provided for maximal 
integration, with full liberalization.  In such cases,  the concept of state aid had been used, as explained 
in the previous EC communication on the Community regime.  Finally, regarding the issue of trade 
distortion, he believed that the key point that was not addressed in the communication was whether 
Members detecting distortions caused by subsidies or  proposing relevant disciplines had made use of S/WPGR/M/49 
Page 18  
 
 the consultations provisions of Article XV:2, thus  indicating that they considered themselves 
adversely affected by a subsidy of another Member .  He was interested in the results of such 
consultations, if any, and thought that relevant information might help to advance discussions in a 
concrete and useful manner.   
63. The representative of the United States
 warned that without an agreed definition of what 
constituted a subsidy Members might well be wasti ng their time and resources to develop lists of 
subsidies that in the end might not be considered su bsidies.  Vastly different lists of subsidies might 
be submitted, with some Members reporting substantia lly fewer subsidies than others.  The fact that 
one Member reported fewer subsidies might simp ly be the result of a Member having defined 
subsidies more narrowly.  Resources could be more productively used to contribute analytical papers 
that could help assess whether subsidies were more li kely to be applied in certain sectors or whether 
certain kinds of subsidies might be more relevant to  trade than others.  Such contributions might be 
instrumental in reducing the scope of issues to be confronted and thereby focusing discussions.  
Further, her delegation disagreed with Hong Kong, Ch ina's interpretation of Article XV:1 with respect 
to the exchange of information.  The relevant ma ndate was qualified by the terms "for the purpose of 
such negotiations".  In addition, it did not call for the information to be provided in advance of the 
negotiations.  It would not make sense for Memb ers to provide information without having some 
common understanding of what would constitute a rele vant subsidy.  Consequently, there was no 
obligation to embark upon an e xhaustive information exchange of the kind described by the 
delegation of Hong Kong, China.   
64. On the Note by the Secretariat, she wished to point out that th e reservations listed appeared to 
apply either to all sectors or to sectors where direct and indirect govern ment participation was 
common for public welfare reasons, such as in hea lth and education services.  Moreover, Members 
had not specified whether they maintained subsid ies, but had rather sought to ensure that the 
commitments did not cover subsidies, should any ex ist.  This could suggest that Members were 
uncertain about the kind of policies that could cons titute services subsidies.  If no subsidies were 
actually granted, she further doubted whether an inscr iption in the market access or national treatment 
columns would be considered to constitute a restrict ion.  In domestic consu ltations, her delegation had 
encountered confusion within the education commun ity on whether research grants or student loans 
would constitute a subsidy.  Since every countr y maintained some level of public support for 
education, healthcare or urban transportation, it mi ght not be wise to include certain public welfare 
policies in any discussions of trade-related subsidies.   
65. The representative of Mexico  said that the communication from Hong Kong, China was being 
further examined by his authorities.  In his view, transparency and the exchange of information were 
key elements of these negotiations.  However, they were not preconditions.  Discussions on the 
various aspects of these negotiati ons should continue independently of the information gathered.  
Such information, as well as that which could be pr ovided by the Secretariat or observer organizations 
could obviously be very helpful, but, as signalled by the delegation of the United States, progress also 
depended on Members making significantly more analytical contributions.   
66. The representative of Switzerland  considered, on the basis of S/WPGR/W/13 and addenda, 
that more than 35 Members had entered limitations regarding subsidies.  The absence of an agreed 
definition of subsidy did not seem to pose problem s for the scheduling and implementation of these 
limitations.  This should be borne in mind in fu ture work.  Further, she expressed support for the 
communication from Hong Kong, China and thought that the invitation to Members, in paragraph 3, 
to present concrete proposals was of crucial importa nce.  On the information exchange, she endorsed 
the suggestion, in paragraph 7(a), to set an i ndicative timeframe by which information would be 
provided.  Her delegation considered that the mandate entailed a clear obligation to exchange 
information concerning all subsidies related to trade in services.  Setting a concrete timeframe seemed 
the most appropriate way to make progress and sh e invited delegations to fulfil the obligation to  S/WPGR/M/49 
 Page 19 
 
 
 exchange information by the second cluster of next year.  She suggested that the Chairperson put on 
record that the information exchange had to be fulfilled by such proposed timeframe.  Substantive 
work relating to these negotiations could proceed si multaneously with the information exchange.   
67. She reiterated that export subsidies were the mo st harmful type of subsidy; their purpose was 
always to affect trade and they distorted competitio n in third markets.  What would be the value of 
securing market access commitments in sectors where competition was being distorted by operators of 
third countries subsidized by their home governments? Such practices could create problems for all Members.  In addition, there was no obligation to schedule export subsidies if these were granted on a 
national treatment basis.  There was a clear need fo r action on this issue.  On definition, she believed 
that export subsidies in services could, in genera l terms, be circumscribed as support measures of a 
Member granted to a service provider in respect of, or in direct connection with, the supply of a 
service in the territory of another Member.  The ASCM defined export subsidies as subsidies 
contingent upon export performance and Annex 1 to that agreement provided an illustrative list of 
such subsidies.  She thought that it would be help ful to examine whether a similar concept could also 
be used in the context of services.           
68. The representative of Chinese Taipei
 welcomed the contribution from the delegation of Hong 
Kong, China.  She saw value in the suggestion to  set a timeframe by which Members would provide 
the relevant information.  However, such info rmation should assist the Working Party in assessing 
issues relating to the development of disciplines on subsidies, but not be used for negotiations or 
disputes in the future, since no disciplines had b een developed under Article XV.  Regarding the 
previous communication from her delegation, she wish ed to emphasize that it was designed to test, 
with the use of concrete examples, whether and to  what extent the ASCM could provide a good basis 
for developing a working definition of subsidies.   Dealing with definitions was inevitable if 
disciplines were to be developed.  However, this was not necessarily the first priority.  The issues of 
definition and trade distortion could be discussed in parallel, as they were separate, although related, 
concepts.  There was no particular reason why the tw o concepts should be linked up for the purpose of 
analysis as part of negotiations.  Regarding Sw itzerland's intervention, she thought that export 
subsidies could be a priority issue.  Turning to th e discussion at the last meeting of the first example 
listed in the communication from Chile, in particular the issue of who would be the beneficiaries of 
the programme, she noted that the companies con cerned needed to have exportable services with a 
local content of at least 50% and thought that this  gave an advantage to domestic services, compared 
with services provided from abroad.  It would cause unfair competition in third markets.  Export 
subsidies in general had trade distortive effects, in particular under mode 1, which was a situation 
comparable to trade in goods.  However, it was di fficult to see how the programme's requirement that 
50% of the exported service be of domestic content c ould be achieved in relation to modes 3 or 4.   
69. The representative of Thailand  considered subsidies an important area of rule-making.  She 
hoped that a definition could be reached and the extent to which subsidies existed in services 
industries and distorted trade could be determined.  The issues of definition and trade distortion could 
be examined separately.  Notwithstanding their policy goals, subsidies altered the conditions of 
competition and interfered with price signals.  Nevertheless, she acknowledged that the effects 
depended on the form of subsidy, the market st ructure, the eligibility conditions, and how they 
interacted with other policies.  Turning to the Note  by the Secretariat, she considered that the subsidy-
related entries in schedules, while not providing mu ch information on definition, revealed certain 
policy intentions.  For example, in mode 3, only those companies that were present on the territory 
were eligible for subsidies.  In mode 4, only citizen s and/or residents were eligible.  Things were less 
clear for modes 1 and 2.  The entries also highlight ed the sectors and areas that were of particular 
concern to some Members, such as research and deve lopment, audiovisual, and education.  Examining 
these sectors could be a good starting point.  S/WPGR/M/49 
Page 20  
 
 70. The representative of Chile
 hoped that the list of suggestions contained in the communication 
from Hong Kong, China could motivate Members to provide information on their subsidies.  Her 
delegation hoped to do so at the next meeting.  Th is was an information exchange, not a notification 
exercise.  It could help to provi de an inventory of subsidies whic h could then be analyzed to assess 
trade distortive effects.  Eventually , the Working Party might be able to develop some disciplines.  On 
the other hand, further analysis could also perm it to highlight programmes meeting certain public 
policy objectives.  More information was needed in  order to proceed to such analysis.  Like 
Switzerland, she considered that setting a timeframe for the information exchange was a practical way 
to advance the matter.  She also thought that it would be useful to know the status of the work carried 
out by UNCTAD and to be informed of other re levant sources of information.  She called on 
Members to submit communications on specific issues, in particular regarding definition or trade 
distortion.  She hoped to deepen the discussion of the first examples contained in her delegation's 
communication at the next meeting.   
71. On the communication from the delegation of  Hong Kong, China, the representative of 
Australia  thought that the suggestion for more focused work on the issues of definition and trade 
distortion was particularly useful.  His delegation c onsidered that priority should be given to the 
definition of subsidy.  Otherwi se, the chicken-and-egg problem would persist and complicate the 
exchange of information.  A common definition wo uld allow Members to exchange information in 
earnest without being required to subjectively evalua te what subsidies created trade distortions.  He 
wondered whether the communication from Hong Kong, China did not place too much emphasis on the concept of trade distortion, rather than on the need for a definition.   
72. The representative of the Republic of Korea
 expressed general support for the proposals in 
JOB(04)/127 on the information exchange and want ed to be kept informed of the status of 
UNCTAD's work on subsidies.  She recalled her view  that the subsidy definition of the ASCM could 
be used as it was.  No specific objections had b een voiced.  Since it had been suggested that the 
definition of the ASCM be used as a guide for th e information exchange, those who wished to use a 
different definition could explain why.  On the i ssue of export subsidies, she supported the idea of 
closely examining the illustrative list of export s ubsidies found in Annex 1 to the ASCM to see how 
this could be applied in services.  With respect to the discussion at the last meeting on the issue of the 
conferment of a benefit, she did not think that a modal distinction could be made when providing a 
subsidy.  The beneficiary was the company that supp lied services, whether that beneficiary decided to 
export services under modes 1, 2, 3 or 4.  In this re gard, government support to trade associations, part 
of Chile's first example, might not fall within the definition of direct beneficiaries because these were 
not service suppliers per se .  They rather supported their members through marketing and exhibition 
activities, which were not directly related to export performance.  Such types of indirect support were 
not in the illustrative list in the ASCM.  Regarding tr ade distortive effects, she noted that in the case 
of mode 3 the subsidy aimed to support the compan y to go abroad and establish subsidiaries.  The 
subsidies used might include insurance guarantees for outward foreign investment, or income or 
corporate tax reductions for relate d remittances.  At the same time, the company might benefit from 
investment incentives offered by the host country.  In such cases, how could trade distortive effects be 
determined?  The situation was similar for mode 4.  While government support for mode 4 exports 
would fall within the ambit of export subsidies, su bsidies to workers might be motivated by social 
policies to alleviate unemployment problems.  At the same time, since Members had scheduled such 
policy tools as ENTs and labour market tests, it seemed difficult to assess the degree of trade 
distortive effects.  With respect to definitions of services subsidies found in schedules or EIAs, she did not think that her delegation had envisioned speci fic definitions.  There was thus ample room for 
discussing definitions to be used in the future.   
73. The representative of the United States
 added that the definition in the ASCM seemed to be 
an appropriate starting point for the purpose of  comparison.  The representative of Singapore  said that 
he would revert to the communication from Hong Kong,  China at a later time.  An important point  S/WPGR/M/49 
 Page 21 
 
 
 highlighted in previous interventions was the role th at subsidies played in relation to legitimate public 
policy objectives.  This was already envisaged in paragraph 1 of Article XV, which specified that 
negotiations should recognize the role of subsidie s in relation to the development programmes of 
developing countries and take into account the need s of Members, particularly developing country 
Members, for flexibility in this area.  On export subsidies, he recalled that a number of commentators 
had said that the GATS might not necessarily cover export-related measures.  He still was not sure 
whether or how export subsidies were captured by the negotiating mandate under Article XV.  
Finally, like Australia, he emphasized the need to  focus on the definition of subsidy, using, as 
suggested by the US, the ASCM as a possible starting point.   
74. The representative of El Salvador  expressed concerns regarding paragraphs 7(f), 10(a) and 
18(a) of the communication from the delegation of Hong Kong, China.  Since there was no agreed 
definition of subsidies, her delegation had reserva tions regarding the information contained in the 
Note by the Secretariat circulated as S/WPGR/W/ 25 and addenda.  Consequently, she did not think 
that it was yet appropriate to try to further clar ify its content.  The representative of Guatemala  shared 
Hong Kong, China's concerns with respect to the n on-fulfilment of the information exchange.  Lack 
of clarity with respect to subsidies and their eff ects produced uncertainty, which could even have an 
impact on the scheduling of commitments.  He consider ed that it would be useful to be informed of 
the results of the study on services subsidies conducted by UNCTAD, and hoped that it could be presented in the Working Party.   
75. On the Note by the Secretariat contained in S/WPGR/W/13/Add.2, the representative of 
China
 sought clarification regarding the statement in paragraph 2 to the effect that discriminatory 
subsidies might also be granted in situations  where no commitments had been undertaken.  She 
wondered whether that meant that certain subsidies were provided to domestic service suppliers even 
if not inscribed in Members' schedules.  Rega rding the communication from the delegation of Hong 
Kong, China, she wished in particular to echo the proposal in paragraphs 13(a) and 13(b) concerning 
the study by UNCTAD and the provision of additional sources of information by the Secretariat.  A 
representative of the Secretariat  clarified that the scheduling of limitations to national treatment in 
schedules was intended to provide cover for discrimin atory effects of subsidies in situations where 
national treatment commitments were undertaken.  In sectors or sub-sectors where such commitments had not been undertaken, there was no requirement to list such measures.            
76. The representative of Hong Kong, China
 wished to react to points made.  He considered that 
the suggestion by the delegation of Switzerland rega rding a timeframe for the information exchange 
was quite useful, as it could help authorities to pl an ahead.  On the definition of subsidy, the 
suggestions in his delegation's communication were aimed at avoiding the chicken-and-egg syndrome.  
He agreed with the delegation of Australia that  it would be important to move forward on the 
definition of subsidy, but felt that the various issues under discussion under this agenda item had to 
proceed in parallel.  The discussion on definition or  trade distortion should not be conditioned upon 
the information exchange, or vice-versa.  In order to  build on the work done so far, he had requested 
the Secretariat to produce a composite note on the issue of definition.  Responding to a comment from 
the delegation of Singapore, he be lieved that export subsidies were clearly within the scope of the 
GATS and of the mandate under Article XV.  First, Article XV said that Members should enter into 
negotiations with a view to developing the neces sary multilateral disciplines to avoid trade distortive 
effects of subsidies.  To the extent that export subsidies might have trade distortive effects, these 
should be addressed in the negotiations.  Second, nothing in Article I:1 of the GATS confined the 
meaning of measures affecting trade in services solely to measures affecting imports.   
77. He would reflect further on the remarks by the delegation of the European Communities and 
comment more extensively at a future meeting.  He did not agree that issues relating to the 
information exchange were within the ambit of th e Regular Session rather than the Special Session of 
the Council for Trade in Services.  Negotiations  under Article XV were part of the services S/WPGR/M/49 
Page 22  
 
 negotiations, which were overseen by the Special Sess ion.  They included the information exchange, 
as exemplified by the fact that such article speci fied that the information exchange was for the 
purpose of negotiations.  On comments regarding para graph 2 of Article XV, he noted that he also 
would be pleased if any delegation wished to shar e experience in that regard.  Referring to earlier 
discussions on the scope of the mandate under Article  XIII, he cautioned against reading too much 
into Article XV:2 when entering into negotiations pursuant to Article XV:1.  Turning to comments 
from the delegation of the United States, he noted that he had encouraged delegations to make 
concrete proposals and did not think that their discussion should be conditio nal on the information 
exchange.  He took note of the difficulties affecti ng the information exchange, but hoped that the 
delegation of the United States could further explain what, in their view, should be done in respect of 
the last sentence of paragraph 1 of Article XV.  Re garding comments on the need to recognize the role 
of subsidies in relation to public policy objectives, he said that this aspect had to be taken into account 
in any future discussions on trade distortiveness.  His delegation intended to provide further thoughts 
on this issue.                              
78. The representative of Canada
 said that the proposals and sugg estions raised today would be 
carefully examined by his authorities.  Accordingly,  he did not wish to express any definitive views at 
this stage.  An informal meeting in advance of th e next formal meeting could be held to discuss the 
way forward, if needed.  The representative of the United States  indicated that she did not share the 
interpretation of the delegation of Hong Kong, Ch ina with respect to the relationship between the 
negotiations in this Working Pa rty and those pursuant to Artic le XIX.  These were parallel 
negotiations governed by different mandates.  She could not support the proposal concerning the 
setting of a timeframe for the information exchange , as it would in effect amend Article XV:1.   
79. The representative of the European Communities  wished to react to the latest intervention by 
the delegation of Hong Kong, China.  He coul d not see any relation between the points made 
regarding the interpretation of the different mandat es. Rather, he had noted that a number of proposals 
had been put forward relating to the concept of trad e distortion.  The best wa y to gather information 
on this issue seemed to be to ask Members that  had encountered problems because of subsidies 
granted by others to inform the Working Party of their experience under Article XV:2.  With respect to the suggestion relating to the Chairperson's repor t, he noted that the negotiations were under the 
umbrella of the Special Session.  However, the pr oblem raised related to the implementation of an 
obligation that had been in effect since 1994 and not to the ongoing negotiations.  Issues of implementation were dealt with in the Regular Session.       
80. In summing up discussions, the Chairperson
 noted that many procedural and substantive 
suggestions had been made in the light of the informal communication from the delegation of Hong 
Kong, China, including on timeframe and on furthe r work by the Secretariat.  She urged all 
delegations to carefully consider these suggestions in  preparation for the next meeting.  On the study 
by UNCTAD, she undertook to let the membership know  when the document would be available.  On 
information exchange, useful ideas suggesting some flexibility regarding the relevant format were 
discussed; delegations might want to exhaust existi ng resources in the first instance.  She also 
considered that the proponents of the discussions on subsidies might want to set an example, and 
commended the delegation of Chile for intending to  submit information at the next meeting.  
Hopefully others would do the same.  She noted that some delegations had called for concrete 
negotiating proposals and that a range of views ha d been expressed regarding the nature of the 
information exchange.  A delegati on, supported by others, had called for a concrete timeframe for the 
submission of information, while others placed highe r priority on the development of a definition.  A 
large number of delegations would prefer the various  aspects to proceed in tandem.  There seemed to 
be general agreement that the definition of subsid y in the ASCM provided a useful starting point for 
further discussion on this issue.  She proposed that the Working Party take note  of statements made.  S/WPGR/M/49 
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 IV. DATE OF THE NEXT MEETING 
81. The Chairperson  indicated that the Working Party would hold its next formal meeting during 
the next cluster of services meetings, the exact date  of which would be announ ced in due course.   
V. OTHER BUSINESS 
82. The representative of Chile  wished to draw the attention of delegations to the discussion in 
the Negotiating Group on Rules, the following day, of a communication from Chile on Article V of the GATS.   
__________