RESTRICTEDWORLD TRADE
ORGANIZATIONS/WPGR/W/27
20 November 1998
(98-4692)
Working Party on GATS Rules
ISSUES FOR FUTURE DISCUSSIONS ON EMERGENCY SAFEGUARDS
Note by the Secretariat
1. This paper was requested by the Working Party on GATS Rules in its meeting of 6 October
1998.  The paper considers first, alternative forms that a safeguard mechanism under the GATS maytake.  It then elaborates on the list of issues identified in the outline submitted by Venezuela (Job No.
5412, dated 14 October 1998), drawing upon the submissions made by Members and the precedent in
Article XIX of GATT 1994 and the Agreement on Safeguards.
I. Alternative forms of a safeguard mechanism
2. Members have suggested several alternative forms for a possible safeguard mechanism under
the GATS.  One view has been to model it closely on the mechanism in the goods area.  The
applicability of concepts in the Agreement on Safeguards (AS) to the GATS context has been
discussed in a previous Note by the Secretariat (S/WPGR/W/8).
3. A second view has been to include safeguard-type provisions for specific sectors in a
Member's schedule of specific commitments (this view has been expressed in a Communication fromthe United States, S/WPGR/W/17).  Rules may still need to be developed to be followed by Members
who include such safeguard-type provisions in their sc hedules.  It has been suggested that such rules -
general, sector-specific or mode-specific - could include the requirement that a Member including a
safeguards-type provision in its schedule in a given sector must combine it with a commitment to
liberalization in that sector.  The extent of libera lization which would justify inclusion of a safeguard
provision would presumably be determined throug h negotiations between the concerned Member and its
trading partners.
4. A third view has been to use the model in Article 5 of the Agreement on Agriculture.  This
Article deals with Special Safeguard Provisions which are triggered by import volume increases or
import price reductions, and  permit the imposition of additional duties up to specified limits.  The
volume trigger is sensitive to the degree of import penetration, while the price trigger is related to
certain base-year average prices in domestic currency.   The volume trigger leads to the non-discriminatory application of additional duties, whereas the price trigger leads to additional duties
fixed on consignment-by-consignment basis.  It is notable that the provision does not require injury to
domestic industry as a basis for safeguard action.
5. A fourth view has been to use the model in Article 6 of the Agreement on Textiles and
Clothing.  This Article deals with a transitional safeguard mechanism which has been established forproducts not yet integrated into GATT 1994 and not subject to restriction.  This safeguard is applied
selectively to particular exporters.  Safeguards may be maintained for a maximum of three years.
Special treatment is envisaged when applying safeguards against small exporters, least-developed
countries, wool producers, outward- processing trade and cottage industries.  It is notable that this
provision requires a Member to demonstrate that a particular product is being imported into itsterritory in such increased quantities as to cause serious damage, or threat thereof, to the domesticS/WPGR/W/27
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industry producing like and/or directly competitive products;  and that the damage can be attributed to
imports from the country in question.
II. List of issues for future discussions
6. The italicised headings below have been taken from the outline submitted by Venezuela (Job
No. 5412, dated 14 October 1998).
1. Definition and scope of safeguards in services.
- Active subject:  who applies the safeguard?  E.g. government, professional
associations, central banks.
7. Safeguards would normally be applied by a Member.  It is conceivable that a Member may
delegate the responsibility for action to a particular agency.  Under the GATS, measures by Members
are defined broadly to include measures taken by central, regional or local governments, as well as
non-governmental bodies in the exercise of power s delegated by the government.  Governments can,
therefore, be held accountable in the WTO for decisions or actions affecting trade in services by non-
governmental bodies, such as those regulating particular service sectors, which exercise delegated
powers.  This may be relevant if such bodies were to have responsibility for the administration of
safeguard action.
- Passive subject:  to whom is it applied?  Country, industry of a country, specific
company.
8. There are two related aspects of this question:  first, on whose behalf is safeguard action taken
and second, against whom such action is taken.  In the goods case, safeguard action is taken on behalf
of a domestic industry - defined to mean the producers as a whole of the like or directly competitive
products operating within the territory of a Member, or those whose collective output of the like ordirectly competitive products constitutes a major proportion of the total domestic production of those
products.  In the Working Party, one view has been that the goods precedent should be followed, and
safeguard action be taken to protect all domestically established suppliers of like or directly
competitive services, regardless of ownership and control.  According to this view, it would not be
desirable to use, for the purpose of safeguard action, the relevant definition in GATS Article XXVIIIto determine what constitutes national industry.
9. Another view has been that safeguard action should be available to protect the national
industry, which is understood to mean all natural and juridical persons of the Member taking the
measure who supply like or directly competitive services.  According to this view, the distinction
between national and foreign entities should be based on the relevant definition in GATS Article
XXVIII.  It has been noted, however, that indi vidual Members were not obliged to make this
distinction when taking safeguard action.
10. The response to the second aspect of the question, concerning against whom safeguard action
is taken, depends on the response to the first aspect: all those who do not benefit from such action
would suffer its consequences.  Thus, it would seem that safeguard action could either only be taken
against suppliers of the like or directly competitive products located outside the territory of the
Member taking such action, or also against foreign suppliers of such products located in the territoryof the Member.  Two observations are relevant.  First, even Members who wish to make a distinction
within the class of domestically established suppliers on the basis of nationality have stated that
"acquired rights" of foreign suppliers should be respected, and measures which force disinvestment
must not be taken.  (It would be necessary to ex amine closely what is meant by the protection of
acquired rights and whether this would be consistent with MFN.)   Second, given the Article XS/WPGR/W/27
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requirement that any emergency safeguard measures be "based on the principle of non-
discrimination", it is clear that safeguard action cannot be selective, but must be applied on an MFN
basis to all foreign services and service suppliers.
- Objective:  What is covered? All kinds of services?  Which sectors?  Which modes of
supply?
11. One view has been that a general safeguard provision be created under Article X which would
cover all services and sectors.  Another view has been that safeguard action should only be available
for certain sectors where it is possible to produce adequate quantitative evidence.
12. With regard to modes, one view has been that  safeguard action be taken with respect to all
modes of supply.  The argument has been advanced that mode-specific safeguard action could create
economic distortions, and that such action may not be effective since it could be circumvented byforeign suppliers switching to unrestricted modes.  The other view is that action can only be taken
with respect to certain modes.  The argument is that it may be counterproductive to target all modes;
for instance, if the purpose of safeguard action is  to prevent unemployment, it may not make sense to
restrict new investment or to take action against locally established foreign firms.  The issues
discussed under the previous item may also be relevant.
2. Situations justifying application.  Type of injury.
13. One view is that we should follow the precedent of Article XIX of GATT 1994 and of the
Agreement on Safeguards.  The determination of whether increased imports have caused or are
threatening to cause serious injury to domestic industry should be made by employing, mutatis
mutandis , the rules provided for in Article 4:2(a) and 4:2(b) of the Agreement on Safeguards:
"(a) In the investigation to determine whether in creased imports have caused or are threatening to
cause serious injury to a domestic industry under the terms of this Agreement, the competentauthorities shall evaluate all the relevant factors of an objective and quantifiable nature having a
bearing on the situation of that industry, in pa rticular, the rate and amount of the increase in
imports of the product concerned in absolute or relative terms, the share of the domestic markettaken by increased imports, changes in level of sales, production, productivity, capacity
utilisation, profits and losses, and employment.
(b) The determination referred to in the subparagra ph (a) shall not be made unless this investigation
demonstrates, on the basis of objective evid ence, the existence of the causal link between
increased imports of the product concerned and seri ous injury or threat thereof. When factors
other than dramatic increased imports are causi ng injury to the domestic industry at the same
time, such injury shall not be attributed to increased imports."
14. It may be deemed appropriate to substitute the notion of "consumption of foreign services" for
"imports" to cover supply through each of the four  modes;  it would also need to be considered
whether references should be to "domestic i ndustry", as above, or to "national industry".
15. The other view is that it is likely to be difficult in the area of services, given the state of
statistics, to demonstrate injury and show that it is caused  by increased imports.
16. It has also been suggested that any safeguard action should also take into account the wider
public interest, and not only industry-specific considerations.S/WPGR/W/27
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3. Temporary or provisional measures.
17. Members seem to agree that any safeguard measure must be temporary.  There is also a view
that any safeguard measure should be progressively liberalized during the period of application.
Article 7 of the AS dealing with Duration and Revi ew of Safeguard Measures may be relevant.  This
provision contains detailed rules on the length of time for which safeguard measures might be applied,
and the interval that must elapse before a new safeguard measure may be introduced on a product that
has previously been the subject of safeguard action.
18. With regard to provisional safeguard measures, it may be useful to consider Article 6 of the AS
which permits the adoption of such measures in “critical circumstances where delay would cause
damage which it would be difficult to repair ... pursuan t to a preliminary determination that there is clear
evidence that increased imports have caused or are threatening to cause serious injury”.
4. Applicable procedures.  Investigation of injury.  E.g. statistics, income-tax and VAT 
declarations, growth of the bound sector.
19. No detailed views have been expressed, but it seems obvious that an investigation would be
required.  Article 3 of the Agreement on Safeguards dealing with investigation may be relevant.  This
provision stipulates that a safeguard measure may only be applied following an investigation, andprescribes the procedures that must be followed.
5. Applicable measures.  National treatment and non-discrimination principles.
20. There has been limited discussion of measures. There would seem to be agreement that
safeguard action should only be applied to the extent necessary to prevent or remedy serious injury
and to facilitate adjustment, as is required by Article 5 of the AS.  Safeguard action could take the formof temporary market access restrictions or temporary su spension of the national treatment principle.  It is
also conceivable that safeguard action may involve the temporary suspension of other obligations, such
as those arising from additional commitments unde rtaken under Article XVIII.  While it has been
suggested that measures could also take the form of  foreign exchange restrictions and limitations on the
movement of capital, this may raise questions of consistency with GATS Article XI.
21. Some of the issues discussed under other items, such as those pertaining to the modal
application of safeguard action, are also relevant.
6. Periods of application or time-limits.
22. See the discussion under item 3 above.
7. Transparency.
23. Members have emphasized the need for transparency but no specific discussion has taken
place.  The elements of the AS which are relevant include Article 3 on Investigation which requirespublic notice to interested parties, public hearings and publication of findings;  Article 12 on
Notification and Consultation which requires notification to the Committee on Safeguards at each
stage on initiation of an investigation, finding serious injury, and taking a decision to apply measures,
as well as giving Members with substantial export interest in the product an opportunity for prior
consultations;  and Article 13 on Surveillance which establishes the Committee on Safeguards withresponsibility inter alia  for monitoring the implementation of the AS.S/WPGR/W/27
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8. Notifications.
24. Members agree that there should be advance notification.  Article 12 of the AS dealing with
Notification and Consultation, mentioned above, may be relevant.
9. Special and differential treatment.25. Some Members have suggested that there should be special and differential treatment for
developing countries.  Article 9 of the AS dealing with Developing Country Members may be
relevant.  This provision stipulates that safeguard measures shall not be taken against a product
originating in a developing country Member as long its share of imports of the product concerned in
the importing country does not exceed certain threshold levels.  The provision also allows developing
countries greater flexibility with respect to the length of time for which safeguard measures might be
applied, and the interval that must elapse before a new safeguard measure may be introduced on aproduct that has previously been the subject of safeguard action.
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