RESTRICTEDWORLD TRADE
ORGANIZATIONS/WPGR/M/28
4 August 2000
(00-3240)
Working Party on GATS Rules
REPORT OF THE MEETING OF 7 JULY 2000
Note by the Secretariat
1. The Working Party on GATS Rules held is twenty-eighth meeting under the chairmanship of
Mr. Tony Sims, from the United Kingdom.  The agenda for the meeting was contained inWTO/AIR/1343.  It consisted of five items:  ne gotiations on safeguards under GATS Article X;
negotiation on subsidies under GATS Article XV;  negotiations on government procurement under
GATS Article XIII;  date of the next meeting;  and other business.  The agenda for the meeting was
adopted.
2. The Chairperson drew attention to an informal Note (Job No. 4058, 27 June 2000), he had
circulated to assist delegations in their preparation for the meeting.
A. NEGOTIATIONS ON SAFEGUARDS UNDER ARTICLE X OF THE GATS
3. The Chairperson said that good progress had been made since the beginning of this year on
the question of an emergency safeguard mechanism ("ESM").  The ASEAN Concept Paper
(S/WPGR/W/30, 29 March 2000, hereinafter the "ACP ") was a substantive contribution which had
helped to focus discussion.  The Working Party had held four informal meetings which had allowed
detailed exchanges on the eight themes listed in the Chairperson's Note, Job No. 1979, as well as on
issues raised by Members.  This process had helped Members to identify important questions to be
considered, irrespective of the form of any ESM.  The Secretariat had prepared, under its own
responsibility, a Note summarizing the informal discussions (Job No. 3449, 7 June 2000 and
3449/Add.1, 27 June 2000).  Under this agenda item, he intended to address, first, the substantive
aspects of the Working Party's work on an ESM and, second, procedural matters. With respect to thesubstantive debate on an ESM, the Chairperson suggested that Members elaborate on issues raised in
past formal and informal meetings, for instance in re lation to the ACP or the eight themes listed in Job
No. 1979.  Members were, of course, free to raise any other issue.  He pointed out three papers tabled
by the Secretariat, which delegations might want to consider:  S/WPGR/W/32 (15 May 2000)
described past and future work of the Inter-Agency Task Force on Statistics in International Trade inServices;  S/WPGR/W/33 (31 May 2000) dealt with patterns of limitations scheduled under mode 2;
the Secretariat had prepared a second revision of Job No. 5294 ( Relevant Criteria, Sources and
Conditions,  Job No. 5294/Rev.2) in the light of recent informal discussions held in the Working Party.
Before opening the floor for the general discussion, the Chairperson invited the delegation of Poland
to introduce its communication on Emergency Safeguards Mechanism Contained in Article 18 Act of
18 December 1998 on Foreign Exchange Law  (S/WPGR/W/34, 3 July 2000).
4. The representative of Poland said that the communication was of an informative nature,
intended to contribute to elaborating rules governing an ESM in services and to give an example of a
situation in which such measures might be used.  The mechanism described was meant to deal with
events presenting an extraordinary risk to the Polish financial system, for example if the foreignexchange reserves decreased substantially.  Poland had not used this mechanism so far.  A number of
delegations thanked Poland for presenting this comm unication and said they would revert to it at the
next meeting of the Working Party.S/WPGR/M/28
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5. Introducing document S/WPGR/W/32, a representative of the Secretariat indicated that, in a
few years, the work on a services manual might be su fficiently advanced to use services statistics in
negotiations.  This did not, however, imply that they could also be used in the context of safeguard
action, since these statistics would still be at quite a high level of aggregation.  In that regard, it might
also be worth recalling that, in the area of goods, safeguard actions were not necessarily based onofficial statistics, which, in many cases, were sti ll too aggregated and too old in order to provide an
empirical basis for an emergency action.  The 1999 report of the Committee on Safeguards (G/L/338,
26 October 1999) listed, for instance, products such as sandals or safety matches, for which official
statistics were unlikely to be available.  Thus, the situation in services might not be very different
from goods.  The key question seemed to be what data , rather than what statistics, would be available.
6. The representative of Thailand, speaking on behalf of the ASEAN Members, informed the
Working Party that ASEAN had taken the initiative to hold a series of informal meetings to discuss
technical issues related to the ACP.  The purpos e was to provide an informal setting in which
Members might further exchange views and provide ASEAN with inputs, which, together with the
on-going work in the Working Party, could be used as a basis for a draft text on emergency safeguard
measures.  So far, two such meetings had been held at the Mission of Thailand and another meeting
would be held on 25 July, open to all Member wishin g to participate.  ASEAN was of the view that,
since the ACP had been submitted to the Working Party, a thorough and useful debate had taken
place.  All key issues that could possibly be identified at this stage had been examined and needed to
be properly digested.  ASEAN would seriously refl ect on comments received and hoped to be able to
submit a draft text to the Working Party in the au tumn.  Turning to the papers prepared by the
Secretariat, he said that Job No. 5294/Rev. 2 faithf ully reflected discussions in the Working Party on
indicators and criteria for injury determinat ion and would help ASEAN to update the ACP.
S/WPGR/W/33 was a good attempt to establish patterns of limitations under mode 2, as these were
contained in schedules of commitments.  This paper showed that such limitations existed under the
GATS for both horizontal and sector-specific purposes.  An ESM was in essence an additional
limitation to a Member's specific commitments.  If such limitations already existed under mode 2,then it would only be consistent with the GATS framework to allow Members to apply a safeguard
measures also under mode 2.  The patterns provided in W/33 were concrete proof that, for a large
number of Members, it was feasible to apply limitations to their specific commitments under mode 2.
It should then also be feasible to apply and enforce an ESM under mode 2.  He noted that W/33
enumerated the types of measures that might be taken as ESMs, and were not necessarily limited to
measures targeted at consumers.  Relevant measures included, for instance, requirements on the
supplier to be locally established;  some 80 Members had scheduled this type of limitation in financialservices.  It would then be only logical to allow th at such a measure be used as an ESM.  ASEAN was
therefore convinced that an ESM was applicable for all modes, including mode 2.
7. The representative of Argentina said that sub-paragraphs (iii) and (iv) of paragraph 1 of the
Polish communication were very interesting because they described two situations that were not
included in any provision of the GATS, for example Ar ticle XII.  It might be interesting to examine
paragraph 1(iii) because of the obligation on all Members to authorize the inflow of capital where
there were commitments, in particular in light of footnote 8 to Article XVI of the GATS.  If mode 1
were to be liberalized by a Member, for instance, such a situation could occur; this was probably what
Poland had in mind.
8. The representative of Egypt said that the paper presented by Poland was relevant because it
indicated the circumstances in which a safeguard measure could be taken and gave some
understanding of the terms "unforeseen circumstances".  He hoped that other Members could also
describe situations in which they would take safeguard measures.  He further noted that the
mechanism presented by Poland aimed at preserving the stability and integrity of the financial system
and that increased supply of services in the financial sector could affect the equilibrium of thebalance-of-payments.S/WPGR/M/28
Page 3
9. The representative of India wished to encourage ASEAN Members in their efforts to present a
revised text.  The Working Party had to bear in mind its mandate and deadline, and all delegations
should engage fully under this agenda item.
10. The representative of Brazil agreed that the Working Party had made very significant progress
in the last months, thanks to the ACP and the examination of the eight points listed in Job No. 1979.
The process had led to a better focus and an improved understanding of the elements which might be
part of an ESM;  this helped to visualise possible disciplines for an ESM which would be operational,
not more burdensome than Article XXI, and would give the necessary comfort and legal certainty to
Members wishing to liberalise access to their market.  Brazil was pleased to participate in the process
initiated by the ASEAN Members.  Concerning the availability of data and statistics, Brazil was of the
view that data provided by companies played a very important role and were sufficiently
disaggregated;  the problem of statistics should therefore not be exaggerated.
11. The representative of Kenya asked the delegation of Poland if the legislation presented in
W/34 had been made necessary by capital inflows attracted in the last decade.  The representative of
Poland said her delegation would answer at the next meeting of the Working Party.
12. The United States said that the law referred to in W/34 might be more relevant to other areas
of the GATS.  He agreed that discussions on ESMs, in particular those held in informal mode, had
been very fruitful and had raised an important number of questions.  All delegations had
constructively participated.  On Job No. 5294/Rev.2, he welcomed the clarification made in table 2,
but still had questions regarding the difficulties that might be encountered in obtaining reliable
statistics on many of these factors, in particular those related to increases in imports.  The point made
by the Secretariat regarding the possible use of unofficial data and sources was worth considering.W/33 gave a good overview of the types of measures that had been scheduled under mode 2, but a
large number of them were not specific to mode 2.  The types of restrictions that looked most relevant
for an ESM would appear to be discriminatory tax measures;  restrictions on transfers;  payments or
capital transactions;  exclusions from insurance reimbursement and public support;  as well as various
forms of quantitative restrictions.  While all these measures might theoretically be used under anESM, it was not clear how some very basic safeguard concepts, such as degressivity, could be
incorporated.
13. The representative of the European Communities said she doubted whether the
communication presented by Poland went beyond wh at was covered by GATS Article XII and the
carve-out for prudential measures contained in the Annex on Financial Services.
14. The representative of Canada noted that an ESM raised difficult conceptual issues, but also
had profound trade policy implications.  Therefore, Members had to ensure that any such mechanism
would be on solid ground.  The question of transparency should be looked at, not only in terms of
WTO procedures, but also from a domestic point of view to ensure due process.  In relation to Job
No. 5294/Rev.2, he wished to emphasize the importance of a clear causal link between the increased
supply of foreign services and its impact on domestic suppliers.  There was currently a lack of data
which made it difficult to ensure that such a link was duly established.  It was necessary to relate theincreased participation of foreign suppliers to liberalization commitments undertaken by the Member
concerned, based on objective criteria.
15. The representative of Japan expressed appreciation for the initiative taken by the ASEAN
Members in tabling a concept paper and for the progress made so far in the Working Party.  Japan
looked forward to a revision of the ACP.
16. The representative of Venezuela suggested that a twelfth point should be added in table 2 of
Job No. 5294/Rev.2, which would relate to transboundary movements in transport, whether by air,S/WPGR/M/28
Page 4
road or sea.  Information from international or na tional transport agencies in specific sectors would be
needed.  He agreed that many relevant statistics or information sources were private;  in the case of
services, the weight of such information could be considerable.
17. The representative of the Republic of Korea considered that the matter raised by Poland in
W/34 related mainly to GATS Article XII.  He acknowledged that the ACP had facilitated and
focused the debate, and was looking forward to the revised text. He wished to clarify previous
interventions by his delegation concerning the distinction between national and foreign firms:  the
reason Korea had stressed the need for this distinction was to facilitate drafting, but the intention was
not to discriminate against foreign established suppliers.  His delegation supported option 1 in
paragraph 5 of the ACP.
18. In summing up, the Chairperson said that ASEAN and other delegations felt that the Working
Party had had a detailed debate on all key issues relating to an ESM.  It was now time to reflect and to
consider a revised text.  A number of delegations had expressed interest in participating in informal
meetings held by the ASEAN Members.  In his view, delegations had shown a high level of
engagement in the last months.  With respect to subs tance, it had been suggested that, in revising the
ACP, ASEAN should look carefully at the issues of transparency and due process.  Different opinions
had been expressed on W/33:  a first view was that limitations under mode 2 did exist and, thus, that itwas possible to take safeguard action under this mode, but one delegation had wondered whether, in
practice, such a safeguard action would work.  More  discussion was therefore needed on this subject.
With respect to Job No. 5294/Rev.2, there clearly remained questions related to the availability of
statistics, but interesting points had been made about using unofficial data sources.  The importance of
a causal link was stressed in this context and there seemed to be a consensus on this point.  He notedthat various views had been expressed with resp ect to the communication circulated by Poland in
W/34:  some saw it as a new element in the discussion, whilst others considered that the issues raised
were already covered by GATS Article XII and the prudential carve-out.
19. Before concluding on this agenda item, the Chairperson suggested to consider how to
organise work in the coming months in view of the 15 December deadline.  He recalled that thequestion of principle about the desirability of a safeguard could not be prejudged and that it had been
agreed to leave this question aside for the time being.  Members had had very useful formal and
informal discussions on a number of themes in recent months but many issues remained unresolved
and discussions needed to continue.  Meanwhile, ASEAN had indicated that it was planning to table a
draft safeguard text in the autumn.  Having any such text or texts would help the Working Party to
focus on hard policy choices, including feasibility and desirability, which would have to be tackled in
relation to any possible safeguard.  In his view, it would therefore be appropriate to give dueconsideration to any such text(s) and discuss them in a comprehensive manner, whilst at the same
time not excluding discussion of any other past or  present contribution which might be on the table.
He was of the view that, in order to keep order in the debate, it would be useful to continue to
consider any contribution on a thematic basis, in the same way as the Working Party had structured its
work in recent months, although it might need to be reconsidered whether the list of themes contained
in Job No. 1979 needed to be expanded. Finally, he proposed that the Working Party should consider
in September how to organise its time in the autum n, on the basis of what would be on the table.  It
was so agreed.
B. NEGOTIATIONS ON SUBSIDIES UNDER ARTICLE XV OF THE GATS
20. The Chairperson drew attention to the papers prepared by the Secretariat, based on proposals
by Argentina and Hong Kong, China in S/WPGR/W /31.  In S/WPGR/W/25/Add.1, the Secretariat had
compiled subsidy-related information extracted from 37 Trade Policy Reports published since
December 1997, thereby updating a previous Note circulated in January 1998.  S/WPGR/W/13/Add.1
presented subsidy-related entries found in schedules attached to the Fourth and Fifth Protocols, asS/WPGR/M/28
Page 5
well as in schedules of Members which had acceded to the WTO since January 1996.  As mandated
by the Working Party, the Secretariat had also undertaken a survey of regional trade agreements
notified since 1996, in order to update a previous Note (S/WPGR/W/12).  However, no relevant
information had been found additional to that already contained in S/WPGR/W/12.  The Secretariat
had also enquired whether work carried out at the OECD could provide relevant information and, in
particular, whether the 1996 study on Public Support to Industry1 had been updated;  the answer was,
in both cases, negative.  The Chairperson understood that Australia and New Zealand were still
considering whether they could supply any relevant information on ANZERTA.  He encouraged
delegations to complete the 1997 subsidies questio nnaire (S/WPGR/W/16) and recalled that, in doing
so, Members had the flexibility of not answering to all questions and of using their own definition of
"subsidy".  Moreover, any example of export subsid ies would be welcome.  He suggested two points
for discussion:  (i) delegations should give their views on the desirability and content of a possiblechecklist of issues, which might help the Working Party to address the issues raised in a more
systematic manner;  (ii) with respect to the substa nce, delegations might wish to focus on issues 10(a)
and 10(b) of S/WPGR/W/31, i.e. "factors to be c onsidered in developing any subsidies disciplines"
and "social objectives of subsidy programmes".  He invited the European Communities to introduce
their informal note on The Community Regime for State Aid in the Services Area  (Job No. 4302,
6 July 2000).
21. The representative of the European Communities said that this informal note intended to
outline the EC regime for subsidies ("state aids" in  EC law).  The document did not give a detailed
explanation of the disciplines for each sector, but simply underlined some aspects which were specific
to the services area.  The definition for "state aid" contained four elements:  (i) transfer of stateresources;  (ii) economic advantage;  (iii) selectivity;  and (iv) effect on competition and trade
between Member states.  The EC aimed at establishing a competitive internal market free of
distortions and, since subsidies might give an unfair advantage to one company, the principle was that
state aid was prohibited.  There were, however, a certain number of exceptions, in principle in
exceptional circumstances, where subsidies might have a beneficial impact.  Section D of JobNo. 4053 described these exemptions and explained that the Commission, which was responsible for
scrutinizing subsidies within the EC, had some discretion.  The Commission had to verify, in
particular, that the proportionality test was met, i.e. that the subsidy did not go beyond what was
recognized to be the legitimate objective.  The main  specificities of the services area, as compared to
the goods, were:  (i) determination of the production capacity of services producers was much more
complex;  (ii) the concept of general economic interest services had to be respected, for those
services, such as energy and communication, which were recognized to fulfil a public mission;  and(iii) transport services, although subject to the general provisions on state aid, were subject to special
rules.  The EC policy in this field was not static, but evolved continuously.  A number of delegations
thanked the European Communities for their informal note and said they would comment on it at thenext meeting of the Working Party.
22. The representative of Argentina said that W/13/Add.1 showed that national treatment could
be a general discipline for subsidies.  His delegation had started to do some homework on subsidies
that could have distortive effects on trade (such as financing operations, export guaranties, and
subsidies on interest rates) and hoped to make a contribution at the next meeting;  he noted that, on
pages 9, 17 and 21 of W/25/Add.1, the Secretariat had earmarked some of these subsidies.  If they had
a distorting effect on trade in goods, the same could arise in the case of services.  He was in favour ofdeveloping a checklist of pertinent issues.  In particular, the checklist should allow, as had been the
case in safeguards with Job No. 1979, to discuss all subjects listed, without waiting for a conclusion
on one item before moving to the next.  Two subjects deserved particular consideration:  (i) subsidies
having a distortive effect on trade, and (ii) the application of current GATS disciplines to subsidies.
                                                     
1 Report by the Industry Committee to the Council at Ministerial Level, OCDE/GD(96)82, Paris, 1996.
This study is available on request at the WTO Secretariat.S/WPGR/M/28
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23. The representative of Hong Kong, China no ted that W/13/Add.1 showed that acceding
countries had frequently included a horizontal limitation for modes 1 and 2 and, sometimes, mode 3,
with respect to the non-eligibility of non-nationals for subsidies.  This might mean that acceding
countries had particularly carefully analysed the need for such limitations or that they had made more
wide-ranging commitments than most other Members.  He agreed with the representative ofArgentina that the question of national treatment could become a general principle in subsidies.  With
respect to W/25/Add.1, he took issue with the statement, in para. 5, that the application to services of
the subsidy definition used in the Agreement on Subsidies and Countervailing Measures had not
posed any problems in principle.  It appeared to his delegation that a number of subsidies, including
social and cultural subsidies, had not been mentioned at all.  He said that the subsidies attributed to
Hong Kong, China in table 1 of W/25/Add.1, und er "Banking" and "Other financial services"
reflected the intervention made by the government in the stock market in 1998;  implying that this
intervention had the effect of a subsidy was a subjective judgement which he would refute strongly.
The government of Hong Kong, China had intervened to prevent a stock market movement which
would have undermined the Hong Kong dollar;  the government had bought all the constituent
components of the Hang Seng Index (not just banks), but had played no part in the management of
companies, and there had been no suggestion that companies in the Hang Seng Index had securedmore favourable treatment.  So, there was no financial contribution and no benefit conferred.  He was
disappointed that there was nothing to report concerning subsidy disciplines in regional trade
agreements and this was perhaps due to the fact that only the ANZERTA and the EC had detailed
enough rules.  Concerning the follow-up on W/31, he supported the suggestion to use the points in
paragraph 10 as a rolling-checklist of matters to be considered, and agreed with Argentina that allrelevant issues should be addressed (such as public policy objectives, MFN, national treatment, trade-
distorting effects, remedies, flexibility for developing countries) without prejudice to any final
outcome.
24. Responding to the comments made by the representative of Hong Kong, China on
W/25/Add.1, a representative of the Secretariat sa id that there was inevitably an element of
subjectivity involved in classifying the content of TPR reports.  He noted that the same criteria had
been used throughout the TPR reports, and no account had been taken of the underlying policy
intentions.
25. The representative of New Zealand supported the idea of having a rolling checklist of issues
to the extent it helped to focus discussion.  Documents W/31 and W/9 provided a source of useful
information.  He suggested to look in particular at questions raised in paragraph 41 of W/9.  A
checklist of issues had to focus on the essential purpose of the mandate contained in Article XV,namely the avoidance of distortive effects on services trade.  There was, thus, a need to identify
services subsidies having trade-distortive effect, since they would influence the shape of possible
disciplines.
26. The representative of Uruguay suggested that W/25/Add.1 should be updated on a regular
basis.
27. The representative of Switzerland said that W/25/Add.1 pointed out the lack of an agreed
definition and confirmed that subsidies tended to concentrate on three sectors (maritime, tourism and
financial services).  It also highlighted the importance of determining the extent to which some
sectors, such as health services, were provided under governmental authority.  He noted that
W/13/Add.1 was not as exhaustive as W/25/Add.1 because subsidies had been scheduled only ifgranted in sectors in which specific commitments had been undertaken.  The problem of definition
should be included in a checklist of issues, although agreement on a definition might be reached only
when delegations had developed a clearer idea of the disciplines to be established.  The implications
of using national treatment as a disciplines should be examined more thoroughly.  The scope of modesS/WPGR/M/28
Page 7
1 and 2 and their relation with mode 3 should be clarified.  Countervailing measures should also be
discussed.
28. The representative of Brazil said that document W/25/Add.1 indicated the existence of
subsidy practices in various services sectors (tourism, air and maritime transport, financial services,
audiovisual);  subsidies might also exist in sectors such as postal services, construction, R&D andadvertising.  It was possible to identify certain patterns in subsidy programmes, associated with the
level of development of countries;  for example, subsidies in tourism were generally granted by
developing countries through tax incentives, while subsidies in the audiovisual sector seemed to be
mostly granted by developed countries.  Work should concentrate on subsidies that were contingent
upon export performance and that had an effect on international trade in services, even though no
precise information was available for the time being.  Subsidies affecting competition in third markets
should also be taken into account.  Brazil agreed with others that work should focus on a list of topicsincluding definitional issue, MFN, national treatment, likeness, mode specificity of subsidies, possible
exceptions, and possible use of countervailing measures.
29. The representative of Canada said it would be useful to have general information about the
frequency of use of the mechanism described by the EC in their informal Note, Job No. 4302.  He
considered that a checklist of issues would help to structure the discussion, but stressed that,according to the mandate of Article XV, work should focus on trade-distorting subsidies and not on
subsidies in general.  The checklist should concentrate on the definition of subsidies, the identification
of trade-distortive subsidies in services, and the analysis of existing disciplines.  It was premature to
look at possible new disciplines.
30. The representative of the United States supported the idea of having a checklist of issues,
whose content should be of an evolving nature.  It was therefore not necessary to be comprehensive at
this point.  His delegation was in favour of a short and focused list to begin with.  He associated
himself with the suggestions made by Canada with respect to the content of the checklist and agreed
that it was too early to address possible additional disciplines.
31. The representative of Thailand, speaking on behalf of the ASEAN Members, was also in
favour of a checklist.  Paragraph 10 of W/31 as well as elements contained in W/9 provided a good
basis for such a list.  He noted that some of the key issues, such as MFN, national treatment or
likeness, had already been addressed in the context of the safeguard discussion and Members could
refer to this discussion to the extent it was relevant for subsidies.
32. The representative of Australia said that work should concentrate on trade-distortive effects of
subsidies and that a rolling checklist of issues should be short as a starting-point.  There was a need to
identify the core issues under this agenda item.  The representative of Mexico supported the idea of a
short checklist, containing the three issues mentioned earlier, i.e., definition, identification of trade-
distortive subsidies, and analysis of fundamental principles (MFN and national treatment).  The
representative of Japan felt that a checklist of issues should give priority to definitional issues and
trade-distorting effects.
33. The representative of Argentina was in favour of a longer checklist, closer to eight points than
three.  A real discussion was needed on the issue of trade-distortive effects because a subsidy might
operate like a tariff in the subsidizing country.  Any checklist should include subsidies subject to
export-performance in order to discuss distortive effects on third markets.
34. The representative of Hong Kong, China said  that, in order to consider questions like
definition, one needed to know the scope and depth of the field of subsidies.  It was essential to go
through all issues before concluding on one in particular.  The representative of the European
Communities agreed that all the points on the checklist should be examined.  MFN, national treatmentS/WPGR/M/28
Page 8
and definition should be on the list.  The representative of Venezuela concurred that trade-distorting
effects in third markets should be discussed and suggested that the concept of "nullification or
impairment" be also included in a checklist.
35. In summing up, the Chairperson noted that there was broad support for a checklist of issues to
structure the debate under this agenda item.  Two different views had been expressed, however, on
how to proceed:  some delegations had said that all items should be addressed one after the other,
while others wanted to focus first on core items.  There was no need to decide at this stage how many
items should be included in the list.  He noted that three points had received broad support, namely:
definition, trade-distortive effects and scope of current disciplines, in particular national treatment and
MFN.  Other points raised included the role of su bsidies for developing countries, mode-specificity,
likeness, remedies (including countervailing measures), public policy objectives, possible exceptions
and the concept of "nullification or impairment".  He suggested that, on the basis of this discussion, hewould draft a checklist to be circulated by the end of July, so that the Working Party could discuss it
at its next formal meeting.  He also proposed that, in the September meeting, delegations start
discussing the first item on the list, whatever it would be.
C. 
NEGOTIATIONS ON GOVERNMENT PROCUREMENT UNDER ARTICLE XIII OF THE GATS
36. The Chairperson invited the European Communities to introduce their informal
communication on Government procurement of services – possible development of multilateral
disciplines  (Job No. 4021, 26 June 2000).
37. The representative of the European Communities said that, with this paper, his delegation
hoped to reactivate the debate on possible disciplines that might be established for government
procurement.  It was too early to discuss market access commitments and the focus should be instead
on the principles of national treatment and transparency.  Since GATS Article XIII:1 expressly
provided that Articles II, XVI and XVII did not apply to government procurement of services, it
might be inferred that other provisions of the GATS did apply, notably Articles III and VI.  It might
therefore be useful to explore the possibility of extending the principles of Article VI to government
procurement.  Concerning non-discrimination, the di scussion could address, as a starting-point, such
issues as MFN, treatment of bilateral or plurilateral agreements, national treatment, review
mechanisms and flexibility for developing countries.  With regard to transparency, he recalled the
activities carried on in the Working Group on Transparency in Government Procurement ("WGTGP")
and noted that, in the Working Party on Domestic Regulation ("WPDR"), the EC had submitted an
informal paper in February 2000, outlining possible elements of transparency.  In a number of
respects, these two Working Groups examined simila r elements and concepts, although discussion in
the WGTGP also covered issues specific to the procurement context.  In order not to duplicate work,transparency-related issues should continue to be addressed in that Group.  He recalled that, in
February 1998, the EC had presented a paper in the WPGR, focusing on what constituted government
procurement of services.
2  While views expressed in this paper remained valid, he believed that, at
this stage, it was preferable to avoid restarting a discussion on definitional issues.  A number of
delegations thanked the EC for their informal communication.
38. The representative of India said that disciplines on government procurement, if and when
developed, could not impose more onerous obligations on Members than what they had committed to
in schedules.  This Working Party should wait for the results of the work currently going on in the
WGTGP.  He disagreed with the EC's interpre tation, in paragraph 2 of Job No. 4021, that "…
provisions, such as Articles III and VI applied to government procurement".
                                                     
2 Communication dated 13 February 1998, no Job No.S/WPGR/M/28
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39. The representative of Hong Kong, China said he did not entirely agree with the priorities and
the thrust of the EC informal communication.  Like India, he had some doubts regarding the
suggestion, in paragraph 2, that the explicit exclusion of Articles II, XVI and XVII implied that other
provisions of the GATS might apply.  It would first be necessary to define what government
procurement was.  On the question of Article VI, he wondered whether the EC was suggesting thatany horizontal disciplines that might be agreed under Article VI:4 would apply to government
procurement.  Government procurement was not a sector as such.  He recalled that accountancy
disciplines applied only where specific commitments had been made.  He agreed with the EC that
national treatment was a vital part of any procurement disciplines but he did not see why it had to be
dealt with separately from the question of market access, since both national treatment and market
access were the subject of specific commitments.  He asked what the EC had in mind when referring
to "a subsequent phase" (paragraph 2).  Transparency was an important matter in governmentprocurement and his delegation supported work on this subject in whichever forum progress was most
likely to be made.  He enquired what level of government the EC suggested should be covered by any
transparency provision;  in his view, this should be all levels of government.  He recognized,
however, that, given the heavy burden this might put  on developing country Members, longer phase-
in provisions could be considered.
40. The representative of New Zealand said that his delegation was in the process of reviewing
the EC paper, and in particular paragraph 2.  It would be useful to focus on non-discrimination,
including the issues suggested by the EC in para graph 4.  His delegation wondered how the EC would
link the issue of transparency with the work cu rrently going on in the WGTGP and in the WPDR.
Work should not be duplicated.  He was of the view that, at this stage of the process, the prime focusfor government procurement in the WPGR should be on more substantive issues, for example scope
and coverage, MFN and national treatment, as well as procurement procedures.  He recalled that a
non-paper presented by New Zealand in 1997 addressed some of these issues
3 and suggested that it
might be useful to have a more structured discussion under this agenda item too.
41. The representative of the United States sa id that the legal interpretation contained in
paragraph 2 was interesting and deserved further discussion.  It might be difficult to separate the
issues of non-discrimination and market access and, therefore, it might be worth examining whether
some sectors were of special importance for government procurement in services.  The United States
placed great importance on the work currently carried on in the WGTGP.  He recalled that in that
body, several delegations had said that services should not be included in a transparency agreement
and wondered, therefore, in what forum those dele gations would like to address transparency in
services procurement.  Transparency was essential if substantive disciplines were to be agreed upon.The United States was currently reflecting on the issue of definition.
42. The representative of Brazil said that paragraph 1 of the EC paper went too far since
Article XIII of the GATS only mandated Members to have multilateral negotiations on government
procurement in services, but did not prejudge th e result.  He shared other delegations' doubts
regarding the applicability of Articles III and VI to government procurement.  The application ofArticle III:1 might be envisaged, but not III:3, which applied only if there were specific commitments.
The same comments would apply to Article VI, paragraphs 1, 3, 5 and 6;  moreover, any disciplines
developed under GATS Article VI:4 in the WPDR could apply only to scheduled sectors.  His
delegation could not go along with suggestions to consider eventual market access negotiations for
government procurement because this would be outside the scope of the mandate of Article XIII.Work on transparency should concentrate in the WGTGP.
43. The representative of Canada said that the suggested approach of considering possible
disciplines first and, at a later stage, discussing market-access commitments, was consistent with the
                                                     
3 Non-paper from New Zealand, Job No. 5446, 30 September 1997.S/WPGR/M/28
Page 10
views expressed by Canada in this Working Party.  Non-discrimination and transparency obligations
were two important aspects which could be examined by this Working Party, although other
obligations might also be needed.  She enquired how the EC saw the application of existing GATS
disciplines, such as Articles III and VI, in the government procurement context.  She recalled that
Canada could not support the criteria proposed by Japan in communication Job No. 6789(12 November 1999), focusing on determining when a governmental entity was privatized.  She also
believed that it was premature to establish a framework for the application of disciplines, as suggested
in the Chairperson's Note Job No. 782 (11 February 2000).
44. The representative of Japan said that transparency and non-discrimination were important
principles in the context of government procurement, for which it was desirable to establish
disciplines, separated from market access.  With respect to the informal communication from the EC,
he would welcome clarification on the fourth and fifth sentences of paragraph 2.  He wondered howthe EC intended to address principles relating to transparency and non-discrimination in the context of
market access negotiations.  Japan considered that discussion on transparency in government
procurement in this Working Party should be interrelated with work going on  in the WGTGP and in
the WPDR.  With respect to transparency disciplines, it would be more appropriate that the same
principles apply to both goods and services.  The WPGR could give a useful input to the WGTGP.
45. The representative of Switzerland said that her delegation was in favour of focusing
discussions on transparency in government procurement in the WGTGP.  On non-discrimination, she
supported addressing the points raised in paragraph 4 of the EC informal communication, especially
the issue of national treatment.  Discussions on MFN treatment would also seem important, but might
be more difficult.
46. The representative of Australia sought clarification on paragraph 2 of the EC informal
communication, especially the first and last sentences.  The focus should be on transparency and non-
discrimination and work should be coordinated with  other relevant bodies dealing with government
procurement.  It might be useful to have a paper summarizing relevant aspects of other bodies' work
in this area.  The representative of Thailand, speaking on behalf of the ASEAN Members, said that it
was important to look closely at the scope of the negotiating mandate under Article XIII.  The
ASEAN Members intended to come back to a number  of points raised in the informal communication
by the EC, in particular in paragraph 2.  The representative of the Republic of Korea enquired whether
the Secretariat could provide information on the status of concessions made by Members under theAgreement on Government Procurement in the services area.  The representative of Mexico agreed
with those delegations who had expressed concern regarding paragraph 2 of the informalcommunication by the EC, relating to the application of some GATS provisions to governmentprocurement.  Referring to the last sentence of paragraph 2, her delegation doubted whether the
mandate of Article XIII:2 necessarily involved market access negotiations.  It was therefore necessary
to clarify the mandate before going further.  Some fundamental elements, such as definition or scope
of a possible agreement, would seem to dese rve immediate attention.  Non-discrimination was
important, but certain elements listed in paragraph 4 of the EC informal communication did not fitinto Article XIII  mandate.  On transparency, wo rk should not duplicate activities in other fora.
47. The representative of the European Communities replied that the "subsequent phase"
mentioned in paragraph 2 of the informal communication, referred to a gradual approach to
liberalizing government procurement, having regard  to the sensitive nature of the subject for many
Members. Establishing principles on transparency and non-discrimination first would seem to be arealistic approach and further liberalization could then be considered.  His view was that Article XIII
mandate allowed for such a gradual approach to negotiations.  On transparency, it was important not
to duplicate work in other bodies.  The EC was still reflecting on the scope and coverage of a possible
agreement.  He felt that the interpretation, in pa ragraph 2, regarding the applicability of Articles IIIS/WPGR/M/28
Page 11
and VI of the GATS was correct, at least concerning those provisions which were not dependent upon
specific commitments.
48. The representative of Hong Kong, China wonder ed in which body the EC intended to address
transparency issues.  He could not share the view, expressed by several Members, that market access
might not fall within the scope of Article XIII.  The extent to which Article XVI:2 would be relevantto government procurement was another question.  The representative of the European Communities
agreed that there should be no duplication of activities and that work on transparency in governmentprocurement should probably take place in one body only.  However, there was no need to designate it
now;  the Working Party should gather information on the relevant activities going on in other bodies.
49. The Chairperson noted that the informal communication by the EC had prompted strong
reactions on a number of issues, for instance with respect to paragraphs 1 and 2.  He noted that some
delegations were interested in further exploring non-discrimination, while others found it difficult toseparate this issue from market access.  Delegations disagreed on the question of whether Article XIII
included the mandate to address market access issues.  On transparency, many delegations had
questions about the relationship between work in th is Working Party and activities going on in other
bodies.  Questions were also raised about how future work might be structured.  Taking into account
requests made at this meeting, he proposed that the Secretariat would, by the November meeting,(i) circulate a checklist of documents dealing with relevant activities in the Committee on
Government Procurement and in the WGTPG, and (ii) prepare a factual note compiling services
concessions made in the framework of the Agreement on Government Procurement.  It was so agreed.
D. DATE OF THE NEXT MEETING
50. The Chairperson said that the next formal meeting had been tentatively scheduled for
27 September, which was the first day of the September/October services cluster.  He proposed that
an informal meeting on safeguards be held, if necessary, on 19 September;  this date would be
confirmed after Jeûne Genevois.
51. The representative of Brazil said that the meetings of the Working Party on GATS Rules
should be scheduled, as far as possible, within the services week, so that experts from capitals could
attend.  The Chairperson took note of this point wh ich was of concern to other delegations too.  He
had raised it with the other Chairpersons and with the Chairperson of the Services Council and they
had acknowledged that the services clusters would necessarily exceed one week.  Thus, one or more
subsidiary body(ies) would have to meet outside this week.
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