RESTRICTEDWORLD TRADE
ORGANIZATIONS/WPGR/M/27
6 June 2000
(00-2222)
Working Party on GATS Rules
REPORT OF THE MEETING OF 4 - 5 MAY 2000
Note by the Secretariat
1. The twenty-seventh meeting of the Working Party on GATS Rules was opened by
Mr. Siva Somasundram, of Singapore, Chairperson of the Working Party.  The agenda for the meeting
was contained in WTO/AIR/1288.  It consisted of six items:  appointment of a new chairperson;
negotiations on safeguards under Article X of the GATS;  negotiations on subsidies under Article XVof the GATS;  negotiations on government procurement under Article X III of the GATS;  date of the
next meeting;  and other business.  The agenda for the meeting was adopted.
2. The Chairperson drew attention to an info rmal Note (Job No. 2598, 28 April 2000) he had
prepared in cooperation with Mr. Tony Sims, designated new Chairperson, to assist delegations in
their preparation for the meeting.
A. APPOINTMENT OF THE NEW CHAIRPERSON
3. The Chairperson recalled that Mr. Stuart Harbinson, former Chairperson of the Services
Council, had circulated a list of names for the chai rs of the subsidiary bodies, including the Working
Party on GATS Rules.  It had been agreed that, in the absence of any objections by delegations, it
should be assumed that there was a consensus on these names and that the subsidiary bodies shouldproceed with the election of their new chairpersons.  No such objections had been raised.  He,
therefore, proposed that Mr. Tony Sims, from the United Kingdom, be the next chairperson of the
Working Party.
4. Mr. Tony Sims was elected by acclamation.
B. NEGOTIATIONS ON SAFEGUARDS UNDER ARTICLE X OF THE GATS
5. The Chairperson indicated that he intended to open the floor twice on this agenda item.  First,
he would invite Working Party Members to continue their discussion on substantive issues.  Second,
he intended to have an exchange of views on how to organize work in the coming weeks and months,
in view of the deadline of 15 December.  He encouraged delegations to give further consideration
among others to the ASEAN Concept Paper (ACP ) (S/WPGR/W/30) and elaborate on preliminary
comments made at the last meeting.  It was importa nt for the authors of this paper to receive as much
input as possible, both in terms of general and more specific comments.  Contributions were alsowelcomed on the eight themes listed in the Chairperson's Note of 29 March 2000 (Job No. 1979).  The
issues identified in this Note were earmarked ma inly for informal meetings, but Members should also
use opportunities to advance work during formal meetings.  These issues needed to be addressed in
defining possible elements of any safeguard mechanism, irrespective of its form.  At the informal
meeting held on 7 April, some delegations had suggested other issues to be added to the list, such asthe concept of "unforeseen developments", transparency or provisional measures.  Delegations might
also want to address the comments and questions raised in the Chairperson's Note of 11 February (Job
No. 782), since they had not really been discussed at the last meeting.  Finally, he reiterated calls for
hypothetical or real-life examples of situations in which emergency safeguard measures might be
used.S/WPGR/M/27
Page 2
6. The representative of Thailand, speaking on behalf of ASEAN, said that the ASEAN
Members found the list of themes contained in Job No. 1979 useful.  It contained the key issues
identified in the ACP, as well as in other submissions, that needed to be thoroughly discussed before
any substantial progress could be made.  ASEAN w ould therefore strongly urge the Working Party to
concentrate its efforts on these eight themes, so as to arrive at an early consensus on them. He wishedto underline, however, that discussion of this list should not preclude the Working Party from
discussing other inputs from Members, including the ACP.
7. He wished to offer comments on the Chairperson's Note Job No. 782, as well as on the
informal Note by the Secretariat Job No. 5294/Rev .1.  The latter was an important and positive step
forward in the ESM negotiation with a view to de veloping a credible and well-balanced mechanism
for injury investigation. The new third section would provide a key component for such a mechanism.
Causality requirements were essential to prevent abuse of an ESM. It was important for the WorkingParty to come up with appropriate disciplines to be respected by the investigating Member, which,
however, allowed for flexibility in the demonstration of a causal link.  Referring to the goods area was
a good starting point.  "Objective evidence" of a causal link had to be demonstrated in services in the
same manner as under the Agreement on Safeguards (AS).  WTO practice might be referred to for the
interpretation of the relevant terms.  ASEAN also  agreed with the suggestion that more than one
injury criterion should be met in order to demonstrate injury.  This was one area where the
particularities of services, as opposed to goods, should be duly taken into account.  Flexibility should
be used as to the exact number of criteria to be met.  Another possible element to be introduced into
this section could be the requirement for the inve stigating authority to consider "factors other than
increased supply or consumption of service" in order to demonstrate causality (see para. 13.3 of theACP).  To develop further rules in this regard, re ference might be made for example to the Agreement
on Anti-Dumping and to the relevant WTO practice in anti-dumping injury determinations.  Finally,
he agreed with the suggestion that transparency should be increased in the investigation phase in order
to prevent abuse.  This could mainly take the form of notification and consultation.  ASEAN felt that
Article 12 of the AS should be used as model, to be adjusted to the services context (Section X of theACP).  Turning to the Chairperson's Note Job No. 782, he said that ASEAN was in favour of a
"necessity test" with regard to the choice, extent, and scope of the ESM to be applied.  Article 5.1 of
the AS would be, to a certain extent, a suitable model (see also paras. 9 and 14 of ACP).  ASEAN
believed that provisions on degressivity should be included in the mechanism, and that Article 7.4 of
the AS could be referred to as a model (see also ACP para. 20).  ASEAN was still reflecting on the
issues of provisional safeguard measures and compensation, and would be pleased to hear Members'
responses to the ACP in this regard.  ASEAN was in favour of a provision on special and differentialtreatment (S&D) for developing countries (ACP para. 29).  The ASEAN delegations would like to
come back to the points raised in para. 11 of the Chairperson's Note.
8. He then referred to questions addressed by Members with respect to the ACP, and in
particular to the questions posed by Canada, wh ich appeared in Annex II of S/WPGR/M/26.  A
careful reading of the ACP, which had been circulated well before the last meeting, already containedmany answers these questions.  ASEAN agreed that the GATS de alt with "supply" rather than
"consumption" of services.  This basic idea underpinned the concept of the four modes;  it was clear
that in modes 1, 3 and 4, an ESM would affect (or restrict) the capacity to supply the service
concerned. In mode 2, it was true that a restriction could only be imposed on the consumption, since
the invoking Member did not have the jurisdiction to regulate supply of service outside its territory.Because of this peculiarity, mode 2 might raise some complications in the application of ESM.
However, a restriction on consumption was tantamount to a de facto restriction of the supply itself.
With respect to Canada's question concerning mode 2, ASEAN thus believed that an ESM might be
applied even in this mode.  This was logical, taking into account the framework of the GATS which
allowed Members to include, in their respective schedules, limitations to their specific commitmentsin all modes, including mode 2.  ASEAN suggested that the Secretariat be requested to examine
Members' schedules of commitments in order to find examples of existing limitations under mode 2.
If such limitations were already applied by Members,  it would be logical to allow Members to applyS/WPGR/M/27
Page 3
them as ESM under mode 2.  ASEAN would also appreciate if the Secretariat could provide inputs on
how Members actually implemented these limitations.  With respect to the second question posed by
Canada, ASEAN noted that the phrase "operating within the territory of a Member" meant what it
said:  there had to be some kind of physical presence by the supplier in the territory of the invoking
Member.  ASEAN believed that the modes of supply were of no relevance for defining the domesticindustry.  Taking them into account could indeed result in a farcical situation in respect of mode 2,
because this could lead to a possible inclusion of foreign suppliers abroad in the domestic industry.
With regard to the second part of the question on how to define domestic industry, ASEAN wished to
draw attention to the ACP itself which was amply clear.  Para. 5 proposed two options:  the first one
included foreign suppliers established in the country through commercial presence;  the second option
included only national suppliers.  The Canadian delegation might also wish to refer to footnote 2 as
well as to the Annex, which compiled relevant issues and was intended to facilitate the debate.  Withrespect to the third question by Canada, he felt that paras. 12 and 13, in particular 13.3, of the ACP
were self-explanatory.  Concerning the fourth questio n, a careful reading of paras. 3 and 4 of the ACP
clearly pointed out that, in this conceptual fram ework, an ESM could be applied across all modes of
supply.  This issue was, however, quite separate from the appropriateness of a given measure in
respect of the mode of supply.  It might not be possible to have a homogeneous measure that could be
applied in all modes, and, presumably, account should be taken of the extent to which a particular
mode of supply caused serious injury to the domestic industry.
9. Commenting on the fifth question raised by Canada, he noted that footnote 11 of the ACP
suggested that Members might either refer to existing  models in the goods area, or attempt to devise a
new framework specific to services.  In the latter instance, Members might want to work through JobNo. 5294/Rev.1, which showed what indicators and criteria of quantifiable nature might be obtainable
and relevant to determine serious injury or threat thereof.  The collection of data would depend on the
Members' respective domestic legislation.  ASEAN did not believe that there was need for a
multilateral provision governing the national authorities' work in implementing rights or obligations
under international law.  With respect to the sixth question, para. 14, in particular its chapeau,indicated that the applicable measures included "any or a combination of" the three types of measures
provided for in the paragraph.  With respect to the seventh question, he believed it was clear from the
ACP that ASEAN was aiming at an overall equivalence of commitments under the GATS, regardless
of sectors.  Footnote 16 of the ACP also referred to the applicable provisions in the goods sector
which, in turn implied that the key issue was the trade value of the commitments concerned.
10. In response to the eighth question, he referred to para. 16 of ASEAN's statement introducing
the ACP
1 which was clear on the issue at hand.  There was a significant difference between
"selectively" drawing on a source, and a good faith attempt to draw inspiration from that source and to
adapt its valid or applicable elements to a different context.  The provisions governing safeguards in
goods, and their use, constituted a useful reference, but services trade was different in many aspects.
A rule that worked in the goods area might not necessarily lend itself to direct translation into the
services context.  In many cases, at least some adjustments were required; provisional measures werean example.  Responding to the first part of question nine, he felt that no prior approval from the
Council on Trade in Services (CTS) was required before the suspension of equivalent commitments
by the Member affected by an ESM.  The ACP intentionally used the same language as the AS, and
this was also quite clear from a careful reading of paras. 15 and 16, together with footnote 16.
However, in order to disapprove of such a suspension, the CTS would have to make a formal decisionto that effect.  In this sense, there was no "imbalance" as suggested.  In fact, it would seem to be
inappropriate if all procedural steps were to be approved by the CTS.  If no such imbalance was
perceived to exist in the context of the goods agreement, there was no logic of it being raised in the
context of services.  With regard to the last part of question nine, he stressed that the whole question
of an ESM revolved around the issue of temporar y withdrawal or modification of commitments under
                                                     
1 See Annex I of S/WPGR/M/26.S/WPGR/M/27
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the GATS.  This was wholly distinct from issues related to GATS Article XXI, which dealt with
longer term developments.
11. ASEAN Members supported the Chair's proposal to  hold two informal meetings in May and
June, and a formal meeting in July, provided that  the Working Party agreed to keep a record of
informal meetings for future reference.  It was ASEAN's hope that the Working Party finished
discussing Job No. 1979 by the end of the informal meeting in June. The formal meeting in July
would then provide an opportunity to wrap up the discussion and seriously consider a way forward for
the negotiation on ESMs.
12. The representative of Japan supported a definition of "domestic industry" which included
established foreign suppliers.  However, it was necessary to define the concept of "established foreign
suppliers" and, in particular, consider whether it included joint ventures, branches or representative
offices.  On the relation between domestic industry and the MFN principle, Japan noted that there hadbeen considerable support for para. 6 of the ACP.  However, further discussion might be needed with
respect to the scope of "like services and service suppliers", as provided for in GATS Article II.  The
Working Party had to further discuss whether the definition of "acquired rights" included expansion
activities (injection of additional capital, establishment of subsidiaries, mergers, acquisitions, etc);
business had to be kept in mind.  Japan felt that many delegations were of the view that disinvestmentshould not be allowed.  However, what was meant by "disinvestment"?  Did it include, for instance,
the suspension of business, the withdrawal of licenses or authorizations?  Transparency should be
discussed in relation to indicators and criteria.  Japan was interested in a notification mechanism along
the lines of Article 12 of the AS.  On applicable measures, Japan supported replacing "temporary
withdrawal" with the terms "temporary suspension" (para. 14 of the ACP).  Japan would like tofurther consider the possible impact on the scope of ESMs of the disciplines currently discussed in the
context of domestic regulations and subsidies.  The duration of an ESM should be as short as possible.
Further work was needed to develop objective criter ia for assessing "substantially equivalent level" of
specific commitments (para. 16 of the ACP).
13. The representative of Peru said that, according to Peruvian legislation, all established
companies operating on the Peruvian territory were c onsidered to be domestic industries, regardless of
their ownership regime.  Peru therefore supported op tion 1 of para. 5 of the ACP.  Consequently, any
safeguard measure should focus in principle on new foreign competitors.  As to the related question of
whether this might entail a violation of the MFN principle, an analysis carried out by UNCTAD
maintained that the MFN principle did not mean that foreign investors had to be treated in an equal or
identical manner, regardless of their specific activities in the importing country.  Differential
treatment could be justified vis-à-vis  industries from various countries if there were in objectively
different  situations.  This analysis coincided with para. 6 of the annex to the ACP.  A safeguard
measure applied under mode 3 against possible foreign investors would not create a problem with
regard to the MFN principle, because the decisive issue was whether the foreign supplier was already
established or not, and not its nationality.  Peru was still considering the merits of introducing a
compensation requirement, taking into account the nature of the mechanism and the characteristics ofArticle XXI of the GATS.  In the event of a such a requirement, there was a risk that it might be more
onerous for a Member to adopt a temporary ESM than resorting to a permanent modification of
commitments under Article XXI.  When seeking an ESM, not only would a Member be required to
compensate, as under Article XXI, but would also have to go through an investigation procedure to
demonstrate injury and a causal link.  One possible outcome would be to allow for the application ofESMs without compensation for specified short periods of time.  A similar mechanism was provided
for in the AS.  What would be the relationship between the application of a provisional ESM and
compensation?  Would compensation be due when a provisional ESM was enforced?  Para. 29
(option 2) of the ACP exempted developing countries from compensation.  He believed that S&D
should be included in an ESM mechanism.S/WPGR/M/27
Page 5
14. The representative of Canada asked for the comments made by the representative of Thailand
on behalf of ASEAN to be circulated in writing.
15. The representative of the European Communitie s considered that discussions in informal
meetings should be the object of a summary record, ev en if only an informal one, so as to be brought
to the attention of formal meetings.  The positi on Members had on the issue of "domestic industry"
was influenced by their internal legislation.  Because of the specific nature of services, it would seem
important that "domestic industry" be considered to include foreign-established suppliers.  As pointed
out by Japan, the concept of "foreign established suppliers" would need to be examined.  For instance,
how should branches be treated, which were instructed and controlled from other places?  How should
joint ventures be treated?  Would there be a distinction in case of majority/minority shareholding, and
could a threshold for such majority shareholding be established?  The case of representative offices
was perhaps easier;  in the EC, representative offices were not considered to be established suppliers.With respect to acquired rights, she asked what would happen if foreign established suppliers were
few in number, but represented quite a high percentage of the business in the country.  Could this be
seen as a form of inverted protectionism against further foreign competition?  The question of further
investment needed to be explored because denying the possibility of further investment could actually
amount to going backward.  This might apply to capital investment, but also to investment inpersonnel.  It should be possible in principle to apply an ESM across all four modes of delivery even
though questions remained as to whether it was possible to effectively apply measures under mode 2.
With respect to the concept of "like service", the EC had some concerns about reference to end-use in
the ACP, but was willing to further discuss the is sue.  Work on classification issues might not be
sufficiently advanced to enable Members to identify  "like" or "directly competitive" services.  Case-
law could be important since some issues, which could have an impact on the safeguard discussion in
services, had been dealt with in dispute settlement.  Indicators and criteria needed to be further
examined, in particular those whose usefulness was questioned.  The greater the number of relevant
criteria which might be identified, the better the cause for a safeguard mechanism.  She asked whether
the Secretariat could give an update on the progress made by the U.N. Inter-Agency work onStatistics.  The EC would also try to provide information on the type of statistics available within the
Community.  With respect to applicable measures, the question of additional commitments under
Article XVIII needed serious study.  For instance, some Members had scheduled the fact that they
were developing new legislation and committed on implementing it upon completion;  would such a
commitment be covered by an ESM?  The EC was in favour of a necessity test whose criteria might
depend on the ongoing work in the domestic regulations context.  With respect to compensation, she
noted that the shorter the duration of an ESM, th e lesser the need for a compensation requirement.
She agreed with Peru that the relationship  between a compensation requirement under GATS
Article X and Article XXI had to be kept in mind.  S&D was enshrined in the GATS, but Members
might find it easier to determine its content once they had a clearer idea of the safeguard mechanism
itself.
16. The representative of Pakistan generally supported the ACP and hoped that the deadline of
15 December would be met.  He would revert to this matter at the next meeting.
17. The representative of the Republic of Korea did not have a final view on the definition of
"domestic industry".  However, he strongly believed that foreign investments and foreign firms should
be protected.  Should option 1 of the ACP be adopted for the definition of "domestic industry", a
number of issues would need to be considered.  For instance, "new entrants" should be defined, aswell as the scope of "acquired rights", including the right for foreign established suppliers to expand.
Korea was of the view that it would be difficult to apply an ESM to prevent the expansion of foreign
established companies.  To the extent that an ESM applied only to new foreign entrants, irrespective
of their origin, there should not be a violation of  the MFN obligation.  However, there remained the
possibility of a de facto  violation, as mentioned in para. 7 of the annex to the ACP.  On the other
hand, a problem could arise with regard to Article X, first paragraph.  If the determination of injury
and causality was based on the concept of domestic industry, including foreign established suppliers,S/WPGR/M/27
Page 6
and lead to the conclusion that the new entrants were not responsible for the injury, applying an ESM
to them might be problematic.  Korea was of the view that, taking into account their limited
availability, a list of indicators and criteria should be illustrative.  There was no need for a necessity
test.  An ESM should apply to specific commitments undertaken under GATS Article XVI, XVII
and XVIII.  The Working Party needed to discuss the re-introduction of quantitative restrictions underArticle XVI.  It was necessary to adopt S&D prov isions depending on economic status of developing
countries, including a specific de minimis  provision.
18. The representative of Uruguay agreed to proceed on the themes identified in the Chairperson's
Note Job No. 1979, with the understanding that work should also focus on the ACP.  It was important
to define the scope of domestic industry and ensure protection of acquired rights.  S&D was an
horizontal concept which had to be included.
19. The representative of Egypt supported option 1 of the ACP for defining "domestic industry"
because it used the same language as that contained in Article 4 para. 1 of the AS.  But various types
of foreign-established suppliers still needed to be defined, as well as the relationship with the MFN
principle.  Egypt agreed with using the terms "supply and consumption", as proposed in the ACP.
The concept of "unforeseen developments" might be more difficult to apply in services than in goods;
possible criteria could be considered in this regard.  Egypt recognized the temporary nature of anESM, which should be applied to the extent necessary  to prevent serious injury or threat thereof, and
supported the application of a necessity test.  Provisional measures should be included in an ES
mechanism but should be limited and non-renewable;  the range of possible measures should be more
limited than those available after a full investigation procedure.  An ESM needed to include a
compensation requirement, in spite of the problems to determine a "substantially equivalent level".Data availability  was a horizontal problem in services, which should be addressed.  An ESM should
also provide for S&D, in particular with respect to  the relevant minimum thresholds of supply and the
extension of the period of application of a safeguard measure.
20. The representative of Australia supported option 1 of the ACP for the definition of domestic
industry.  She shared the questions raised by Korea regarding new entrants.  Predictability for
investors was fundamental in the development of an ESM;  the middle ground between disinvestment
and full national treatment (post-establishment rights) should be explored.  Australia strongly
supported the development of common guidelines to establish trade and injury links; a mandatory, but
not exhaustive list of relevant criteria could be established, based on the proposal by Venezuela.  She
was also in favour of exploring the feasibility of a necessity test to ensure that any measure adopted
was not unduly trade-restrictive.  It was necessary to provide for compensation, including for
developing countries, in order to avoid misuse.  The concept of "substantially equivalent" benefits hadto be further examined in this regard.  The Work ing Party might consider whether, when an affected
party suspended a substantially equivalent level of specific commitments (para. 16 of the ACP), the
MFN obligation was also suspended.
21. The representative of New Zealand sought clar ification with respect to Korea's position on a
necessity test.  The representative of Korea, responded that the scope of an ESM should be limited to
the extent necessary to prevent or remedy serious injury.  However, strict criteria might be too
burdensome and Members should retain a certain level of discretion.
22. The representative of the United States considered that the Chairperson's Note Job No. 1979
was a good basis for further work since it contained the issues key to the basic question of feasibility.
The United States was of the view that the definition of "domestic industry" should includeforeign-established suppliers and that "acquired rights" would have to be protected under a possible
ESM.  A number of interesting questions were raised as to how to define these concepts.  As noted by
the EC, restrictions on the expansion of business might in fact force suppliers to go backward.  With
respect to indicators and criteria, Job No. 5294/Rev.1 was a good starting-point but provided littleS/WPGR/M/27
Page 7
guidance on how to measure increased imports.  Extending the concept of applicable measures to
additional commitments under Article XVIII required careful consideration.
23. The representative of India shared the views expressed by Uruguay and Egypt with regard to
the inclusion of S&D treatment.
24. The representative of Poland said that his capital was considering the possibility of presenting
a non-paper to the Working Group.  Poland was of the view that foreign-established suppliers should
be included in the definition of "domestic industry".  In addition, the definition should be consistent
with Article XXVIII of the GATS.  Poland was examining the issue of cross-modal application of
ESMs, focusing on the feasibility of applying measures under mode 2.  With respect to "like
services", he noted some difficulties due to a lack of statistical data.  Poland had some reservations
against the inclusion of a compensation requirement.   Examination of relevant indicators and criteria
should continue. Applicable measures should in clude temporary suspension or modification of
specific commitments under Articles XVI, XVII and XVIII.  A necessity test was desirable.
25. The representative of Hong Kong, China said his delegation was not convinced of the need
for compensation, primarily because an ESM should be short in duration.  He was not sure that a short
ESM would justify incurring all the difficulties as sociated with compensation.  If compensation were
to be introduced, questions such as cross-retaliation and data problems in assessing the "substantiallyequivalent level of specific commitments" needed to be looked at.  The questions raised in para. 9 of
Job No. 782 were also relevant.  On the ACP, Hong Kong, China was concerned about para. 17,
which suggested that the right of suspension of commitments should not be exercised for the first
three years.  Rights and benefits of services suppliers should be protected.  He agreed that, in general,
there should be some flexibility for developing countries, but the question remained as to what mightbe covered under S&D.  Looking for a threshold was an interesting idea.  Developing countries
should not be exempted from a compensation requirement.  It might be difficult for any invoking
country to determine the origin of a service.
26. The representative of Guatemala said that ac quired rights should be protected.  Guatemala
legislation did not distinguish between national and foreign established suppliers.  Therefore, she
preferred option 1 contained in para. 5 of the ACP.
27. The representative of Argentina said that the choice between options 1 and 2 in para. 5 of the
ACP would influence the effectiveness of the measure.   The first option was narrowly linked with the
mode of supply in the goods sector and the AS.  The questions raised by Korea in this regard were
relevant:  who should be protected and against what?  How could a new entrant, not present in the
market, cause injury?  On MFN, his delegation woul d further reflect on the points raised by Peru.  He
had some doubts about the need for a compensation clause because an ESM should be of shortduration.  It would be interesting if the ASEAN Members could, even informally, indicate what they
had in mind as to the maximum period of time for a safeguard measure.
28. The representative of Mexico said that his delegation would like to concentrate on the ACP.
There were many similarities between the goods and services sectors, but also differences.  To the
extent possible, advantage should be taken of the experience and the legislative approach in the goodsarea.  A safeguard mechanism was not an end in itself, but a means in order to achieve a goal.  The
choice between options 1 and 2 in para. 5 of the ACP would depend on what was intended to be
protected.  The concepts of "like services" and "acquired rights" were very important and would have
a decisive influence on what might be the final result.  Transparency in investigation and consultation
procedures should be addressed and a maximum duration for the investigation process be determined.A national authority should be able to start an investigation procedure ex officio .  In para. 14 of the
ACP,  the concept of "suspension" would be more suitable that the concept of "withdrawal".  Mexico
was of the view that S&D provisions should be considered.S/WPGR/M/27
Page 8
29. The representative of El Salvador said that his delegation was in favour of option 1 of para. 5
of the ACP.  The legislation of his country granted foreign-established investors the same rights as
national ones;  acquired rights should thus be protected.  The concept of S&D should be included.
30. The representative of Brazil said that, regardless of what the definition of domestic industry
would ultimately be, work should concentrate on defining more precisely "established foreign
suppliers".  Brazilian legislation granted full national treatment to any established firm.  Brazil
reserved its position concerning the need for a necessity test;  the use of ESMs should not be too
burdensome.  His delegation was not sure whether a compensation mechanism would be necessary,
especially if the duration of the measure was to be  short.  The possibility for cross-retaliation should
be excluded.  S&D-related provisions remained to be devised but, as a matter of principle, should be
included.
31. The Chairperson recalled the questions raised by Peru and Argentina, and the requests for
Secretariat's contributions.  The representative of Thailand, on behalf of ASEAN, said he would
provide answers at a later stage.  A Member from the Secretariat mentioned that an example of
mode 2 limitations was the exclusion, from public insurance schemes, of the costs of healthcare
treatment abroad.  The Secretariat would be pleased to undertake a full-scale examination of current
schedules with regard to mode 2 limitations;  it would be far more difficult, however, to obtaininformation on how these limitations were actually implemented.  Concerning the U.N. Inter-Agency
Work on Statistics, the Secretariat would get back to the Working Party with a progress report.
32. In summing up, the Chairperson noted that a number of delegations considered it important to
proceed on the basis of Job No. 1979 to determine whether a safeguard mechanism was feasible;
other delegations felt that work should concentrate on the ACP. In his view, a conceptual discussionwas necessary if driven by inputs from Members.  On the definition of "domestic industry", many
delegations were in favour of including foreign-established suppliers;  it was also suggested to further
discuss the precise scope of these terms.  It seem ed that the Working Party was close to a consensus
that there should be no disinvestment.  Open questions remained, however, such as the definition of
"disinvestment", expansion activities, etc.  He would come back in due time to issues 1 and 2 of JobNo. 1979.  On indicators and criteria, a number of delegations had referred to Job No. 5294/Rev.1.  It
had also been suggested that the anti-dumping experience in goods should be considered more
thoroughly.  With respect to applicable measures, some delegations suggested that the word
"suspension" be used instead of "withdrawal" in para. 14 of the ACP.  A number of delegations were
in favour of a necessity test, but it was also said that Members should retain some discretion.  Some
delegations were reluctant to consider the suspension of commitments under Article XVIII.  Mixed
views were expressed on compensation:  a number of delegations were not sure about the need forcompensation, particularly if the ESM was of short duration.  Some Members had pointed out the
difficulties in implementing such provisions (lack of data, cross-retaliation, etc.).  Many delegations
were in favour of including S&D, while noting that the content remained to be defined.  Criteria were
needed to specify "unforeseen developments" if the concept was to be used.  He encouraged
delegations to circulate any specific comments before the next meeting of the Working Party.  TheSecretariat would conduct a factual search in schedules in order to identify existing limitations under
mode 2 and would prepare a progress report on developments on the statistical side.
33. The Chairperson sought the views of delegations on how work should be structured in the
coming weeks and months.  It would be useful to have had a discussion of the eight issues listed in
Job No. 1979 before the summer break.  The Working Group should decide on the number ofmeetings and whether these should be formal or informal.  Ideally, the advantages of free-flowing
informal discussions should be combined with some  sort of record which could be referred to the
future.  On timing and number of meetings, the Chairperson proposed to hold the next formal meeting
on 7 July;  informal meetings would be held on 5 May (items 3 and 4 of Job No. 1979), 22 May
(items 5 and 6) and 22 June (items 7 and 8, plus any other issue delegations might want to raise).  OnS/WPGR/M/27
Page 9
record-keeping, he suggested that a Note be prepared, for instance under the Secretariat's
responsibility, which would contain a summary of informal discussions.
34. The delegations of Thailand on behalf of ASEAN;  the European Communities;  Brazil;
United States;  Hong Kong, China;  India;  Uruguay;  Japan;  the Republic of Korea;  and New
Zealand took the floor and supported in general the proposals made by the Chair.  It was so agreed .
C. NEGOTIATIONS ON SUBSIDIES UNDER ARTICLE XV OF THE GATS
35. The Chairperson noted that, at their last meeting, Working Party Members had a promising
discussion on this subject-matter.  A number of substantive issues had been raised, in particular in
relation to the Communication presented by Argentina and Hong Kong, China (S/WPGR/W/31).
Para. 10 of W/31 raised a number of key points which the Working Party needed to further consider.
Delegations might also want to revert to the Chairperson's Note of 14 February 2000 (Job No. 782)
and should feel free to add any other pertinent issue.  Factual information on Members' experiencewith subsidies encountered in foreign markets would greatly facilitate discussion on this item.  As far
as background documentation was concerned, the Secretariat was currently working on updates
proposed in paras. 9(a), (b) and (c).  The Secretariat would endeavour to make these documents
available for the next meeting of the Working Party.  Delegations should make suggestions as to how
they would like to proceed with respect to paras. 9(d), (e) and (f) of W/31.  With respect to disciplineson export subsidies in ANZERTA (para. 9(e)), he  understood that Australia and New Zealand would
come back to the Working Party.  On 9(f), the Wo rking Party was expecting a clearer indication of the
types of institutions the authors of W/31 had in mind.
36. In reply, the representative of Argentina mentioned work carried out in the OECD, and in
particular the 1996 study on Public Support to Industry, Report by the Industry Committee to the
Council at Ministerial Level .  The Secretariat could enquire whether updated or additional
information had been made available since the publication of this report.
37. The representative of the European Communities hoped to table a document on relevant
jurisprudence at the next formal meeting of the Working Party.  Para. 6 of W/31 contained interesting
considerations.  When considering possible disciplines, there might be a need to identify policy areaswhich could be agreed to warrant some form of public intervention.  There could also be a need to
determine to what extent disciplines should be horizontal or sector-specific.  The issues raised in para.
10(c) to (f) might perhaps be addressed at a later stage.  Para. (a) would require in-depth examination.
In her view, the concept of necessity was not directly relevant;  work should focus on the trade
distortive effects.  The question of remedies would also be important.  The Working Party also needed
to look at social objectives of subsidy programmes (para. 10(b)), and determine what types of
subsidies would fall into this category.  Transparency should also be discussed.
38. The representative of New Zealand said, on behalf of Australia and New Zealand, that they
were still considering whether any further information could be provided on ANZERTA, as suggested
in para. 9(e) of W/31.
39. The representative of Hong Kong, China propose d that the Working Party agree, as a starting-
point, to focus on paras. 10 (a) and (b) before addressing other issues.  On the question of social
subsidies, he noted that GATS Article XV stated that Members should negotiate on disciplines to
avoid trade-distortive effects of subsidies.  Thus, where there was no trade, there was no reason to
investigate the matter.  Some years ago, most social areas could have been excluded (health,
education, social welfare), but now trade was increasingly taking place.  Mode 3 played an important
role in these areas, as well as, increasingly, modes 1 and 4.  Most governments did subsidize socialservices and should retain the ability to do so ef fectively.  Disciplines might, however, be needed to
avoid trade-distortive effects.  Would a green box be desirable?  The ongoing work on domestic
regulation could have an indirect impact on the activities of this Working Party, if domestic regulationS/WPGR/M/27
Page 10
were to be based on such criteria as competency, ability to supply and not more burdensome than
necessary to ensure the quality of a service.  It could impact on the distribution of subsidies in a
positive way.  Hong Kong, China was in favour of considering a necessity test.  National treatment
would go a long way in reducing the adverse effect of subsidies, but would affect only mode 3.  The
impact on other suppliers, in particular under mode 1, would need to be considered.
40. The representative of the United States said that his authorities had initiated a new process of
consultation with domestic constituencies, based in particular on W/31.  He hoped to share
information on the results of this process with th e Working Party in a near future.  Updates by the
Secretariat would be most useful.  His delegation was not yet fully prepared for a detailed discussion
on some of the issues raised on para. 10 of W/31.  Some consideration should be given to developing
a rolling checklist of issues for future consideration, based on W/31 and W/9.  He stressed the need
for more factual information.
41. The representative of the Republic of Korea said that discussion should focus on subsidies
with trade-distortive effects.  The concept of a green box should be considered.  He agreed with para.
10(c) of W/31 regarding countervailing measures.  His delegation would try to provide information at
the next meeting of the Working Party.
42. The representative of Canada was in favour of adopting a systematic approach to subsidies,
starting for instance with work on definitions, examination of the relevance of the Agreement on
Subsidies and Countervailing Measures, etc.
43. The representative of Uruguay agreed with suggestions for updated information contained in
para. 9 of W/31.  His delegation was still analysing para. 10 and was interested in views on possible
ways forward.  With respect to para. 43 of S/WPGR /M/26, he said that, in the fourth sentence of this
paragraph, the word "industrial" should precede "goods", since export subsidies were not prohibited in
all sectors, for instance in agriculture.
44. The representative of Japan, while looking forward to receiving additional information
pursuant to paras. 9(e) and (f) of W/31, was also interested in information under para. 9(d).  He
expressed interest in a green box concept and believed that "trade distortive" effects should beaddressed with priority.
45. The representative of Bolivia said that his country did not maintain any type of subsidies.
46. The Chairperson stressed the need to receive answers to the 1997 questionnaire.  He
understood that some delegations would endeavour to provide written contributions by the next
meeting.  Mentioning that was not his intention to draw any particular conclusion for the time being,
he noted that the discussion had focused on issues raised under paras. 10(a) and (b) of W/31.  Several
delegations were in favour of further considering the issue of social subsidy programmes.  Hesuggested that the Working Party come back to th e proposal of developing a rolling checklist of
issues;  delegations should give further reflection to this idea.  At the next formal meeting, Members
might want to focus on points raised in paras. 10(a) and (b).
47. The representative Mauritius requested the Chairperson to give further thought to producing a
checklist of issues for discussion.  The checklist could take into account developments since 1996.
48. The Chairperson said that he intended to revert to  the issue of a checklist of issues at the next
meeting.  Canada's suggestion of a systematic approach might impinge on the order in which issues
would be addressed in a checklist;  he wondered whether the Canadian delegation wanted to provide
further input.S/WPGR/M/27
Page 11
D. NEGOTIATIONS ON GOVERNMENT PROCUREMENT UNDER ARTICLE XIII OF THE GATS
49. The Chairperson recalled that, at the last meeting, several delegations had expressed support
for work being pursued in parallel on definition and possible multilateral disciplines.  Delegations
were thus encouraged to comment on both issues.
50. The representative of the European Commun ities informed the Working Party that her
delegation was planning to circulate a written subm ission, which she hoped would be ready in June. It
would focus on possible multilateral disciplines, including transparency and non-discrimination.
51. The representative of Canada said that, as stated at the last meeting, his delegation could not
agree with the criteria proposed by Japan (Job No. 6789, 12 November 1999) to determine whether a
governmental entity was privatized.  He also believed that it was premature to establish a framework
for possible disciplines in the absence of any de velopment regarding these disciplines.  The Working
Party should first examine and specify disciplines before considering their application.  Issues relatedto non-discrimination (national treatment and MFN) should be considered.
52. The representative of Japan said that the paper submitted by his delegation (Job No. 6789)
was a useful basis for work.  In his view, a recent dispute between Korea and the United States had
arisen precisely because the current GPA lacked a precise definition of publicly-owned enterprises.
He invited Members to consider how the Japanese proposal could be improved.
53. The representative of the United States said that his delegation had done further work on
definitional issues, in particular in the context of the Free Trade Areas of the Americas (FTAAs)
Negotiating Group on Government Procurement.  A U.S. proposal presented to that Negotiating
Group identified four characteristics of transactions falling within the definition of "government
procurement":  (i) the entity made an acquisition as a government entity, or was subject to the control
or influence of a government entity;  (ii) goods and services were supplied in the furtherance of
governmental purposes;  (iii) there was a mutual exchange of benefits;  (iv) the transaction was not
subject to normal competitive market forces.  He hoped his delegation would be in a position to
submit additional proposals in a near future.  In his view, the Japanese proposal was very specific to
the Agreement on Government Procurement (GPA).
54. The representative of the Republic of Korea supported that work should continue on
definitional issues and disciplines.  The GPA was a plurilateral agreement which covered goods and
services.  It might therefore be possible to borrow some definitions and disciplines, but account
should be taken of the needs of developing countries.
55. The representative of Hong Kong, China said that it was time to consider disciplines and he
stressed the importance of non-discrimination in this context.
56. The Chairperson looked forward to receiving, as indicated, written contributions which might
help to advance the discussion on disciplines.  He noted some hesitation as to whether or not it was
appropriate, at this stage, to discuss a possible framework for disciplines.
57. DATE OF THE NEXT MEETING
58. The Chairperson indicated that, as previously agreed, the next formal meeting of the Working
Party would take place on 7 July.  In addition, an  informal meeting would be held on 22 May, to
address issues 5 and 6 of Job No. 1979.  A se cond informal meeting, on 22 June, would allow
Working Party Members to discuss items 7 and 8, the issue of "unforeseen developments" as well as
any other issues they might want to raise.
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