RESTRICTEDWORLD TRADE
ORGANIZATIONS/WPGR/M/39
12 November 2002
(02-6205)
Working Party on GATS Rules
REPORT OF THE MEETING OF 23 OCTOBER 2002
Note by the Secretariat1
1. The Working Party on GATS Rules held its thirty-ninth meeting under the chairmanship of
Mr. Thomas Chan, from Hong Kong, China.  The agenda for the meeting was contained in
WTO/AIR/1930.  It consisted of five items:  ne gotiations on emergency safeguard measures under
GATS Article X;  negotiations on subsidies under GATS Article XV;  negotiations on government
procurement under GATS Article XIII;  date of the next meeting; and other business. The Chairperson
drew attention to the Annotated Agenda (JOB(02) /144) in which he proposed themes for discussion
under the three agenda items.
2. The representative of Thailand said he intended to make a statement under "Other Business".
The Chairperson announced that he would inform de legations on a letter he had received from the
Chairperson of the Committee on Trade and Development Special Session.
3. The agenda for the meeting was adopted.
A. NEGOTIATIONS ON EMERGENCY SAFEGUARD MEASURES  (ARTICLE X OF THE GATS )
4. The Chairperson recalled that, under the Work Programme on emergency safeguard measures
adopted by the Working Party in July,2 Members were encouraged to put forward submissions as
early as possible before 31 December 2002.  Moreover, Members had agreed, inter alia , to identify,
elaborate and consolidate elements of an ESM and to address the question of feasibility and
desirability.  It had also been agreed that the Chairperson would circulate a note by 15 March 2003 to
report on the results of such work.  The Annotated Agenda circulated prior to this meeting proposed
that, for the purpose of identifying, elaborating and consolidating elements of an ESM, delegations
might continue their comparison of the various proposals on the table.  In his view, five broadapproaches could be identified:  (a) the "horizon tal" safeguard mechanism;  (b) the "scheduled"
safeguard;  (c) the "consensus-based" safeguard mechanism;  (d) the "core" safeguard mechanism;
and (e) no explicit safeguard mechanism.  Based on the elements contained in the Synopsis
3,
Members might want to identify the main differences as well as possible common elements.  The
question of feasibility might also be addressed in this connection.  This discussion was withoutprejudice to the question of desirability of an ESM.  Members wishing to address this question were
encouraged to present submissions.
5. The representative of the United States noted that, while items (a) to (d) (paragraph 2 of the
Annotated Agenda, JOB(02)/144) could be interpreted as different "approaches", item (e) should be
considered as an "outcome", based on a review of the issues of feasibility and desirability.  It might beuseful to reformulate (e) in this sense, since the negotiations on an ESM were without prejudice to an
outcome.
                                                     
1 This document has been prepared under the Secretariat's own responsibility and without prejudice to
the positions of Members and to their rights and obligations under the WTO.
2 S/WPGR/7, specifically paragrap h 3.  See also S/WPGR/M/38.
3 JOB(01)/122 of 7 August 2001 and JO B(01)/122/Add.1 of 21 December 2001.S/WPGR/M/39
Page 2
6. The Chairperson replied that the five approaches were based on proposals by Members and
were intended to facilitate discussions.  Item (e) included the situation, raised by some Members at
previous meetings, where even in the absence of an established ESM, a Member decided to inscribe
an ESM it its schedule of specific commitments.  He stressed that the approaches – or outcomes –
identified in the Annotated Agenda were not meant to prejudge the negotiations in the Working Party.
7. The representative of Switzerland said that the option described under (e) went beyond the
particular situation just described by the Chairperson and deserved further consideration, in particular
in discussing desirability of an ESM.  The Chairperson said that Members were invited to address the
issue of desirability in this meeting.
8. The representative of the United States recalled that her delegation had submitted a proposal
on desirability and feasibility and noted that these issues had been raised by other Members as well in
their proposals.  Members were free to put forward more submissions, but contributions already onthe table should not be forgotten.
9. The Chairperson proposed that the Working Party continue discussions on emergency
safeguard measures in informal mode.4  It was so agreed.
10. In concluding discussions under this agenda item, the Chairperson stressed that substantive
inputs were needed.  He noted an interest to take up further the Australian proposal in order to see
how it could be merged with other approaches on the table.  Clearly, more work was required on
desirability and feasibility.  It was also important to discuss concrete cases in which safeguard
measures might be needed.  With respect to the request made during the informal session for inputs by
the Secretariat, he suggested that the Secretariat could highlight core elements contained in the
various written proposals on the table.
B. NEGOTIATIONS ON SUBSIDIES  (ARTICLE XV OF THE GATS )
11. The Chairperson drew Members' attention to the Work Programme agreed by the Working
Party.  He recalled that Members were encouraged to put forward submissions as early as possible
before 31 March 2003, and that it had been agreed to continue discussion on the basis of submissions
and materials available.  He noted that, at the last meeting, there was a general feeling that moreinformation on subsidies was needed.  Members had been invited to give consideration to a simplified
questionnaire put forward by the delegations of Argentina, Chile and Hong Kong, China, for the
purpose of information exchange on subsidies (JOB(02)/84).  Moreover, the Secretariat had circulated
an updated summary of information on subsidies contained in TPR reports (S/WPGR/W/25/Add.3).
He invited delegations to continue the discussion on  information exchange on the basis of these
documents.  Members might also wish to consider if they had other suggestions to further the
gathering of information, and any other technical and analytical work.
12. The representative of Chile said that this agenda item was particularly important for her
delegation.  In the course of the ongoing market access negotiations, her delegation had asked
Members having sent requests to Chile to provide information on the subsidies they maintained in
sectors they wanted Chile to open.  But no information had been provided so far.  Increasing
transparency on subsidies remained a key objective and any type of information was useful.  In aprocess of market opening, addressing the issue of subsidies was in everybody's interest.  She noted
that it had been said on various occasions that no sufficient information was available.  However, the
webpage of some Members contained a wealth of information on their subsidy regimes in different
sectors.  The problem was that this information did not always cover important elements such as
                                                     
4 See Summary of Comments Made During the Informal Meeting of 23 October 2002 , Note by the
Secretariat, JOB(02)/159.S/WPGR/M/39
Page 3
amounts, beneficiaries, etc.  For the next meeting, specific questions could be made to these Members
on their subsidy programmes.  With respect to the Secretariat document W/25/Add.3, she noted that
(i) the information focused on some services sectors only (mainly tourism, transport, financial
services);  (ii) it was not clear whether subsidies targeted services exports, and (iii) developing
countries appeared to subsidize more than developed countries.  She enquired which sources whereconsulted when drafting TPR reports.
13. The representative of Ecuador said that the examples in W/25/Add.3 were limited to some
sectors and concerned mostly developing and least-developed countries.  She drew attention to a
submission that Saudi Arabia had circulated in the Committee on Trade and Environment and in the
Committee on Trade and Environment Special Session on Energy Taxation, Subsidies and Incentives
in OECD Countries and Their Economic and Tr ade Implications on Developing Countries, in
Particular Developing Oil Producing and Exporting Countries5 and suggested that it be circulated in
this Working Party because it contained interesting information on subsidies in the energy sector.  It
would be important for the Working Party on GATS Rules to be aware of this document.
14. The representative of Hong Kong, China suggested that, under this agenda item, Members
might also want to address the issue of permissible subsidies, including schemes aimed at promoting
government policies in the health and education sectors, or research and development.
15. The representative of Uruguay said that the Working Party was mandated by Article XV to
develop the necessary multilateral disciplines to avoid trade-distortive effects.  Technical work and
negotiations on subsidies had to be carried out on this basis, taking into account the Work Programme
on subsidies.
16. The representative of Cuba enquired why the simplified questionnaire put forward by the
delegations of Argentina, Chile and Hong Kong, China (JOB(02)/84, 12 July 2002) had not included
the question on the policy purpose of the subsidy which was contained in the original questionnaire
(see S/WPGR/W/16).
17. The representative of the Republic of Korea said that the Secretariat's document W/25/Add.3
was a good basis for furthering the information exchange.  Noting that this compilation focused on
some services sectors of an infrastructural nature, she suggested that Members might be more
proactive in other sectors.  The document also concentrated on small economies where tourism was a
key sector.  It might be useful to refer to previous documents to have a more general view.  More
information would allow to work on the form, nature and definition of services subsidies.  She
wondered whether incentives provided to foreign investors should be addressed.  In the goods sectors,
investment incentives were not covered, unless there was a violation of the TRIMs Agreement.  It was
interesting that tariffs and tax exemptions on goods should be considered as incentives to someservices, such as tourism.  Other questions included whether consumer tax exemptions on oil used for
airplanes and ships, or support provided to educat ion and training of certain professionals should be
regarded as subsidies.  The definition of subsidy contained in the Agreement on Subsidies and
Countervailing Measures was broad and more factual data on services subsidies were needed.  Work
on categorisation of various services-related subsidy programmes should also be considered.  TheWorking Party should examine how to update the checklist on subsidies.
18. The representative of New Zealand recalled that her delegation had submitted in 1997 a
response to the subsidy questionnaire in S/WPGR /W/16/Add.2 and would endeavour to update this
information.  New Zealand would welcome if other countries, developed and developing, submitted
information under the simplified questionnaire in JOB(02)/84.  Her delegation was interested in any
                                                     
5 Document WT/CTE/W/215 and TN/TE/W/9.S/WPGR/M/39
Page 4
clarification that might emerge as to the scope of measures that were being addressed under this
agenda item.
19. The representative of Chile recognized the importance of the policy objective behind
subsidies.  However, as a first step, it was important to obtain as much information as possible on
subsidy programmes.  She agreed with Hong Kong, China that the issue of permissible subsidieswould need to be addressed.  The representative of the Republic of Korea had raised a range of
interesting questions.  Chile welcomed New Zealand's intention to update its reply to the
questionnaire and encouraged other countries to do the same.  She enquired about the necessary
procedure to circulate a document presented in one WTO body in another body.
20. The representative of Switzerland noted that W/25/Add.3 compiled information contained in
documents which had been circulated in another WTO body.  The Secretariat might provide via by e-
mail the document referred to by the delegation of Ecuador, as it did for other documents.  Hewondered whether there were some guidelines for circulating documents in other bodies.  Document
W/25/Add.3 was a good basis.  More information on the existing types of subsidies was needed in
order to identify trade-distortive measures and proceed with this negotiation.  Information was
available because all Members should have a broad idea of the kind of subsidies they maintained.
Switzerland was willing to go on with this exercise, but a critical mass of interested Members wasnecessary.
21. The representative of Chinese Taipei noted that some subsidy programmes listed in
W/25/Add.3 were different from those in the SCM Agreement.  Therefore, she agreed that, as
mentioned by the Secretariat, the term "subsidy" and related concepts might not have been used in
TPR reports with the SCM Agreement definition in mind.  Those types included incentives andconcessions relating to investment programmes, in particular in the tourism sector;  subsidies through
the procurement of goods and services from public entities;  exemptions from indirect taxes, in
particular VAT, usually not conformity with th e SCM Agreement;  most subsidies in W/25/Add.3
were specific, as required by the SCM Agreement.  She wondered whether a broader definition would
be needed in the services context, which would take into account the particular nature of servicessectors.  A first step would be to agree on the scope and definition of a subsidy for services.  The
SCM Agreement could offer some guidance, but it was not a panacea.  It was not appropriate at this
stage to discuss permissible subsidies before other issues, such as types and scope of subsidies, had
been addressed.
22. The representative of the United States said that circulating documents from one body to
another raised systemic issues and she preferred to consult her capital on this question.  She supported
Switzerland's practical proposal that each delegation should obtain information within its owngovernment as quickly as possible.  Further discussion was needed on what type of subsidies should
be addressed under this mandate.  It would be impossible to identify all subsidies.  For instance,
should scholarships be classified as subsidies?  How many Members had such educational grants,
should they be considered justified?  Hence, the scope of subsidies should be discussed and only
trade-distortive ones be addressed under this agenda item.
23. The representative of Paraguay said that information on services subsidies was useful in view
of the ongoing market access negotiations.  Members should provide information on existing
subsidies, and discuss a definition for, and the scope of, services subsidies.  Lack of information
prevented many Members from opening their markets.  His delegation supported proposals to
improve transparency.
24. The representative of Mexico said that the information contained in W/25/Add.3 was limited
but did nevertheless give a general idea of what types of subsidy programmes existed, and which
sectors were concerned.  Most subsidies granted in developing countries took the form of taxS/WPGR/M/39
Page 5
exemptions, while other countries granted direct financial assistance for a number of policy purposes.
Taking as a starting-point statistics on international trade in services, it should be possible to identify
countries granting subsidies impacting on international services trade, and the sectors which were
targeted.  Each Member, developed and developing, could then provide information on subsidies in
these sectors (type of programme, amounts involved, beneficiaries, etc.).  Mexico would be ready tocontribute to such an exercise.  On the basis of the information collected, it could be possible to assess
the potential for trade-distortive effects and identify legitimate support.
25. The representative of Mauritius enquired whet her the compilation of TPR-related information
on subsidies undertaken by the Secretariat covered all TPR reports since 1995.
26. The representative of Brazil said that it would be difficult to deviate from the requirement in
Article XV to exchange information on all subsidies related to trade in services that were provided to
domestic suppliers.  This information exchange was a first and important step, and had proved to bedifficult since the beginning of the negotiations.  He doubted whether scholarships should be a focal
issue in terms of trade-distortiveness.  When negotiating the Tokyo Round Subsidy Code and the
subsequent SCM Agreement, governments had moved into the negotiating phase once they had
obtained all the information available on subsidies.  Some information was thus needed.  In the
Working Party, the questionnaire W/16 had been the first procedural step to comply with theinformation exchange.  Few delegations had replied, none of them was a large trading partner.  The
simplified questionnaire in JOB(02)/84 would hopefu lly provide more input.  In addition, Members
might wish to consider further refining the m echanism that had been used in order to obtain
information.  Information drawn from TPR reports ap peared to be significantly limited since the TPR
mechanism operated along specific procedures and all TPR reports had the same structure.  Thereview of a Member's trade policy was conducted in the light of Members' obligations in the WTO,
with a view to increasing transparency.  In prep aring the reports, the Secretariat did not focus on
services subsidies since those were not the object of specific rules.  For instance, the questionnaire
submitted to Brazil by the Secretariat staff drafting the TPR report in 1996 and 2000 did not contain
questions on services subsidies.  Members could consider ways of ensuring that, in future, the  TPRDivision take into account the negotiations in this  Working Party and include information on services
subsidies, without prejudice to the question of trade-distortiveness.  Seeking information in other fora
had already been proposed in this Working Party.  Brazil had suggested that the OECD could play an
important role in providing information on export credit.  The Secretariat had prepared a note on the
Arrangement on Guidelines for Officially Supported Export Credits ,, including on the so-called
Yellow Book
6, but no data had been available on subsidies per se  because, in his understanding, the
OECD had not been in a position to provide such information.  Members might want to explore again
the idea of involving the OECD in the process of information gathering.  Finally, it should be kept in
mind that Members' schedules contained limitations for discriminatory subsidies and, hence, could be
a source of information.
27. The representative of Guyana said that the GATS, and in particular Articles IV, V and XV,
aimed at promoting economic development, but also ensuring the participation of developing
countries.  Those countries, especially the small economies, relied on services and needed to be able
to use subsidies to stimulate economic growth.  He wondered whether the information contained in
TPR reports was accurate and reliable.  For instance, the information provided, on page 16 of
W/25/Add.3, on subsidies in the United States did not coincide with the relevant limitations in the US
schedule of specific commitments.  On the other hand, detailed information was provided forDominica and other Members.  On page 29, regarding subsidies in the TPR report of the European
Communities,  it was stated that "no figures are available on subsidies granted by the 15 Member
States".  Countries did not seem to provide the same type of information and there was a need to have
a clearer view before addressing the issue of trade-distortiveness.
                                                     
6 JOB(01)/66.S/WPGR/M/39
Page 6
28. A representative of the Secretariat, replying to the question by the delegation of Chile, said
that, in drafting TPR reports, the Secretariat relied primarily on information provided by the Member
under review, but also on any pertinent source (Interne t, for instance).  A questionnaire was used as a
working document, in particular when information was difficult to find in the public domain.  It was
sent to the authorities of the Member under review.  Its structure reflected that of the final report.
Information was sought primarily in sectors with st rong government involvement.  In many countries,
this was typically the case for tourism, transport, telecom, etc.  Other sectors, which may be
economically important, but where governments intervened to a lesser extent – construction,
professional services – attracted less attention.  It had to be kept in mind that TPR reports were not
meant to provide a systematic picture on subsidies (whether for goods or services), but focused on
Members' trade policies and practices from a broad perspective with a view to enabling a multilateral
assessment of the effects on the world trading system.  Regarding the proposal by the delegation ofEcuador to circulate, in the Working Party on GATS Rules, a document of Saudi Arabia, which had
been initially distributed in the Committee on Trade and Environment, she said that she was not aware
of specific procedures in this respect.  However, there might systemic implications, and the position
of the submitting delegation might need to be taken into account.  She noted that the contribution in
question was an official WTO document, which each delegation was free to consult;  a reference tothis document would be recalled in the minutes of the meeting.
7  With respect to the question by the
delegation of Mauritius, she confirmed that all TPR reports had been reviewed in the compilations
undertaken by the Secretariat since 1995, which were contained in documents S/WPGR/W/25,
including Add.1 to 3.  With respect to the comment by Brazil regarding subsidy-related limitations in
Members' schedules, she recalled that the Secretariat had compiled relevant entries in documentS/WPGR/W/13 and Add.1.
29. The representative of Chile suggested that Members having scheduled limitations relating to
subsidies could provide information on these subsidies.
30. The Chairperson noted that the exchange of information mandated in Article XV remained an
important issue.  Various delegations had referred to other possible sources of information, including
the simplified questionnaire.  He drew attention to  the Work Programme which stipulated that the
discussion should continue on the basis of submissions from Members as well as from materials
available.  Members should use existing sources to the fullest extent possible.  Mention had been
made to the need to categorise subsidies and/or clarify scope and definition of services subsidies.
These issues could be further discussed at the next meeting.  He was ready to update the Checklist of
Issues, but substantive input from Members was needed, in particular on the issues raised during this
meeting.
C. NEGOTIATIONS ON GOVERNMENT PROCUREMENT  (ARTICLE XIII OF THE GATS )
31. The Chairperson drew attention to the Work Programme on government procurement agreed
by the Working Party.  He recalled that Members were encouraged to put forward submissions as
early as possible before 31 March 2003, and had agreed to continue discussion on the basis of
submissions from Members and materials available.  At the last meeting, the European Communitiesand their Member States had introduced a comm unication on government procurement of services
(S/WPGR/W/39), which delegations might want to further discuss.
32. The representative of the European Communities replied to questions raised at the July
meeting.8  Concerning the coordination of work between this Working Party and the Working Group
on Transparency in Government Procurement (WGTGP), he said that GATS Article XIII contained ageneral mandate for government procurement in services, while WGTGP's mandate was limited to
                                                     
7 See paragraph 13 above.
8 See S/WPGR/M/38.S/WPGR/M/39
Page 7
transparency, in both goods and services.  Addressing transparency issues in both fora should not be
problematic and discussion should continue in parallel, since progress in one forum could facilitate
progress in the other.  Consistency should be ensured and information exchanged so that compatible
disciplines could be developed on both sides.  With  regard to the relationship between horizontal and
sectoral disciplines, the EC was ready to discuss various approaches.  He felt, however, that there wasa preference for horizontal disciplines, which could be complemented, whenever necessary, with
sectoral rules.
33. The representative of Chinese Taipei noted that the negotiation under Article XIII included
two main aspects, i.e. procedural and market access-related issues.  On procedural aspects, including
transparency, general rules could be modelled on those of the Agreement on Government
Procurement.  It was important to ensure that challenge procedures be in the hands of independent
entities.  The intangible nature of services was likely to influence the nature of the contracts, and shesupported a discussion on sector-specific rules.  The proposal to undertake market access
commitments on a sectoral basis was an interesting aspect of the paper.  The Working Party should
examine the provision of government procurement under the various modes of supply and their
respective implications.  In that respect, modes 3 and 4 seemed to be most relevant.  It was important
to foresee the possibility of thresholds in order to limit the administrative burden .
34. The representative of India said that the mandate contained in Article XIII paragraph 1
exempted government procurement from the application of Articles II, XVI and XVII.  The
discussion on government procurement in the Working Party should respect this exclusion.  He noted
with concern that the paper by the European Communities referred to Articles II, XVI and XVII and
wanted to register his delegations's disagreement with this approach.
35. The representative of Pakistan supported the statement made by the delegation of India.
36. The representative of Egypt said that market access-related issues should be addressed in the
Committee on Government Procurement.  He asked the European Communities to elaborate on
paragraph 7 of W/39, which stated that "MFN and national treatment requirements are not sufficient
to ensure equal treatment and non-discrimination in the area of government procurement" and that"domestic procedural principles" should be developed.  Finally, his delegation was of the view that
MFN, national treatment and market access issues should not be addressed under Article XIII.
37. The representative of China enquired about the relationship between the MFN obligation,
referred to in the EC paper, and the Agreement on Government Procurement.  She supported the
statements made by the delegations of India, Pakistan and Egypt regarding the scope of the mandate.
38. The representative of the European Communities recalled that their communication proposed
a flexible framework for commitments on governme nt procurement.  Members could undertake such
commitments on a voluntary basis, by sector and mode, whenever suitable.  Some modes of supply
were irrelevant for some sectors (for instance, mode 1 in the construction sector).  He noted that in the
Understanding on Commitments in Financial Services, some Members had opened their government
procurement under mode 3 only.  He agreed that it was important to allow for thresholds and it could
be left to each Member to determine their level.  Disciplines should be developed with respect totransparency and internal proceedings, with a view to ensuring effective market access and national
treatment.  The MFN obligation should apply as soon as a framework on government procurement
was developed.  Signatories to the Agreement on Government Procurement should be able to take
MFN exemptions so as to grant more favourable treatment to other signatories.
39. The representative of the United States wondered how discussions should proceed in this
Working Party in order to avoid duplication, or even contradiction, with the WGTGP.S/WPGR/M/39
Page 8
40. The representative of the European Communities replied that an important amount of work
had already been carried out in the WGTGP and could be used in this Working Party.  Vice-versa , any
relevant work in the WPGR could be useful for the WGTGP.  Information could be exchanged
between the two fora so as to ensure compatibil ity – or perhaps even identity – of disciplines.
41. The Chairperson noted that a number of interesting questions had been discussed in relation
to the EC contribution.  Some interventions had also been made on the scope of the mandate.  He
invited the Working Party to take note of the statem ents made and revert to this issue at the next
meeting.
D. DATE OF THE NEXT MEETING
42. The Chairperson indicated that the next formal meeting of the Working Party was expected to
take place during the next cluster of services meetings, which had been tentatively scheduled from 2
to 13 December.  The Working Party would meet during the first week of the cluster and the exactdate would be communicated to delegations in due time.
E. 
OTHER BUSINESS
43. The representative of Thailand informed the Working Party that his delegation had organised
a brainstorming session on emergency safeguard measures in services on 26 September 2002.  The
purpose had been to allow Members to exchange views in a free and non-committing manner.Thailand noted with grave concern that slow progress had been made during the negotiations on ESM,
even after three extensions of the mandate, over the past seven years.  His delegation was of the view
that the brainstorming exercise would be useful fo r those who had been working for some time in the
field, and also for newcomers with whom Thailand would work closely in the future, to facilitate
progress in the Working Party.  Thailand had sent invitations to more than 30 delegations from allregions.  Around 30 participants had been able to attend the seminar.  Thailand wished to thank them
for their active interest, as well as the Chairperson of the Working Party, and the WTO and UNCTAD
Secretariats.
44. The Chairperson informed the Working Party th at, on 22 October, he had received a letter
from Ambassador Smith, Chairman of the Special Session of the Committee on Trade and
Development.  He recalled that, during its meeting held on 28 January – 1 February 2002, the TNC
had agreed that "….the review of all special and differential treatment provisions with a view to
strengthening them and making them more precise, effective and operational provided for in
paragraph 44 of the Ministerial Declaration shall be carried out by the Committee on Trade and
Development in Special Sessions."  Pursuant to th at mandate, the Chairperson of the Special Session
of the CTD was now requesting information on any discussions or other developments relating to
special and differential (S&D) treatment that had taken place in the Working Party on GATS Rules.This information should be conveyed to the Special Session of the CTD by 30 November 2002.
Therefore, he intended to write a letter to the Ch air of the Special Session of the CTD, recalling the
mandate of this Working Party and informing him, in a factual manner, on S&D-related issues that
had arisen in the Working Party, if any, under the three agenda items.  This report to the CTDSS
would be without prejudice to the position of any Member on the issue of S&D.  It was so agreed.
__________