RESTRICTEDWORLD TRADE
ORGANIZATIONS/WPGR/M/32
17 May 2001
(01-2533)
Working Party on GATS Rules
REPORT OF THE MEETING OF 10 MAY 2001
Note by the Secretariat
1. The Working Party on GATS Rules held its thirty-second meeting under the chairmanship of
Mr. Hugo Cayrus, from Uruguay.  The agenda for the meeting was contained in WTO/AIR/1542.  It
consisted of five items:  negotiations on safeguards under GATS Article X;  negotiations on subsidiesunder 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.  The Chairperson
drew attention to an informal Note (Job(01)/42, 1 May 2001) he had circulated to assist delegations intheir preparation for the meeting.
A. 
NEGOTIATIONS ON SAFEGUARDS UNDER ARTICLE X OF THE GATS
2. The Chairperson invited delegations to addres s, in informal mode, the following topics
contained in the Chairperson's Note Job No. 1979/Rev.1:  special and differential treatment (item 7);
indicators and criteria (item 4);  compensation (item 6);  definition of "domestic industry" and the
issue of "acquired rights" (item 1);  situations justifying an ES action (item 8).1  He drew attention to
the following documents, which had been circulated since the last meeting: communication byVenezuela on Indicators and Criteria for the Determination of Serious Injury or Threat Thereof ,
JOB(01)/48 (18 April 2001);  non-paper by Brazil on Compensation , JOB(01)/50 (19 April 2001);
2
communication by Mexico on Emergency Safeguard Measures ;  Note by the Secretariat on WTO
Members' Practice Relating to Article 8 of the Agreement on Safeguards , JOB(01)/61 (3 May 2001).
3. With respect to future work, the Chairperson proposed that the Working Party hold a two-day
informal meeting on 26 and 27 June.  He recalled that, at the last formal meeting, his predecessor had
made some suggestions on how work might be organized until the summer break.3  This proposal, on
which he had been consulted, was also reflected in the Annotated Agenda prepared for the April
informal meeting of the Working Party.4  On this basis, he wanted to propose the following
arrangement for the June meeting.  The first part would be related to substantive discussion, with a
view to completing consideration of the Chairper son's Note Job No. 1979/Rev.1.  He intended to have
an open-ended debate on all items in Job No. 1979/Rev.1.  Any other issue that Members might wishto raise would be considered as well.  For that pur pose, delegations were encouraged to indicate to the
Chair, sufficiently in advance of the meeting, specif ic topics that they would like to address.  These
issues could then be reflected in an Annotated Age nda so that everybody could come fully prepared to
the meeting.  He might also propose some specific topics which, in his view, could benefit from
further consideration.  He strongly encouraged Members to submit written contributions as soon aspossible.  The second part of the June meeting would be a process discussion to assess what had been
achieved since April 2000 and to determine what the next steps should be, including whether it might
                                                     
1 See Summary of the Comments Made During the Informal Meeting on 10 May  2001 , Note by the
Secretariat, Job (01)/74 (17 May 2001).
2 These two communications were presented during an informal meeting on 23 April 2001, see
JOB(01)/54 (26 April 2001).
3 See S/WPGR/M/31, para. 5.
4 See JOB(01)/47, 10 April 2001.S/WPGR/M/32
Page 2
be useful to work on a text.  He indicated that he intended to conduct informal consultations with
delegations in the coming weeks, so as to get an idea of the range of options reasonably available.  He
also strongly encouraged delegations to directly contact him.  The June informal meeting would be
important to prepare the formal meeting in July .  Members should come ready to discuss the
organization of the work programme after the summer break, taking into account the 15 March 2002deadline.
4. The representative of Mexico introduced a communication on ESM addressing the following
issues which, in Mexico's view, deserved further consideration:  definition of "domestic industry";
the concepts of "emergency" vs. "unforeseen developments";  the issue of "acquired rights";
determination of injury or threat thereof;  and compensation.5  He indicated that Mexico was currently
assessing the feasibility of a services ESM and reserved its right to modify its position in view of
future developments.
5. The representative of Argentina said that, with respect to the mandate contained in Article X,
his delegation was in favour of a pragmatic solution which should add value to the GATS.  The first
question to be considered was the situation in which a safeguard measures would be justified.  An
ESM should remain a last-resort measure.  He noted that, in Argentina, the expansion of some
enterprises in various sectors could be suspended, which was a form of safeguard measure.  Thismeasure applied primarily in financial services.  He also pointed to the prudential carve-out in the
Annex on Financial Services.  The difficulties linked to availability of data and statistics should not be
exaggerated.  In this regard, he welcomed the non-paper submitted by Venezuela, which contributed
to demystifying the problem.  While the indicators and criteria listed in the paper were undoubtedly
useful as a first step, a case-by-case approach should nevertheless prevail in individual cases.  Withrespect to mode 4, the type of service concerned would determine which of the two envisaged criteria
– number of suppliers or volume of services – would be relevant in a given case.  As to the definition
of "domestic industry", GATS Article XXVIII should remain the starting-point.  Should this not be
the case, what would then be the value of this provision, and what would happen to schedules of
commitments containing national treatment limitations under mode 3 (such as discriminatorysubsidies)?  Suspending the establishment of new foreign suppliers was not appropriate if the injury
was caused by established foreign suppliers.  An alternative solution to consider could be a
mechanism which would be quick, automatic and of short duration (18-20 months);  the invoking
country would not need to grant compensation and, should the measure need to be prolonged, the
procedures of Article XXI should be invoked.  He noted that a communication presented by the
United States in S/WPGR/W/17 (13 March 1997) cont ained various elements which deserved further
consideration.
6. The representative of the United States said that his delegation did not view paragraph 2 of
the Annex on Financial Services as being a safeguard measure.  This provision had specific
enumerated purposes, which were different from the circumstances addressed by GATS Article X.
With respect to future work, his delegation supported the approach reflected in the minutes of the last
formal meeting (S/WPGR/M/31) and outlined in the April Annotated Agenda (JOB(01)/47).  One ofthe items mentioned was the question of desirability of an ESM, which had explicitly been left aside
for the time being.  Nevertheless, the United States considered that it was important to discuss when
and how desirability of an ESM should be addressed.
7. The representative of Argentina concurred that the prudential carve-out was not a safeguard
within the meaning of GATS Article X, but had different objectives.
8. The representative of the European Communities said that a number of new issues had
emerged in the course of the discussion.  The representative of Brazil noted that a decision was
                                                     
5 See JOB(01)/67, 9 May 2001.S/WPGR/M/32
Page 3
needed, at the July meeting, on how to move forw ard.  His delegation did not rule out working on a
text.  The question of desirability was not essential.  An ESM was necessary and the question was
how to make it operational.  The representatives of Mexico and Chile  agreed to the work programme
proposed by the Chairperson.  The representative of Paraguay associated himself with the comments
made by the delegation of Brazil concerning feasibility.  The representative of Thailand, speaking on
behalf of ASEAN, said that the ASEAN Members were ready to discuss the next steps.  The
representative of Venezuela indicated that her delegation was ready to work on a text.  The
representative of Chile informed the Working Party that her delegation intended to present a written
communication, together with other delegations, by the June meeting.
B. NEGOTIATIONS ON SUBSIDIES UNDER ARTICLE XV OF THE GATS
9. The Chairperson invited delegations to address item 4 of the Chair's Checklist (Job Nno.
4519/Rev.1, 6 October 2000), which reads as follows:  (a) The wider role of subsidies, including to
pursue public policy objectives;  (b) The role of su bsidies in relation to development, and the needs of
developing country Members for flexibility, including special and differential treatment .  He drew
attention to a Note prepared by the Secretariat, following a request made at the last meeting, on the
OECD Arrangement on Guidelines for Officially Supported Export Credits , and the so-called "Yellow
Book" (JOB(01)/66, 8 May 2001).
10. The representative of Hong Kong, China noted that subsidies could be used to pursue
different policy objectives, such as promotion of  public health or education.  Moreover, the GATS
recognized these objectives as perfectly legitimate.  Subsidy disciplines should not affect them, but
should aim at correcting trade-distortive effects.  Her delegation did not question the right of
governments to set their own policy objectives, but wondered whether subsidies were the propercourse of action in all instances.  Members should use subsidies in a proper way, so as to diminish
trade-distortive effects.  She noted that the level of trade-distortiveness could vary greatly from one
case to another.
11. The representative of Brazil said that, when asking for information on the OECD
Arrangement on Guidelines for Officially Supported  Export Credits and the so-called "Yellow Book",
his delegation intended to contribute to the process of data gathering.  This was not meant to prejudge
the trade-distortive effects of any subsidy.  Brazil was of the view that the Arrangement might be a
good source of information, given the fact that it was a public instrument and entailed a notification
procedure.  He noted that paragraph 8 of the Secretariat Note JOB(01)/66 indicated that the
Arrangement contained "a set of procedural rules, including notification, consultation and information
exchange" and paragraph 9 related to special sectoral guidelines applying to ships, nuclear power
plants and aircraft.  The Note further indicated, in paragraph 11, that the "Yellow Book" did notcontain information on actual disbursements.  He understood that the "Yellow Book" did not contain
information on interest rates and other specific information on export credit and export finance.  He
further noted that the Arrangement applied to "all official support for export of goods and/or
services", which suggested that it could be a good source of information for export subsidization
practices.  The issue of trade-distortive subsidies was important for Brazil, not only in services, butalso in goods and agriculture.  In Brazil's view, the Arrangement had had an unfortunate influence on
the negotiations of the Agreement on Subsidies and Countervailing Measures and this should be
avoided in the negotiations of any services disciplines.
12. A representative of the Secretariat said that the information referred to in paragraph 8 of the
Note was available only to the Participants to the Arrangement.  Participation was also open to non-
OECD Members.S/WPGR/M/32
Page 4
13. The representative of Canada said that subsidies were always granted in pursuit of a particular
public policy objective.  The basic question to be considered was whether and to what extent subsidies
actually distorted trade.
14. The representative of Argentina said that Ar ticle XV clearly mandated the Working Party to
address trade-distortive subsidies.  It was premature to consider the objectives pursued by subsidies
before having considered what kind of disciplines were needed.  The Secretariat paper S/WPGR/W/9
contained interesting questions which should be further considered (he noted in particular
paragraph 15).  Subsidy disciplines could apply to all measures which were not captured by the
schedules of specific commitments.
15. Addressing item 4(a) of the Checklist, the representative of the United States said that
subsidies in services seemed to exist mainly in so-called public-good sectors, such as education,
health, post and transport.  It was important for governments to maintain the ability to meet publicpolicy objectives in these areas, including by providing assistance to service suppliers and consumers.
The possible trade effects should be looked at.  The United States was of the view that the next step
would be to consider whether existing GATS disciplines were sufficient.  Concerning the evolution of
subsidy rules in the goods area, he noted that the general approach had been to balance the rights of
governments to take measures in furtherance of economic and social policies, with the need to offsetor neutralize adverse effects of measures on the trade interests of others.
16. The representative of Singapore said that his delegation did not intend to question public
policy objectives, but whether subsidies distorted trade.  The representative of Australia asked the
United States whether, in its view, state-funded education, provided as a result of a public policy
choice, could be considered to have trade-distortive effects and, if so, how such effects did arise.  Therepresentative of the United States noted that one of the previous items on the Checklist related to
evidence of trade-distortive subsidies.  However, very few examples had been provided in this regard.The problem to be resolved had to be identified before developing any new disciplines.  The
representative of Brazil said his delegation did not question the right of governments to employ
subsidies to achieve public policy objectives.  The question was whether they resulted in trade-
distortive effects.  There was no economic reason why subsidies provided in services would not have,
in similar circumstances, the same trade-distortive effects as a subsidy granted in the goods area.
National treatment disciplines did not capture trade-distortive subsidies (in mode 1, for instance).  He
noted that some sectoral negotiating proposals tabled in the Special Session referred to the need for
subsidy rules.
17. The Chairperson said that, at the next formal meeting, delegations would be invited to address
the fifth and last topic of the Checklist (Job No. 4519/Rev.1), i.e.:  Is there a need for additional
GATS disciplines to avoid trade-distortive effects?  This would include consideration of the
appropriateness of countervailing procedures.  Next steps .  He noted that, with this topic, the
Chairperson's Checklist of issues would have been exhausted.  At the next meeting, he would like,
therefore, to invite views on how delegations intended to continue work under this agenda item in
order to move forward.
C. NEGOTIATIONS ON GOVERNMENT PROCUREMENT UNDER ARTICLE XIII OF THE GATS
18. The Chairperson proposed that delegations should continue their general exchange of views
on any aspect of government procurement of services.
19. The representative of Chile indicated that her de legation intended to raise some issues related
Article XIII at the next meeting.S/WPGR/M/32
Page 5
D. DATE OF THE NEXT MEETING
20. The Chairperson indicated that the next formal meeting of the Working Party had been
tentatively scheduled for 2 July 2001.
E. OTHER BUSINESS
21. Nothing was raised under this agenda item.
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