RESTRICTED  WORLD TRADE  
ORGANIZATION  S/WPGR/M/48 
20 July 2004 
 
 (04-3131) 
Working Party on GATS Rules  
 
  
REPORT OF THE MEETING OF 23 JUNE 2004 
 
Note by the Secretariat
1 
 
 1. The meeting of the Working Party on GATS Ru les was chaired by Ms. Clare Kelly, from 
New Zealand.  The agenda for the meeting, contained in WTO/AIR/2337, included the following 
items:  subsidies, government procurement, emerge ncy safeguard measures, date of the next meeting 
and other business.  To assist delegations in th e preparation of the meeting, the Chairperson had 
prepared an annotated agenda contained in JOB(04)/74.   
2. The Chairperson noted that the order of the items on the agenda had been modified and 
indicated her intent to continue to do so, taking in to account a variety of factors.  She did not think 
that the order of the items should have any substa ntive bearing.  Delegations needed to discipline 
themselves, including regarding the length of th eir interventions, so that all issues could be 
appropriately discussed.  Even though the current meeting of the Working Party would last only a 
half-day, the informal meeting of 11 June had permit ted to alleviate some of the time pressure.  The 
agenda was adopted
.   
3. The Chairperson indicated that she had held, since assuming her new position, informal 
discussions with many delegations regarding the work of the Working Party.  It was evident that not 
all delegations attached the same priority to each  of the three issues under the responsibility of the 
Working Party.  However, she thought that all delegations did want to thoroughly examine the three topics, discuss various technical issues without  prejudging any given outcome, and avoid getting 
tangled in procedural problems.  She would pursue consultations with delegations as she had not yet 
been able to talk to all.   
4. The Chairperson also recalled that no decision had been taken at the informal meeting on 
whether the Secretariat should prepare a non-attributab le and informal summary of discussions at that 
meeting.  Indeed, a delegation had expressed conc erns regarding how such informal summaries could 
be interpreted.  The Chairperson believed that a summary would help keep track of the Working 
Party's discussions and avoid repetition.  In addition , it had to be kept in mind that many developing 
countries had limited resources and could not attend the informal meeting.  A summary might also be 
of assistance to them.  To alleviate the concerns expressed, she suggested that the non-attributable 
summary by the Secretariat take the form of  a non-paper instead of a JOB document.  The 
representative of Hong Kong, China enquired about the difference between a summary in the form of a non-paper as opposed to a summary in the form of a JOB document, as had typically been done in 
the past.  The Chairperson noted that a key difference was that the status of the proposed summary 
would be like that of a room document and, as such, it would not appear on the document distribution 
facility.  It would however be translated and distributed to delegations. Since there were no 
objections, she suggested that the Working Party proceed as suggested.  It was so agreed. 
                                                     
 
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.  S/WPGR/M/48 
Page 2  
 
 I. NEGOTIATIONS ON SUBSIDIES (ARTICLE XV) 
5. The Chairperson
 said that discussions during the last meeting had focused on the list of 
examples of subsidy programmes provided by the delegation of Chile in the informal document 
JOB(03)/218.  Many felt this was a useful way to advance work, as it could help delegations assess 
whether some types of subsidies created trade distortio ns of concern to them.  Also, she noted that the 
delegation of Chinese Taipei had recently circulated an informal communication (JOB(04)/78). Like 
the room document presented by that delegation at the last meeting of the Working Party, it discussed 
the definition of subsidy and other issues in the light of the examples  mentioned in Chile's 
communication.  In addition, the delegation of Chin ese Taipei had circulated a new room document, 
which provided answers to questions raised on its contribution during the last meeting. 
6. The Chairperson invited delegatio ns to offer any additional comm ents on the latest Note by 
the Secretariat (S/WPGR/W/25/Add.4), which cont ained information on subsidies found in recent 
Trade Policy Reviews (TPR).  Delegations might also want to build on previous discussions on the 
definition of subsidies and to see how progress could be made on the information exchange.  Those 
that had not yet shared information might be able to provide suggestions as to how to overcome the difficulties encountered.  Further, she asked delegations  to start giving some thought to how best to 
organize future discussions so as to get a clearer picture of the need for disciplines to avoid the trade 
distortive effects that subsidies might have.  In the last two or three meetings, various delegations had 
raised a number of issues and basic questions that had not been fully discussed, even though they 
often concerned core tasks of the Working Party.  This might be more fully addressed at the next 
meeting.  Finally, she reported that UNCTAD had not yet finalized its study on subsidies.   
7. The representative of Chinese Taipei
 said that the informal communication from her 
delegation, contained in JOB(04)/78, was based on the room document which she had presented at the 
last meeting.  It had been modified to take into account the comments then made by various 
delegations.  She reiterated that the purpose of this document was to test, in the light of some concrete 
examples, whether and to what extent the Agreement on Subsidies and Countervailing Measures (ASCM) provided an appropriate basis for developing  a working definition of subsidies in services.  
She did not think that the ASCM necessarily was the only source of inspiration.  The Agreement on 
Agriculture contained subsidy disciplines and her delegation did not wish to preclude looking at this 
model, even though that Agreement used the ASCM definition as its reference.  She also drew 
attention to the room document that her delegatio n had circulated for the current meeting, which 
contained answers to specific questions raised pursuant to her intervention at the last meeting.   
8. The representative of Switzerland
 thought that the submissions from Chile and Chinese 
Taipei contributed to improving the Working Party's understanding of the issue.  Her delegation 
thought that export subsidies had to be addressed as  a priority;  they were the most harmful type of 
subsidies.  Export subsidies distorted competition in  third markets; suppliers from such markets faced 
unfair competition from abroad, as did exporters from other countries.  In addition, export subsidies did not appear in Members' schedules.  The value of new market access commitments would be diminished if competition was distorted by subsidized  suppliers of a third country.  Another advantage 
of dealing with export subsidies as a priority was that it seemed easier to tackle the most harmful 
categories of subsidies rather than all of them at once.  For subsidies other than export subsidies, it 
was not always obvious to determine whether a trade distortive effect existed.  In contrast, trade 
distortive effects were inherent to export subsidies.   Further, while many subsidies were motivated by 
national policy objectives, export subsidies were in the overwhelming majority pure trade measures.  Focusing on them thus did not involve discussing the issue of legitimate policy objectives and might 
allow Members to have an early harvest.  Her de legation hoped that Members, in the context of the 
current Round of negotiations, could design and agree on a process of progressive phase-out of export 
subsidies in services sectors.  She envisaged a process that was flexible and compatible with the 
architecture of the GATS.  S/WPGR/M/48 
 Page 3 
 
 
 9. With respect to the informal communication from Chinese Taipei, she noted that 
paragraph 12 stated that service suppliers under mode 1 would probably be beneficiaries of the 
programme.  She considered that suppliers under modes 3 and 4 would also be covered by the 
programme.  As far as the effects of the programme were concerned, she hoped to hear the views of 
the delegation of Chinese Taipei with respect to the effects of the subsidy programme under these 
modes.  Concerning the sharing of information, it was important to comply with the clear mandate in 
Article XV.  Since achieving transparency was crucia l and no progress had been made on this issue, 
she considered that it was time to agree on a target date for the required exchange of information.  
With respect to the definition of subsidies, she wished to draw attention to two past Notes prepared by 
the Secretariat, S/WPGR/W/13 from 1996 and S/WPGR/W/13/Add.1 from 2000, which listed limitations related to subsidies contained in Memb ers' schedules.  She asked whether the Secretariat 
could prepare a Note, before the end of the year, on the definitions of subsidies contained in 
schedules.   
10. The representative of Colombia
 wished to focus on the first example contained in the 
communication from Chile, the Exportation Programm e.  She raised four issues:  the financial 
contribution, the benefit, the provider of the subsidy, and domestic content.  First, she thought that it was pertinent to assess whether the programme invo lved a financial contribution.  This assessment 
was made difficult by the lack of detailed information, par ticularly on the type of activities covered by 
the programme.  For example, the programme allege dly provided for a sharing of the costs of export 
market development activities, but it was not clear what such activities entailed.  Did the programme 
cover such activities as market intelligence, develo pment of commercial offices abroad, information 
on regulatory conditions designed to improve exporter s' knowledge of foreign markets?  Would such 
activities be permitted?  The represen tative pointed out that the descri ption of the programme said that 
the activities contemplated were thos e that suppliers could not, or would not, normally attempt on 
their own.  Could that mean that the activities con cerned general infrastructure, that is the type of 
services that governments should provide?  Second, assuming there was a financial contribution, it 
would be necessary to analyse the value of the contri bution received by the exporter.  The description 
of the Exportation Programme did not make clear whether the exporters would reimburse the costs incurred by the government.  If there was full reimbursement, no benefit would be conferred.  An 
element of benefit could be identif ied if it were clear that the programme resulted in lower costs for 
the exporter.  She wondered whether, in such a context, repayment of 4% of the company's 
incremental revenues was equal to the costs to th e government.  Third, regarding who granted the 
financial contribution, she considered that the terms "a government or any public body within the territory of a Member", which were used in the ASCM, could apply and cover all levels of 
government.  Fourth, concerning domestic content, which was a condition of eligibility for the 
Exportation Programme, she thought that this concep t was probably more difficult to use in services 
than in goods trade.  Defining the origin of a service might be more complex for certain modes of 
supply.  This issue could benefit from further discussions.   
11. The representative of the Republic of Korea
 agreed with Switzerland that discussions should 
concentrate on export subsidies and lead to a concre te result at the end of the negotiations.  Regarding 
the definition of subsidies, she considered that the definition in the ASCM could be applied to 
services.  She wished to focus on the three questi ons listed in Chile's communication.  Concerning the 
first question, on the element of subsidy, she thought that the Exportation Programme involved a 
financial contribution, but sought clarification on the comments by the delegation of Chinese Taipei 
concerning the repayment of 4% of incremental re venues.  The fact that support was not provided 
directly to enterprises but rather to trade asso ciations, which she assumed were not governmental 
organizations, made the analysis more complex.  The government was not providing subsidies directly 
to a company; the relationship was indirect.  With  regard to assistance for market information and 
intelligence, she thought that the link to exports was more limited and lacked specificity.  Concerning 
the beneficiaries of the programme, she did not think that distinctions pursuant to modes of supply 
were made when granting subsidies to companies.   For example, the companies that received the S/WPGR/M/48 
Page 4  
 
 subsidies could use the contribution for advertisement or promotion to attract foreign consumers.  
Complexities relating to mode 3 should also be furt her discussed.  Concerning the effects of the 
programme, she considered that the issue of subsidy an d that of distortion should be separated.  Based 
on the ASCM, the Exportation Programme would be considered a prohibited export subsidy because 
it included a domestic content requir ement.  The analysis of trade distortions should take into account 
the situation of small and medium-sized enterprises, but this could best be addressed horizontally as 
part of the discussion of legitimate policy objectiv es.  Further, regarding the contribution by Chinese 
Taipei, she wished to point out that Article 2.3 of  the ASCM provided that any export subsidy would 
be deemed specific.  Hence, there was no need for further analysis in this regard.   
12. The representative of Japan
 thought that the communication from Chile was useful for 
advancing discussions and welcomed the contribu tion from Chinese Taipei.  He hoped Members 
could present information on subsidies they found trade distortive, on the basis of the inputs provided 
by their national industries.  The representative of China  thanked the delegation of Chinese Taipei for 
providing, in its room document, written answers to questions raised at the last meeting and indicated 
she would revert to this at a later time.   
13. The representative of Hong Kong, China  noted that the communication from Chinese Taipei, 
even though its purpose was to contribute to the development of a working definition of subsidies in 
services, referred to some notions in the ASCM that did not relate to the definition of subsidies.  For 
example, the paper touched upon issues relating to trade distortions, which he felt should be examined 
separately from the definition of subsidies.  He ag reed that it was useful to examine the applicability 
to services of concepts contained in the ASCM, and he saw four key elements in that regard.  The first was the definition of subsidy in Article 1, which was generic and unrelated to the notion of trade 
distortion.  Second, the concept of specificity in Article 2 was related to the concept of trade distortion 
since only specific subsidies could be actionable un der the ASCM.  A third element was the scope of 
prohibited subsidies in Article 3, which was distinct  from the notion of specificity.  A fourth element 
related to the scope of actionable subsidies.  In that regard, Article 5 of the ASCM mentioned adverse 
effects on other Members:  injury to domestic in dustry, nullification and impairment of benefits, and 
serious prejudice to Members' interests.  He thought that it would be useful to distinguish these 
elements so as to better structure discussions in  the Working Party.  The representative considered 
that apart from the definition, all other elements related, to varying extents, to the notion of trade 
distortion.  However, trade distortion should not be  directly equated with these elements.  The fact 
that certain subsidies were not specific did not nece ssarily mean they were not trade distortive.  For 
example, prohibited subsidies were deemed specific even if not captured by the concept of specificity in Article 2.1.  Likewise, possible difficulties in as sessing adverse effects of subsidies in services did 
not necessarily mean that these were not trade dist ortive.  Moreover, the representative noted that the 
communication made various referen ces to adverse effects as well as to trade distortions.  However, 
adverse effects were not the only conceivable type of distortion;  for instance, subsidies contingent on 
exports were prohibited in the ASCM.  He thought th at notions such as adverse effects, injury, or 
actionable were not directly relevant to the exam ination of subsidies contingent on exports.   
14. Turning to the first example listed in the communication from Chile, the Exportation 
Programme, he wished to echo the comments of  the delegation of Switzerland on the trade 
distortiveness of export subsidies, especially given the relevance of such effects to all Members.  It 
might be useful to focus on the concept of export contingency in order to see whether it could be applied in the context of trade in services.  This  might provide some insights into the possibility or 
necessity of developing disciplines.  In examining this issue, a key distinction to keep in mind was 
that services, unlike goods, were generally intangible.  Further, he agreed with comments made by the 
delegation of the Republic of Korea on the relevance of making distinctions by mode of supply.  He 
did not think that the effects of export subsidies could easily be distinguished or analysed on a modal 
basis.  Subsidy programmes related to the export of services were not specific to any particular mode.  
Effects in third markets might not be best captured  by an analysis according to mode of supply.   S/WPGR/M/48 
 Page 5 
 
 
 Regarding information, he welcomed the suggestion by the delegation of Japan that Members provide 
information on the subsidies which their suppliers have found to be distortive, but he thought this 
could not be a substitute for the information exch ange mandated under Article  XV.  Paragraph 1 of 
that Article referred to the exchan ge of information on all subsidies affecting trade in services and not 
only to trade distortive subsidies.  He recalled that  his delegation had made various suggestions in the 
past, for example that Members use their own defin ition, share information in a gradual manner, or 
share the difficulties they had encountered in collecti ng information.  He asked those delegations that 
had scheduled limitations relating to subsidies to indicate the definition they used.  Members whose 
subsidies had been identified in the TPR reports, as compiled by the Secretariat in S/WPGR/W/25 and 
addenda, could share information on these subsidies and, if appropriate, explain why they did not think that the measures involved actually constituted subsidies.   
15. The Chairperson
 said that the Secretariat was not awar e of definitions of subsidies contained 
in schedules, but could verify and report at the next meeting.   
16. The representative of Chile  considered that the communication from his delegation had 
helped to initiate a substantive discussion and move away from the chicken-and-egg problem, which 
had characterized deliberations on the need for a de finition.  Many themes could be further analysed, 
but he thought that delegations wanted to concentrate on export subsidies.  Obviously, many aspects 
needed to be discussed, relating for example to defi nition, domestic content, or the applicability of the 
modes of supply.  His delegation aimed at providing a more detailed intervention in this regard at the 
next meetings.  All issues, however, could not be ad dressed at once but might better be tackled in a 
gradual manner.  Discussions so far seemed to sugg est that delegations agreed  that export subsidies 
could distort trade in services.  It therefore seemed reasonable to focus work on them.  He hoped to 
see Members' positions start converging towards th e need for disciplines in this area.  Many 
limitations in schedules related to subsidies, ofte n in the horizontal section, without providing any 
definition.  However, this should not prevent Me mbers from discussing issues relating to export 
subsidies.  After all, the GATS did not contain a definition of services.  He agreed with other 
delegations that the definition in the ASCM could be  used as a basis.  Concerning the link between 
subsidies and modes of supply, his delegation did not have a final position, but thought that the 
delegation of Hong Kong, China might be right in saying that such a distinction was not fundamental.  
Regarding the exchange of information, he indicated that his delegation hoped to soon make a 
contribution.  He supported the idea of fixing a target date for the exchange of information and 
thought that the end of the year could be a reasonab le timeline.  Finally, regarding the requests made 
for work by the Secretariat, he be lieved that, even if no definitions  were found in schedules, further 
information could be provided on limitations rela ting to subsidies.  Members that had scheduled 
limitations could explain what definition of subsidies they had in mind.   
17. The representative of the United States  said that her delegation continued to question the 
usefulness of hypothetical subsidy programmes, as contained in the communication from Chile.  The 
mandate under Article XV:1 referred  to the voluntary submission of information by Members on their 
own subsidies.  The communication from Chile and other recent contributions did not follow this 
approach.  She hoped that interested Members would provide information on their own domestic 
subsidies, if any.  To go beyond what was cont emplated in Article XV:1 meant going beyond what 
Members had agreed and presupposed  the existence of a definition of subsidies in the services 
context, which was not the case.  To illustrate problems of using hypothetical examples, she noted for discussion purposes that even under the disciplines of the ASCM, which might or might not be relevant in the context of services, some of th e examples would not be classified as actionable 
subsidies.  For example, many governments provided general trade statistics and information 
regarding export market opportunities.  Export promotion activities could encompass government 
guides on how to export, overseas marketing reports, and marketing bulletins.  She questioned 
whether such activities should be subject to sp ecific disciplines.  However, export promotion 
programmes that provided, for example, low cost loans to particular companies might be an area that S/WPGR/M/48 
Page 6  
 
 the Working Party might want to examine further.  Regarding Chile's example on infrastructure, she 
noted that under Article 1 of the ASCM the provision of a good or service by a government could be 
considered a financial contribution and potentially a su bsidy if a benefit was provided to the recipient.  
However, the provision of general infrastructure was not a financial contribution.  The issue, in the 
context of the ASCM, was how general infrastructur e was to be defined.  In the view of her 
delegation, certain types of infrastructure created for the broad societal welfare of a country, region, 
state or municipality should not be subject to sp ecific disciplines.  Th is category included, for 
example, interstate highways, schools, health car e facilities, sewage system s or police protection, 
assuming they were provided for the public good and where available to all citizens on the same 
terms.  Obviously, some other types of infrastructure could be more difficult to categorize in this way.  In concluding, she reiterated the need for caution relating to questions on what would fall under Article 1:3(b), what would fall under the scope of the GATS, and what would fall under the scope of 
scheduled commitments.  Her delegation was uneasy about the Working Party discussing 
interpretations of the ASCM.  That Agreement was monitored by another Committee of the WTO.   
18. The representative of Mexico
 considered that contributions such as that of the delegation of 
Chinese Taipei provided a basis for substantive discussions and decisions on the types of disciplines to elaborate.  He wanted to follow the approach take n by Chile and Chinese Taipei, that is to consider 
concrete examples on the basis of three questions: what was the form of the subsidy, who was the 
beneficiary, and what were the effects on trade?  Regarding the aspect of the first example that related 
to the industry, he agreed that to the extent th at specificity existed and adverse effects could be 
demonstrated, there was no doubt that the programme entailed a subsidy.  Concerning the second aspect that related to trade associations, he belie ved that more analysis would have to be conducted 
before determining whether a subsidy was involved.  He thought that the second example was very 
clear and he considered that Chinese Taipei's identif ication of elements of su bsidies in sub-paragraphs 
(ii) and (iv) of its communication, relating to inco me tax exemptions, was accu rate.  With respect to 
the third example, relating to tourism, he believed that the import duty exemption on advertising and 
promotional material, which benefited only some supp liers, was more of a na tional treatment issue.  
In such a case, the commitment, if any, would have  to reflect such measures.  He wondered why the 
contributors thought it was necessary, at this stage of  the discussions, to identify the beneficiaries, or 
those affected by the subsidy, according to mode s of supply.  It was more important to identify 
whether a subsidy existed and leave aside, for the moment, the issue of the modes of supply.   
19. Concerning the fourth example, on scientific research and technology transfer, he considered 
that the effects would have to be further analysed before determining whether or not a subsidy was involved.  This could be done through an investigation, and delegations might better focus on the 
parameters upon which it should be based.  Regarding the fifth example, he again wondered why it 
was necessary to discuss the modes of  supply at this stage of the analysis.  If the subsidy resulted in a 
change in the conditions of competition in the mark et, certain suppliers would be affected, but this 
could be determined through a subsequent investigation.  Finally, he wished to provide answers to 
each of the questions listed in paragraph 31 of the communication from Chinese Taipei.  Regarding 
sub-paragraph (a), he answered in the affirmative to  both questions.  On sub-paragraph (b), he also 
answered positively.  The definition of subsidy should be based on experience.  Concerning sub-
paragraph (c), his answer was positive, but only in part, because further discussions would be needed.  
With respect to sub-paragraph (d), he agreed that  certain subsidies should be characterized as non-
actionable, for example subsidies aimed at the development of a viable services sector in developing countries.  Developing countries should benefit from  certain prerogatives.  On sub-paragraph (e), he 
believed that beneficiaries could, in principle, be  identified, although more analysis was needed and 
much could be gained from the experience acquired in other areas.  Concerning sub-paragraph (f), he 
thought that the answer to this que stion was found in the first element of the first example, which in 
his view included the import substitution effect.  Regarding sub-paragraph (g), he believed it was 
difficult to answer all questions at this time, noti ng that the task at hand was the elaboration of 
disciplines, which would form the basis for investigations that might be conducted.  Keeping that in  S/WPGR/M/48 
 Page 7 
 
 
 mind, he thought that if a subsidy affected trade in  more than one mode of supply, such effects would 
have to be considered in the light of possible co untervailing measures.  On sub-paragraph (h), the 
concept of trade distortions in services would have to take into account the modes of supply.  He 
reiterated that this should be disc ussed after other elements of disciplines had been identified.  On 
sub-paragraph (i), he believed that subsidies mentio ned in schedules should be assessed case-by-case.  
Finally, lack of information should not be used to avoid substantive discussions on this issue.  The 
communications from Chile and Chinese Taipei pr ovided a useful basis for developing disciplines 
pursuant to the mandate in Article XV.   
20. The representative of Australia  considered the contribution by Chinese Taipei to be useful for 
discussions.  The Agreement on Agriculture, even though it contained disciplines on domestic support, did not contain a definition of subsidies.  The definition contained in the ASCM was the 
reference point.  In paragraph 14, the contributi on noted that the ASCM prohibited export subsidies 
and import substitution subsidies because of their impact  on trade.  He wished to draw attention to the 
fact that certain subsidies were considered non actionable if they were not specific and made widely 
available.  Regarding paragraph 15, he noted that subsidies contingent on exports or on the use of domestic over imported goods were deemed specifi c in the ASCM.  They were prohibited because 
they were presumed to cause serious trade distortio ns.  In such cases, a complainant did not need to 
show trade effects.  Finally, he thought that the question contained in paragraph 31(b) was interesting, 
as it seemed to suggest that the development of futu re disciplines on services subsidies might follow 
the development of rules on subsidies for goods.  For example, during the Tokyo Round, an 
illustrative list of export subsidies was develope d, without having a definition of subsidies.  
21. The representative of the European Communities
 said that his intervention was without 
prejudice to the EC's final position on necessary di sciplines.  He reminded that on 6 July 2000, his 
delegation had circulated an informal communication describing the Community regime for state aid.  
The rules applied both to services and to goods se ctors.  The application to services might raise 
particular issues, namely when determining whether a subsidy was trade distortive.  For example, it 
was not always easy to establish the productive capacity of a service company or sector.  These concepts were normally used in certain state aid di sciplines in the EC.  The core issue was whether 
state aid distorted competition, and not solely whether it distorted trade.  Hence, EC rules in this area 
were more stringent than any disciplines that could be developed in the Working Party.  In addition, 
as highlighted in his delegation's communication from 2000, compliance with the EC rules on state 
aid was monitored by a central and independent authority, i.e., the Commission.  The general principle was that state aid was banned because it di storted competition by giving some enterprises an 
advantage over others.  However, the possibility exis ted that certain state aids be permitted by the 
Commission.  In this regard, a number of public policy objectives were e xhaustively listed in the 
Treaty.  In addition, specific rules regarding tr ansport were in place, given the different policy 
framework for that sector.  Provision was also made to ensure that the provision of services of general 
interest was not prevented.  He reminded delega tions that the Commission published every year a 
scoreboard on state aid, which was available on th e Commission's website.  However, the information 
did not distinguish between services and non-services sectors.   
22. His delegation needed additional time to further analyse the communication from Chinese 
Taipei.  In a preliminary manner, he observed that the only example listed in the communication from 
Chile that could eventually be considered trad e distortive, was the first one, the Exportation 
Programme.  While others had noted that export subsidies were trade distortive per se  and could not 
be justified by public policy objectives, he hoped for further elaboration on this point.  Such 
statements might be too sweeping.  Further, he recalled that paragraph 2 of Article XV provided for 
consultations in cases where a Member felt that it had been adversely affected by a subsidy of another 
Member.  He proposed that Members that had receiv ed complaints from their industry and engaged in 
consultations pursuant to Article XV share the results with the Working Party.   S/WPGR/M/48 
Page 8  
 
 23. While noting that the communication from Chines e Taipei was being further analysed by his 
authorities, the representative of Canada
 recalled that his delegation had expressed doubts as to 
whether the ASCM could readily be applied to serv ices.  Caution needed to  be exercised in that 
regard.  In light of the discussion today, he thought it might be worthwhile to further discuss the 
concept of trade distortion.  The Working Party needed to consider whether there was a problem and, 
if so, what its scope and magnitude was.  Since the discussion of hypothetical examples had 
highlighted that information was lacking to assess the effects of programmes, Members might want to 
come forward with actual cases of distortive subsidy programmes.   
24. The representative of Chinese Taipei  thanked delegations for the comments and questions 
raised with respect to the informal communicatio n from her delegation.  She considered that the 
discussion had underscored a few key questions, su ch as the meaning of export subsidies, the 
definition of trade distortion, and the relevance of the modes of supply.  Given time constraints, she 
said that she would provide detail ed replies for the next meeting.  In her view, the discussion had 
helped to highlight a number of areas where, given the special characteristics of trade in services, 
further work would have to be done.  In this rega rd, she drew attention, in particular, to paragraph 
31(e) of the communication, which asked how the be nefits to the recipient of the subsidy could be 
defined under the various modes of supply when tr aditional notions of domestic and foreign origin, 
exports and imports, could not readily be transferre d to services.  Also, paragraph 31(f) raised the 
question of how export subsidies could be defined under modes 3 or 4, and paragraph 31(i) whether 
subsidies inscribed in services schedules should be exempt from eventual disciplines.    
25. The Chairperson  noted that the Working Party had had a very useful discussion of the 
informal communications from Chinese Taipei and Chile .  Export subsidies, the definition of  subsidy, 
and possible trade distortive effects had attracted par ticular interest.  Delegations had also raised the 
question of the information exchange and a variety of ideas had been put forward so as to make a 
greater collective effort to meet the mandate under  Article XV.  In addition, a suggestion had been 
made for the Secretariat to take a closer look at th e limitations relating to subsidies found in schedules 
and, in particular, to see whether any definitions had been included.  She proposed that the Secretariat 
update its previous Notes on this issue, contained in S/WPGR/W/13 and S/WPGR/W/13/Add.1, and 
use the opportunity to list any definitions of subsidies contained in schedules.  She proposed that the 
Working Party take note  of statements made.   
II. NEGOTIATIONS ON GOVERNMENT PROCUREMENT (ARTICLE XIII) 
26. The Chairperson  suggested that delegations concentrate on the new contribution from the 
delegation of the European Communities, contai ned in S/WPGR/W/48, concerning a framework 
under GATS for procurement of services.  She recalled that it had been agreed at the last meeting that 
the Secretariat expand on its earlier Note on gove rnment procurement provisions in regional trade 
agreements and noted that, given the amount of information involved, it could be ready for Members' 
consideration at the next meeting of the Working Party.   
27. Concerning the Note being prepared by the Secretariat, the representative of the United States  
said that her delegation had expressed a concern at th e last meeting about the identification of relevant 
provisions.  She thought that consultations with delegations from countries participating in such 
agreements might be warranted be fore the document was circulated.  She wondered whether, if a 
particular agreement did not specifically identify a government procurement provision, the Secretariat 
would make a judgement as to what was effectiv ely involved.  She wished to know whether the 
Secretariat had so far only considered provisions explicitly referring to gove rnment procurement.  If 
so, no consultations might be needed.  After cons ulting with the Secretariat, the Chairperson  said that 
the Note was examining those provisions which the relevant agreements presented as pertaining to 
government procurement.     S/WPGR/M/48 
 Page 9 
 
 
 28. The representative of th e European Communities  indicated that the new communication built 
on two previous contributions from his delegation, from July 2002 and May 2003.  It aimed at 
providing some answers to questions raised during the last meetings, notably by Singapore in an 
informal communication of December 2003, contained in JOB(03)/216.  As requested by a number of 
delegations, the communication provided examples of commitments and MFN exemptions relating to 
government procurement.  These examples underscored the feasibility of commitments on 
government procurement in services, including with respect to thresholds, possible limitations on the 
coverage of entities, and various modes of supply.  The examples illustrated the flexibility of the 
framework proposed, which allowed Members to ad just their commitments in line with their 
developmental  and public policy objectives.  The proposed framework would also permit to grant more favourable treatment to services suppli ers from developing countries or regions.  The 
communication further addressed the relationship between, on one hand, commitments relating to 
government procurement and, on the other hand, co mmitments under Articles XVI and XVII of the 
GATS.  It also aimed to respond to questions about the treatment of public contracts covering services 
under different CPC categories, as well as questions about the scope of the agreement, in particular 
the distinction between services contracts and goods co ntracts.  On this issue, his delegation proposed 
to follow, mutadis mutandis , the precedent used in the GATT Code on Government Procurement.  
With respect to the relationship with the G overnment Procurement Agreement (GPA), the 
communication proposed to include an exception in a GATS Annex on Government Procurement so 
as to exempt GPA commitments from the application of the MFN obligation.  Finally, the 
contribution underlined the importance of developing appropriate procedural rules in order to ensure the commercial value of future GATS commitments on government procurement. 
29. The representative of Chinese Taipei
 had a number of questions on the communication.  First, 
paragraph 3 suggested that even when no commit ments had been made on government procurement, 
all GATS provisions except Articles II, XVI and XVII applied to relevant laws, regulations and 
requirements.  She asked whether the conditional obligations would apply to government procurement 
once a sector was included in the schedule, ev en if no government procurement commitment was 
taken.  For example, if a Member's governme nt procurement regulations or practices were 
inconsistent with the obligation contained in Article  VI:2, in particular w ith respect to domestic 
review, could another Member have recourse to the DSU pursuant to Article XXIII?  She noted that 
provisions of the GATS other than Articles II, XVI  and XVII might apply to government procurement 
since they had not been explicitly excluded through Ar ticle XIII:1.  However, paragraph 2 of Article 
XIII, which called for negotiations, cast doubt on  whether all other GATS provisions applied to 
government procurement.  Second, did the EC consid er Article I:3(a), which referred to measures 
taken by central, regional or local governments and authorities, as well as to non-governmental bodies 
in the exercise of powers delegated by governments, to be relevant in the co ntext of their proposed 
framework?  
30. Third, regarding example 6 in the communicatio n, she said that the limitation inscribed for 
government procurement was quite different from th at used in the market access and national 
treatment columns.  In these two columns, the annotation "unbound except..." clearly indicated what 
was not subject to the obligations.  In contrast, the government procurement column said "none for 
contracts above 200,000 SDR".  There was no mentio n of the level of treatment granted for contracts 
below 200,000 SDR.  Fourth, would it be necessary for a Member to list the covered entities?  Fifth, 
could the EC explain how Members could schedul e their government procurement commitments 
under the various modes of supply.  What was the meaning of a government procurement 
commitment under mode 4?  This issue needed to be further clarified and should be subject to further 
discussions.  Finally, she asked how the proposed framework would apply to two scheduling 
situations.  In the first case, market access was "unbound" and the commitments in both the national 
treatment and government procurement columns read "none".  In the second case, commitments in 
both the market access and government procurement columns were without limitations and national S/WPGR/M/48 
Page 10  
 
 treatment was "unbound".  What was the value of commitments under govern ment procurement in 
such situations? 
31. The representative of Singapore
 drew attention to an earlier informal communication from his 
delegation, contained in JOB(03)/216.  He thought that the examples provided in the communication 
from the EC helped to illustrate what governme nt procurement commitments would look like and 
how they would relate to commitments in the mark et access and national treatment columns.  These 
examples were further studied by his authorities and he would provide more detailed views at a later 
time.  Without prejudging the scope of the mandate  under Article XIII, he assumed that there would 
be two parts to the negotiations.  First, the government procurement commitments and, second, the 
Annex which would contain certain disciplines to govern these commitments.  Work on this Annex would help to better understand the implications, reach and depth of government procurement 
commitments.  The communication from the EC provided some answers to questions raised in the 
earlier communication from his delegation.  The co mmunication had noted, in paragraph 2(b), that 
while GATS Article XIII:I referred to the exclusion of MFN, market access and national treatment, 
possibly in the interim period, it was silent on  the applicability of other GATS provisions to 
government procurement in services.  Could this be in terpreted, by implication, to mean that all other 
GATS provisions already applied?  Paragraph 3 of the EC's communication indicated that government 
procurement laws and regulations were subject to all GATS provisions apart from those contained in 
Articles II, XVI and XVII.  He took note of th is view, and his authorities would reflect on it.  
Paragraph 4 of the communication suggested that  government procurement commitments should 
apply to all levels of government, as envisaged in GATS Article I:3.  He felt it was appropriate to put 
commitments on government procurement on the same footing as other GATS commitments.   
32. The representative then drew attention to the question contained in paragraph 2(f) of his 
delegation's communication, whic h related to Article III:3 of th e GPA.  He thought that the 
communication from the EC captured the concepts reflected in this Article.  Indeed, paragraph 8 of 
the communication stated that any benefit gained  from government procurement commitments under 
the GATS would be subject to the traditional commitments on market access and national treatment.  He hoped the EC could confirm the intention to apply the concepts found in GPA Article III:3.  His 
next question related to the inte rface between the GPA and the GATS  obligation of MFN treatment.  
The EC, in paragraph 15, proposed a one-off possibi lity to schedule MFN exemptions.  Paragraphs 21 
to 25 further elaborated on the interface between the GPA and the MFN obligation of the GATS.  He 
felt, on a preliminary basis, that the EC's sugges tions in that regard were practical.  Concerning 
example 6, which addressed a situation where a cont ract covered several services sectors, he asked 
how the "main object of the contra ct" could be determined in practice.  What was the threshold value 
of the covered services?  What percentage of the total value would be governed by the commitment?  
Concerning paragraphs 18 to 20 of S/WPGR/W/48, where the EC suggested possible ways to address 
contracts involving the provision of both goods and se rvices, he thought that the EC's proposed use of 
Article 1.1 (a) of the GATT Code on Government Procurement was interesting and invited the EC to 
operationalize this proposal.   
33. The representative of Canada
 wished to offer some preliminary comments and seek 
clarifications.  She appreciated the concrete nature of the EC communication which allowed the 
discussions to move forward.  However, her delegation had some reservations about the level of 
complexity involved in determining what commitmen ts actually applied to a specific procurement 
case.  The EC might wish to simplify the approach.  With respect to example 2, paragraph 4 pointed 
out the breadth of the organizations covered by the government procurement commitment.  She 
wondered if the EC could explain how partial commitments, both within a specific level of 
government and for an entire level of government, would be expressed.  Concerning example 3, she 
noted that many WTO Members had structures where decision-making about the type and form of 
preferential policies wa s decentralized.  How could this be addressed?  She also wished to see how an 
exception for a 5% domestic price preference would be dealt with.    S/WPGR/M/48 
 Page 11 
 
 
 34. Examples 4 and 5 reflected a situation where government procurement commitments for 
mode 4 were more open than the corresponding ma rket access and national treatment commitments.  
She wondered whether the dele gation of the European Comm unities could provide further 
explanation.  She understood that example 5 also dealt with a situation where no limitations appeared 
in the market access and national treatment column s under mode 3, but the government procurement 
commitment was more restrictive.  How would thes e restrictions be operationalized in individual 
procurement cases?  Moving to example 6, where a procurement covered several sectors, she referred 
to paragraph 13 of the EC communication ("and if the contract cannot be divided into two different 
contracts").  She asked if the intention of the EC was to suggest that procurements be divided on the 
basis of GATS commitments?  With respect to MFN exemptions, she hoped the EC could provide practical examples of preferential conditions, and indicate how these would be operationalized in individual procurement cases.  Finally, with respect to thresholds, she asked if the EC had considered 
the possibility of scheduling thresholds horizontally so as to reduce complexity.  In concluding, she 
indicated that the proposal helped to clarify one possible methodolog y for the scheduling of 
commitments on procurement in the GATS.  The feas ibility of such an approach was closely linked 
with the procedural rules that would apply.  Her delegation shared the EC's view on the importance of developing such rules.   
35. The representative of Hong Kong, China
 wished to focus on some technical issues raised by 
the EC's communication.  As a ge neral point, he believed that the proposed framework should not 
affect Members' obligations under the GPA in respect of services.  The relationship of the proposed 
framework with the GPA should be clearly addres sed in the proposed GATS Annex on Government 
Procurement.  He asked how the proposed framework would relate to Members' obligations under the GPA in respect of services.   More particularly, wh ich rules would apply in situations where certain 
services were covered by commitments under bo th the GPA and GATS?  Would bidders from 
Members who are Parties to the GPA and those of Members who are not Parties be subject to 
different rules?  What would be the situation if bot h types of bidders were involved in a particular 
procurement?  Would there be any difference in the obligations applied to them?  With respect to the scheduling of commitments on government procurem ent, he asked whether the EC was proposing 
MFN and national treatment obligations as general obligations or as obligations only applicable to 
those sectors where commitments on  procurement were undertaken?  Further, he noted that the 
communication proposed that commitments in the government procurement column should be read in conjunction with Members' existing commitment s on market access and national treatment for the 
relevant sector and mode.  He noted the examples included in the communication, but hoped the EC 
could provide greater clarity on this issue.  For instance, in example 4, "unbound" was inscribed under 
both modes 1 and 2 for national treatment, while the government procurement commitment said 
"none for contracts above 5 million SDR".  In such a situation, would the latter commitment be confined, in practice, to mode 3?   
36. Moreover, the representative invited the EC to explain how the government procurement 
commitments applied across different modes of supply,  especially in respect of modes 1 and 2.  He 
also wondered how a commitment in the government procurement column would be read in conjunction with national treatment commitments across different modes.  For instance, under 
example 3, where full national treatment commitmen t was granted under modes 1, 2 and 3, would the 
Member be obliged to provide the same treatment to bidders across all modes of supply?  With 
respect to paragraphs 14 to 17, which related to MFN exemptions, his delegation considered MFN 
treatment as a fundamental principle of the multilateral trading system.  Should the GATS' coverage 
of government procurement be extended, he did not see why the MFN obligation should not be a 
general obligation.  His delegation needed to reflect further on the EC's suggestion to permit MFN 
exemptions with respect to government procurement in services.  In considering whether new derogations to the MFN obligation were warranted, his delegation would take into account the 
experience with existing MFN exemptions.  He asked the EC whether, and if so how, the elements of 
non-application and reciprocity in the GPA could be reconciled with the proposed MFN exemptions S/WPGR/M/48 
Page 12  
 
 for government procurement in services.  He also  wished to obtain more specific details on the 
proposed provision in the Annex that would exclude GPA commitments from the MFN obligation.   
37. With respect to example 1 of the EC's commun ication, where no commitments were taken for 
government procurement, the representative of Switzerland
 asked why the EC considered that it was 
necessary in such cases to inscribe "unbound" in the government procurement column.  In 
comparison, when no additional commitments were undertaken, the additional commitment column 
remained empty.  She wondered why the EC was propos ing in that regard an approach different than 
the one taken in the case of additional commitments.  Concerning example 6, the communication stated that in cases where government procuremen t commitments had been made only in one of the 
two sectors concerned by a given contract, a spec ific provision of the GATS Annex on government 
procurement would define the main object of the contract, which would be determined according to the value of each category of service covered.  She invited the EC to elaborate on how the relevant value would be defined.  Further, in example 6, government procurement commitments for each of 
the two sectors (computer services and manageme nt consulting) were taken for contracts above 
200,000 SDR.  Would that mean that for a specific contract covering both sectors, the thresholds 
added up to 400,000 SDR, or would the threshold of 200,000 SDR apply to the whole contract?  In a 
situation where the thresholds were not added up, what would happen if the threshold for computer services was 200,000 SDR and that for management  consulting services 40,000 SDR?  What 
threshold would apply to a contract covering both sectors?  
38. The representative of the United States
 hoped to be able to provide further comments and 
questions at a later time.  While believing that Article XIII provided the basis for discussions on 
government procurement in services, her delegation wa nted to ensure that any proposal arising from 
such discussions supported existing commitments and efforts to broaden commitments under the 
GPA.  She hoped that delegations could circulate the questions raised.   
39. The representative of India  wished to recall that Members held different views about the 
scope of the mandate under Article XIII.  While paragraph 1 of the communication from the EC stated 
that the proposal was made within "the framework  of the negotiations under the mandate given by 
GATS under Article XIII:2", he indicated that Arti cle XIII:1 was also re levant, reiterating his 
delegation's previously expressed position.  He also drew attention to the uncertainty that existed with 
respect to the Singapore issues in the Doha Round.  As said in the past, without a clear understanding 
on the status of these issues, his delegation had to  reserve its position in the Working Party in that 
regard.  Notwithstanding these general positions, he  hoped to get back to specific questions in 
upcoming meetings.   
40. The representative of Malaysia  fully supported the views expressed by the delegation of 
India.   
41. The representative of Japan  said that his delegation recogni zed the potential importance of 
government procurement in services.  The commun ication from the EC provided a good basis to 
deepen discussions on this issue.  He considered that the proposed approach to schedule commitments 
on government procurement was easily understandable  and interesting.  He hop ed to hear the opinions 
of other Members in that regard, especially devel oping countries.  He understood that, according to 
the EC's proposal, the MFN obligation would always prevail, no matter whether a commitment was made in a particular area.  On the other hand, in  the GPA, MFN only applied in areas where Members 
made commitments.  The proposed approach thus needed  to be further examined.  With respect to the 
entities covered by the potential rules on government  procurement in services , he noted that the EC 
proposed that all entities falling under Article I:3( a) be covered.  However, these entities were 
different from those falling under the GPA.  He wo ndered how such differences could be addressed.  
In addition, he drew attention to paragraph 22, which mentioned that the GATS agreement on 
government procurement would not affect GPA rule s and obligations.  He believed that such a  S/WPGR/M/48 
 Page 13 
 
 
 provision would be important.  Finally, with respect to procedural rules, he wondered how far the EC 
intended to go.  Was the intent to follow the a pproach taken in the GPA with respect to rules on 
transparency or tendering procedures?   
42. The Chairperson  suggested that delegations share copies of their questions to the delegation 
of the European Communities and ho ped that written answers could be provided in preparation of the 
next meeting of the Working Party.   
43. The representative of the European Communities  said that he hoped to start the next session 
by providing answers to questions he would not have time to address today.  Receiving questions in 
advance could enable his delegation to prepare wr itten answers before the next meeting.   With 
respect to the question by Chinese Taipei on the applicability of GATS to government procurement, 
he agreed that all GATS Articles other than Artic les II, XVI and XVII already applied to government 
procurement.  A distinction had to be drawn betwee n, for example, Article I II on transparency which 
applied to government procurement in all services sectors and provisions of Article VI which applied 
to sectors where government procurement commit ments had been made, that is only for certain 
Members through the Understanding on Financial Serv ices.  He noted that the negotiating mandate in 
paragraph 2 of Article XIII was not limited to Ar ticle II, XVI and XVII.  Negotiations could also 
touch upon the application of any other Article.  With respect to the point made by Chinese Taipei on the meaning of limitations on govern ment procurement, he indicated that such limitations referred to 
the opening of government procurement.  He wished to avoid ambiguities with respect to limitations 
on national treatment or market access.  The inscription "none for contracts above 200,000 SDR" implied that the commitment was "unbound" below that threshold.  This could be more explicitly expressed in Members' commitments so as to avoid ambiguity.   
44. Some delegations had asked whether it was ne cessary to list the entities covered by the 
commitment in the government procurement column.  Obviously, if all entities were covered, it was 
not necessary to list them.  However, pursuant to hi s delegation's proposal, Members would be free to 
establish either positive or negati ve lists of entities.  Regarding a question by Canada on the different 
levels of government, he believed that Members could, for example, inscribe "none" for the central 
government and "unbound" for local governments.  The same could be done for entities within a 
given level of government.  Concerning Members th at had a federal structure and could thus have 
different limitations in place for different sub-fe deral governments, he noted that it was already 
possible in the GATS to list market access or nation al treatment limitations for certain specific sub-
central governments.  The same approach could be taken for commitments on government procurement.  With respect to questions relating to Article III of the GPA, he  wished to confirm that 
the same approach would be taken in the proposed GATS Annex on Government Procurement.  
Government procurement commitments in the GATS would cover the award of contracts, while the 
provision of the service thereafter would be covere d by Articles II, XVI and XVII of the GATS.  A 
foreign company participating in a procurement of  another Member would still be subject to any 
limitations inscribed in that Member's schedule when  supplying the service to fulfil the contract.  The 
representative indicated that, due to lack of time, he  would answer the remaining questions at the next 
meeting.   
45. The Chairperson
 noted that the presentation by the European Communities had generated a 
number of questions, which focused on the scheduling of commitments on government procurement, 
the scope of the mandate in Article XIII, the nature and scope of the proposed Annex on Government 
Procurement, and coherence between Members' commitments under the GPA and commitments on 
government procurement in the GATS.  She invited the Working Party to take note  of the comments 
made.   S/WPGR/M/48 
Page 14  
 
 III. NEGOTIATIONS ON EMERGENCY SAFEGUARD MEASURES (ARTICLE X) 
46. The Chairperson
 said that the Working Party would not be able, due to lack of time, to enter 
into a substantive discussion on emergency safegu ard measures and suggested that the issue be 
reverted to at the next meeting.  The representative of Venezuela  indicated that this agenda item was 
of significant importance to his delegation, and expe rts were taking part today.  He said that his 
authorities were revising a communication which they had previously circulated in the Working Party, 
contained in JOB(01)/48, and that his delegation had wi shed to offer comments in this regard.  He had 
also hoped to comment on the latest contribution fr om a group of ASEAN countries, in particular with 
respect to acquired rights, the duration of the safeguard measure, surveillance, and special and 
differential treatment.  Given time constraints, he agreed to come back to this issue at the next 
meeting of the Working Party.   
47. The representative of the Philippines  suggested that emergency safeguard measures be the 
first issue to be raised at the next meeting of th e Working Party.  The representative of the European 
Communities  enquired whether the intent was to address government procurement before emergency 
safeguard measures.  The Chairperson  said she saw no need now to discuss the order of the agenda 
items of the next meeting and expressed confidence that all interests could be met.  
IV. DATES OF THE NEXT MEETING 
48. The Chairperson  indicated that the Working Party would hold its next formal meeting during 
the next cluster of services meetings, the exact da te of which would be announced in due course.   
V. OTHER BUSINESS 
49. No point was raised under this item.   
 
__________