WORLD TRADE
ORGANIZATIONWT/WGTI/W/138
11 September 2002
(02-4763)
Working Group on the Relationship
between Trade and InvestmentOriginal:  English
COMMUNICATION FROM JAPAN
The following communication, dated 9 September 2002, has been received from the
Permanent Mission of Japan.
_______________
"EXCEPTIONS AND BALANCE-OF-PAYMENTS SAFEGUARDS "
I. INTRODUCTION
1. Non-discrimination represents one of the most important principles in WTO rules. It prohibits
Members to take discriminatory treatment with  regard to measures disciplined by the WTO
agreements. However, the WTO agreements have some areas where the principle of non-
discrimination does not apply, when it is truly necessary. Paragraph 22 of the Doha Ministerial
Declaration clearly states that "exceptions and balance-of-payments safeguards" are one of the
elements which should be included in cons ideration toward an investment framework.
2. This paper comprises two sections. Section A examines exceptions, while Section B covers
balance-of-payments safeguards.
A. EXCEPTIONS
1. Analytical framework
3. WTO rules are designed to liberalize trade and to minimize negative influences of the various
trade-related measures on trade. These rules do not call for blanket elimination of all trade-obstructing
measures under their coverage, but  allow for exceptions if necessary. Introducing exceptions means
exceptionally establishing areas where the rules do not apply. Accordingly, how to stipulateexceptions becomes an important element which substantially influences the level of effective
disciplines provided by the various types of rules.
4. There are various approaches to exceptions
1, which can be divided into the following three
categories. In all cases, exceptions are literally exceptions to the principles and need to be strictly
interpreted.
                                                     
1 UNCTAD provides for three categories: (1) gene ral exceptions, comprising (a) health and public
order and (b) security; (2) subject-sp ecific exceptions (e.g., taxes, regional  exceptions, etc.); and (3) country-
specific exceptions (e.g., exceptions reflecting the particular circumstances of each country, as seen in GATS,etc.). (UNCTAD, Most-Favoured-Nation Treatment, UNCT AD/ITE/IIT/10 (Vol. III), D ec. 1998, pp. 15-27, and
UNCTAD National Treatment, UNCTAD/ITE/IIT/11 (Vol. IV), Dec. 1998, p. 12.).WT/WGTI/W/138
Page 2
(a) General exceptions
5. It is valuable to pursue rules which enhances economic welfare through trade promotion and
economic growth, achieved by trade liberalization and elimination of trade-related measures
obstructing free trade. 　General exceptions are based on the idea that various social values, which
are different from values pursuing liberalization, also need to be recognized, and measures necessary
to realize these values, such as measures related to public morals, need to be accepted.
(b) Security exceptions
6. Measures necessary for the protection of national security and for the maintenance of
international peace and security are regarded as "security exceptions".
(c) Other exceptions
7. Other possible exceptions reflect national or regional circumstances—for example, regional
agreement exceptions and a Member’s reservations on liberalization in particular sectors.
8. The third group of exceptions("other exceptions") has been analyzed in the context of national
treatment (NT) and most-favoured-nation (MFN) and is  referred to in Japan ’s written contribution
submitted to the July meeting, namely "Non-discrimination "(WT/WGTI/W/124) and "Modalities for
Pre-establishment Commitments"(WT/WGTI/W/125).  Therefore, it will be excluded from the scopeof this paper.  This paper will look into (1) general exceptions and (2) security exceptions.
9. It would also seem necessary to examine how the "development provisions" discussed at the
July meeting will fit into the context of "exceptions." Incorporation of a development element is
essential to create flexible rules which enable an appropriate response to the  different circumstances
of member states, taking into account the various differences in terms of development stage,economic structure, and policy priorities which exist among countries, notably developing countries.
However, the development issue should be regarded on a country-specific basis based on each
Member’s situation. Country-specific considerations should be distinguished from general exceptions,
and discussed instead in the context of reservations from liberalization commitments.
2. Examples of exceptions in existing WTO rules
10. We undertook an analysis of the exception provisions within existing WTO rules with reference
to the GATT and GATS.
(a) General exception provisions
11. The scope of general exception provisions is set out in GATT Article XX and GATS
Article IV, which list the following specific items
2:
(i) Common items in GATT Article XX and GATS Article XIV
− Protection of public morals
                                                                                                                                                                    
2 Further, the GATS Annex on Financial Services provides in "2. Domestic Regulation " that
"Notwithstanding any other provisions of the Agreement, a Member shall not be prevented from taking
measures for prudential reasons …". These "prudential measures " could be regarded as general exceptions in the
area of financial services.WT/WGTI/W/138
Page 3
− Protection of life or health
− Measures related to compliance with laws or regulations which are not inconsistent with the
provisions of the agreement
(ii) Items only in GATT Article XX
− Exports and imports of gold or silver
− Products of prison labour
− Protection of national treasures
− Conservation of exhaustible national resources
− Inter-governmental commodity agreement
− Restrictions on exports of domestic materials necessary to ensure essential quantities of such
materials to a domestic processing industry
− Acquisition or distribution of product in general or local short supply
(iii) Items only in GATS Article XIV
− Maintenance of public order
− Fair and efficient direct taxation
− Agreement on the avoidance of double taxation
(b) Security exceptions
12. The scope of security provisions is set out in GATT Article XXI and GATS Article XIV.2, which
list the following specific items:
− Measures regarding the provision of information contrary to a country’s essential security
interests
− Measures necessary to protect a country’s essential security interests (relating to fissionable
and fusionable materials; traffic in arms, ammunition and implements of war; or taken in time
or war or other emergency in international relations)
− Measures taken in pursuance of obligations under the United Nations Charter for the
maintenance of international peace and security.
3. Approach to exceptions in an investment context and points of discussion
13. Based on the disciplines for general exceptions and security exceptions in existing WTO rules
which were demonstrated above, this paragraph considers the kind of exceptions which need to be
built into WTO investment rules.
(a) Discussion points in considering exceptions
14. As with other WTO rules, exceptions will of course be necessary for investment rules. Three
points need to be borne in mind when considering rules on exceptions. Firstly, the universality of the
exception. Secondly, the balance between disciplines and exceptions. Thirdly, the balance between
exceptions to the investment rules and those to other WTO rules.
(i) Universality of exception
15. Exceptions which should be incorporated as elements of rules should not reflect country-specific
circumstances.  Rather, exceptions set out in the ru les should have certain universality, that is they
have to be applicable to all countries.WT/WGTI/W/138
Page 4
16. In other words, as discussed at the previous WG meeting, exceptions which should be considered
on a country-specific or subject-specific basis— for example, exceptions to liberalization
commitments for NT, or exceptions to MFN—should not be included as general exceptions or
security exceptions. That is, exceptions for development policy reasons, regional agreement
exceptions and other such exceptions are not of a nature to be outside the scope of rules from theoutset. Rather, the application of liberalization reservations should be determined based on rational
reasons based on each Member’s particular circumstance when country-specific commitments are
considered.
(ii) Balance between disciplines and exceptions
17. In establishing exceptions, it will be vital to ensure that individual exceptions do not
undermine the required level of discipline. As well as considering the many merits to national
economies brought by trade liberalization, we also need to accurately identify and highlight thevarious elements which are not evaluated along the value axis of liberalization merits. The importance
of public morals and health protection is easy to grasp from this perspective. However, while such
elements serve as the axis for different value systems, over-expansion of the scope of exceptions
could dilute the effect of the discipline, and fu ll consideration must be given to the need for each
specific exception.
18. Further, it would be inappropriate if the application of these exceptions were too loose, or
arbitrary and discriminatory and it negatively affected the investment disciplines and the direction of
liberalization. For example, general exceptions mu st not be used to avoid paying compensation in
cases of expropriation.
3
(iii) Balance with other rules
19. The importance of the adequate balance between exceptions to the investment rules and those
to other WTO rules is self-evident. Exceptions should be considered along a different value axis from
that concerning the positive economic effects of trade liberalization, etc. Accordingly, with
considering the different nature of each WTO rule, it is desirable to avoid the major differences with
regard to items included as exceptions in those rules more than is necessary.
(b) Basic exception elements in investment rules
20. Given the above points, an appropriate starting point in discussing exceptions in the context of
investment rules would be to consider (1) general exceptions and (2) security exceptions, as in the
case of existing WTO rules. Naturally, further consideration would be required as to whether any
special exceptions are needed for investment which fall beyond the scope of exceptions under the
GATT, GATS or other existing rules, or, conversely, whether some of the exceptions in existing rules
would be inappropriate for investment.
21. However, given that investment in the services area is already substantively covered in mode 3
under GATS and  no particular problems are presented by the exceptions provisions in the current
GATS, it would be possible to have those exceptions under the GATS as a base of the discussion on
exceptions in investment rules. Moreover, as investment has an influence on goods trade, it would be
                                                     
3 Both GATT (Article XX) and GATS (Article XIV)  clearly state that these exceptions shall not be
applied in a manner which would constitute a means of unjustifiable discrimination or a disguised restriction on
international trade and trade in services. "2. Domestic Regulations " in the GATS Annex on Financial Services
mentioned above adds that prudential measures "shall not be used as a means of avoiding the Member ’s
commitments or obligations ".WT/WGTI/W/138
Page 5
also possible to elaborate the discussion with considering exceptions under the GATT. it would also
be feasible to apply these exceptions as exceptions in investment rules.
22. In the context of security exceptions, it seems unlikely at this moment that any pressure will arise
for a major review of specific elements. Where necessary, consideration could be given as to what
should be included in the security exceptions during the future negotiation process, taking intoaccount the current discussions based on GATT and GATS.
B. B
ALANCE -OF-PAYMENTS SAFEGUARDS
1. Basic approach
23. Generally, "safeguard measures" mean temporary and exceptional emergency measures under
certain circumstances. Under safeguard measures, in order to protect other priority interests, member
governments are permitted to be exempted from obligations under international agreements. Above
all, safeguard measures for the purpose of protecting a country’s balance of payments are necessarydevices to avoid the situation in which balance-of-payments problems would leave a country with no
means of making external payments, and cause trade shrinkage which could force a country to be kept
out from the international trading order.
24. Balance-of-payments safeguards are stipulated in both the GATT and the GATS; for example,
GATS Article XII notes that in order to protect the balance of payments, a Member may adoptrestrictions on trade in services on which it has undertaken specific commitments, on the condition
that the restrictions meet certain requirements such as non-discrimination..
4
25. It is true that safeguards are just temporary and exceptional emergency measures, and it
should be noted that these measures do not solve structural balance-of-payments problems. However,
particularly for developing countries, which tend to experience balance-of-payments problems in thecourse of their economic development, such emergency measures would become a more valuable
economic policy tool when policy options are limited.
2. Specific examples of balance-of-payments safeguards in existing WTO rules
26. Approaches to balance-of-payments safeguards in existing WTO rules in the context of the
GATS are outlined below.
27. Firstly, five points are indicated as requirements in instituting restrictions.
(i) Non-discrimination
(ii) Consistency with the IMF Agreement (consisten cy with the Articles in the Agreement of the
International Monetary Fund)
(iii) Avoidance of unnecessary damage to the interests of other members (avoidance of
unnecessary damage to the commercial, economic and financial interests of any other
member)
(iv) Suitability of extent of restrictions (not exceeding the level necessary to deal with the balance-
of-payments difficulties)
                                                     
4 This paper discusses not the general safeguard measures such as those under GATS Article X
(Emergency Safeguard Measures), but the rules for balance-of-payments protection such as those of GATS
Article XII (Restrictions to Safeguard the Balance of Payments).WT/WGTI/W/138
Page 6
(v) Temporary nature of restrictions (temporary, and to be phased out progressively).
28. Secondly, the following two procedural requirements are placed on the country implementing the
restrictions.
(i) Notification requirement (adoption of or changes to restrictions notified to the General
Council)
(ii) Consultation requirement (Consultation with Committee on Balance-of-Payments to ensure
the appropriateness of restrictions).
29. Thirdly, clear consideration is given to developing countries. More specifically, the GATS
recognizes that a Member may need to impose rest rictions to ensure the maintenance of a level of
financial reserves adequate for the implementation of its program of economic development or
economic transition.
3. Issues regarding balance-of-payments safeguards in the context of  investment
(a) Significance of balance-of-payments safeguards in investment
30. Here we consider the significance of balance-of-payments safeguards in investment rules
given the approach to these safeguards in existing WTO rules as described above. There are three key
points: first, the different nature between goods a nd services, and investment in terms of the balance
of payments; second, the relation to post-establishment investment activities; and third, dealing withinvestment outflow.
(i) Investment vs. goods and services
31. In the case of goods, where import restrictions are recognized as exceptions to the GATT
principle of general elimination of quantitative restrictions, it is obvious that the trade balance would
improve within a short period of time. With regard  to services, imposing restrictions on service
imports would also clearly improves the service account. In both cases, import restrictions lead to the
ultimate improvement of the current account balance, and are thus consistent with the goal of
protecting the balance of payments.
32. However, the effect of restricting investment itself—namely, restricting pre-establishment
investment—differs from that of restricting goods and services. Stopping the flow of investmentwould conversely cause deterioration of the capital account, which comprises investments and other
capital transactions. Even from the perspective of short-term balance-of-payments protection,
encouraging investment inflow surely becomes an essential policy.
33. Furthermore, given the long-term nature of investment
5, restricting investment inflow could
also have a substantial negative effect on the host country. Because foreign investment-based
production activities in the host country create the employment necessary for production and spur
procurement for that production, restricting investment  inflow is very likely to have negative effect on
the medium- to long-term economic growth of the  host countries. The long-term economic policy
direction of  host countries should, therefore, be  to improve the investment environment in order to
allow rational investment decisions, and to promote the introduction of foreign investment, which will
contribute to structural improvement of the balance of payments.
                                                     
5 This paper discusses only the long-term cross-bor der investment referred to in Paragraph 20 of the
Doha Ministerial Declaration.WT/WGTI/W/138
Page 7
(ii) Relation to post-establishment investment activities
34. Restrictions on the post-establishment activities of investors from a balance-of-payments
perspective could conceivably take various forms. Some of the cases will not necessarily be balance-
of-payments safeguards based on investment rules. For example, import restrictions for investors who
import raw materials would correspond to balance- of-payments safeguards for goods, and as such,
GATT disciplines would be applied.
35. One case where the relation to the structure of investment rules should be considered would be
restrictions on international transfer and payments for the purpose of protecting the balance of
payments. GATS contains disciplines on payments and capital movement (Article 11), stipulating that
restrictions shall not be applied to international transfers and payments for current transactions
relating to specific commitments. However, restrictions for the purpose of balance-of-payments
protection are permitted. When we discuss an investment rule, the idea of liberalization of theinternational transfer and payments and permission for restrictions on those for the purpose of
safeguarding the balance of payments would serve as a reference.
36. Investment host countries should consider that even for the purposes of balance-of-payments
protection, the frequent use of such restrictions does not create a favorable environment for investors,
nor does it contribute positively to the actual inflow of investment. Ideally, obviously, Membersshould not rely on balance-of-payments protection measures for emergency risk-avoidance at the
border, but to pursue measures for structural balance-of-payments improvement.
(iii) Dealing with investment outflow
37. In regard to investment outflow, in the case  of direct investment, outflow can occur when
industries in a country relocate their business overseas or when existing foreign investment withdrawsfrom host countries. When a country has balance-of-payments problems, the additional burden of
investment outflow can provoke further bala nce-of-payments deterioration, and could also
theoretically result in the restriction of withdr awal for the purposes of balance-of-payments
protection.
38. For example, one possible scenario is capital flight in response to a so-called "economic crisis". In
fact, given that direct investment remained stable even during the financial crisis triggered in 1997
6, it
seems reasonable to think that investment conversely helped to prevent balance-of-payments
deterioration. However, it is understandable that developing countries hosting investment are
concerned over the possible withdrawal of foreign investment, and that could be one ground why
balance-of-payments safeguards are required in investment rules.
39. Naturally, imposing restrictions on individual cases ,such as decisions of withdrawal for low
profitability could lead the host country to maintain and sustain inefficient businesses with noprospect of profitability. It should be noted whether such restrictions would benefit the economy of
the host country, for example, from the standpoint of the effective utilisation of labour and other
domestic resources.
                                                     
6 Foreign Direct Investment and the Balance of Payment (WT/WGTI/W/95), Feb. 2001.WT/WGTI/W/138
Page 8
(b) Perspectives in further considerations
40. Given the above points, we need to consider how balance-of-payments safeguards can be
incorporated as an element of the investment framework with a view to creating a type of safety-valve
and securing structural flexibility in that framework. Further consideration will also be needed from
the following perspectives, including the effect and significance of balance-of-payments safeguards inthe stage of pre-establishment investment.
(i) Relation between investment acti vities and balance of payments
41. Direct investment, capital goods imports accompanying investment, economic activities such
as product imports and exports resulting from investment need to be considered, as well as the social
and economic impact where restrictions are imposed on these. In other words, we need to evaluate (i)
the short-term impact on the balance of payments and (ii) the long-term impact on aspects such as
production and employment.
42. A rule structure is certainly required which will allow emergency-avoidance measures for the
purpose of protecting the balance of payments. At the same time, given that investment is an
economic activity undertaken over the long term, , the long-term impact of these measures must also
be taken into consideration, when the host country actually exercises balance-of-payments safeguards.
(ii) Concrete rules for exercising balance-of-payments safeguards
43. Given that balance-of-payments safeguards are emergency-avoidance measures deviating
from the original purpose of WTO rules, these measures must only be taken in instances of true
necessity, and promptly eliminated once that necessity has gone. Balance of payments improvement
usually manifests as a result of economic structural improvement achieved through an integrated
package of fiscal, financial and other macroeconomic policies, and should not be clearly soughtthrough border measures in the form of balance-of-payments safeguards.
44. GATS Article XII notes five requirements in implementing restrictions, namely, restrictions
(i) shall not discriminate against other members; (ii) shall be consistent with the IMF Agreement;
(iii) hall avoid unnecessary damage to the interests of other members; (iv) shall be of an appropriate
extent; and (v) shall be temporary. These provisions in existing rules should provide a valuablereference.
(iii) Need for consideration of developing countries
45. Given that the main investment hosts are deve loping countries, consideration must also be
given to the need for special provisions for developing countries, as also found in the GATT and
GATS.
II. CONCLUSION
• Exceptions and balance-of-payments safeguards will be important elements in a future investment
framework.
• With regard to exceptions, we need to start our considerations with the elements composing
general exceptions and security exceptions, referring to the exceptions in the existing WTO rules.Investment-specific elements, if any, should be appropriately reflected in the consideration.
• When considering exceptions, we must be careful that exceptions do not lead to undermine the
level of discipline sought by investment rules.WT/WGTI/W/138
Page 9
• It would also be appropriate to include balance-of-payments safeguards in the investment
framework, referring to the disciplines in the existing WTO rules and reflecting investment-specific elements, if any.
• At the same time, given that such measures are primarily designed for emergencies cases, we
need to seriously consider the specific requir ements for their actual implementation, referring to
the existing rules.
• Consideration for developing countries will be essential in both exceptions and balance-of-
payments safeguards.WT/WGTI/W/138
Page 10
ANNEX 1
Exception provisions in existing agreements
I. REGIONAL AGREEMENTS
A. NAFTA
(a) Application of GATT Article XX (General Exceptions) in Part Two (Trade in Goods) and
Part Three (Technical Barriers to Trade)
(b) Measures necessary to secure compliance with laws or regulations which are not inconsistent
with NAFTA (including measures related to health, safety and consumer protection) in PartTwo, Part Three, Chapter Twelve (Cross-Border Trade in Services) and Chapter Thirteen
(Telecommunications)
(c) Measures necessary for the protection of essential security interests (measures related to arms,
ammunition, implements of war, and military facilities, measures taken in time of war or
other emergency in international relations, and measures related to the non-proliferation ofnuclear weapons)
(d) Measures attendant on obligations under the United Nations Charter for the maintenance of
international peace and security.
B. F
RAMEWORK AGREEMENT ON THE ASEAN I NVESTMENT AREA (AIA)
(a) Measures necessary to protect national security and public morals
(b) Measures necessary to protect human, animal or plant life or health
(c) Measures necessary to secure compliance with laws or regulations which are not inconsistent
with provisions of the AIA, including those relating to (i) the prevention of deceptive or
fraudulent practices or to deal with the effects of a default on investment agreement; (ii) the
protection of the privacy of individuals in relation to the processing and dissemination ofpersonal data and the protection of confidentiality of individual records and accounts; and (iii)
safety.
(d) Measures aimed at ensuring the equitable or effective imposition or collection of direct taxes
in respect of investments or investors of Member States.
II. BILATERAL TREATIES
A. J
APAN -ROK I NVESTMENT TREATY
Each Contracting Party may:
(a) take any measure which it considers necessary for the protection of its essential security
interests;
(i) taken in time of war, or armed conflict, or other emergency in that
Contracting Party or in international relations; orWT/WGTI/W/138
Page 11
(ii) relating to the implementation of national policies or international agreements
respecting the non-proliferation of weapons;
(b) take any measure in pursuance of its obligations under the United Nations Charter for the
maintenance of international peace and security:
(c) take any measure necessary to protect human, animal or plant life or health; or
(d) take any measure necessary for the maintenance of public order. (The public order exceptions
may be invoked only where a genuine and sufficiently serious threat is posed to one of the
fundamental interests of society.)
B. JAPAN -SINGAPORE ECONOMIC PARTNERSHIP AGREEMENT FOR A NEW AGE
Parties able to adopt or enforce those measures:
(a) necessary to protect public morals or to maintain public order (The public order exception
may be invoked only where a genuine and sufficiently serious threat is posed to one of the
fundamental interests of society.);
(b) necessary to protect human, animal or plant life or health;
(c) necessary to secure compliance with the laws or regulations which are not inconsistent with
the provisions of this Agreement including those relating to:
(i) the prevention of deceptive and fraudulent practices or to deal with the effects
of a default on contract;
(ii) the protection of the privacy of the individual in relation to the processing
and dissemination of personal data and the protection of confidentiality of
personal records and accounts;
(iii) safety;
(d) relating to prison labour;
(e) imposed for the protection of national treasures of artistic, historic or archaeological value;
(f) to conserve exhaustible natural resources (if such measures are made effective in conjunction
with restrictions on domestic production or consumption).WT/WGTI/W/138
Page 12
ANNEX 2
Balance-of-payment safeguard provisions in existing agreements
I. REGIONAL AGREEMENTS
A. NAFTA
NAFTA allows each Party to impose or maintain restrictions on capital movement in cases
where the Party experiences "serious balance of payments difficulties, or the threat thereof". The
following requirements apply in instituting these restrictions:
(a) Measures shall avoid unnecessary damage to the interests of another Party.
(b) Measures shall be kept to the minimum necessary.
(c) Measures shall be temporary and phased out progressively.
(d) Measures shall be consistent with the IMF Agreement.
(e) Measures shall be non-discriminatory.
Moreover, in terms of procedures, Parties are obliged to consult with the IMF on economic
adjustment measures to address the economic difficulties and adopt or maintain economic policies
consistent with such consultations.
B. FRAMEWORK AGREEMENT ON THE ASEAN I NVESTMENT AREA (AIA)
The AIA contains provisions on balance-of-pay ments safeguards similar to those in GATTS
Article XII. More specifically, in the event of "s erious balance of payments and external financial
difficulties or the threat thereof, a Member State may adopt or maintain restrictions on investments on
which it has undertaken specific commitments" (including on payments or transfers for transactions
related to such commitments). Requirements in rega rd to imposing such restrictions are as follows:
(a) Measures shall be non-discriminatory.
(b) Measures shall be consistent with the IMF Agreement.
(c) Measures shall avoid unnecessary damage to the interests of any other Member State.
(d) Measures shall not exceed those necessary.
(e) Measures shall be temporary and phased out progressively.
It is also recognized that pressures on the balance of payments of developing countries in the
process of economic development may necessitate the use of restrictions. In terms of procedures,
Member States are obliged to given notice of measures taken to the AIA Council within 14 days from
the date the measures are taken, and to commence consultations with the AIA Council and other
Member States within 90 days from the date of notification.WT/WGTI/W/138
Page 13
II. BILATERAL TREATIES
A. JAPAN -ROK I NVESTMENT TREATY
Pursuant to Article 17, a Contracting Party may adopt measures not conforming with its
national treatment and freedom of remittance obligations in regard to cross-border capital transactions
"in the event of serious balance-of-payments and external financial difficulties or threat thereof; or incases where, in exceptional circumstances, movements of capital cause or threaten to cause serious
difficulties for macroeconomic management, in particular, monetary and exchange rate policies."
Imposition requirements are as follows:
(a) Measures shall be consistent with the IMF Agreement.
(b) Measures shall not exceed those necessary.
(c) Measures shall be temporary and shall be eliminated as soon as conditions permit.
(d) Measures shall be promptly notified to the other Contracting Party.
B. J
APAN -SINGAPORE ECONOMIC PARTNERSHIP AGREEMENT FOR A NEW AGE
Article 84 provides that a Party may "adopt or maintain measures inconsistent with its
national treatment and freedom of remittance obligations in regard to cross-border capital transactionsin the event of serious balance-of-payments or external financial difficulties or threat thereof; or
where, in exceptional circumstances, movements of capital result in serious economic and financial
disturbance in the Party concerned." Imposition requirements are as follows:
(a) Measures shall be consistent with the IMF Agreement.
(b) Measures shall not exceed those necessary.
(c) Measures shall be temporary and shall be eliminated as soon as conditions permit.
(d) Measures shall be promptly notified to the other Contracting Party.
(e) Measures shall not discriminate between the Parties.
(f) Measures shall ensure that the other Party is treated as favorably as any non-Party.
(g) Measures shall avoid unnecessary damage to the commercial, economic and financial
interests of the other Party.WT/WGTI/W/138
Page 14
ANNEX 3
Balance-of-Payments safeguards provisions in GATT and GATS
GATT Article XII GATS Article XII
Substantive provisions • Avoidance of unnecessary damage
to the interests of any othercontracting party ("to avoid
unnecessary damage to the
commercial or economic interestsof any other contracting party")
• Suitability of extent of restrictions
(restrictions shall not exceed those
necessary to forestall "a serious
decline in monetary reserves")
• Temporary imposition of
restrictions (measures to betemporary and progressivelyrelaxed)
• Restrictions impairing regular
channels of trade by unreasonablypreventing minimum importsprohibited (no restrictions"unreasonably preventing theimportation of any description of
goods in minimum commercial
quantities")
• Restrictions preventing imports of
commercial samples or preventingcompliance with patent, trade
mark, copyright, or similar
procedures prohibited (norestrictions which would "preventthe importations of commercialsamples or prevent compliancewith patent, trade mark, copyright,
or similar procedures")• Non-discrimination (Restrictions "shall
not discriminate among Members")
• Consistency with IMF Agreement
("consistent with the Articles of
Agreement of the InternationalMonetary Fund")
• Avoidance of unnecessary damage to
interests of any other Member ("shall
avoid unnecessary damage to the
commercial, economic and financialinterests of any other Member")
• Suitability of extent of restrictions
("shall not exceed those necessary todeal with balance-of-payments
difficulties")
• Temporary ("hall be temporary and
phased out progressively")
Procedural provisions • Consultation obligation (regular
consultations with the ContractingParties on restrictions;consultations based on requestsfrom Contracting Parties subject to
restrictions)• Notification obligation ("Any
restrictions adopted or any changestherein shall be promptly notified tothe General Council.")
• Consultation obligation (Consultations
with Committee on Balance-of-
Payments Restrictions to ensuresuitability of restrictions)WT/WGTI/W/138
Page 15
GATT Article XII GATS Article XII
Developing country
provisions• Requirements on restriction
imposition and procedural
requirements relaxed for
developing countries ("contractingparties, the economies of whichcan only support low standards ofliving and are in the early stages ofdevelopment"), recognizing that
these countries "tend, when they
are in rapid process ofdevelopment, to experiencebalance-of-payments difficultiesarising mainly from efforts toexpand their internal markets as
well as from the instability in their
terms of trade".  (GATT ArticleXVIII(b)).• Recognize that a Member in the
process of economic development or
economic transition may need to use
restrictions to ensure "maintenance of alevel of financial reserves adequate forthe implementation of its programmeof economic development or economictransition."
__________