RESTRICTED
WORLD TRADE S/WPGR/W/15/Add.1
11March 1997
ORGANIZATION(97-1012)
Working Party onGATS Rules Original: English
COMMUNICATION FROM THAILAND
Response totheQuestions Relating toanEmergency Safeguard Mechanism inGATS
Thefollowing communication isbeing circulated attherequest ofThailand toMembers of
theWorking Party onGATS Rules
____________
What isthejustification andpurpose ofanemergency mechanism under GATS?
1. Thequestion ofwhat asafeguard mechanism would beforinvolves thefollowing
considerations:
a. Would anemergency safeguard forservices beintended todealwiththekindof
situation foreseen inArticle XIXofGATT --thatis,atemporary threat toadomestic
“industry ”arising from increased imports? Would ithaveanyother objective?
Theprime element tobetaken intoaccount inanswering thisquestion isthatthenature
oftrade inservices isverymuch different from thatoftrade ingoods andthescope
ofcoverage oftheformer isverymuch larger thanthatofthelatter. Naturally,
therefore, theemergency safeguard measures (ESMs) inGATS canbedifferent from
thatoftheGATT. Though theESMs inGATS cancover thesituation similar tothat
inArticle XIXoftheGATT (Emergency Action onImports ofParticular Products),
itcaninnowaybelimited tothat.Actually, theESMs could beconceived ofasa
mechanism tocorrect anysituation which mayariseoutoftheobligations oftheGATS
byaMember oftheWTO thatcould notbeforeseen bythatMember when itundertook
those obligations, andwhich could notwaitforthenormal mechanism oftheGATS,
suchasArticle XXI, tosolve theproblem. Forinstance, aMember mayencounter
asituation whereby there isanoverwhelming commercial presence offoreign banks,
orforeign insurance, transportation ortelecommunication companies, orforeign
professionals, etc.tosuchanextent thatitcauses orthreatens tocause serious injury
tothecorresponding domestic companies orprofessions, despite itsprecautionary
measures toprevent thatsituation. Thesituation could happen inthefuture taking into
account thefactthatMembers oftheWTO haveanobligation toprogressively liberalize
higher leveloftheirtradeinservices andconsidering thefactthattheMFN exemptions
provided forareonlyephemeral. Atacertain point intimetheMembers mayfind
thattheycannolonger availthemselves ofothersafeguard mechanisms, suchasArticle
XXIortheMFN exemptions, simply because theycannotrollbacktheirprevious
commitments andtheycannolonger resort totheMFN exemptions anymore. TheS/WPGR/W/15/Add.1
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ESMs canbeemployed inthissituation torectify thedifficulties. Inaddition, for
international trade policy purpose, theESMs canalsobeamechanism toprovide
incentive foraMember toliberalize itstrade inservices since itcanatleastprovide
anassurance tothatMember thatifanything which ithadnotconceived ofwhen it
undertook theobligations goeswrong, thatMember canescape thatsituation through
theESMs.
b. Areexisting“safeguard”mechanismsinGATS,notablythosecontainedinArticleXII
andArticle XIV, sufficient toaddress anydifficulties governments might encounter
asaconsequence oftheirGATS commitments? Similarly, doesArticle XXIprovide
anadequate vehicle forreversing ormodifying scheduled commitments intheevent
ofunanticipated difficulties?
Thepurpose ofESMs isdifferent from those ofArticles XII,XIV, andXXIofthe
GATS asmuch asorevenmuch more thanthepurpose ofArticle XIXoftheGATT
isdifferent fromthose ofArticles XII,XX,andXXVIII ofthatAgreement. Since it
isestablished thatArticles XII,XX,andXXVIII oftheGATT, whose scope ofcoverage
isverymuch narrower thantheGATS ’sscope ofcoverage, arenotenough forthe
handlingoftheemergencysafeguardsituationsintheGATTcontext,andtherebyArticle
XIXofthatAgreement isprovided for,afortiori reason dictates thatArticles XII,
XIV, andXXIoftheGATS, whose scope ofcoverage isverymuch wider thanthe
GATT ’sscope ofcoverage, arenotsufficient forthetreatment oftheemergency
safeguard situations intheGATS context. Itwould beastonishing toholdthattheGATT
andother Agreements under theWTO suchasAgriculture andTextiles andClothing
which cover onlythetrade ingoods asproducts needavariety ofmeans tocopewith
theemergency situations, buttheGATS which cover almost allaspects oftrade life
oftheMembers, andmany ofthem areessential totheeconomy, social, cultural and
environmental lifeofthepeoples ofthese Members, doesnotneed anemergency
safeguard provision atall.Consequently, Articles XII,XIV, andXXIoftheGATS
arenotsufficient forthetreatment oftheemergency safeguard situations oftrade in
services. Theimplementation ofcommitments might result inunforeseen developments
ofincreased service imports which cause orthreaten serious injury todomestic services
suppliersandwhichthereferredmechanismscannotremedythedifficulties.ArticleXXI
cannot either provide anadequate vehicle tosolve theunanticipated difficulties which
require immediate oremergent remedy. Tomodify thecommitment inaccordance with
Article XXI, governments must await thethree years requirement tolapse before.
Such measures maynotbeeffective togovernments tosafeguard theirinterests due
toemergency situations.
c. DoesthenatureofcommitmentsundertakeninGATS--wherebyMembersmaychoose
whether toschedule asector, andmayalsocondition market access andnational
treatment with respect tocommitments thataremade --obviate theneed for
safeguards? Orwould itbemore appropriate tothink interms oftheideathatthe
existenceofasafeguardwouldallowgovernmentstobemoreforthcomingwithrespect
totheirscheduled commitments?
Article XIXoftheGATS requires ,interalia,that“Members shallenterintosuccessive
round ofnegotiations, beginning notlaterthanfiveyears fromthedateofentry into
force oftheWTO Agreement andperiodically thereafter, withaview toachieving
aprogressively higher levelofliberalization. ”Moreover, Article XVII oftheGATS
further requires thattheMember which hasgranted aconcession andthusinscribed
thatconcession within itsSchedule ofSpecific Commitments must accord nationalS/WPGR/W/15/Add.1
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treatment toallother Members inrespect ofthatconcession. Consequently, oncea
Member hasmade aconcession, theMember cannot,inprinciple, withdraw, retract,
ormodify thatcommitment, norrefuse toaccord national treatment toother Members.
ItistruethataMember candecide whether ornottomake aconcession, ortocondition
itsnational treatment, ortomodify them lateroninaccordance withArticle XXI;
however, thefreedom andeasiness ofsuchactions isrestricted bytherequirement
ofprogressively higher levelofliberalization together withthestringent requirements
ofnegotiations, compensations, orretaliations foranymodification oftheconcession
inpursuance ofthatArticle. Inanyevent, themodification according toArticle XXI
mustawait thethreeyearrequirement tolapsebefore theMember cantakeanyaction.
Inthelonger terms, therefore, suchactions maynotbeeffective noruseful anymore
totheMember tosafeguard itsinterests duetoemergency situations. Thenon-existence
oftheESMs maycause aMember tobeverycautious, andtometiculously grant only
thoseconcessions which theyconsider theycancopewithshould anemergency situation
arise, which inpractice tendtobeabareminimum aswehavewitnessed inthepast.
Therefore, itwould bemore appropriate orevenmore advisable tothink about the
ESMs asanindispensable tooltotrigger more concession andhigher liberalization
oftrade inservices.
What criteria might bebrought tobearindetermining when anemergency safeguard measure
maybejustified?
2. Anumber ofquestions canbeidentified inrelation tothecriteria thatmight apply in
determining thecircumstances inwhich emergency safeguard measures aretobeused. Thequestions
included below assume thatessentially thesame GATT concepts ofincreased imports, injury and
causality would apply under anemergency safeguards mechanism inGATS.
b. How should serious injury bedetermined? Injury towhom orwhat?
Theserious injury should bedetermined byavariety offactors ofanobjective nature
having abearing ondomestic services suppliers sustaining unanticipated difficulties,
suchastherateandamount oftheincrease inimports ofservices inabsolute orrelative
terms, theshare ofdomestic market byforeign imports; therateandamount ofincrease
offoreign services suppliers; therateandamount ofchanges inthelevel ofsales,
profits, production, capacity utilization, andemployment ofdomestic service suppliers.
What form might asafeguard mechanism forservices take?
3. Ifincreased foreign competition andserious injury todomestic services orservice suppliers
have occurred, andcausality between thetwohasbeen established, aquestion arises astothe
characteristics ofasafeguard measure thatmight beapplied.
f. What should betheduration ofanysafeguard measures adopted?
Theduration should besufficient torectify thedifficulties.S/WPGR/W/15/Add.1
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g. Would safeguard measures bemade degressive during theperiod oftheirapplication?
Itwould bepossible. Some provisions oftheSafeguard Agreement could beapplied
mutatis mutandis inaGATS context.
h. Would aMember taking asafeguard action berequired alsotoadopt adjustment
measures?
Itwould bepossible. Some provisions oftheSafeguard Agreement could beapplied
mutatis mutandis intheGATS context.
i. Would theapplication ofsafeguard measures beaccompanied bycompensatory
adjustments intheschedule oftheMember taking themeasure?
Itwould bepossible. Some provisions oftheSafeguard Agreement could beapplied
mutatis mutandis intheGATS context.