RESTRICTED  WORLD TRADE  
ORGANIZATION  S/WPGR/M/56 
4 July 2006 
 
 (06-3226) 
Working Party on GATS Rules  
  
REPORT OF THE MEETING OF 21 JUNE 2006 
 
Note by the Secretariat
1 
  1. The meeting was chaired by Mr. Trond Gabrielsen, from Norway.  The agenda for the 
meeting, contained in WTO/AIR/2838, included the following items:  emergenc y safeguard measures, 
subsidies, government procurement, date of th e next meeting, and other business.  To assist 
delegations in the preparation of the meeting, th e Chairperson had prepared  an annotated agenda, 
contained in JOB(06)/191.  The agenda was adopted
.   
I. EMERGENCY SAFEGUARD MEASURES (ARTICLE X) 
2. The Chairperson  recalled that at the last formal meeti ng certain delegations had suggested that 
a Note on emergency safeguard measures be prepared , and that he undertake consultations so as to 
outline the contours of a contribution that could meet the acceptance of all delegations.  As a result, he 
had convened open-ended c onsultations on 10 May, at which there was broad support for an informal 
Note from the Secretariat that would summarize the main views expressed on emergency safeguard 
measures since the last extension of negotiations in  March 2004.  Certain dele gations had wished that 
the Note also capture the views expressed prior to th e extension.  However, in the end, the Secretariat 
had indicated that covering the latter part of 2003 would not very significantly change the overall 
picture and, in any event, consultations suggested that some delegations still preferred the March 2004 
cut-off date.  The Secretariat Note had been circulated as JOB(06)/165.  
3. A representative from the Secretariat  introduced the Note.  It was structured along similar 
lines as some previous Notes circulat ed in the Working Party on this topic and referred to such issues 
as "situations justifying the use of a safeguard", "domestic industry", "injury determination" and 
"applicable measures and modal issues".  He stressed  that the Note was a summary of main views and 
it was therefore not a complete inventory of all views expressed, but a tool to assist discussions.   
4. The representative of Malaysia , speaking also for the delegations of Brunei Darussalam, 
Indonesia, Myanmar, the Philippines and Thailand,  commended the Secretariat for the Note.  She 
wished to reiterate some positions and offer view s in areas meriting further examination.  On 
situations justifying an ESM, discussions had been  useful in showing why such a mechanism was 
necessary in the context of services liberalization.  Some situations justifying the use of an ESM had 
been described by proponents in  terms of market share and employment.  Some delegations had 
questioned these examples, but such issues as when an ESM could be used, who would be affected, 
and what situations would trigger it would be deci ded in the course of negotiations.  An agreement 
would alleviate many concerns on ESM.  The di scussion of relevant situations should contribute 
positively to the crafting of rules in practical legal form that would allow for more specific operationalization.  An ESM could act as a safety  net and address concerns about the impact of 
liberalization on the domestic services sector.  It would provide the means to mitigate any adverse 
consequences of liberalization for domestic s uppliers.  During the Uruguay Round, Members had 
                                                     
 
1 This document has been prepared under the Secret ariat's own responsibility and without prejudice to 
the positions of Members and to their rights and obligations under the WTO.  S/WPGR/M/56 
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  recognized the possibility of such adverse conseque nces and had sanctioned the need for negotiations 
on disciplines on ESM.  A mechanism was meant to be used only if there was ser ious injury or threat 
thereof.  If liberalization produced benefits, there w ould be nothing to fear from an ESM and recourse 
would be rare.  The proponents took careful note of Members' suggestions to present more concrete 
examples of situations justifying the use of safe guards against the background of commitments that 
Members were contemplating to offer in this Round.   Proponents were in touch with their regulators 
for such examples.  They urged any Members with re levant experience to share it so as to contribute 
to focused discussions.  Her group of delegations wo uld seek to provide more examples.  This should 
not be for the sake of making hypothetical assumptions , but to contribute concretely to the framework 
of an eventual mechanism.   
5. The representative said that the concept of li mited window was reasonable and felt that there 
was strong convergence within the membership.  Th e details of application were negotiable and 
Members should strive for a compromise.  Her gr oup of delegations was open to ideas and hoped to 
see similar flexibility from others.  With respect to the relationship betw een an ESM and market 
access, she said that nothing in Article X suggested a link.  Howe ver, there was a positive correlation 
because an ESM would provide domestic suppliers  with enough confidence to undertake better 
commitments.  There should not be a pre-cond ition that an ESM be limited to cases of full 
liberalization.  ESM application could not exclude any sector a priori  or be confined to certain sectors 
only.  However, she took note that certain sectors we re more sensitive than others and suggested that 
the relationship between an ESM and progressive liber alization be further explored in these sectors.  
She was also open to examining the correlation in certain modes of supply.   
6. Concerning domestic industry, she pointed out that national definitions varied between 
Members.  This allowed for a variety of approa ches:  (1) a standard multilateral definition;  
(2) different national definitions based on the do mestic regime;  (3) definitions based on "like 
services" determined by investigating authorities on a case-by-case basis, similarly to the goods 
model;  and (4) different definitions for differe nt modes of supply.  Proponents were open to 
Members' views and did not see problems regarding transparency.  Regarding acquired rights, she did 
not consider that the application of a safeguard or  exemptions from acquired rights were inconsistent 
with MFN treatment.  With respect to concerns regarding bilateral investment treaties and the 
application of an ESM on an MFN basis, proponent s did not see how this could be a major concern 
given that the whole of GATS, and not solely ESM, was based on the principle of non-discrimination.   
7. The representative of Indonesia
, speaking also for the delegations of Brunei Darussalam, 
Malaysia, Myanmar, the Philippines and Thaila nd, wished to provide further comments on 
JOB(06)/165.  Regarding injury dete rmination, he believed that this  had to be determined on a case-
by-case basis by the Members seeking to impose a sa feguard.  National economic interests needed to 
be considered in this context.  Such considerati ons were relevant not only for injury determinations, 
but for other aspects as well, such as domestic industry or applicable measures.  With respect to data 
issues, he reiterated that the onus of proof rega rding injury and causality largely rested on the 
domestic industry invoking a safeguard measure.  Concerning applicable measures and modal issues, 
he recognized that enforcing a safeguard in certain modes or sectors might be more difficult than in 
others, but preferred full modal coverage so as to r espect the integrity and architecture of the GATS.  
There was no justification for excluding any mode a priori , as this would raise problems of 
discrimination, effectiveness, and distortion.  Pr oponents acknowledged that certain concerns and 
technical issues needed to be addressed, and were ope n to suggestions.  With respect to duration and 
compensation, he reiterated that an ESM would requi re neither compensation nor pre-authorization.  
He was, however, open to more focused discussions on duration.  Concerning surveillance, he was 
open to suggestions from Members on how to fu rther elaborate this aspect.  A surveillance 
mechanism should apply to safeguards imposed beyond one year.  This should provide an opportunity 
to assess whether the situation still justified the conti nuation of a safeguard.  With respect to special  S/WPGR/M/56 
 Page 3 
 
 
  and differential treatment, the focus on mode 4 was reflecting most developing countries' traditional 
exports interests, but proponents were willing to  explore other elements of S&D treatment.   
8. The representative of Hong Kong, China  thought that JOB(06)/165 was comprehensive and 
captured well key points raised.  He wished to highlight two particular issues.  First, while there had 
been much discussion on technical or feasibility issues, what was most crucial was the fundamental 
question of why an ESM was called for, e.g., in wh at circumstances would a safeguard be justified, 
whom would be protected, and against what woul d protection be provided?   Clear and specific 
answers to these questions would be needed for cr afting any ESM.  While he appreciated that some 
Members might wish to use an ESM, this was not the key question.  He was open to further discussing 
feasibility, but not at the expense of fundamental qu estions.  Simply trying to find ways to address 
feasibility without having answered the fundamental questions would amount to creating a solution 
for an unclear problem and would be an undesirabl e outcome.  Second, he wished to highlight the 
relationship between an ESM and economic integra tion agreements (EIAs), which was particularly 
important to his delegation and had not been highlight ed in JOB(06)/165.  For example, an increase in 
imports might be essentially due to commitments undert aken in EIAs rather than opportunities arising 
out of GATS commitments and injury might therefore arise from the influx of services from EIA 
partners rather than from other WTO Members.  If an ESM were to be applied on an MFN basis, to 
what extent would WTO Members bear the burden of  remedying an injury that resulted from an EIA 
to which they were not party?  He thought this raised important issues of fairness, but also of 
feasibility.  For example, to what extent would a Member be able to determine the origin of the 
imports causing the injury?  These were examples of questions on the relationship between ESM and 
EIA that he was hoping to further discuss.   
9. In reaction to points raised by the delegati on of Hong Kong, China, the representative of 
Thailand  referred to paragraph 4 of the Secretariat No te, which listed proponent s' views on situations 
justifying an ESM.   
10. The Chairperson  invited delegations to turn their attention to a room document from the 
group of ASEAN less Singapore on the definition of domestic industry.  
11. The representative of Thailand , also on behalf of Brunei Da russalam, Indonesia, Malaysia, 
Myanmar, and the Philippines, noted that this contribution aimed to encourage further active 
discussion on the issue of domestic industry.  An ESM was not an instrument only for proponents, but would be available for all Members and he hoped to h ear from the silent majority of delegations.  He 
recognized the benefits of FDI and had no desi re to cancel out efforts to promote economic 
development and investment.  These goals had to be balanced with other objectives, such as the 
development of the domestic industry.  Safeguard measures should not be seen as a protectionist tool, 
but rather as a way to mitigate market liberalization in view of sustainable growth and development.  
Co-sponsors did not attach particular preference to  any options presented in the room document, but 
simply wanted to lay out possible scenarios.  Ther e could be additional optio ns and he encouraged 
delegations to share their views.  Regarding domest ic industry, a sectoral approach might be a more 
practical way to go.  This did not mean that he  was advocating a scheduling approach;  co-sponsors 
believed that other possible components of a future  ESM could apply horizontally, e.g., protection of 
acquired rights or duration.   
12. The representative wished to underscore the assumptions on which the document was based.  
First, domestic industry was commonly viewed as most  relevant to mode 3, but he remained open to 
extend this concept to modes 1 and 4.  Second, the scope of market access on mode 3 was often set by 
relevant domestic investment-rela ted legislations.  Third, such legislations could compromise 
(1) generic, economy-wide, investments laws, incl uding on mergers and acquisitions and competition, 
that addressed the complexity of cross-ownership and (2) sector-specific laws, as was usually the case 
for telecommunications and financial services.  Fi nally, most if not all Members did not have an S/WPGR/M/56 
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  a priori  definition of domestic industry;  the definition would reflect the policy of the time and vary 
from sector to sector.  The situation provided in the room document was hypothetical.  Further, it was not the only situation that could lead a Member to  invoke a safeguard.  The reason for a safeguard in 
the situation presented was to have a longer adjust ment period.  While safeguard measures were not 
the only measures that could be used to redress the situation, they could serve as flanking measures to 
complement other measures.  Construction services were used as an example because it was a diverse 
sector involving a wide range of activities, with SMEs, consortiums and c onglomerates.  Co-sponsors 
came to the conclusion that the definition of domes tic industry could be mult iple.  To avoid legal 
uncertainty for the implementation phase, Members mi ght consider engaging in a notification exercise 
in sectors where specific commitmen ts had been undertaken.   
13. The representative of India
 expressed discomfort with some points concerning domestic 
industry.  In national regimes, this was not some thing that could be defined exclusively for the 
purpose suggested by proponents.  There were much  wider legal connotations.  His delegation would 
not be prepared to have definitions of domestic  industry for the purpose of an ESM.  That was a 
legislative requirement that India could not fulfil.  The representative also had comments regarding 
the situations put forward by proponents.  Situati on A, for example, implied a number of problems.  
First, the difficulties encountered by the industry seeme d to be structural in nature, and not to result 
from commitments.  Second, the injury seemed to have  been caused by precisely those firms that were 
already present on the territory.  If firms that had cau sed the injury were incl uded in the definition of 
domestic industry, however, what wa s one intending to protect?  Furt her, and more fundamentally, the 
way a Member would define domestic industry would determine whether safeguards could be 
meaningfully imposed or not.  If a Members' defi nition included all established suppliers, it would not 
be able to take action against those that had caused  the injury.  On the other hand, if a Member's 
definition limited domestic industry to only certain established suppliers, as in situations B and C, that 
country might be able to take action against th e established suppliers that had caused injury.  
Members might not have the same recourse to an ESM, depending on how they defined domestic 
industry.  This seemed like an aberration.  The r oom document suggested the possibility of proceeding 
sectorally, but this was not the case in India and he was therefore not sure how it could work. 
14. The representative of Pakistan  drew attention to paragraph 6 of the room document, which 
mentioned that a vibrant SME sector was essentia l for promoting sustained economic and social 
development, and that the disappearance of local SME suppliers would result in a less diversified 
economy and greater reliance on imports.  She asked co-sponsors about their definition of SMEs, for 
example in terms of the number of persons employed or financial assets.   
15. The representative of the United States  noted that her delegation still had fundamental 
differences of views with the proponents concerning  the desirability and feasibility of an ESM and 
was satisfied to see that her delegation's views ha d been reflected in JOB(06)/165.  Regarding the 
room document on domestic industry, she shared many of India's concerns regarding discrimination in 
the use of an ESM.  She did not think that the so lutions proposed would bring the Working Party any 
closer to a consensus on a mechanism, should one be agreed to.  Regarding section C of the room 
document on typical rationales for the imposition of an ESM, she also thought that some problems were structural in nature and would have strong concerns if an ESM were used to address such 
situations.  She shared the question from the dele gation of Pakistan on the definition of SMEs, but 
pointed out that local SMEs could also receive i nvestment, which would help generate employment 
and reach other objectives listed in the third senten ce of paragraph 6.  She felt that the document, 
rather than resolving issues previously raised, had generated more queries about why and how an 
ESM might be needed.  Regarding the co-sponsors' concerns about the disappearance of local SME 
suppliers, she found it very difficult to relate such concerns to the notion of a goods-type injury test, 
especially since foreign service suppliers might aid in the development of the economy and help to 
promote the development of different types of suppliers.    S/WPGR/M/56 
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  16. The representative of Chinese Taipei  recalled her delegation's thoughts at the last meeting on 
the definition of domestic industry.  In her vi ew, the definition might vary from case to case 
depending on the services that would need to be prot ected, as well as the mode of supply.  It seemed 
very difficult to have a single definition.  She w ould comment further at a later stage.  She hoped to 
get further explanations from co-sponsors on the rationales for imposing an ESM, especially 
paragraph 6, which touched upon SMEs.   
17. The representative of the European Communities  wished to reiterate that in any trade defence 
instrument, the definition of domestic industry was es sential so as to have clarity and certainty.  While 
the development of a definition in the context of services had faced difficulties, these could not be 
overcome by adopting multiple defi nitions.  They would create even more concerns for her 
delegation.  In particular, the sentence in section 2.A (iv) of the room document, which read "the 
definition of domestic industry will reflect the polic y of a given time and can vary from sector to 
sector" was worrying.  Varying definitions created si gnificant uncertainty and appeared to amount to a 
carte blanche  to change the rules as one wished.  This w as against the spirit of the WTO, which was 
to establish harmonized rules applicable to all Me mbers in a consistent manner.  Her delegation 
therefore could not support the approach proposed in the room document.   
18. The representative of the Republic of Korea , similarly to the delegation of the European 
Communities, wondered how an ESM could be applie d in a non-discriminatory and consistent way if 
the definition of domestic industry varied from sector  to sector to reflect policies of various Members 
at different times.  Regarding the situations pu t forward by the co-sponsors, he wondered about the 
implications for different types of entities, such as joint-ventures, subsidiaries or branches.  The 
representative also enquired about how an ESM would apply in a situation where a mode 1 
commitment was subject to a commercial presence requirement.   
19. The representative of Hong Kong, China  observed that the notion of domestic industry was 
extremely relevant to the question of whom to pr otect, which he had raised earlier.  His delegation 
was willing to look at different ways to define dom estic industry, recognizing that it might not always 
be feasible to adopt a one-size-fits-all approach.  Th ere might be merits in looking at situations across 
different sectors, or case-by-case.  Countries had to have a clear idea of who the stakeholders were and then be consistent in devising an ESM on that  basis.  The scenarios in Part B of the room 
document reflected different views as to who should benefit from prot ection.  However, he was not 
sure that Part C of the document, which discussed rationales for the imposition, was talking about the 
same groups of stakeholders as Part B.  For exampl e, Part B (i) said that country A would consider 
any entity incorporated within its territory as part  of the domestic industry.  This begged the question 
of where the injury was coming from?  From servi ces supplied through other modes?  Who was being 
injured by whom?  Another issue that he wanted  to highlight was that of non-discrimination and 
MFN-compliance.  He was not sure he could agree with earlier comments by the delegation of Malaysia that acquired rights would not lead to MF N inconsistency.  If the safeguard measures did not 
apply to certain established foreign suppliers, th ere would be less favourable treatment for those 
Members that did not have suppliers already present in the territory of the imposing Member.  He asked co-sponsors to elaborate on what they meant by non-discrimination, since paragraph 5 and 6 seemed to suggest a distinction between 'MFN' and 'non-discrimination'.  It was important to know 
how the principle of non-discrimination in th e mandate of Article X was being applied.  
20. The representative of United States
 associated herself with some of the questions asked by the 
delegation of Hong Kong, China, and invited the co -sponsors to elaborate on the meaning attached to 
non-discrimination in paragraphs 5 and 6 of the room document.   
21. The representative of Thailand  hoped to further explore the points raised by India in the 
context of informal exchanges.  He  agreed with the delegation of India that the definition of domestic 
industry would determine the type of safeguard measures that might be taken.  The scenarios S/WPGR/M/56 
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  presented in the room document tried to capture different choices that Members might make.  For 
example, a Member particularly concerned with the impact on investment might chose to adopt a 
definition of domestic industry that encompassed an y entity established, irrespective of the proportion 
of foreign ownership.  His delegation tended, in a preliminary manner, to favour that particular 
approach.  Regarding questions on  SMEs, he did not think that it  was necessary, for the purpose at 
hand, to define what constituted an SME.  The in tention was to allow developing Members to identify 
themselves with the proposal.  On points raised by the delegation of the United States, he indicated 
that the intent was to provide a definition that covered all possible scenarios so that countries could 
reflect their policy choices.  Regarding structural pr oblems, he reiterated that even where the domestic 
industry was requiring structural adjustment, safeguard measures could form part of a broader 
solution and provide breathing space for the affect ed domestic industry.  Unforeseen circumstances 
resulting from liberalization could arise and an ESM was to provide for a temporary suspension of commitments.  When circumstances had change d, countries would again comply with their 
commitments.  In response to points made by the delegations of the European Communities and the Republic of Korea, he thought that the issue of le gal certainty could be solved through his group of 
delegations' proposal for a pre-notification of defi nitions.  Concerning points made by the delegation 
of Hong Kong, China, he said that what was to be protected was the sustainability of market 
liberalization.  Responding to comments from dele gations of Hong Kong, Ch ina and the Republic of 
Korea, he thought that the concept of like servi ces remained paramount, for example whether services 
provided under modes 1 and 3 were like.  
22. In concluding, the representative wished to hi ghlight a dilemma he was facing.  In the 
plurilateral and bilateral negotiations, the issue of majority foreign equity participation had often 
come up.  The request to allow up to 51% foreign equity had to be entertained in the context of 
whether there was an ESM, so as to get appropria te policy comfort.  Currently, commitments often 
did not reflect the actual regime in place because policy makers felt that they needed such a margin of 
safety.  An objective of an ESM was to address the gap between what a country was able to offer and 
what the situation on the ground was.   
23. The representative of Malaysia
 felt that it was hard to discuss the issue of domestic industry 
without touching upon acquired rights.  She did not  think that distinguishing among suppliers on the 
basis of a particular definition of domestic indus try amounted to MFN discrimination.  The criterion 
was not based on the foreign origin of the supplie r, but rather on when companies had entered the 
market.   
24. The representative of China  thought that the room document contained useful information and 
was conducive to further focused discussions.  She wanted to offer a preliminary comment.  In 
paragraph 5, the co-sponsors indicated problems th at the proposed ESM was supposed to address, 
namely excessive market competition, over-invest ment and lagging resource reallocation which 
threatened the stability of market liberalization.  Sh e considered that the nature of services trade - the 
majority of which was carried out through mode 3 - explained that the problems that an ESM was 
supposed to address were different from those th at a goods safeguard might address.  The ESM 
concepts in the goods context might not always be applicable in services.   
25. The representative of the Philippines  wished to provide information on informal exchanges 
organized by the proponents on the issue of ESM.  The Working Party then turned to informal  mode.   
26. In concluding the discussion, the Chairperson  noted that the Secretariat Note had elicited 
some detailed comments, especially from ASEA N minus Singapore.  Other delegations had 
emphasized the importance of looking at the link between EIAs and ESM, as well as clarifying fundamental questions on the need and purpose of an ESM.  The room document had provoked 
comments from various delegations and some had i ndicated they would provide views at the next 
meeting.  He proposed that the Working Party take note
 of comments made.    S/WPGR/M/56 
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  II. SUBSIDIES (ARTICLE XV) 
27. The Chairperson  invited Members to continue their discussion on elements of a possible 
working definition in light of the proposal by a group of Members in JOB(05)/96.  What elements need to be added, modified or withdrawn?  The stated purpose of a working definition was to help the information exchange; a detailed definition agreed by  all was not a prerequisite since Members were 
free to use their own definition, but a broad unde rstanding on key elements might provide useful 
guidance in compiling information.  Regarding the information exchange, a number of suggestions 
had been made in past meetings to encourage pr ogress, including the diffusion of national sources of 
information by delegations.  As indicated in the annotated agenda, he inv ited delegations to share 
information on the obstacles they had encountered so that possible solutions could be explored.   
28. The representative of the United States
 believed that many questions remained concerning a 
working definition of subsidy, which impeded the effectiveness of the information exchange.  In 
examining the proposal contained in JOB(05)/96, her delegation had raised a number of questions 
relevant to the discussion and she wished to introdu ce a few at this meeting.  These and additional 
questions would be provided soon in writing.  Th e representative remarked that only cross-border 
supply of services, mode 1, was comparable to in ternational trade in goods.  Transactions involving 
modes 2, 3 and 4 generally took place when the ser vice providers and consumers were in the same 
market.  How did the existence of different modes a ffect the definition of a service subsidy?  Were 
there aspects of the definition contained in th e Agreement on Subsidies and Countervailing Measures 
(ASCM) that needed to be refined to make them mo re applicable to the services context?  What were 
the implications of the requirement in the proposed definition that a subsidy measure should be within 
the scope of Article I:3(a), for example a financia l contribution granted by central, regional or local 
governments and authorities as well as non-governmental  bodies in the exercise of delegated powers?  
Were there special implications because of the ex istence of private associations and self-regulatory 
organizations?  Another member of her delegation wished to give a flavour of some difficult questions 
that his delegation kept coming upon and strugglin g with.  The definition proposed in JOB(05)/96 
suggested that the term benefit should be evalua ted by determining whethe r a measure was provided 
on terms available to the recipients in that mark et.  The Working Party might want to consider 
whether this approach was suitable for evaluating subsidies to certain types of industries where 
traditional market benchmarks might not exist, fo r example education, environmental, or health 
services.  Did the nature of certain services sectors require modification or clarification to the definition provided for under the ASCM in order to measure a benefit?  He observed that the 
definition of subsidy in the ASCM, as well as the definition proposed in JOB(05)/96 provided for an 
exclusion for general infrastructure.  However, th e proposed definition also excluded the provision of 
public services by the government.  Under the ASCM, the provision of public services could constitute an actionable subsidy in certain circumstan ces.  This could lead to incongruous results with 
respect to exactly the same financial contribution, wh ether looked at through the lens of the ASCM or 
the GATS.  How did the Working Party suggest addressi ng the issue of public services in that regard?   
29. The representative of Hong Kong, China
 thought that the annotated agenda provided useful 
points on how to structure the discussion.  He saw three separate tracks on this topic.  The first was 
the mandated information exchange, as highlighted in the Hong Kong Ministerial Declaration.  Some ideas merited further examination, such as the suggestion by the European Communities that 
delegations communicate to the Secretariat sources of information on their subsidy regimes.  The 
Working Party should also be attentive to other s ources of information, such as studies done by other 
organizations.  He noted that the Secretariat ha d already provided a list of studies done by other 
international organizations, circulated as S/WPGR/W /47, which he was still examining.  He recalled 
that proponents had made many suggestions in the p ast to facilitate the information exchange and to 
address problems that other delegati ons had highlighted as obstacles, for example suggestions to start 
with a partial exchange of information, with certain  sectors only, or with the information contained in 
Trade Policy Reviews.  Proponents had also referre d to the ASCM definition as a possible starting S/WPGR/M/56 
Page 8  
 
  point and proposed that Members develop their own definitions.  He enquired whether certain 
delegations were still uncomfortable with the inform ation exchange despite all these options available 
to them.  The last two possible obstacles mentioned in the annotated agenda, i.e., concerns about how 
the information would be used and concerns that  other Members would not reciprocate in providing 
information, might merit further reflection.  He  hoped to know whether these were the real reasons 
that were hindering delegations and suggested that  the Chairperson consult with delegations to 
explore their actual motives. 
30. Concerning the definition, the representative indicat ed he would come back at a later time to 
the questions suggested in the annotated agenda, which he found useful.  Engaging in a thematic 
discussion on the basis of the Secretariat's synth esis Notes and Members' proposals could help make 
headway.  The synthesis Notes provided a good struct ure to organize discussions.  He suggested that 
the Working Party embark upon such a thematic di scussion at the next meeting.  With respect to 
questions raised by the delegation from the Unite d States, he acknowledged that a key difference 
between goods and services was the existence of four  modes of supply in services trade.  While goods 
trade was similar only to mode 1, the definition in the ASCM was not tied to that particular mode.  
What elements in the ASCM definition or in the pr oposed definition were preventing its application to 
other modes of supply?  The issue of definition had to be distinguished from that of possible disciplines, where modes of supply might be relevant .  Regarding the reference to Article I:3(a), the 
definition proposed in JOB(05)/96 reflected the fact that he expected the scope of subsidies to cover 
only those measures that would fall within the sc ope of the GATS.  A working definition did not 
prejudge the final outcome of the negotiations.  He would further reflect on questions relating to the 
concept of beneficiary and public services.  With  respect to questions on the concept of general 
infrastructure, the co-sponsors of JOB(05)/96 had wa nted to prompt a debate as to whether public 
services, especially when made available to the pub lic in general, should be  captured as financial 
contributions or not.  For the purpose of a worki ng definition, the co-sponsors would be open not to 
consider them as financial contri butions.  He recalled that, in the plurilateral negotiations, there were 
some situations in which subsidies for the supply of public services were mentioned as key elements.  
To what extent should one try to capture these in the definition?  He would come back to this at the 
next meeting.  In terms of possible future contributions, he had been examining three aspects that might not need to be subject to disciplines, and hoped to elaborate on how the concepts of green-box or non-actionable subsidies might also be relevant  in the services context.  The focus could be on 
subsidies used to meet certain essential public policy objectives, for instance in education, health or 
audiovisual services.   
31. The representative of Colombia
 felt that the questions put in the annotated agenda helped to 
encourage discussions.  He supported the views e xpressed by the delegation of Hong Kong, China, 
and hoped that the Chairperson, after conducting consultations, would examine the possibility of 
calling informal meetings to further discuss these is sues.  The potential for progress should be greater 
than it had been in the past.   
32. Regarding the definition contained in JO B(05)/96, the representative of China  asked what was 
meant by "government goods and services" in paragra ph 3(d) of the Annex.  With respect to the 
information exchange, she noted that certain Me mbers had scheduled subsidies in sector-specific 
commitments and asked the co-sponsors whethe r they were expecting Members to provide 
information only on those or also on non-scheduled subsidies. 
33. The representative of Switzerland  recalled that his delegation had many times shared its views 
on the information exchange and asked whether the delegation of the United States could provide its 
questions in writing.  The representative of the United States  said that the questions he had put 
forward were a preview of a communication that his delegation hoped to circulate shortly.    S/WPGR/M/56 
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  34. The representative of Hong Kong, China  said that paragraph 3(d) of the proposed definition 
covered something already contained in the ASCM definition.  Regarding the information exchange, 
he recalled that he was not proposing such an exch ange;  this was mandated by Article XV.  He was 
simply suggesting a working definition to facilita te the process of exchanging information without 
preventing any delegation from using its own defi nition.  The mandate called for exchanging 
information on all subsidies regardless of wh ether they were scheduled or not.   
35. The representative of China  asked the Secretariat to clarify the background of Article XV.  
Were Members expected to provide informati on on all subsidies, whether scheduled or not? 
36. A representative of the Secretariat  said that the intention at the drafting stage of Article XV 
was to cast the net on the exchange of information as wide as possible.  This had been done in full 
awareness that there was no definition of subsidy in  GATS, and it was left to Members to look into 
their own subsidy programmes and use their own defin ition.  The approach ultimately agreed to was 
that Members go back to their authorities and look into  all kinds of information that might be useful 
for this process and notify, even if in doubt.  Th e objective was to shed light on existing subsidies 
since there was a serious information deficit rega rding the subsidy schemes that governments applied 
in different areas of services and the underlying po licy objectives.  The intention was to take an 
approach as broad as possible for the benefit of the information exchange.  
37. The Chairperson  said that, unless Members felt otherwi se, he would conduct consultations 
with Members so as to get a clearer sense of r easons that had hindered their participation in the 
information exchange and would later report to th e Working Party.  Regarding the suggestion to 
engage in a thematic discussion, he would con tinue consultations with those Members that had 
expressed particular concerns in that regard to see wh at could possibly be done for the next meeting.  
He proposed that the Working Party take note  of comments made.   
III. GOVERNMENT PROCUREMENT (ARTICLE XIII) 
38. The Chairperson  invited delegations to discuss a new Communication from the European 
Communities, circulated as S/WPGR/W/54, which pro posed a legal text for an Annex to the GATS on 
government procurement. 
39. The representative from th e European Communities  said that the proposal built on previous 
proposals from his delegation in 2002, 2003, 2004 a nd 2005.  In 2002 and 2003, his delegation had 
underscored the importance of trade in services in the context of government procurement, especially 
with regard to market access commitments.  The EC  had then started to develop the contours of 
possible rules regarding procedures and the undertak ing of commitments.  In 2004, his delegation had 
attempted to show, through conc rete examples, how commitments on government procurement could 
be undertaken as part of schedules of commitment s.  In 2005, attention had focused on rules of 
procedures and the Communication from the EC had pr ovided the structure of what might constitute 
an annex to the GATS.  His delegation's most recent Communication, which he was now presenting, 
proposed the text of such an annex.  This w as in conformity with the Hong Kong Ministerial 
Declaration, which called on Members to engage in mo re focused discussions and, in that context, to 
put greater emphasis on proposals by Members.  The proposed annex took into account past discussions in the Working Party as well as other communications such as that from Singapore in 
2004.  His delegation had attempted to limit the pr oposed annex to essential provisions, without trying 
to be too complex.  Such provisions were inspired by the analysis of provisions contained in EIAs by 
the Secretariat.  The Notes had shown that governme nt procurement provisions in EIAs tended to be 
broadly the same.  His delegation had tried to achieve the greatest possible coherence with the 
provisions of the Government Procurement Agreemen t (GPA), so that parties to that plurilateral 
agreement would not encounter difficulties in conf orming to the proposed annex.  His delegation had 
also attached importance to introducing flexibilities for developing countries.   S/WPGR/M/56 
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  40. The representative wished to highlight key aspect s of the proposed annex.  Titles 1 to 7 
concerned general principles, while subsequent titl es related to procedural rules and were more 
technical in nature.  The annex recalled the rele vant context, namely the mandate contained in 
Article XIII:2, and confirmed that all provisions of  the GATS applied to gove rnment procurement in 
services, with the exception of Articles II, XVI and XV II.  Title 2 provided definitions of a number of 
terms used in the text, including open, selectiv e and limited tendering procedures.  It defined 
"procuring entities" as those entities listed in the schedule of commitmen ts of Members.  This was an 
important point because the Working Party had discu ssed in the past whethe r to use the definition 
contained in Article I:3(a) of the GATS or a more restrictive list.  His delegation thought that most 
Members would undertake commitments on the basis of a more precisely defined list of entities.  
Accordingly, his delegation accepte d that covered entities would be those that each Member would 
inscribe in its schedule.  Title 3 related to the scope of application.  Paragraph 3 recalled that the scope 
of the annex was defined in accordance with Article  XIII:1.  For the purpose of clarity, it was added 
that actions of entities, including individual proc urements, were also subject to the provisions, 
especially those from Title 8 onwards.  Paragraph 4 addressed situations where the procurement 
involved both goods and services.  Paragraph 5 prov ided the possibility for Members to undertake 
commitments on government procurement as additional commitments.  Paragraph 6 indicated that the 
provisions of the Annex only applied to sectors where specific commitments were undertaken, and 
with limitations listed, with the exception of paragraph 16 which provide d for most-favoured-nation 
treatment.  MFN would therefore apply independently  of whether commitments had been undertaken.  
Paragraph 7 dealt with situations where the pr ocurement involved more than one service sector.  
Paragraph 8 contained provisions fo r procurement relating to activities of an entity that would be 
exposed to competition.   
41. Title 4 dealt with exclusions and exceptions a nd aimed to be coherent with GATS provisions 
in that regard.  Title 5 on S&D treatment for deve loping countries foresaw two types of flexibilities, 
additional to the built-in flexibility concerning the scheduling of commitments.  The first one would 
allow for offsets or price preference programmes for a limited period of time.  The second element 
would be a transition period to bri ng measures into conformity with  the provisions of the annex.  
Title 6 was key because paragraph 15 contained a na tional treatment obligation and paragraph 16 an 
MFN obligation, with the possibility to take MFN exem ptions upon the entry into  force of the annex.  
Paragraph 16(c) provided a specific derogation according to which preferential treatment that GPA parties might grant each other would not be extended to all other WTO Members.  Title 6 also 
included provisions on procurement methods that could be followed, on the use of electronic means as 
well as on rules of origin, and specified that offset s could not be used except in the context of S&D 
treatment.  Title 7 indicated that the provisions  of the annex applied to procurement beyond a 
threshold value that would be inscribed in each Me mber's schedule.  This was an additional element 
of flexibility.  Nevertheless, it seemed important to reduce the number of different thresholds to the 
minimum.  In EIAs, there was a threshold for construction services and another one for all other 
sectors.  Members' thresholds should be as harmonized as possible.   
42. Other titles included provisions regarding the publi cation of information in appropriate media, 
as well as the publication of notices of intended proc urement and notices of planned procurement.  
Title 9 foresaw special flexibility for entities operati ng in the utilities sector with respect to such 
notices.  Title 10 related to information on inte nded procurement, including the completeness of 
tender documentation, the obligation to respond to re quests for relevant information, and provisions 
on technical specifications.  Title 11 included some common rules on conditions for participation, including some specific rules for selective tende ring and multi-use lists.  Title 12 concerned time 
limits.  The annex proposed delays, of 40 days in  general, between the publication of a notice of 
intended procurement and the final date for the s ubmission of tenders.  De lays of an additional 
25 days would be allowed in cases involving procedur es of pre-qualification.  Title 12 also provided 
for derogations.  These corresponded to provisions existing in a number of agreements.  Title 13 
provided the possibility of conducting negotiations.  Title 14 specified rules for limited tendering,  S/WPGR/M/56 
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  including conditions under which such methods coul d be used.  Title 15 asserted basic principles 
relating to the treatment of tenders and award of contracts, notably the possibility to have award 
criteria other than simply relating to the price.  Title 16 dealt with information to be provided to 
suppliers, including with regard to outcomes of th e award process and explanations relating to the 
rejection of tenders.  Title 17 focused on domestic review, which had previously been discussed in the 
Working Party.  Delegations had discussed whether the provisions of Article VI:2 of GATS were 
sufficient, or not, to address such situations for government procurement.  Without prejudging ongoing discussions on domestic regulation, it seemed interesting to develop, based on provisions 
contained in other agreements, rules on review pro cedures specifically for government procurement.  
Among other things, this permitted th e adoption of interim measures and corrective actions, including 
compensation for suppliers.   
43. The representative of Switzerland
 believed that the proposed annex contained the essential 
rules.  It provided sufficient fl exibility and was less elaborated and complicated than the GPA, 
therefore serving as a good basis for further discu ssions.  Regarding the link between the proposed 
annex and the GPA, he asked how the signato ries of the GPA could transpose their GPA 
commitments into the proposed annex, and conversel y.  He observed that the EC was now proposing 
that government procurement commitments be inscrib ed in the column of the schedule reserved for 
additional commitments, rather than in a supplemen tary column.  His delegation could support such 
an approach.  He would come back w ith further comments at a later stage. 
44. The representative of Brazil  wished to reiterate his delegation's previously expressed position 
on the mandate contained in Article XIII.  He believe d that Articles II, XVI and XVII were not part of 
the negotiations on this topic in the Working Party.   
45. The representative of Mexico  supported the views expressed by Brazil.  Divergent opinions 
remained on the question of the mandate, and no conc lusion had been reached.  The proposal by the 
European Communities seemed precipitated.  The pr ovisions mentioned by Brazil did not apply, and 
he would discuss only issues relating to transparency.  
46. In a preliminary manner, the representative of Hong Kong, China  said that, since his 
government was party to the GPA, many of the proc edural rules appeared familiar, and his delegation 
would look at them in a positive light.  He soug ht clarification from the delegation of the EC 
regarding paragraph 16 of the proposed annex, wh ich pertained to MFN.  Some of the language 
resembled the text in Article II of the GATS, but  was not exactly the same.  He wondered why the 
proposed annex did not stick to the text of Article II.  For instance, it provided for the possibility to 
take MFN exemptions, but did not refer to the GATS Annex on Article II Exemptions.  Regarding 
paragraph 16(c), which constitute d a derogation for preferential treatment among GPA parties, he 
asked how reciprocity provisions in the GPA would be reconciled with the proposed annex.  Did it 
mean that any commitment made pursuant to the annex would prevail over any kind of reciprocity 
condition under the GPA?  Given the experience with  MFN exemptions under the GATS, he would be 
very cautious with any kind of new MFN exempti ons, especially since the ones proposed in the annex 
seemed even more open-ended.  Hi s delegation would also be wary of any exceptions for reciprocity 
because it feared that Members with such conditions  might not be induced to make commitments.  He 
would come back to this proposal at the next meeting.   
47. The representative of the United States  appreciated that the text proposed by the European 
Communities reflected work being undertaken in the Government Procurement Committee to revise 
the GPA.  Although her delegation could not examine the document in full detail, it appeared to be a 
useful reference.  She had previously highlighted  that the GPA did not differentiate between goods 
and services regarding the rules governing procuremen t.  While a definitional distinction between 
goods and services procurement could be made, the larger question was whether drawing such a 
distinction was worthwhile.  Her delegation was wil ling to continue to engage, but was not confident S/WPGR/M/56 
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  that a consensus would be emerging soon.  The pro posed text indicated that numerous issues would 
need to be addressed in any government procurement annex.  Those Members that were parties to the 
GPA were familiar with these rules and the issues underlying them, but considerably more time would 
be needed for non-GPA parties to examine them.  Addressing government procurement appropriately in services might require a longer-term work programme.   
48. The representative of Pakistan
 and Egypt  lent support to the interventions made by the 
delegations of Brazil and Mexico .  The representative of Egypt  reiterated his delegation's position 
regarding the scope of the mandate under Article XIII and expressed c oncerns about the path that the 
discussions were taking.  In the absence of a minimum level of consensus among Members on the 
scope of the mandate, attempts to shift to a text-based discussion would lead nowhere.  The 
representatives of the Bolivarian Republic of Venezuela  and Cuba  supported the interventions of 
Brazil, Pakistan, Mexico and Egypt.   
49. The representative of the Dominican Republic  said that the Working Party did not have a 
mandate to examine proposals dealing with market access and supported previous interventions.  The 
representative of Argentina  concurred.  He recalled that his delegation had expressed the same views 
every time that the European Communities had presented a Communication on government 
procurement in the Working Party in the last few years.   
50. The representative of Canada  said that her delegation would provide substantive comments at 
the next meeting.   
51. The representative of the European Communities  commented that it could not be said that 
there was no mandate.  The mandate in Article XIII:2 had been confirmed through the Hong Kong 
Ministerial Declaration, which asked Members to intensify discussions on the basis of contributions 
from Members.  There had not been a variety of di vergent contributions so far.  Article XIII:1 said 
that Articles II, XVI and XVII did not apply to  procurement, thus implying that other GATS 
provisions applied.  In that context, the manda te in Article XIII:2 necessarily pertained to these 
aspects that had been excluded from GATS application.  If the intent had been to exclude Articles II, 
XVI and XVII from the negotiations, it would have been stated clearly.  Even if that was not the case, 
there would be a number of other provisions which Members could discuss.  Saying that nothing on government procurement could be discussed would empty the mandate of any meaning.  With respect to questions on the relationship with the GPA, he indicated the proposal aimed at coherence.  The provisions of the annex were intended to be such th at parties to the GPA could comply automatically, 
at least with regard to procedural rules.  Con cerning commitments, parties to the GPA would likely 
undertake commitments in the GATS that reflected so me of the commitments that they already had 
contracted under the GPA.  The proposed MFN derogation for the GPA did not apply solely to obligations that GPA parties could have with each  other from a collective standpoint, but also to 
reciprocal commitments among a limited number of GPA parties.  Coherence between the proposed 
GATS annex and the GPA was also achieved through th e exclusions.  Title 4 aimed at reproducing as 
clearly as possible the respective exclusions found in the two agreements.  The annex was not meant 
to be more constraining than the GPA.   
52. Regarding the MFN obligation, the representativ e felt that it should apply to all services 
sectors irrespective of whether commitments had be en undertaken.  This seemed to correspond to the 
views expressed by delegations in previous discussions.  MFN exemptions would be permitted 
because Article II did not apply to government pr ocurement at the end of the Uruguay Round.  
Regarding points raised by the delegation of Hong Kong, China, he thought that introducing in the 
draft annex a direct reference to Article II might prove difficult since the timelines for the undertaking of exemptions would be different, but he was ope n to further discussions.  With respect to the 
comment about the use of the additional commitme nts column to undertake government procurement 
commitments, he recalled that in previous proposal s the EC had proposed, for reasons of clarity, that  S/WPGR/M/56 
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  procurement commitments be inserted in a supplemen tary column in schedules.  However, he took it 
from past discussions that certain delegations had a degree of scepticism about adding a new column 
and preferred that the additional comm itments column be used instead.   
53. The Chairperson  invited delegations to pursue their exam ination of this proposal at the next 
meeting given the recent circulation of the document.   He proposed that the Working Party take note  
of comments made.   
IV. DATE OF THE NEXT MEETING 
54. The Chairperson  suggested that the next formal meeting be held during the next cluster of 
services meetings.    
V. OTHER BUSINESS 
55. No items were raised under this agenda item.   
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