WORLD TRADE  
ORGANIZATION  TN/S/W/56 
S/CSC/W/49 28 November 2005 
 
(05-5634) 
Council for Trade in Services 
Special Session Committee on Specific Commitments Original:   English 
 
  
COMMUNICATION FROM THE REPUBLIC OF KOREA 
 
An Example of Economic Needs Tests
 
 
 
 The following communication, dated 25 Novemb er 2005, from the delegation of the Republic 
of Korea is being circulated to the Members of  the Council for Trade in Services and the Committee 
on Specific Commitments. 
 
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I. INTRODUCTION  
1. Korea has prepared this paper in relation to paragraph 7 of the annotated agenda 
(JOB(05)/109) by the Chairman of the Committee on Specific Commitments dated 15 June 2005, 
which called for an information exchange on the co ncrete operation of economic needs tests (ENTs). 
With a view to facilitating more in-depth discu ssions on the specifications of ENTs and their 
applications, this paper presents a practical exampl e of an ENT inscribed in Korea’s revised offer 
along with some issues to be further considered.  This paper does not prej udge Korea’s final position 
in the on-going services negotiations, in particular, related to the ENTs in the existing schedule as 
well as in the offers. 
II. BACKGROUND 
2. It has been noted that, while Members may main tain the right to use ENTs to regulate trade 
flows in their GATS schedules of specific commitment s, most of the ENTs in Members’ schedules 
provide no guidance concerning the criteria on whic h the tests are based, nor do they describe the 
criteria as set out in the Scheduling Guidelines.
1  Combined with the lack of further elaboration on the 
term “economic needs test” in th e GATS, the absence of clear specifi cations of ENTs has led to the 
criticism that ENTs may have a more or less rest rictive impact on trade depending on the manner in 
which they are implemented.2 Accordingly, deliberation on the de gree of specification of ENTs has 
been called for so as to raise their predictability. 
3. As emphasized in the communication of JOB( 04)/171 by Hong Kong, China, Korea supports 
the idea of further discussing the meaning and criteria for ENTs and sharing experiences and information of their application for transparency purposes. In line with this proposal, Korea has 
inserted the criteria of ENTs in its revised offer as  specified in existing domest ic laws and regulations, 
                                                     
 
1 Para 12, S/CSS/W/118 and Para 3, JOB(04)/171. 
2 Para 1, “Lists of Economic Needs Tests in the GATS Schedules of Specific Commitments,” 
UNCTAD, UNCTAD/ITCD/TSB/8, 6 September 1999 and Para 8, "The Scheduling of Economic Needs Tests 
in the GATS: An Overview," OECD, TD/TC/WP(2000)11/FINAL, 10 November 2000..  TN/S/W/56 
S/CSC/W/49 Page 2 
 
 
 in order to improve clarity, certainty and comparab ility in the scheduling of Article XVI limitations.  
Korea would like to share with Members these cr iteria and invite others to do likewise.  
III. AN EXAMPLE OF ENT 
4. For the ENT on mode 3 MA limitation in wholesale trade services for used cars and gaseous 
fuels and related products, Korea inserted in its  revised offer the following main criteria
3: 
(a) formation of reasonable prices 
(b) the number of and impact on existing supp liers for balance of demand and supply 
(c) healthy development of the industry 
(d) establishment of orderly trade 
(e) population density 
(f) traffic 
(g) environmental pollution 
(h) local conditions and other local characteristics 
(i) public interest 
5. This economic needs test is conducted on a non-discriminatory case-by-case basis, as each 
application for licence or permit/authorization is submitted to the central, local or municipal 
governments. The central, local or municipal governme nts review each application and may reject the 
application if any of the criteria is not satisfied. Unlike the measures of Article VI:4, these criteria are 
currently subject to overall market conditions based  on total demand and supply and their fulfilment 
should be beyond the control  of the affected individual service supplier.4 
IV. RELATED ISSUES FOR FURTHER THOUGHT 
6. ENTs may serve the role of a comfort measure for regulators of host countries, especially in 
sectors where any attempts for opening the domestic  market cause severe political resistance. Once 
the economy reaches a certain level of maturity that allows for free competition in the domestic 
market, perhaps by restructuring the domestic industry, regulators can give more positive 
consideration to the elimination of ENTs.5  
7. If an ENT, typically applied as an ex ante  measure, is to provide more predictability to service 
suppliers, clear specification and enha nced transparency should be assured.6 Once potential service 
suppliers meet the criteria of the ENT and get th e approval for entry, a stable business environment 
                                                      
3 The criteria are inscribed as they exist in the laws and that no further specificity can be demanded. 
4 This distinction has been pointed out in paragraph 7 of S/CSS/W/118. 
5 On the other hand, elimination of ENTs may become more difficult afterwards, once political 
interests build up and strengthen.  Henc e, whether it is better to inscribe ENTs in the first place or not depends 
on the interest relations in each market.  
6 It has been argued that there is no differen ce between an ENT with essentially little or no 
specification on the one hand and an unbound on the other hand. Para 11, JOB(04)/171.  TN/S/W/56 
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 needs to be guaranteed in the local market with in the boundary of the existing criteria and acquired 
rights.  
8. Since a Member is naturally bound in administ ering an ENT by the relevant provisions of 
Article VI,7 that concerned Member would need to en sure that the criteria in its ENTs “are 
administered in a reasonable, objective and impartial manner.”8 Also, with respect to the delay in 
deciding on an individual application under an ENT, a Member would need to inform the applicant of 
a decision “within a reasonable period of time.” 9  Furthermore, its trading partners can challenge any 
rejection of an application for a license, by establis hing that the rejection is not justified on the basis 
of the specified criteria of the ENT.   
9. Therefore, the critical issue is how to decr ease the degree of subjectivity associated with 
ENTs. To the extent that some sectors and modes would remain subject to the application of ENTs 
before being ready to apply less trade-restrictive ways of achieving specific goals, efforts should be 
made to reduce the scope for arbitrary and discrimin atory practices, provide greater transparency and 
specify more neutral economic criteria.10  
 
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7 Para 7, S/CSS/W/118. 
8 Article VI:1 
9 Article VI:3 
10 Para 7, “Lists of Economic Needs Tests in  the GATS Schedules of Specific Commitments,” 
UNCTAD/ITCD/TSB/8, 6 September 1999.