RESTRICTED  WORLD TRADE  
ORGANIZATION  S/WPGR/M/65 
5 November 2009 
 (09-5524) 
Working Party on GATS Rules  
  
 
REPORT OF THE MEETING OF 6 OCTOBER 2009 
 
Note by the Secretariat
1 
  
1. The meeting was chaired by Mr. Felipe Lopea ndia from Chile.  The agenda for the meeting 
was contained in WTO/AIR/3429.  The agenda was adopted
.       
2. The Chairman  reported on his informal consultati ons on emergency safeguard measures 
(ESM), government procurement and subsidies, and provided an assessment of what he saw to be the 
current situation in the negotiations.  He noted that he had been cons ulting delegations on the 
organization of future work in fulfilment of th e GATS Rules mandates.  Based on these consultations, 
a first round of informal technical discussions on sel ected topics had been completed.  The Chairman 
underscored that it would be his intention to continue with these technical discussions, as many fundamental issues and questions remained open.  In this connection, he stressed that Members had to 
keep in mind that the purpose of the technical work was to facilitate the conclusion of negotiations in 
accordance with the Hong Kong Ministerial Declarat ion and the respective GATS Rules mandates.   
3. On subsidies, the Chairman noted that very  recently, several delegations, had repeatedly 
called for more work to be undertaken on developing  disciplines to avoid the trade-distortive effects 
of subsidies in services.  Of all the GATS Rules subj ects, he felt that subsidies had received relatively 
little negotiating interest from Members.  He highlight ed that over the last 15 years of discussions by 
the Working Party, no delegation had submitted any communication concretely identifying the nature 
of the distortions that needed to be addressed, nor the subsidy disciplines required.  Discussions 
amongst Members, which had been limited, had fo cused on the exchange of information and a 
provisional definition for subsidies in services.  Ho wever, so far, only five Members had responded to 
the questionnaire approved by the Working Party in 1997 for information exchange.  While a 
provisional definition of subsidies had been proposed, discussions had, so far, been inconclusive.  He 
hoped to receive from delegations the necessary inputs  that are needed to energise the negotiations on 
subsidy disciplines.  It was stressed that unless input s were received from delegations on the nature of 
the problem to be addressed and the means for doing so, little progress could be expected.  
Delegations wishing to intensify work in this ar ea were urged to submit their inputs specifying how 
the trade-distortive effects of subsidies might be addressed.  
4. On ESM, the Chairman believed that th e situation was qualitatively different.   He recalled 
that over the years, a group of Members had consistently  provided inputs relevant to the consideration 
and formulation of a safeguard mechanism.  It was noted that there had been substantive and technical 
discussions on various aspects of the proposals submitte d.  Indeed,  ESM had been the item to which 
most time has been devoted in the Working Part y.  However, the Chairman underscored that the 
amount of time spent did not indicate that substan tial progress had been achieved.  Members remained 
divergent on issues as fundamental as the desirabilit y and feasibility of an ESM.  However, unlike the 
negotiation on subsidy disciplines, the ESM discuss ion had not suffered from a lack of substantive 
                                                     
 
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/65 
Page 2  
 
  inputs.  While further technical work, such as on the "definition of domestic  industry" could help 
clarify important issues, ultimately, the Chairman was of the view that to move forward in the 
negotiations, Members had to have the political will to  reach an outcome, irrespective of what that 
outcome might be.   
5. With regard to government procurement, the Ch airman recalled that a proposal to establish a 
GATS Annex on Government Procurement in Serv ices had been on the table for some time.  
However, despite the existence of an elaborated  proposal on government procurement in services, 
Members had not engaged substantivel y on its content.  He noted that informal technical discussions 
had been launched to provide Members the opportunity  to go further into specific elements of the 
proposal, and that he would be willing to continue with such consultations.  The Chairman felt that 
while technical work remained important and necessar y, it would not be sufficient in itself.  He 
stressed that a fundamental difference existed between Members on the ultimate objective of the 
negotiations mandated under Article XIII.  In his view the negotiations on government procurement, 
as with the other GATS Rules subjects, could only m ove forward if Members had the political will to 
find a common basis for proceeding.  The Chairman ur ged delegations to keep the questions that he 
had posed on the overall situation in mind, as wo rk was undertaken to conclude the GATS Rules 
negotiations.  
6. The representative of Argentina
 appreciated the views expressed by the Chairman on the 
overall situation in the GATS Rules negotiations and not ed that it was familiar to delegations.  At the 
last informal meeting of the Council for Trade in Se rvices in Special Session, Argentina had stressed 
that the negotiations on services should not be based exclusively on market acc ess and that there were 
other mandates to be fulfilled.  The mandates for the GATS Rules negotiations stemmed not only 
from the Hong Kong Ministerial Declaration but we re built into the GATS itself.  Indeed, these 
negotiations which pre-dated the launch of the D oha Round, had been on-going for many years with 
no result achieved.  Argentina was of the view that  Members were not meeting the requirements of 
the GATS Rules mandates.  As was pointed out by the Chairman, few contributions had been 
submitted on the trade-distorting effects of subsidies in services.  Nevertheless, in the reports by the 
Director-General on trade-related developments there are examples of subsidies that could distort trade in services, particularly in terms of s upport given to the financial and banking sector.  
7. The representative of Switzerland
 concurred with the assessment provided by the Chairman 
on the overall GATS Rules situation.  Switzerland underscored that a distinction should be made 
between those subjects for which lack of progress had b een due to a lack of involvement on the part of 
Members, and those for which there had been in tensive involvement but positions could not be 
reconciled.  It was pointed out that apart from the degree of involvement, another factor was the 
substantially different mandates for the three GATS Rules subjects.  Switzerland urged Members to keep these differences in mind, as the mandates are th e basis for the discussions in the Working Party.  
8. The representative of India
 expressed appreciation for the assessment of the Chairman on the 
GATS Rules situation.  India believed that Members need to contribute to the task of developing 
disciplines on the trade-distorting effects of subsid ies.  It noted that work on developing such 
disciplines, as mandated by Article XV of the GA TS and the Hong Kong Ministerial Declaration, had 
been complicated by the lack of a clear definition of  subsidies in services, as well as data.  It had also 
been conceptually difficult to deal with the various modes of supply for trade in services.  
Nevertheless, several studies, as well WTO Trade Policy Reviews, had previously recorded the 
prevalence and scale of subsidies pr ovided by some countries to their service suppliers.  Subsidies 
diminished the value of many of the liberalization commitments that may have  been undertaken by 
Members.  As developing countries steadily climbe d the value chain in services, it was even more 
critical for Members to examine the effects of subsidies on competitiveness  and economic growth.  
India was especially concerned by the recent multi- billion dollar bailouts that had been provided by 
some countries to their financial institutions.  In dia believed that such bail-outs erode existing  S/WPGR/M/65 
 Page 3 
 
 
  liberalization commitments.  An urgent task faci ng Members was the finalization of the definition of 
subsidies in services.  The lack of a definiti on had impeded the inform ation exchange process 
amongst Members.  India recognized the need to ta ke into account the role of subsidies in the 
development programs of developing countries, and th e need for flexibility, especially for developing 
country Members.  India supported the effort to negotiate multilateral disciplines in subsidies and 
sought the cooperation of all Members in this endeavour.  
9. The representative of Pakistan  concurred with the assessment provided by the Chairman.  
Pakistan highlighted a fourth dimension to the ne gotiations, which was that since the mandates for all 
three subjects are built-into the GATS they should be  taken on their own merit and delinked, as much 
as possible,  from the market access negotiations.  
I. NEGOTIATIONS ON EMERGENCY SAFEGUARD MEASURES UNDER 
ARTICLE X OF THE GATS   
10. The Chairman  noted that during the last meeting of the Working Party on 22 June 2009, a 
communication was received from the delegation of China on the issue of a "limited window of ESM", as contained in JOB(09)/56.  He also highlighted that he had circulated an informal Chairman's 
Note on the definition of domestic industry, the discu ssions of which were being pursued informally.  
11. The representative of the Philippines
 on behalf of the delegations of ASEAN (less Singapore) 
underscored the political and economic importance th at ASEAN attached to the ESM negotiations.  
Work on this issue continued to be fundamental for the proponents, not only in the WTO, but also in the context of ASEAN and the APEC Group on Services.   The Chairman was requested to convey this 
position to the Ministers during the forthcoming 7
th Ministerial Conference of the WTO, should he be 
required to report on the GATS Rules negotiations.  It was further noted that should the Doha 
Development Agenda come to some closure a cr edible outcome in ESM would be needed.  The 
proponents were gratified by the continuing constr uctive nature of the discussions in the Working 
Party and other forums, and appreciated the r ecent consultations held by the Chairman.  
12. The representative of Malaysia  associated itself with the stat ement read by Philippines on 
behalf of ASEAN (less Singapore).  In addition, Ma laysia noted that as one of the proponents of 
ESM, it hoped that equal treatment would be given to  the subject as compared to the market access 
and domestic regulation nego tiations.  It was underscored by Malaysia that the establishment of an 
ESM was a "pre-nuptial" that it would want before binding any commitments. 
13. The discussions continued in informal mode .  
II. NEGOTIATIONS ON GOVERNMENT PROCUREMENT UNDER ARTICLE XIII 
OF THE GATS 
14. The Chairman  recalled the communication from the European Communities on a draft GATS 
Annex on Government Procurement in Services, as c ontained in S/WPGR/W/54.  He noted that this 
proposal had been discussed in the informal segm ent of the meeting together with the updated 
Secretariat Note on "Government procurement -related provisions in economic integration 
agreements" (S/WPGR/W/49/Add.1).  As no further interventions were  made under this agenda item, 
the Chairman indicated that he would continue w ith his informal technical discussions on the proposal 
contained in S/WPGR/W/54.  
III. NEGOTIATIONS ON SUBSIDIES UNDER ARTICLE XV OF THE GATS 
15. The Chairman  underscored that several Members, at previous me etings, as well as in other 
WTO bodies had called for more focused work on de veloping necessary disciplines to avoid the trade-S/WPGR/M/65 
Page 4  
 
  distortive effects of subsidies.  He asked for guida nce from these delegations on how work in this area 
could be advanced.  In this connection, he noted th at he had circulated to delegations an informal 
Chairman's Note, as contained in JOB(09)/95, recalling past discussions and proposals on a provisional definition for subsidies.   
16. The representative of Switzerland
 made a distinction between the exchange of information 
mandated under Article XV of the GATS and the de velopment of disciplines to avoid the trade-
distortive effects of subsidies in services.  In term s of information exchange, the mandate was clear.  
It was therefore regrettable that  this requirement was not being fulfilled by Members.  Switzerland 
stressed that there was no prerequisite in Article  XV for the exchange of information.  Members 
should be able to make progress on this element of the mandate.  Of all the subjects under the 
Working Party, Switzerland considered subsidies to  be the most important.  In response to the 
Chairman's question on the nature of the distortion cau sed by subsidies, it was highlighted that in the 
case of export subsidies, the nature of the distorti on was inherent to the measure.  The very purpose of 
an export subsidy, however defined, is to give an advantage to one's own exporters.  It was clear to 
Switzerland that since these subsidies are aimed at creating distortions there should be disciplines on 
their use.    
17. Referring to a proposal made by Switzerland so me years ago, examples were provided of how 
export subsidies distort trade by giving certain supp liers an unfair advantage over those that do not 
receive such subsidies.  It was underscored that  while there may not have been as many subsidy-
related proposals on the table as compared with othe r negotiating areas, the elimination or ban on the 
use of export subsidies in services remained an im portant objective for Switzerland.  The idea had not 
been rejected by any delegation.  Some delegations had at that time said that it was not a problem as 
they did not have export subsidies.  However, shoul d this be the case, it would be easier to agree that 
such subsidies will never be used.  In view of  the recent crisis and the responses taken by some 
governments, it would be prudent to agree that wh atever the circumstances,  export subsidies would 
not be used.  Switzerland had not examined whethe r other countries used export subsidies but it could 
confirm that it did not use such instruments.  By focusing on export subsidies, questions on the nature 
of the distortion and the definition of subsidies b ecame irrelevant, since a prohibition would cover all 
such practices, whatever definitions are used.  Sw itzerland hoped that following concerns with recent 
trade policy developments, as highlighted in the Dir ector-General's report, there would be a broader 
consensus than before to engage on this issue.  
18. The representative of Mexico  supported  the comments made by Argentina and India.  Mexico 
recalled that together with the delegations of  Hong Kong, China and Chile, it had submitted a 
proposal on a provisional definition of subsidies in services.  It believed that  this definition could 
provide a good basis for the exchange of informa tion and for further technical discussions.  Mexico 
urged other delegations to comment on the proposals th at were on the table, and in this connection, 
referred specifically to the communication from Hong Kong, China and Mexico, as contained in 
document JOB(07)/27.   
19. The representative of Hong Kong, China   felt that there had been a lack of interest in the 
subsidy negotiations.  However, it concurred with th e statement by the Indian delegation, as well as 
by other Members, that the use of stimulus p ackages and rescue programs by governments had made 
the negotiations on subsidies even more relevant .  A more focused discussion was required on the 
trade-distorting effects of subsidies in services.  Hong Kong, China appreciated the sensitivity and the 
complexity of the subject.  However, the issue could not be left unaddressed.  As stressed by the 
Chairman and many other Members,  more energy should be injected into the subsidy negotiations.  
Hong Kong, China recalled that, together with othe r Members, it had submitted a proposal with a 
provisional working definition on subsidies back in June 2005.  It had also submitted a proposal to 
limit the information exchange to five sectors c hosen by Members themselves.  Hong Kong, China  S/WPGR/M/65 
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  believed that these inputs are still relevant would welcome further discussion on how the provisional 
working definition could be improved.   
20. The Chairman  requested clarification from Hong Kong,  China on the criteria that could be 
used for the selection of the five sectors for the exchange of information on subsidies.  
21. The representative of Hong Kong, China  clarified that the five sectors would be self-selected.  
The idea was to limit the information exchange exerci se so as to encourage greater participation.  It 
had not suggested any criteria for the selection of sectors but would be happy to discuss such details 
with interested Members. 
22. The representative of Brazil  supported statements by delegations  calling for an intensification 
of work in the area of subsidies.  
23. The representative of Pakistan  noted that while it concurred that export subsidies should be 
disciplined, it would be even more important to ha ve an agreed definition on measures that would fall 
under the scope of such disciplines.  For example,  if doctors and engineers receive subsidised 
education and then provide mode 4 services, could the subsidy received for education be considered 
an export subsidy.  Similarly, would special tax incentives or some other start-up bonuses or 
incentives to companies that have affiliates in anothe r country be considered to be export subsidies.  
The business, in an export sense, is not directly subsidised but the impact on the global or holding company might indirectly be an export subsidy.  These intricacies would need to be discussed.  
24. The representative of the United States
 (US) recalled the comments made by the Chairman on 
the different reasons for the lack of progress in the GATS Rules negotiations.  It was noted that on 
some issues there had either been a lack of enga gement or interest, while on others, views had been 
highly divergent.  On  subsidies, the US felt there had been a lack of interest from some of the most 
important players in this particular discussion.  Firstly, the proponents in the negotiations had not 
come up with a firm definition of subsidies and had not answered some of the questions that had been 
posed by the US in 2005.  Moreover, proponents in  this particular discussion had neither proposed 
any particular discipline nor indicated how subsidie s should be dealt with.  From the perspective of 
the US, the discussion on subsidies was vague in comparison to other subjects under negotiation in 
services.  There had been proposals explaining wh ich type of subsidy pr ogrammes would not be 
subject to disciplines but no indication had been given of the disciplines to which subsidies would be subjected.  It was noted that Switzerland had stated  that all programmes whic h could be defined as 
export subsidies should be prohibited,  irrespective of the definition u sed.  The US also recalled that 
Switzerland had asserted that it had no export subsides.   However, the US believed that Switzerland 
could not possibly know, as it had not defined export s ubsidies.  Secondly, a very important party in 
the negotiations, namely the private industry, had been absent from the negotiations.  As had been 
observed on several occasions, as well as in a recent OE CD examination of the issue, there seemed to 
be no interest whatsoever on the part of private indus try on the issue of subsidies in services.  The US 
underscored that the lack of interest did not mean th at subsidies did not exist but that they do not seem 
to causing significant trade effects.  In this c onnection,  the US reminded delegations that WTO 
Members are meant to address significant trade problems and not to discuss hypothetical problems.    
25. Thirdly, there had been very little discussion on what distortive effects are produced by 
subsidies, if any.  The US welcomed some further description of the kind of distortions that may exist, 
and any particular evidence of the distortions a ffecting Members.  While some studies had been 
conducted by the OECD, as well as by the WTO Secr etariat, there had not been any empirical 
evidence that subsidies in services are trade-distorti ng.  Nor had there been any evidence to show that 
exporters in receipt of subsidies have a disproportiona te share of the market as  compared to those that 
are not subsidized.  The US thus requested furthe r details from Switzerland on the distortive effects 
which it had mentioned.  In this connection, the US believed that a definition of export subsidies S/WPGR/M/65 
Page 6  
 
  would be relevant to identifying distortions, if any di d exist.  It was highlighted that in the goods area 
there had been a great deal of debate when formul ating the definitions contained in the Agreement on 
Subsidies and Countervailing Measures (SCM), partic ularly on export subsidies.  Based on the SCM, 
a provisional working definition on subsidies in ser vices had been put forward by some Members in 
2005.  However, the proposed definition seemed to de part from the SCM model in certain ways.  At 
that time, the US had requested the proponents to explain the differences but no response had been 
received.  On the suggestion of selecting five sector s, this did not address the initial problem of not 
having a definition of subsidies to identify the type  of measures that may be relevant.  The US had 
always been willing and eager to work with Member s on a definition of subsidies, but that definition 
depended on proponents having a clearer idea of th e ultimate purpose of the exercise.  Definitions 
may differ depending on the particular discipline in  mind.  The definition used for countervailing 
duties for services, might be different from the one used in a ban on export subsidies, as was put forward today, or in the reporting of any kind of financial contribution.  
26. The representative of Switzerland
 stressed that as his delegation had previously provided 
information on subsidies, he could confirm that no export subsidies existed under the Swiss regime.  
To submit the  information required under GATS Article XV, Switzerland had reviewed all budget 
lines and had provided descriptions of relevant programmes.  Every budget line contained the 
framework and conditions of eligibility for the recei pt of subsidies.  While  the SCM definition could 
be useful, it still needed to be tran sposed into the services world.  Neve rtheless, the fact remained that 
the main purpose of export subsidies is to distor t competition, as government funds are used to 
subsidise service suppliers with the intent of impr oving their market position.  The distortion is in-
built since the very aim of the measure is to distor t.  Since export subsidies are a clear case of how a 
subsidy can distort trade, Switzerland hoped that  other Member could focus on this subject.  
27. The representative of India  recalled that the first line of Article XV of the GATS stated that, 
"Members recognise that, in certain circumstances, s ubsidies may have distortive effects on trade in 
services".  The "distorting effects" of subsidies on trade in services had been recognized by all 
Members.  The second sentence stat ed that, "Members shall enter into negotiations with a view to 
developing the necessary multilateral disciplines to a void such trade-distortive effects".  Since both 
the concept of distortion and the need to negotia te disciplines had already been settled, Members 
should be moving forward rather than backward in  their discussions.  India urged Members to begin 
with the work programme and to deal simultane ously with both the definition question and the 
exchange of information.  Members should then proc eed to the next stage of developing disciplines.  
As was pointed out by the US, India recognized that there was a lack of empirical data on subsidies in 
services.  However, there were cases  where subsidies are known to have trade-distortive effects.  India 
disagreed with the suggestion that since the priv ate sector had not complained, a problem did not 
exist.  It was pointed out that there are similarly no complaints in respect to market access in a number 
of sectors but Members are still discussing the matte r.  India urged Members to agree on a work 
programme to implement the mandate of GATS Article  XV and to move ahead with the discussion on 
subsidies.  
28. The representative of Hong Kong, China  responded to the US by noting that its delegation, 
together with other Members, had proposed a discuss ion a working definition of subsidies in order to 
provide focus to the Working Party's discussions.  The intention had not been to pre-empt discussion on any other important issue.  It was noted th at Hong Kong, China shared many of the points 
expressed by India on the importance of providing further inputs and exch anging information on 
subsidies.  Members were urged to keep working to wards the development of disciplines in this area.  
Hong Kong, China believed that Members do share so me consensus on the need to address the trade-
distortive effects of subsidies.  
29. The representative of the United States
 (US) underscored that its delegation had never been 
opposed to the discussion on subsidies in services but, in fact, welcomed a more enthusiastic  S/WPGR/M/65 
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  discussion.  In response to India, the US stressed that it had not found the first two sentences of GATS 
Article XV to be completely clear. 
30. The Chairman  invited the Working Party to take no te of comments made.  He informed 
delegations that he would be c ontinuing with his informal discussions on both the provisional working 
definition of subsidies in services and the exchange of information mandated under GATS 
Article XV.  
IV. OTHER BUSINESS 
31. No items were raised under this agenda item.   
 
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