RESTRICTED  WORLD TRADE  
ORGANIZATION  S/WPGR/M/60 
17 January 2008 
 (08-0238) 
Working Party on GATS Rules  
  
 
REPORT OF THE MEETING OF 29 NOVEMBER 2007 
 
Note by the Secretariat
1 
  
1. The meeting was chaired by Ms. Shaista Sohail from Pakistan.  The agenda for the meeting, 
contained in WTO/AIR/3123, included the follo wing items:  emergency safeguard measures, 
government procurement, subsidies, date of  the next meeting, and other business.   
2. The Chairperson
 noted that as requested at the previous meeting of the WPGR on 
17 September 2007, UNCTAD had been invited to make a presentation on its current research on 
subsidies in services under agenda item C.  She proposed that, apart from the presentation by 
UNCTAD, discussions on emergency safeguard measur es, government procurement and subsidies be 
conducted in informal mode.  Any Member, should it so  wish, might request that their intervention be 
recorded in the minutes of the meeting.  The agenda was adopted . 
I. NEGOTIATIONS ON EMERGENCY SAFEGUARD MEASURES (ARTICLE X) 
3. The Chairperson  recalled that Brunei Darussalam, Cambodia, Indonesia, Malaysia, Myanmar, 
the Philippines, Thailand and Viet Nam have circ ulated a revision of their room document of 
6 March 2007 that proposed rules regarding the u se of an emergency safeguard mechanism (ESM) in 
services.  The revision is contained in JOB (07)/ 155.  She invited the delegations concerned to 
introduce their communication.  
4. The representative of the Philippines  noted on behalf of the delegations sponsoring the 
revision that the changes made to the room documen t had been explained at the previous meeting of 
the WPGR on 17 September 2007 and asked that they be reflected in the records of this meeting.  In 
this connection, it had been highlighted that the revision would seek to do the following:  firstly, the 
causal link between the liberalising commitment and injury or threat of injury or viability of the domestic industry as referred to in paragraph 2 wo uld be made clearer and tighter.  The intention 
would be to prevent an ESM from being used to circumvent a specific commitment under the GATS.  
Secondly, the market condition of "substantial increase in imports" would be moved to the chapeau of 
paragraph 3.  By doing so, it would become part of  the chapeau, which would have to be satisfied, 
before any of the market conditions justifying an  ESM could be triggered.  The revised document 
would also try to address some of the questions a nd concerns raised by Members on the ambiguity of 
certain market conditions as enumerated in paragra ph 3.  Thirdly, with regard to paragraph 4, the 
"public interest" benchmark or standard would be made more mandatory and less discretionary.  On 
sub-paragraph 4 (iv), it would be made clear that the support provided to domestic service suppliers 
would be to enable them to adjust to the new co mpetitive environment and that suspension of market 
access commitments would be used only as a last reso rt.  In this connection, he noted that the 
proponents were also seriously contemplating maki ng an ESM applicable only to new commitments 
in the Doha Development Agenda (DDA) or fu ture rounds under the GATS.  Fourthly, on the 
                                                     
 
1  This document has been prepared  under the Secretariat's own responsibility and without prejudice to 
the positions of Members and to their rights and obligations under the WTO.  S/WPGR/M/60 
Page 2  
 
  question of reprisal, the last phrase of paragraph 11, referring to the non-approval of the Council for 
Trade in Services of the suspension, would be delete d.  This would make it clear that suspension can 
be automatic, unilateral and discretiona ry on the part of the affected Me mber.  Fifthly, with regard to 
special and differential treatment, greater specificity  will be provided with actual percentages given to 
the various de minimis thresholds.   
5. He underscored that ESM negotiations are of  political and economic importance to the 
delegations sponsoring the proposal.  This was demonstrated by the work done by ESM proponents in 
the WTO, ASEAN as well as within the Group on Services in the context of the Asia-Pacific 
Economic Cooperation Community (APEC).  He noted  that should the DDA come to a close in the 
near future, a credible outcome in ESM would be  required.  He underlined that, as emphasised in 
previous meetings, an outcome was  understood in  a generic manner and c ould either be a full 
mechanism, or a more definite clarification of wh at is meant by "more focused discussions" or of the 
mandate of ESM negotiations.  He noted that the constructive discussions and engagement since the 
Hong Kong Ministerial Conference was appreciated a nd that the sponsors would welcome any further 
comments on the revision.   
6. Discussions continued in informal mode.   
7. The Chairperson
 invited the Working Party to take note  of comments made.   
II. NEGOTIATIONS ON GOVERNMENT PROCUREMENT (ARTICLE XIII) 
8. The Chairperson  invited further comments in relation to  the latest proposal from the European 
Communities, contained in S/WPGR/W/54, concerning the text of an annex to the GATS on government procurement in services.   
9. Discussions continued in informal mode.   
10. The Chairperson
 invited the Working Party to take note  of comments made.   
III. NEGOTIATIONS ON SUBSIDIES (ARTICLE XV) 
11. The Chairperson  recalled that following a proposal made at the meeting of 
17 September 2007 and subsequent informal consultations, UNCTAD had been invited to present its 
current research on subsidies.  The representative of UNCTAD /DITC  introduced two analytical 
papers on subsidies from the Trade Negotiations  and Commercial Diplomacy Branch of UNCTAD 
and referred to a recent UNCTAD Expert Meeting on Universal Access to Services held on 14 to 16 November 2006, as well as the respec tive UNCTAD Secretariat background note
2 and other 
UNCTAD work.  She noted that the two individually author ed papers did not re present the position of 
UNCTAD on the subject nor necessarily the views of the UNCTAD Secretariat.   
12. On the first paper, "State Support Measures for Services:  An Exploratory Assessment with 
Scanty Data", she further noted that it was still a draf t.  The author had sought to develop in the paper 
an analytical framework for assessing state support measures for services;  to provide quantitative 
data on cross-cutting and sector specific subsidies, to the extent possible; and to highlight areas 
requiring further analytical work and empirical re search.  The paper grouped state support measures 
according to their intended beneficiaries:  (i)  house holds or consumers;  (ii) service suppliers;  and 
(iii) society as a whole.  Drawing from the paper, the presentation highlighted examples of subsidies 
                                                      
2 Universal Access to Services, Note by the UNCTAD Secretariat, TD /B/COM.1/EM.30/2, 18 
September 2006.  
  S/WPGR/M/60 
 Page 3 
 
 
  typical for different services sectors and different po ssible approaches to analysing the potential trade-
distortive impact of various types of subsidies.  In terms of conclusions, the representative of 
UNCTAD highlighted that the paper found subsidies in  services to be widespread and significant.  
Available evidence pointed to some differences between developing and developed countries in the 
use of subsidies.  Further work on assessing the nature  of particular measures, and the amount of state 
resources involved, would be needed in order to eval uate the possible effects on trade in services.  In 
view of the author, there was a need to continue pursuing information sharing exercises, and to seek 
inputs from other bodies and entities which have undertaken  work in this area.  In this connection, the 
paper also underscored the importance of formulat ing a working definition for information sharing 
and highlighted areas for specific research on i nvestment incentives, bailouts and export promotion 
measures.  With respect to possible future discip lines, the paper stressed th at such disciplines should 
not only target existing government behaviour but should also try to anticipate future behaviour.  
While focusing on trade effects, such disciplines woul d also need to recognize the particular needs of 
developing countries.   
13. The second paper, "Subsidies to Services Sectors:   A neo-protectionist distortion or a useful 
development tool?", examined general aspects of subsidies in services.3  It raised some political 
economy questions on the relative resilience of s ubsidy programmes and reviewed some quantitative 
evidence at an aggregate level.  The role and f easibility of services subsidies as a development tool 
was also discussed.  While availability of data w as a problem, the author estimated that global public 
subsidies are likely to be more than US$ 1 trillion per year and could amount to about 4% of world 
GDP.  The figure, which the paper noted, would be equal to the combined GDP of all low income 
countries or the external debt of developing countries .  In terms of absolute figures, OECD countries 
were estimated to spend more than twice as much as developing countries, but in terms of GDP the 
levels were lower, at 3.4% and 6%, respectively.  Subsidies were found to be prevalent in all sectors, 
particularly in sectors dealing with natural resource s.  In this connection, it was conceptually and 
empirically difficult to separate between different sectors and sub-sectors.  Ag riculture, for instance, 
received a large share of subsidies worldwide, but  it was sometimes difficult to distinguish between 
agricultural subsidies and subsidies to, for example, water or irrigation.  In addition to the technical 
difficulties involved, the author also noted that developing countries are at a financial disadvantage as compared to developed countries as they had fewer resources available to fund  subsidy programmes.  
The author argued in the paper that the asymmetr y of conditions between developed and developing 
countries would need to be taken into account in any negotiations on future disciplines for subsidies 
and that special and differential treatment might be required in that context.   
14. Thirdly, the representative from UNCTAD
 referred to the November 2006 UNCTAD Expert 
Meeting on Universal Access to Services and the respective background note by the UNCTAD 
Secretariat.  Unlike the other papers which focused on the trade-distortive impact of subsidies, this 
meeting and background note examin ed how subsidies had been used to enhance universal access to 
essential services such as health, education, water, energy  or telecom.  At the meeting, experts agreed 
that, out of the many options, household and provide r subsidies had been widely used to address 
market failures and to enhance access to essential serv ices.  She noted, however, that many challenges 
were involved in designing subsidy regimes such  as deciding on the underlying policy choices and 
how best to target beneficiaries to ensure that benefits reach the poor.  She also referred to some 
successful policy tools such as the use of universal  service funds to collect and disburse revenue for 
telecom services.  Among other experiences reviewed at the Expert Meeting were the successful use 
of education vouchers in public and private schools in Chile and Me xico, to improve attendance and 
performance.  In conclusion, she noted that UNC TAD would be reviewing its work on services and 
would appreciate comments and suggestions for further work and research in this area.  
                                                      
3  UNCTAD/DITC/TNCD/MISC/2003/7. S/WPGR/M/60 
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  15. The representative of Mauritius
 welcomed the presentation.  He noted, however, that while 
the papers had a lot of academic merit, and would help developing countries to take more informed 
decisions in this area, they had relied on research by only two, albeit credible , organizations.  In his 
view, this was insufficient as even in research th ere might be an element of bias depending on which 
organisation has conducted the work.  He proposed that UNCTAD should reorient its research and 
future work so as to take stock of developing count ry realities and problems in the use of subsidies.  
He further noted that subsidies could not be studied in isolation and should be examined together with 
other branches of trade.  He gave the example of subsidies hidden in environmental measures.  He 
encouraged UNCTAD to look specifically at how subs idies were used in developing countries as well 
as how special and differential treatment could be ushere d in for the interest of developing countries.  
16. The representative of Hong Kong, China  found the work conducted by UNCTAD to be 
comprehensive and useful for discussions in the WPGR .  In particular, she noted that the sectoral 
analysis provided a useful overview of the situation on the ground in terms of individual sectors.  In 
addition to the implications of subsidising service providers and possible trade distortive effects, the 
analysis had also illustrated how certain domes tic policy objectives, such as for development, 
environmental protection or rescue situations, might me rit the use of subsidies.  She thought that these 
were important points that could benefit from further discussion in the WPGR.  She expressed her interest in knowing when the draft paper would be finalised and if in the research a way had been 
found to distinguish between beneficiaries, given the difficulties presented by the increasing prevalence of cross-border ownership of services firms.   
17. The representative of Mexico
 found the presentation to be comprehensive and noted the 
importance of highlighting the relationship between th e trade-distorting effects of some subsidies and 
development objectives.  It would be important to  examine the possible trade distorting effects of 
certain subsidy programmes in light of their polic y aims and objectives.  He observed that it was 
interesting to see how the positions  of developed and developing c ountries changed when subsidies 
were measured relative to GDP rath er than in absolute terms.  M easuring subsidies in relative terms 
would give a better indication of the level of suppor t to beneficiaries.  The representative asked for 
more information on how current and future behaviour would be taken into account in the 
development of possible disciplines.  He also asked for further details on the empirical work 
envisaged by UNCTAD in this area.  
18. The representative of the United States  noted that the individually authored papers did not 
represent UNCTAD's view of the issue nor necessarily that of the UNCTAD Secretariat.  She thought 
that the papers provided an interesting academic discussion of subsidies in the services context and 
welcomed the theoretical exploration of the issue, as  well as the useful data which had been gathered.  
However, since subsidies had been mandated for negotiations by WTO Members, the issue went 
beyond academic interest and would need to be discu ssed and defined in more precise terms, with a 
focus on practical questions of economic growth and development.  In particular, the research would 
need to take into account whether there were significant practical problems, which WTO Members 
needed to address, and if WTO Members had been successful in dealing with problems as they had 
arisen, for example, by using the existing flexib ilities in the request-offer negotiations.  In this 
connection, she wondered what would be the benefi ts and drawbacks of adopting disciplines in this 
area.  She noted that the papers, as well as the ot her work by UNCTAD, would inform thinking on the 
issue and appreciated that it had been br ought to the general attention of the WPGR. 
19. The representative of China  found the main findings and research methodologies to be very 
useful.  They would help inform further policy discussions and future research on subsidies in 
services.  He noted that the data gathered would al so provide a good source of information for future 
research and negotiations.  He observed that dis tinguishing between goods and services subsidies was 
particularly difficult, for instance, in certain sectors such as maritime transport services and air 
transport services, and would be one of the problems that would need to be addressed.  S/WPGR/M/60 
 Page 5 
 
 
  20. The representative of the European Communities  noted that, while he appreciated the 
academic value of the work, he was not certain that it could be used in the discussions in the WPGR.  
The papers did not differentiate between different types of state support in the economy.  He believed 
that many Members did not support the view th at support to consumers and households were 
subsidies within the meaning of Article XV, or even measures falling under the GATS.  He thought 
that it would be useful to focus future work on subsidies to servi ces suppliers meeting the selectivity 
criteria.  He encouraged UNCTAD to pursue its wo rk focusing only on selected subsidies to service 
suppliers, and also on subsidies provided by developing countries as it was often difficult to obtain such information. 
21. The Chairperson
 made a number of observations on the presentation and noted, inter alia , that 
it was interesting to see how cross-subsidisation in the host country could be traced back to 
government support in the home country of a firm.  She asked whether universal service funds, which 
were typically tied to providing targeted support to a specific region for development purposes, would 
be considered a subsidy.  
22. The representative of UNCTAD  remarked that no clear solution had emerged from the work 
undertaken on how best to distinguish between the various beneficiaries of subsidy schemes.  This 
was one of the issues that remain ed under discussion.  Concerning the queries on current and future 
behaviour, she clarified that the idea had been to  highlight the need to minimise opportunities for 
circumvention by governments when designing disciplines on subsidies.  In terms of universal service funds, she noted that the Expert Meeting had looked  at the issue from the pe rspective of ensuring 
universal access to essential services rather than with  regard to its potential trade distortiveness.  She 
explained that data from developed countries had b een used as these were most  readily available.  
Indeed, there might also be a need in the future to look more closel y into how subsidies were used in 
developing countries as well as their development imp lications.  She took note of the suggestions for 
UNCTAD in future work to focus even more on subs idies given to service providers.  When finalizing 
the study an effort would be made to reflect more  on developing country data and take a broader 
approach in the analysis.  She undertook to keep the WPGR informed of developments.  
23. The Chairperson
 thanked the representative of UNCTAD and looked forward to hearing more 
when the work was finished.  She invited the Working Party to take note of comments made.  
24. Turning to the negotiations on subsidies, the Chairperson  recalled a communication from the 
delegation of Hong Kong, China, dated 13 Septem ber 2007, which provided preliminary views in 
response to the first 6 questions listed in paragra ph 6 of JOB(07)/27 on non-actionable subsidies.  She 
noted that Mexico in its communication dated 28 November 2007 had also joined Hong Kong, China 
in providing its responses to these questions.  She i nvited the delegation of Mexico to introduce the 
responses and other delegations to  provide their initial views.  
25. Discussions continued in informal mode.   
26. The Chairperson  noted that the Working Party would revert back to its discussion on the 
responses from Hong Kong, China and Mexico at its next meeting and invited the Working Party to 
take note  of comments made.   
IV. DATE OF NEXT MEETING 
27. The Chairperson  suggested that the next formal meeting be held during the next cluster of 
services meetings, subject to the usual consultations.    S/WPGR/M/60 
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  V. OTHER BUSINESS 
28. No items were raised under this agenda item.   
__________