RESTRICTED  WORLD TRADE  
ORGANIZATION  S/WPGR/M/57 
9 May 2007 
 
 (07-1930) 
Working Party on GATS Rules  
  
 
REPORT OF THE MEETING OF 19 APRIL 2007 
 
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/2991, included the following items:  appointment of chairperson, 
emergency safeguard measures, government procuremen t, subsidies, date of the next meeting, and 
other business.  Since the rules of procedures foresa w the appointment of the new chairperson at the 
end of the first formal meeting of the year, the Ch airperson suggested that this agenda item be moved 
accordingly.  The agenda was adopted
 with the modification suggested.   
I. NEGOTIATIONS ON EMERGENCY SAFEGUARD MEASURES (ARTICLE X) 
2. The Chairperson  recalled that delegations had held a number of informal discussions on 
emergency safeguard measures since the last formal  meeting in June 2006.  More recently, at the 
open-ended informal meeting of 8 March 2007, delegations had exchanged views on a room 
document from a group of ASEAN Members.   
3. The representative of the Philippines , speaking on behalf of Brunei Darussalam, Cambodia, 
Indonesia, Malaysia, Myanmar, the Philippines, Tha iland and Vietnam, drew attention to their room 
document containing a new proposal on ESM.  The docum ent, made available at the informal meeting 
of 8 March, proposed legal language establishing rul es for the use of emergency safeguard measures 
in services.  The group's new proposal built on earlier proposals as well as on past discussions in the 
Working Party.  It also reflected the political and economic underpinnings of the proponents' position 
on this issue.  The purpose of the text was to pr ovide rules for establishing an emergency safeguard 
mechanism (ESM) in Members’ domestic framework, and not a "one size fits all" mechanism.  The room document therefore only contained a grant of  permission for Members that wished to apply 
safeguards measures;  flexibility and discretion were  thus preserved.  However, some rules were 
prescribed;  the proposal provided an illustrative lis t of the kinds of market conditions that should 
exist for the application of safeguard measures a nd set out parameters that Members needed to 
observe.  His group of delegations had attempted to  strike the proper balance between protection in 
situations of emergency, on the one hand, and th e prevention of domestic regulatory capture, on the 
other hand, through a non-exhaus tive enumeration of market conditions justifying safeguard 
measures.  These conditions were limited to those sufficiently serious to reasonably give rise to 
safeguard action, but at the same time realistic enough to allow the application of safeguards.  The 
proposal also contained disciplines on the types of measures that Members could impose, as well as 
disciplines on their application. 
4. The representative said that the proposed text, in response to serious concerns raised by other 
delegations, aimed to protect acquired rights wh ile promoting positive measures in lieu of the 
immediate suspension of market access commitme nts.  Other important provisions touched upon: 
                                                     
 
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/57 
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  transparency, notification and consultation;  special  and differential (S&D) treatment;  and review.  
The proposal also included an annex on key concepts , which at this point was limited to domestic 
industry.  It introduced reasonably specific and workable parameters while leaving some space for 
flexibility and adaptation.  He appreciated the co mments received from other delegations and wished 
to highlight some focal points.  Questions and comm ents could be grouped into four main headings.  
First, desirability and feasibility: one  delegation had put it succinctly by saying that it remained to be 
convinced that an ESM was desirable and feasible.   The proposal had not set aside the issue of 
desirability and feasibility, but wanted a more holistic  discussion that would consider threshold issues 
in the context of the Article X mandate and the Hong Kong Ministerial Declaration.  Second, some 
Members had expressed concerns about the balance between protectionism and legitimate safeguard 
application, and had pointed out that a number mark et conditions justifying an ESM were either too 
broad or too vague.  At least one Member had also  found that the public interest requirement was not 
sufficiently mandatory.  Third, a number of technical  questions had been put forward, particularly 
with regard to the meaning and scope of the e numerated market conditions, the kinds of positive 
measures that were encouraged, and the S&D treatmen t provisions.  The representative indicated that 
the concerns of Members as re gards these second and third headings had been conveyed to 
proponents' authorities and that th ese would be taken into consideration in future revisions of the 
proposal.  The fourth group of questions related to  how S&D treatment should be approached in any 
ESM, particularly as regards the timelines foreseen in  the room document.  The representative hoped 
to receive additional comments from Members an d had no objection to pur sue the discussions in 
informal mode.  He took the opportunity to thank the Chairperson for his assistance in facilitating 
informal exchanges and hoped that the incoming Chairperson could do likewise.   
5. The Chairperson
 suggested that discussions continue in informal mode, unless delegations 
specified that they wanted their statement on the record.   
6. In light of the comments made by the represen tative of the Philippines on the room document, 
the representative of the United States  asked that the concerns her delegation had expressed on that 
document at the informal meeting of 8 March be put on the record.   
7. The representative of the United States  had great doubts about the proposal from the group of 
ASEAN Members.  She was open to engaging Memb ers on the question of an emergency safeguard 
mechanism in accordance with relevant mandates.   However, her delega tion continued to have 
concerns about the proposal's ability to address the key issues of necessity and feasibility.  She 
questioned necessity because the bottom-up appro ach of the GATS, combined with provisions 
permitting the modification of commitments, alre ady gave Members considerable opportunity to 
evaluate the implications of their commitments on a sector-by-sector basis.  In addition, Members 
could craft their commitment so as to allow for tr ansition periods to address concerns regarding a 
surge in imports.  Given this flexibility, an ESM could be redundant or ev en negate the balance 
between, on the one hand, the commitments and the injury perceived and, on the other hand, the 
flexibility which is built-in the GATS.  For example,  even if the rest of the proposal was not a goods-
type mechanism, the accelerated invocation of Article XXI suggested in the room document would 
undermine the negotiated balance refl ected in Article XXI itself.  The proposal's exclusion of most 
WTO Members and of an entire mode of supply also demonstrated the unbalanced nature of the room 
document.  Although this was virtually a copy of Article 9 of the Agreement on Safeguards, she was 
still baffled about how a de minimis  concept could be applied in services, where reliable data were 
already a problem.  It would be further aggravated in the context of an ESM.   
8. Proponents appeared to have taken into account certain questions raised in the past, but 
completely ignored others, in particular those raised  by her delegation.  She was reluctant to go into 
details over technical issues in order not to give the impression that this proposal was workable.  For example, the definition of domestic industry still left much discretion that could undermine 
commitments.  It could also lead to a very imba lanced use of an ESM, as well as distortions in the  S/WPGR/M/57 
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  market place, especially  since the proposed mechanism did not  encourage the domestic industry to 
adapt and become competitive.  She was also concer ned that the proposal appeared to assume that old 
and new commitments could create emergency situati ons, without regard to other dynamics at play in 
the domestic economy.  Application of an ESM could also create imbalances between modes of supply and her delegation had in the past raised  a number of questions on modal application, 
including through the provision of examples in re lation to legal services.  Her delegation still had 
fundamental problems with the intent and objective of an ESM.  Over the years, the Working Party had discussed examples such as Shangri-la so as to ge t a sense of the exact type of situation that the 
proponents wanted to address, but the proposed mechan isms did not solve such overriding questions.   
9. The representative did not want to go backward  in the discussion, but to move forward on 
focused discussions as mandated in the Hong Kong Mi nisterial Declaration.  However, the proposal 
still took an approach used in goods and tried to squeeze services into it.  Such attempts were 
ineffective and confusing.  Her de legation remained willing to engage in informal consultations with 
the proponents to see how to bridge thinking in th e interest of more focused discussions, although it 
would be hard for her delegation to  be constructive in future discussions on the basis of the proposal 
contained in the room document;  the core concerns  of her delegation had not been dealt with.  The 
proponents needed to take into account that the mandate on this topic, unl ike domestic regulations, 
was for focused discussions.  She also recalled that Members had negotiated seve ral extensions of the 
timelines foreseen in Article X.  Her delegation coul d have supported the non- extension of timelines, 
which would have translated into the expiration of the mandate and meant that the Working Party 
would not now be discussing this issue.  However, he r delegation had agreed to an extension so as to 
be constructive and sensitive to the overriding political interest of the proponents, with the expectation 
that they would try to convince Me mbers that they needed an ESM to  deal with market openings they 
envisioned for the future.  She was surprised by the suggestion that an ESM would apply to existing commitments, as well as by the imbalance that woul d be created in the trea tment of developed and 
developing countries with regard to mode 4.  The door was not closed, but she was not persuaded by 
the proposal.  
10. The representative of Australia
 said that his delegation remained to be convinced of the 
desirability, necessity and feasibility of an ESM.  The current proposal did nothing to convince his 
delegation otherwise.  He could not support a propos al that amounted to a blanket weakening of the 
GATS.   
11. Despite many years of discussions on this topic, the representative of Canada  remained to be 
convinced that the case had been made for an ESM .  His delegation still questioned desirability and 
feasibility.  He was concerned that elements of the proposal could undermine the framework of the 
GATS despite the significant flexibilities that alrea dy existed.  In addition, a large number of 
outstanding issues remained to be addressed. 
12. The representative of Pakistan  thanked the proponents for introducing the room document and 
asked that the comments made by her delegation at  the informal meeting be put on record.   
13. The representative of Pakistan  appreciated that her delegati on's suggestion to include the 
concept of small and medium-sized enterprises (SME s) in the proposal had been taken on board.  In 
consultations with stakeholders, the objections to making commitments at the WTO mostly came from SMEs.  A mechanism might therefore prove useful  in order to show that the possibility to take 
action existed if SMEs suffered harm.  The r oom document could still provide greater details 
regarding the procedures that Members should follo w during the period in which they were applying 
safeguard measures.  With respect to paragraph 4 (iv) of the proposal, she noted that the temporary 
withdrawal of commitments was treated as a measure of last resort and thought that this deserved further attention.  Maybe the need to deviate fro m commitments could be examined first and, after 
that, as the investigation proceeded, whether suppl ementary measures should be taken to fix the S/WPGR/M/57 
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  problem at hand.  Turning to the application of  safeguard measures to Uruguay Round commitments, 
she said that new service industries kept emerging in  all sectors, even where commitments had been 
made in the past.  All should be able to avail themselves of such a mechan ism, whether under old or 
new commitments.  Concerning S&D treatment, even if she appreciated the concept of de minimis  
treatment, paragraph 13 raised many questions in re lation to mode 4.  The application of an ESM to 
mode 4 should be further examined.   
14. The representative of New Zealand
 said that her delegation remained to be convinced by the 
proposal from the group of ASEAN Members and asked th at her statement at the informal meeting be 
put on record.   
15. The representative of New Zealand  thanked the proponents for the consultations they had 
organized on their proposal and for efforts to find a creative way forward.  In a preliminary manner, 
she saw that the approach taken in the room doc ument left fundamental problems unresolved.  These 
included, first, the suggestion that safeguards coul d apply to Uruguay Round commitments.  It would 
be very difficult in such a context to establish a causal link between commitments and injury, and 
even more so for 'likely injury' as envisaged in paragraph 2 of the proposal.  She found it hard to see 
how a case could be made for an ESM on anything other than new commitments, and even then she 
had doubts about how convincing a case might be.  More specifically, she thought that the non-
exhaustive list was subjective and not conducive to ce rtainty.  She also had concerns about specific 
elements of the list, including paragraphs 2 (vii), 2 (viii), and 2 (ix).  Under some circumstances, these 
conditions could amount to nothing more than a poo rly managed industry, as opposed to an injury 
resulting from a commitment.  In respect of paragraph 4 (ii), she assumed that 'public interest' took 
full account of consumer interests and that these would be balanced with those of domestic service 
suppliers.  The reference to necessity  in paragraph 4 (iii) was intere sting and she hoped to get a more 
detailed explanation, including in respect of dom estic regulatory measures.  Regarding paragraph 4 
(vi) and the reference to an interested party submitting positive informa tion, she wondered what 
'positive information' meant in that context.  With  respect to paragraph 11 on reprisal, she saw an 
imbalance in the fact that the Council for Trade in  Services would need to approve retaliation, while 
no approval was required for application of safeguard  measures.  She sought more details in this 
regard.   
16. The representative of Hong Kong, China  appreciated the efforts of the group of Members 
from ASEAN.  Her delegation had conveyed a numb er of questions to them and acknowledged the 
brief responses provided today and th e possibility of further clarifica tion from capitals.  Her questions 
had touched upon such issues as applicability and the conditions for injury.  She would wait for the 
answers and reserved her position until such time.   
17. The representative of Brazil  believed that the room document represented a step forward in 
terms of putting a more concrete proposal on the ta ble so as to facilitate discussions.  He could 
understand the observations made by ot her delegations on the issues of feasibility and applicability.  It 
was an extremely complex proposition to apply saf eguards in services, much more than in goods 
trade.  However, the comments made on the questi on of desirability seemed odd.  Article X did not 
suggest that desirability was at issue;  it simply called for "multilateral nego tiations on the question of 
emergency safeguard measures".  This was a clear stat ement of desirability by Members.  In contrast, 
the Agreement on TRIMs required in Article 9 that the Council for Trade in Goods "consider whether 
the Agreement should be complemented".  This was an example of a clause that wanted Members to 
discuss desirability.  His delegation thus unde rstood that, in the case of emergency safeguard 
measures, desirability had already been decided.   
18. The representative of Switzerland  recalled that his delegation had expressed several times in 
the past a number of concerns about emergency saf eguard measures. These were still valid since the 
new proposal did not address them.  He wished to reite rate some of these concerns.  First, a number of  S/WPGR/M/57 
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  countries explicitly wanted to make certain for in vestors that modalities for entering their markets 
were liberal.  This was their firmly asserted polic y.  GATS was the main instrument for concretising 
this policy because it was multilateral and legally bindi ng.  If an ESM were established, it would go 
against such policies by making the legal environmen t less certain.  This could not be the purpose of 
this Round.  The representative failed to see, in th e room document, any clear improvement in that 
sense.  There were some signs of progress regardi ng the protection of acquired rights for established 
foreign firms, but this was the only and meagre element that the proposal addressed regarding this 
first concern.   Second, past ne gotiations had achieved a number of  results in terms of commitments, 
which an ESM would compromise.  The elements of an ESM that the group of proponents had previously put forward foresaw a limited window of time during which an ESM could be invoked.  
However, this concept had been dropped from the new proposal.  Not only new commitments, but 
commitments made 10 years ago could be questioned and he did not think this should be the purpose 
of an ESM.  The new proposal could therefore be seen  as a deterioration compared to the elements of 
an ESM that had been previously proposed.  Third,  he was still convinced that there were only a few 
situations, if any, where the application of an ESM  was necessary.  His dele gation was concerned that 
the new proposal did not take this into account.  He would prefer proposals designed in a way that 
limited the scope of an ESM to what was strictly  necessary.  Overall, his delegation's concerns 
remained unanswered. 
19. The representative of China
 expressed appreciation for the continuous efforts of the group of 
proponents.  He thought that the room document provided a good basis for in-depth technical discussions.   
20. The representative of Brazil
 thought that the representative of the United States had implied 
that there should be a differentiation of developing  countries.  His delegation took exception to that.  
In the Doha mandate, Ministers were very clear that  sub-categories of Members should not be created.  
The only accepted distinction was between  LDCs and developing countries.   
21. The representative of the United States  said that she had referred to the fact that there was no 
definition of developing countries in the WTO.  Sh e had not mentioned sub-categories of developing 
countries, but had wondered whether S&D treatmen t in the context of an ESM in services would 
imply that certain developing countries were allowed to use a mechanism, or prevented from using it, 
against certain other developing countries.  Her delegation had no intenti on to define developing 
countries in that context.  
22. The representative of India  found it reassuring to hear that the delegation of the United States 
was not intending to classify developing countries in terms of their levels of sophistication in 
supplying services.  Like the delegation of Braz il, he opposed any differentiation beyond the concept 
of least developed country (LDC) Members.    
23. The representative of the European Communities  asked that his delegation's intervention at 
the informal meeting of 8 March be put on record.   
24. The representative of the European Communities  wished to provide some preliminary 
comments on the proposal.  He first recalled his de legation's position on desirability and the link with 
market access.  In the absence of risks, why was a safeguard needed?  Why would a Member that 
bound autonomous liberalization which had been in  place for the last 30 years need a safeguard?  
Maybe the situation was different if a Member lib eralized for the future and had not foreseen all 
consequences.  The representative asked  if the proposal replaced previous proposals - in particular Job 
No. 6830 from 31 October 2000 - or whether it was a supplement to them.   
25. He thought that some of the issues raised in the last 10 years had been taken into account, 
e.g., the importance of an investiga tion, the need to protect vested ri ghts, and the fact that measures S/WPGR/M/57 
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  had to be proportionate to what one was trying to  achieve.  However, many key issues were not 
addressed at all in the room document, or were rais ed in a manner that raised concerns.  First, the 
question had been raised as to whether all types of commitments should be affected by a safeguard 
measure, or only commitments that were not subject  to quantitative restrictions.  In the context of 
goods, quantitative restrictions were not allowed, but the situation was different in services where 
some sectors were fully closed, others were fu lly open, and others were opened with quantitative 
restrictions.  Second, regarding the 'limited window ', the proponents were now saying that they did 
not like that concept anymore.  But why should co mmitments that had been in place for 10 years be 
affected by an ESM?  A third issue concerned whom the measure was intended to protect.  Paragraph 2 suggested these were domestic service suppliers.  That definition was clear to his 
delegation, since one could rely on Article XV II and XXVIII of the GATS.  However, paragraph 2 
added a definition of domestic industry, which w as more related to the GATT approach.  Which was 
the intended target?  In past discussions, concerns  had been expressed about having an open-ended 
definition, but the term 'domestic service suppliers' was not open-ende d since it was defined in GATS.  
However, the definition of 'domestic industry' was less clear, which could affect legal certainty.  A 
fourth element discussed in the past that had not  been addressed in the room document was the 
concept of unforeseeable circumstances.  Action was not justified simply because the market had 
changed; rather, it must have changed in a way that had not been foreseeable at the time of 
undertaking the commitment.  This was an important  element in relevant GATT provisions and could 
not be abandoned in the services context. 
26. A fifth element left unanswered was the issue of ca usal link.  The injury, or threat of injury, 
had to be the direct consequence of commitments, and not of other reasons.  Six, on the issue of 
reprisal, it appeared that the sponsors wanted to ma intain a balance of rights and obligations, but the 
proposal suggested that reprisal procedures could only be activated if a Member had doubts whether the conditions of paragraph 4 had been met.  What  about the conditions in paragraph 3, i.e., the 
existence of an injury, and paragraph 5, i.e., the fu ll completion of the investigation?  Finally, other 
missing elements included the issue of expedite d dispute settlement, as well as surveillance and 
overview;  the issue of S&D treatment was also not addressed in a satisfactory way.  One of the 
objectives of this Round was to foster south-south trad e in all areas, but the relevant provisions of the 
proposal would make it practically impossible that  a developing country Me mber impose safeguards 
on trade with another developing country.  Assuming s outh-south trade would increase, this was a 
surprising feature.   
27. His delegation also had comments on issues that were mentioned in the proposal.  Concerning 
investigations, the proposal needed to be examined fu rther.  It was important to keep an eye on what 
was occurring in the Rules negotiations.  Regarding acquired rights, the proposal only referred to the 
territory of the invoking Member.  This seemed to suggest that only acquired rights in the context of mode 3 had been considered.  He had some doubts in this regard.  For example, what about a 
company that had long-term contracts to provide services under mode 1?  What about a company that 
already had gone through the pre-examination process  for an investment and wanted to send intra-
corporate transferees?  What about a company which had concluded contracts to supply services through contractual service suppliers?  These rights could be lost.  With respect to proportionality, he 
understood that the terms 'reasonable and necessa ry' meant 'proportionate'.  However, he was 
surprised to see that the first po ssible measures consisted of grants and differential tax regimes, while 
the suspension of commitments was a last resort.  In his view, schedules of commitments covered 
taxation and subsidies unless these had been carved  out.  Either national treatment on taxation and 
subsidies had not been bound, and then no safegua rd was needed to apply such discriminatory 
measures, or a Member had scheduled full national tr eatment for subsidies and taxation and needed to 
suspend a commitment.  Accordingly, he di d not see the difference between suspending a 
commitment and intervening through the use of taxa tion and subsidies.  The representative also drew 
attention to the question of government procuremen t, which currently was not subject to market 
access and national treatment obligations of the GATS.   This situation alread y provided some kind of  S/WPGR/M/57 
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  protection to the domestic industry since it was not facing competition from foreign suppliers in 
procurement markets, which were very important in several sectors, e.g., environmental services or construction.  Should Members, as implied by the EC  proposal on government procurement, decide to 
undertake GATS commitments on government procuremen t at the end of the Round, one conceivable 
measure to protect the domestic industry would be  to suspend certain procurement commitments 
temporarily.  In conclusion, he noted that the prop onents had said that they wanted to have reasonable 
flexibility and discretion.  Reasonable flexibility co uld be discussed, but the word discretion seemed 
excessive.   
28. The representative of Barbados
 thought that the document presented by the group of Members 
constituted a constructive approach to moving th e discussion forward.  Representing a small open 
economy that was very sensitive to international market volatility, she could see the merits of an 
ESM.  Although some elements could be tightened, the proposal was a good start.  Regarding paragraph 4, which said that an ESM would be applied on a non-discriminatory basis, she wondered 
how this would affect Members' current obligations under bilateral investment treaties.  With respect 
to investigation, in paragraph 6, it was important that the criteria u sed in the investigation process to 
justify a safeguard measure not be confidential in or der to prevent abuse.  She would come back with 
additional comments at a future date. 
29. The representative of the Philippines
, speaking on behalf of the sponsors of the room 
document, thanked the other delegations for the comments and observations made.     
30. The Chairperson  encouraged the sponsors of the room document to continue their informal 
exchanges with other delegations.  His successor w ould stand ready to facilitate discussions.  He 
proposed that the Working Party take note  of comments made 
II. NEGOTIATIONS ON GOVERNMENT PROCUREMENT (ARTICLE XIII) 
31. The Chairperson  opened the floor for any further comments on the European Communities' 
latest proposal for an annex to the GATS on gove rnment procurement in services, S/WPGR/W/54, 
which had been introduced at the Working Party's last formal meeting in 2006.   
32. The representative of the European Communities  said that his delegation had provided 
answers to the technical questions that had been raised by other delegations, including in informal 
meetings.  Since the Working Party had discussed this  topic for many years, often on a very technical 
level, he wished to stress the importance of not loosing sight of the final purpose.  Government 
procurement represented about one-third of world e xports in value terms.  It also represented, on 
average, 15% of GNP in OECD countries, of wh ich services accounted for two thirds.  In certain 
sectors, government procurement represented half of all services trade.  This was striking in the case 
of construction services.  A considerable share of trade in services was therefore not subject to GATS obligations of MFN, national treatment and market  access.  A key interest of the ongoing negotiations 
under Article XIII was to address this situation and to not leave such economic potential untouched.  
Since most government procurement took place in OECD countries, was it in developing countries' 
interest to leave access to  these markets closed?   
33. He believed there was a number of reasons wh y the Working Party should aim to facilitate 
access of foreign suppliers to procurement markets.  First, the current situation had severe economic 
consequences and created a number of distortions .  Second, greater openness would lead to a better 
quality-price ratio for public spe nding.  This would create savings permitting public spending in other 
necessary areas.  Third, competition stimulated inno vation and the offering of new solutions.  Foreign 
suppliers wanting to accede procurement markets tended to look for partnerships with local suppliers 
so as to offset their lack of knowledge of releva nt rules and conditions.  Fourth, this helped to 
reinforce the competitiveness of local suppliers th rough innovation and to facilitate their access to S/WPGR/M/57 
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  procurement markets abroad.  Fifth, greater openness of government procurement contributed to 
better governance by helping to fight against corrup tion, which had significant economic costs.  The 
EC's experience in opening governme nt procurement markets had been telling.  The reforms put in 
place at the beginning of the 1990s had permitted an important increase in intra-EU trade;  a number of companies had also established abroad so as to respond to procurement opportunities there.  A 
study also revealed an important impact on prices:   for both goods and servi ces, they had gone down 
by about 30% as a result of the reforms.   
34. He believed that his delegation's communi cation, which had benefited from comments 
received on previous contributions, pr ovided ample flexibility.  Members retained the right to decide 
which sectors to open, in accordan ce with the thresholds and entities specified.  In addition, the 
proposed rules would only apply to specified sectors, in-line with thresholds.  Procedural rules were 
an essential part of the proposal; granting greater ac cess to procurement markets for foreign suppliers 
only made sense if minimum conditions were guarant eed in terms of information and process so as to 
ensure effective participation.  The rules propo sed were nothing new, as could be seen from the 
Secretariat Note on government proc urement-related provisions in ec onomic integrati on agreements.  
At the national level, most WTO Members also had su ch rules in place, and it might be of interest at 
some point to compile them.  Even if some Members did not have in place such set of rules, it would also be in the interest of domestic suppliers to see them put in place.  The rules proposed were quite 
simple.  They related, for example, to publicatio n of procurement information, the treatment of 
tenders, transparency regarding the outcome of th e award process, and review process.  The EC's 
proposal also included provisions on S&D treatment.   It allowed developing countries to benefit from 
a transitional period during which they might continue to use price preference programmes and 
offsets.  It also would allow developing country Members to use a transitional period for implementation if necessary to bring the domestic re gime into conformity with the new disciplines.  
He believed that the proposal was as simple as possible and responded to the views expressed, 
including regarding flexibility.  It was important  to further pursue discussions since the issues 
involved were significant and of interest to all Members.   
35. The representative of Brazil
 noted that, given his participation in the discussions in the 
Working Group on Transparency in Government Proc urement, he was familiar with the arguments in 
favour of the inclusion of rules.  However, his delegation had made its pos ition clear on the mandate 
in Article XIII.  Regarding S/WPGR/W/54, he noted that paragraph 1 of the proposed Annex 
excluded Articles II, XVI and XVII in accordance with  Article XIII:1 of the GATS, while paragraph 
16(a) of the Annex re-introduced the MFN obligation w ith language almost identical to that of Article 
II of the GATS.  He asked why such an approach had been taken.   
36. The representative of the European Communities  noted that the mandate had already been 
discussed extensively.  Regarding MFN, his delegation had had to decide to either refer directly to 
Article II of the GATS or to develop a new provisi on on MFN treatment for government procurement.  
The intention of the proposed Annex naturally was that procurement be subject to the MFN 
obligation.  Since the proposal also allowed for the listing of MFN exemptions for procurement, it 
seemed clearer and sounder not to make a reference to Article II, but to create a specific regime 
applying to government procurement, as per paragr aph 16.  In concluding, he recalled that his 
delegation was open to discuss any technical issues, as well as possible amendments to the proposal if 
that was necessary to gather support from a greater num ber of Members.  In particular, he invited the 
Members that were parties to the Government Pr ocurement Agreement (GPA), which would be in a 
position to easily comply with the proposed provisions, to work together on the proposal.   
37. The Chairperson  proposed that the Working Party take note  of comments made.  S/WPGR/M/57 
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  III. NEGOTIATIONS ON SUBSIDIES (ARTICLE XV) 
38. The Chairperson  suggested that the Working Party focus on two new communications.  The 
first was a Secretariat Note with informati on on subsidies contained in WTO TPR reports 
(S/WPGR/W/25/Add.5).  The second was the informal communication from Hong Kong China and Mexico on non-actionable subsidies in trade in ser vices, JOB(07)/27, which had been introduced at 
the informal meeting of 8 March.   
39. Before turning to these documents, however, the Chairperson wanted to briefly report on the 
consultations that he had been asked, at the l ast formal meeting, to undertake on obstacles 
encountered in relation to the information excha nge mandated in Article XV.  Not surprisingly, a 
whole range of obstacles hindering participation in  the information exchange had been provided, 
although at the same time a number of delegations  had said that they could make efforts under the 
right conditions.  Among the more serious reasons or obstacles mentioned, he underscored that of 
'who goes first'.  Some delegations felt that it was di fficult to convince their authorities to make efforts 
if demandeurs  themselves had not provided information yet.   Others thought, for similar reasons, that 
the largest Members in terms of services trade or subsi dy use, should go first.  It was also clear that 
the fact that few Members had provided information made it harder for a particular Member to take 
the initiative.  A second set of reasons related to the lack of resources, especially for some developing 
countries, and competing priorities, including more pressing negotiating topics.  Third, the 
Chairperson sensed that some delegations had con cerns about how the information provided would be 
used and, also, that their efforts might be criticized  as being incomplete.  In light of these key reasons, 
one suggestion mentioned as a possible way forward was to make use of, and build on, the 
information contained in the various Secretariat Notes that reproduced relevant information from 
Trade Policy Reviews.  Over the years, many Me mbers already had provided information on subsidies 
as part of their Trade Policy Reviews and they might  want to update the information contained on 
their own country and provide additional details on the programmes mentioned, for example, the type 
of policy objectives pursued.  This might be on e of different paths allowing for progress on the 
information exchange, although the question of how to go forward on this topic rested with Members.   
A. SUBSIDIES
 FOR  SERVICES  SECTORS:  INFORMATION  CONTAINED  IN WTO  TRADE  
POLICY  REVIEWS,  NOTE  BY THE  SECRETARIAT  (S/WPGR/W/25/A DD.5) 
40. A representative from the Secretariat  remarked that the new document was the fifth update of 
the background Note on information on services subs idies found in WTO Trade Policy Reviews.  This 
compilation covered the period since the last update, i.e., since February 2004.  In that period, 51 
Reviews had been carried out.  The Note had the same limitations as previous updates.  Compiling 
information from TPR reports could only been seen as an approximation.  For example, the information gathered sometimes went beyond the sectoral coverage of the GATS and extended to 
services provided in the exercise of governmental authority or services excluded through the Annex on Air Transport Services.  In addition, other sectors might be under-represented in the compilation 
because they were not typically covered in TPR reports, which tended to focus on such sectors as 
financial services, tourism, telecommunications and transport.  Finally, since there was no definition 
of subsidy for services, the information was comp iled against the general background of concepts 
used in the Agreement on Subsidies and Count ervailing Measures (ASCM), such as 'financial 
contribution'.  The Note should therefore not be  taken as a precise collection of information on 
subsidies, but was rather intended to facilitate discussions through the provision of potentially 
relevant information.  This was, of course, wit hout prejudice to Members' positions on the topic of 
subsidies in the Working Party.   
41. The Chairperson
 invited comments in relation to this new document, as well as more broadly 
on the topic of information exchange.  In that re gard, Members might want to reflect on what use 
could be made of the background Note in their discussions. S/WPGR/M/57 
Page 10  
 
  42. The representative of Hong Kong, China
 was grateful for the Chai rperson's consultations on 
the information exchange required in Article XV.  Her delegation attached much importance to this 
topic.  She had an open mind regarding propo sals and options by Members to facilitate the 
information exchange.  Her delegation, as well as some others, had responded to the questionnaire on 
information exchange on subsidies.  Regarding po ints made about lack of resources and competing 
priorities, she appreciated Members' difficulties, but hoped that this was a reflection of good 
intentions to go forward with the exercise.  Con cerning concerns about how the information gathered 
would be used, she thought that this might link up with the parallel track of discussions in the Working Party on the question of the definition of subsidy.  With respect S/WPGR/W/25/Add.5, she observed that the Secretariat indicated that the compilation was an approximation of the universe of 
subsidies used in practice.  Acco rdingly, the information contained in TPR reports could not be seen 
as a replacement for the information exchange  requirement that Members had placed upon 
themselves.  She hoped that the Note could prov ide incentives for Members to be forthcoming and 
take this area of the negotiations forward.  He r authorities were studying the document and she 
encouraged Members to update or provide addition al views on the relevant entries.  When the 
Working Party would pursue its discussions on de finition, references woul d likely be drawn from 
these Secretariat Notes.   
43. The representative of Switzerland
 felt that this particular seri es of Notes by the Secretariat 
provided a good picture of existing subsidies grante d by Members.  He observed that no definition 
was necessary to collect and exchange information on subsidies.  Table 1 in the Note highlighted that 
Members tended to grant subsidies in many sector s.  These compilations constituted a good basis for 
those Members that had not yet fulfilled their obligat ions of information exchange under Article XV.  
He encouraged Members to provide greater info rmation on the programmes mentioned in the new 
addendum, as well as in previous updates, and to provide relevant information on subsidies in five 
sectors, along the lines suggested in paragraph 8 of JOB(05)/96.  
44. The representative of Pakistan  sought a number of clarifications on S/WPGR/W/25/Add.5.  
She first wondered if the Secretariat, when updati ng the document, looked at those countries that had 
stopped using certain subsidy programmes.  Second,  she enquired about the meaning of the use of 
italics in the listing of Members contained in Table 1 of the Note.   
45. A representative of the Secretariat  recalled that Table 1 summarized information from all 
updates, and not solely the most recent one.  The ita lics in Table 1 were used to identify the Members 
that were mentioned in this latest update, i.e., S/ WGPR/W/25/Add.5;  Members listed in the table, but 
not in italics, had only been mentioned in past updates.  TPR reports generally did not indicate 
whether certain subsidy programmes referred to in pr evious TPR reports had been discontinued.  It 
was therefore possible that such subsidies were no longer used.   
46. The representative of Canada  thought that delegations needed to focus on government 
assistance to trade in services, and not simply gove rnment assistance to services sectors generally.  
That was a crucial distinction.  Demandeurs  should be able to demonstrate if they had been adversely 
affected by subsidies to trade in services that mi ght exist.  That was the key information gap.   
47. A representative of the Secretariat  recalled that the information contained in the Secretariat 
compilations had not been designed, from the beginning, to correspond to the way the Agreement addressed trade in services or to be limited to measures affecting conditions of competition between 
different service suppliers.  
48. The representative of Indonesia
 noted that Table 1 of the document identified Indonesia as 
granting subsidies in a number of sectors, but of ten under the category labelled "other & unspecified 
measures".  He sought clarification in that regard.  A representative of the Secretariat  said that the 
categories of measures in Table 1 (e.g., direct grants , tax incentives) had been u sed since the first such  S/WPGR/M/57 
 Page 11 
 
 
  compilation.  The category referred to by the dele gation of Indonesia captured situations where the 
information on a given subsidy in the TPR report either did not specify, or did not allow to identify with certainty, the type of financial contribution used .  He recalled that TPR re ports were not prepared 
with the objective of providing exhaustive inform ation on subsidies and that subsidy programmes, 
accordingly, were sometimes only mentioned in passi ng in such reports or without much detail as to 
the form they took.   
49. The representative of Thailand
 took note of the difficulties in preparing 
S/WPGR/W/25/Add.5, especially regarding incomplete elements of information on the identity of the 
recipient of the subsidy or on their scope.  The ex change of information by Members needed to be 
carried out so as to remedy these limitations.  Re garding the question raised by the delegation of 
Indonesia, he wondered whether the Secretariat coul d provide an illustrative example of what might 
be covered by the category "other & unspecified  measures".  A representative of the Secretariat  said 
that an obvious example would be a situation wher e a TPR report simply said that subsidies of a 
certain value were provided in a given sector, but wi thout providing details about the type of measure 
used. 
50. The Chairperson  invited delegations to provide further comments or observations at the next 
meeting, including in terms of possible ways to ma ke use of information contained in TPRs in the 
Working Party's discussions on subsidies.  He proposed that the Working Party take note  of comments 
made. 
B. NON-ACTIONABLE  SUBSIDIES  IN TRADE  IN SERVICES,  COMMUNICATION  FROM  
HONG  KONG,  CHINA;  AND  MEXICO  (JOB(07)/27). 
51. The representative of Hong Kong, China  noted that in past discussions some Members had 
expressed an interest in looking at what might be permissible subsidies.  Accordingly, the sponsors 
attempted to provide an initial framework in the fo rm of exploratory questions .  Some questions might 
have been raised before, but gathering them in  a single document helped to focus discussions.  
Although JOB(07)/27 often referred to the ASCM a nd to the Agreement on Agriculture, this was 
intended to stimulate thinking rather than to direc tly transpose the concepts .  The key points were 
contained in questions in paragraph 6 of the commun ication.  Paragraph 7 also set out the preliminary 
view that government policy objectives could be a releva nt consideration in looking at subsidies.  Her 
authorities were now considering possible answers to  the questions raised in the document.  She 
hoped to discuss preliminary views on these in inform al small group exchanges before coming back to 
the Working Party.   
52. The representative of Mexico  wished to highlight that the communication should not be seen 
as a negotiating proposal, but rather as a tool to stimulate a substantive discussion between delegations.  As the delegation of Hong Kong, China, he would first wish to discuss answers in the 
context of informal exchanges.  The document was without prejudice to the question of trade 
distortive effects of subsidies. 
53. The representative of the United States
 believed that the communication might be premature.  
It asked many important questions, but his delegation did not have answers for many of them.  He was 
eager to hear whether the delegations of Hong Kong,  China and Mexico could share their thinking on 
the disciplines they had in mind, from which the su bsidies mentioned would be exempt.  He asked 
whether the issues raised by the sponso rs were exhaustive or merely illustrative.  It was not clear that 
there was even the beginning of an agreement among Members as to the nature of any possible 
multilateral disciplines in this area or on the definiti on of a services subsidy.  This proposal could be 
seen by some Members, who were unsure of what disciplines the proponents ultimately had in mind, 
as a mechanism to preserve negotiating flexibility.  However, it seemed to presuppose a certain type 
of disciplines, including, as proponents had acknowledged,  a red-light category.  In moving down this S/WPGR/M/57 
Page 12  
 
  path, the proponents had put the cart before the horse.  To discuss whether subsidies needed to be in a 
green or red category, it was necessary to understa nd the nature of the disciplines from which these 
would be included or excluded.  His delegation' s thinking had not yet evolved regarding the 
appropriate nature of rules in this areas.  Many  other Members likely found themselves in the same 
position.  The sponsors' thinking on this topic seeme d much more advanced.  This was an important 
paper that delegations would need to come back to when Members' views began to converge around 
questions such as:  what a subsidy was in the ser vices context and what multilateral disciplines were 
appropriate regarding such subsidies.   
54. The representative of El Salvador
 wished to stress that discussions on this topic needed to 
recognize the role of subsidies in development progr ammes of developing countries and to take into 
account these Members' need for flexibility in this area, as per Article XV.     
55. The representative of Chinese Taipei  wished to take this opportunity to share his delegation's 
views on services subsidies, more specifically on the sc ope and nature of subsidies that were referred 
to in JOB(07)/27 as non-actionable.  This was w ithout prejudice to his delegation's position on the 
issue of definition, nor on the appropriateness of using the ASCM as the building block for the 
discussion.  He wished to share some views on su bsidies that, based on eco nomic theory, might not 
create trade distortive effects and to offer a few thoughts on some of the questions raised in the 
communication.  When a subsidy was said to distor t trade, it was measured against a hypothetical 
situation where market decisions were based on unfettered competition.  Subsidies provided non-
market incentives.  In such circ umstances, trade and competition were distorted as the subsidized 
services enjoyed a competitive advantage that would ot herwise be absent.  However, in the context of 
a market-based economy, a common policy rationale fo r public subsidies was often not to provide an 
artificial competitive advantage, but rather to address market failure.  In a totally liberalized market, 
all services, regardless of their nature, might be  assumed to be supplied by private suppliers.  
However, characteristics of the market might preven t the supply of certain services at a level desired 
by public policy.  In the worst case scenario, th e supply of a service might not take place in the 
absence of a subsidy.   
56. Market failure existed in areas where private s uppliers failed to provide the desirable amount 
of services.  Several factors contributed to this.  The most common one was an investment-return problem.  For example, in the case of infrastructure, public and social services, the cost of service provision often exceeded socially or regionally disa dvantaged consumers’ willingness to pay.  In such 
cases, private provision would not take place unless subsidies filled the gap between the price that 
could recover the cost and the price that was socia lly desirable.  When such services were considered 
essential, e.g., to ensure a minimum level of quality of life or to promote development, government intervention was required.  Such subsidies often di d not create trade distortive effects, even if the 
services were subject to GATS commitments and were  provided by private suppliers.  These subsidies 
were used to address a problem of under-supply, not to provide competitive advantage to existing 
suppliers. Experiences in the sectors of telecommun ication and transport in relation to universal 
service obligations through direct subsidies had de monstrated that as long as they were competitively 
neutral and non-discriminatory, such schemes did not distort competition and trade.  Further, services 
such as education, environmental protection and research services were often essential for the long-
term interest of the society.  The value of th ese services derived not only fr om a steady supply, but 
also from an increased level of consumption.  Priv ate suppliers tended to focus on areas or consumers 
that could provide higher margins in the short run.   Subsidies were thus necessary to cover the gap 
between short-term and long-term incentives and therefore to encourage levels of supply and 
consumption that were socially desirable in the long run.  They did not produce trade-distortive effects, and were a less intrusive tool than others  that also addressed market  failure, for instance the 
supply of services by the government.  Indeed, in the WTO context, the supply of services directly by 
the government deprived of the opportunity to liberalize services that might otherwise be provided by  S/WPGR/M/57 
 Page 13 
 
 
  private operators.  His delegation thus believe d the continued discussion of non-trade distortive 
subsidies was important. 
57. The representative of Turkey  first sought a clarification regarding paragraph 7 of the 
communication, which asked Members to make co mments in relation to subsidies regarded as non-
actionable, permissible, allowable or tolerable, w ith due regard to government policy objectives.  She 
wondered whether the co-sponsors of the paper we re aiming to develop a list of non-actionable 
subsidies in the services area.  However, public policy objectives might differ in accordance with 
levels of development.  Members might therefor e find it difficult to agree on a common understanding 
on non-actionable subsidies.   
58. The representative of Hong Kong, China  welcomed the comments received.  The purpose of 
the communication was to stimulate discussions, and the exchanges today had been in-line with that 
objective.  Regarding the question by the delegation of Turkey, the communication was not suggesting per se  the elaboration of a list of non-actionabl e subsidies, although she retained an open 
mind.  She looked forward to future discussions on these issues.     
59. The Chairperson
 encouraged Members to engage in in formal exchanges so as to facilitate 
future discussions in the Working Party.  He proposed that the Working Party take note  of comments 
made. 
IV. DATE OF NEXT MEETING 
60. The Chairperson  suggested that the next formal meeting be held during the next cluster of 
services meetings.    
V. OTHER BUSINESS 
61. No items were raised under this agenda item.   
VI. APPOINTMENT OF THE CHAIRPERSON 
62. The Chairperson  indicated that, after consultations, the outgoing Chairperson of the Council 
for Trade in Services had put forward to delegations, on 14 March, a list of names.  Accordingly, the 
Chairperson proposed that the Working Party elect  Ms. Shaista Sohail, from Pakistan, as its new 
Chairperson.  Ms. Sohail was elected by acclamation.   The incoming Chairperson thanked delegations 
for their confidence and expressed gratitude to the outgoing Chairperson for the work done under his 
tenure. Delegations thanked the outgoing Chairp erson for his efforts and dedication, and 
congratulated the new Chairperson on her election.   
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