RESTRICTED  WORLD TRADE  
ORGANIZATION  S/WPGR/M/50 
17 January 2005 
 (05-0194) 
Working Party on GATS Rules  
  
 
REPORT OF THE MEETING OF 24 NOVEMBER 2004 
 
Note by the Secretariat
1 
  
1. The meeting of the Working Party on GATS Rules was chaired by Ms. Clare Kelly, from 
New Zealand.  The agenda for the meeting, contained in WTO/AIR/2443, included the following 
items: adoption of the annual report to the Council for Trade in Services, subsidies, emergency 
safeguard measures, government procurement, date of  the next meeting and other business.  To assist 
delegations in the preparation of the meeting, th e Chairperson had prepared  an annotated agenda, 
contained in JOB(04)/167.  The agenda was adopted
. 
I. ANNUAL REPORT OF THE WORKING PARTY ON GATS RULES TO THE 
COUNCIL FOR TRADE IN SERVICES (2004) 
2. The Chairperson  invited the Working Party to adopt the draft annual report contained in 
document S/WPGR/W/50 and transmit it to the Council for Trade in Services.  It covered the meetings of the Working Party from December 2003 to September 2004. 
3. Some delegations proposed changes to the draft report.  The following delegations 
participated in the ensuin g discussions: United States;  Hong Kong, China;  India;  the Philippines;  
European Communities;  Brazil;  Mexico;  Canada;  and Chinese Taipei.  After some modifications 
had been made to the draft, the Working Party adopted
 the Annual Report, which was circulated as 
document S/WPGR/14. 
II. NEGOTIATIONS ON SUBSIDIES (ARTICLE XV) 
4. The Chairperson  suggested that delegations pursue their discussion of the informal 
communication from Hong Kong, China, contained in JOB(04)/127, which provided suggestions on 
the way forward with respect to various aspects of these negotiations.  Concerning the information 
exchange, delegations could consid er ways to encourage a greater number of inputs.  Delegations 
might also want to reflect on the extent to which they had used other existing sources of information, 
for example Secretariat Notes on information cont ained in Trade Policy Reviews.  A significant 
amount of information was available and might allo w interested Members to develop their views on 
any specific problems to be addressed or any necessary disciplines.  On the definition of subsidy, she 
noted that the relevant elements in the Agreem ent on Subsidies and Countervailing Measures (ASCM) 
could provide a useful starting point for further discussion.  She indicated that UNCTAD was not yet 
ready to present a study on subsidies, and that th e Working Party would be kept informed of any 
development in that regard. 
5. The representative of Chile  wished to provide some information on domestic support 
programmes relating to services.  She reiterated that  the primary objective of her delegation in this 
area was to increase transparency so as to comply with the mandate in Article XV and paragraph 7 of 
                                                      
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/50 
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the Guidelines and Procedures for the Negotiations on Trade in Services.  With such objectives in 
mind, her delegation had presented a simplified qu estionnaire jointly with Hong Kong, China and 
Argentina in 2002, as well as a list of examples of subsidy programmes in December 2003.  She 
supported the ideas put forward by Hong Kong, China in JOB(04)/127 to encourage the exchange of 
information, and recognized that Chile had lagg ed behind in providing information on activities 
receiving governmental support.  Her delegation did not consider this exercise as equivalent to a 
notification; the exchange of information should rather permit Members to elaborate a list of 
activities, which could subsequently be analyzed to see whether disciplines were needed.  In that light, 
she wished to mention some ac tivities that received government support in Chile.  The three 
programmes concerned fulfilled public policy goals and,  in her view, did not distort trade.  She hoped 
that the provision of these examples could encourage participation by other Members in the exchange 
of information. 
6. The first example was the Development Fund  for Telecommunications, enshrined in Law 
18.168 (the General Telecommunica tions Law).  This fund was constituted from appropriations yearly 
earmarked in the budget, but there also could be other appropriations.  The objective of the Fund was 
to increase the coverage of telecommunication services in rural areas and low income urban areas, in 
particular in geographically remote towns and vi llages.  The Sub-Secretary of Telecommunications, 
on the basis of specific requests, would be elaborat ing a yearly programme of projects eligible for 
subsidies.  The programme focused on the followi ng types of undertakings: public telephony or call 
centres; community telephone information centres; telecommunication services of free reception or 
local broadcast, whose transmissions were to be made available directly to the public at large free of 
charge;  and any other telecommunication service that directly benefited the relevant community.  All 
projects could be complemented by the installati on of further lines.  The second example was the 
programme of Rural Electrification for Poor Families,  which was launched in 1994; the State financed 
70% of investments under such programmes.  Th e third example was in the area of maritime 
transport.  When the State wanted services to be  provided on special shipping lines that were not 
covered by domestic companies, a competitive biddi ng process was held to grant a subsidy to those 
Chilean shipping companies that committed to provi de the required service.  More information could 
be found on these programmes through the internet.  A number of Members probably engaged in 
similar activities, and she invited them to shar e such information so as to deepen knowledge and 
increase transparency.  More tran sparency meant greater certainty at the time of undertaking new 
commitments. 
7. The representative of the United States
 recognized the concerns expressed by some 
delegations regarding the information excha nge, as well as fears of getting bogged down in 
definitional issues.  She believed that the merits of an exchange of information would be enhanced by 
some sort of understanding on how subsidies might be  defined in the services context.  Her delegation 
was trying to explore possible ways of capturing both aspects.  She had suggested at the last meeting 
that Members' resources could be used to contri bute analytical papers that would assess whether 
subsidies were more likely in certain sectors or whet her, for example, certain kinds of subsidies might 
be more relevant to trade than others.  Noting that some of the proponents had not yet provided 
information, even of a partial nature, she thought that such analysis might help reduce the scope of 
issues to be confronted and thereby focus discussions .  In preparing such analysis, account could be 
taken of previous contributions in the Working Pa rty, including those from Chile and Poland.  One 
way of approaching the analysis could be to e xplore a few services sectors and consider how the 
definition of subsidy contained in the ASCM might  apply.  For example, would government support 
of health care and education be captured in this de finition?  What about subsidies that supported mass 
transit or those underpinning universal access to telecommunications, electric power or postal 
services?  How would the specificity test in the AS CM affect the scope of services subsidies that 
could be captured by a definition?  Because the ASCM  had been negotiated in the context of trade in 
goods, it should not necessarily be assumed that its definition would be entirely appropriate for services.  Consequently, another question to c onsider was whether any aspects of the ASCM 
definition needed to be adapted to better correspond to  the context of trade in services.  Her delegation  S/WPGR/M/50 
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was working on a paper addressing such points (whether subsidies were more likely to be applied in 
certain sectors, whether some types of subsidies were more relevant to trade than others, and 
definitional aspects) and thought it could help advance discussions, including the exchange of 
information.  She hoped to be able to present such a paper at the next meeting, but could make no promise.  With respect to the presentation by Chile, she wondered whether non-Chilean companies 
were also eligible for the programmes relating to telecommunications.  In the case of the programme 
relating to electricity, she asked whether it was only available to homes or also to industrial facilities 
in rural areas.  Concerning shipping, she hoped to obtain more information on the programme; how 
could reducing shipping costs not distort trade?   
8. The representative of Chile
 said that some of the issues mentioned by the delegation of the 
United States, such as public policy objectives, trade distortion, definition, and the relevance of the 
ASCM, needed to be further analyzed.  On th e questions raised, she noted that any company 
established under Chilean law would have access to  the programmes mentioned, even if foreign-
owned.  The Chilean telecommunication sector was ope n to foreign competition.  She indicated that 
she would reply to other questions at the next meeting.   
9. The representative of Singapore  recalled that, along with other delegations, he had suggested 
that focusing first on the definition of subsidy wo uld help address the “chicken and egg” problem in 
the negotiations.  The ASCM definition could serve  as a starting point for such discussions as had 
already been argued in the Working Party in the past.  For example, earlier in the negotiations, certain 
Members had suggested that some modifications to the ASCM definition might be necessary in order to cater to the characteristics of services trade.  The Secretariat had also done a useful background 
paper in 1996, S/WPGR/W/9, which t ouched upon these issues.  It might be useful to revisit this and 
discuss how such concepts as the “ex istence of a financial contribution”, “government or any public 
body”, “any form of income or price support”, or th e “conferral of a benefit to the supplier”, which 
were used in the ASCM, could appl y in the services context.  Accord ingly, he wished to highlight 
some of the salient issues and questions pertaining to the applicability of the ASCM to services.   
10. First, could the various elements of financia l contribution listed in the ASCM (e.g., grants, 
loans, equity infusion, loan guarantees, tax credits) be used in the services context?  Second, some 
Members had highlighted that regulatory measures coul d have subsidy-like effects.  In that context, 
how should the negotiations under Article VI:4  inform the Article XV negotiations?  Would 
disciplines resulting from the negotiations under Article VI:4 be sufficient to address issues relating to 
regulatory measures?  Should the WPGR avoid cr eating overlapping disciplines relating to such 
measures?  Third, while the term "benefit" was not  defined in the ASCM, it had been discussed and 
clarified in the jurisprudence.  For instance, the Appellate Body had clarified that a “benefit to the 
recipient” meant that the recipient must be a natura l or legal person.  The te rm did not imply a benefit 
to a company's productive operations.  He wondered whether it would be appropriate for the Working 
Party to consider such jurisp rudence, even if it did not relate to trade in services.   
11. Fourth, in addition to the reference to "governme nt or any public body", Article 1.1(a)(1)(iv) 
of the ASCM also covered situations where a governme nt entrusted or directed a private body to carry 
out the functions illustrated in Article 1.1(a)(1)(i)- (iii) "which would normally be vested in the 
government and the practice, in no real sense, differs from practices followed by governments".  
Taking Article 1.1(a) as a whole,  could it be inferred that the ASCM captured subsidies granted by 
various levels of governme nt and private entities, which had been  entrusted with certain governmental 
functions?  If so, the ASCM notion of imposing obli gations on central, regional and private bodies 
might not be altogether new to the GATS.  Through Article I:3(a), the GATS applied to measures taken by  "central, regional or local governments authorities" and by "non-governmental bodies in the exercise of powers delegated by central, regiona l or local governments or authorities".  He thought 
that the formulation used in the GATS provided greater clarity and wondered whether it might be 
appropriate to use such language in a definition of subsidy for services.  It should nevertheless be kept 
in mind that, as stipulated in GATS Article I:3(c), subsidies granted by these bodies neither on a S/WPGR/M/50 
Page 4  
 
commercial basis nor in competition with other servi ce suppliers should be outside the remit of the 
GATS.  Fifth, he wondered whether the "traffic li ght" approach used in the ASCM to classify 
subsidies could be applied in the services context.  Should legitimate subsidies such as those granted 
for social services, health services, or basic edu cation services be included in the category of green- 
light subsidies?  In fact, Article XV appeared to pr ovide for this through its recognition of the "role of 
subsidies in relation to the development progra mmes of developing countries".  Article XV also 
required the taking into account of the "needs of Members, particularly developing countries".  
Regarding the category of red-light subsidies, he noted that the ASCM prohibited export subsidies and 
local-content related subsidies.  One view, as expr essed by some commentators, was that the GATS 
did not cover export-related measures.  If so, could export subsidies fall within the remit of Article 
XV?  This issue might need to be discussed further.  Sixth, he drew attention to the fact that paragraph 
40 of the Secretariat Note S/WPGR/W/9 said that "an important objective of the GATS Article VIII was to prevent cross-subsidization from occu rring across activities or sectors".  Though not 
particularly rigorous, Article IX, which related to business practices, also extended some competition 
disciplines to the GATS.  He considered that th ese provisions might relate to some aspects of 
subsidies and wondered how they should inform wo rk pursuant to the mandate in Article XV.  
Shouldn’t the WPGR avoid duplicating disciplines relating to competition-related issues as well? 
12. The representative considered that other provision s in the GATS, in addition to those he had 
just mentioned (Articles VI, VIII, IX), might also address certain aspects of subsidies.  As a reality 
check, it was important to keep these provisions in mi nd, since they might have a bearing on the scope 
of eventual Article XV disciplines.  First, th e national treatment obligation was potentially far 
reaching;  it captured discriminatory subsidies gran ted in sectors listed in a Member's schedule of 
specific commitments, unless an appropriate limitation had been inscribed.  Second, given that Article 
XXIII:3 provided for non-violation complaints, even if a subsidy - or for that matter any measure - did 
not violate any GATS provisions, it might need to be modified or withdrawn if a Member considered that any benefit it could reasonably have expected  to accrue under a specific commitment of another 
Member was being nullified or impaired as a result of the subsidy.  Third, Article XV:2 provided that 
if a Member was adversely affected by a subsidy of another Member, it might request consultations.  
Such requests had to be accorded sympathetic consid eration.  Finally, the representative also stressed 
that the statistical and measurement difficulties in  services trade had to be recognized as work 
proceeded in the negotiations, even if such diffi culties should be no reason to ignore the mandate in 
Article XV.  Additional issues could also be raised.  For example, in relation to the issue of definition, 
the Working Party might need to consider the app licability to services of other ASCM concepts such 
as specificity and serious prejudice.  The points he had highlighted were for discussion purposes and 
without prejudice to Singapore's position on the scope of the mandate or other aspects of these 
negotiations, such as the applicability of the ASCM definition to services. 
13. In response to comments from the delegation of Chile, the representative of Hong Kong, 
China  wondered whether distinctions could be ma de between domestic and foreign services on the 
basis of particular modes of supply.  Certain modes of supply might be particularly important in some 
of the sectors mentioned, for example in shipping.  He was grateful that Chile set an example on how the exchange of information might be advanced and hoped that others  could do the same.  The various 
programmes mentioned by Chile were  in support of public policy objectives, for example to ensure 
the supply of essential utilities in certain areas.  He wondered how the issue of public policy 
objectives should be treated in the development of  disciplines.  While some subsidy programmes 
aimed to further certain legitimate public policy objectives, it was hard to envisage that such 
programmes would not have any distortive effects.  If so, how could a balance be struck?  In that 
context, he had been reflecting on the extent to which an ASCM-type "traffic light" system might be applicable to subsidies in services.  Could certa in subsidies granted in pursuance of some public 
policy objectives, possibly in certain specific sectors, be defined as tolerated or  non-actionable even if 
they had certain trade distortive effects?  He hop ed to provide further thoughts on this at an 
appropriate juncture.    S/WPGR/M/50 
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14. On the definition of subsidy, he looked forw ard to the upcoming contribution from the United 
States and agreed that it would be useful to exam ine a few services sectors.  He concurred that the 
ASCM definition provided a useful starting point fo r the purpose of comparison.  The Working Party 
already had had extensive discussions on the issue of definition on the basis of contributions from 
Members (e.g., Argentina;  Poland;  Chinese Taipe i;  Hong Kong, China), which had touched upon 
the ASCM definition.  It would be useful to refresh delegations' minds and build on these previous 
discussions.  He suggested that the Working Party re quest the Secretariat to produce a synthesis Note 
on the basis of the background Note that they had produced in 1996 (S/WPGR/W/9), communications from Members, and ensuing comments by delegati ons.  The Note could provide information on 
various issues relating to the defi nition of subsidy.  Singapore's inte rvention today had already alluded 
to a structure that could be used in such a Note.  Such a synthesis note would be helpful in facilitating 
and advancing discussions efficiently on the defini tion of subsidy.  Concerning the information 
exchange, he thought that no delegation disputed th at the information exchange had to be done.  
However, the issue of how to carry it out remained .  For the moment, the meaning of the relevant 
mandate in Article XV could be left  aside and delegations might instead focus on what could be done.  
Various suggestions had been made and Members no w had to provide information rather than talk 
about it.  While Switzerland's suggestion to set a timeframe was attractive, some delegations had 
indicated that information would be forthcoming.  Progress could thus be assessed later, for example 
during the first cluster of next year.  He undersco red that the mandate had to be fulfilled for the 
purpose and as part of the negotiations. 
15. The Chairperson
 said that, in assessing progress on the information exchange, delegations 
might want to reflect on whether some subsidy-sp ecific transparency issues warranted particular 
attention. 
16. The representative of Switzerland  recalled that Article XV contained a clear legal obligation 
to exchange information concerning all subsidies rela ted to trade in services.  This obligation existed 
since 1994 and its fulfilment had therefore been long  overdue.  The Working Party now needed to be 
concrete and her delegati on accordingly had invited Members to fulfil the obligation to exchange 
information by the second cluster of 2005.  Memb ers had to make sure that the two mandates 
contained in Article XV - one  on the development of multilateral disciplines and the other on 
information exchange - were implemented.  The prop osed concrete timeframe had to be seen in this 
light; it should be understood as an implementation measure and would not entail a change of the 
mandate.  With regard to JOB(04)/127, she drew attention to paragraph 16 where the delegation of 
Hong Kong, China proposed that the Secretariat pr epare a composite note on issues to be considered 
for a definition of subsidies.  She supported this idea, which would be an important contribution to 
advance work in this area.  Various Members were  of the opinion that the definition in the ASCM 
could provide a useful starting point for further discu ssions in the services context.  That raised the 
question of whether any elements should be added, modified or omitted in order to take into account 
the particularities of services.  She proposed that the Secretariat elaborate, in addition to the composite 
note proposed by the delegation of Hong Kong, Chin a, a separate note regarding, on the one hand, 
concrete critiques that were raised against using th e ASCM definition and, on the other hand, concrete 
improvement proposals made in the Working Party.  She noted that various Members had submitted contributions touching upon the issue of the de finition of subsidy in services, and substantive 
discussions had ensued during previous meetings .  A note providing an overview of these points 
would help highlight elements of the definition where further work was needed.   
17. The Chairperson
 said that the specific suggestions of the delegation of Switzerland for further 
Secretariat work might be incorporated in the prop osal for a new Note as suggested by the delegation 
of Hong Kong, China, rather than as a separate No te.  A possibility might be to update the Secretariat 
Note from 1996 circulated as S/WPGR/W/9 so as to re flect the discussions since.  The representative 
of Switzerland  found this to be acceptable as long as the specific elements that she had highlighted 
were addressed, i.e., concrete criticisms by delega tions regarding the use of the ASCM definition of 
subsidy and concrete improvement proposals.  The Chairperson  indicated that all elements raised by S/WPGR/M/50 
Page 6  
 
delegations, including the aspects just mentioned, could be reflected in a Secretariat Note on the 
definition of subsidy.   
18. The representative of Canada
 sought clarification on the proposal for further work.  He 
understood that what was proposed was basically a reminder of all existing proposals regarding a 
possible definition of subsidy.  He wished to cl arify that the work requested from the Secretariat 
would not involve the consolidation of existing propo sals into a draft text of a definition.  Regarding 
the proposal by the delegation of Switzerland, he thought that there had not been many substantive 
comments on the issue of definition; this could not, however, be seen as implying any kind of 
agreement on definition.  The Note should be a llowed to be updated to incorporate any further 
comments.   
19. The Chairperson  said that her understanding of what was being proposed was a synthesis of 
comments and contributions made in the Working Part y on the issue of definition.  Such a synthesis 
would include the relevant caveats to reflect that  it was work in progress and did not represent any 
consensus.   
20. The representative of th e European Communities  noted that the Chairperson had in the past 
produced a checklist of issues which touched upon the de finition of subsidy.  A possibility might be to 
update that document.  He hoped that the delega tions of Hong Kong, China and Switzerland could 
elaborate on their proposal for further work.   
21. The representative of Hong Kong, China  said that his intent was not to foreshadow any 
potential agreement among Members.  He was looking for a synthesis of what had been done so far, 
which, of course, was work in progress.  Many delegations had expressed an interest in advancing 
work on the definition of subsidy.  A Note would help refresh everybody's memory in a systematic 
manner as to what the issues were and what views or proposals had been expressed so far.  The 
intervention by Singapore and the original backgr ound Note by the Secretariat (S/WPGR/W/9) could 
be useful points of reference.  The proposed co mposite note would help structure and focus the 
discussions in the Working Party on the various aspect s relating to the definition of subsidy.  Such a 
Secretariat Note might also take note of the point s made by the delegation of Singapore regarding the 
various other provisions in the GATS that could be re levant for subsidies.  He agreed that duplication 
should be avoided, although this was not a pressi ng concern as long as the substantive work pursuant 
to the mandate under Article XV was not further advanced.   
22. The representative of the United States  said that her delegation's impression was that the 
essence of what had been proposed was a reminder of  what Members had tabled or introduced.  Her 
delegation might be able to consider a Note in th e form of a succinct recording of what Members had 
said in a category format.  She was concerned about the Working Party developing some sort of an illustrative list of elements of a definition; the usua l caveats would not prove sufficient.  The standing 
of the document should also be discussed.  Her dele gation would prefer that its forthcoming paper be 
included in the proposed Note, rather than included in an update.  The possibility to go back to the 
checklist approach could be explored as a first option.   She agreed that it was important to keep in 
mind the ideas expressed in the past on the issue of defi nition so as to not repeat the same discussions. 
23. The Chairperson
 asked the Secretariat to clarify the wo rk that had been done in the past on 
this issue.  A representative of the Secretariat  said that the checklist was a short informal 
communication from the Chairperson, which had been upda ted in the past and could be updated again.  
Another idea expressed was to update the Secretar iat Note prepared in 1996 (S/WPGR/W/9), which 
provided background information on re levant issues pertaining to subsidies in the context of trade in 
services.  That Note touched upon a series of issues, including definition.  Given that these two Notes 
were quite different, delegations might wish to clearly  specify the type of work  that they wanted the 
Secretariat to undertake.  S/WPGR/M/50 
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24. The representative of the United States  said that her delegation's preference was closer to 
what Hong Kong, China had originally proposed or to the idea of a checklist than to that of an update 
of S/WPGR/W/9.  Her delegation could not suppor t an exercise that would criticize anything.  
Nothing in the ASCM had changed since the preparation of S/WPGR/W/9 and discussions in the Working Party were still at an early stage, where delegations could forward their views. 
25. The representative of Hong Kong, China
 said that three types of work had been mentioned 
today.  The first was the idea of an update of the Chairperson's checklist (JOB(03)/57).  That 
document was a succinct list of issues that might be  relevant to the negotiations under Article XV.  
Such a list contained no information on work that had been done by the Working Party so far.  He was 
open to updating the checklist.  However, recent discu ssions in the Working Party related to elements 
that had already been mentioned in the checklist.  An additional element might be added to cover 
what the delegation of Singapore had raised toda y with respect to the relevance of other GATS 
provisions.  Paragraph 4 of the checklist ("to what  extent do WTO rules already discipline services 
subsidies?") already captured that aspect, but co uld specify the various provisions to which the 
delegation of Singapore had drawn attention to.  Th e second type of work was more analytical in 
nature and consisted in building upon the Secretar iat Note from 1996.  The third type of work was 
what his delegation had originally asked for: a synthesis of the contributions and discussions so far in the Working Party on the question of the definition of subsidy.  This would be done on the basis of the 
various communications from Members on the is sue, the ensuing discussions, and comments by 
delegations.  Such a synthesis note would provide  a structured reminder and would be work-in-
progress and could be updated as needed.  If some had concerns about the status of any such 
Secretariat Note, a possibility could be to circulate it as a room document. 
26. The Chairperson
 confirmed that what was under considera tion was the third type of work just 
mentioned, i.e., a neutral synthesis of contributi ons and discussions which would assist delegations in 
approaching future work on the issue of definition. 
27. The representative of the European Communities  indicated that the purpose of his previous 
intervention was to seek clarification on the work pr oposed and not to put forward a specific view as 
to what should be produced by the Secretariat.  He cautioned that most of the interventions on the definition of subsidy were limited to raisi ng questions, rather than providing answers. 
28. The representative of South Africa
 expressed concerns about the proposal by Switzerland to 
set a concrete timeframe for the information exch ange.  While committed to providing information on 
subsidies, she felt that setting specific timelines would amount to imposing additional obligations. 
29. In summing up the discussions under this agenda item, the Chairperson  highlighted, in 
relation to the information exchange, the presentation of information by Chile and the proposal by one 
delegation to set a concrete timeframe for compliance with the mandate in the last sentence of Article 
XV:1.  On the definition of subsidy, discussions had focused on the applicability of the definition 
contained in the ASCM.  She highlighted the intervention made by the delegation of Singapore and 
hoped that it could be circulated to Members.  Links between the negotia tions under Article XV and 
other GATS provisions were also underscored, as was the role of public policy objectives in 
informing possible approaches to subsidy discip lines.  She welcomed indications from some 
delegations that communications would be submitted, hopefully for the next meeting. 
30. Concerning future work by the Secretariat, the Chairperson recalled that the proposal 
originally put forward by Hong Kong, China was fo r the Secretariat to prepare a synthesis Note on 
past contributions and discussions in the Worki ng Party on the definition of subsidy.  She had 
consulted interested delegations and, on that basis, wanted to propose that the Secretariat be tasked to 
prepare such a Note and circulate it as a JOB document.  The representative of Switzerland  said that 
she could go along with the proposal on the understanding that the aspects she had earlier mentioned would also be covered in the JOB document.  The Chairperson
 said that the Note would cover all S/WPGR/M/50 
Page 8  
 
relevant aspects of the discussions and contributions  made so far.  The representative of the United 
States  said that her understanding was that the paper w ould organize the issues that had been raised by 
delegations, as opposed to analyzing or criticizing ideas expressed, or introducing new ideas.  The 
Chairperson  said that the proposed Note would not go beyond presenting the issues raised so as to 
help organize and structure discussions.  At the request  of the delegation of Brazil, she also confirmed 
that work by the Secretariat would concern solely the synthesis, as opposed to updates of the checklist 
and of S/WPGR/W/9. 
31. The representative of Hong Kong, China  recalled that other suggestions included in his 
delegation's informal communication (JOB(04/127)  remained on the table; agreement on the  
synthesis note should not be seen to imply that the information exchange mandated under Article 
XV:1 had been complied with.  This remained to be addressed. 
32. As there was no opposition, the Chairperson  concluded that the Secretariat should prepare the 
Note as just set out and invited the Working Party to take note  of the comments made. 
III. NEGOTIATIONS ON EMERGENCY SAFEGUARD MEASURES (ARTICLE X) 
33. The Chairperson  suggested that delegations continue their discussions under this topic on the 
basis of the answers provided by the group of Me mbers from ASEAN to questions surrounding their 
proposal contained in JOB(04)/4.  These an swers were contained in JOB(04)/175. 
34. The representative of the Philippines , on behalf also of the delegations of Brunei Darussalam, 
Indonesia, Malaysia, Myanmar, and Thailand, clarifie d that the content of JO B(04)/175 was the same 
as that of the room document circulated at the last  meeting.  Acknowledging that delegations had not 
had much time to study the answers provided at th e last meeting, he invited questions and comments 
on the informal communication.  He also reiterated his invitation for Members to send written 
questions to the group of dele gations he was speaking for. 
35. In reviewing the answers provided, the representative of the United States  said that she found 
herself drawn back to issues such as situations that  might justify the use of a safeguard, the feasibility 
of determining injury and of applying remedial meas ures.  Regarding situations  justifying a safeguard, 
the information provided in the optometry scenar io did not make a compelling case that a domestic 
industry had been injured or that the alleged inju ry was due to trade.  To make this case more 
compelling, information would be needed on such elements as past sales volumes, the revenue of the sector, employment, compensation of opticians and other technicians.  She wondered whether such 
information existed.  As currently described, one c ould infer that an established group of opticians had 
experienced a decline in profitability due to co mpetition from more effici ent service suppliers.  
However, employment, wages and sales volumes could have increased for the optometry sector as a 
whole.  Regarding the example referring to temporar y suspension of regulatory reform, she noted that 
regulatory reform involved a degree of uncertainty regarding the future development of a market and 
thought that it was understandable that one woul d consider whether a safeguard would enable 
countries to undertake more ambitious liberalization.   However, the question remained as to whether 
Members retained sufficient discretion to address an ensuing crisis without resorting to a safeguard 
mechanism.  For example, JOB(04)/175 indicated that competition from foreign service suppliers had 
somehow undercut the ability of domestic suppliers to  fulfil their universal service obligation.  If such 
a scenario were to occur, the appropriate regulat ory action was to adapt the mechanism providing for 
universal service, and not to limit the cross-border supply of services.  The Reference Paper in telecommunications acknowledged that each Member ha d the right to define its own universal service 
programmes.  However, these had to be administ ered in a transparent, non-discriminatory and 
competitively neutral manner and should not be more burdensome than necessary.  Ensuring the 
viability of such programmes was certainly laudable, but not if done in a discriminatory manner or in 
a way that only served to protect a revenue stream  for incumbent operators.  More competition, not 
less, was the most effective means to achieving universal service objectives.    S/WPGR/M/50 
 Page 9 
 
 
36. The representative considered that the answer s concerning the source of statistics did not 
seem to reflect the actual situation, where reliable da ta was simply difficult to compile in services.  In 
the case of the United States, most  official data on services was co llected through periodic surveys 
that were not nearly as detailed as customs data for merchandise trade and suffered from significant 
time lags.  For example, the United States did co llect data on the sale of services through foreign-
owned affiliates, but such data was reported with a two-year delay and the sectors covered were not 
highly detailed.  For example, architectural, e ngineering and construction services tended to be 
bundled together.  Country-specific details on a secto r-by-sector basis were available only for about a 
dozen countries.  In light of these limitations, she asked whether the proponents of an ESM had any 
ideas on how official data from their own systems could demonstrate a link between trade in services 
and economic harm.  Even the United States would ha ve very severe difficulties doing this.  What 
would developing countries from various parts of the wo rld be able to do?  The provision of real life 
examples by the proponents might help to advance the debate.   
37. The representative of Canada  said that his delegation continued to question the need for an 
ESM.  Nevertheless, it remained engaged on the is sue and aimed to ensure that a useful discussion 
continued.  On the concept of a limited window, he  thought that, if an ESM was something Members 
were ready to agree to, his delegation would see a certain logic in this concept.  Unexpected 
developments, if any, associated with liberaliza tion initiatives would most likely reveal themselves 
within a fixed period of time after implementation.  Regarding the proposal that each Member use its 
own definition of domestic industry, his delegation believed that such an approach was undesirable.  It 
would encourage Members to offer definitions of domestic industry that would allow for the 
maximum possible use of an ESM.  Introducing such tailored definitions would lead to uncertainty 
and would undermine confidence in the ability of th e WTO system to deliver reasonable outcomes.  
With respect to the relationship between an ESM and bilateral investment treatie s (BIT), he noted that 
the group of ASEAN Members conceded, in JOB(04) /175, that the application of an ESM could 
create legal conflicts with the provisions of BITs.  It might thus be useful for the Working Party to 
consider this relationship more closely.  In light  of potential conflict, the Working Party might also 
want to consider whether an ESM would undermine efforts aimed at creati ng the positive investment 
climate needed to promote trade and development.  On  the issue of injury determination, the group of 
ASEAN Members conceded in JOB(04)/175 that services trade statistics could not be expected to be 
consistently available at a sufficiently disaggregated  level or according to the four modes of supply.  
Confidence in the ability of the system to deliver fa ir outcomes could again risk to be undermined if 
services trade data was not available at the level needed  for the credible applicat ion of an ESM.  This 
might lead to investigations being initiated without  just cause being shown.   Burdening enterprises 
with the task of having to react to investigations  launched on less than solid grounds would be hugely 
unpopular, as well as wasteful and unreasonably intrusive.   
38. The representative of Hong Kong, China  wished to raise a few points.  On situations 
justifying a safeguard, he wondered whether it was necessary to exhaust all possibilities.  There might 
be value in an approach where the merit in us ing a safeguard was assessed for each particular 
situation.  His delegation considered that the vari ous examples provided so far suggested that some 
Members might want to invoke a safeguard, but th e examples did not justify the use of safeguard 
measures.  On the definition of domestic industry, he considered that it would be difficult to advance 
without settling the fundamental issue of who was to be protected.  Individual Members could let the 
Working Party know whom they would want to pr otect – assuming there was to be an ESM.  This 
could help consider a common definition of domestic in dustry, if such was the in tent of Members.  On 
the relationship between BITs and an ESM, he drew a ttention to the fact that the mandate in Article X 
called for negotiations "based on the principle of n on-discrimination".  He understood this to mean 
that any safeguard would be applied on a MFN basis.  In that context, he did not see the need to talk 
about any deviations from the obligation of most-fa voured-nation treatment.  Issues relating to BITs 
had been discussed during the last review of MFN exemptions.  Some had argued that measures relating to BITs were not inc onsistent with the MFN obligation; the issue of whether MFN 
exemptions were required for such agreements had al so been raised.  He would have thought that the S/WPGR/M/50 
Page 10  
 
broader issue of the relationship be tween BITs and the MFN obligation w as more relevant than that of 
the link between BITs and safeguard measures. 
39. The representative of Japan
 first sought clarification from the group of ASEAN Members 
regarding the distinctions drawn between the de finition of domestic industry and of domestic 
companies.  He thought that the proposed appro ach did not correspond to the definition of domestic 
industry used in the Agreement on Safeguards, or what might commonly be understood by such 
terms.  For example, assume that foreign coffee sh op chains had greatly increased their market share 
in Japan.  Some might say that this had caused a certain amount of injury to traditional domestic 
coffee shops.  However, as a result of the arrival of these foreign chains, the coffee shop industry in 
Japan had flourished.  To the average consumer, a ll these companies, all suppliers - traditional shops 
as well as foreign-owned chains - constituted the do mestic industry.  Second, with respect to the 
example relating to opticians, he wondered whethe r the impact had really been unintended or 
unanticipated for the government, although it might ha ve been unexpected for some opticians.  When 
a government decided to open the market to fore ign suppliers, such consequences were usually 
anticipated.   
40. The representative of Switzerland  recalled that her delegation, at the meeting of March, had 
elaborated on four concerns in the light of JO B(04)/4.  Her delegation had considered the answers 
provided in JOB(04)/175 in the light of these concerns.  On the link between an ESM and progressive liberalization in market access negotiations, she re gretted that some Members had so far made a 
negative link only.  As indicated previously on many occasions, she would prefer to see a concrete positive link between the market acc ess negotiations and an ESM.  JOB(04)/175 said that an ESM 
would make it easier to convince domestic constituenci es to accept greater liberalization.  It also 
indicated that the group of ASEAN Members was open to suggestions on how to further elaborate 
such a link, but did not suggest a concrete positiv e connection.  Her delegation hoped that the group 
of ASEAN Members could indicate the sectors or sub-sectors where they were prevented from taking commitments because of the absence of an ESM.  A nother concern related to the fact that an ESM 
would compromise commitments negotiated in the last  round.  Her delegation was very concerned to 
see that JOB(04)/175 advocated an ESM for future  as well as existing commitments.  The concerns 
previously expressed by her delegation thus remained.   
41. The representative of Mexico
 believed that the communication failed to answer two 
fundamental questions.  First, what alternative measures existed in WTO Agreements to address the 
kind of situations identified by the group of AS EAN Members?  There ha d not been appropriate 
evaluation of this aspect.  Second, assuming - without  conceding - that there would be an ESM, how 
could it be ensured that a safeguard measure was the least-trade restrictive alternative available?  He 
thought this was a key aspect in the discussion.  Recalling his delegation's position on this issue, he 
indicated continued interest in pur suing constructive exchanges.   
42. The representative of the Philippines  wished to provide preliminary answers to questions 
raised.  On situations justifying  a safeguard, he agreed that it might not be necessary to exhaust all 
possible situations.  Each example would have to be examined on a case-by-case basis.  Concerning 
opticians, he said that in domestic  consultations the industry repr esentatives had referred to revenue 
and employment losses and to closure of operations.  Some but not all of the employment lost had 
been compensated by new hiring by the foreign suppliers that had caused  injury.  He considered that 
all the information on the injury suffered would, of  course, have to be substantiated by a petitioning 
industry.  An earlier communication from his group of delegations had referred to the kind of 
information that would need to be provided to sh ow that the situation justified the imposition of a 
safeguard measure.  On points raised by Japan, he  acknowledged that turnover might have increased 
for the sector as a whole, but this could be due to  an increase in the revenue of the foreign-owned 
suppliers at the expense of domestic ones.  With  respect to the example on regulatory reform, he 
considered that the flexibility of the GATS with respect to regulatory measures only existed in the 
absence of certain additional commitments.  The example was relevant where such additional  S/WPGR/M/50 
 Page 11 
 
 
commitments had been undertaken.  The issue in th is example was not one of restricted competition; 
it captured a situation where a Member had comm itted to a particular way of determining the 
interconnection rates, which affected the ability of the domestic service supplier to provide universal 
service.  Expected revenue relating to the comm itment with respect to the determination of 
interconnection rates had not materialized, thus affe cting the possibility to provide universal service.  
Accordingly, there should be some scope to tem porarily modify or withdraw the commitment with 
respect to the determination of interconnection rates.   
43. Concerning the definition of domestic industry, he noted that the proposal to let each Member 
use its own concept did not aim to encourage th e development of definitions that would suit a 
particular desire to impose a safeguard.  Using th e definition found in Article XXVIII of the GATS as 
a common basis was difficult since it was, for some Members, contrary to their domestic legislation or 
Constitution.  Rather, each Member could notify its de finition of domestic industry.  Given that such 
definitions already seemed to exist in some cases,  the scope for manipulations would be limited.  
Regarding a point made by the delegation of Hong K ong, China, he thought that the target group for 
protection would be the domestic companies, defined according to foreign equity participation.  When 
notifying their definition of domestic industry to  the Council for Trade in Services (CTS), Members 
would make a policy judgement concerning the targ et group for protection, i.e., whether it would 
include established foreign suppliers.  Those who di sagreed with such a concept could put forward 
their own thoughts; common elements might thus be developed to form the basis of an alternative 
approach to defining domestic industr y.  In reference to points raised  by the delegation of Japan, he 
noted that under the approach proposed by his group  of delegations, Japan would be free to include 
foreign chains of coffee shops in the definition of do mestic industry that it would notify to the CTS.  
He recalled that some delegations had critic ized proposals made on ESM because these were 
considered too similar to the Agreement on Safeguard s, but on this issue particular efforts had been 
made to be creative and deviate from the goods model. 
44. On the issue of statistics, the representativ e recognized that there might be a lack of 
disaggregated data according to specific modes of s upply or particular activities in some sectors, but 
work was underway in international organizations to develop appropriate statistics for trade in 
services.  His delegation had begun looking at system s for developing databases for services statistics.  
Professional associations also kept statistics.  Not one source of statistics could provide all the information necessary to establish that a safeguard wa s justified.  Looking at all sources concurrently 
could provide an appropriate picture.  He recalled that Australia had made a contribution on how to 
ascertain injury.  Statistics could also be complement ed by some form of qualitative assessment of the 
injury suffered.  Turning to questions on the rela tionship between bilateral i nvestment treaties (BITs) 
and the imposition of safeguard measures, he noted that Article X provided that an ESM should be 
based on the principle of non-discrimination.  Ther efore, ideally, an invoking country would have to 
apply a safeguard measure on a non-discriminator y basis, possibly without regard to its BIT 
obligations.  That gave rise to the possibility that the other party to a BIT could raise a legal challenge 
in the context of the dispute settlement proceedings  of the bilateral agreement.  That possibility 
existed not solely in the context of a possible ESM, but also with respect to other obligations that a 
WTO Member might have undertaken, and which might create some legal tensi ons with another party 
to a BIT.  At the last meeting, he had drawn attention to how the MFN provision had been broadly 
interpreted in dispute settlement proceedings of BITs.  Possible c onflicts between BITs and an ESM 
might then be more apparent than real.  He ag reed with Canada's suggestion to examine this 
relationship further.  On the link between an ESM a nd progressive liberalization, he considered that it 
was difficult to identify either the sectors that Me mbers would open to competition if an ESM was 
agreed upon or those that would remain closed in the absence of an ESM .  A more enlightening 
approach might be to examine cases in the market  access negotiations, where a Member, for example, 
had said that it was prepared to open certain sectors if an ESM was established.  Others had said that 
they would consider conditioning their forthcoming o ffer in a similar manner.  This could suggest the 
sectors that might be opened with an ESM in place.   S/WPGR/M/50 
Page 12  
 
45. The representative of the United States
 clarified that her intervention had been intended to 
focus on technical aspects, even if some broader concerns remained.  On the example relating to 
regulatory reform in telecommunications, she noted  that JOB(04)/175 had said that competition from 
foreign service suppliers was undercutting the ability of domestic suppliers to fulfil their universal 
service obligation.  If such a scenar io were to occur, it seemed logical that the appropriate regulatory 
action would be to adapt the mechanism providing for the universal service, not to limit the cross-
border supply of services.  The answer provided by th e group of delegations did not address this point.  
On the issue of statistics, she thought that the responses - for example in paragraphs 33 and 34 of 
JOB(04)/175 – only attempted to address the questions in  a very general manner.  It was not clear how 
data problems could be solved in practice.  It w ould be useful if the proponents could provide more 
information on the kind of data that they coul d actually produce, as well as possible examples, for a 
given sector in order to determine inju ry, for example under modes 1, 3 and 4. 
46. The representative of Japan  said he understood that the proponents suggested that domestic 
industry could be defined so as to exclude segments on the basis of some percentage of foreign equity.  
However, employees of foreign coffee shops in Japan  were Japanese.  Applying a safeguard measure 
to such shops would have a negative impact on Japanese employees.  He doubted that such an 
approach was reasonable in terms of  benefits to the national economy. 
47. Commenting on the technical feasibility of safeguard measures, the representative from 
Hong Kong, China  considered that useful inferences coul d be drawn by looking at economic needs 
tests (ENTs).  Even if ENTs and ESM were different, the same arguments made regarding the technical infeasibility of an ESM could be made c oncerning ENTs if one were  to substitute the terms 
"economic needs" with the concept of serious in jury caused by increased imports.  Nevertheless, 
ENTs were inscribed in schedules for the four modes of supply, suggesting that they could be applied 
in each of these modes and sectors.  Experience from Members in applying economic needs tests 
might thus help to answer some of the questions  put forward regarding the feasibility of applying 
safeguard measures.  A key distinction between an ESM and ENTs was that the former might involve 
a multilaterally-agreed criteria.  For many ENTs, it  was not clear what type of measure could be 
imposed and on the basis of what criteria.  Techni cal problems relating, for example, to statistics 
might suggest that ENTs were not feasible after all.   
48. The representative of Brazil
 recalled that his delegation ha d said that this issue was of 
significant interest and that examining fictional s ituations was not the only way to pursue discussions.  
He had invited the Members with safeguard-type en tries in their schedule to explain how they had 
dealt with feasibility issues.  Such  entries seemed to pose similar challenges than had been raised 
regarding an ESM.  His delegation was hoping to pr esent, at the next meeting, a document which 
would look at schedules of Members and examine safeguard-type entries or limitations that could produce equivalent effects to that of an ESM.  The questions put to the proponents of an ESM might 
also be put to those having such entries.  A discu ssion on the basis of such concrete examples might 
prove useful in the lead-up to a review of negotiations in 2005.   
49. The representative of the United States
 thought that some of the issues raised by Brazil had 
been dealt with in the bilateral request-offer pro cess since they concerned schedules of commitments.  
In reaction to points made by the delegations of Brazil and Hong Kong, China, she thought that ENTs 
were different from an ESM and doubted whether co mparisons could usefully be made.  The mandate 
in Article X concerned the question of an ESM an d therefore related to elements such as unforeseen 
circumstances and serious damage.  It was not useful to look at other types of tools that were available 
in the GATS.  She wished to explore more carefu lly some of the technical questions rather than 
engage in a political discussion.  She was not look ing for additional hypothetical examples, but for 
real situations.  In the case of legal services s upplied under mode 1, for example, how many 
memoranda, destined for how many citizens, would ha ve to cross the border for harm to be caused to 
a domestic industry in, say, the Philippines?  Suppos e a consumer in the Philippines decided to seek 
legal advice from a Philippine lawyer who had m oved abroad and established a practice in the  S/WPGR/M/50 
 Page 13 
 
 
United States.  Even though employing mostly Amer icans, that practice could still have many clients 
from the Philippines, which might affect Philippi ne lawyers operating in the Philippines.  Her 
delegation was not asking for all possible scenarios to be exhausted, but was looking at the types of 
statistical issues that, for example, a developing country might face.  The coffee shop example discussed earlier showed that the use of a safegua rd against established foreign suppliers could 
actually result in a government hurting its own citizens by reducing the total number of employees in 
the industry.  With respect to mode 4, she wonde red to what extent natural persons from various 
Members would need to provide sufficiently simila r services to allow for the determination of an 
injury.  She reiterated her interest in examples th at might help to clarify how and on what basis 
governments would determine whether to impose a safeguard. 
50. The representative of the Philippines
 appreciated these efforts to look at some of the more 
technical issues.  Concerning the example relating to regulatory reform, he was not suggesting that 
access of new foreign service suppliers be restri cted.  Instead, the point was that an additional 
commitment might need to be modified or withdr awn in cases where a Member might want to use a 
particular method of calculating interconnection rates ra ther than another.  With respect to statistics, 
he recalled that past contributions from Venezuela and Australia had referred in more detail to this 
issue.  This had been discussed and addressed in past contributions from hi s delegation, which had 
listed about 15 determining factors that had to be eval uated.  All of these factors could be looked at by 
the companies petitioning for a safeguard measure; regulatory authorities and professional associations could also make contributions.  He tho ught that his authorities, as well as those of other 
countries he was speaking for, knew how to obtain su ch data, although it might not be as easy for all 
developing country Members.  In most situati ons, the relevant domestic companies would have 
available the data needed to show the kind of injury being suffered.  For instance, the ASEAN 
contribution from 2000 had referred to declining profits, returns on investment, cash flows, 
occurrence of losses, price reductions, etc.  The representative recognized the points made by the 
delegation of Japan on possible effects on employment.  In the end, one had to balance the interests of 
service suppliers against those of consumers and of  employees of foreign service suppliers.  He was 
not suggesting that in all cases the interests of consumers or employees of foreign service suppliers 
should be set aside.  He had indicated in the past th at all such interests would have to be ascertained 
on a case-by-case basis.  Concerning the example on legal services raised by the United States, he thought that the issue of like services, as explained in a recent contribution from his group of delegations (JOB(04)/4), would also have to be assessed on a case-by-case basis.  On the points made 
with respect to ENTs, he thought that there were  some links with the concept of ESM, although ENTs 
were scheduled ahead of time and often did not cont ain clear criteria.  In contrast, an ESM would be 
governed by strict criteria.   
51. The representative from Hong Kong, China
 wished to react to previous interventions on the 
issue of ENTs.  The delegation of the United States had asked what might be the elements of an ENT 
relating to injury or other factors that might be ta ken into account in the application of an ESM.  It 
was hard for him to answer such a question since his delegation did not have ENTs  in its schedule.  In 
addition, most ENTs did not clearly indicate the criteria guiding their application, which made it 
difficult to assess whether such crite ria were similar to the factors governing the use of an ESM.  
Some criteria could be similar, but more transparen cy with respect to ENTs was needed.  Turning to 
another point made by the delegation of the Unite d States, he recognized that ENTs and ESM were 
different types of instruments that had different obj ectives.  However, issues of feasibility would often 
be the same, for example as regards the compilation and use of statistics to ascertain whether action 
was needed.  The application of both instruments also raised questions with regard to particular modes 
of supply. 
52. The representative of Japan  looked forward to the forthcoming contribution by the delegation 
of Brazil and hoped that it would introduce new el ements and avoid repetition of past discussions.  
Concerning the limitation in Japan's initial offer on road transport services, he said that such a 
measure did not discriminate against foreigne rs and was therefore different from an ESM. S/WPGR/M/50 
Page 14  
 
53. The representative of the European Communities
 considered that the discussion at this 
meeting had not brought forward any new elemen ts, except maybe with respect to BITs.  His 
delegation did not agree that an analogy could be  drawn between ENTs and an ESM.  Concerning the 
link between an ESM and progressive liberalization,  he expressed serious concerns about comments 
suggesting that certain offers were conditional on the existence of an ESM.  Given the content of 
these offers, he wondered what commitments might  be offered in the absence of an ESM.   
54. The representative of the United States  thought that it was critical that all delegations 
participate in the discussions on substantive and tec hnical issues.  She disagreed with points made by 
the delegation of Hong Kong, China regarding ENTs.  While some ENTs might lack transparency, the 
criteria relating to statistics might be totally differe nt from what might be relevant in the case of an 
ESM.  She doubted the usefulness of engaging in a comparison given the dearth of information on 
ENTs; this might distract the Working Party from a detailed discussion of the question of an ESM. 
55. In summing up, the Chairperson  noted that positions were still far apart and did not seem to 
be converging.  Nevertheless, de legations had engaged in a substa ntive technical discussion on such 
issues as the definition of domestic industry, the ava ilability of appropriate statistics, and the concept 
of a limited window.  There was disagreement on possi ble analogies between ENTs and an ESM.  She 
invited the Working Party to take note  of the comments made. 
IV. NEGOTIATIONS ON GOVERNMENT PROCUREMENT (ARTICLE XIII) 
56. The Chairperson  suggested that delegations pursue th e discussion of the latest proposal from 
the European Communities on a framework under GA TS for government procurement in services, 
contained in S/WPGR/W/48.  Issues that could be ex amined further had been mentioned, for example, 
in the informal communication from Hong Kong, China (JOB(04)/130), in an earlier communication 
from Singapore (JOB(03)/216) as well as in the annotated  agenda and the report of the last meeting.  
These issues included: whether the MFN obliga tion would apply in sectors where government 
procurement commitments were not taken; th e relationship between the MFN obligation and 
reciprocity provisions in the Government Procur ement Agreement (GPA); and, more generally, 
whether the manner in which commitments were  undertaken in the GATS was best suited for 
liberalization of government procurement.  The Chai rperson noted that interest had been expressed in 
further discussing issues relating to transparency and procedural rules and recalled that various 
delegations also had reiterated th at negotiations should not cover market access issues.  In that 
context, and in the light of the Note requested  from the Secretariat on government procurement 
provisions in economic integration agreements, S/WP GR/W/49, delegations might want to consider 
what type of procedural rules might be re levant in the context of these negotiations. 
57. The Chairperson noted that the Secretariat had prepared, as requested, a Note providing 
summary observations on approaches taken in econom ic integration agreemen ts (EIAs) regarding 
commitments on government procurement (S/W PGR/W/51).  In presenting this document, a 
representative of the Secretariat  pointed out that government procurement provisions in EIAs 
generally did not use terms such as "schedules" or  "commitments" and that such provisions did not 
form part of a services chapter; they constitute d a distinct set of provisions, alongside sets of 
disciplines relating to trade in services.  In genera l, the scope of the procur ement-related disciplines, 
including liberalizing obligations, was further define d through annexes, which typically specified the 
sector coverage, the procuring entities covered, and threshold values above which the provisions 
applied.  The Note provided further details on so me key features of these annexes, for example 
classification issues or whether a positive-list or  negative-list approach was followed.  The 
agreements reviewed covered both goods and services.   The Note also highlighted that while the 
relevant agreements did not provide for the inscrip tion of limitations or reservations to particular 
liberalization obligations, many of them allowed fo r country-specific exclusions from the scope of the 
set of provisions.  These tended to take the form of notes in the annexes.  In addition, the agreements 
reviewed usually did not make distinctions betw een modes of supply.  The representative said that  S/WPGR/M/50 
 Page 15 
 
 
further details might best be provided by the pa rties involved, since scope and coverage of the 
agreements, including annexes, differed significantly.  
58. With respect to the latest Secretariat No te (S/WPGR/W/51), the representative of the 
European Communities  noted that in most EIAs the sectors and entities covered, as well as the 
thresholds, were specified in annexes.  In th e context of the GATS, these would correspond to 
schedules of commitments, to which his delega tion had proposed to add a fifth column for 
government procurement, where the s ectors covered and thres holds would be specified.  In the case of 
the GATS, the sectors would be listed on the basis of a positive-list approach.  With respect to 
procuring entities, his delegation ha d proposed that they be listed in the schedule, sector by sector, on 
the basis of either a positive-list or negative-list approach.  To accommodate concerns that it might 
not be practical to include long lists of entities alongside sector-specific commitments, it might be 
preferable to list covered entities - especially if they were the same for all sector s - in an annex to the 
schedule.  With respect to the sectoral scope of government procurement provisions in EIAs, he noted 
that the lists of covered sectors contained in anne xes (whether based on a pos itive-list or negative-list 
approach) were generally not e xhaustive.  The question of how to treat procurement contracts 
covering simultaneously sectors committed and sectors where no commitments had been taken also 
arose in most EIAs.  This was therefore not a ne w issue.  Concerning modal application, the Note 
indicated that a few EIAs made distinctions for cer tain modes of supply.  For example, an agreement 
did not cover mode 1 for financial services and a nother exempted mode 2.  The GATS' Understanding 
on Commitments in Financial Services limited commi tments on government procurement to mode 3.  
It was thus possible - and in some cases desira ble - to undertake commitments on government 
procurement mode-by-mode.  The EC proposal allowed Members to undertake mode-specific 
commitments, although in most cases Member s making government procurement commitments 
would not draw distinctions betw een modes of supply.  The information contained in the two recent 
Secretariat Notes (S/WPGR/W/49 and S/WPGR/W/51) provided a good basis to develop the procedural rules and scheduling guidelines that we re needed to open procurement markets in the 
context of the GATS. 
59. Turning to questions mentioned in the Chairpers on's annotated agenda, he first indicated that 
it was appropriate to allow Members, only at the time of entry into force, to list procurement-related 
exemptions to the MFN obligation, as was done in 1994 for all services.  In addition, his delegation 
had proposed an exception to cover the preferences that parties to the GPA granted each other.  In 
addition, Article V of the GATS would cover the pref erential treatment granted as part of EIAs with 
respect to government procurement.  On the ques tion of the relationship between the MFN obligation 
and the reciprocity provisions in the GPA, the repr esentative said that the co mmitments taken in the 
GPA, with the limitations they contained, coul d obviously not affect commitments taken in the 
GATS.  Such limitations would only have value for parties to the GPA to the extent that the sectors 
concerned were not committed, or were committed at a lower level, in the GATS.  Concerning the 
general question of whether the structure of th e GATS was suited for commitments on government 
procurement, he reiterated that this was the case.   The structure of the GATS provided for maximum 
flexibility and should thus permit Members to take commitments according to their needs. 
60. With respect to S/WPGR/W/51, the representative of Hong Kong, China
 observed that all 
EIAs reviewed covered both goods and services.  Accordingly, the question of how to treat 
government procurement contracts involving the su pply of both goods and services, which confronted 
the Working Party, did not arise in EIAs.  The Note also highlighted that the EIAs generally did not 
make distinctions between different modes of supply.  While under the European Communities' 
proposal a Member could choose not differentiate be tween modes of supply, government procurement 
commitments would still have to be read in conj unction with market access and national treatment 
commitments that were made under the respective m odes of supply.  Hence, modal issues would not 
go away even if government procurement commitm ents did not draw modal distinctions.  For 
instance: how should one interpret a situation where a government procurement commitment was 
combined with a "none" in mode 1 and an "unbound" or a partial commitment in mode 3?  S/WPGR/M/50 
Page 16  
 
Divergences thus existed between the approach typica lly taken in EIAs and the one being proposed by 
the European Communities in the Working Party. 
61. Putting aside questions surrounding the negotiating mandate for the time being, the 
representative raised certain fundamental issues whic h he thought had to be fully addressed before 
further considering the European Communities' propo sal.  Such issues were: the relationship between 
the proposed framework and the GPA; the applicatio n of the MFN obligation; the reconciliation of the 
proposed MFN exemptions with the non-application and reciprocity provisions in the GPA; modal 
application; and the scheduling approach for govern ment procurement commitments.  His delegation 
saw MFN as a general obligation under the GATS an d as a fundamental principle of the multilateral 
trading system.  If the GATS were to be extended to cover government procurement in services, MFN 
should be a general obligation applicable to all government procurement in services covered under the 
GATS, irrespective of whether government procurem ent commitments were made in the additional 
column being proposed.  Ample derogations from the MFN principle already existed under the GATS 
framework and his delegation would be very hesita nt to see any further carve-out.  The delegation 
from the European Communities had said that the proposed framework would provide for the 
application of the MFN obligation as a general rule .  However, his understanding of the EC proposal 
was that the MFN principle would not apply in sectors where no government procurement 
commitments had been undertaken.  In contrast , the MFN obligation in the GATS applied to all 
services sectors, irrespective of specific commitment s.  The possibility to take MFN exemptions did 
not obviate the need to apply the MFN obligation across the board.  His delegation would have serious doubts about the usefulness of the proposal  of the European Communities if it allowed 
Members to freely deviate from the MFN obligati on or permitted Members to maintain largely 
bilateral or plurilateral reciprocal systems for gove rnment procurement in services. If this were the 
case, he wondered whether time should be spent on discussing this issue multilaterally. 
62. His delegation had previously signalled its w illingness to discuss proposals without prejudice 
to the question of the negotiating mandate.  However,  he was intrigued by the views of the European 
Communities concerning the distinction made be tween implementation and the mandate for the 
negotiations, as recorded in paragraphs 62 and 79 of the report of the previous meeting.  He 
wondered, if such logic was to apply in regard of  Article XIII, whether the question of the mandate 
should be treated as an implementation issue and re ferred to the Regular Session of the Council for 
Trade in Services for resolution.  He was open to pursuing discussions in this Working Party before 
involving the Council for Trade in Services.  He di sagreed with the interpretation put forward by the 
delegation of the European Communities on the issue of the mandate, and was open to further work 
on this item on the basis of any proposal put forward by Members. 
63. Without prejudice to his delegation's position on  the negotiating mandate or other issues 
under Article XIII, the representative of Singapore
 recalled the issues and questions raised by his 
delegation in the informal communication circulat ed as JOB(03)/216.  Recognizing the divergence of 
views among Members on the negotiating mandate, he  pointed out that Article XIII specifically 
mandated negotiations on government procurement.  If there was to be progress on this issue - as for 
all other negotiating issues in services and in the D oha Development Agenda -, the Working Party had 
to start addressing the technical aspects.  His delegation was not a demandeur  on this issue, but 
recognized the existence of the various mandates in  services and remained engaged and constructive 
in all aspects of the negotiations.  While some of  the issues arising from the European Communities' 
proposed framework had been clarified over the past  year, a number of questions had to be further 
discussed.  For example, one basic question was whether a clear distinction could be made between goods and services for the purpose of procurement.  The relevant provisions in the GPA and in the 
EIAs mentioned in the Secretariat Notes S/WP GR/W/49 and S/WPGR/W/51 related to both goods 
and services; no distinctions were made.  He also  underscored the comments made in past meetings 
by other Members to the effect that government procurement policies were not developed in the 
perspective of the GATS' modes of supply.  As hi ghlighted in S/WPGR/W/51, EIAs generally did not 
make modal distinctions.  He considered that  there was scope for further discussions on the  S/WPGR/M/50 
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framework proposed by the European Communities,  as well as on other issues in the Article XIII 
negotiations; information on the way government pr ocurement commitments had been undertaken in 
EIAs, as summarized in S/WPGR/W/51, constituted usef ul reference material.  By the same token, it 
might be timely to look at transparency and proce dural rules relating to government procurement. 
64. In its most recent communication (S/WPGR/W/48), the European Communities had 
suggested that relevant rules be contained in an Annex to the GATS.  This seemed a logical 
suggestion.  However, what type of procedural rul es might be contained in such an Annex?  Another 
question, highlighted in the annotated agenda, concer ned the approach that might be contemplated for 
the negotiation and application of such rules.  Pr ocedural rules contained in EIAs might provide a 
starting point.  In that regard, S/WPGR/W/49 mentioned such issues as non-discrimination, valuation 
of contracts, technical specifications, procuremen t methods, qualification of suppliers, invitations to 
participate, time limits, tender doc umentation, and award of contracts.   Further, in paragraph 4 of 
S/WPGR/W/49, the Secretariat had noted that some provisions of the GPA had often been 
incorporated by reference in EIAs.  There was a fa irly extensive commonality of procedural rules in 
the EIAs.  It might be useful for the Working Pa rty to discuss how existing rules, with appropriate 
modifications, might provide a working basis.  Secretariat Notes prepared for the Working Group on 
Transparency in Government Procurement (WGTGP/W/6, WGTGP/W/32, WGTGP/W/33) might also prove useful.  In his view, the two following el ements were critical: private challenge procedures, 
and special and differential treat ment for developing countries.  Concerning the first element, 
procurement was often a one-shot event that could not be reversed.  Accordingly, in addition to 
typical dispute settlement procedures, Article XX  of the GPA and relevant provisions of EIAs 
provided for private challenge procedures at the na tional level.  Possible models were listed in 
S/WPGR/W/49.  Members might also want to consider whether domestic review procedures 
contained in Article VI:2 of the GATS were suffici ent for the purpose of Article XIII disciplines.  
Concerning the second element, he considered that procedural rules would also have to address the 
concerns of developing countries; special and differe ntial treatment might therefore be necessary.  For 
example, Article XVI:2 of the GPA provided that developing countries might "at the time of 
accession negotiate conditions for the use of offsets,  such as requirements for the incorporation of 
domestic content".  It also stated that the "cond itions shall be objective, clearly defined and non-
discriminatory".  He wondered whether such provisi ons might be applicable in the context of the 
Article XIII negotiations and what modifications, if any, might need to be made in order to address 
the legitimate concerns of developing countries.  In  closing, he recalled that government procurement 
provisions in the EIAs to which Singapore was party we re not negotiated in isola tion, but as part of an 
overall package of rights, obligations and concessions. 
65. The representative of Canada
 hoped to comment on S/WPGR/W/51 at a future meeting.  He 
wondered whether the delegations of the European  Communities and Singapore could circulate copies 
of their interventions, either formally or informa lly.  The feasibility of an y approach to scheduling 
commitments in this area was strongly linked to the procedural rules that would apply.  These rules 
should be simple (e.g., one set for all procurement)  and provide for transparency (e.g., posting of all 
procurement notices).  Further, open competition s hould be the norm rather than the exception, and 
such rules should build on the existing structure of the GATS. 
66. The representative of Mexico  noted that various EIAs to which his country was a party were 
mentioned in the Secretariat Note S/WPGR/W/49.  He  wished to draw attention to the clarification 
made in paragraph 2 of the Note to the effect that the procurement provisions reviewed had to be read  
in the light of the totality of the rights and obl igations contained in such agreements.  These 
provisions resulted from bilateral negotiations and fo rmed part of a broader package of rights and 
obligations.  He underscored the need for the Work ing Party to focus on transparency given that no 
consensus on the scope of the nego tiating mandate could be reached. 
67. The representative of Switzerland  noted that most agreements reviewed in the Secretariat 
Note S/WPGR/W/51 specified in annexes the servi ces sectors that were subject to the government S/WPGR/M/50 
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procurement provisions.  While some EIAs followed a positive-list approach, others used a negative-
list approach.  The Note also pointed out that mo st agreements limited the scope of the relevant 
provisions to specified entities, as well as to proc urement above a certain threshold value.  These 
EIAs thus clearly provided considerable flexibility to parties with regard to many key aspects.  She 
considered that the approach proposed by the EC was well suited for liberalization of procurement;  a 
very positive aspect of the EC proposal was its  flexibility, based upon the GATS' approach to 
scheduling commitments.  The contributions by the European Communities provided a good basis to deepen discussions and should be further considered in detail. 
68. The representative of th e European Communities
 wished to address some questions raised by 
delegations.  The first concerned differences between procurement contracts for goods and for 
services.  While the mandate in Article XIII provi ded for negotiations on gove rnment procurement for 
services, the recent Notes by the Secr etariat highlighted that in all the EIAs reviewed certain services 
and goods were covered and others were not.  Accordingly, the need to determine whether a given 
contract was within the scope of procurement provisi ons arose in EIAs in the same way that it might 
arise in future GATS provisions on government procur ement.  Another relevant  example related to the 
GATT Agreement on Government Procurement, which covered only goods and not services.  
Therefore, this issue was neither new nor difficult to address.  In a GATS framework on procurement, 
certain services sectors would be covered and others would be excluded, as in all existing agreements.  
The second question concerned modal application.  He considered that the flexibility to take 
procurement commitments for particular modes only,  which was provided in certain agreements as 
well as in the GATS' Understanding on Commitments in Financial Services, was useful even if such 
flexibility might not be used extensively.  With r espect to the work ahead on procedural rules, he 
shared the proposals made by the delegation of Singapor e.  The Notes by the Secretariat, in particular 
S/WPGR/W/49, contained useful information that c ould be used to define the content of a future 
GATS Annex on Government Procur ement.  Echoing comments by th e delegation of Canada, he 
thought that such rules should be simple and the sa me for all sectors.  Concerning the rules for the 
scheduling of commitments, the latest communicati on from his delegation provided some indications 
in this regard.  Flexibility had to be a guiding  principle in developing scheduling guidelines for 
government procurement commitments. Concerning comments made by the delegation of Singapore 
on the specific needs of developing countries, the re presentative underscored that the structure of the 
GATS provided all Members - but in particular de veloping countries – with the necessary flexibility 
to cater to particular needs. 
69. Concerning the Secretariat Note S/WPGR/W/51, the representative of the Dominican 
Republic  highlighted that the government procurement provisions in EIAs applied to both goods and 
services.  Government procurement had to be dealt with  in an integral manner.  In the relevant body, 
her delegation had indicated a willi ngness to negotiate transparency in  government procurement, but 
not market access.  Progress in this area had been  linked to the improvement of conditions of access 
with respect to mode 4.  The issue of govern ment procurement involved aspects of governance and 
development policy, for which this Working Party was not the most appropriate forum. 
70. In summing up the discu ssion, the Chairperson  said that delegations, in discussing 
S/WPGR/W/51, had highlighted features of EIAs such as modal application and coverage of both 
goods and services.  Delegations had also looked at issues arising from the pro posal by the European 
Communities, relating for example to MFN application.  Key principles and possible ways forward in 
relation to the development of procedural rules ha d also been mentioned.  She invited the Working 
Party to take note  of the comments made. 
V. DATE OF THE NEXT MEETING 
71. The Chairperson indicated that the Working Party would hold its next formal meeting during 
the next cluster of services meetings, the exact date  of which would be announ ced in due course.    S/WPGR/M/50 
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VI. OTHER BUSINESS 
72. No point was raised under this item.   
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