RESTRICTEDWORLD TRADE
ORGANIZATIONS/WPGR/W/46
12 November 2003
(03-6070)
Working Party on GATS Rules
OVERVIEW OF SUBSIDY DISCIPLINES RELATING TO TRADE IN SERVICES
IN ECONOMIC INTEGRATION AGREEMENTS
Note by the Secretariat1
I. INTRODUCTION
1. At its meeting of 1 October 2003, the Secretariat was asked to provide an overview of subsidy
disciplines relating to trade in services in economic integration agreements notified under GATS
Article V.
2. The following overview takes into account a previous Note of the Secretariat dated 20 May
1996 ( Provisions  on Subsidies Relating to Trade in Services in Regional Trade Agreements)2.  The
present Note thus only looks at agreements , 24 in total, notified under Article V after that date and
focuses on specific provisions on services subsidies that go beyond GATS-type obligations such as
national treatment or MFN.  An Annex lists the agreements reviewed, as well as the relevant
provisions.
3. Of the 24 agreements reviewed, 13 contain disciplines on subsidy practices relating to
services.  Of these, 11 are agreements between the European Communities and other European
countries, which contain disciplines on state aids th at may distort competition.  Four other agreements
include provisions calling for further consideration of this issue in the future, sometimes making a
reference to the negotiations under Article XV of the GATS.
II. OVERVIEW OF RELEVANT PROVISIONS
A. AGREEMENTS WITH DISCIPLINES ON SUBSIDIES IN SERVICES SECTORS
4. A first group of economic integration agreements with subsidy disciplines relating to services
are the agreements signed between the European Communities and other European countries.  As
explained in the previous Note from the Secretariat (see paragraph IV of S/WPGR/W/12), such
agreements contain a provision similar to that of Article 87 of the EC Treaty, prohibiting aid which
may distort competition.  For example, Article 64 of the Europe Agreement establishing an
association between the European Communities and their Members States and the Republic of
Slovakia states:
"1. The following are incompatible with the proper functioning of the Agreement, in so
far as they may affect trade between the Community and the Slovak Republic: (...)
(iii) any public aid which distorts or threatens to distort competition by favouring certain
undertakings or the production of certain goods.
                                                     
1 This document has been prepared under the Secretariat's own responsibility and without prejudice to
the positions of Members and to their rights and obligations under the WTO.
2 S/WPGR/W/12S/WPGR/W/46
Page 2
2. Any practices contrary to this Article shall be assessed on the basis of criteria arising
from the application of the rules of Articles 85, 86, and 92 of the Treaty establishing the
European Economic Community."
5. Paragraph 3 then envisages the adoption by the Association Council, within three years of the
Agreement's entry into force, of rules to implement provisions relating to state aids.  Paragraph 4indicates that, for purposes of applying the provisions of paragraph 1(iii), the Slovak Republic shall be
regarded, during the first five years of entry into forc e of the agreement, as an area identical to those
areas of the Community described in Article 92(3)(a) of the Treaty establishing the European
Economic Community.  That provision of the EC Treaty says: "3. The following may be considered to
be compatible with the common market: (a) aid to promote the economic development of areas where
the standard of living is abnormally low or where there is serious underemployment."
6. Paragraph 4 also includes provisions on transparency.  It specifies that each Party shall report
annually on the total amount and the distribution of the aid given and shall provide, upon request,
information on aid schemes.  In addition, when a Party considers that a particular practice is
incompatible with the terms of paragraph 1, paragraph 6 allows such a Party, to take "appropriate
measures", in certain specific circumstances, e.g., when such incompatible practice is not adequately
dealt with under the implementing rules mentioned in paragraph 3 of the Article.
7. Other agreements notified after 20 May 1996 and that include similar but not necessarily
identical disciplines on subsidies are the agreements between, on one hand, the European
Communities and their Member States and, on the other hand, the following WTO Members:
Hungary (Article 62), Poland (Article 63), Czech Republic (Article 64), Romania (Article 64),
Bulgaria (Article 64), Estonia (Article 63), Lithuania (Article 64), Latvia (Article 64), Slovenia(Article 65)
3.
8. The Agreement establishing the European Economic Area  (EEA) concluded between the
European Communities and their Member States, and Norway, Iceland and Liechtenstein also
contains substantive disciplines on state aids that may distort competition (Article 61 to 64 and
Protocol 27).  The agreement was notified on 10 October 1996, but its relevant provisions werealready described in paragraph V of the previous Secretariat Note.  In short, paragraph 1 of Article 61
stipulates that "(s)ave as otherwise provided in this Agreement, any aid granted by EC Member
States, EFTA States or through State resources in any form whatsoever which distorts or threatens to
distort competition by favouring certain undertakings or the production of certain goods shall, in so
far as it affects trade between Contracting Parties, be incompatible with the functioning of this
Agreement".  Paragraphs 2 and 3 then respectively i ndicate which types of state aid either are to be, or
may be, considered to be compatible with the functioning of the Agreement.  Article 62 then providesfor state aid to be reviewed for their compatib ility with Article 61.  It specifies that the EC
Commission shall conduct such review for EC Member  States according to the rules laid out in the
EC Treaty, and that the EFTA Surveillance Authority shall do the same according to the rules set out
in an agreement between the EFTA States.  Article 62 also provides for cooperation between the EC
Commission and the EFTA Surveillance Authority, as set out in Protocol 27.
9. In the event that one of the surveillance authorities considers that the implementation by the
other surveillance authority of Articles 61 and 62 is not in conformity with the maintenance of equal
conditions of competition, Article 64 provides that an exchange of views takes place.  If no solution
can be agreed within two weeks,  the affected Contracting Party may adopt appropriate interim
                                                     
3 In addition to the information provided in S/WPGR/W/12, the delegation of the European
Communities presented a Communication to the Working Party entitled The Community Regime for State Aid in
Services Area (JOB(00)/4302), which can be of use in view of the relationship between the subsidy disciplines
found in the EC Treaty and the Europe Agreements.S/WPGR/W/46
Page 3
measures in order to remedy the resulting distortion of competition.  Consultations are then to be held
and, if no commonly acceptable solution is found within 3 months and if the practice causes or
threatens to cause distortion of competition affecting trade between the Contracting Parties, the
interim measures may be replaced by definitive measures.  Such measures must be strictly necessary
to offset the effect of such distortion and priority shall be given to such measures that least disturb thefunctioning of the EEA.
10. The Protocol on Trade in Services to the Australia-New Zealand Closer Economic Relations
Agreement  (ANZCERTA) contains a prohibition on th e introduction of new or the expansion of
existing "export subsidies, export incentives and other assistance measures having a direct distorting
effect on trade" between Member States (Article 11).  The Article also mandated Parties to work
towards the elimination of any such measures by 30 June 1990.  This Agreement was notified under
GATS   Article V in October 1997, but was already mentioned in paragraph II of the previous Note
from the Secretariat on this issue.
11. The Revised Treaty of Chaguaramas establishing the Caribbean Community including the
CARICOM Single Market and Economy
4 provides, in paragraph 1 of Article 69, that "Member States
shall harmonize national incentives to investments in the industrial, agricultural and services sectors".
The following paragraphs of Article 69 then provide, among other things, that the Council for Financeand Planning (COFAP), a principal organ of the Community, make proposals regarding incentives
regimes "consistently with relevant international agreements".
B. A
GREEMENTS WITH PROVISIONS CALLING FOR FUTURE CONSIDERATION OF THE ISSUE
13. A number of agreements, while not containing substantive disciplines on subsidy practices,
provide for future consideration of the issue.  Some  refer in that regard to possible results of the
negotiations under GATS Article XV.  Paragraph 3 of Article 16 of the European Free Trade
Association (EFTA) , notified by Switzerland, Norway, Liechtenstein and Iceland, provides that
Member States shall review the scope of application of the Chapter on State Aid "with a view to
extending the disciplines on state aid to the field of services, taking into account international
developments in the sector".   Such reviews are to take place at yearly intervals.
14. The Free Trade Agreement between the EFTA States and Mexico  provides, in Article 19, that
"Parties shall pay particular attention to any disciplines agreed under the negotiations mandated by
Article XV of the GATS with a view to their incorporation into this Agreement".   Similarly, Article
23(2) of the Agreement between New Zealand and Singapor e on a Closer Economic Partnership
states that the Parties "shall pay particular attention to any disciplines agreed under Article XV of
GATS with a view to their incorporation into this Agreement".   Paragraph 3 of the same Article says
that "Parties shall consult on appropriate steps in regard to subsidies related to trade in services whereany subsidy issues arise in bilateral services trade under this Agreement".
15. The Singapore-Australia Free Trade Agreement  provides, in Article 21, that "Parties shall
review the treatment of subsidies in the context of developments in international fora of which both
Parties are Members" and that "Parties shall consult on appropriate steps in regard to subsidies related
to trade in services where any subsidies issues arise under this Chapter".
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4 The Revised Treaty was notified by the following WTO Members: Antigua and Barbuda, Barbados,
Belize, Dominica, Grenada, Guyana, Jamaica, St. Kitts an d Nevis, Saint Lucia, St. Vincent and the Grenadines,
Suriname and Trinidad and Tobago.S/WPGR/W/46
Page 4
ANNEX
Economic Integration Agreement Notifi ed under GATS Articl e V since 20 May 19965
Economic Integration
AgreementDate of Notification Document reference Where Relevant Provision(s)
Can Be Found
EC – Slovak Republic 27 Au gust 1996 S/C/N/23 Art. 64
EC – Hungary 27 Augu st 1996 S/C/N/24 and
S/C/N/24/Corr.1Art. 62
EC – Poland 27 August 1996 S/C/N/25 and
S/C/N/25/Corr.1Art. 63
EC – Czech Republic 9 Octo ber 1996 S/C/N/26 Art. 64
EC – Romania 9 Octobe r 1996 S/C/N/27 Art. 64
EC – Norway, Iceland,
Liechtenstein10 October 1996 S/C/N/28 Art. 61-64, Protocol 27
EC – Bulgaria 25 April 1997 S/C/N/55 Art. 64
Canada – Chile 13 Nove mber 1997 S/C/N/65 - -
New Zealand – Australia 21 Oc tober 1997 S/C/N/66 Art. 11
Chile – Mexico 14 March 2001 S/C/N/142 - -
EFTA – Mexico 22 August 2001 S/C/N/166 and
S/C/N/166/Corr.1Art. 19
New Zealand – Singapore 19 Se ptember 2001 S/C/N/169 Art. 23
EC – Latvia 11 February 2002 S/C/N/187 Art. 64
EC – Estonia 11 Februa ry 2002 S/C/N/188 Art. 63
EC – Lithuania 11 February 2002 S/C/N/189 Art. 64
EC – Slovenia 11 Februa ry 2002 S/C/N/190 Art. 65
Chile – Costa Rica 24 May 2002 S/C/N/191 - -
EC – Mexico 21 June 2002 S/C/N/192 - -
United States – Jordan 18 October 2002 S/C/N/193 - -
Japan – Singapore 14 Nove mber 2002 S/C/N/206 - -
EFTA 3 December 2002 S/C/N/207 Art. 16
EFTA – Singapore 24 Ja nuary 2003 S/C/N/226 - -
CARICOM 19 February 2003 S/C/N/229 Art. 69
Singapore – Australia 1 Oc tober 2003 S/C/N/233 Art. 21
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5 Internet links to the agreements are found at http://www.wto.org/english/tratop_e/region_e/type_e.xls