RESTRICTEDWORLD TRADE
ORGANIZATIONS/WPGR/M/17
31 July 1998
(98-3041)
Working Party on GATS Rules
REPORT OF THE MEETING OF 23 JUNE 1998
Note by the Secretariat
1. The seventeenth meeting of the Working Party on GATS Rules was chaired by Mr. Harald
Fries of Sweden.  The agenda of the meeting wa s contained in WTO/AIR/854.  It consisted of five
items:  negotiations on safeguards under Article X of the GATS;  negotiations on subsidies under
Article XV of the GATS;  negotiations on government procurement under Article XIII of the GATS;
date of the next meeting of the Working Party;  and other business.
2. The Chairman said that he had circulated a Note, dated 15 June 1998, with the intention of
assisting delegations in their preparation for the meeting.  As indicated in the Note, he suggested a
modification in the order of the agenda items to facilitate the participation of experts in government
procurement.  The Working Party agreed to this proposal.
ITEM A: NEGOTIATIONS ON GOVERNMENT PROCUREMENT UNDER ARTICLE XIII
OF THE GATS
3. The Chairman recalled that the Working Party had agreed to structure its work as outlined in
the Chair's Note dated 21 February 1997.  At the previous meeting, the discussion on "the scope and
coverage of government procurement of services" had already started.  He drew Members' attention
to the fact that in the Working Group on Transparen cy in Government Procurement the issues related
to scope and definition of procurement were also be ing discussed; he had invited the Secretary of that
Working Group to brief the Working Party on the status of those deliberations.
4. The Secretary of the Transparency Working Group said that an informal Note by the
chairman entitled "List of Issues Raised and Points Made" (job no. 1860) had been circulated to
introduce the main agenda item, i.e. transparency-related provisions in existing international
instruments on government procurement and national procedures and practices.  Concerning the firstissue - "Definition and Scope of Government Pr ocurement"- the view had been expressed that
obligations on transparency should only be applicable if market access for foreign supplies and
suppliers had been permitted. Other delegations had expressed a preference for applying transparency
disciplines as broadly as possible.
5. Concerning the definition of government procurement, it had been suggested that the
Transparency Working Group should employ a sufficiently broad approach to accommodate differing
meanings given to the term "government procurement" in national legislations.  The Group had also
identified a range of issues that would need to be taken into account.  In this context, a distinction had
been made between the following questions:  (i) w ho was doing the procuring?  (ii) what was being
procured? and (iii) what types of transactions were covered?S/WPGR/M/17
Page 2
6. In regard to the first question, it had been suggested that entities at all levels of government,
as well as enterprises owned or influenced by the government, be covered by a transparency
agreement.  Another suggestion was initially to apply the relevant rules only to entities at the central
or federal government level and to condition the coverage of state enterprises on how they operated.
7. Regarding the second question (what was being procured?), it had been suggested that the
scope of a transparency agreement be extended to all goods and services, and any combination of
goods and services.
8. In relation to the third question (what types of transactions would be covered?), it had been
suggested that acquisition by any contractual means, including through lease or rental, be covered.
Questions had been raised as to whether concessions and build-operate-transfer (BOT) contracts
should be covered as well.  In connection with that issue, the delegation of Venezuela had presented a
submission concerning the particular characteristics of government procurement, privatization andconcession-granting systems (circulated as job no. 3295).  With respect to the use of threshold values
in determining the coverage of a transparency agreement, the view had been expressed that in
principle all contracts should be covered, but that certain provisions might be more flexibly applied to
smaller contracts.  Other delegations had felt that transparency obligations should only apply above
certain threshold levels in order to avoid information costs and that the Group should take intoaccount the relevant national practices.
9. In introducing the discussion, the Chairman recalled that the Working Party on GATS Rules
had initially based its deliberations on scope and coverage on a submission from the European
Communities.  He proposed continuing that discussi on with a view to identifying issues for further
consideration.  Most delegations that spoke indicated an interest in developing a working definition ofgovernment procurement based on the questions in the EC submission.  The need was expressed for
an examination of the issue of concessions.  One delegation noted that some discussion on
concessions had taken place at the previous meeting and that a similar discussion was being
conducted in the Working Group on Transparency in Government Procurement; it was thus important
to avoid duplication and to coordinate work.  In certain delegations' view, the definition ofgovernment procurement in GATS appeared to exclude concessions where services were not
purchased for governmental purposes.  Accordingly, those transactions would be subject to the
disciplines of Articles II, XVI and XVII of the GATS. However, some delegations expressed
reservations about this interpretation.  They felt it was necessary first to define concessions and then
to discuss the relevance of GATS disciplines.  In this context, it was proposed that delegations
provide information on national regimes relating to concessions.  One delegation recalled that some
information on this subject already existed in the responses to the questionnaire.
10. The Chairman recalled that the Working Party had agreed to address the basic principle of
non-discrimination as a second step in the work pr ogramme.  He reminded delegations of a non-paper
submitted by New Zealand (dated 30 September 1997) which examined some issues, including
definition and the principles of MFN and national treatment. While one delegation felt that for
practical reasons it would be appropriate to discuss MFN-related issues first, others were of theopinion that the two principles should be dealt with in parallel since they were closely intertwined.
11. The Chairman concluded that there was a need to continue the discussion regarding and
definition of procurement and, in particular, the treatment of concessions.  More information on how
concessions were defined and treated within national legislations was necessary;  Members agreed to
provide this information by the next meeting.  Regarding the principle of non-discrimination, he notedthat more input from delegations was needed on how to deal with this issue and encouraged Members
to submit contributions by the following meeting. He would continue to coordinate work with the
different fora dealing with government procurement.S/WPGR/M/17
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ITEM B: NEGOTIATIONS ON SUBSIDIES UNDER ARTICLE XV OF THE GATS
12. As indicated in his Note dated 15 June 1998, the Chairman proposed a three-pronged
approach to the discussions.  First the conceptual discussion should continue on the basis of theChairperson's note of 3 April 1998. Second, delegations might wish to clarify their understanding of
the precise scope of existing GATS disciplines applying to subsidies;  that might help to identify
circumstances of trade distortion, if any, which are not satisfactorily covered in the existing
framework.  Finally, given it was necessary to advance the information exchange programme
mandated by Article XV and improve the common understanding of the role of subsidies in services
sectors, the Chairperson asked Members to indicate when their responses to the questionnaire were
likely to be ready.
13. The delegation of Australia gave examples of subsidies maintained in her country at the
federal level, including an air services subsidy scheme providing assistance for regular air deliveries
of educational material, general freight and passengers to remote areas; a Regional
Telecommunications Infrastructures Fund; and tax concessions to companies establishing regional
headquarters in Australia.  In addition, government assistance for services such as education andhealth might be regarded as subsidies.  However, such assistance would have a minimal impact on
trade and would not be an appropriate area for subsidy disciplines under the GATS.
14. Some delegations argued in favour of using, as a basis for discussions in the Working Party,
the definition and framework of the Subsidies Agreement.  In their view, there was no difference
between subsidies in goods and services as the criteria and schemes were basically the same.  Otherdelegations, however, emphasized the need to examine whether the definition of subsidies in the
Subsidies Agreement was appropriate for services sectors.  In addition, it was questionable whether
the remedies, i.e. countervailing measures, contained in the Subsidies Agreement could be applied to
services.
15. Some delegations shared the view that conducting a discussion on the scope of existing
GATS disciplines would be helpful.  A previous Secretariat Note on Subsidies and Trade in Services
(S/WPGR/W/9) had not been fully discussed.  In light of the views expressed, the Chairman proposed
conducting a discussion on the basis of document S/WPGR/W/9 at the following meeting.  The
Working Group agreed to this proposal.
16. Concerning the replies to the subsidies questionnaire, one delegation underlined that
empirical information was a prerequisite for a substantive debate.  Two delegations indicated that they
aimed at submitting their replies within a few months.
ITEM C: NEGOTIATIONS ON SAFEGUARDS UNDER ARTICLE X OF THE GATS
17. The Chairman proposed that the Working Party should aim at concluding the discussion on
the four key questions contained in a Chairperson's Note, dated 3 June 1997, at the present meeting.
He  recalled that at the previous meeting the Working Party had held some discussion on the firstquestion, i.e. on whose behalf would a safeguard action be taken?  Several delegations had responded
that action could be taken on behalf of all domestically established suppliers, regardless of ownership
and control; while others had felt that it could be designed to protect only nationally owned suppliers.
He recalled that the Secretariat had been asked to examine WTO jurisprudence relevant to the issue ofS/WPGR/M/17
Page 4
whether distinctions could be made between domestically established suppliers.  The delegations
concerned had expressed particular interest in the implications of the Panel Report and the Report of
the Appellate Body on the European Communities regime for the importation, sale and distribution of
bananas.  The Reports had used the definition in Article XXVIII of GATS to affirm that juridical
persons established in the territory of a Member would be regarded as service suppliers of anotherMember if they were owned or controlled by natural or juridical persons of that other Member.  The
Chairperson noted that it was for the Working Party to  examine the implications, if any, of that report
for its discussion.
18. Resuming the discussion of the first question, some delegations indicated that emergency
safeguard measures would normally be taken to protect the national industry.  This was understood to
mean the totality of the natural and juridical person s supplying like or directly competitive services of
the Member taking the measures according to the definition provided for in Article XXVIII of theGATS.  Other delegations felt that the rules of origin contained in Article XXVIII of the GATS were
not relevant for determining what "national indust ry" meant;  in their view, the Article provided a
legal definition of "service supplier of other Member" which was not a suitable concept for the
purpose of a safeguard mechanism.
19. In relation to the second question, concerning the circumstances in which safeguard actions
might be taken and the relevant purpose, some delegations pointed out cases where, as a result of
unforeseen developments and of obligations under the GATS, there was a dramatic increase in
consumption of foreign services.  If such increase would cause or threaten to cause disruption of the
national industry, the purpose of an action would be to provide time for adjustment to foreign
competition.  These delegations felt that the concept of "increased consumption of foreign services"was more appropriate than the concept of "increased imports", since the latter might not always be
relevant to services given the four modes of supply.  In this context, other delegations stressed the
need to give concrete examples of circumstances warranting a safeguard action.  In concluding this
discussion, the Chairman observed that the Working Pa rty seemed to share the view that the objective
of a safeguard action should be to facilitate adjustment to foreign competition.
20. In relation to the third question, concerning the approach to be adopted in respect of
injury/adverse effects and the causal link between injury/adverse effects and commitments under the
GATS, some delegations felt that the relevant criterion was serious injury.  It could be measured by
employing, mutatis mutandis, the provisions of Article 4:2(a) and (b) of the Agreement on
Safeguards.  One delegation expressed reservations as there were important differences between
GATS and the Agreement on Safeguards in Goods, including the fact that in services limitations
could be scheduled in advance.  Therefore, the conditions for imposing safeguards on services shouldbe stricter than in the goods area.  Some views were expressed on the issue of who carries the burden
of proving causality. Delegations who spoke all agreed that the burden of proof would lie on the
Member taking safeguard action.  However, some delegations questioned whether it would be at all
possible to prove causality in the area of services.
21. In relation to the fourth question, relating to the measures to be taken under the emergency
safeguard mechanism, some delegations suggested that some measures could be temporarily applied
in relation to all modes of supply, at both the pre-establishment and post-establishment stages.  For
instance, restrictions on market access, which could include regulations, taxes and quotas, could be
applied in relation to all modes of supply, while a suspension of national treatment could be used in
regard to mode 3 and mode 4.  One delegation emphasized that in the case of post-establishmentacquired rights would not be affected;  foreign services suppliers already established might not,
however, qualify for new benefits which could be granted to national suppliers.  For example, only
national banks could be offered subsidies in such cases, and market access could be suspended for
new foreign banks.S/WPGR/M/17
Page 5
22. Other delegations found these concrete examples very helpful, and called for more such
contributions from Members.  The Chairman also stressed the need for more concrete examples.  He
proposed preparing a note taking stock of the views expressed so far in the Working Party on the four
questions and identifying appropriate issues for the brainstorming session to be held soon after the
summer break.  The Working Party agreed.  Finally, the Chairman suggested that the Working Partywould discuss at the next formal meeting what could be achieved in the period up to the negotation
deadline of 30 June 1999.
ITEM D: DATE OF THE NEXT MEETING
23. It was agreed that the Working Party would meet next on 6 October 1998.
ITEM E: OTHER BUSINESS
24. No matters were raised under other business.
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