World Trade
Organization RESTRICTED S/WPGR/M/41
12 March 2003 (03-1390) Working Party on GATS Rules

REPORT OF THE MEETING OF 25 FEBRUARY 2003

Note by the Secretariat

The Working Party on GATS Rules held its forty-first meeting under the chairmanship of Mr.
It included six items: negotiations on emergency safeguard measures under GATS Article X; negotiations on government procurement under GATS Article XIII; negotiations on subsidies under GATS Article XV; date of the next meeting; other business; and appointment of the Chairperson.
Negotiations on Emergency Safeguard Measures (article x of the gats)
The Chairperson recalled that the following documents, requested by Members at the meeting of 3 December 2002, had been circulated by the Secretariat: (i) a Compilation of References Made by Delegations to Safeguard-Type Provisions, in JOB(03)/20; (ii) a revision of the note on Core Elements Contained in Members' Proposals – Overview of the Synopsis, in JOB(02)/200/Rev.
His current assessment was that the Working Party had not gone very far and that the work on these two issues had not brought forth any tangible results so far.
Indeed, experience gathered in implementing the GATS had not brought any concrete example of emergency situation, and Article X:2 had never been used.
Contrary to antidumping measures that constituted a reaction to unfair trade, an emergency safeguard measure was a reaction to fair trade and challenged legal certainty.
As regards structural problems, which by their very nature were not extraordinary, the bottom-up architecture of the GATS afforded Members enough flexibility to fully take them into account when undertaking commitments.
Turning to the Note by the Secretariat on Safeguard-Type Provisions in Economic Integration Agreements, he said that, although the note clearly stated that it did not purport in any way to prejudge the measures covered by Article X, it indicated that the provisions reproduced in the document were comparable to GATT Article XIX.
For example, for telecommunications, construction and engineering design services, possible grounds for invoking safeguards were protection of infant industries, physical infrastructure and national culture as well as significant increase in imports and the prevention of abuse of market power (including crosssubsidisation and the monopolization of information).
which contained a provision entitled Article XI – Emergency Safeguard Measures: "[I]f a given service is being imported into the territory of a party in such, substantially increased quantities [in absolute or relative terms] or a party is faced with such a major external cause of disturbance of its market for a given service as to cause or threaten to cause serious injury to domestic providers of like or directly competitive services, the party shall be free, subject to the conditions and procedures laid down in paragraph 2, to, suspend, in whole or in part, a liberalization commitment under this Agreement .
For instance, parties to an agreement between the EC and one country "may introduce measures which derogate from the provisions of this Chapter as regards the establishment of Community companies and nationals if certain industries: are undergoing restructuring; or are facing serious difficulties, particularly where these entail serious social problems in (…); or face the elimination or a drastic reduction of the total market share held by (…) companies or nationals in a given sector or industry in (…); or are newly emerging industries in (…)".
The ASEAN Draft Agreement on Emergency Safeguard Measures proposed that "an emergency safeguard measure may be applied to trade in services only if the applying Member has determined, in accordance with the provisions of this Agreement, that, as a result of the effect of its specific commitments undertaken under Part III of the GATS, there is an emergency where there is an increase in supply of the service concerned by a supplier or suppliers of another Member, [or consumption thereof,] either, in absolute terms or relative to domestic supply [or consumption of such domestically supplied service], which is causing or is threatening to cause serious injury to the domestic industry that supplies like or directly competitive services" (Article 11:1).
The structure of the distribution sector reflected what might be described as the early 20th century United States experience: the dominant marketing channel was a general store in small towns; in larger cities, small conveniently located stores specialized in a narrow range of items with perhaps a few large department stores selling a much wider range of goods.
The historical account made by the delegation of Thailand was interesting, but an ESM should address circumstances not taken into account when a commitment had been undertaken.
She agreed with the Chairperson that a reality check was needed and agreed with the points raised by the European Communities; the introduction of an ESM was not a decided issue, and concrete examples were needed.
Moreover, the level of obligations undertaken under that agreement was very high, full market access and national treatment were extended to all sectors across the board.
Moreover, it was difficult to reconcile the idea that an emergency situation should be unforeseen with the assertion that the GATS provided sufficient flexibility at the time of scheduling to take into consideration all possible problems which could arise as a result of a commitment.
Some economic integration agreements, such as the agreement between the EC and Mexico, or between the EC and Chile, did not contain an ESM.
The representative of Thailand, speaking on behalf of the ASEAN Members, said that the fact that an ESM had not been needed so far did not mean that it would not be needed in future as further liberalization was underway.
A first column could describe examples of factual circumstances that might justify the imposition of a safeguard measure, ordered according to the modes of supply.
If, for illustrative purposes, the matrix were applied to the goods sector, the first column would describe an unexpected situation and remedial measures, such as a tariff increase, would be in the second column.
The representative of the European Communities said that a full commitment under the GATS was still different from liberalization under an economic integration agreement to the extent that the latter went further in terms of regulatory harmonization and precluded possibilities to withdraw commitments.
the result could be an ESM agreement; (ii) should the WPGR have identified such situations, but failed to prove feasibility and desirability of an ESM, the result could be making Article X:2 permanent; and, (iii) should the WPGR be unable to identify such situations, this would suggest that there was no need for an ESM.
He recalled that Members were encouraged to put forward submissions as early as possible before 31 March 2003, and that it had been agreed to continue work on the basis of submissions and materials available.
Following on the discussion at the informal meeting
on 29 January 2003, he suggested that delegations
focus, inter alia, on desirability and feasibility of developing disciplines for government procurement in services and on other related issues.
The representative of the United States said that her delegation would be pleased to provide transparency provisions in agreements which would soon be ratified, such as the US–Chile and USSingapore agreements.
Following on the discussions at the informal meeting on 29 January, which had focused on the submission by the delegation of Poland, he suggested that delegations continue their debate on the issues raised at that meeting, including definition of subsidies in services, categorisation of such subsidies, scope of "actionable" subsidies, and possible parallels between the GATS and the SCM Agreement.
The issue of categorisation of subsidies should be included in the Checklist, as well as the question of whether countervailing duties could be applicable.
First, the issue to whom a subsidy was granted was not regulated in the SCM agreement; the test was rather whether a subsidy implied a benefit, but did not depend on whether the service was supplied on a commercial basis.
For instance, the Swiss schedule of specific commitments limited the scope of commitments in education services to private education; as a consequence, measures concerning public education, including subsidies, were not covered by the commitment.
This issue included two different aspects which could be distinguished in future discussions: (i) the generic definition of subsidies in the services context, including the relevance of the definition contained in the SCM Agreement; and (ii) the meaning of the concept of trade-distortive or "actionable" subsidies.
Date of the Next Meeting
The Chairperson said that the next formal meeting of the Working Party was expected to take place during the next cluster of services meetings, which had been tentatively scheduled from 12 to 23 May 2003.

Appointment of the Chairperson
The Chairperson said that, in accordance with the rules of procedure for meetings of the Council for Trade in Services (S/L/15), the election of a new chairperson should take place at the first meeting of the year and take effect at the end of that meeting.
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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.