World Trade
Organization RESTRICTED S/WPGR/M/48
20 July 2004
(04-3131) Working Party on GATS Rules

Report of the meeting of 23 June 2004

Note by the Secretariat

The meeting of the Working Party on GATS Rules was chaired by Ms.
The representative of Hong Kong, China enquired about the difference between a summary in the form of a non-paper as opposed to a summary in the form of a JOB document, as had typically been done in the past.
The Chairperson noted that a key difference was that the status of the proposed summary would be like that of a room document and, as such, it would not appear on the document distribution facility.
Like the room document presented by that delegation at the last meeting of the Working Party, it discussed the definition of subsidy and other issues in the light of the examples mentioned in Chile's communication.
In the last two or three meetings, various delegations had raised a number of issues and basic questions that had not been fully discussed, even though they often concerned core tasks of the Working Party.
She also drew attention to the room document that her delegation had circulated for the current meeting, which contained answers to specific questions raised pursuant to her intervention at the last meeting.
Another advantage of dealing with export subsidies as a priority was that it seemed easier to tackle the most harmful categories of subsidies rather than all of them at once.
As far as the effects of the programme were concerned, she hoped to hear the views of the delegation of Chinese Taipei with respect to the effects of the subsidy programme under these modes.
Third, regarding who granted the financial contribution, she considered that the terms "a government or any public body within the territory of a Member", which were used in the ASCM, could apply and cover all levels of government.
The representative of China thanked the delegation of Chinese Taipei for providing, in its room document, written answers to questions raised at the last meeting and indicated she would revert to this at a later time.
China noted that the communication from Chinese Taipei, even though its purpose was to contribute to the development of a working definition of subsidies in services, referred to some notions in the ASCM that did not relate to the definition of subsidies.

Turning to the first example listed in the communication from Chile, the Exportation Programme, he wished to echo the comments of the delegation of Switzerland on the trade distortiveness of export subsidies, especially given the relevance of such effects to all Members.
He recalled that his delegation had made various suggestions in the past, for example that Members use their own definition, share information in a gradual manner, or share the difficulties they had encountered in collecting information.
To illustrate problems of using hypothetical examples, she noted for discussion purposes that even under the disciplines of the ASCM, which might or might not be relevant in the context of services, some of the examples would not be classified as actionable subsidies.
In concluding, she reiterated the need for caution relating to questions on what would fall under Article 1:3(b), what would fall under the scope of the GATS, and what would fall under the scope of scheduled commitments.
He thought that the second example was very clear and he considered that Chinese Taipei's identification of elements of subsidies in sub-paragraphs (ii) and (iv) of its communication, relating to income tax exemptions, was accurate.
Regarding sub-paragraph (g), he believed it was difficult to answer all questions at this time, noting that the task at hand was the elaboration of disciplines, which would form the basis for investigations that might be conducted.
Finally, he thought that the question contained in paragraph 31(b) was interesting, as it seemed to suggest that the development of future disciplines on services subsidies might follow the development of rules on subsidies for goods.
While others had noted that export subsidies were trade distortive per se and could not be justified by public policy objectives, he hoped for further elaboration on this point.
he recalled that paragraph 2 of Article XV provided for consultations in cases where a Member felt that it had been adversely affected by a subsidy of another Member.
In this regard, she drew attention, in particular, to paragraph 31(e) of the communication, which asked how the benefits to the recipient of the subsidy could be defined under the various modes of supply when traditional notions of domestic and foreign origin, exports and imports, could not readily be transferred to services.
She recalled that it had been agreed at the last meeting that the Secretariat expand on its earlier Note on government procurement provisions in regional trade agreements and noted that, given the amount of information involved, it could be ready for Members' consideration at the next meeting of the Working Party.
After consulting with the Secretariat, the Chairperson said that the Note was examining those provisions which the relevant agreements presented as pertaining to government procurement.
It also aimed to respond to questions about the treatment of public contracts covering services under different CPC categories, as well as questions about the scope of the agreement, in particular the distinction between services contracts and goods contracts.
For example, if a Member's government procurement regulations or practices were inconsistent with the obligation contained in Article VI:2, in particular with respect to domestic review, could another Member have recourse to the DSU pursuant to Article XXIII?
He thought that the examples provided in the communication from the EC helped to illustrate what government procurement commitments would look like and how they would relate to commitments in the market access and national treatment columns.
The communication had noted, in paragraph 2(b), that while GATS Article XIII:I referred to the exclusion of MFN, market access and national treatment, possibly in the interim period, it was silent on the applicability of other GATS provisions to government procurement in services.
Concerning example 6, which addressed a situation where a contract covered several services sectors, he asked how the "main object of the contract" could be determined in practice.
She understood that example 5 also dealt with a situation where no limitations appeared in the market access and national treatment columns under mode 3, but the government procurement commitment was more restrictive.
With respect to the scheduling of commitments on government procurement, he asked whether the EC was proposing MFN and national treatment obligations as general obligations or as obligations only applicable to those sectors where commitments on procurement were undertaken?
Concerning example 6, the communication stated that in cases where government procurement commitments had been made only in one of the two sectors concerned by a given contract, a specific provision of the GATS Annex on government procurement would define the main object of the contract, which would be determined according to the value of each category of service covered.
While paragraph 1 of the communication from the EC stated that the proposal was made within "the framework of the negotiations under the mandate given by GATS under Article XIII:2", he indicated that Article XIII:1 was also relevant, reiterating his delegation's previously expressed position.

The representative of the European Communities said that he hoped to start the next session by providing answers to questions he would not have time to address today.
A distinction had to be drawn between, for example, Article III on transparency which applied to government procurement in all services sectors and provisions of Article VI which applied to sectors where government procurement commitments had been made, that is only for certain Members through the Understanding on Financial Services.

The Chairperson noted that the presentation by the European Communities had generated a number of questions, which focused on the scheduling of commitments on government procurement, the scope of the mandate in Article XIII, the nature and scope of the proposed Annex on Government Procurement, and coherence between Members' commitments under the GPA and commitments on government procurement in the GATS.

NEGOTIATIONS ON EMERGENCY SAFEGUARD MEASURES (ARTICLE X)
The Chairperson said that the Working Party would not be able, due to lack of time, to enter into a substantive discussion on emergency safeguard measures and suggested that the issue be reverted to at the next meeting.