World Trade
Organization RESTRICTED 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

The meeting of the Working Party on GATS Rules was chaired by Ms.
ANNUAL REPORT OF THE WORKING PARTY ON GATS RULES TO THE COUNCIL FOR TRADE IN SERVICES (2004)
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.
The programme focused on the following 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.
Her delegation 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.

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.
It might be useful to revisit this and discuss how such concepts as the “existence of a financial contribution”, “government or any public body”, “any form of income or price support”, or the “conferral of a benefit to the supplier”, which were used in the ASCM, could apply in the services context.
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, regional or local governments or authorities".
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if a subsidy - or for that matter any measure - did not violate any GATS provisions, it might need to be modified or withdrawn if a Member considered that any benefit it could reasonably have expected to accrue under a specific commitment of another Member was being nullified or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.
Could certain 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 suggested that the Working Party request 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 delegations.
She proposed that the Secretariat elaborate, in addition to the composite note proposed by the delegation of Hong Kong, China, a separate note regarding, on the one hand, concrete critiques that were raised against using the ASCM definition and, on the other hand, concrete improvement proposals made in the Working Party.

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.
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.
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.
Regarding the example referring to temporary 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 would consider whether a safeguard would enable countries to undertake more ambitious liberalization.
With respect to the relationship between an ESM and bilateral investment treaties (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.
His delegation considered that the various examples provided so far suggested that some Members might want to invoke a safeguard, but the examples did not justify the use of safeguard measures.
Some had argued that measures relating to BITs were not inconsistent with the MFN obligation; the issue of whether MFN exemptions were required for such agreements had also been raised.
Second, with respect to the example relating to opticians, he wondered whether the impact had really been unintended or unanticipated for the government, although it might have been unexpected for some opticians.
Some but not all of the employment lost had been compensated by new hiring by the foreign suppliers that had caused injury.
The issue in this example was not one of restricted competition; it captured a situation where a Member had committed to a particular way of determining the interconnection rates, which affected the ability of the domestic service supplier to provide universal service.

Concerning the definition of domestic industry, he noted that the proposal to let each Member use its own concept did not aim to encourage the development of definitions that would suit a particular desire to impose a safeguard.
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 tensions with another party to a BIT.
It would be useful if the proponents could provide more information on the kind of data that they could actually produce, as well as possible examples, for a given sector in order to determine injury, for example under modes 1, 3 and 4.
Even if ENTs and ESM were different, the same arguments made regarding the technical infeasibility of an ESM could be made concerning ENTs if one were to substitute the terms "economic needs" with the concept of serious injury caused by increased imports.
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 comparisons could usefully be made.
In the case of legal services supplied under mode 1, for example, how many memoranda, destined for how many citizens, would have to cross the border for harm to be caused to a domestic industry in, say, the Philippines?
He thought that his authorities, as well as those of other countries he was speaking for, knew how to obtain such data, although it might not be as easy for all developing country Members.
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 contain clear criteria.
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.
These issues included: whether the MFN obligation would apply in sectors where government procurement commitments were not taken; the relationship between the MFN obligation and reciprocity provisions in the Government Procurement Agreement (GPA); and, more generally, whether the manner in which commitments were undertaken in the GATS was best suited for liberalization of government procurement.
In general, the scope of the procurement-related disciplines, including liberalizing obligations, was further defined through annexes, which typically specified the sector coverage, the procuring entities covered, and threshold values above which the provisions applied.
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 sectors - in an annex to the schedule.
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 were needed to open procurement markets in the context of the GATS.
While under the European Communities' proposal a Member could choose not differentiate between modes of supply, government procurement commitments would still have to be read in conjunction with market access and national treatment commitments that were made under the respective modes of supply.
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 procurement commitments were made in the additional column being proposed.
He disagreed 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.
He considered that there was scope for further discussions on the framework proposed by the European Communities, as well as on other issues in the Article XIII negotiations; information on the way government procurement commitments had been undertaken in EIAs,
In that regard, S/WPGR/W/49 mentioned such issues as non-discrimination, valuation of contracts, technical specifications, procurement methods, qualification of suppliers, invitations to participate, time limits, tender documentation, and award of contracts.
He wondered whether such provisions 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.
While the mandate in Article XIII provided for negotiations on government procurement for services, the recent Notes by the Secretariat highlighted that in all the EIAs reviewed certain services and goods were covered and others were not.
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.