RESTRICTED
WORLD TRADE S/WPGR/M/5
13May1996
ORGANIZATION(96-1874)
Working Party onGATS Rules
REPORT OFTHE MEETING OF28MARCH 1996
Note bytheSecretariat
1. Thefifthmeeting oftheWorking Party onGATS Rules waschaired byMr.Stuart Carre of
Canada. Theagenda consisted offiveitems: negotiations onsubsidies under Article VXoftheGATS;
negotiations onemergency safeguards under Article XoftheGATS; negotiations ongovernment
procurement under Article XIIIoftheGATS; dateofthenextmeeting oftheWorking Party; andOther
Business.
Negotiations onsubsidies under Article XVofGATS
2. TheChairman observed thatthiswasthefirsttimetheissue ofsubsidies hadbeenplaced on
theagenda. Herecalled thatthenegotiating mandate inArticle XVacknowledged thatsubsidies may,
incertain circumstances, havedistortive effects ontradeinservices. Themandate called uponMembers
toenterintonegotiations withaviewtodeveloping thenecessary multilateral disciplines toavoid such
trade-distortive effects. Thenegotiations werealsotoaddress theappropriateness ofcountervailing
procedures. Themandate further stated thatthenegotiations would takeintoaccount theroleofsubsidies
inrelation tothedevelopment programmes ofdeveloping countries andtakeintoaccount theneeds
ofMembers, particularly developing country Members, forflexibility inthisarea. Inaddition, the
Chairman observed thatafootnote toparagraph 1ofArticle XVrequired thatawork programme be
established todetermine how, andinwhattime-frame, negotiations onmultilateral disciplines were
tobeconducted. Finally, themandate alsostipulated thatMembers would exchange information
concerning allsubsidies related totradeinservices thattheyprovided totheirdomestic service suppliers.
3. TheChairman drew theattention ofdelegations toabackground notebytheSecretariat
(S/WPGR/W/9) introducing thesubject. Inaddition, Chile hadcirculated adocument onsubsidies
immediately prior tothemeeting, which would becirculated asasubmission totheWorking Party.
Inintroducing hispaper, therepresentative ofChile noted thatsubsidies could distort tradeinservices
invarious waysandcould undermine thevalue ofmarket access commitments under GATS. Moreover,
subsidies could takemany forms, notnecessarily involving afinancial contribution bygovernments.
Itwasessential todistinguish between broad-based subsidies aimed atachieving social andothernational
objectives, orataddressing market failure, andthosesubsidies designed tosecure commercial advantage
foraparticular sub-set ofservices orservice suppliers. These different categories ofsubsidy should
notbetreated inthesamemanner under GATS. Itwould behelpful inclarifying theseissues ifMembers
were toexchange information regarding theirsubsidy programmes, andagood starting point might
bethenotification obligations under Article 25oftheAgreement onSubsidies andCountervailing
Measures.
4. Therepresentative ofChile noted thatenormous difficulties would beencountered inanyattempt
todefine injury orcausality under subsidy investigations inservices, notleast because ofthe
complementarity insome circumstances ofdifferent modes ofsupply. Aquestion would alsoarise
astothenature ofcountervailing measures inservices. Moreover, acountervailing instrument couldS/WPGR/M/5
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bemisused forprotectionist ends. These considerations favoured anapproach thatwould focus on
commitments toeliminate subsidies orreduce theireffect ontrade.
5. Recognizing theinherent complexity ofthesubsidy issueinservices, many delegations urged
acareful andsystematic approach tothenegotiating mandate. Itwasimportant totakefullaccount
ofthestructureofGATS,andthefactthatcertainsubsidydisciplinesalreadyexistedwithinthisstructure.
Several delegations alsonoted thatsome lessons could begleaned fromtheexperience ofdealing with
subsidies inthefieldofgoods, although there were important differences aswellwhen itcame to
services. Thedifference inemphasis between apriori disciplines onsubsidies andreliance onanti-
subsidy remedies should beborne inmind. Onerepresentative stated thatinexploring thekindof
subsidy disciplines thatmight bedeveloped, dueconsideration should begiven totheneeds ofdeveloping
countries. Many delegations stressed theneedforgathering information, including inrelation tothe
subsidy practices ofMembers.
6. Insumming upthediscussion, theChairman observed thatmany delegations hadcalled for
caution andcareful analysis astheWorking Party cametogripswiththeArticle XVnegotiating mandate.
Heurged delegations toputtheirideasdown onpaper, andtogivefurther consideration tothose aspects
ofthenegotiating mandate thatcalled fortheestablishment ofawork programme andtheexchange
ofinformation. TheWorking Party agreed thattheSecretariat would prepare twopapers. Onewould
identify subsidy andcountervailing measure provisions applicable toservices inregional agreements.
Theother would listsubsidy measures thathadbeeninscribed inMembers ’schedules ofspecific
commitments.
Negotiations onsafeguards under Article XofGATS
7. TheChairman noted thatdifferences ofviewhadbeenexpressed astowhether theArticle X
negotiating mandate committed Members toestablish safeguard disciplines, oronlytoexplore the
possibility ofdoing so.Heurged thatthisissue besetaside, andthatdelegations focus instead on
thesubstantive question ofwhatasafeguard provision might beusedfor,andhowsuchaprovision
might work. These weretheissues tobeaddressed inconsidering themandate foradecision on“the
questionofemergencysafeguardmeasuresbasedontheprincipleofnon-discrimination.”TheChairman
observed thatthose arguing against theestablishment ofasafeguard mechanism hadbased theircase
ontheviewthatemergency safeguards wereintrinsically unnecessary inthefieldofservices, thatthe
nature andscope ofspecific commitments under GATS rendered safeguards superfluous, andthat
methodological andstatistical difficulties indesigning andimplementing asafeguard provision were
sosevere astooutweigh anypossible benefit fromdoing so.Ontheother hand, those defending the
caseforasafeguard hadargued thataction under Article XXItowithdraw ormodify specific
commitments wasnotdesigned asanemergency safeguard, andcould notmeettheneedforsucha
provision. Those infavour ofasafeguard instrument alsoargued thathigher levels ofscheduled
commitments would likely beforthcoming ifsubsequent emergency safeguard action werepossible,
thatsome domestic legislation mayalready contemplate safeguards forservices andwould needtobe
accommodated inGATS, andthatmethodological andstatistical challenges werenotsufficient reason
fordispensing withanyfurther consideration ofthemerits ofasafeguard provision. TheChairman
saidthatthese different views needed tobedeveloped anddefended withgreater specificity ifthe
Working Party were tomake further progress. Heurged delegations tofocus onthischallenge and
tofollow theexample ofthose whohadalready made written submissions. Inresponse toarequest
fromseveral delegations, theChairman agreed tocirculate hisintroductory comments asaninformal
document.
8. Inopening thediscussion, theChairman alsodrewtheattention ofdelegations toanoteprepared
bytheSecretariat entitled “Emergency Safeguard Measures inGATS: TheApplicability ofConcepts
Applied intheWTO Agreement onSafeguards ”(S/WPGR/W/8). Several delegations agreed thatmoreS/WPGR/M/5
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work should bedoneinrelation tothequestion whether asafeguard mechanism should bedeveloped
inGATS. Anumber ofthese delegations undertook toprepare written submissions. Certain
representatives saidthatinaddressing thevarious negotiating mandates before it,theWorking Party
should accord balanced treatment toallofthesubjects, bearing inmind thedifferences inpriorities
andinterests thatexisted among Members.
9. Some delegations reiterated earlier statements regarding thecaseforandagainst asafeguard
mechanism. Among theimportant issues tobeaddressed astheWorking Partdeliberated further,
delegations identified thequestions ofhowtodefine anemergency, howtoaccommodate theneeds
ofdeveloping countries, howtodefine critical circumstances, howtoprovide fortemporary safeguard
action, andhowtoaddress differences arising from alternative modes ofsupply. Atthesuggestion
ofanumber ofdelegations, theChairman proposed thataftermore written submissions hadbeen
received, theWorking Party should holdaninformal meeting todiscuss safeguards inmore depth,
andconsider thenextstepstobetaken inpursuit ofthenegotiating mandate. Members oftheworking
Party agreed withtheChairman ’ssuggestion. Itwasalsoagreed thatsafeguards, liketheother two
negotiating subjects under theWorking Party’smandate, would remain forthetimebeing ontheagenda
offuture meetings.
Negotiations ongovernment procurement under Article XIII
10. TheChairman recalled thatatitsprevious meeting, theWorking Party hadagreed thatitwould
nottakeupgovernment procurement inasubstantive manner atthepresent meeting, butrather would
seektosecure agreement onasetofquestions thatMembers would attempt toanswer inregard to
theirprocurement regimes. Aninformal meeting hadbeenheldon25March 1996, atwhich delegations
hadcome closetoagreeing onanappropriate setofquestions. TheChairman recalled theunderstanding
thatapragmatic approach would beadopted toinformation-gathering, inorder toensure thatthisdid
notbecome anendinitself, thuscrowding outsubstantive discussion. Delegations would make their
bestendeavours toprovide alltheinformation sought. Notwithstanding thevoluntary nature ofthe
exercise, theChairman urged theWorking Party toagree upon adatebywhich delegations would
provide information. TheWorking Party agreed onthesetofquestions drafted bytheSecretariat and
modified attheinformal meeting, andalsoagreed that28June1996 would bethedatebywhich
delegations would attempt toprovide replies tothequestions. Inthemeantime, thesetofquestions
would beissued asaworking document.
Next Meeting oftheWorking Party
11. TheChairman saidthatthedateofthenextmeeting oftheWorking Party would besetto
coincide withameeting oftheCommittee onGovernment Procurement.
Other Business
12. Nomatters were raised under Other Business.