Bridges Weekly Trade News Digest • Volume 5 • Number 22 • 12th June 2001

GATS Focus: New Spark for Discussions on Emergency Safeguards

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While declaring themselves unconvinced of the necessity to establish an Emergency Safeguard Mechanism (ESM) under the GATS, Chile, Costa Rica and Switzerland on 8 June issued a ‘non paper’ on policy issues for the establishment of such a mechanism.

Negotiations on emergency safeguards are — together with subsidies, government procurement and domestic regulation — part of the ‘unfinished business’ from the Uruguay Round in which future talks were mandated as part of the Services agreement.

Discussions on emergency safeguards (as well as subsidies and government procurement) are being held within the Working Party on GATS Rules (WPGR), which is one of the subsidiary bodies to the Council for Trade in Services. So far, Members have been unable to agree not only on the formulation of an ESM, but also on the principle of its necessity.
The joint Chilean, Costa Rican and Swiss working paper, unlike an earlier proposal from the ASEAN group (S/WPGR/W/30), was designed not as a technical proposal but more as a conceptual and analytical paper to stimulate the debate on policy issues relating to Emergency Safeguards within the WPGR.

In their communication, entitled “Possible Comprehensive Approach for an ESM,” the three Members address, inter alia, the possible scope, definition and conditions of application for an ESM. Furthermore, the paper focuses on transparency, surveillance, and special and differential treatment for developing and least developed countries (LDCs).

The paper takes a rather clear-cut stance on several sensitive issues regarding Safeguards. For instance, regarding the scope of an ESM, the joint communication states a preference for a horizontal approach, as opposed to a service sector-by-sector approach. Furthermore, the paper says that Foreign Direct Investment (supply of services through commercial presence, Mode 3) must be excluded from the application of ESM measures. The paper also states that a necessity test should apply; that the duration of a measure should not exceed a maximum of 27 months; and that an institutional mechanism of surveillance, possibly a body separate from the CTS, should be created.

“The paper is on purpose rather extreme in order to stimulate a debate on conceptual questions within the WPGR,” one trade official said.

Concerning Special and Differential Treatment (SDT) for developing countries and LDCs, the paper states that such treatment should be provided for in an ESM. Examples of possible SDT mentioned in the communication are extensions of duration of an ESM, and a longer period to conduct the investigations necessary to establish proof as to the injury or threat of injury to domestic service suppliers.

In the ‘preamble’ of the paper, Chile, Costa Rica and Switzerland recall that they are, in principle, opposed to the establishment of an ESM. Like other Members of the same opinion, they argue that the structure of the GATS is flexible enough to accommodate all kinds of situations.

Those in favour of an ESM (including many developing countries) argue, on the contrary, that the few alternatives to an ESM, such as the modification or withdrawal of commitments, requires lengthy negotiations and would be a factor of instability. In addition, they say, if the time-consuming and cumbersome modification process is the only recourse available in times of emergency, Members are likely to be reluctant to further liberalise sectors in the ongoing GATS 2000 negotiations.

The following WTO Agreements already provide safeguard measures under certain conditions: the Agreement on Safeguards; the general rule on safeguards modifying the pre-existing GATT XIX; the Agreement on Agriculture; the Agreement on Textiles and Clothing; and the Understanding on the Balance-of-Payments Provision of the GATT 1994.

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