TWN Info Service on WTO and Trade Issues (Mar07/12)

30 March 2007
ASEAN tables emergency safeguard proposal in GATS talks
Published in SUNS #6208 dated 12 March 2007 
By Riaz K. Tayob, Geneva, 9 March 2007  

After years of protracted negotiations among WTO members on having an emergency safeguard mechanism to deal with adverse economic impacts as a result of services liberalization in the WTO, the ASEAN group (excluding Singapore) has tabled a proposal on it.

The proposal, in a room document, was tabled Thursday by Brunei Darussalam, Cambodia, Indonesia, Malaysia, Myanmar, the Philippines, Thailand and Viet Nam (ASEAN minus) during an informal meeting of the Working Party on GATS Rules.

Emergency Safeguard Measures (ESM) are undertaken when market conditions result in injury, or likely injury, to domestic service suppliers. The proposal outlines parameters for the ESM and includes additional protection for developing country members under special and differential treatment including specific protection for services supplied by natural persons of developing countries.

It also applies to liberalisation commitments made previously and those that are anticipated at the end of this round of negotiations. In addition, there are provisions on reprisals which allow an affected member to suspend an equivalent level of specific commitments of the member invoking the ESM.

Article X of the GATS agreement mandates multilateral negotiations on the question of emergency safeguard measures based on the principle of non-discrimination. The negotiations were to have been concluded not later than three years from the date of entry into force of the WTO Agreement.

Since no agreement was reached, the Fifth Decision on Negotiations on Emergency Safeguard Measures adopted on 15 March 2004 states that the results of these negotiations shall enter into effect on a date not later than the date of entry into force of the results of the current round of services negotiations. The 2005 Hong Kong Ministerial Declaration called on members to intensify their negotiations on rule-making, including the ESM.

The proposal states that "a member may apply emergency safeguard measures in a service or sub-service sector where commitments have been made, if that Member determined that domestic service suppliers experience market conditions that result, or are likely to result, in serious injury to these suppliers or seriously threaten the viability of the domestic industry."

To establish that there has in fact been injury or a serious threat of it, the investigating authority (of the member) may use "a non-exhaustive list of market conditions which includes, substantial increase in imports; decreasing employment, serious imbalance in employment between foreign and domestic natural persons, and decline in relative wages; sharp reduction in the number of domestic suppliers or establishments; abrupt or persistent loss of market share; price suppression associated with market saturation or over-competition; serious decline in profits, return on investments or cash flow; decline in the growth of output or sales; reduced ability to raise capital or investment; or reduced level of capital and capacity utilisation."

To assuage some of the concerns on the application of such a measure, the proposal states that any ESM measure "adopted shall be non-discriminatory subject to the provisions of S&D for ESM; be terminated within 3 years; take into account public interest; and be reasonable and necessary in order to remedy the situation."

The ESM measure includes remedial measures "targeted at providing support to the domestic service suppliers" such as "through differential positive measures such as grants, differential tax regimes or other support measures."

"Only as a last resort will measures relating to suspension of commitments be undertaken," states the proposal.

The proposal contemplates these measures as being temporary, and "at the expiry of the agreed duration or as soon as the reasons invoked to justify the emergency safeguard measures subside, the original situation (status quo ante) shall be restored."

If the difficulties persist, the invoking Member may choose to commence withdrawal procedures under the provisions of the GATS.

The proposal also stipulates several conditions that govern the application of an ESM measure. For instance, "a Member may apply a safeguard measure only following an investigation by the competent authorities of that Member and shall include reasonable public notice to all interested parties and public hearings or other appropriate means in which interested parties could present evidence and their views, including the opportunity to respond to the presentations of other parties and to submit their views. The authorities shall publish a report setting forth their findings and reasoned conclusions."

The invoking Member shall also "notify to the Council for Trade in Services of the decision to initiate an investigation" and "shall provide information to the Council including a clear description of the proposed safeguard measure(s); the sector(s)/sub-sector(s) that may be affected; reason for invoking; and make available any other investigation information that is not confidential upon written request. "

The proposal states that "affected Member(s) shall be given opportunities to hold consultations with the applying Member during the investigation period, and 18 months after the application in order to find ways and means to alleviate the situation."

The ASEAN proposal also contains special and differential treatment features. For instance, the "ESM measures shall not be applied against the supply of a service by a supplier or suppliers of a developing country Member if that Member's share of the total supply of the service concerned in the territory of the Member intending to apply the measure does not exceed x per cent (to be specified), subject to an overall developing country limit on the total supply, which is still to be determined."

The Council for Trade in Services shall undertake a technical review of the operation of the ESM at a time still to be decided.

Some members such as Australia, the US and Japan continue to raise concerns about the desirability and feasibility of applying the ESM. According to a trade diplomat involved in the negotiations, this is because they have no political will and simply do not want to talk about it, even though it is part of the mandate to do so.