 
 RESTRICTED  WORLD TRADE  
ORGANIZATION  TN/RL/M/20 
1 December 2004 
 (04-5232) 
Negotiating Group on Rules  
  
 
SUMMARY REPORT OF THE MEETING 
HELD ON 3-4 NOVEMBER 2004 
 
Note by the Secretariat
 
 
 
1. The Negotiating Group on Rules ("the Group") held a formal meeting on 3-4 November 2004. 
A. ADOPTION OF THE AGENDA  
2. The Group adopted the following agenda: 
 A. ADOPTION OF THE AGENDA 
 B. ANTI-DUMPING  
 C. SUBSIDIES AND COUNTERVAILING MEASURES, INCLUDING FISHERIES 
SUBSIDIES   
  D. ELECTION OF THE CHAIRMAN 
 E. REGIONAL TRADE AGREEMENTS 
 F. OTHER BUSINESS 
- Date of the next meetings of the Group. 
B. 
ANTI -DUMPING  
3. There was no discussion under this agenda item.  
C. SUBSIDIES AND COUNTERVAILING MEASURES , INCLUDING FISHERIES SUBSIDIES  
4. The Group discussed one new submission, entitled "Fisheries Subsidies" (TN/RL/W/166) and 
sponsored by six participants.  A co-sponsor explai ned that the paper offered a simple, enforceable, 
and flexible structure for new disciplines on fisheries subsidies.  It also provided an overall negotiating framework to enable Participants to put forward specific proposals.  This approach 
established a broad prohibition on subsidies that bene fit the fishing industry.  The main task of the 
negotiations would be to identify those subsidies th at would not be prohibited under new rules.  The 
paper identified a non-exhaustive list of progra mmes that would not be prohibited, such as 
government expenditures for management; general in frastructure; access; certain fisheries-related 
social insurance programmes and appropriately stru ctured decommissioning subsidies.  The paper 
also drew attention to special and differential treatment and the importance of addressing specific 
needs of Members at all levels of development. In  this respect, the paper referred to a submission 
(TN/RL/W/136) made by a group of developing Me mbers identifying areas of interest.  The paper 
emphasised that identifying other specific areas of concern would assist the Group to consider at an TN/RL/M/20 
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 early stage how such concerns may be accommodated in an effective way.  Other co-sponsors stressed 
that, with a general prohibition in place, special a nd differential treatment c ould be strengthened and 
grey areas avoided.  
5. Some participants welcomed the paper becau se the top-down approach it advocated favoured 
simplicity, enforceability and flexibility and was more likely to result in effec tive disciplines than the 
piecemeal approach suggested by some other Particip ants.  These Participants considered that such an 
approach had transparency benefits, as Members wo uld have an incentive to come forward with the 
details of programmes they wished to retain.  The importance of such  an approach also stemmed from 
the fact that establishing a green box has neve r been a sufficient motive for compliance.  
6. Other Participants considered a bottom-up a pproach, as presented in TN/RL/W/164, superior 
to a broad prohibition in terms of consistency w ith the Agreement on Subsidies and Countervailing 
Measures ("ASCM") and the Doha mandate.  A bottom-up approach could categorize subsidies 
according to their effects, thus providing more transparency and better knowledge of prohibited as 
well as green subsidies.  It was also superior in  that it provided more flexibility according to the 
effects of subsidies.  It was noted that subsidi es, although similar in design, might have different 
impacts depending on how and where they are applie d.  A blanket ban of subsidies in a given sector 
was inconsistent with the basic principles and co ncepts of the ASCM.  Further, there was not 
necessarily a causal link between fisheries subsid ies and overcapacity and over-fishing as these are 
matters of resource management.  To the extent ne gotiations targeted the trade distorting aspects of 
any subsidy, the discussion should focus on streng thening the rules and di sciplines of the ASCM 
across all sectors of non-agricultural goods, instead  of establishing a separate set of disciplines for 
fisheries subsidies.   
7. Some Participants noted the need to a dd more subsidies rela ting to development 
considerations to the paper's non-e xhaustive list of exemptions.  Another Participant noted that some 
of the world's largest fishing nations were devel oping Members with extensiv ely developed fisheries 
operating both within and beyond their exclusive econom ic zones, and there was merit in the paper's 
suggestion that such countries not be exempted from the disciplines developed by the Group.  
8. In response, a co-sponsor submitted that the pa per did not introduce new concepts into the 
ASCM, but avoided that by using terms that are alre ady in the ASCM.  By contrast, the concept of a 
properly managed fishery, suggested by some Part icipants, introduced new concepts into the WTO 
system.  In response to a question, the sponsors i ndicated that they had not yet resolved the issue 
whether the proposed disciplines would apply to ma riculture or aquaculture.  The sponsors further 
indicated that they had not yet reached a defined position regarding whether subsidies not within the 
prohibition remained actionable or would be non-actionable.   
D. 
ELECTION OF THE CHAIRMAN  
9. The Group elected its new Chairperson, H.E. Mr. Guillermo Valles Galmés, Ambassador of 
Uruguay, to succeed H.E. Mr. Eduardo Perez Motta, Ambassador of Mexico. 
E. REGIONAL TRADE AGREEMENTS  
10. The Chairman said that the main purpose of the meeting was to continue discussions on 
"systemic" issues on regional trade agreements (RTA s), on the basis of heading 3 of the Chairman's 
Roadmap for Discussions on RTAs' "Systemic" Issues – Rev.1 , entitled "Other Issues".  He recalled 
that at the  meetings held on 29 June and 21 Se ptember, Participants had had the opportunity to 
express views on "Coverage" and "Neutrality" questions , respectively under headings 1 and 2 of the 
Roadmap , and invited participants wishing to complement their views on those two topics to do so  TN/RL/M/20 
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 after consideration of heading 3.  He also invite d Participants to share with the Group their views 
regarding the Group's next step on the consideration of systemic issues. 
11. One Participant asked whether the Secretariat could send faxes and informal documents by 
electronic mail to those Participants who indicated their interest in receiving documentation in electronic format.  The Chairman replied that this could be done and invited participants wishing to 
proceed that way to register with the Secr etariat and provide it with their-mail addresses. 
12. Under sub-heading 3.1 of the Roadmap , entitled Coherence among WTO rules relating to 
RTAs , a number of Participants expressed their interest in having an in-depth discussion on item 
3.1(ii), regarding the application of global safegua rds to RTA partners; they  also noted that the 
negotiations should provide for a clarification of  how safeguard and anti-dumping measures could be 
applied in an RTA. 
13. Several Participants argued that global safeguards were to be applied MFN - that is also to 
RTA partners - in accordance with Article 2.2 of  the Safeguards Agreement which clearly specified 
that safeguard measures were to be applied irresp ective of the source.  One Participant noted that 
safeguard measures were restrictive by nature and in operation and should be regarded as part of 
"other restrictive regulations of commerce" (O RRCs).  The list of exceptions contained in GATT 
Article XXIV:8(a)(i) and (b) should be considered as  non exhaustive.  Also, because of the particular 
nature of global safeguards, their application on a selective basis would be discriminatory towards 
third parties and compromise the MFN principle contained in Article 2.2 of the Safeguards Agreement.  Another Participant noted that safe guards were temporary measures and not a permanent 
withdrawal of concessions, and as such did not pr ohibit further integration of RTA partners.  The 
requirement of GATT Article XXIV:8 was to eliminate duties and ORRCs on "substantially all the 
trade" and the term "substantially" had been interpre ted by a panel and the Appellate Body to reflect 
some flexibility on the applicability of the regulation of commerce. 
14. Other Participants supported the view that  RTA parties could be excluded from the 
application of global safeguard measures at their discr etion.  One Participant noted that parties to a 
free-trade area (FTA) should be excluded from the application of global safeguard measures if the 
RTA so provided.  Another Participant observed that global safeguards that were applied in 
accordance with the WTO Agreement could not be c onsidered ORRCs.  Several points of view were 
also expressed: that ORRCs in GATT Article  XXIV:8 did not include measures under GATT 
Articles XIX and VI, since the list of exceptions w as exhaustive; there was no contradiction from a 
legal point of view, since Article 2.2 of the Sa feguards Agreement provided for the MFN application 
of safeguard measures, while footnote 1 of Article 2 stated that the Agreement did not prejudge the 
relationship between Article XIX a nd Article XXIV;  concerns regard ing inappropriate application of 
causality were sufficiently dealt with in the Safe guards Agreement, as interpreted by the Appellate 
Body; and, finally, the possibility of excluding par ties to an RTA from the application of safeguard 
measures could be a way of gradually converging to wards approaches that would not provide for such 
trade policy instruments, and that could al so have value at the multilateral level. 
15. Regarding footnote 1 to Article 2.2 of the Safe guards Agreement, one Participant was of the 
view that it was mostly addressed to customs unions (and not to FTAs);  its last sentence was however 
ambiguous and a very stringent interpretation of  Article 2.2 might pose a problem to a fully 
implemented customs union which fully conformed to  the requirements of GATT Article XXIV:8.  
Another Participant pointed out that the last sentence of the footnote referred to "paragraph 8 of 
Article XXIV of GATT 1994", which covered bo th customs unions and FTAs, and not only to 
subparagraph 8(a) which dealt exclusively with cu stoms unions, and as such left open the question of 
whether it applied to both FTAs and customs unions.  It  was also noted that this question also touched 
upon the differentiation between customs unions and FTAs. TN/RL/M/20 
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 16. Finally, still in regard to the application of safeguard measures vis-à-vis  RTA parties, the 
point was made that parallelism was of importance in  that if an RTA party targeted a country as 
subject of the injury determination investigation,  that country should also be included in the 
application of the safeguard measure. 
17. One Participant was of the view that, at that moment in time, item 3.1(iii) could be considered 
as rather academic and abstract given the wide di fferences in the levels of experience regarding these 
rules; it would not appear to be useful to start discussing it at that point. 
18. Regarding development-related flexibilities
 (sub-heading 3.2 of the Roadmap ), one 
Participant observed that although development issues were of major importance, the consideration of 
elements on special and differentia l treatment should follow a clarification and improvement of the 
rules and disciplines relating to RTAs.  Also, r ecalling that the revised proposal announced by the 
sponsors of the submission circulated as documen t TN/RL/W/155 had not yet been issued, he drew 
Participants' attention to his delegation's co mments on that submission (document TN/RL/W/165), 
and requested the Group to take note of it.  Anot her Participant expressed interest in in-depth 
discussions regarding items 3.2(a) and (b).  
19. The Group took note  of the submission distributed as TN/RL/W/165. 
20. Regarding RTA effects on non-parties  (sub-heading 3.3 of the Roadmap ), one Participant 
noted that existing rules of Article XXIV of the GATT 1994 were insufficient in addressing compensation for negative effects on third parties upon the formation or enlargement of an RTA.  
While Article XXIV:6 dealt with and set procedures regarding the increase of bound rates of duties, it 
did not contain any procedures on how to remedy trade losses due to the increase of non-tariff 
measures vis-à-vis  third parties; his delegation would pursue this issue in the future. 
21. Regarding the retroactive application of new RTA rules
 (sub-heading 3.4 of the Roadmap ), it 
was noted that improved understanding of this issu e was warranted, and reference was made to the 
Secretariat's note entitled Issues Related to the Retroactive Application of Possible New WTO Rules 
on Regional Trade Agreements  (Job(03)/44/Rev.1), which described the elements involved.  It was 
argued that the matter did not relate to a retroac tive application of any new rules – which in legal 
terms applied only in exceptional circumstances – but rather to their application to RTAs already in 
force at the time of their adoption; this was di stinct from the concept of "grandfathering" and both 
issues should be distinguished.  While Participants  generally noted that new rules should apply to 
existing RTAs and that "grandfathering" existing RT As from the new rules was not in line with the 
overall purpose of the negotiations, a number of Participants referred to the need for granting existing 
RTAs a transition period to conform to any new rules.  It was observed that a distinction needed to be 
made between new procedural rules and substantive ru les, and in that context one Participant said that 
any new rules regarding examination should also apply to existing RTAs.  Some Participants 
requested the Secretariat to modify the heading's title  to better reflect the issue at stake, and it was 
suggested to refer instead to "exemption from the a pplication of the new rules".  The point was made 
that, as suggested in the past, discussion of this matter should be deferred to a later stage, once any 
new rules had been outlined; however, one Participan t expressed the view that it would be beneficial 
to hold this discussion in light of and in parallel w ith the consideration of the new rules themselves. 
22. Regarding future work  on systemic issues, Participants favoured proceeding on the basis of 
Participants' proposals.  While doubts were  expressed on whether any proposals would be 
forthcoming, some Participants noted that it would be premature to work on this assumption; in that 
context, reference was made to th e expected revision of TN/RL/W/155 and to the fact that during the 
discussion of the Roadmap  a number of Participants had expressed strong views which might lead to 
the submission of concrete proposals.  One Partic ipant suggested that, given Members' collective  TN/RL/M/20 
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 responsibility for this issue, a Chairman's short list of issues to be further explored might contribute 
positively to the discussion 
23. The Chairman said that he had perceived an in terest in adopting a realistic and pragmatic 
approach to the analysis, debate and negotiation of systemic issues.  He sensed that the Group shared 
the view that, while Participants were not to be r estricted from raising any systemic issue, discussions 
could be circumscribed to those issues which had been detected as particularly sensitive for some 
Participants and/or as having weakened the system.  He informed the Group of his intention to consult 
with delegations on the way forward and indicated his openness to receive any suggestions that would 
help ensure that negotiations be conducte d in a practical and efficient manner. 
24. After that, the Chairman moved into informal  mode to deal with "RTAs' Transparency" 
questions, on the basis of a revised informal note by the Chair entitled Regional Trade Agreements – 
Transparency Check-List , dated 29 October 2004 
F. OTHER BUSINESS  
25. The Chairman recalled that the next mee ting of the Group relating to anti-dumping and 
subsidies and countervailing measures including  fisheries subsidies would be held on 14-
17 December 2004.  The deadline for submission of any informal elaborated proposals for 
consideration in informal mode at that meeting was Tuesday, 30 November 2004, close of business.  
26. The Chairman also informed the Group that the next meeting of the Group dealing with RTAs 
would be held on 13 December 2004.  The Chairm an intended, at that meeting, to propose a 
programme of work and dates of meetings for 2005. 
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