Common use of Emergency Safeguards Clause in Contracts

Emergency Safeguards. Emergency safeguards in services may be expected to allow for the temporary suspension of market access, national treatment and/or any additional commitments that Members may have assumed in individual sectors. Any such mechanism, should it be agreed to by Members, would need to be based on the principle of non-discrimination. It would complement existing provisions under the GATS that already allow for temporary or permanent departures from general obligations or specific commitments. Relevant provisions include Article XII if a Member experiences serious balance of payments and external financial difficulties; Article XIV if action is deemed necessary for overriding policy concerns such as protection of life and health or protection of public morals; and Article XXI if a Member intends to withdraw or modify a commitment on a permanent basis. Contrasting with these provisions, a safeguards clause might be used to ease adjustment pressures in situations where a particular industry is threatened by a sudden increase in foreign supplies. If the Safeguards Agreement for goods is used as a precedent, the onus would be on a protection-seeking industry to demonstrate that a causal link exists between such increases in supplies and its suffering serious injury. There are two main schools of thought among Members. One group is not convinced that such a mechanism is desirable, given the scheduling flexibility under the GATS and the risk of undermining the stability of existing commitments through new emergency provisions. There are also doubts whether a services safeguard would be workable in practice. Sceptical Members point to the scarcity of reliable trade and production data in many sectors, and the technical complexities associated with the multi-modal structure of the GATS. Another group of Members feels that the availability of safeguards in the event of unforeseeable market disruptions, would encourage more liberal commitments in services negotiations. In their view, abuse could be avoided through strict procedural disciplines. Data problems should not be exaggerated, given the existence in many sectors of professional associations, regulators and licensing bodies that compile relevant information.