Services encompass activities as diverse as air transport, banking, tourism, telecommunications, and the treatment of wastewater. Governments often provide subsidies to the providers of these ser-vices through grants (e.g., for the construction of hotels), subsidies in-kind (e.g., airports), concessional financing, and tax breaks.
When trade negotiators began drafting a General Agreement on Trade in Services (GATS), at the beginning of the Uruguay Round of multilateral trade negotiations, they were well aware that subsidies could distort trade in services, and some wanted to create new disciplines to avoid such trade-distorting effects. At the close of the Uruguay Round, however, the negotiators were unable to reach agreement on even the desirability, much less the substantive content, of any disciplines.
Subsidies to services therefore remained unfinished business at the WTO, part of the Council on Services' "built-in agenda" for follow-on negotiations. These commenced in 1996 and in 2001 were subsumed under the broader Doha Round of multilateral trade negotiations.
Progress on these negotiations has been slow. As of the beginning of 2007, negotiators had not even agreed on the definition of a subsidy. The WTO Secretariat itself has suggested using the ASCM definition of a subsidy as a starting point, but some WTO Members are nervous that it may contain unforeseen traps. Further complicating the discussions are the different "modes" in which trade in services takes place.
For the time being, therefore, WTO Members' subsidy practices affecting services remain subject only to the GATS' general obliga-tions, notably its most-favoured nation (non-discrimination) and national treatment obligations. The latter applies only in service sectors to which countries have scheduled (i.e., formally declared) liberalization commitments. Basically, national treatment requires that a subsidy provided to domestic service suppliers also be accessible to foreign service suppliers.
