General Agreement on Trade in Services (GATS) is one of more than 20 agreements administered and enforced by the World Trade Organisation (WTO). The GATS Agreement establishes a multilateral framework of principles and rules for all forms of trade in all services. The agreement was agreed on in 1994, at the conclusion of the Uruguay Round, which led to the creation of the WTO from GATT (General Agreement on Trade and Tariffs). Negotiations to strengthen and deepen the agreement are part of the "built-in" agenda of the Uruguay Round and therefore, these negotiations can continue despite the collapse of the Seattle Minesterial meeting in December, 1999. The current round of GATS negotiations was officially launched in February, 2000,
GATS covers 160 types of service sectors. "Services" in the GATS framework include health, education, water, utilities, energy, transport, childcare, and just about every area of activity that we require for well being and sustainable development. The categories in the 1994 proposal include: Business; Communication (such as postal, telecomm and audio-visual); Distribution; Education; Environment (such as water, energy, and waste disposal); Financial; Health and related; Social and related; Tourism and Travel related; Recreational; Cultural and Sporting; Transport (sea, air, rail and road); and others.
GATS is being promoted as a "bottom-up" treaty rather than a "top-down" treaty since it ostensibly allows governments to make commitments for trade liberalisation in different sectors through progressive liberalisation (in other words, governments can supposedly choose the sectors they want to start opening up through incrementally). But in fact, GATS is not bottom-up. It is extremely top-down and also fundamentally undemocratic. The rules and content of GATS are not driven by the priorities and needs of ordinary people, but by the interests of large transnational corporations who are able to use their influence with powerful northern governments to impose trade rules on the people of the world. GATS content and rules have not been discussed with local communities, parliaments and other domestic/national rule making bodies, or even regional (inter-governmental) policy groupings. As in the case of most WTO agreements, GATS negotiations are proceeding behind closed doors and we are likely to learn what our governments have committed us to only after key decisions have been made.
I. The Mandate of GATS (i.e., what GAT seeks to do and what it is entitled to do)
1. Liberalisation of trade in services: the removal of government barriers, control and regulation to the provision of services by all service providers, public and private; this covers all kinds of services in every sector whether finance, transport, water, education, or health; eventually, this would move towards the privatisation of services altogether.
Some examples of services that are being discussed in the GATS negotiations: healthcare; hospital care; home care; dental care; child care; care of the elderly; all education (primary to higher levels); museums; law; social assistance; energy; water; environmental protection; real estate; insurance; transportation; postal services; etc. These services were identified as priority areas by the US Coalition of Service Industries and the European Services Forum.
2. Make it difficult and eventually impossible for governments to run public services without the involvement of private companies/providers-all public services must eventually move towards private provision and come under profit making rules.
3. Commit WTO members to keep liberalising services (progressive liberalisation), with no reversals allowed; domestic regulatory frameworks which are considered barriers to imports in services will have to be reduced and eventually eliminated altogether.
4. When GATS negotiations are concluded and passed, the WTO will be able to restrict government actions related to services through legally binding rules; if governments disobey these rules, they can face sanctions through the WTO. Under these circumstances, governmental ability and action to protect access to and regulation of essential services will be determined through the dispute settlement mechanisms of the WTO and not by the priorities of public interest.
II. What is in the Current GATS Agreement
The Agreement is still being negotiated and not yet finalised. A number of already developed countries have introduced specific proposals based on the strengths and interests of their respective private sectors. In contrast, developing countries have made very few proposals. In principle, the agreement is intended to cover all service sectors and all government measures to regulate services in the national setting.
Some of the key principles that underlie the GATS Agreement are:
1. National treatment: this means that host countries are prohibited from discriminating against foreign companies and corporations that can provide services that are currently provided domestically (by public or private means). National treatment involves a number of prescriptions that governments must follow, such as:
Ø Host governments cannot set performance requirements for foreign companies, for example, meeting domestic environment or labour laws, meeting quality standards, price controls, and so on;
Ø Foreign companies are not compelled to establish joint partnerships with local/domestic firms since they are already considered "national;"
Ø Foreign companies are not required to hire and train local staff, or to build local/ domestic capacity in their particular areas of operations;
Ø No requirements for technology transfer from foreign to domestic entities;
Ø Host governments must provide foreign companies the same tax and subsidy privileges that they provide domestic companies;
Ø Host governments cannot impose restrictions on foreign companies on the acquisition of land and other assets, access to natural resources, imports of goods and equipment, repatriation of capital and profits, etc.;
Ø In sum, host governments must treat all foreign service providers as though they were domestic service providers and must provide "equal competitive privileges" to foreign companies. In developing countries, domestic/local companies often do not have the resources or capacity to compete successfully with foreign companies. If foreign companies are provided the same privileges as domestic companies, it is extremely likely that both domestic capacity to provide services in-country, as well as domestic potential to export services to other countries will be severely inhibited.
2. Host governments must provide equal market access to all WTO member countries-i.e., they must provide Most Favoured Nation (MFN) status to all WTO members. This means that national treatment must applied "horizontally," or across the board to corporations of all countries. Host governments cannot choose which corporations get national treatment and which do not.
3. Host governments must provide corporate access to domestic markets through "least trade restrictive" business environments. This means that:
Ø Governments cannot enact laws or establish standards for environment, labour, public health and safety, universal access to services, price controls, or any other measures that are perceived to restrict "free trade;"
Ø All public services (including social welfare and other essential services) have to be essentially profit oriented and operate through market mechanisms for costing and pricing;
Ø For any service to remain or come directly under government authority, it must be provided entirely free; this is impossible for any country to do since all public services have some elements of cost recovery and private sector inputs; also, providing public services entirely free to all members of society is a formidable financial burden to governments in developing and poorer countries;
Ø If host governments do choose to impose standards or laws that corporations find "trade restrictive," they must show why and prove that no other alternative was possible; in other words, governments must bear the "burden of proof" to protect the interests of their own populations;
4. The GATS Agreement is the MAI in another form-three years ago, passage of the Multilateral Agreement on Investment (MAI) was defeated by coordinated and unified public action across northern and southern countries; now, many (mostly northern) government and private sector representatives see the GATS as a way of getting the MAI, but with less risk of the same type of public opposition:
Ø Because of national treatment and market access commitments under GATS, foreign corporations can establish a commercial presence to provide any service in the host country; so GATS would cover foreign investments in any case;
Ø Services provision already comprise about two-thirds of the economies of developed countries; an expansion of trade in services also means an expansion of foreign investments in the host country, but without the traditional benefits of Foreign Direct Investment (FDI) such as technology transfer, local employment, building domestic technical capacity and infrastructure, increased revenues through taxation, etc.
III. Some Key Issues of Concern for Developing Countries Regarding Services Liberalisation
1. As a result of World Bank-IMF structural adjustment programmes over the past twenty years and similar policy reforms insisted upon by regional development banks, most developing counties have already liberalised their economies considerably. They have also (to varying degrees) undertaken privatisation programmes to unbundle, corporatise and out-source a number of services that were once considered state preserves because of their importance to public welfare, equity and equality. The liberalisation of services trade under GATS comes on top of these already existing processes of liberalisation and privatisation, and will likely exacerbate the alienation of large numbers of people from quality services.
2. There is no evidence so far to conclusively show that liberalisation of services results in increased FDI in host countries. However, services liberalisation continues to be held as a carrot in front of developing country governments in order to attract FDI.
3. Most developing countries already have a deficit in services trade-i.e., they have more import than export of services and services trade related benefits; exceptions to this are tourism, travel and worker’s remittances.
4. Since the adoption of GATS in 1994, the share of developing countries in world services exports has only increased by six percent (largely accounted for by a handful of Asian countries). On the other hand, developed countries account for three-fourths of the world export of services; most of the top 20 services exporters are from developed countries.
5. Physical and technological infrastructures (such as in telecommunications, finance and transport) are important factors to increase the competitiveness of goods and services exports; but developing countries usually lag significantly behind developed countries in these areas.
6. Because of poorer capacity and infrastructure in "knowledge-intensive" industries, developing countries are usually unable to adapt to rapidly changing market needs and conditions in the service sectors, particularly in high value sectors such as finance, telecommunications, information, health and education. As a result, the participation of developing countries in high value services exports is likely to be limited, especially in the face of growing competition from developed countries.
7. There are social and developmental dimensions of services: infrastructure for water, transport, credit, health and education have direct bearing on public welfare and well-being, and sustainable development. These dimensions must be recognised and acknowledged; essential services cannot be treated only as avenues for profit-making.
8. For many developing countries, export of services is the only means of trade diversification and thereby, of reducing excessive dependence on commodities. Therefore, it is important that they protect and nurture their capacities to provide high quality services.
9. GATS is extremely broad and the language of GATS provisions is still quite ambiguous. Many developing countries have already made substantial commitments to GATS in many service industries and have provided increased market access to foreign corporations by liberalising sectors such as public works, energy and water. However, they have done this without sufficient experience and analysis of the ramifications of meeting these commitments.
10. An important resource that developing countries have is labour of varying quality and levels. But developing countries have not received meaningful economic returns through fair and just mobilisation of labour, or the movement of natural persons under a universal framework that protects the rights of such movement. It is far easier for capital and technology to cross international borders than it is for labour. In fact, countries in both the north and south are putting in place even more stringent immigration laws than before that selectively provide entry to specific types of labour based on the host country’s specific needs.
IV. Potential Impacts of GATS on Developing Countries
1. Reduction or complete elimination of domestic regulation in service sectors. This in turn can result in:
Ø Lowering of standards of services, particularly those provided to populations that are poor, vulnerable and politically and socially disadvantaged;
Ø Increased costs of services, many of which are essential for survival and development, such as water, health and education; this would further limit the access of poor and vulnerable populations to good quality services.
Ø Increased financial burden on governments since they will have to provide special subsidies and safety nets for those who cannot afford to pay for essential services.
Ø Increased indemnification of private sector providers from wrong-doing and social responsibility .
(numerous examples of the above can be found in privatisation processes related to water, healthcare and power/electricity in parts of Asia, Sub-Saharan Africa and Latin America; the almost epidemic rise of diseases such as cholera, malaria, tuberculosis and AIDS in all three regions are to a large extent attributable to: 1) increasingly limited access to essential services such as clean water and healthcare among poor and vulnerable populations, and 2) lack of responsibility among private service providers and government regulatory bodies to ensure timely, quality and affordable service provision)
2. Prioritisation of markets and profits over public interest and well-being:
Ø With a shrinking public sector, the private sector will act as a magnet for well trained, competent staff, leaving the public sector with fewer, high quality human resources;
Ø Governments will have to take care of low-income, vulnerable and high-risk populations with fewer financial, human and technological resources to provide quality services.
3. Elimination of the concept of universal rights of a country’s population to development:
Ø As a result of issues discussed above, we are likely to entrench a tiered system of those who can afford and therefore have access to quality services, and those who cannot; in many instances, access (or lack thereof) to quality services can be an issue of survival;
Ø Further creation and entrenchment of a service "underclass"-i.e., populations with reduced and limited access to essential services such as education, health, clean water, credit, employment, etc.
Ø Exacerbation of social and political inequalities within already disadvantaged and vulnerable populations such as migrant labour, those living in remote areas and rural communities in under-served areas; examples of social and political inequalities include those arising from gender, caste, class, race and ethnic/cultural differences;
(experience from many parts of the world shows that in times of increased scarcity, crisis and hardship, all members of a community or family do not bear the same burden; often, women and female children bear a larger share of the family burden by eating less and working harder to maintain the family and community; more generally, children bear a disproportionate share of such burdens since poor nutrition, illness and lack of access to schooling scar their future prospects for development and advancement)
4. Destruction of the notion of "commons:"
Ø GATS coverage extends to areas that have traditionally been considered common property (or, "commons") of communities, societies and cultures; the GATS agreement would cover environmental services, natural resources protection and management, conservation, culture, the arts, etc., and bring them under private property and management regimes;
Ø Forests, watersheds, river systems, coastal areas and wildlife could all come under transnational corporate management if GATS negotiations go in the direction of corporate interests;
Ø Bringing the commons under externally imposed private property regimes will restrict the access of local populations to natural resources necessary for their food and livelihood security; this will increase the survival burdens of subsistence farmers and fishers, indigenous peoples, and populations living in remote and under-served rural areas, and likely lead to conflict and struggles over scarce resources among local communities;
Ø Eventually, the application of GATS to common property will lead to the commodification of common heritage, including seeds, bio-diversity, traditional crafts, water and cultural products such as music and arts, and result in the destruction of the very notion of commons altogether; another cause for worry here is that as the commons disappear, so also will the store of precious communal resources such as bio-diversity and traditional knowledge.
5. Complete take-over by markets over all aspects of daily life: as more and more services come under externally driven private ownership or management, market principles will increasingly govern everyday social transactions; this has serious implications for collective social responsibility, community solidarity and the general strength of the "social fabric."
6. Like all WTO agreements, GATS is being negotiated with little public oversight. The conclusion of these negotiations in favour of multinational corporate interests will mean that host governments would have to make significant changes in national policies and laws regardless of larger public interests. The entire GATS package is serious setback to public participation and democratic oversight in the formulation of national policies, laws and regulations.
V. General State of GATS Negotiations
1. The current, ongoing GATS negotiations were launched in February, 2000, in the Council for Trade in Services. These negotiations include the preparation of guidelines and schedules on how negotiations should proceed, and assessments of impacts of trade in services; these were to be discussed in a "stock-taking" session of the Council in Geneva from March 26-28, 2001. After the "stock-taking," it is expected that the next, more comprehensive phase of negotiations will begin.
Earlier drafts of the negotiating guidelines were rejected by a number of Caribbean, African and Asian countries. According to some government representatives present at the stock taking, the final draft of the negotiating guidelines has more than 90 percent of the content that southern governments wanted.
Further meetings will be held in early May to discuss market access guidelines.
2. WTO members are generally divided about how to proceed in these negotiations:
Ø The European Union (EU), US, Japan and Canada are very active in putting forward proposals for liberalisation; the EU and US, in particular, are putting forward proposals on numerous sectors at the same time;
Ø Japan, the EU and the US want negotiations to proceed quickly; however, the EU and Japan want the conclusion of GATS negotiations to be linked to a broader round of trade negotiations in the WTO; both are unwilling to agree to a deadline for the conclusion of negotiations until a broader round can be agreed upon; in particular, they are interested in new rules for investment, competition policy and trade remedies. The EU is pushing for an investment agreement in the new round using the "bottom-up" language in GATS.
Ø The US, on the other hand, wants the next round of trade negotiations to be a "market access" round, which would add industrial goods, procurement and a few more issues to the agreements on agriculture and services.
3. Both the US and the EU trade representatives are trying to get authority from US Congress and the European Parliament to "fast track" GATS negotiations and want negotiations to be concluded by the next WTO Minesterial Meeting in Qatar scheduled for November 9-13; if fast track authority is granted, neither US Congress, nor the European Parliament would have any oversight over the negotiations.
4. Developing countries in the WTO have varying positions on the GATS:
Ø Most developing countries are skeptical towards an agenda driven by the interests of northern corporations and governments; but at the same time, they have not come up with a common position; not surprisingly, they too are acting out of their own perceived interests;
Ø There is among the developing countries an informal grouping of GATS supporters who call themselves the "Friends of the GATS;"
Ø Hong Kong has a particularly strong interest in liberalising services; South Asian countries (particularly India) have taken a "defensive" position on most GATS issues, but are promoting labour mobility (the movement of natural persons).
Ø Overall, developing countries have not been as intensely involved with GATS negotiations as they have with issues regarding intellectual property rights, agriculture and implementation of past agreements.
5. Corporate lobby groups are playing a dominant role in trying to influence GATS negotiations:
Ø North American, European and Japanese service corporations are pressuring their respective governments to accelerate GATS negotiations and have made specific market access proposals to their governments.
Ø Since services constitute a much larger share of developed countries’ economies than other sectors, corporations are generally dissatisfied that services liberalisation has not been given as much importance as agriculture liberalisation.
6. Both corporate leaders and WTO officials are worried about a backlash from civil society organisations (CSOs), social and political movements, worker’s alliances, women’s organisations and the general public about the GATS agenda and negotiations:
Ø They know from past experience with WTO issues and the MAI that they cannot win their interests behind closed doors; therefore, they are actively wooing CSOs and NGOs to convince them that GATS is good for everyone;
Ø They are publishing articles and papers, and commissioning research to show the benefits of GATS and to discredit critics of GATS; since they have very little empirical evidence to go by, they are trying to intimidate GATS critics by producing statistics and numbers;
Ø They are challenging governments who are concerned about public opinion and critiques by alleging that they are intimidated by civil society, and trying to create rifts between civil societies and their governments;
VI. Some Possible Actions and Strategies for Civil Society to Stop the "GATS Attack."
1. Create awareness about GATS and its impacts among all sections of society-everyone will be affected by GATS since its reach extends to all types of services in all sectors. Despite its importance, GATS is relatively unknown compared to other WTO agreements in agriculture, investment measures and intellectual property rights.
2. Research and document what is happening in our respective societies and communities with regard to the liberalisation of services and investments, and privatisation processes in general. Institutions such as the WTO and World Bank, private corporations and even governments are producing all manner of documents and reports to show that GATS will be useful and beneficial to everyone. We also need to produce our own "peoples’" research that we can use in discussions with our policy and law makers. Some questions we can ask are:
Ø What services, activities and sectors have been liberalised and privatised so far? What has already taken place and what is being proposed?
Ø Which are the institutions (national, international and multinational) and corporations (domestic and foreign) involved in these processes?
Ø How have laws, regulations and policies changed to accommodate liberalisation and privatisation processes? What has already taken place and what is being proposed?
Ø What have been the impacts of the above on different sectors of society?
3. Find out the positions and views of our governments on GATS and insist that these be discussed with the general public, legislators, elected representatives and national law making bodies (such as parliament, congress, national assembly, etc.). GATS must come under democratic oversight.
4. Form alliances across sectors and areas (such as agriculture, labour, energy, health, education, environment, social welfare, etc.) to monitor liberalisation and privatisation processes.
5. Take firm positions on areas and services that we think should absolutely not be liberalised, and on what we expect our governments to do in order to protect the public sphere. For example, the commons (environment, education, water, health, culture, etc.) must be removed from GATS coverage.
6. Insist on a moratorium on GATS negotiations until our governments have discussed their positions domestically through democratic platforms and processes.
7. Demand firm commitments from our governments that present and future GATS negotiations will not weaken domestic regulation, and universal, good quality, public provision of services, especially essential services. A multilateral agreement on services trade must strengthen domestic capacities and infrastructure for the provision of services, not weaken them.
8. Move towards greater engagement with governments about regional, international and global trade. Trade rules and policies should not be decided by technocrats alone, but also by societies, parliaments, and in fact, by all of us who will be affected by these rules and policies one way or another.
Selected References:
Barlow, Maude. The Last Frontier. The Ecologist, Vol. 31 No. 1, February 2001.
General Agreement on Trade in Services. Press Briefing-March, 2001.
Gould, Ellen and Susan George. Corporatising Daily Life. Social Development Review, September 2000, Vol. 4, No. 3.
Shiva, Vandhana. An Accord to Auction Vital Resources. The Hindu, April 3, 2001.
Sinclair, Scott. GATS: How the World Trade Organisation’s new "services" negations threatens democracy. Canadian Centre for policy Alternatives, September, 2000..
Sinclair, Scott. The GATS Negotiations: "state of play." Canadian Centre for Policy Alternatives, February 9, 2001.
The South Centre. GATS 2000 Negotiations: Option for Developing Countries. T.R.A.D.E. Working Papers 9, Geneva, December, 2000.
