BY EVA CHENG
Of the myriad of global trade rules being negotiated under the auspices of the World Trade Organisation (WTO), the General Agreement on Trade in Services (GATS) is among the least understood. However, it is also among the most dangerous, undermining not only the economic interests of Third World nations but also their national sovereignty.
Asserting the economic domination of First World corporations over the underdeveloped countries, the General Agreement on Tariffs and Trade (GATT) — the WTO's predecessor — had for the first four decades of its existence focused on obtaining bigger foreign markets only for physical goods.
However, the governments of the developed capitalist countries — particularly those of the US, the European Union and Japan — wanted more from the "Uruguay Round" of global trade talks which started in 1986. Eight years later, during the final push to seal the vast trade rules package, they succeeded in bringing "trade in services" into the global trade rule regime. The result was GATS.
Since the new global round of trade talks was launched in Doha, Qatar, in November 2001, the major First World governments have sought to re-negotiate GATS as part of a broad package of trade rules covering agricultural produce, industrial goods, "intellectual property" rights and investment measures.
The state of the negotiations will be reviewed at the WTO ministerial meeting in Cancun, Mexico, over September 10-14.
The rich countries' attempt to expand the Uruguay Round agenda, including its extension into "services", was stubbornly resisted by the poor countries. But the whole package was eventually adopted on the understanding that the developed countries, in return, were going to open more of their markets to exports vital to the underdeveloped countries, such as textiles and agricultural goods.
Eight years later, most Third World governments have realised that the developed countries weren't serious about delivering the substance of the 1994 compromise. On GATS, they realised it was full of traps and many of its safeguards were illusionary.
Meanwhile, a growing number of people in the rich countries also came to appreciate the danger of GATS in undermining the democratic rights and social gains of working people in all WTO member-countries.
Sweeping coverage
A striking feature of GATS is its coverage. It claims to cover any exchanges of non-physical goods, ranging from personal services of all sorts, and entertainment and cultural activities, as well as the wide range of commercial activities associated the circulation of physical goods, such as transport, communications, banking and insurance.
It seeks to commercialise essential social service and basic utilities, including the provision of education and medical care, as well as postal services, water and energy supplies, toxic waste disposal and environment management.
The agreement hasn't spelled out where the "services" boundary ends. Its long reach was further enhanced by a generous definition of the "modes of delivery". This include a service supplier's overseas "commercial presence", thus giving GATS jurisdiction over direct foreign investment.
Critics rightly pointed out that GATS is a backdoor way to revive the Multilateral Agreement on Investment which was ditched after a major international public campaign in 1998. The MAI sought to free foreign investors from any government controls, whether in services sectors or not.
Camouflage
Like the rest of the WTO trade rule regime, GATS shrouded its real agenda under an array of deceptive safeguards. It comprises two key sections: 17 areas of "general obligations and disciplines", which are unconditionally applied to all services sectors (unless exempted), and two main areas of "specific commitments", the exact shape of which is at member-countries' discretion, allowing for exclusions.
While this might sound fair, when GATS was sealed in 1994, as part of the extensive Uruguay Round, not many Third World governments were fully aware that the option under GATS to specify the limits and exclusions in their specific commitments was an one-off opportunity. Many have missed the boat.
No changes could be made to those commitments within three years of implementation and changes would only be permitted after "acceptable" compensation was made to all other WTO members.
Considering the vast scope and complexity of GATS and under intense pressure from their rich country trading partners to open up their markets, many underdeveloped countries were coerced into making "specific commitments" detrimental to their interests.
Even for exemptions already granted, they will be subjected to renegotiation on a regular basis and some automatically expire after a limited period. The "most-favoured-nation" (MFN) provision, for example, is subject to renegotiations after five years and will expire altogether after 10 years.
Within the sectors where specific commitments had been made, tough obligations must be observed on market access and "national treatment".
In the name of enhancing "market access", many quantitative or value prescriptions were banned on the "service suppliers" or their operations. Any governmental interventions, for whatever social considerations, in the areas specified are thereby seriously discouraged because they are easily liable to legal challenge under GATS.
However, neither the natioanl parliaments nor the provincial governments of many WTO member-countries, let alone their constituencies, were ever consulted on the powerful reach of GATS. Very few people, in the developed and underdeveloped countries alike, were aware in 1994 that they would be kissing good-bye to a big part of their democratic rights under GATS.
Formally and deceivingly, member-governments' "right to regulate" was assured in GATS' preamble. But that section of GATS had no legal sanction. In the agreement proper, "services provided in the exercise of government authority" were exempted from GATS obligations. However, the qualifying conditions of what constitute such activities under GATS were so stringent that in practice they would disqualify most public services.
Services which are in any way deemed to be supplied on a "commercial basis" — e.g., when a fee is charged — or are in competition with any other supplier (are, therefore, not supplied 100% by a government agency — will not qualify as government services.
Under the "national treatment" requirement, conditions set for foreign service suppliers mustn't be less favourable than those applied to domestic suppliers.
Of GATS general obligations, the MFN provision is among the most threatening to the non-commercialised provision of social services. A Canadian Centre for Policy Alternatives study, A Guide to GATS Debate, released last year, spells out the danger: "In effect, MFN requires that any regulatory or funding advantage gained by a single foreign commercial provider must be extended, immediately and unconditionally, to all. MFN rights... helps to consolidate commercialisation wherever it occurs."
Another highly problematic GATS general obligation relates to "monopolies and exclusive service suppliers". To ensure universal access to essential services, government organisations have to become exclusive service suppliers. But such arrangements could be charged under GATS as being unfair to other "service suppliers", i.e., private corporations.
Another GATS general obligation relates to "domestic regulation". It requires member-countries to ensure that their measures are "not more burdensome than necessary" and must prove that is the case. Similar "necessity tests" are also required under GATS and have been interpreted in ways that undermined legitimate public interests.
A Guide to GATS Debate says: "Such restrictions [on domestic regulation of corporate activities], if ever agreed to, would be an extraordinary intrusion into democratic policy-making on a broad range of important regulatory matters that are only obliquely related to trade."
In fact, restrictions on government regulation of corporate activities permeates the entire GATS agreement. The US and the EU had already demanded under GATS that certain countries open up their essential services, such as water provision and education to corporate competition. GATS' "built-in" agenda to force member-countries to "re-negotiate" every few years with the goal to achieve escalating "liberalisation" (read: privatisation) will turn more essential services into sources of corporate profit-making.
[To find out more about the global anti-GATS campaign, visit <http://www.gatswatch.org>.]
From Green Left Weekly, July 23, 2003.
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