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Information for Social Change

Information for Social Change

"an activist organisation that examines issues of censorship, freedom and ethics amongst library and information workers..."

ISC 14. Trading away basic rights: the General Agreement on Trade in Services (GATS)

Clare Joy

For a moment, ponder on the possible links between railways, department stores, radio stations, mobile phones and financial services. Add to this list libraries, medical and dental services, refuse collection, higher education and postal delivery and you've only begun to scratch the surface of the contents of a World Trade Organisation (WTO) agreement covering 160 services. Since February 2000, away from the glare of public scrutiny, trade officials have been meeting on a regular basis at the Geneva HQ of the WTO. The agenda for these meetings is to ensure more service activities, including the above, are covered by a fierce set of free trade principles. Once decisions are reached under the General Agreement on Trade in Services (GATS), government activities in the services sector that are seen to 'interfere' with trade faces the threat of WTO legal action.

We are told by supporters of the GATS (one of the keenest being the UK Government), that this agreement is simply a 'set of rules'. So what are these rules? And why do critics such as the World Development Movement believe that they are a problem because they extend the reach of international trade law into new areas covering activities such as the provision of health care, the setting up of retail stores and 'libraries, archives, museums and other cultural services'. In fact, WDM is not the only GATS-watcher to have noted this. A former Director General of the WTO noted that the agreement 'extends into areas never before recognised as trade policy'. He went on to say, "I suspect that neither governments, nor industry have yet to appreciate the full scope of these guarantees."

How does the GATS work

Challenge any GATS supporter and their response will be 'all's well with the GATS - it's a bottom-up agreement'. What they mean is participating WTO members (and there are now 144 of them) are free to decide which of their 160 service sectors are covered by the agreement's fierce free trade principles.

This is only half the GATS story. The GATS is divided into two parts. To begin with, the first part of the agreement is not 'bottom up', and its clauses apply to all 160 service sectors unless specific exemptions are made. This is what trade negotiators would call 'top-down'. However, at the agreement's core are strict free trade obligations that WTO members choose to opt services into, on a sector-by-sector basis. During the current negotiations countries will build on a list of opt-in commitments made after the last set of GATS negotiations in 1995. This means expanding the GATS by applying the heart of the agreement to ever more services.

There are two key trade principles at the core of the GATS. These two principles are designed to limit government interventions in the service sector. For example under the national treatment principle, once a government signs up a service, it could face WTO challenge if it implements legislation which favours local suppliers over foreign suppliers. This has implications when it comes to the granting of subsidies. For example, where a GATS commitment has been made, governments providing subsidies to domestic service suppliers also have to make an equivalent subsidy available to foreign providers operating in the country. This principle goes much deeper as it also threatens government action which may not obviously adversely affect foreign companies, but creates an environment which is easier for local suppliers, because of their 'local-ness' to operate within. This could be a requirement to employ local people or use local suppliers.

The opt-in aspects of the GATS are clearly the core of the agreement. The reason behind their 'bottom-up' application goes back to the Uruguay Round of trade talks (1985-1994) when GATS was hammered out and written. During these talks, developing countries strongly objected to the inclusion of services in the WTO. The bottom-up structure was crucial for their consent to the final GATS framework.

Yet all is not well, even with 'bottom-up' assurances. There is deep inequality within the WTO when it comes to levels of negotiating capacity. The majority of the WTO's members from some of the world's poorest countries do not have the negotiating might and analytical capacity of their North American and European trading partners. The bottom-up structure works on the basis of 'request and offers'. During negotiations, countries request GATS commitments from others who subsequently make offers having considered these requests. In the current WTO set-up, there is political pressure on many developing countries to commit more of their services to the agreement. A political pressure that one European negotiator called 'a fact of life'. In addition to this, negotiators from countries like the EU and US come heavily armed with demands from their big service industries that list the services they want other countries to include in a GATS deal. Meanwhile even negotiators from large developing countries such as Brazil do not have the information to deal with these requests or know what to ask for in return.

While negotiators in Geneva are yet to enter this intense 'request-offer' phase, they have been working on general negotiating proposals which begin to indicate the big deal that European countries want from the current talks.1 The UK Government will also be considering what it is prepared to offer in return for the requests from other countries. Even if it is bottom-up, a WTO member has to offer something. In this context, campaigners in the UK have so far raised concerns about GATS commitments in higher education and the postal service. Those in the libraries and information sectors will know that their sector could be caught in the bright beam of commercial, for-profit delivery systems. There are real questions to ask about how this could translate into GATS commitments.

There are currently no EU GATS commitments in the libraries sector. Library services are covered by Recreational, Cultural and Sporting Services and are listed under section C 'Libraries, archives, museums and other cultural services'. So far, the USA and 12 other countries have made GATS commitments here. However, an analysis of the GATS classification list also indicates that some sectors could be covered by GATS rules because of commitments in other sections. For example, section B of Business Services is 'Computer and Related Services', a GATS commitment here could affect the software and data processing aspects of library services. Under section F of this section, would a commitment to open up 'Building and Cleaning Services' impact on this area in libraries?

Many questions remain unanswered about current levels of GATS commitments and the impact that an expanded agreement could have on a wider-range of sectors. For this reason, 262 Members of the UK Parliament signed an Early Day Motion in early 2001 calling for an open discussion of GATS negotiations.

Deciphering current UK GATS commitments negotiated through the EU is a difficult task. Reading the list of GATS commitments involves engaging in a whole new language of trade and service sector-speak. You need to be a libraries/trade expert, a heath/trade policy analyst, and a professional services/trade researcher. Therefore there is an urgent need for groups potentially affected by current UK GATS commitments to put pressure on the Government to issue an accessible overview which details the commitments the UK has already made to bind open market service delivery into the GATS.

Given that GATS is, in the words of its former director, an "effectively irreversible" agreement, it is surely unacceptable for negotiators to be making binding commitments, without knowing the consequences of this action. Bottom up or not.

GATS is not just a set of rules

During the 1985-1994 negotiations when GATS came into being, the agreement's inclusion in the WTO was deeply controversial. From a campaigning perspective, it was the words of the agreement's supporters that raised concerns about the expansion of a free trade deal that covers basic services. Prior to the WTO's Ministerial in Seattle in 1999, Dean O'Hare, Chair of the US Coalition of Service Industries noted that 'GATS can encourage more privatisation particularly in the field of health care.' 2

If a Government commits aspects of a sector such as health to the GATS, this then sets conditions on how the government can behave towards companies operating in this sector. (The UK Government has already made some commitments in the health sector.) While GATS may not force the privatisation of basic services such as health, education or libraries, WTO members are encouraged to cement current levels of privatisation and market opening with a GATS commitment.

Where a GATS commitment is made, governments who have already or intend to privatise basic services, are then obliged to do so using the GATS framework of rules. Failure to comply means the threat of a WTO challenge. GATS give privatisation policies international legal teeth.

As groups around the world are seriously questioning the benefits of open markets in sectors such as health and education, GATS is an attempt to shut down this debate. This is an international agreement that encourages liberalisation as the general trend in basic service delivery. As international campaigns against this style of policy making increase, and some governments are reversing previous free market strategies in areas such as rail transport, water delivery and energy, the head-long pursuit of an expanded GATS with its binding mechanism is of great concern.

The 160 services covered by GATS do not only include basic services. It also includes sectors such as advertising, tourism, retail and broadcasting. While governments may not play a pivotal role in the delivery of these services, there are many instances where they are required to intervene in these sectors in order to pursue social, environmental or political objectives. For example, in New Zealand the Government's attempts to intervene in the broadcasting sector in order to fulfil an electoral commitment will conflict with its 1995 GATS commitments. This refers to the government's policy of introducing local content quotas to try and offset the problems, including poor current affairs coverage, which have resulted from liberalisation in this sector.

By committing sector to the GATS, governments are agreeing to tilt the balance of power away from themselves and their citizens and towards the needs of corporations. GATS will have an enormous impact on the ability of governments to pursue objectives in their services sector which conflict with the needs of companies trading those services.

Perhaps the biggest threat posed by GATS is the threat to democracy. Service provision and the regulation of companies in these areas are issues around which communities mobilise. Whether this is the demand for better refuse collection, or attempts to block the development of high-rise hotels. GATS means that if a government listens to the voice of its people and responds by making appropriate policy changes, where these changes adversely affect say the environmental service company or the tourist operator, then the government faces the threat of WTO action. GATS-style policies are not new. Applying commercial, open market, for-profit principles to the delivery of services has proved deeply unpopular everywhere. These policies are unpopular because a system based on ability to pay will not deliver services to those who cannot afford to pay. Until it was recently removed from its website, the WTO gave the impression of welcoming this anti-democratic aspect of GATS. In its own question and answer introduction to the Agreement, the WTO recommends GATS to pro-liberalisation governments for the political assistance it can bring them in "overcoming domestic resistance to change".

The smooth running of services as diverse as libraries, inland waterways transportation, medical and dental services, retail distribution, refuse disposal and advertising depends on a variety of government controls and mechanisms which must be based on a democratic mandate and implemented in consultation with those affected. This is precisely the kind of consultation and people-centred policy making that GATS is designed to defeat and replace with policy making based on the needs of companies anxious to expand their trade and profit margins. Yet the broad alliances, building across the diverse sectors that GATS covers is showing that the sheer breadth of this particular trade deal could be its downfall.


1. For details of negotiating proposals tabled so far:

2. D. O'Hare, Chair of the Coalition on Service Industries, speaking to the House Committee on Ways and Means 'Hearing on the United States Negotiating Objectives for the WTO Seattle Ministerial Meeting', 5/8/99.

Clare Joy is the Campaigns Officer for the World Development Movement


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