GATS: $ervices With A $mile?
By Aziz Choudry, GATT Watchdog
Anti-globalisation activists have another international agreement in their sights. The World Trade Organisation is worried. It fears that the growing campaign against GATS - the General Agreement on Trade in Services - which took effect in 1995 under the WTO's umbrella - could become as huge as the one that helped sink the Multilateral Agreement on Investment. Negotiations are now underway to extend GATS, which is more about promoting the rights of foreign investors than a 'trade' agreement. A recently released New Zealand government document indicates that it is leaping further into this almost without reservation.
The WTO calls GATS "the world's first multilateral agreement on investment since it covers not just cross border trade but every possible means of supplying a service, including the right to set up a commercial presence in the export market". Under GATS, governments agree to open the economy to foreign suppliers of certain services. In those services, foreign suppliers must be given at least as favourable treatment as it gives to local suppliers. Governments cannot set limits on the numbers of service suppliers operating in its market or impose requirements for local content. Still reeling from Seattle, some see GATS as a litmus test of the WTO's ability to function.
Services have been described as anything that you cannot drop on your foot, including banks, schools, energy, healthcare, water, rubbish collection, libraries, railways, airlines, TV and radio. In 1999 the international trade in services was worth $1.35 trillion. They are big business, comprising between half and three quarters of all economic activity in richer and poorer countries. They are a lucrative market which the world's transnational corporations through industry lobby groups want to control. They want services to be treated purely as commodities to be bought and sold in a competitive market.
According to the European Commission, "GATS is not just something which exists between governments. It is first and foremost an instrument for the benefit of business". David Hartridge, Director of the WTO's Services Division says: "without the enormous pressure generated by the American financial services sector there would have been no services agreement". Besides seeking to extend the range of services each government has committed, pressure is on to impose 'disciplines' on the domestic regulation of services, and to bring services that are publicly owned and/or 'procured' by government agencies under GATS rules.
GATS threatens to restrict a government's ability to ensure access to affordable, adequate basic services for all its citizens by removing any restrictions and internal government regulations in the area of service delivery considered to be "barriers to trade". These include measures which pursue environmental, social or community objectives. It restricts core areas of government planning. All WTO member governments are required to make enforceable commitments to open their services markets. It binds local governments.
This includes their regional economic development role of supporting community initiatives in ways that give preference to local hiring or purchasing. The rights of foreign suppliers against a government deemed to have broken GATS rules are enforceable and make backtracking on commitments almost unthinkable.
In 1999 Bolivia privatised Cochabamba's city water system under World Bank instructions. It was sold to a consortium led by International Water Ltd. which sharply increased water prices - in some cases by over 100%. Poor households were spending one third of their income on water. The crippling price rise sparked mass protests and a general strike. After troops killed six demonstrators, the government finally backed down and reversed the privatisation. Had Bolivia made GATS commitments under water delivery, regaining ownership would have been almost impossible.
New Zealand has one of the most wide-ranging GATS commitments of any WTO member. Most public services have been commercialised and privatised. Our public education and health systems have become commercialised and open to private sector competition, and under GATS risk being locked open to commercial competition from other WTO members. Plans to introduce local content quotas in free-to-air broadcasting have been stalled because they would breach the GATS promise not to limit the market available to foreign suppliers, and not to discriminate in favour of our own.
The Labour/Alliance government claims to believe that unregulated market forces cannot be left to rule. Yet it seems as zealously committed to free trade and investment as previous governments. If regulations are considered "barriers to trade" then the government's ability to deliver on the domestic public, social, and cultural policy objectives it claims to support is severely curtailed by GATS.
A June 26 2001 government document submitted to the WTO Council for Trade in Services states: "First, and foremost, New Zealand will actively encourage Members to explore ways in which existing commitments in all services sectors, in terms of both market access and national treatment, can be progressively liberalised." This implies the government is prepared to offer all services - including all education, health, and water services.
Over 260 British MPs are calling for an independent assessment of GATS' likely impact on basic services in the UK and internationally. It is high time New Zealand politicians - and all of us - awoke to the dangers of this agreement.