Civil society groups voice concerns over GATS talks at WTO

By Kanaga Raja, Geneva 24 June 2005
Published in South North Development Monitor 27 June 2005

More than 160 civil society organizations from around the world sent a letter to WTO ambassadors in Geneva Thursday expressing their deep concerns regarding the current round of negotiations on the General Agreement on Trade in Services (GATS), which is part of the 'single undertaking'under the July 2004 Framework.

The letter (sent to Heads of Delegations, the Chair of the GATS talks, the GeneralCouncil Chair and the WTO Director-General) called on negotiators to stoppressuring developing countries to open up their services sector to the corporationsbased in industrialized countries.

Among the 160-plus groups that signed the letter are ActionAid International,ATTAC, Corporate Europe Observatory, Friends of the Earth, GreenpeaceInternational, IATP, Institute for Global Justice, IBASE of Brazil, InternationalForum on Globalization, Oxfam Solidarity of Belgium, Public Citizen's Global TradeWatch, Public Services International, the Sierra Club of Canada and the US,SEATINI, the Berne Declaration, the Council of Canadians, Third World Networkand the World Development Movement.

The letter by the civil society groups comes just as the services negotiations are setto resume on 27 June for a week-long session.

At the last meeting of the Special Session of the Council for Trade in Services inMarch, where negotiations on market access in services are taking place, the Chair ofthe Special Session had painted a rather sobering picture over the low quantity andquality of offers on services received from members so far.

The civil society letter said that enormous pressure is being put on developingcountries to open up their service markets to powerful foreign-based, for-profitcorporations from the industrialized countries.

With only 50 countries making offers so far (counting the 25 EU member states asone), developed countries continue to demand that 40 developing countries and 32less developed countries make offers to open up their service markets.

'This makes a mockery of claims that the GATS is a flexible agreement, in whichcountries could elect to put specific services on the negotiations table or not,' thegroups said.

Key sectors in which developed countries are seeking further commitments fromdeveloping countries are, among others, finance, energy, environment, water, tourism,distribution and transportation services.

On the one hand, these are among the service sectors where the EU and US are thehome base of for-profit corporations seeking to expand their global market reach. Onthe other hand, these sectors represent crucial and necessary bases for the fulfilmentof human rights and they provide the fundamental support services required foragricultural and industrial production, the letter said.

The letter noted that the GATS is essentially an investment treaty. It is designed, firstand foremost, to protect investor rights and extend 'lock-in' liberalization in theservice sectors of other countries for foreign-based service corporations.

This is why big business lobby machines like the US Coalition of Service Industriesand the European Services Forum, which represent the major for-profit corporationsin key service sectors, are openly pushing hard for developing countries to makecommitments now.

And, once these commitments are made, they are 'effectively irreversible'. At thesame time, the capacity of developing countries to have their own service industriesoperating 'competitively' in global markets is very small or non-existent, making thesenegotiations very one-sided.

The civil society groups said that the US and the EU are advocating for theestablishment of 'benchmarks' which would restrict the flexibility of countries todecide which service sectors to put on the negotiating table.

The letter to WTO ambassadors said that to accelerate the pressure and ensure anoutcome in services negotiations, developed countries, such as the EuropeanCommission and the United States have advocated the establishment of 'benchmarks'for the GATS negotiations and are coordinating these demands through informal'friends' groups in key sectors.

Imposing benchmarks would imply that WTO members would not have flexibilityanymore to decide whether to table offers and engage in commitments or not.

'We especially condemn moves to reclassify telecommunications to includevalue-added content as a back-door route to secure commitments that governmentsare unwilling to make. Commitments made under the proposed new classificationwould deprive governments of the chance to assess the implications of thesetechnologies and decide the appropriate form of regulation.'

'This erosion of the so-called flexibility in the GATS negotiations - alongside thefailure of industrialized countries to propose and support significantdevelopment-oriented proposals in the simultaneous agricultural negotiations and inthe so-called Non Agricultural Market Access (NAMA) negotiations - exposes thegulf between the rhetoric and reality of the so-called 'Doha Development Round'.'

The groups warned that liberalization commitments in services will have severeimpacts upon national development policy options and their implementation.

Contrary to the claims being made about services liberalization, the civil societygroups said:

• The 'locking-in' of deregulation and market access for foreign-based servicecorporations through the GATS will not enhance development goals and priorities indeveloping countries and truly address the needs and concerns of citizens;
• Foreign direct investment in many services sectors mostly happens throughmultinational enterprises taking over privatized public services and existing localcompanies, rather than building up new enterprises;
• There is little evidence of the creation of new employment opportunities but ratherretrenchments and job losses accompanying privatization;
• There is evidence that any extension of services remains limited and essentiallyrestricted to the elite;
• When public services such as water, education and health are exposed toliberalization, the people suffer the consequences. 'Consider what happened whenArgentina allowed an essential service like water/waste water to be taken over by theglobal water giant, Suez. Argentinean's experienced rising rates, broken promises forexpanded services, and the construction of a new treatment plant that dumped rawsewage into the Rio de la Plata'; and
• Furthermore, in addition to all the above, there is the track record of these sameservice providers demanding compensation for their own failures and using tradelanguage to justify their self-serving business interests.

The NGO letter also noted that the WTO has ignored the repeated requests ofdeveloping countries for a comprehensive assessment of the developmental,environmental, social and gender impacts of service liberalization before continuingwith the GATS negotiations.

In this respect, it cited a recent study paper by the UNCTAD secretariat that questionsthe promised benefits of privatization and liberalization in the service sector andshows how developing countries will lose flexibility in public policy-making underthe GATS.

The UNCTAD secretariat paper cited by the groups was on 'Trade in services anddevelopment implications' that was prepared for the Commission on Trade in Goodsand Services and Commodities.

The paper said that the services negotiations in the WTO have so far not attained anoverall balance of rights and obligations and that the initial offers by the major tradingpartners have been disappointing for developing countries.

The paper added that the benefits of privatization and liberalization are not automaticand that there is a need for policy flexibility and proper sequencing of liberalization.

The civil society groups also pointed to recent WTO rulings on services such as theTelmex case and the US gambling case, which highlight the dangers of makingcommitments to open up service sectors without knowing the full implications, evenfor countries experienced in trade matters.

'The GATS regime contains other equally pernicious measures that can be used toundercut or reduce the space of governments for public policy making,' the groupscautioned, noting that the Domestic Regulation Article VI.4 of the GATS, forexample, makes provisions for governments to challenge unwanted laws andregulations of another country, which may be perceived as a disguised barrier to trade.

Yet, the groups said, as the UNCTAD secretariat study points out, such challengescan also reduce the policymaking and regulatory flexibility/security of developingcountries.

The right to regulate and maintain policy flexibility is essential for developingcountries to ensure that their own development priorities and strategies are advanced,especially since most of them do not have optimal policy-making and institutionalframeworks in place.

At the same time, the letter said, developing countries are hopeful of enormous gainsunder Mode 4, which refers to the movement of 'natural persons' into other countriesto supply services. Yet it is clear that most developed countries such as the US willnot make substantial offers, particularly in relation to low and unskilled workers, dueto internal political pressures.

On the other hand, the potential impacts on developing countries of the loss of skilledworkers in health, education or professional services have not been assessed. Norhave rich countries recognized any obligation to compensate those countries for thecost of training these professionals, the groups stressed.

In addition, the manner in which the GATS negotiations have been proceeding andthe established experiences of services liberalisation and privatization give reason forworking people to be concerned about job losses, job insecurity, curtailment ofworkers' rights, decline in real wages and increased demands in labour flexibility,since the protection of labour rights and promotion of core labour standards areincreasingly being viewed as 'protectionist measures or barriers to free trade.'

The civil society organizations called upon the WTO members 'to stop the currentpush for a deeply questionable agreement that serves the expansionary interests ofservice corporations and will be a profound disservice to citizens around the world.'

The letter to the WTO ambassadors set forth a range of civil society demandsincluding:

• a comprehensive independent assessment be made of the developmental,environmental, employment, social and gender impacts of the liberalization ofservices, in all countries, but especially in developing country economies, beforeproceeding any further with the current round of GATS negotiations;
• any continuation of service negotiations must be preceded by comprehensivenational policymaking processes involving all affected constituencies domesticallyand the public at large, and all requests and offers must be made fully public withoutdelay;
• no selective 'benchmarks' or other changes in the negotiation process should beintroduced that force developing countries to make precipitated commitments inspecific sectors;
• no modalities in domestic regulation should be decided upon that limit thepossibility of governments to introduce rules and regulations of their choice to protecttheir people and environment and that would put trade interests above all otherinterests;
• no government should submit any bilateral offers or respond to any requests whilethere are ongoing multilateral discussions on the framework of rules that will applyto services in areas such as Domestic Regulations, Subsidies, GovernmentProcurement and Emergency Safeguards;
• certain services sectors must be explicitly excluded from multilateralisedliberalization, especially health, education, cultural/audio-visual, social assistance,water, postal services and energy services, and in the classifications related to newtechnologies;
• all WTO members must be able to define service sectors that they wish to be fullyexcluded; and
• international financial institutions like the World Bank and the InternationalMonetary Fund must respond immediately to global civil society demands anddeveloping-country government requests for the immediate cancellation of all odiousand illegitimate Third World debts, and an immediate end to the pressures ondeveloping countries to liberalize and privatize their public services throughregulatory or institutional impositions or by placing such economic policy conditionson their loans.

'If negotiations do not proceed on the above terms, we call upon developing countriesto seriously consider how or whether the negotiations should continue. Simply put,access to essential services and the livelihoods of millions of people in the developingworld are at stake,' the civil society letter concluded.