The Multinational Monitor

April 2001 - VOLUME 22 - NUMBER 4

T R A D E   M A D N E S S !

Serving up the Commons
A Guest Essay

By Tony Clarke

The smoke and pepper spray had barely lifted from the streets of Seattle when the World Trade Organization (WTO) began a new set of global trade negotiations. Although efforts to launch a new round of worldwide comprehensive trade talks collapsed in Seattle, one of the built-in agendas which the WTO inherited from the Uruguay Round of the GATT was a commitment to expand global rules on cross-border trade in services through the General Agreement on Trade in Services (GATS) regime. In February 2000, the WTO launched what has been labeled as the GATS 2000 negotiations.

The GATS negotiations are designed to provide multinational corporations with the power tools they need to take control of much of what remains of the 'commons' on this planet. Every service imaginable is on the table, including a wide range of public services in sectors that affect the environment, culture, energy and natural resources; plus drinking water, health care, K-12 education, post-secondary education, and social security; along with transportation services, postal delivery, prisons, libraries and a variety of municipal services. By phasing out all governmental "barriers" to international trade and commercial competition in services, the GATS regime is designed to apply to virtually all government measures affecting trade-in-services, from labor laws to consumer protection, including regulations, guidelines, subsidies and grants, licensing standards and qualifications, and limitations on access to markets, economic needs tests and local content provisions.

If the proposed set of GATS rules are adopted, they will radically restructure the role of government regarding public access to essential social services worldwide, to the detriment of the public interest and democracy itself.

The existing GATS regime of the WTO, initially established in 1994, is already comprehensive and far reaching. Currently, the GATS rules apply to all modes of supplying or delivering a service including foreign investment, cross-border provisions of a service, electronic commerce and international travel. The current GATS features a hybrid of both a "top-down" agreement (where all sectors and measures are covered unless they are explicitly excluded) and a "bottom-up" agreement (where only sectors and measures which governments explicitly commit to are covered). What this means is that presently certain provisions apply to all sectors while others apply only to those specific sectors agreed to.

The new GATS negotiations are designed to adopt new GATS rules, and to extend them to all service sectors. Besides compelling governments to grant unlimited market access to foreign service providers, without regard to the environmental and social impacts of the quantity or size of service activities, the proposed expansion of the WTO regime on services will:

  • Impose new and severe constraints on the ability of governments to maintain or create environmental, health, consumer protection and other public interest standards through an expansion of GATS Article VI on domestic regulation. A proposed "necessity test" would require governments to show that their laws and regulations affecting service industries are the "least trade restrictive," regardless of financial, social, technological or other considerations. This matches existing WTO rules related to the trade in goods.
  • Restrict further the use of government funds for public works, municipal services and social programs. By imposing the WTO's national treatment rules on both government procurement and subsidies, the new negotiations seek to impede governments from making public funds available only for public services, to the exclusion of foreign-based, private service corporations.
  • Accelerate the process of providing service companies with guaranteed access to domestic markets in all sectors - including education, health and water �� by permitting them to establish their commercial presence in another country. These rules would hold that, since provision of a service may require an in-country presence (as contrasted to goods, which can always be shipped), foreign service corporations must be permitted to invest and open shop in GATS member countries.

The Industry Lobby
The chief beneficiaries of this new GATS regime are a breed of corporate service providers determined to expand their global commercial reach and to turn public services into private markets all over the world. Service corporations view health, education and water each as trillion-dollar-plus annual markets.

Driving the GATS agenda are powerful lobby machines like the U.S. Coalition of Service Industries (USCSI), which specifically claims credit for establishing the agenda for GATS 2000. The USCSI is composed of major corporate players with vested interests in securing global markets for their service products including electronic entertainment and telecommunications giants AOL Time-Warner, AT&T and IBM; energy and water enterprises like Enron and Vivendi Universal; financial empires like Citigroup, Bank America and J.P. Morgan Chase; investment houses like Goldman Sachs and General Electric Financial; health insurance companies like the Chubb Group; management and consultant firms like KPMG and Price-Waterhouse Coopers; and express delivery services like United Parcel Service and Federal Express.

The USCSI is further fortified in its lobbying actions by both the European Services Forum and the Japan Services Network, which represent similar corporate service providers who want access to global markets. The European big business coalition is comprised of 47 corporations providing for-profit services in several key sectors. These include major banking institutions like Barclays PLC and Commerzbank AG; telecommunications giants such as British Telecom, Telefonica and Deutsche Telekom AG; water giants including Vivendi and Suez-Lyonnaise des Eaux; health insurance companies like the AXA Group and CGNU (CGU plus Norwich Union); financial consultants/accounting firms such as Arthur Andersen Consulting and Price-Waterhouse Coopers; publishing and entertainment conglomerates like Bertelsmann; plus brand name empires such Daimler-Chrysler Services and Marks and Spencer PLC. The head of the newly formed Japan Services Network is the CEO of the Mitsubishi Corporation.

If these big business coalitions get their way, the GATS 2000 agenda will amount to a frontal attack on the collective and individual rights of people that are enshrined in the United Nations Universal Declaration of Human Rights and its accompanying Covenants and Charters. Not only will foreign-based, for-profit corporations be able to access public dollars to take over public hospitals and schools, but regulations on health and education standards will be undermined by global trade rules under the WTO. Chains of foreign-based, for-profit corporations will be able to invade the child care, social security and prison systems in all WTO member countries. Foreign-based corporations will gain rights to bid for municipal contracts for construction, sewage, garbage disposal, sanitation, tourism and water services.

For many Third World countries, this invasion of peoples' basic rights is not new. During the past two decades or more, the structural adjustment programs of the International Monetary Fund and the World Bank have been used to force many governments in the South to dismantle their public services and allow foreign-based healthcare, education and water corporations to provide services on a for-profit basis. Under the proposed GATS rules, developing countries will experience a further dismantling of local service providers, restrictions on the build up of domestic service providers, and the creation of new monopolies dominated by corporate service providers based in the North.

The WTO will convene a stocktaking session at the end of March 2001 to clarify the negotiating positions of the member countries along with the rules and guidelines for the GATS negotiations. Following this stocktaking session, formal negotiations are expected to begin and continue for roughly another two years or so.

WTO chief Michael Moore has been issuing public warnings in Washington, D.C. and the capitols of other major industrialized countries about the dangers of the GATS becoming the target of a citizen campaign. As civil society groups begin to mount their campaigns to "Stop the GATS Attack," the WTO is calling on member governments and their corporate allies to become vigorously engaged in publicly defending the GATS.

As the chair of the U.S. Coalition on Services, Dean R. O'Hare (who is also CEO of the Chubb health insurance consortium), put it in his presentation to a European Services Forum conference on GATS 2000: "We have to do more to counter those who have distorted the issues and threaten to roll back the benefits of freer trade. As we saw in Seattle, and at the IMF meetings in Washington and Prague, � those opposed to open trade are strongly mobilized. We can't any longer expect to be able to win our case in private closed meetings with governments. We have to convince wider publics."

Tony Clarke is the director of the Polaris Institute in Ottawa, Canada. He is the co-author (with Maude Barlow) of Global Showdown: How the New Activists Are Fighting Global Coporate Rule.

In Their Own Words

Critics are ringing alarm bells about the potential impact of an extension of World Trade Organization rules over the services sector.

The expansion of the General Agreement on Trade in Services (GATS), they say, would entrench privatization and deregulation worldwide, largely for the benefit of U.S. and European multinational corporations. Expanded GATS rules would impose profound, permanent constraints on democratic policy-making. For citizens of the North, valued public services and regulations are at risk. Citizens of the South, they warn, are facing the prospect of having IMF/World Bank-style structural adjustment locked in place for all time. The idea of the GATS itself, and proposals for GATS expansion now being debated in ongoing GATS negotiations (known as GATS 2000), are largely the creation of multinational service corporations, they claim.

Supporters largely agree.

Andre Sapir, an adviser at the Directorate-General of the European Commission, writes that the very idea for a trade agreement covering services originated 20 years ago with a small group of U.S. multinational corporations. WTO Director of Services David Hartridge said in 1997 that the GATS would never have even been signed in 1994 if it had not been for pressure from American Express and Citicorp. The Coalition of Service Industries, the key U.S. corporate lobby group on services, including companies from AT&T to Citigroup, brags that it had a major role in shaping the original GATS agreement.

John Irwin, chair of the International Association of Drilling Contractors, says that the GATS is the world's first multilateral agreement on investment. Pierre Sauve and Christopher Wilkie of the of the OECD (Organization for Economic Cooperation and Development) agree, adding that GATS has the political advantage of not attracting as much NGO attention and not being as easy to oppose as a whole new set of negotiations on investment.

Industry Canada (Canada's Department of Commerce) says that the GATS is first and foremost an instrument for the benefit of business. Dean O'Hare, chair of the Coalition of Service Industries, told a U.S. Congressional committee that the GATS can encourage more privatization, particularly in the field of health care. The European Commission says in a guide to the GATS that the agreement reflects WTO members' basic belief in deregulation.

Although WTO officials deny that proposals in the new GATS will require wholesale deregulation, they do acknowledge that GATS 2000 would constrain government's regulatory authority. "The GATS imposes constraints, however, on the use of unnecessarily restrictive or discriminatory requirements in scheduled sectors," says a 1997 paper, "Economic Effects of Services Liberation," published by the WT0 Secretariat. "Governments may thus be required to complement market-opening measures with a review of domestic regulation."

The WTO Secretariat also agrees that commitments to privatize and deregulate under GATS are nearly irreversible. In the Secretariat's words, "bindings undertaken in the GATS have the effect of protecting liberalization policies, regardless of their underlying rationale, from slippages and reversals."

- Ellen Gould is a Vancouver researcher and GATS analyst