What's wrong with the WTO?
The WTO’s General Agreement on Trade in Services (GATS) threatens to commercialize public resources and services and subordinate human needs for them to the interests of transnational corporations and wealthy countries. It has begun to erect new fences around the global commons, promoting privatization of public services and deregulation of private services while eroding consumer, worker and environmental protections.
The wide-ranging provisions of GATS encompass all service sectors, from banking, energy and telecommunications to predominantly public services such as prisons, water delivery, health care, and education. The treaty is also, in effect, a multilateral investment agreement because it covers direct provision of services by foreign corporations.
Built into GATS is the presumption that signatory governments will continue to negotiate with the goal of liberalizing more services. Although the treaty does not cover sectors unless a country lists them in its “schedule of specific commitments,” the U.S. and Europe are putting heavy pressure on developing countries to continually expand their coverage. Yet for poor nations, the agreement’s “national treatment” and “market access” provisions could hamstring their ability to promote development and protect infant industries, by forcing them to throw open their markets to foreign service providers.
GATS mandates that services essential to human life and social stability be increasingly exposed to the vagaries of international markets. And because commitments under GATS are practically irreversible, it endangers local democratic control over these services.
GATS 2000 talks continue
GATS is one of the original treaties included under WTO jurisdiction at the conclusion of the Uruguay Round of trade negotiations in 1994. GATS is a “multilateral framework agreement,” a core treaty that will be continuously expanded through negotiations to include new sectors and rules. These ongoing negotiations on GATS are part of the "built-in agenda" agreed on when the WTO was formed.
In compliance with this provision, the “GATS 2000” talks were launched in February 2000, chaired by Canadian Ambassador to the WTO Sergio Marchi, and continue today. The United States has been the strongest proponent of expanding this treaty; for its part, the European Commission has pressed for including drinking water in it. The U.S., Europe and Canada share the goal of reaching an expanded agreement by December 2002.
The idea of a services agreement was originally advanced 20 years ago by a small group of major U.S. corporations. American Express and Citicorp were instrumental in promoting the adoption of GATS in 1994. The U.S. Coalition of Service Industries, according to its Web site, “played a major role in shaping” GATS and the 1997 WTO Telecommunications and Financial Services Agreements.
The current process continues to be shaped behind closed doors by powerful industry associations such as the U.S. Coalition of Service Industries and the European Services Forum, working closely with the trade representatives of the wealthy governments and the WTO bureaucracy. Public debate has been minimal both in national legislative bodies and in civil society. Representatives of developing countries and citizen groups have been marginalized and excluded.
General Agreement on Trade in Services (GATS).
See GATS page.
GATS is one of the treaties enforced by the World Trade Organization.
Domestic regulation (Article VI)
GATS rules on domestic regulation (Article VI) are analogous to Agreement on Technical Barriers to Trade rules on "least trade restrictive" regulations. They require that domestic regulations "do not constitute unnecessary barriers to trade in services" and are "not more burdensome than necessary to ensure the quality of the service."
While Article XIV, General Exceptions, exempts measures "necessary to protect human, animal or plant life or health," GATS drops the GATT exception for measures "relating to the conservation of exhaustible natural resources."
Necessity is not clearly defined and will be subject to interpretation by the WTO dispute settlement system. Tests of necessity that are hostile to public-interest regulation will likely be imported into GATS from other WTO agreements.
These provisions appear to place the burden of proof on governments to show that service regulations are "necessary," and that no less "trade-restrictive" mechanism was available to achieve a particular goal. Governments would have to prove that a regulation served the pursuit of a "legitimate" WTO objective, which again is not defined. Disciplines based on this section could be used to overturn national, state and local regulations even if they do not discriminate in violation of National Treatment or Most Favored Nation provisions.
National treatment rules (Article XVII)
This article and market-access provisions compromise the ability of governments to promote development. Under them, governments cannot distinguish between domestic and foreign service providers in order to encourage the development of domestic services in poor countries.
"The World Trade Organisation (WTO) is drawing up regulatory proposals which could force governments to open up their public services to foreign investors and markets. As part of the General Agreement on Trade in Services (GATS) negotiations, the WTO working party on reform of domestic regulation is developing a regulatory reform agenda which could mark a new era of compulsion in international trade law. Article VI.4 of the GATS is being strengthened with the aim of requiring member states to show that they are employing least trade-restrictive policies. The legal tests under consideration would outlaw the use of non-market mechanisms such as cross-subsidisation, universal risk pooling, solidarity, and public accountability in the design, funding, and delivery of public services as being anti-competitive and restrictive to trade. The domestic policies of national governments will be subject to WTO rules, and if declared illegal, could lead to trade sanctions under the WTO disputes panel process. The USA and European Union, with the backing of their own multinational corporations, believe that these new powers will advantage their own economies."
—Allyson Pollock & David Price in The Lancet (UK)
Cases & Controversies
Under pressure from World Bank and IMF, the city of Cochabamba, Bolivia, entrusted its water services to a private consortium of international corporations including U.S. construction giant Bechtel. Water bills quickly became unaffordable for most citizens, leading to strikes and protests, violence, and finally termination of the contract.
Major firms in the U.S.—Azurix, Enron's water subsidiary—and Europe—Suez Lyonnaise des Eaux and Générale des Eaux—are pushing to privatize municipal water supplies around the world. The European Commission's GATS negotiators want to include drinking water in GATS commitments.
“In 1999 water privatisation was part of a package of reforms required by the World Bank so that Bolivia could receive debt relief. In Cochabamba the sale—to UK company International Waters Ltd—led to charges so crippling they sparked mass protest. Water suddenly cost more than food. Those on the minimum wage saw nearly half their budget devoured by the water bill. Even collecting rain water in rooftop tanks on a farm became illegal without a permit. In April the people of Cochabamba had had enough. Hundreds of thousands took to the streets to protest, which ended in clashes with the police, and the death of six protestors.”
“In Bolivia this demonstration of people power was successful—International Waters was kicked out of Bolivia and the industry renationalised. But if current negotiations in the WTO are successful, governments will be forced to privatise services and the sale will be irreversible.”
—World Development Movement
More information on GATS and water services
Official WTO Web site
By Peter Costantini ~ Seattle ~ November 2001