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Sectoral and
cross-cutting briefings for meetings in Geneva between a number
of civil society organisations and member state delegations
to the World Trade Organization
The following is a
set of contributions from some of the members of the NGO group
that met with Member State delegations on June 2005.
1. Mode 4
Concerning the services negotiations, it seems that developing
countries expect benefits particularly to come from movement
of natural persons, or mode IV, including the movement of
medium and low-skilled workers.
There is some concern
however, that developing country negotiators only regard the
possible benefits, without considering negative effects on
the workers concerned or other social impacts. Temporary migration
such as that
contemplated under
Mode IV does not enable the rights of mode IV workers to be
defended effectively and leaves the men and women workers
concerned extremely vulnerable to exploitation. The competences
and structure of the WTO do not enable it to regulate migratory
movements, including those on a temporary basis such as under
Mode IV, in a manner that protects migrant workers' rights.
It would therefore
be far more desirable to create some form of orderly arrangements
for permanent migration, including full measures to guarantee
migrant workers equal rights, encourage their full integration
(including through acquired rights to permanent residence
and citizenship), prevent exploitation by employers and protect
them against all forms of discrimination.
If any governments
do nonetheless make Mode IV offers that would include the
temporary movement of workers, then these must ensure observance
of core labour standards, national labour law in the country
where the service is delivered, and existing collective agreements
in the host country by all parties, with regard to all workers
concerned. They must also ensure protection of the workers
concerned against all forms of discrimination and exploitation
as well as guarantees of the remittance of their contributions
to social security and insurance schemes. In the absence of
such conditions, GATS negotiations and commitments under Mode
IV should not go forward.
Some further specific
comments – such as ‘brain drain’ concerns
– are mentioned below in particular sector/service comments.
2. Gender and
Trade
Services, particularly issues on essential services, environmental
services, tourism, and education, are important concerns for
all of the regions of the International Gender and Trade Network
(IGTN). Women workers in the services sector are adversely
affected when the services sector is privatized. Women are
mainly responsible for providing health care, education, water
(especially in developing countries), and other public goods
essential for the development and well-being of their families
and communities. As is often the case when these goods are
privatized or deregulated, they become less accessible and
more costly for the poorer sections of society, often women.
The IGTN position concerning GATS is to:
Renegotiate the GATS
with an emphasis on the protection of essential services,
recognition of the strategic importance of key service industries
to development and greater clarity in the content of the agreement.
Situate the GATS within
a human rights framework, including the right to development.
Declare a moratorium on GATS negotiations until a development,
social and gender impact assessment is completed.
3. Domestic
Regulations
Background
GATS Article VI.4 specifies that Members shall develop any
“necessary disciplines” to ensure that "measures
relating to qualification requirements and procedures, technical
standards and licensing procedures do not constitute unnecessary
barriers to trade in services”. Such disciplines shall
aim to ensure that regulatory measures are “not more
burdensome than necessary to ensure the quality of the service".
These negotiations
are currently well advanced in the GATS Working Party on Domestic
Regulation (WPDR). Negotiators appear to be working towards
a draft of the proposed disciplines by the end of July 2005,
with outstanding issues referred to 6tth Ministerial Meeting
in Hong Kong for decision.
Among the outstanding
issues are whether the disciplines should apply horizontally
to all services sectors or vertically within just those sectors
where government have made commitments and whether the list
of legitimate objectives should be open-ended (defined by
governments themselves) or exhaustive.
There appears to be
an emerging consensus among negotiators that the disciplines
should include applying a “necessity test” to
non-discriminatory regulations affecting trade in services.
A few governments still maintain that the proposed disciplines
need not go beyond transparency, although some employ a broad
definition of “transparency” (including, for example,
a requirement to give prior notice of new regulations and
an opportunity to comment to foreign governments and service
providers.)
The proposed “disciplines”
explicitly target non-discriminatory domestic regulations,
those that treat local and foreign services and service providers
the same. So, even if a regulatory measure were consistent
with the non-discrimination rules of the GATS (Articles II
and XVII) and the GATS market access prohibitions (Article
XVI), it could still be challenged under the proposed domestic
regulation restrictions.
The scope of these
proposed restrictions - -measures relating to qualification
requirements and procedures, technical standards and licensing
procedures -- is very broad. Many types of governmental measures
and regulatory authority could be affected. Licensing requirements,
for example could include not only professional licensing,
but also broadcast licenses, university accreditation, facilities
licensing for clinics, hospitals and laboratories, waste disposal
permits, municipal zoning approvals, and many other matters.
Technical standards refer, according to the GATS secretariat,
not only to regulations affecting the “technical characteristics
of the service itself,” but also to “the rules
according to which the service must be performed”. This
nearly all-inclusive category would cover standards related
to water quality, pipeline safety, sustainable forest management,
toxic waste disposal and many other vital service activities.
Key messages
The proposed disciplines interfere with governments’
right to regulate and will weaken governments’ ability
to protect the public. Negotiators and WTO officials claim
that the GATS, and the proposed disciplines, recognize the
right to regulate and to introduce new regulations. But this
is misleading, because the “right to regulate”
can be exercised only in accordance with the GATS obligations,
including the proposed disciplines on domestic regulation.
Even if governments remain free to determine the ends of regulatory
action, the means will be subject to GATS challenge and WTO
oversight.
Proposals to apply
some form of “necessity test” to this wide range
of non-discriminatory domestic regulations are particularly
troubling. The “necessity” test is an extremely
difficult test to meet, and, in GATT and WTO dispute settlement,
it has repeatedly failed to provide an adequate defence for
challenged regulations. The WTO Secretariat describes the
two aspects of a potential GATS necessity test as: “the
first aspect is the general requirement that regulations not
be more trade restrictive than necessary; the second aspect
is to examine whether an individual measure is actually necessary
to achieve the specified legitimate objective.” The
very prospect of having to clear the hurdle of a GATS necessity
test will have a chilling effect, discouraging the enactment
of new regulations.
This exercise is an
unwarranted and unnecessary intrusion of trade law into important
domestic public safety laws. Overseeing non-discriminatory
domestic regulations (those which do not discriminate in standards
and qualifications based on nationality) affecting trade in
services is not an appropriate role for the WTO. The WTO has
an institutional mandate to enhance trade, putting commercial
interests ahead of regulatory measures to protect public health
and safety. Furthermore, regulations must be drafted within
the political realities and context of each country; it is
inappropriate for domestic political compromises to be second-guessed
by WTO panels, far-removed from local political realties and
constraints.
Problems with existing
GATS provisions should be fixed before new restrictions are
contemplated. As the gambling case has demonstrated, GATS
rules already interfere with domestic regulatory authority.
GATS market access rules, as interpreted by the Appellate
Body, interfere with non-discriminatory regulations that prohibit
undesirable activities in covered services sectors. These
existing problems need to be addressed, rather than developing
new GATS restrictions that would interfere with important
public protection regulations.
The domestic regulation
negotiations should not proceed further without a full, public
review of the regulatory framework (at all levels of government),
in each WTO member country. There is considerable concern
about these negotiations, particularly among state and local
governments. Twenty- nine States Attorneys General have recently
written to the USTR warning that “any new GATS provisions
that would confer on WTO panels the right to judge whether
regulations made by elected representatives, within their
constitutional mandates, are ‘necessary’ or ‘proportionate’
would unacceptably encroach upon our states’ regulatory
authority”. Similar concerns have been expressed by
hundreds of local governments in Australia, Canada, France,
New Zealand and the UK on the impact of GATS commitments on
their local regulatory and legislative powers. Such a review
would demonstrate that the regulatory framework provides essential
protections that should not be subject to WTO trade law interference.
This is particularly true in developing countries, where regulatory
frameworks need to be flexible allowing new regulations to
be developed in response to development needs.
4. GATS and
Water
The first issue with GATS is that it is binding on all levels
of government and is effectively non-reversible. The second
is that it will allow corporations, though friendly governments,
to use dispute resolution procedures to challenge government
decisions that are deemed ‘trade restrictive’.
In a nutshell, GATS will provide a very tight framework that
will tie government hands for generations to come. In the
water sector, these will likely be debilitating.
Market Dynamics
Don’t Work in Water
The water sector has characteristics that make it particularly
unsuited to inclusion in GATS. Water services do not typically
obey market dynamics – these services are offered most
often as a natural monopoly; there is no substitute for water,
hence the ‘customer’ can’t choose another
product; the ‘customer’ must have regular access
to water, otherwise they may die; water services require taking
into account many issues that are not responsive to market
pressures or profit maximisation.
The EU has made no
secret of the fact that it sees GATS as "first and foremost
an instrument for the benefit of business, and not only for
business in general, but for individual service companies
wishing to export services or to invest and operate abroad."
One of the main objectives of the EU in the new round of negotiations
is to achieve real and meaningful market access for European
service providers for their exports of environmental services.
Governments Will Lose
the Ability to Regulate with Security
One fundamental effect of the GATS rules will be to severely
limit a government’s abilities to regulate with the
security of not having such democratic decisions challenged
by people not electing or elected in the country concerned.
Regulations are seen as ‘non-tariff barriers’
to trade, which is what GATS is seeking to eliminate. Water
distribution services (read drinking water) fall under the
definition of Environmental Services, and are currently subject
to EU requests.
Other Sectors
Relating to Water
(waste-water works).
There has been massive
opposition from across the world to the EU’s GATS water
requests. Several EU member states have criticised the requests,
making charges of EU hypocrisy at a time when (quite rightly)
the EU is not offering its own water distribution services
for liberalisation under GATS. Even parts of the private sector
water industry itself have spoken out against the inclusion
of water in the GATS negotiations, and developing countries
such as South Africa have called for water to be taken out
of GATS altogether.
In view of the potential
damage which GATS liberalisation commitments could cause to
vulnerable communities worldwide, we call on the EU - and
in particular its G8 members: France, Germany, Italy and the
UK - to withdraw its water requests of other WTO members immediately.
We also call on the EU to withdraw its proposal to reclassify
the GATS category of environmental services, by which it intends
to bring "water for human use" into the current
GATS negotiations.
5. Health Services
and GATS
Risks
The risks involved in including health services in requests/offers
in the GATS negotiations include:
• Diversion of
financial and human resources (internal brain drain) from
the public sector to private sector, leading to an impoverishment
of the national health system;
• A decrease in access for the poor: availability will
be affected (especially in rural areas); affordability will
change, with a direct impact on the poor;
• Quality may diminish as profit rather than servicing
needs dominates;
• Accountability starts to be unclear once government’s
role in funding and monitoring the health services gets diluted
or more complex;
• Inequities in access to and standards of health services
will increase. The development of a two-tiered health system
becomes almost certain.
It is very likely that
trade/economic concerns will prevail over health service concerns,
whereas it should be the other way around.
Specifically for mode
2: Crowding out of the local population and diversion of resources
to service foreign nationals (health tourism) has been a universal
pattern in recent experience. The use of public money for
investment in special services for tourists, to be provided
by public hospitals in special private wards is common.
Specifically for mode
4: There is a risk of external brain drain, with an outflow
of desperately needed health personnel with related loss of
investment in education, training, etc.
While it is true that
Mode 4 movement is supposed to be temporary, this means that
a permanent pool of valuable people is lost to the national
health services of the sending/home countries which further
undermines its functioning!. Some of these people will, in
fact, return home, resulting in a brain gain, but evidence
shows that many of these people – often the most qualified
- use the sojourn abroad to arrange contacts and invitations
that result in their permanent return to the host country.
The health sector is
exceptional when it comes to human resources shortages: the
sector is losing staff more rapidly because of additional
burdens such as HIV-AIDS and the many Global Health Partnerships
(public-private) attracting staff primarily from the public
sector. And of course health is special simply because people
will die if local health services cannot be guaranteed due
to lack of human resources for health.
There has been widespread
abuse of non-Mode 4 temporary movement in the construction
industry in Germany, where workers from Central and Eastern
Europe are being employed by companies based in their own
countries, often on false bases. This has led to undercutting
of the national labour market. There is no guarantee that
this will not happen under Mode 4.
Concern about Mode
4 also represents an opportunity for North-South cooperation
and provides the basis for solidarity.
Process issues
GATS negotiations focus on a request offer made by a lone
country to another. Developing countries do not want to open
up in areas of public services such as education, health and
water. Requests are made in private. A country does not have
to make its requests in public and can be even less open with
its response. There has been little openness about the process
with the people of most countries.
Ancillary services
There is not an apparent impact on public health, in so far
as clinical and professional services are concerned; however
commitments relating to insurance, ancillary services and
IT services are expected to have a significant impact on health
services. The impact of such commitments on the integrity
of the health services needs to be monitored because governments
might not realise that they have been negotiating health insurance
as part of financial services.
Regulatory
concerns
Far from being only a drain on resources or taking the attention
away from prevention and other forms of care, liberalisation
of health care may lead to a diminishing role of the State
as a regulator and steward. The State should retain the final
responsibility for guaranteeing people’s right to health.
The development and protection of national health policies
by governments should remain possible but this could be put
at risk if inflexible domestic regulation disciplines are
adopted.
The influence of the
private sector – often a foreign private sector - on
the national priorities for health should be carefully watched
and not increased.
Requirements
Ministries of Health should have a focal point for trade-in-health-related
services. They should demand full involvement in the preparations
of any GATS commitments and be part of any negotiating delegation.
Contacts should be established with all other ministries involved
in health-related activities and there should be full involvement
of civil society and other relevant stakeholders.
In any case, governments
considering opening up the health sector under GATS, should
before making any specific commitment under GATS, ensure they
have thoroughly assessed (ex-ante) the implications of opening
health systems to foreign services and the potential costs
and benefits of making legally binding commitments.
With GATS being part
of the in-build agenda of the WTO, several CSO’s have
called on WTO members (already before Cancún) to adhere
to their commitments to analyse ex-ante the impact of GATS
on health. – They argue that article XIX.3 of the GATS
agreement requiring WTO countries to make an assessment of
the impact of trade in services before entering further negotiations,
has been ignored.
What follows are some
examples collected by Wemos:
The effects of privatisation in health care are now becoming
clear. [We accept that GATS does not require/compel privatisation
– it simply locks it in forever.] Field studies, such
as that which Wemos conducts with its partners in Kenya, demonstrate
that health care privatisation leads to a decrease in access
to basic health care, especially for the poor and vulnerable.
In Kenya many health
care insurance companies are now under private foreign ownership.
This liberalisation of services has led to ‘cream-skimming’,
selecting the healthiest patients while refusing to cover
the chronically ill, those who are HIV-positive or have AIDS.
Those remaining must be covered by the public health sector.
This in turn becomes more expensive so many Kenyans remain
uninsured with no access to the health system.
Meanwhile private hospitals
established in countries such as Thailand and South Africa
are shifting to more lucrative care, mostly for the wealthy
urban population or foreigners, such as dental care or cosmetic
surgery. This is more likely to generate profits but usually
these are not then re-invested in the national health system.
Foreign patients may also limit the access to care for domestic
patients because their care will consume public funds needed
for the domestic population. For example countries such as
Nigeria have seen expensively trained health staff being poached
from the public sector.
There are examples
from Kenya too that private hospitals discharge patients who
cannot afford further treatment, make them work in the kitchens
or gardens to pay off their bills, or even chain them to their
beds until bills are met.
All these developments
threaten a proper delivery of basic primary preventative care
such as immunization, oral re-hydration and malaria treatment.
The public sector has less money for them, while the private
sector is not interested in them. The quality, especially
of rural services, suffers as several health facilities are
cut back, reducing access to care and exacerbating health
inequalities between different population groups within a
country.
The presence of high
tech private hospitals, sucking in the most experienced staff
and affluent patients, may threaten the very integrity of
the whole health system. Far from promising greater choice
to the population, the WHO’s World Health Report 2000
argued, privatisation leaves an impoverished public sector
unable to benefit from cross-subsidisation and risk pooling
on which sustainable health systems are based.
Another trend negatively
affecting access to health care is that valuable staff are
leaving for private sector hospitals abroad such as in the
US, Australia and the UK. The Philippines, South Africa and
Nigeria have experienced a loss of valuable health staff.
In 2001 alone 2,114 South Africa health care staff left to
work in the UK.
This in turn reduces
the proportion of health-care workers to inhabitants in developing
countries further limiting access to care. For example, the
WHO believes that there should be a minimum of one doctor
to every 5,000 people. But in countries as Malawi, Mozambique
and Tanzania the figure is 1 to 30,000.
WTO-delegates are
urged to:
• To guarantee equal access to health care for all men,
women and children, especially during discussions on the implementation
of trade agreements and in launching and supporting genuine
partnerships with the private sector;
• To contribute to strengthening of integrated health
care systems;
• To always put health before commercial interests;
• To stress the importance of investing in health staff;
• To support governments of developing countries to
fulfil their duty to appropriately regulate trade in health
services. Governments need to adequately regulate the public
and private sector in order to protect people’s basic
rights;
• To guarantee that independent impact assessment studies
are being conducted before further international trade international
trade negotiations take place.
6. GATS and
global governance in education
At its heart, the GATS is an agreement that commits member
countries to a broad liberalization agenda, not just through
the elimination of barriers to trade and investment, but also
by encouraging and locking-in domestic liberalization in the
form of privatization, contracting out of public services,
and deregulation.
This poses a number
of risks for public education systems around the world. Because
of the practically irreversible nature of the agreements reached
under this agreement, it is very important indeed to examine
these effects. Before getting down to the matter in hand,
we need to establish some matters quite clearly. Firstly,
we should bear in mind that progress in the GATS talks for
the education sector will simply serve to worsen some trends
that are already evident. Therefore, we must distinguish between
the effects caused exclusively by the GATS from those whereby
the agreement will act as an aggravating factor. Also we need
to add that some of the agreement's effects apply to virtually
every country in the world, whereas others will worsen the
education system in the poorest countries. For this reason,
under the last points we have examined in greater depth the
issue of inequality between north and south.
At an extreme, some
common education-related measures adopted by governments that
would be put at risk by both the general and specific obligations
of the GATS include:
• Restrictions
on the presence of foreign and for-profit institutions;
• Regulations that require foreign education providers
to partner with local institutions;
• Tax rules that are seen to discriminate against foreign
educational institutions;
• Conditions relating to nationality (such as requirements
in hiring procedures that preference be given to citizens
or landed immigrants);
• Restrictions of public subsidies and research grants
to domestic institutions only.
The main concerns about
the impact of GATS on education include the following:
Commercialization and
privatization: Trade liberalization through the GATS will
promote the expansion of private and for-profit provision
of education services. If a country were to fully commit its
education sector, Most Favoured Nation (MFN) rules would require
any regulatory or funding advantage gained by a single foreign
commercial provider to be extended unconditionally to all.
Market access rules would prohibit any government measures
that discriminate between non-profit and for-profit education
providers.
Undermining the right
to regulate education services: While the preamble to GATS
states the agreement recognizes the right of Members to regulate,
this does not fully protect the ability of governments to
enact rules and regulations to meet their domestic needs.
Governments are free to regulate only if their regulations
are consistent with GATS rules. In addition, new disciplines
on domestic regulation could further restrict the ability
of regulators to maintain and adopt measures. As a result,
if commitments in the education sector are taken, virtually
every regulatory measure governing education could be exposed
to potential challenge.
Education and the State:
For some decades, the state has been the main provider, source
of funding and regulator of education systems. As a result
of the GATS agreement, public bodies may lose competency in
the control and planning of their education systems, especially
if we bear in mind that GATS involves submitting national
education systems to the rules of the market and free trade.
This has a regressive effect on national sovereignty and public
control of key sectors.
Liberalization of the
education market: The GATS agreement furthers the liberalization
of the education sector and the introduction of greater competition.
GATS is an instrument with a clear vocation for opening up
and protecting markets, allowing particular educational enterprises
to achieve their objectives in terms of territorial expansion.
Consequently, this will favour the growth of the private education
sector. Of the educational sub-sectors included under GATS,
the one that is most susceptible to becoming subject to trade
is that of higher education, and the modality with greatest
potential is that of "cross-border trade", which,
in the field of education, means distance learning.
Introduction of market
mechanisms into educational systems: Liberalization puts institutions
of public education into competition with bodies from the
private sector, so that, if they do not perform efficiently,
they can be excluded from the market. Therefore, universities
and other public institutions may, due to their interacting
with an increasing number of private institutions (both national
and foreign), become involved in the dynamics of competition
to a greater extent than is the case at present.
Inequality: The extension
of the private sector encouraged by the GATS agreement undermines
educational equality in terms of access, since the cost of
private services can usually only be afforded by wealthier
students. This trend may become worse given the current "fiscal
crisis" of the state, since some governments may find
the expansion of private sector education at some levels to
be a necessary precondition for reducing public spending without
its having any quantitative effect on supply.
Quality: In education,
increase in supply is not directly related to better quality.
GATS does not cover matters relating to educational standards,
and thus may encourage a greater number of low prestige educational
providers, or what some call “diploma factories”.
This trend undermines students' right to high quality education.
Content: Providers
of higher education for profit direct the education they offer
towards apprenticeships in the labour market, to the detriment
of humanistic aspects of higher education. In this way, it
becomes possible to put limits on the concept of knowledge
as the ‘raw material’ of the current system of
production. This trend may be associated with greater restrictions
on academic freedom and autonomy in the production of knowledge.
Workers' rights: Another
consequence of liberalization is a reduction in the power
of trade unions to protect their members’ employment,
conditions and rights, and also higher levels of deregulation
and flexibilisation of teaching staff.
Cultural homogenisation:
The less companies providing educational services change their
study programmes and the less they adapt these to the different
situations of their students internationally, the higher will
be their profits. English is the predominant language used
in distance education programmes because of the national origin
of the main providers and because this reduces costs of the
production process in transnational education programmes.
Countries in the southern
hemisphere: There are three factors which lead us to believe
that the effects of GATS may be worse in poorer countries:
a) there are greater limitations on the education budget in
these countries; b) it would discourage the capacity-building
of local public education institutions and exacerbate an unequal
balance of trade between North and South; c) the public sector
education system does not usually offer complete coverage,
so a new private sector has greater opportunity to fill in
the gaps left by the State and to use this as a market-opening
strategy from which they can then dismantle the rest of the
public system.
Unequal balance of
trade: The flow of investment and trade in educational services
will clearly not favour countries in the south. The EU-US-Australia-New
Zealand axis will profit the most from the export of services
and setting up educational subsidiaries abroad. In the southern
hemisphere, service sector companies (whether public or private)
will not only have no access to markets in the North, but
also may be displaced or absorbed by international competition
in their own country. To cite just one example, in Mexico,
shortly after the NAFTA (North American Free Trade Agreement)
was approved in 1994, direct foreign investment by Canadian
and U.S. education companies increased dramatically. In that
country between 1994 and 2003, 113 foreign companies invested
about 40 million dollars. The U.S. consortium Sylvan Learning
Systems bought up Universidad del Valle, one of the main private
universities in Mexico. Furthermore, the number of institutions
of higher education of questionable quality increased considerably
in Mexico: in 1990 there were 706 and by 2002 there were 2,153.
Developing countries
and the brain drain: For developing countries, the liberalization
of trade in education services would have a serious impact.
It is already accelerating the “brain drain” to
the North. Mode 4 trade in services (natural persons) encourages
qualified professionals to travel to different parts of the
world to work. Therefore, if the negotiations on the trade
of services continue, the brain drain could get worse. It
would mean countries in the Southern hemisphere losing cultural
capital and high-level human resources. Also, the liberalization
of Mode 4 trade brings with it serious contradictions, since
the rich countries probably intend to open their doors only
to the better qualified personnel from the southern hemisphere,
while maintaining their restrictions and discriminatory rules
against workers with few qualifications.
For these reasons,
WTO members should be strongly encouraged to adopt a precautionary
approach and make no commitments on education or education-related
services.
7. Concerns
Regarding Liberalisation of Financial Services
Liberalizing financial markets through GATS: what is being
sought?
Recent development includes:
• Developed countries are demanding that developing
countries commit to liberalization and get rid of regulations
in the finance sector.
• They are directly influenced by the Financial Leaders
Group (some forty CEOs from leading banks and insurance companies).
• At the last General Council Services meeting in February
the Financial Leaders Group issued a statement calling on
WTO members to seek commitments for substantial liberalization
in the area of financial services and they hosted a ½
day seminar at the WTO entitled “The Benefits for Developing
Countries of Liberalizing Financial Services Markets”.
They all argue that
the entry of foreign firms into the markets of developing
countries will enhance competition and bring needed additional
know-how and technology into the sectors. This would lead
to a deepening of the financial sector in developing countries.
Developed countries
are also pushing for the elimination of all controls on capital
flows. In doing so, they completely ignore the importance
of such controls for developing countries. And since the Asian
crisis, it is known that rapid capital inflow often causes
speculative bubbles on the stock market and often lead to
an asset-price boom. The rapid growth of asset prices increases
inequality. Free flow of capital enables local elites in developing
countries to bring their assets abroad, often evading taxation,
taking this money from social budgets. Under a regime of deregulated
capital flows, countries are easily affected by financial
crises in others countries.
The EU and other Western
countries have prioritised financial services as the sector
in which they want many countries to open up their market
under the GATS. While this serves the aggressive expansion
strategy ("consolidation") of the Western financial
industry, they argue that liberalisation of financial services
leads to much needed efficiency, better choice and service
in developing countries.
Not so efficient
for the local economy
However, the experience of liberalizing banks, insurance companies,
health insurance, mutual funds, investment banks and pension
management indicates many negative consequences.
Foreign financial firms
especially target rich clients and rich regions in a country,
and can attract the best managers away from local banks. As
consequence, local financial institutions are left with the
less well off clients and less trained personnel, which might
lead to risky strategies rather than more efficiency. More
importantly, foreign banks often fail to lend to local industries,
small businesses or poor people, which stifles economic growth,
as is currently the case in Mexico where around 85% of the
financial sector is in the hands of foreign banks. As soon
as developing country markets are opened, foreign firms have
in many countries rapidly taken over a large part of the domestic
financial industry.
GATS undermines
necessary prudential measures
Making commitments under GATS increases the risk of financial
instability. Western GATS negotiators ignore the experience
of previous financial crisis that liberalisation needs to
be gradual and well sequenced, underpinned by costly capacity
building of financial authorities in developing countries.
Foreign financial firms are likely to increase cross-border
money transfers e.g. through lending in foreign currency,
as is the case in China. While GATS is not supposed to liberalise
capital flows, GATS articles and commitments in financial
services in practice do. This can lead to foreign exchange
instability and unexpected financial risks.
The financial prudential
measures that are permitted under the GATS leave many developing
countries' regulations open to challenges by WTO disputes,
or bullying to have developing countries remove regulations
during the secret bilateral GATS negotiations.
Developing countries have to carefully assess whether to open
up their financial sector under the GATS because Western negotiators
have not made any assessment of the financial, social and
economic risks involved.
8. Concerns
Regarding Liberalisation of Distribution Services
Distribution services include wholesale trading and retailing
such as by supermarkets and hypermarkets. Opening up markets
for foreign distribution companies is claimed to lead to more
efficiency, new technology and know how, and cheaper products.
The question is whether
these claimed positive effects outweigh the negative effects
of liberalisation as experienced in different countries. Moreover,
commitments under GATS restrain government's freedom of policy
making to deal with the problems.
Opening up the market
to foreign supermarkets, hypermarkets, discounters and other
retailers has lead in different countries to:
• A sharp reduction in the traditional retail shops
that provide an income for many poor people,
• Bypassing of traditional wholesalers and middlemen,
and preference for supply through imports or very large producers,
• Rapid concentration of the supermarket retailing sector
in the hands of a few (foreign) supermarkets, even in different
developing countries, which undermines bargaining power of
producers and provides opportunities to set too high prices.
Supermarkets in the
West increasingly have the power ("buying power")
to squeeze the prices of their national or foreign suppliers
of fresh and processed products while making a lot of profit.
At the same time, they demand adherence to more and more strict
standards. These practices are being transferred when they
start operating in developing countries, undermining the development
of local small and medium sized industries and farms.
When making GATS commitments,
governments have to refrain from limiting the number of foreign
distribution service providers (Art. XVI), providing support
to their national retailers only (Art. XVII), and imposing
measures about establishment, licensing and standards that
might hinder foreign distributors' operations (Art. VI). The
current negotiations even want to restrict the economic needs
test.
Research on the concentration
of supermarket sector in the world shows that Western supermarkets,
such as Wal-Mart or Carrefour, are in the top-10 providers
in Asia, Latin America, Africa and Central and Eastern Europe.
It is these same companies that will benefit from new GATS
commitments while those from developing countries might have
less capacity to grow and expand.
9. Liberalizing
Tourism Markets through GATS
Developed countries force developing countries to liberalize
their tourism markets. The rigid WTO principles of market
liberalization and national treatment for all investors are
not suitable for promoting sustainable tourism: on the contrary,
they endanger it.
In its report on Tourism
and Poverty Alleviation, the World Tourism Organization specifically
mentions the importance of laws, taxes, and investment frameworks
for the benefit of the local population, as well as regulations
on the environment.
Further commitments
for liberalisation under the GATS will pose a threat to the
increasingly numerous initiatives for responsible tourism
that benefits the local population, addresses women’s
needs and helps protect their livelihoods.
Increasing global competition
in the travel and tourism industry will also increase concentration
in the tourism sector, to the disadvantage of many small hotels,
restaurants and small tourism companies that will not be able
to withstand the competition.
A number of countries
will have to offer more and more investment incentives to
investors, including tax holidays, as well as infrastructure
to be put in place which the poor population can only dream
of and which represents a burden on the national budget.
10. Agriculture
Services and GATS
There are 4 major reasons why the GATS is an issue for people
concerned about agriculture and food – including the
workers in these sectors:
By encouraging and
enforcing profit-driven commercialization and privatization
of water supply and distribution, the GATS threatens the viability
of agriculture – the largest single use of fresh water
– and has a direct impact on the job security and working
and living conditions of agricultural workers and the livelihoods
of millions of small family farmers and peasants around the
world.
The privatization and
commercialization of environmental services under the GATS,
including waste management, treatment and disposal by private
corporations, further diminishes the responsibility and capacity
of national governments to protect the environment and the
occupational safety and health of workers, including workers
engaged in agriculture and food processing. It is also crucial
to recognize that the opening of services to foreign companies
includes agricultural extension services provided by governments
to rural communities.
The GATS is used to
consolidate and prevent the reversal of corporate concentration
in the food retail sector, effectively reinforcing corporate
control along the food chain from "the farm gate to the
dinner plate."
Through its provisions
for the right of foreign corporations to establish a ‘commercial
presence’ in all WTO member-states and related protection
of the rights of foreign investors, the GATS realizes key
elements of a multilateral agreement on investment in the
WTO. It is in effect a MAI by other means.
According to the UN
World Water Development Report, an estimated 70% of all fresh
water consumed is used for agriculture, while 22% is for industrial
use and 8% for domestic use. That means that 70% of all water
withdrawals from rivers, lakes and aquifers is destined for
use in irrigating crops. For developing countries, where agriculture
is predominant, this reaches as high as 82% of all fresh water
usage.
The link between water
and food production is critical when we consider the growing
crisis in water scarcity. Water scarcity translates into food
shortages – undermining food security and afflicting
more than a billion people dependent on agriculture for their
livelihoods, including 450 million agricultural workers.
The crisis will worsen
as the water needs of agriculture increase. The FAO estimates
that to meet future food production needs agricultural water
withdrawals will increase by some 14% over the next 30 years.
One of the results is that farmers in developing countries
face increased competition for scarce fresh water resources.
The FAO has also drawn
attention to the interconnections between water, crop irrigation
and health. For example, mismanagement of irrigation is linked
to the spread of water-borne diseases. This reinforces the
need to ensure water quality and safety as part of the health
and safety of agricultural workers and their communities.
These and other long-term
effects of the GATS expansion are indicative of the systematic
violation of rights involved. As the UN Commissioner on Human
Rights observed in a report on trade and investment:
According to the Committee
on Economic, Social and Cultural Rights, the obligation to
respect the right to water includes refraining from arbitrary
or unjustified disconnection or exclusion from water services
and from increasing the price in water to the extent that
it is unaffordable.
The unsustainable management
of water resources promoted under the GATS threatens the viability
of sustainable agriculture. In this sense, the GATS undermines
the capacity of national and local governments to manage resources
such as water to meet the needs of sustainable agricultural
production, especially food production. This in turn undermines
the prospects for decent work in agriculture, since sustainable
employment in agriculture is a critical dimension of decent
work.
By enforcing the "liberalization
of all services" and removing barriers to foreign corporations'
entry into the services sector, the GATS effectively opens
up public services like water distribution to control by water
giants such as Suez, Vivendi, Aqua Mundo and Thames Water.
In fact, the European Commission worked closely with these
companies when drafting its the GATS requests to 109 WTO members
demanding the liberalization of their service sectors. This
includes requests to 72 countries to open up "water collection,
purification and distribution" to foreign corporations.
State ownership and/or
management of water utilities and related water services are
primary targets under the GATS since they are treated as barriers
to foreign competition. Information leaked in early 2003 shows
that the EU identified public water corporations in countries
such as Brazil, Bolivia, Botswana, Bangladesh, Tunisia and
Honduras as barriers that must be removed to allow foreign
competition - a process requiring privatization of public
water utilities and guarantees securing the right of foreign
corporations to enter and dominate these markets. The pursuit
of these the GATS requests - especially aggressive moves to
force open public water services to foreign ownership - was
a critical item on the EU's Cancun agenda, and remains a priority
in the post-Cancun maneuvering. Whatever deadlocks plague
other aspects of the WTO trade negotiations, the EU - acting
in the interests of the corporate water giants - is determined
to force through its the GATS attack on water.
Defenders of the GATS
often argue that it does not impose water privatization, but
is only limited to the distribution and use of water and does
not concern ownership. National governments can remain the
owners of water resources. However, the legal and political
reality of GATS is that this ownership 'does not, in and of
itself, protect a State's right to use and continuously regulate
water resources.' Water use may be granted for decades to
corporations that exercise full control over the pricing and
distribution of water, and the government - instead of regulating
this to ensure public access to water, environmental protection,
etc - in fact faces the threat of having to pay financial
compensation to foreign water companies for infringing their
rights. This means that all future policy decisions on re-regulating
the water sector are subject to an assessment of financial
liability.
There are many ways
in which the expansion of corporate control of water under
the GATS will affect agriculture in general and agricultural
workers in particular. This includes:
Rising Water Costs: Increased corporate control of water leads
inevitably to increased water charges and related costs, thereby
increasing the cost of water inputs into agricultural production.
As past experience demonstrates, employers are likely to offset
rising production costs by reducing labour costs - either
by reducing workforce numbers or cutting workers' wages. At
the same time, workers will face rising water costs in their
own communities as corporate water suppliers introduce cost-recovery
fees. This will increase the living costs of workers and their
families.
Intensifying Competition:
Corporate control over water distribution will intensify competition
over water use, with a high risk of water being redirected
towards industry and away from agriculture due to the greater
capacity of industrial firms to pay higher charges for water
and to privately subsidize water supply infrastructure. This
will have the effect of reducing agricultural production,
which threatens to reduce employment in agriculture. At the
same time, the rural communities where agricultural workers
live will also be forced to compete with both industry and
agriculture for access to water.
Water Use: Declining
water availability or rising water costs will force major
shifts in agricultural production. This is especially so in
countries and regions affected by water scarcity, drought
or desertification. Shifts away from crops requiring significant
water inputs to crops requiring less water will lead to changes
in farming practices and employment, and may undermine local
food production. Higher income cash crops using less water
(e.g. cotton) may replace essential staple foods (e.g. rice),
therefore undermining local food security. As such the viability
of certain crops is under threat.
Water Harvesting: As
experiences in countries such as Bolivia have shown, water
harvesting by foreign corporations extends to rainwater collection.
This has a serious impact on rain-fed crops as well as preventing
groundwater recharge through rainwater. The loss of groundwater
recharge in turn affects agricultural production. Even rainwater
collection for drinking water in communities is threatened
by corporate claims on water rights and the introduction of
water charges.
Water and Health: Corporate
control of water and rising costs affects agricultural workers'
access to clean water, both at work and at home. On farms
and plantations clear water will be rationed or restricted
in use. This may limit the drinking water available to workers,
which may have severe health effects. In rural communities
the loss of access to affordable, clean water has a direct
impact on community health, especially if rising costs force
people to use unclean water for drinking or the preparation
of food.
Pesticides and Water:
On-farm water restrictions and/or rising water costs may also
mean that agricultural workers are denied use of water necessary
to clean themselves after exposure to or use of agro-chemicals.
Every year 40,000 people die from pesticides and 3 to 4 million
are poisoned. The health and environmental harm caused by
agro-chemicals extends to rural communities where agricultural
workers live. Access to clean water both on farms and in rural
communities is necessary - but not sufficient - to reduce
the effects of exposure to pesticides.
Corporate Cleanup? The disposal of obsolete pesticide stocks
(a major source of soil and water contamination in rural areas)
may be treated under the GATS as a commercial environmental
service. The entry of foreign corporations into this 'market'
distorts the priorities and methods of pesticide stockpile
disposal, as well as discriminating against poorer communities.
Corporate contamination cannot be resolved through and corporate
cleanup.
These points illustrate the link between the ongoing water
crisis and the rights and livelihood of agricultural workers.
The GATS can only deepen this crisis by undermining the capacity
of national and local governments to manage public resources,
including water. The GATS therefore generates new barriers
to achieving sustainable agriculture of which decent work
is an integral element.
11. GATS and
postal services
Background
The multinational courier industry has succeeded in making
postal and “express delivery” services a central
focus of the GATS negotiations. The industry has three key
aims:
Greatly increasing
GATS commitments covering postal and “express delivery
services.”
Creating a new, expanded classification for “express
delivery services” that includes many services currently
classified as postal services.
Applying GATS “pro-competitive”
rules, first developed in 1997 for the telecommunications
sector, to postal and courier services.
In February 2005, The
US, EC, Hong Kong, Japan, New Zealand and Switzerland presented
a proposal (TN/S/W/30) that advances the industry’s
main demands.
Key messages
We urge governments not to make GATS requests or offers in
postal or courier services. Making commitments in courier
services, or “express delivery services,” would
threaten national postal administrations, by exposing them
to GATS claims that they are “cross-subsidizing”
and/or “abusing their monopoly position.”
We urge governments
to maintain the current CPC classification system for courier
and postal services. If accepted, the proposals to reclassify
postal and courier services would undermine public postal
and courier services. The proposed reclassification includes
many services routinely delivered by national postal administrations.
The proposed reclassification would increase legal uncertainty,
particularly for those governments that have already made
GATS commitments covering courier services.
We urge governments
to reject applying “pro-competitive” rules to
postal and courier services. Such rules would:
Grant multinational
courier companies a legal right to access national post offices’
facilities and networks, at favourable rates, but without
the responsibility or financial costs of fulfilling their
public service obligations.
Prevent cross-subsidization — which can be a valuable
means of ensuring more equitable supply of essential services.
Undermine universality of postal services by imposing new
restrictions on Universal Service Obligations, including a
WTO-enforced “necessity” test to ensure USOs were
“no more burdensome than necessary”.
Increase pressure on public post offices to withdraw from
courier and other services where they compete with foreign
multinationals.
top___________________________________
Trade: Still a 'great deal of disappointment' in GATS
offers
Raja Kanaga
There is still a great
deal of disappointment being expressed by members with respect
to the quality of initial and revised offers that have been
tabled so far in the services negotiations.
This assessment was
provided by Mr Hamid Mamdouh, Director of the Services
Division of the WTO, after the conclusion of a week-long meeting
of the
Special Session of the Council for Trade in Services, where
the negotiations on
market access in services is taking place. Mamdouh added that
members have also felt that even the improvements in the revised
offers tabled by some members have been modest. In an assessment
of the state of play in the services negotiations so far,
Mamdouh said that there was both good news and bad news.
The good news has been
that the number of offers have improved in that "we
are in better shape than we were, which could be a sign of
improved activity."
So far 23 revised offers have been submitted since 19 May.
A good number of initial offers has also been received during
that period. If one looked at the numbers alone, leaving aside
the quality of the offers, during the first two years, from
the end of March 2003 to the end of March 2005, there were
52 initial offers. During the two months of May and June 2005,
in total there were 40 offers submitted by members.
"That gives an
indication of the pace that is picking up," Mamdouh said.
However, the bad news
has been that based on the quality of the initial and revised
offers submitted, the general feeling of members during the
review of progress in the services negotiations at the Special
Session last week has been that there is still a great deal
of disappointment. Mamdouh noted that the tone for the review
of progress in the services negotiations was set by a note
by the Chairman of the Special Session, Ambassador Alejandro
Jara of Chile distributed to members last week. The Chairman's
note to members on the review of progress in the services
negotiations said that the services negotiations, now in their
sixth year, have not been progressing in a satisfactory manner.
The Chair said that 2005 is a crucial year for these negotiations,
noting two important benchmarks - May for the submission of
revised offers, and December for the Sixth WTO Ministerial
Conference in Hong Kong.
The Chair noted that
the views expressed by members have related in a general manner
to the shortcomings in offers submitted, the lack of sufficient
progress in bilateral as well as the rule-making negotiations.
The Chair said that at the present meeting of the Special
Session, members should express their views in a much more
detailed and specific manner than they usually do. He encouraged
them to provide, in sectors and modes of supply of interest
to them, a detailed account of how they evaluate the offers
submitted by other members and the criteria on the basis of
which they have arrived at their individual assessment.
The Chair also invited
members to identify in equally detailed terms what they would
have liked to have seen in other Members' offers, as well
as identify what they consider to be the main barriers or
regulatory issues that they wish to see addressed in these
areas of interest to them. This should give a clear idea as
to where each member wishes to be at the end of this round.
The Chair said that
such views expressed by members would provide the main inputs
for his report to the TNC, which he hoped will not only describe
the state of play, but would also indicate the desired destination
together with some suggestions on how to arrive at it on time.
During the discussions at the Special Session meeting on Friday
afternoon, the US outlined five elements of a work plan that
it suggested the Chair to prepare.
The five elements are:
* formulation of the
level of ambition for the negotiations through approaches
consistent with the Services Negotiating Guidelines and Procedures
and the July 2004 package;
* development of an
outline of a "potential package" to be negotiated
on domestic regulation in accordance with GATS Article VI:4
negotiations;
* a statement of progress
in the discussion on services rules pursuant to the mandates
set out in accordance with Articles X, XII and XV;
* an outline of elements
that could address requirements of GATS Article IV and ensure
implementation of the LDC modalities; and
* assuming agreement
on modalities in agriculture and NAMA, a suggested schedule
for proceeding with services negotiations with an equivalent
level of specificity keeping in view the different structure
of the GATS.
At the end of the meeting
on Friday, the Chair said that he would consult with members
on this and other issues. Mamdouh said that during the discussions
last week, a number of members expressed interest in securing
commitments in energy services, construction and engineering
services, financial services, telecommunications, education
services, and in Mode 4 and Mode 1 with respect to the supply
of services.
In financial services,
for example, there was clear indication that foreign equity
limitations, removal of restrictions on legal form of entities
to be established under Mode 3 and discriminatory licensing
conditions were among the issues that need to be addressed.
Most of the interest in the financial services sector was
expressed by the developed countries, Mamdouh said.
Several references to Mode 4 (movement of natural persons)
were made by the developing countries, he added, where they
stressed the need for more commitments in relation to contractual
service suppliers and to independent professionals. In this
respect, the developing countries referred to specific sectors
such as computer-related services and professional services
such as legal and accountancy, as well as to administrative
procedures such as the obtaining of work permits.
The technical side
of the services negotiations were also highlighted by several
countries, such as issues relating to the schedules of commitments,
classification and rules. The developing countries stressed
the importance of dealing with the issue of scheduling of
commitments, Mamdouh said. He pointed to the recent rulings
in the gambling and telecoms dispute, which has raised some
questions with respect to scheduling, such as in ensuring
the legal certainty and predictability of commitments.
On the issue of rules,
some countries had expressed disappointment on the lack of
progress in negotiations on emergency safeguard measures over
the past ten years. Mamdouh also said that there were some
"veiled references" during the Special Session meeting
to the fact that the request-offer process in services negotiations
was not producing the results that were aspired to, and that
bilateral negotiations are tedious and take a long time. Some
members proposed exploring alternative approaches, an idea
which Mamdouh referred to as "benchmarking" (see
SUNS #5834).
However, there has
been no concrete proposal submitted to the Special Session
on the "benchmarking" approach, he added. Mamdouh
also said that the "benchmarking" approach is surrounded
by many difficulties, both technical and political in nature.
In trying to set targets under the "benchmarking"
approach, members would have to precede the services negotiations
with a negotiation process on the benchmarks itself. Mamdouh
said that theoretically speaking it might be useful to say
that if members set multilaterally agreed targets, they might
respond to them and this can help achieve negotiating efficiencies.
But this depends on what kind of "benchmarking"
that members are going to have, whether this would produce
the required substance, and how long it would take for members
to agree to the benchmarks.
He noted that some
developing countries were resistant to the benchmarking idea
arguing that the structure of the GATS and the established
guidelines need to be adhered to. Principles such as flexibilities
for developing countries and the right of each member to choose
what sectors to commit to and what sectors they choose not
to, are equally important for developing and developed countries.
Other issues of importance
that were raised, he said, were attention being paid to sectors
and modes of supply of interest to developing countries and
the positive listing nature of the schedules of commitments.
top___________________________________
Services negotiations: common sense instead of a common baseline
Submission
by Brazil
1. Ideas about a "common
baseline" in services (a new name for ''benchmarks'')
have been circulated lately. These ideas are based on false
premises and dangerously detract from the GATS structure.
They would create a "round for free" in services
for the developed countries, while forcing the way for more
concessions by the developing ones. Such approach is not a
good way forward in the services negotiations, and this is
why.
2. The notion that
the request/offer system is not enough to push forward the
services negotiations is based on the assessment that revised
offers are too poor. Actually, from the 20 revised offers
presented so far, 17 come from developed countries, and these
are very poor indeed, whereas the developing countries' revised
offers show a much more constructive approach. The problem
thus rests in the bad quality of developed countries' revised
offers, and nowhere else. These offers show an unwillingness
to address the existing mandate, that is, to give priority
to sectors and modes of supply of interest to developing countries',
as stated in Annex C of the "July Package".
3. The problem can
only be solved through better offers by developed countries.
Developing countries have clearly indicated their expectations,
both bilaterally and collectively. These expectations can
be reiterated in further requests. Developed countries can
also, of course, make new requests on the basis of revised
offers, mainly to one another (since they seem to find their
respective offers so poor), but also to developing countries
(most of whose revised offers, by the way, are still not on
the table). To claim that the request/offer approach is exhausted
or insufficient is biased and masks the fact that developed
countries do not give signs to be disposed to make their contribution
to the Doha services negotiations.
4. It is against all
good logic to generalize the problem of bad developed countries'
offers, and to make all other members responsible for an overall
improvement of the level of commitments. But this is exactly
the idea behind a "common baseline".
5. The main element
of a "common baseline" would be the obligation to
take commitments in sectors chosen from a certain priority
list. Whatever "flexibility" is allowed in this
model, it would be far less than the flexibility already existing
under GATS, which does not oblige countries to take commitments
in any sector, or list of sectors, or sectors chosen from
a list. The phantom of mandatory commitments, which haunted
the beginning of GATS negotiations in the Uruguay round under
the inspiration of developed countries, would come back to
life.
6. The idea that sectors
already committed in the Uruguay round could be counted again
to fulfill each country's new commitments under the ''priority
list" is untenable. Since developed countries generally
made more commitments in the Uruguay round, it would allow
them to count again those same sectors as their "contribution"
to the Doha round. Developed countries would thus have a round
for free in services, whereas all the burden to take new,
meaningful commitments would rest on the shoulders of developing
countries. This approach would subvert Articles IV and XIX
of GATS, where flexibility is established in favor of developing
countries, not against them.
7. The "common
baseline" would pre-determine not only the sectors, but
also the contents of market access commitments in each mode
of supply. Elimination of local presence and domestic capital
requirements is preached. This would amount to a rewriting
of Articles XVI and XVII of GATS, which form the basis for
specific commitments, and which provide the possibility for
members to maintain any requirements inscribed in their schedules.
The "common baseline" approach would move GATS close
to other models of services negotiations, such as NAFTA, where
local presence and domestic capital requirements are banned,
where development needs are not recognized, and where flexibility
is very limited due to a negative list system of commitments.
8. The "common
baseline" also foresees some specific treatment for Mode
4: in some sectors, Mode 4 barriers would be removed. This
approach ignores the fact that practically all Mode 4 regulations
are horizontal, not sectoral, and if horizontal limitations
remain, sectoral movements are meaningless.
9. To give transparency
to Economic Needs Tests, as the proponents of a "common
baseline" offer to do, is no more than the obligation
that Members already have under GATS Articles III and XVI.
It can certainly not be considered a "concession".
10. The ideas for a
"common baseline" already vented would create a
division between developing countries and least developed
countries, which does not exist in the GATS. Developing countries
as a whole face specific situations in the services negotiations,
and GATS addresses this fact. The sort of special flexibility
which the "common baseline" foresees for LDCs is
something that they already have - together with all other
developing countries - under the GATS. Thus, the "common
baseline" would erode the flexibility which GATS reserves
for developing countries, without creating any new flexibility
in favor of LDCs.
11. For such reasons,
it is clear that the "common baseline" is fundamentally
flawed. No adjustments or coefficients in that model could
make it compatible with GATS and with the main principles
on which the Doha round is based. It is intended as an instrument
to force developing countries to make commitments much beyond
those of developed countries.
12. Not a common baseline,
but a common sense approach is needed. Problems must be correctly
identified before they are addressed. Today's problems in
the services negotiations are not to be found through an aggregate
study, either quantitative or qualitative, of tabled offers
as a whole, but in the analysis of individual offers, and
the fact they do not fulfill specific mandates. The solution
is the improvement of those deficient offers, and not some
sort of diluted, collective approach, which in practice would
mean the improvement of all other offers but those which are
deficient.
top___________________________________
European Union
Non paper: common baseline for the services negotiations possible
elements
Submission
by the European Union
The following sets
out possible elements for common baseline for the services
negotiations that together with plurilateral approaches aimed
at achieving critical mass in key sectors would complement
the “request-offer approach’.
Cross sectoral
elements
Commitment to make offers in a minimum number of sectors/subsectors
from an agreed list of priority sectors/subsectors. Particular
attention shall be given to sectors of interest to developing
countries. Commitments offered should be commercially meaningful
and reflect no less than existing level of market opening
(status quo).
If a sector from the
list is already committed to the extent required by point
1 above this sector would be counted towards the total.
Flexibility should
be provided to all Members in the sense that each Member would
choose the sectors it commits from the agreed list with the
option of not committing a limited number (e.g. commit X out
of Y and thus opt out of Z).
Additional flexibility
should be provided to take account of the level of development
of individual Members and in particular LDCs. The flexibility
for developing countries could for example take the form of
committing them to offer fewer sectors/subsectors and to allow
for longer implementation periods. LDCs should be encouraged
to schedule commitments in even fewer sectors from the agreed
list.
Economic needs tests
should be clearly inscribed and indicate whether they are
discriminatory or not and the main criteria on which the test
is based.
Modal elements
Mode 1: Commitments in X% of sectors/subsectors offered from
the agreed list and in those sectors/subsectors removal of
all commercial presence requirements.
Mode 2: Commitments
in and removal of limitations in Y% of sectors/subsectors
committed from the above list.
Mode 3: Commitments
in Z% of sectors/subsectors committed from the agreed list
and in those sectors/subsectors removal of NT limitations
in sectors committed as to types of legal entities, ability
to buy or rent land and buildings for direct commercial use,
nationality requirements for board members and senior management.
In addition, removal of foreign ownership restrictions or
where maintained foreign ownership should be allowed up to
at least 51% and should not be combined with licensing quotas.
Mode 4: Commitments
for Business Visitors (BV) and Intra-corporate transferees
(ICTs) in all committed sectors from the above list. Commitments
for Contractual Service Suppliers (CSS) and Independent Professionals
(IPs) in at least S% of committed sectors from the above list.
top___________________________________
Editorial- Services Negotiations
Chandrakant
Patel, 9 July 2005
The recently concluded
meetings of the Special Session of the GATS Council (Geneva,
27 June - 1 July) suggests the emergence of Services, Agriculture
and NAMA, as among the key deal making/breaking issues at
the Ministerial meeting in Hong Kong later this year. The
reasons for this are clear: all three areas, from the standpoint
of the demandeurs, warrant new and deeper market access commitments
by the South. The cross-linkages and scope for trade offs
between them will be fully exploited by the OECD countries
in December, with progress in Agriculture (or any other area)
being made contingent upon satisfactory market access concessions
in others. The renewed drive by the developed countries to
place the Services negotiations on a higher footing than has
been the case heretofore in the Doha Round may well be designed
to camouflage the absence of progress in Agriculture and to
a meaningful reform of the subsidy regimes in Europe, United
States and Japan.
The fact remains that
improved market access commitments in services will be the
central-piece of demands of the developed countries over the
balance of the Doha Round. Due to their strong growth prospects
in the foreseeable future, several countries of Eastern Europe,
Asia (most notably China, Indonesia, India and Malaysia) and
Latin America and Africa (notably Egypt, South Africa and
Nigeria) are identified as providing the greatest opportunities
for the developed countries multinational corporations. These
opportunities cover sectors as diverse as transport and telecommunications,
financial and insurance services and environment, health and
education services. Unlike many of the smaller countries in
Asia, Africa and Latin America who have been forced to open
up their fledgling services markets under IMF-World Bank borrowing
conditions, none of the larger developing countries have similar
obligations. Besides, none of them (barring a few such as
Mexico and South Africa) have been required to make concessions
in the context of regional or bilateral arrangements. The
larger developing countries, with the greatest market access
potential, are also viewed as having made unsatisfactory offers
in the current Services negotiations.
Although developed
countries, for tactical and strategic reasons, will establish
linkages and trade-offs between the three sectors mentioned
above, developing countries cannot lose sight of the fact
that the three sectors are fundamentally different. Trade
in goods, a quintessentially border issue, does not pose the
same degree of negotiating complexity as the various services
sectors: the latter embraces a vast range of non-trade and
non-border considerations involving sensitive political, cultural
and social issues. Then again, services are a new issue in
international trade law (post-GATT and Uruguay Round) and
countries are still learning to deal with its complexity,
including developing special rules to deal with its non-border
features, in a multilateral negotiating forum. Not the least
of such difficulty is the absence of any agreed definition
of services. Since there is no comparability between the GATS
definition of services (revolving around the four modes of
their delivery) and national income account definition of
services, revolving around value addition, few would venture
to make cross-country comparisons of the role of services
on the basis of GATS definition or come to any conclusion
about the development value of GATS related market access
commitments.
Of much concern to
developing countries are the new proposals advanced by developed
countries to “speed up” the Services negotiations,
perceived by them as being in a state of crisis. The so-called
‘crisis’ is attributed by the developed countries
and the WTO secretariat to derive from the unsatisfactory
quality of developing countries offers tabled so far. They
are claimed to be below OECD countries expectations and below,
according to them, the level of commitments to “progressively
liberalize services sectors” in the Uruguay Round. Accordingly,
under the pretext of speeding up the negotiations, EU has
proposed what it calls ‘alternative and complimentary
‘methods of negotiations (and which it seeks have endorsed
by the July meeting). The broad approach advocated by EU (and
earlier by the US and others) involves targeting a minimum
number of priority clusters of sectors/sub-sectors for liberalization.
As the paper by Brazil makes clear, the new approaches would
drive GATS towards a NAFTA type of services model in which
development dimension would be largely absent. If adopted,
the new approach would represent a major shift in the architecture
and negotiating model of GATTS. The cluster approach (also
known as ‘benchmarking’, ‘horizontal modalities’,
and ‘formula approach’) would drastically alter
the structure of GATS: in particular, it would result in a
shift from the present positive list and bilateral offer and
request approach that provides some flexibility to developing
countries to a negative list and a plurilateral and/or multilateral
approach.
On their part, many developing countries have expressed disappointment
at the quality and scope of offers by developed countries
in general and concerning Mode 4 in particular. They have
also expressed serious concerns about a number of important
issues that remain undressed. These include treatment of domestic
regulation, rules relating to treatment of subsidies and safeguards
and treatment of government procurement and the entry into
a negotiating mode for the consideration of these issues.
If the conclusions
of the foregoing analysis are correct, namely that the developed
countries will target services liberalisation as the central
objective of the Doha Round (and ensure at the same time that
the present agriculture regime remains effectively intact)
then, both African Governments and the civil society will
have to rethink current strategies and respond accordingly,
including demanding a standstill and rollback on earlier commitments
and rejecting any EPAS related negotia | 
