| Trade in services was brought under the rules of the
multilateral trading system at the conclusion of the Uruguay
Round. This is covered by the World Trade Organisations
General Agreement on Trade in Services (GATS) which came into
force on January 1, 1995. The GATS lays down the basic rules
to conduct international trade in services and aims to promote
international trade in services, and to remove barriers to
such trade. The GATS applies to all services ranging
from transport to health and education, to banking and telecommunications.
It operates through four modes of supply:
· Mode 1- Cross-border trade, where the trade
takes place from the territory of country A into that of B.
Only the service itself crosses the boarder, e.g. passing
information by fax or email.
· Mode 2 Consumption abroad, where a national
of country A consumes a service in country B, e.g. tourism.
· Mode 3 Commercial presence, where a
service supplier of country A crosses the boarder to establish
presence in country B and provide a service in country B,
e.g. establishment of a branch or wholly owned subsidiary
in country B.
· Mode 4 Movement of Natural Persons,
applies to natural persons only, when they stay temporarily
in a foreign Members territory in order to supply a service.
For example, the self employed and the employees of service
suppliers
GATS
as a framework is an agreement which developing countries
do not consider unfriendly. At the launch of the GATS,
developing countries found the Agreement, through its Article
IV, development friendly; and through its Article XIX, sympathetic
and accommodating in allowing the liberalisation process to
take place with due respect for national policy objectives.
Other positive aspects of the GATS Article XIX include: provision
for appropriate flexibility for individual developing country
Members; provision of liberalising fewer types of transactions
and progressively extending market access in line with their
development situation; allowing them to attach market access
conditions when making their markets available to foreign
service suppliers.
Statistics
However,
the implementation of the GATS has not been that rosy for
developing countries. According to the WTO 2001 International
Statistics Report, world trade exports of commercial services
increased by 20% between 1995 and 2000. Out of this increase,
40.3% belongs to Europe 35,6% to North America, 16.5% to Asia, 6.6% to Latin
America and only 2% to Africa. Six years after the GATS entered
into force, it is still the developed countries that are benefiting
and they are becoming even more aggressive to conquer new
markets in Africa. The initial requests from developed countries,
especially the United States and the European Community reveal
this. Despite this negative trend of liberalisation of trade
in services, the WTO Secretariat is managing to keep developing
countries still interested in making more commitments in trade
services. How is this happening?
Why
are our governments buying into the GATS Agreement?
The
WTO Secretariat together with developed countries are taking
advantage of the many ambiguities that exist within the GATS
to keep developing countries on the hook. Some of the tactical
language used include the possibility of using the bottom-up
approach when making commitments. This implies that governments
are free to choose the particular sectors that they would
like to liberalise. This would seem to mean that governments
will only open up sectors of services that will be beneficial
to the development and growth of their economies, and hence
good for the well being of their people. Unfortunately, this
is not entirely true. The GATS negotiating guidelines adopted
in March 2001 stipulate the bottom-up approach as one of the
main approaches to be used when making commitments. This leaves
room for the use of other approaches such as clusters whereby
some sectors can be combined to be liberalised simultaneously.
The Doha declaration reconfirmed this and most developed countries
and some few developing countries are advocating clusters
as opposed to the bottom-up approach.
The
other ambiguity in the GATS refers to services supplied in
the exercise of governmental authority. Commonly known as
public services. These include services such as water supply,
health, education, etc. The first article of the GATS excludes
such services from the scope of the agreement. However, the
same article goes on to define such a service as one which
is supplied neither on a commercial basis, nor in competition
with one or more service suppliers. In most countries
public provision of services like education and health coexist
with private sector provision. This therefore means that,
in such cases, public services are covered by the agreement.
In other words, we could fairly say that GATS covers any type
of service, public services included. So, the exclusion of
public services from liberalisation remains unclear and developed
nations keep on taking advantage of this. This is witnessed
by their inclusion of such services in their initial requests
to their trading partners.
Another
carrot that is meant to confuse our governments is the possibility
of applying the Most Favoured Nation Treatment exemptions
(MFN) when making commitments. The MFN mean that, if country
A opens up a certain service sector to country B, that sector
becomes immediately and unconditionally open to all other
WTO member countries. MFN Exemptions allow countries to maintain
measures inconsistent with MFN. This is however, for a limited
period of time. The maximum duration of exemption is 10 years
in principle from the 1st of January 1995. This
is therefore just a temporary measure to incite member countries
into making gradual commitments in services with the objective
of achieving maximum liberalisation as fast as possible. So,
the GATS is well crafted with language tactics that will not
always be to the benefit of developing countries.
Why
is GATS important for Local Authority Leaders and Parliamentarians?
It is
important mostly because the power of the governments to determine
domestic policy is under threat through the GATS. The GATS
is intrusive on domestic regulation. Through the GATS Article
VI.4, the flexibility of policy makers to achieve legitimate
policy objectives for the good of their people might
be constrained. Further liberalisation in the GATS will
be meaningful if the local governments do not lose their ability
to regulate economic activity and to provide basic affordable
and accessible services to all their people. Advocates
of the GATS argue that the GATS Article VI.4 on Domestic Regulation
permits the governments to protect their basic services. However,
this Article on Domestic Regulation takes a minimalist view
on kinds of regulations that should cover services.
This article states that disciplines relating to qualifications,
procedures, licensing and technical standards should be “no
more burdensome than necessary to ensure the quality of the
service. However, the quality of the service does
not address the critical question of distribution of accessibility
of services. It is the inaccessibility of services that leave
developing countries’ populations extremely vulnerable to
neglect as key public services such as garbage collection
and water supply are privatised. There is no criteria for
determining “more burdensome than necessary.” The ambiguities
leave a given countrys regulations to ensure universal and
affordable education, for example, open to the WTO dispute
settlement mechanisms. What this Article actually mandates
is that, government regulation is permitted as long as it
does not constitute an unnecessary barrier to trade.
In
addition to all this, the most important reason why Parliamentarians
and Local Authorities should be concerned about the GATS is
the irreversible nature of the GATS commitments. The GATS
commitments are irreversible, regardless of changes of government.
The term irreversible is in quotes because there are
some articles of the GATS that allow for reversibility of
commitments, but their implementation is problematic to most
developing countries. The GATS allows Members to renegotiate
their commitments against compensation (Article XXI), ignore
them for health and other public policy reasons (Article XIV)
or security concerns (Article XVI bis), and introduce
restrictions to protect the Balance of Payments (Article XII).
While these provisions seem to give some flexibility on commitments
of governments, they remain difficult to implement because
developing country governments do not have the financial capacity
to meet the compensation that might be required. Furthermore,
renegotiating commitments might mean putting under threat
some of the unopened sectors. The most difficult thing for
the developing countries will be for them to prove that the
negative impact (prompting them to reverse their commitments)
is solely due to the liberalisation of the particular service
sectors. The losing country can take the country seeking to
reverse their commitments, to the Dispute Settlements. This
will make it unaffordable for developing countries. So, in
the end, developing countries would rather keep their commitments
as they are. So, what can the Parliamentarians and Local Authority
Leaders do to stop this “GATSastrophy”?
Recommendations
· Parliamentarians and Local Authority Leaders
should remember that they are the mouth piece of the people
they represent. They should therefore give top priority to
the concerns of their constituencies. This means that they
should have some interest in the issues under GATS negotiations.
· They should then inform their constituencies
of the implications of the GATS and discuss with them about
possible options and recommendations.
· They should then take these concerns to the
Parliament and ask that some of these GATS negotiations, (especially
commitments in public services) be subject to parliamentary
debate before approval. This will enhance making informed
decisions at all levels.
· In the context of current pressures to privatise
services, all stakeholders, especially ordinary people that
consume these services, should insist on proper assessment
of the efeects of privatisation (for example, of water and
energy). They must also work closely with their national parliaments
and governments to ensure that these services are not traded
off in the process leading to the WTOs 5th Ministerial
at Cancun.
*Muroyi is a Programme Officer as well as
the Administrator of SEATINI. This is an edited version of
a paper originally presented at a Workshop organised for Zimbabwean
parliamentarians and leaders of local government by SEATINI
in October 2002. |
