| WHAT IS THE GATS GATS?
The General
Agreement on Trade in Services (GATS) is one of the
agreements of the World Trade Organistion (WTO). It
was brought under the rules of the multilateral trading
system at the conclusion of the Uruguay Round in 1994.
The GATS came into force on 1 January 1995. The GATS
lays down the basic rules to conduct international trade
in services. It aims to promote international trade
in services and to remove any barriers to such trade.
The GATS operates through four modes of supply:
• Mode 1: Cross-boarder 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 Member’s territory in order to supply
a service. For example, the self employed and the employees
of service suppliers
WHICH SERVICES ARE COVERED BY THE GATS?
The GATS practically covers all types of services.
The services covered are currently classified under
the following twelve broad sectors, each divided into
several sub-sectors:
1. Business services
Professional services, including legal services, accounting,
auditing and bookkeeping, architectural and real estate
services, engineering services, medical and dental services,
veterinary services, other professional services computer
and related services, research and development services,
real estate services and rental/ leasing services other
business services, such as management consultancy, advertising,
technical testing, maintenance and repair, packaging
and printing services, convention services, cleaning
services
2. Communication services
All forms of basic and value added telecommunication
services, including on-line information and date processing
services postal and courier services audio-visual services:
radio and television services, motion picture and video
tape production and distribution services, satellite
communication
3. Construction and related engineering services
General construction work for buildings, general construction
work for civil engineering, installation and assembly
work, building completion and finishng work.
4. Distribution services
Including retail, wholesale and franchising
5. Educational services
Primary education, secondary education services, higher
education services, adult education.
6. Environmental services
Such as sewage, disposal and sanitation services
7. Financial services
Direct insurance underwriting, reinsurance and insurance
intermediation and other insurance auxiliary services
banking and other financial services, including securities-related
services, provision of financial information, and asset
management
8. Health-related services and social services
Hospital services, other human health services, social
services.
9. Tourism and travel-related services
Travel agencies and tour operators, hotels and restaurants,
catering, tourist guide services
10. Recreational, cultural and sporting services
including entertainment services, news agency services,
museums and other; sporting services and recreational
services.
11. Transport services
Maritime, internal waterways, air, space and road transport
services, pipeline transport, multi-modal transport,
and services auxiliary to all modes of transport.
12. Other services
This category covers any other services not specified
elsewhere. It would certainly cover here energy transport
and distribution and other energy related services,
which can also be covered under the residual categories
of services of distribution, transport, environmental
and other business services.
WHAT DOES THE GATS MEEN TO THE ORDINARY PERSON?
• To the ordinary person, the GATS means that
access basic services such as water, health services,
education, electricity, etc. are under threat. These
are the types of services that have been traditionally
provided under governmental authority, meaning that
these services have been heavily subsidised for accessibility
to all people, rich and poor. However, today, the provision
of these services should respect the regulations that
make up the GATS because these same services are now
being provided in competition with multinational companies.
• As a result of the failure of the Structural
Adjustment Programmes (SAPs), the burden of debt servicing
and mismanagement of most state enterprises, many developing
country governments are unable to adequately provide
basic services to their people. To remove this burden
off their shoulders, most developing countries have
embarked on a fast track privatisation programme. Privatisation
means changing of ownership from public hands into the
private hands. Private hands, be they foreign or indigenous,
they are driven by the same motive. Profit-making if
not profiteering. Their pricing strategies are the same.
Affordable at first and sky-rocketing as they go. The
services will eventually be out of reach of most of
many. Seeing the dilemma that the African governments
are in terms of managing public services, TNCs see an
opportunity to make money. They pressurise their governments
(developed country governments) to use the GATS to take
advantage of the situation. Their governments are therefore
making requests to developing countries to make commitments
in the very sectors that are in shambles. Our governments
are made to believe that foreign direct investment through
commercial presence is the only way that they can save
their people from the water shortage problems, badly
equipped hospitals, inefficient garbage collection.
• What our governments usually fail to put to
question is the commitment behind these foreign investors.
For how long are they going to be around to serve the
basic needs of their people? This question is not usually
posed, because we always want to save crisis situations
and avoid long-term challenges. But the real response
to the question is that, foreign companies will stay
as long as they make profit. Foreign owned companies
will not tolerate customers who do not pay their bills
on time. Foreign companies will not carter for low-income
earners who might give them problems in the long run.
They would rather leave them out completely. So, the
ordinary person’s needs are being further marginalized
by the GATS.
WHY SHOULD PARLIAMENTARIANS AND LOCAL AUTHORITY LEADERS
BE CONCERNED ABOUT THE GATS?
• 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 under 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. 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 and
accessibility of services to the people. Furthermore,
there is no criteria for determining “more burdensome
than necessary.” The ambiguities leave a given
country’s regulations open to the WTO’s
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.
• Parliamentarians and Local Authorities should
be concerned about the GATS because of the ‘irreversibility’
nature of the GATS commitments. 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 most developing countries. So, in the end, developing
countries would rather keep their commitments as they
are making the existing commitments ‘irreversible’.
Legislators should therefore take this fact into account
each time they authorise, on behalf of their constituencies,
services commitments to be done.
WHAT DOES THE GATS MEAN TO THE SMALL SCALE
BUSINESS PERSON?
• Through its article on National Treatment (Article
XVII), the GATS asks a national government to accord
no discrimination between foreign owned companies and
indigenous companies. The host company can not protect
its small scale companies from unfair competition by
big multinational companies. If the host country decides
to give some subsidies to its small scale companies,
the already well established TNCs should also benefit
from the same type of subsidy. The GATS therefore restricts
the use of public funds in this regard since developing
countries would then choose not to give any subsidies
at all. The small scale enterprises are therefore subject
to marginalisation in there own territory, by foreign
owned enterprises. This marginalisation will prevent
then from growing and can also lead to their elimination
from the market, both at national and international
levels.
ARE THERE ALTERNATIVES FOR A PEOPLE-MINDED GATS?
• The GATS as an agreement will not be a bad
agreement if it can put the needs of the people first.
This will only be feasible if the representative of
the people prioritise this objective. Hence, it is imperative
for parliamentarians and local authority leaders to
inform their constituencies of the implications of the
GATS and discuss with them the possible options and
recommendations. After that, the parliamentarians should
then take their people’s 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.
• For developing countries, further liberalisation
in the GATS will be meaningful if it brings infrastructural
development with it. In most developing countries, provision
of major basic services goes beyond just bringing the
required service to the people. The basic infrastructure
needs to be put in place first, which makes it almost
impossible to look at one service sector in isolation.
What developing countries need is basic infrastructure
first, in both their urban and rural areas. Developing
countries therefore need to exploit each and every possible
room for flexibility within the GATS in order for them
to reap something substantive out of their existing
and future commitments. In this regard, they need to
make use of the three major elements of the GATS, among
others, namely: the Negotiating Guidelines, Article
IV, Article XIX.
• Before making any further commitments, the government
should identify areas of interest for the opening up
(where it lacks competence) as well as for export market
(for its local enterprises). This can only be done successfully
if and only if the private sector takes part in the
process.
• There is need for a co-ordinated regional approach
to the GATS negotiations, especially in the case of
services where there are broad common interests among
the member states. The importance of regional integration
cannot be over-emphasised. It is even more vital that
African countries move towards creating sub-regional
and regional markets through their greater economic
co-operation and regional integration. This would not
only give them a greater bargaining power in international
fora, but more importantly, provide the economies of
scale needed to set up more viable and competitive industries.
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