GATS: Threat to public as their rights ignored

Henry Heyneardhi, Business Watch Indonesia, Surakarta, heyneardhi@watchbusiness.org

The General Agreement on Trade in Services (GATS) is being negotiated by the World Trade Organizations. At the WTO Ministerial meeting in Doha, Qatar in November 2001, deadlines were set for GATS negotiations.

Since submitting their request list for market access in services, member countries have an opportunity to review the request and respond with offers of the services they agree to open up by March 31 this year. It is on the basis of these requests and offers that WTO members will engage in bilateral negotiations, to be completed by Jan. 1 2005.

GATS is one of the 28 free trade agreements of the WTO regarding free trade in services. Services include health, education, water provision, energy, transport, broadcasting and communication, banking and so on.

According to Public Services International, the importance and share of services in the world economy has steadily increased. The volume of international trade in services is already significant, amounting to US$1.35 trillion in 1999, up from some $400 billion in 1985 and from $ 1.2 trillion in 1995.

However, until recently, services only account for about 20 percent of international trade, but it is likely to increase because services are growing more rapidly than trade in general -- 10 percent annually in recent years.

GATS covers 160 types of service sectors and various methods for supplying services. First, the cross-border supply or services supplied from one country to another such as international telephone calls, TV or Internet. Second, consumption abroad -- when consumers from one country making use of a service in another country like students or tourists.

Third, commercial presence -- corporate investment or the setting up of subsidiaries in a foreign country. Fourth, presence of natural persons applied in the case of individuals traveling from their own country to provide services in another country.

Article I.3 of the GATS stipulates that the agreement applies to all levels of government, including municipalities and even to non-governmental bodies in the exercise of powers delegated by central, regional, or local governments or authorities.

GATS aims to remove government barriers, control and regulation to service provision. It could be attained by a set of obligations treated to all WTO member countries. Some of them like the most favored nation treatment and transparency, apply directly to all WTO member countries for all services.

If a WTO member country grants favorable treatment to another country (even a non-WTO member), it must grant all other member countries the same treatment. Any exemption cannot last for more than 10 years.

Further, the agreement does not distinguish between the private sector and the non profit public sector working in the provision of services.

The WTO has promoted GATS as a "bottom up" rather than a "top down" treaty since it allows a country to make commitments for trade liberalization in different sectors through progressive liberalization. But activists such as India's Vandana Shiva say the claim is fundamentally flawed.

Shiva writes that to be truly "bottom up" the rules and subject matter of GATS need to be first discussed among local communities, regional and national parliaments. They then have to be amended on the basis of democratic feedback. Hence, GATS is now a top down agreement being forced on the people of the world.

It is frightening to realize that GATS is based on a principle which prioritizes economic value over the social value of service provision. This process goes along with economic liberalization, which requires restriction of the role of the state or public sector. The result: Privatization of service provision, with serious implications.

Under private management, service provision is a business. The private sector recognizes the need of services, but not the right to it. Access is available as long as customers can afford it. In the case of the United States and Latin American countries we learn that when health services is operated for profit, the poor lack access to health care. The same cases also emerge worldwide, when water services are being transferred to private companies.

Privatization implies transfer of power to private corporations, leading to unbalanced bargaining power between the corporate and the customers. Private management can arbitrarily raise the service tariff, shifting the burden to customers to pay for business risks and taxes.

Seeking for profit, private management always prioritizes economic efficiency in decision-making for investment and avoid risks. Private companies do not favor investment in non- profitable regions -- the poor are not on the priority list.

Proponents of GATS believe those concerns are emotional. GATS, they say, makes an exception for public services -- for services "supplied in the exercise of governmental authority".

But this is misleading, because GATS defines government services very narrowly: "Any service which is supplied neither on a commercial basis, nor in competition with one or more service suppliers" (article 1.3c). Since public services also have a fee, and there are always private companies in water, health, energy or education sector, that exemption is meaningless.

In recent years, under structural adjustment programs, jointly imposed by the International Monetary Fund and the World Bank, many Third World countries have been forced to hand over their public services to private companies, especially trans-national companies, thereby disconnecting access of million people to basic services.

Under GATS regime, liberalization and privatization will be irreversible and governments are compelled to put their remaining public services on the market. There will not be a single aspect of our life that is not affected by GATS.