General Agreement on Trades in Services (GATS)
The General Agreement on Trade in Services (GATS) is a treaty proposed by the World Trade Organisation (WTO) which establishes an international set of rules for the supply of services between countries. Services represent between 60% and 80% of the gross domestic product (GDP) of most developed countries.
The General Agreement on Trade in Services is different to other WTO Agreements in that there is no one rule to which all Members must adhere. Under GATS, each WTO member makes specific individual commitments on opening up markets to competition from foreign service suppliers. There is ongoing pressure to increase the scope of 'liberalisation'. Commitments are therefore subject to a ‘ratchet’ principle - they can be rolled forward but not reversed.
Under the GATS, the intention is to force the supply of all services to be competitive: all work involving a service should be put out to tender, and that the lowest tender from anywhere in the world ought to be accepted. Environmental laws, immigration laws, labour laws and state management of publicly owned services are regarded as restraints on trade which must be lifted.
There are many public services such as control of health, education, libraries, water, electricity, sewage, waste disposal, communication, transport, environmental protection and other public works which are provided by governments. Some privatised services such as health and education have proved to be highly profitable. These services may be transferred to the private sector under competition policies put forward under the GATS proposals.
The number, type and level of public services offered differ widely between countries. In the United States public services are mostly run by private operators licensed by the various State governments. In developing countries governments often cannot afford to provide public services and rely on private contractors. Public services are the most developed in Europe whereas in Canada, Australia and New Zealand there is a mix between public and private.
The scope of GATS varies according to which services are included and which are exempt. Countries volunteer which of their services are covered by GATS. So unless it is stated in the GATS policy that a country is exempt from GATS then market access by any transnational company will be an obligatory requirement. It may be a health or postal service or a service to supply drinking water to a community or to manage a national park.
The General Agreement on Trade in Services is called a free trade agreement because it proposes to open markets to competition between companies if countries are signatories to the agreement. It opposes protectionism even when protectionism has positive social and environmental benefits. Under GATS the world economic system is designed to follow the principles of economic rationalism.
If a government or organisation violates GATS rules, they may be brought before a WTO dispute settlement body and be required to change the mechanism of the supply of the service.
The General Agreement on Trade in Services - History
The General Agreement on Trade in Services is one of over 20 international trade agreements administered by the WTO. The first round of GATS was agreed to in Uruguay in January 1995 and the second round started in January 2000. Intensive negotiations began in Doha on 19th March 2001.
These negotiations were expected to be completed by 1 January 2005 but are still ongoing. Governments of GATS member countries were supposed to offer services that they decided were available for take up by foreign corporations. They were also to request other countries to make certain services available to them. This is a lengthy process and many countries, particularly developing countries, have not as yet responded.
The General Agreement on Trade in Services is part of a well-organised corporate campaign to override government regulations that limit corporate activities in the public sector and stand in the way of corporate profits. Many conservative governments are in agreement with the corporations and GATS is a perfect opportunity for them to introduce unpopular economic reforms such as privatisation. Public funding is viewed as a subsidy under most trade agreements. GATS will regard subsidies as unfair competition. Free market economists advocate the removal of all barriers to free trade including subsidies.
The General Agreement on Trade in Services - Problems
For a service to be exempt from GATS rules it must be supplied in the exercise of governmental authority. So far there is no agreement on the definition of 'services supplied in the exercise of governmental authority'.
Another condition for exemption is that it must not be supplied on a commercial basis. The statement 'services not supplied on a commercial basis' is not clear: it may mean (1) services provided without charge (2) services supplied at a subsidised rate (3) services supplied below the market price (4) services supplied at a non-profit rate or (5) services provided at a price at least covering the costs of supply.
A third condition is that the service must not be in competition with one or more service suppliers. Yet the term 'competition' is only appropriate if the different service suppliers are actually supplying the same service and/or targeting absolutely identical market segments.
There is a risk to a government's right to provide its own services, services that may be economically inefficient but are socially useful.
Local communities will have less control over their local resources. Water for example may be privatised and control passed to transnational corporations.
There are risks to a government’s right to manage the environment and its national parks, to carry out environmental protection work such as cleaning up poisonous residues, planting trees or removing weeds from a native forest.
The General Agreement on Trade in Services may result in a weakening of national environment laws. Article XIVb allows governments to take steps to prevent damage to human health, animal or plant life, provided there is also no unjustifiable or arbitrary discrimination against other countries or a restriction of trade in services. In other words, governments must find ways to regulate and protect without constraining the activities of foreign service providers.
At present there is no provision where there is a need to protect non-living natural resources such as land, water and air. There is an obvious conflict here if transnational companies become involved in mining, oil exploration, manufacturing or tourism and wish to invoke the GATS rules on liberalisation of services. [However, there is a clause in another WTO agreement which allows the over-riding of free trade rules by measures to conserve non-living natural resources. This is Article XX of the General Agreement on Tariffs and Trade (GATT)].
Governments will be restricted from taking action to protect themselves against the privatisation of their services. GATS can impose penalties on governments which do not conform to the rules.
Government departments with control over goods that are related to trade in services, are also covered by GATS rules.
Public services will become less a service and more a business.
Democratic decision-making could be subordinated to GATS rules.
The General Agreement on Trade in Services enforces a system of trade and investment rules that promotes economic growth and capitalist expansion. The WTO drive is for economic growth at any cost.
No country will be able to give another country favourable access to its markets, for example, countries with which it may have strong historical ties or which are preferred because they are more democratic or have more humanitarian institutions.
The General Agreement on Trade in Services will undermine the integrity of public services which will become less a service and more a business. Less public sector funding will lead to gradual erosion of the public sector.
GATS could make it illegal for a government to provide a public service to the community if a transnational corporation is denied the right to bid for it.
The General Agreement on Trade in Services - Solutions
It is our contention that international agreements on the environment and human rights must have legal priority over economic agreements.
The text of any economic agreement should include a broad range of service exemptions based on the principle of fairness and environmental needs. National law should take precedence over GATS rules.
The policy of privatisation is based on the myth that the private sector is efficient while the public sector is inefficient. It should be recognised that both the private and the public sector are very wasteful of natural resources for which they do not pay the full price such as forests and clean air.
It should also be recognised that the public sector is more efficient than the private sector because it can provide a service without extracting a profit. Companies in the private sector must extract a surplus, a profit for its shareholders.
Furthermore, governments answer to the people: as taxpayers, people want their money spent wisely and most taxpayers accept that their money is used to subsidise things that society wants and needs, like public hospitals and public transport. Shareholders are not so accepting!
The General Agreement on Trade in Services should protect any government’s right to use either public or private delivery of services. Any exclusion for 'public services' under GATS must be broad enough to protect the environment and protect public interest.
International trade rules must effectively deal with high levels of government bureaucracy and corruption. In most countries there are laws against corruption and in most developed countries government departments and the police enforce these laws, while the mass media acts as a watchdog to expose corruption. If a government is corrupt then this will impact on both the public and private sectors.
A service may be defined as work done for somebody or which meets a public need but does not make anything.
A public service may be defined as a universal service obligation that is provided by a public entity such as a governmental agency to the general public for the common good of all, at a price that is affordable, and often without distinguishing between costs in different regions.