Published: 02/10/2005

Europe has no more important offensive interest in the Doha Round than services. [European Services Forum press release, Brussels, 31 May 2005]

There is agreement among all Governments that in the new round of negotiations the freedom to decide whether to liberalize any given service and the principle of progressive liberalization will be maintained. there is no obligation to make commitments under the GATS. [From “GATS – Fact and fiction”, a WTO brochure]

The General Agreement on Trade in Services (the GATS) is one of the pillars of the WTO, alongside the Agreements on agriculture and intellectual property (TRIPS). The GATS creates a framework for forcing open a wide variety of services to foreign investors. Under the GATS rules, once a sector is open there is no turning back. Getting GATS moving is regarded as crucial for the current round of WTO negotiations. But the negotiations are bogged down, advancing so slowly that former WTO Director Supachai Panitchpakdi periodically lamented the lack of “more and better quality” offers.

“More offers” means that more countries offer up more service sectors for the corporate auction block. “Better quality” means that governments are expected to make committed offers that create additional access to their services markets over and above current access. “More and better quality” offers means that governments renounce their right and their obligation to regulate services generally considered to belong to the sphere of public regulation, because they are essential for the public interest.

The negotiations have made little progress because to date they have been framed in a “voluntary”, “selective” opt-in process. Under the current GATS rules, governments are required only to table particular services for opening up, and can ostensibly choose not to do so. Mali, for example, can open, say, water provision to EU-based transnationals, allowing them to operate under the same conditions as national companies. This is known as “non-discrimination”. This in turn gives transnationals based in Mali the right to invest in European water services should they choose to do so, thus creating a “level playing field” for investors.

In the real world, of course, this ignores the many strong pressures that developing countries, nearly all of them heavily indebted, come under in their relations with the international financial institutions. Developing countries face the very real threat of losing access to global financial markets if they fail to radically reduce expenditure on public services like health and education and surrender their service markets to foreign investors. Complying with these demands, which are generally accompanied by demands for further labour market deregulation, is known as “good governance”. Good governance maintains the value of global investment portfolios and results in points being awarded by the World Bank’s new rating index for “business friendly” governments.

Given the disastrous experience with most service privatizations in both rich and poor countries, governments are increasingly wary of surrendering their services. Popular uprisings like the revolt against water privatization which brought Bolivia to the brink of civil war, or Argentina’s standoff with the company that hijacked water provision in Buenos Aires, are not something most governments are willing to risk. The GATS negotiations therefore haven’t yielded the desired results, pushing corporations and their lobby arms (like the European Services Forum) on the offensive, pushing governments in turn to take up the expanded corporate agenda in trade negotiations.

One manifestation has been the push for bilateral and regional trade agreements with extensive service liberalization provisions. These give investors what they haven’t been able to get so far through the GATS. But a global agreement, through the WTO, remains the ultimate prize, because it establishes a binding global framework which in turn can be ratcheted up through new bilaterals. So the GATS process, with its negotiating guidelines already stacked in favor of investors, will have to be stretched in order to enhance the “quality” of offers. This is called getting the “development round” back on track.

An explicit change of the WTO rules, however, is a risky venture. It would require consensus agreement, a slow and cumbersome process for an institution which is already suffering a serious crisis of credibility. Hence the six proposals – from the EU initially and then Japan, Australia, Korea, Taiwan and Switzerland – which have recently been submitted to the GATS negotiations.

These would abolish the bilateral “request-offer” nature of the process, depriving WTO member states of the leeway to decide which service sectors, if any, they choose to open up, and at what pace, and replace them with broad mandatory requirements. The new name for this is “benchmarking” or “complementary approaches”. Benchmarking requirements would commit countries to simultaneously open up a minimum number of sectors and sub-sectors, and link this to the promise of further liberalization. Basic regulatory requirements – such as limits on foreign equity and distinctions between foreign and national service providers – could be radically reduced or eliminated.

Unions are already familiar with performance benchmarking at the workplace, the process by which corporations establish productivity standards and bring national and international units into competition to meet and surpass these requirements. The result is intensified competition between workers and downward competitive pressure on pay and working conditions.

An accelerated race to the bottom is now being imported into the services negotiations. Benchmarking at GATS means more competition to open more services to investors and more pressure to deregulate. It makes explicit what critics have always pointed to as the end-goal of the GATS process: a free-for-all for transnational corporations.

Because of their ambitious reach, the GATS negotiations will have a far-reaching impact on society and the labour movement as a whole, including IUF members (see The GATS Attack on Food and Agriculture for an analysis of the impact on the food system. The IUF has therefore joined with other international unions, including Public Services International (PSI) and the International Metalworkers’ Federation (IMF), and with civil society organizations mobilized around trade and investment issues, in exposing and denouncing these proposals. A common declaration has been sent to WTO chief Lamy and to the chair of the services negotiations calling for the clear rejection of benchmarking.

The full text is available on the PSI web site, and we encourage all unions to make use of it to convey their opposition to their governments and to their national trade negotiators. Service markets, like all markets, must be regulated by government in the public interest. The GATS, because it is comprehensive, seeks to radically diminish and even eliminate that role in all services, public and private. The process must be stopped now before it advances any further.