Global Policy Forum

More than 160 civil society organizations from around the world have sent a letter to WTO ambassadors in Geneva expressing their deep concerns regarding the current round of negotiations on the General Agreement on Trade in Services (GATS), which is part of the 'single undertaking' under the July 2004 Framework.

The letter (sent to Heads of Delegations, the Chair of the GATS talks, the General Council Chair and the WTO Director-General) called on negotiators to stop pressuring developing countries to open up their services sector to the corporations based in industrialized countries.

Among the 160-plus groups that signed the letter are ActionAid International, ATTAC, Corporate Europe Observatory, Friends of the Earth, Greenpeace International, IATP, Institute for Global Justice, IBASE of Brazil, International Forum on Globalization, Oxfam Solidarity of Belgium, Public Citizen's Global Trade Watch, Public Services International, the Sierra Club of Canada and the US, SEATINI, the Berne Declaration, the Council of Canadians, Third World Network and the World Development Movement.

At the last meeting of the Special Session of the Council for Trade in Services in March 2005, where negotiations on market access in services are taking place, the Chair of the Special Session had painted a rather sobering picture over the low quantity and quality of offers on services received from members so far. The civil society letter said that enormous pressure is being put on developing countries to open up their service markets to powerful foreign-based, for-profit corporations from the industrialized countries.

With only 50 countries making offers so far (counting the 25 EU member states as one), developed countries continue to demand that 40 developing countries and 32 less developed countries make offers to open up their service markets. "This makes a mockery of claims that the GATS is a flexible agreement, in which countries could elect to put specific services on the negotiations table or not," the groups said. Key sectors in which developed countries are seeking further commitments from developing countries are, among others, finance, energy, environment, water, tourism, distribution and transportation services.

On the one hand, these are among the service sectors where the EU and US home to the "for-profit corporations" seeking to expand their global market reach. On the other hand, these sectors represent crucial and necessary bases for the fulfillment of human rights and they provide the fundamental support services required for agricultural and industrial production, the letter said.

The letter noted that the GATS is essentially an investment treaty. It is designed, first and foremost, to protect investor rights and extend 'lock-in' liberalization in the service sectors of other countries for foreign-based service corporations. This is why big business lobby machines like the US Coalition of Service Industries and the European Services Forum, which represent the major for-profit corporations in key service sectors, are openly pushing hard for developing countries to make commitments now. And, once these commitments are made, they are "effectively irreversible".

At the same time, the capacity of developing countries to have their own service industries operating 'competitively' in global markets is very small or non-existent, making these negotiations very one-sided. The civil society groups said that the US and the EU are advocating for the establishment of "benchmarks" which would restrict the flexibility of countries to decide which service sectors to put on the negotiating table.

The letter to WTO ambassadors said that to accelerate the pressure and ensure an outcome in services negotiations, developed countries, such as the European Commission and the United States have advocated the establishment of 'benchmarks' for the GATS negotiations and are coordinating these demands through informal 'friends' groups in key sectors. Imposing benchmarks would imply that WTO members would not have flexibility anymore to decide whether to table offers and engage in commitments or not.

"We especially condemn moves to reclassify telecommunications to include value-added content as a back-door route to secure commitments that governments are unwilling to make. Commitments made under the proposed new classification would deprive governments of the chance to assess the implications of these technologies and decide the appropriate form of regulation." The groups warned that liberalization commitments in services will have severe impacts upon national development policy options and their implementation. Contrary to the claims being made about services liberalization, the civil society groups said:

- The "locking-in" of deregulation and market access for foreign-based service corporations through the GATS will not enhance development goals and priorities in developing countries and truly address the needs and concerns of citizens;

- Foreign direct investment in many services sectors mostly happens through multinational enterprises taking over privatized public services and existing local companies, rather than building up new enterprises;

- There is little evidence of the creation of new employment opportunities but rather retrenchments and job losses accompanying privatization;

- There is evidence that any extension of services remains limited and essentially restricted to the elite;

- When public services such as water, education and health are exposed to liberalization, the people suffer the consequences. "Consider what happened when Argentina allowed an essential service like water/waste water to be taken over by the global water giant, Suez. Argentinean's experienced rising rates, broken promises for expanded services, and the construction of a new treatment plant that dumped raw sewage into the Rio de la Plata"; and

- Furthermore, in addition to all the above, there is the track record of these same service providers demanding compensation for their own failures and using trade language to justify their self-serving business interests.

The NGO letter also noted that the WTO has ignored the repeated requests of developing countries for a comprehensive assessment of the developmental, environmental, social and gender impacts of service liberalization before continuing with the GATS negotiations. In this respect, it cited a recent study paper by the UNCTAD secretariat that questions the promised benefits of privatization and liberalization in the service sector and shows how developing countries will lose flexibility in public policy-making under the GATS.

The civil society groups also pointed to recent WTO rulings on services such as the Telmex case and the US gambling case, which highlight the dangers of making commitments to open up service sectors without knowing the full implications, even for countries experienced in trade matters. "The GATS regime contains other equally pernicious measures that can be used to undercut or reduce the space of governments for public policy making," the groups cautioned, noting that the Domestic Regulation Article VI.4 of the GATS, for example, makes provisions for governments to challenge unwanted laws and regulations of another country, which may be perceived as a disguised barrier to trade.

Yet, the groups said, as the UNCTAD secretariat study points out, such challenges can also reduce the policymaking and regulatory flexibility/security of developing countries. The right to regulate and maintain policy flexibility is essential for developing countries to ensure that their own development priorities and strategies are advanced, especially since most of them do not have optimal policy-making and institutional frameworks in place.

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