Global Policy Forum

By Erik Wesselius

According to the European Commission, the General Agreement on Trade in Services (GATS) is "not just something that exists between Governments" but "… first and foremost an instrument for the benefit of business." That is not by accident. The 1994 GATS agreement would never have come into being without almost twenty years of intense lobbying by the US services industry. The current negotiations to expand and deepen the scope of the GATS seem to be primarily driven by the European Commission, working in close cooperation with European services companies.

Godfathers of GATS

The US Coalition of Service Industries (USCSI) is undoubtedly the most influential services lobby group in the world. Its origins date back to the mid-1970s, when US financial services companies American International Group (AIG), American Express and Citicorp wanted to improve their access to heavily regulated markets outside the US, especially in South-East Asia. They considered the inclusion of ‘trade in services' in the General Agreement on Tariffs and Trade (the WTO precursor) as a good tool to force open these markets.

After having placed services firmly on the global trade agenda in the first half of the 1980s, the US Coalition of Service Industries worked closely with US negotiators during the long-winded Uruguay Round (1986-1994). As former USCSI chairman Harry Freeman reflected afterwards: "At the close of the Uruguay Round, we lobbied and lobbied. We had about 400 people from the U.S. private sector. There were perhaps four Canadians and nobody from any other private sector. The private sector advocacy operations in the U.S. government are radically different from those in every other government in the world."

CEOs Taking the Lead

But although the 1994 GATS agreement created a multilateral framework for the corporate agenda of liberalising trade in services, it still lacked important elements. Most significantly, it didn't contain a sectoral agreement on financial services as US demands for market access were not met. An attempt to conclude a Financial Services Annex to the GATS was made in the first half of 1995, but it failed when the US withdrew from the negotiations.

But a deal on financial services clearly was in the interest of the financial services industry, especially from the US and the EU. Aware of that corporate interest, the US Government, the EU Commission and the WTO Secretariat actively sought the support of US and EU financial services industry leaders to break the deadlock in the negotiations. In the Spring of 1996, the Financial Leaders Group, exclusively consisting of chief executive officers and chairmen, and a lower-level Financial Leaders Working Group, started operating.

According to Bob Vastine of the USCSI: "The Financial Leaders Group not only agreed on the principles it would seek to achieve in the negotiations, and on the key countries from which concessions would be sought, it also agreed on the precise barriers it wanted removed. The unanimity in the Financial Leaders Group became a message to governments that the US and European financial community wanted meaningful liberalization and a substantial success, and that the negotiators should co-operate to achieve it. The strategy clearly worked."

Chief executives from the Financial Leaders Group, especially those from the US companies, reportedly played a decisive role during the final hours of the negotiations in Geneva in December 1997. The conclusion of the WTO Financial Services Agreement, improving US and EU-based financial services companies' access to financial services markets in Central and Eastern Europe, Asia, Africa and Latin America, formed the profitable outcome of the Financial Leaders Group's two-year lobbying campaign.

Brittan's Brainchild

The decisive role of the Financial Leaders Group during the WTO Financial Services negotiations in 1997 deeply impressed EU Trade Commissioner Leon Brittan. He also realised the important role of the US Coalition of Service Industries in guiding US negotiating objectives during the Uruguay Round. At the start of preparations for the GATS 2000 negotiations, Brittan decided to create a European services industry pressure group, comparable to the USCSI and borrowing from the new, CEO-driven approach of the Financial Leaders Group, to guide the EU GATS negotiators.

So in early 1998, Leon Brittan asked Andrew Buxton, who had also been a key figure in the Financial Leaders Group, to form a European services lobby. At the launch meeting of the European Services Forum on 26 January 1999, Commissioner Brittan outlined the role he envisioned for the newly formed organisation: "I am in your hand to listen what are your objectives, your priorities for liberalisation […] I count on your support and input, at the company, CEO and Chairman as well as at the European or National Federations, so that we can refine our strategy and set out clear, priority negotiating objectives which will make a difference in the international expansion of service business."

In September 1999, Mr. Robert Madelin, a high level DG Trade official, told a UK business audience: "The European Commission is convinced of the need to work not only with the member states' experts but directly with European industry. We are going to rely heavily on the European Services Forum. […] We are going to rely on it just as heavily as on member state direct advice in trying to formulate our objectives."

Evidence collected by Corporate Europe Observatory clearly indicates that the European Services Forum has indeed developed into a privileged liaison structure between the European Commission's GATS negotiators and the EU services industry. In fact, the ESF has played an important role in the formulation of the EU GATS request lists that were forced upon the EU member states in a rushed procedure between April and June 2002.

GATS Requests and Offers: Open Debate Needed

At the Doha WTO Ministerial Conference, the WTO member states set themselves deadlines for the tabling of bilateral requests (30 June 2002) and corresponding initial offers for new GATS commitments to liberalise trade in services. The preparation of the requests has taken place in a very intransparent and unbalanced manner. In the European Union, but also in other OECD countries, government and business have closely collaborated in the preparation of the request lists, whereas NGOs, trade unions and parliaments were excluded from this process.

The debate over the corporate agenda behind the GATS negotiations gained new momentum in the Spring of 2002, when a series of draft EU request lists was leaked to NGOs. The draft request lists contain detailed demands to 29 WTO member countries to apply GATS free-trade rules to a broad range of their service sectors, including water, energy, transport, tourism, construction and distribution services. The draft GATS EU requests lists addressed to countries like Indonesia, the Philippines and Colombia were clearly not written from a development perspective, but reflect offensive interests of the EU-based services industry.

The European Commission had planned to keep these documents secret, even after approval by the EU member states in the so-called Committee 133 on services. As the head of the Cabinet of Pascal Lamy, Pierre Defraigne stated a few weeks before the leak, the request lists "can and WILL NOT be made public". But the secrecy didn't extend to business.

On 22 October 2001, the Commission noted in a letter to Pascal Kerneis, Managing Director of the European Services Forum: "(W)e would very much welcome industry's input to this exercise, both in terms of finding out where the problems currently lie and in making specific requests. Without ESF input the exercise risks becoming a purely intellectual one …". The Commission followed this up with a memo on the 14 January 2002, in which they "stress the importance to provide within the following days any input you may have, as we are currently finalising the draft requests that will be transmitted to Member States very soon."

These documents highlight how the European Commission has actively sought ESF guidance in formulating its GATS negotiating positions. They point to a sequence of events where business input has been prioritised over member state reflections. Moreover, there has been no comparable input by civil society groups, including trade unions. Nor did the Commission respond to the broad range of concerns raised since GATS negotiations started in February 2000, except by denying these concerns as false and exaggerated.

Groups that are jointly campaigning against the EU's GATS agenda, have repeatedly requested the European Commission and the EU Member States provide full transparency on GATS negotiations and called for a severing of the close links between the European Commission and the European Services Forum. But at the time of writing this article (December 2002), these demands were not met. Although summaries of both the incoming and outgoing GATS requests were published, this falls far short of the level of transparency which would allow for a well informed debate on the EU GATS negotiating agenda.

The corporate influence over GATS negotiators is not limited to the European Union and its member states but reflects a wide-spread phenomenon, especially in countries with a well-developed services industry. While it can be useful and justified for governments to take business concerns into account when formulating trade policy, privileged co-operative arrangements between business and government have no place in a democratic policy-making process.

This crisis of old methods calls for a new model for international policy-making and regulation of a globalising economy. High priority should be given to the development of balanced and democratic mechanisms for civil society input in trade policy preparation. International trade policy should be reassessed and reoriented so that it serves the common interest and fosters sustainable development.

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