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The Corporate Attack on Basic Human Services

The WTO's General Agreement on Trade in Services (GATS)
& the Free Trade Area of the Americas (FTAA)

What is the "Service Sector" & why are the corporations pushing for increased privatization and deregulation?

At one time, trade rules were designed to enhance trade in goods and therefore focused on the lowering of tariff and quotas. But today's "trade" agreements also seek to encourage international competition in a vast range of service sectors. The new trade agreements encompass "everything that you cannot drop on your foot," and include banking, telecommunications, postal services, tourism, transportation, waste disposal, oil and gas production and electricity. They also cover those services universally considered to be essential to human health and development, like healthcare, education and drinking water.

In many countries, citizen access to essential services as well as a fundamental function of government is to ensure and protect this access. Traditionally, this has meant that governments have provided the services themselves. While we often don't think of essential services as primarily profit-making operations, many essential services such as health care and schools have proved highly profitable when privatized and freed from public interest regulation. For corporations, health care and education represent a combined $5.5 trillion market worldwide, and the new trade agreements like the WTO General Agreement on Trade in Services (GATS) and the proposed Free Trade Agreement of the Americas (FTAA) would increase their access to that market without building in protections for consumers, workers or the environment.

How are our essential public services under attack?

For several years, we have seen a growing trend of selling of public utilities, bus lines, prisons and more to private companies. This privatization trend includes the "Coca Colanization" of our schools, turning private hospitals into for-profit operations and the growth of chain nursing homes to name a few.

There are also several international agreements and institutions that are playing an increasing role in the services privatization and deregulation game. In particular, new negotiations under the auspices of the World Trade Organization (WTO) and a proposed Free Trade Area of the Americas (FTAA) a/k/a "NAFTA for the Americas" could lead to an acceleration of privatization of services. As a result of these negotiations, it could become more difficult for communities to achieve vital policy goals such as access to health care; limit how many hotels will be allowed in an environmentally sensitive area; give preferences to local service providers or give preferential treatment to providers that are owned by women or minorities.

WTO's General Agreement on Trade in Services (GATS) was established in 1994 as part of the Uruguay Round. GATS is known as a "bottom-up" agreement because it is based on countries listing the sectors they will open up for liberalization . GATS negotiators and the WTO staff like to portray GATS as a very flexible agreement from which countries may completely exclude certain sectors. Unfortunately, in reality, the GATS text is very ambiguous in terms of what is covered by its rules and what is not. For instance, the first paragraph in the GATS states that only government services that are "supplied neither on a commercial basis nor in competition with one or more service suppliers" are excluded from GATS on the basis of being a government service. Most government services (like health care, education and energy) involve some public/private mix and might therefore be subjected to GATS rules. Such government services could be challenged for violating WTO rules through WTO's trade dispute panels, where unelected bureaucrats with no mandate to weigh social or environmental aspects make the decisions.

Now the WTO countries -- pushed in particular by the U.S. and the Europan Union (EU) and their service industries -- are seeking a major expansion of the existing GATS. In the GATS 2000 negotiations that are now underway, the goal is to achieve "progressive liberalization" and to have all service sectors on the table as a topic for negotiations. The U.S. has already proposed negotiations on issues like energy, "environmental services," tourism, and higher education and the EU has proposed that bulk water collection (i.e. rivers and lakes) be included as an environmental service.

In addition, the EU has proposed to establish new limits on local, state and federal governments abilities to regulate in the service sector. The EU proposal is to establish a "necessity test," putting governments in the impossible position of proving a negative - that there is no less trade restrictive way to accomplish its goal. Local officials normally tend to craft policies that attempt to balance public welfare with private sector interests, not always putting trade considerations first, but prioritizing effectiveness and affordability. Through GATS, legitimate domestic policies that treat domestic and foreign services alike could be challenged before unaccountable and unelected trade tribunals in Geneva, where the burden of proof would fall on the local officials to prove that there wasn't a less trade restrictive way to manage their service sectors.

The Free Trade Area of the Americas (FTAA), a/k/a "NAFTA for the Americas" is currently being negotiated between every country in the western hemisphere (except Cuba), and is a 31-country expansion of the NAFTA model. We know that FTAA's services agreement will go at least as far as GATS and might even go further. It will apply to "all measures affecting trade in services taken by governmental authorities at all levels of government." The services agreement, says the FTAA Services Negotiating Group, should have "universal coverage of all service sectors." Governments are granted the right to "regulate" these services, but only in ways compatible with the "disciplines established in the context of the FTAA agreement."

The U.S. is also pushing to have some of the sectors covered in the GATS to be dealt with in FTAA's Investment chapter instead of the Services chapter. FTAA's investment chapter (which will be based on NAFTA), has a special provision that allows corporations to sue governments directly in NAFTA tribunals if they feel that their profit has been limited by a governmental policy - even vital health and environmental policies applied equally to domestic and foreign investors. This provides investors with an incredibly powerful tool to undermine public interest policies. There have already been several cases filed by corporations challenging environmental and health laws -- and in most of the cases, the tribunals have ruled that the environmental and health laws were in violation of the NAFTA rules -- and requiring governments to compensate the corporations.

No way out

Even though the GATS agreement allows countries some flexibility to list which sectors they are willing to liberalize and which are at least somewhat excluded (keeping in mind that the GATS 2000 negotiations aim to expand the sectors covered under GATS), it is clear that once you have agreed to liberalize a sector, there is almost no turning back. If a country seeks to "de-liberalize" a sector, the government has to enter into negotiations with other WTO member countries to open up another sector for liberalization or to pay compensation to other WTO countries. For local policy makers who are often juggling various options, GATS would permanently lock them into commodifying public services. For example, if a state such as California sought to reverse a failed experiment and re-regulate its electricity sector, the United States could be faced with substantial demands for compensation or trade concessions.

The GATS model - although it allows some initial flexibility in terms of which sectors will be covered - forces politicians to become soothsayers where they must predict in advance the impact of liberalizing a service, as well as in which sectors they should take commitments and which ones they should hold off on.

Timeline

Even though the WTO's Ministerial in Seattle ended in failure in 1999, WTO negotiations have continued on Services, Agriculture and Intellectual Property Rights (TRIPS). They are part of the so-called built-in agenda, where negotiations were mandated regardless of the outcome of the Ministerial. The U.S. is pushing to have the GATS negotiations completed by 2003, but several countries are resisting setting a firm deadline for completion. The next WTO Ministerial will be held in Qatar in the Persian Gulf, November 9-13, and the EU in particular is pushing for the launch of a New Round that would also include new issues like investment and competition policies. Some developing countries are eager to see concessions made by Northern countries in areas like agriculture and implementation and are using the GATS negotiations as a bargaining chip. Several Northern governments are hoping that they will be given a broad mandate for future negotiations in Qatar, but developing countries as well as civil society world wide are launching campaigns highly critical of launching a New Round as well as the sectoral negotiations on GATS, Agriculture and TRIPS.

The FTAA negotiations are scheduled for completion in 2005. There is enormous public opposition growing throughout the hemisphere, though, and already the negotiations are running into internal problems.

What YOU can do!

Write & call your Member of Congress and Senators, and tell them that you oppose any further service negotiations in the WTO or the FTAA before a thorough assessment of the impacts of trade in services has been conducted.

Contact your local and state-level elected officials and ask them if they are aware of these international negotiations that would seriously undermine their ability to do their job as regulators.

Get active in fighting privatization efforts in your community! Make the link between these local fights and the international negotiations that are taking place in the FTAA and the WTO.

For more information contact spark@citizen.org.

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