special article

GATS – Round 2000 Talks

The Evil is in GATS

-- Girish Ghildiyal

GATS (General Agreement on Trade in Services) was one of the lesser-known agreements of the Uruguay round of talks of 1992/96. But after the failure of MAI (Multilateral Agreement on Investment) in 1998 and Seattle debacle in 1999, the developed countries have come to rely upon this agreement to further their interests. GATS, signed in 1995, had a built in provision for review after every 5 years. It was thought that GATS will not arouse as strong a public reaction as, say, agriculture or the TRIPS had done earlier. As a result, all kinds of agendas began to be pursued, and an earnest quest began to broaden the scope of GATS so much so that it grew beyond any reasonable definition of either trade or service (See Box).

The negotiations started in early February ’2000. The talks with far-reaching ramifications were being held quietly and away from public scrutiny. In most of these talks the lobbyists of corporate groups were dealing with the governments of developing countries in ‘green rooms’. The WTO Secretariat was working in complete cohort with Western corporate interests and was furthering their interests in the trade talks. But slowly the news began to leak through in the media about the draft proposals on GATS. The campaign by various NGOs and their coalitions aroused public interest in the matter. By the beginning of the current year, there was widespread criticism of the draft proposals and the principal promoters of new round were clearly on the defensive.

Reacting to the criticism, the present and former WTO officials, EC Commission and EC ministers have resorted to uncharacteristic bluff and bluster to run down the entire campaign. Former WTO Director of Information David Woods has said that opposition to the GATS is “the biggest public relations threat to the launch of a new round next year”. He has also criticized GATS critics as being liars, malicious demagogues circulating garbage, nonsense and scare stories, whereas the UK development cooperation minister Claire Short has criticized them as ‘conspiracy theorists’.

Simultaneously, a lot of lame justifications have been bandied out in favor of GATS provisions, which could just not stand barest scrutiny. On the charge of loss of government’s right to regulate in case of deregulation and liberalization, the votaries said: “this is simply false”, while arguing in the same breathe that services “have long been tightly regulated” and that the benefits from liberalization in this sector could be particularly high. They asserted: “There is nothing in the GATS — or in the GATT — that would oblige governments to sacrifice any reasonable level of technical or commercial regulation. The GATS imposes constraints, however, on the use of unnecessarily restrictive or discriminatory requirements in scheduled sectors”. What does this “reasonable” level of regulation as long as it is not “unnecessarily restrictive or discriminatory” mean? And why should trade policy experts sit on judgment on social policy matters? They asserted: “The proposals put the interests of customers and the environment first”, dropping at the same time, key GATT exceptions for measures “relating to the conservation of exhaustible natural resources...” from services agreement. Moreover the “necessity test” — the requirement that regulatory measures be no more trade restrictive than necessary — conflicts with efforts of the governments to introduce new regulations in favor of greater consumer and environmental protection. GATS is not about privatizing the services industry but has been founded on a commitment by countries to negotiate continuously to eliminate or reduce “adverse” measures in order to provide “effective market access.” What does that mean? And what does increasing effective market access for private firms mean in a sector where services are predominantly delivered by government? Such has been the loss of face to the WTO that it seems as if WTO officials had developed the “foot in the mouth” disease.

Meanwhile even as the preparatory work on critical “technical” issues such as classification and revised scheduling guidelines continues, thanks to the relentless campaign by various groups, the reality of the proposed conditions has begun to sink in amongst the developing countries’ negotiators. In the key March “stock-taking” session the US and EU were faced with rare unanimity amongst the developing countries. During the ‘Services Week’, among other things, the final approved draft of ‘Guidelines and Procedures for the Negotiations’ was watered down and had to accommodate the views of the developing countries.

This unity has forced the developed countries to make major attempts to divide the developing countries. Although major powers have been put on the defensive over the attempts to push a neo-liberal globalization agenda (of liberalization of goods and services trade and investments) they have begun intensive exercise to contact the developing countries and make them fall in line with a carrot and stick policy.


The fate of the GATS negotiations will be influenced by happenings at Doha. The GATS talks are to continue independent of Ministerial meet at Doha with the target of completion by December ’2002. If the talks at Doha fail, then developing countries will try to push more and more of their agenda into the GATS talks, making the agreement increasingly more complex and diffuse.

The GATS negotiations, having come under public scrutiny, are likely to face more and more opposition in the months to come. Meanwhile, the terrorist attacks on US is likely to worsen the recession in the US and rest of the world. The US is likely to adopt a more protectionist stance. And its corporations looking for better opportunities abroad will need all the coercive might of its government to ‘pry open’ the global markets. The future definitely looks alarming and messy. And whatever be the outcome of the US anti-terrorist moves today, it is more likely that the developed world has a far bigger fight on cards over the livelihood concern of developing countries. (Concluded)

In Whose Service?


Perhaps more than any other international agreement, the development of GATS has been deeply influenced by multinational corporations. David Hartridge, Director of WTO Services Division, has said that, “Without the enormous pressure generated by the American financial services sector, particularly companies like American Express and Citi Corp, there would have been no services agreement.”

The US Coalition of Service Industries (CSI) was formed in 1982 to ensure that US trade in services, once considered outside the system of world trade negotiations, would become the central goal of future trade liberalization efforts. It has played a leadership role in organizing the international corporate lobby behind the GATS. Indeed, Robert Vastine, the coalition’s president openly acknowledges that his organization has played an “aggressive advocacy role in writing the General Agreement on Trade in Services.”

The themes and the language adopted by US Trade Representative, Charlene Barshevsky, with respect to the GATS appears to be lifted directly from the speeches made by CSI representatives. Meanwhile, the lines between CSI and the WTO have become so blurred that the coalition actually issued a news release one month prior to the WTO ministerial in Seattle, announcing the start of services negotiations at its industry-sponsored conference.

At the beginning of February ’2000, two weeks before negotiators met at the first official WTO Services Council Meeting in Geneva, CSI organized a meeting. Present were the top WTO officials who deal in services, including WTO Director General Mike-Moore. WTO member delegates also attended, and spoke openly about their countries’ positions in the forthcoming negotiations, providing details that are routinely kept from ordinary citizens on the grounds that they would jeopardize a country’s bargaining stance. They produced invaluable information to the services lobby group on where political pressure could be brought to bear in order to further their interests.

Source: World Development Movement.

What is the GATS?


The General Agreement on Trade in Services is a multilateral framework agreement that restricts government actions affecting services through legally enforceable constraints backed up by trade sanctions. The GATS is an extraordinarily ambitious and quite complex agreement.

Some of the most significant features of the existing GATS are:

It covers practically all government measures. This includes laws, regulations, guidelines and even unwritten practices — for example, subsidies and grants, licensing standards and qualifications, limitations on access to markets, economic needs tests, and local content provisions. No government measure “affecting trade in services”, whatever its aim — environmental protection, consumer protection, enforcing labor standards, promoting fair competition, ensuring universal service, or any other goal — is, in principle, beyond GATS scrutiny.

It covers all service sectors, and all modes of supply. Certain obligations apply to all sectors without exception, and all sectors, without exception, are on the table in future negotiations. The agreement also covers not just cross-border trade, but every possible means of supplying a service, including through electronic commerce, international travel and foreign investment.

It covers most public services. Services “provided in the exercise of governmental authority” are excluded from the agreement. However, these are defined so narrowly that the exclusion has very limited practical value. All governmental services provided on a commercial basis are subject to GATS provisions. Similarly, governmental services supplied in competition with any other suppliers are also subject to the GATS. This exclusion does not appear to protect most aspects of public education, social services, Medicare and other services provided through a mix of public and private delivery and funding.

It extends beyond trade, and beyond “non-discrimination.” The GATS is far more than a simple “trade” agreement; it is designed to cover all government measures, which affect the supply of a service having some international component. The agreement prohibits “discrimination” (treating like services or service suppliers from one country more favorably than another, or treating like domestic services and service suppliers more favorably than their foreign counterparts) in sectors specified by individual members. But the agreement goes further, by absolutely prohibiting certain types of non-discriminatory government measures.

Its most significant constraints apply only to sectors covered by member governments. The most powerful and intrusive GATS provisions, such as national treatment and market access, currently apply only to those sectors that are specifically listed in a member government’s country schedule. However, the coverage of these provisions is intended to become increasingly comprehensive through successive rounds of future negotiations.

Most protection provided in the agreement is uncertain and temporary. There are a variety of exemptions and exclusions in the GATS. However the effectiveness of most exceptions and limitations on coverage for existing and future measures is untested and remains an open question.

The GATS is designed for ever-increasing expansion. Ratchet-like tightening of constraints on government regulatory authority is built into the very structure of the agreement, as members have committed to expand the GATS through “successive rounds of negotiations ... aimed at achieving a progressively higher level of liberalization.”

Source: GATS: How the WTO’s new “services” negotiations threaten democracy - by Scott Sinclair

Developing Countries — Labour Pains


The overall significance of the commitments (on allowing movement of labor) is quite limited for developing Countries especially due to the coverage of mostly higher-level personnel who are typically associated with foreign commercial presence with high capital requirements. Since most developing countries are capital-poor and recipients rather than sources of foreign direct investment in services, there is little impact of such liberal commitments for higher-level staff for their own potential in supplying services through the movement of natural persons. ...

... If one compares the commitments on labor mobility with those for capital mobility, one finds that the GATS bindings are at a lower level overall for labor, denial of entry is the norm. Access is denied to most categories of personnel excluding high-level persons. Market access is generally discouraged and barriers such as economic needs tests and labor market tests and standards are common. There is a greater use of qualitative restrictions in the case of labor movement.

Thus, an overall assessment of GATS commitments on the movement of natural persons indicates that liberalisation has been marginal in this mode.

Source: Movement of natural persons and trade in services: Liberalising temporary movement of labour under the GATS (An ICIER sponsored study) - Rupa Chanda