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What is GATS?
The General Agreement on Trade in Services (GATS) is one of 15 agreements adopted as
part of the Uruguay Round of trade negotiations concluded in 1994 which greatly expanded
the 1947 General Agreement on Tariffs and Trade (GATT). The Uruguay Round also created the
World Trade Organization (WTO) to enforce the agreements. Today 139 countries are in the
WTO. Every country in the WTO is part of the GATS agreement.
Services cover everything from McDonalds hamburger flippers to international
bankers. Health care, education, lawyers, accountants, advertising, media, travel, even
municipal services like sewer and water, are all services which today makes up about 70%
of the U.S. economy.
The goal of bringing services into the WTO is to make sure they are
"liberalized." This means promoting privatization of public services like
education. It also means deregulation of services at the local, state and national levels
and subjecting them to the WTOs global rules for the benefit of transnational
The U.S. pushed very hard to have services included in the Uruguay Round negotiations,
but did not succeed in requiring the inclusion of all services. Countries resisted the
threat to privatization of their public services and would only agree to GATS if they
could choose which services to include in the agreement. So GATS has country-specific
schedules of commitments which detail which services are covered. Nonetheless, GATS
creates legally enforceable obligations backed up by trade sanctions.
The WTO says:
GATS is the first multilateral agreement to provide legally enforceable
rights to trade in all services. It has built-in commitment to continuous liberalization
through periodic negotiations. And it is the worlds first multinational agreement on
investment, since it covers not just cross-boundary trade but every possible means of
supplying a service including the right to set up a commercial presence in the export
This sets out rights without responsibilities for corporations, including the right for
U.S. corporations to set up operations in other countries immune from U.S. laws.
Now big changes are being proposed. GATS is part of the "built-in agenda."
Negotiations are going forward even though the "millennium round" of new WTO
negotiations came to a screeching halt in Seattle. This is because the original GATS
agreement requires negotiations to recommence at the beginning of 2000 in order to pursue
The service industry corporations see a real opportunity here. To quote J. Robert
Vastine, President of the U.S. Coalition of Service Industries, speaking in Tokyo on May
13, 1999: "The overarching objective of the global business community in the
coming negotiations should be both to broaden and deepen countries GATS
liberalization commitments. A contestable, competitive market in every sector and in every
WTO member country is the ultimate goal."
The end result of this scenario would be government of the corporations, for the
corporations, and by the corporations. What public services remained would be forced into
constant competition with the corporations leading to slashing of labor costs and services
to the poor.
The trade ministers of WTO member countries meet in regular and, when negotiating, in
special session. Countries also appoint representatives to the Council on Trade in
Services which meets more frequently to do the legwork for the ministers. The WTO provides
staffing through its Secretariat located in Geneva. The U.S. Trade Representatives
office (USTR) is the lead U.S. agency, which also maintains staff in Geneva.
If a member country believes another member country has violated GATS and they cannot
resolve their disagreement, the aggrieved country can bring its claim to the WTO's
Dispute Settlement Body, which has not been receptive to environmental, health and other
public concerns. This panel meets in closed session, acting like a secret tribunal.
Decisions are enforced by the winning country imposing economic sanctions on the losing
country until it comes into compliance.
GATS Impact Our Lives?
Privatization of services impacts how our kids get educated, the elderly are cared for,
workers are treated, even how we obtain water to drink. GATS rules will accelerate a trend
toward privatization of human services already underway in the United States. In a
democracy, people should be able to decide what human services they want the government to
Under GATS, once a country agrees to put a service into its "schedule of specific
commitments," it is very difficult to change course. A country has a three-year
window in which to withdraw a commitment and must agree "on any necessary
compensatory adjustment" for the withdrawal. Also, at the time the U.S. makes a
commitment, it can exempt existing state laws, but once the commitment is made no states
can pass similar laws without violating GATS.
Education Already corporations have made major
inroads into our educational system. High schools are contracting with private businesses
for guidance counselors; text books are using corporate logos in their exercises; Zap Me!
is offering schools free computer equipment in return for displaying a constant stream of
advertisements on the screens; and Coke made a deal with Colorado Springs schools to
provide $8.4 million in funding over 10 years in exchange for the schools contracting to
sell 70,000 cases of Coke products to students every year.
According to David Kearns, the U.S. Chair of Xerox, "Business will have to set the
agenda...a complete restructure driven by competition and market discipline, unfamiliar
grounds for educators."
When knowledge becomes privatized, it is no longer a common heritage to be used for the
common good. Maude Barlow writes in The Ecologist: "The intellectual property
provisions of NAFTA and GATT treat knowledge as a commodity and as the exclusive property
of the company that takes a patent or holds a copyright on it." The inclusion of
education under GATS would accelerate this process and make it harder for citizens to turn
Health Care "...it is not health which makes
money but ill health," states Agnes Bertrand in The Ecologist. The WTO staff
says countries should reconsider the "depth and breadth of their commitments" on
health and social services, which are "trailing behind other sectors." This
means more privatization, deregulation and competition by foreign suppliers.
Privatization of public health services increases inequity. The WTO acknowledges that
"private health insurers competing for members may engage in some form of cream
skimming...private clinics may well be able to attract qualified staff from public
hospitals without...offering the same range of services to the same population
groups...." According to Public Services International: "The elite will be able
to access private TNC-controlled care; the rest will have to make do with the shrinking
public system." U.S. managed care corporations are doing just this in Latin America.
As mobility of health care professionals is encouraged, there will be pressure for a
downward leveling of standards for medical training and qualification resulting in a
reduction in health quality standards. Further, health service providers may encourage
rich foreign clients while ignoring poorer clients in their own area as is already
happening in northern Mexico. Finally, "privatization brings with it a view of labour
as a cost, rather than an investment in skills," notes the PSI report, leading to use
of less skilled labor to replace more skilled labor performing the same tasks.
Water With water scarcity becoming widespread,
partly due to the pollution and misuse of water by corporations, companies like Bechtel
and Enron want to profit from this scarcity by supplying water in bulk to those who can
afford it. While water itself is a commodity, the operation of water pipelines and ships
to supply bulk water is a service.
The local distribution of drinking water is also a service. In the U.S. this is
primarily a municipal function. But today, TNCs want to privatize these systems, as
has already been done in countries such as France and Great Britain.
Rebecca Mark, speaking as CEO of Enrons water subsidiary Azurix, said she would
not rest until all the worlds water has been privatized. Contrast this with the
words of Vandana Shiva: "Privatization and commodification of water are a
threat to the right to life."
The threat is at our doorstep. In California, the state constitution guarantees that
the people have the right of ownership of the water, but tragically the people are losing
control of this right to agribusiness, private land companies, and water speculators like
Azurix. Since 1992, some companies, operating as federal contractors, have been given the
right to sell some of Californias water on the open market. In 1995, the state also
gave its contractors the right to sell water.
The European GATS negotiators want to be sure that drinking water is included in the
GATS agreement because they have large TNCs like Suez Lyonnaise des Eaux and
Generale des Eaux, a division of Vivendi SA, which are involved in privatizing municipal
water services around the world, including the city of Indianapolis.
Now the U.S. negotiators are figuring out how to respond. They know there is
controversy in the U.S. about having GATS cover water. U.S. corporations would like
limited coverage in areas where they are competitive with the European corporations.
Advocates for environment and justice dont want water covered in GATS at all. The
U.S. is looking for a compromise position. They are willing to propose that GATS
"carve out," i.e., exclude, transportation of bulk water across international
borders by private companies. This would be good from the perspective of citizens and
organization who believe water is a RIGHT not a need to be supplied by the market for
But the U.S. is considering a more compromised position on water services within a
country such as water treatment, distribution, and sewage treatment. They have suggested
limiting the application of GATS in the U.S. to commercial applications. Unfortunately,
this approach does not deal with the fact that other countries might have a harder time
resisting the pressure from TNCs to put public water systems on their schedule of
commitments. If a country does this and later realizes it made a mistake, it could be too
late to change course.
Encouraging the private sector to supply water for commercial uses could lead to less
water being available for public uses like public drinking water and wildlife protection.
Also, if big commercial users get water from private sources, public water supplies will
have to carry more of the public infrastructure costs, leading to higher rates. This is
another form of cream skimming.
Finally, GATS fits in nicely with the IMF and World Banks agenda to promote
privatization. In Bolivia, under pressure from these institutions, the government passed a
law which led to the privatization of water in its major city of Cochabamba. The city
signed a contract with a private consortium in which Bechtel had a majority interest.
Water bills quickly became unaffordable. Cooperative distribution systems were dismantled.
People first refused to pay, then took to the streets to protest. In the end, after police
violence, the people won and the contract was terminated.
Prisons The trend in the United States toward
privatization of prisons has been quite dramatic over the last decade. According to
AFSCME, there are now 193 for-profit prisons in operation or under construction in 30
states with 43 in Texas and 24 in California. Altogether they account for 7% of the prison
population. Profits passed the $1 billion mark in 1998.
The two largest private prison corporations in the US are Wackenhut and Corrections
Corporation of America. These corporations have already become transnationals. CCA alone
manages 82 prisons with 73,000 beds in 26 states, Puerto Rico, Great Britain, and
Australia. Wackenhut extends its reach to South Africa and Canada.
Not only are prisons being privatized, but 36 states allow corporations to set up
factory production in prisons where wages are low and workers forced to be compliant. The
New York Times reports: "Private sector programs, which exist in 36 states and
employ 3,500, have doubled in size since 1995 after years of almost no growth."
(3/19/00, p. 22)
Recent studies report that minorities are being targeted by the judicial system:
"black men are sent to state prisons on drug charges at 13 times the rate of white
men" even though five times as many whites use cocaine; minorities are given longer
sentences and treated more harshly than whites. These three trends -- private prisons,
private sector production in prisons, and a judicial system which targets minorities --
are creating a system tantamount to slave labor.
Workers and Unions GATS is likely to accelerate the
use of cheaper labor abroad facilitated by use of the internet in providing many services.
Privatization of government services will allow for replacement of public sector unions
with non-unionized workers. This loss of worker power will further accelerate the race to
the bottom in wages.
There cannot be justice at home or abroad when human services are taken out of the
public sector and given over to profit-driven corporations. This trend is being promoted
by the overall goal of privatization of all services through GATS. How much will be
achieved in this round of negotiations remains to be seen.
The United States Trade Representatives office and the WTO Secretariat say not to
worry. All government services are excepted under GATS Article I, section 3 (b) and (c).
But is this really true? It is important to understand just what these sections say.
Section (b) says "'services includes any service in any sector except
services supplied in the exercise of governmental authority." Sounds fine, right?
Read on. Section (c) says "'a service supplied in the exercise of governmental
authority means any service which is supplied neither on a commercial basis, nor in
competition with one or more service suppliers."
Now it just so happens that "commercial basis" is not defined in GATS. The
USTR staff say they cannot provide a definition, nor can the WTO staff. Member countries
would have to agree on the definition. Meanwhile, if a dispute arises over whether a
government service is covered, it would be left up to the dispute settlement procedures to
decide the meaning.
"Competition" is also used without any further explanation. If there is one
private school in a community, does that mean there is competition and the public system
is not exempted? If one community is totally public, but the next has a private school
which will accept students from both communities, is there competition? Again, the USTR
and WTO staff cannot provide the definition.
In sum, this exception is so full of holes that it is almost impossible to say with
certainty what local, state or federal government services are covered. One thing is for
sure, the police and military are exempted from GATS under the "public safety"
GATS Article XIII calls for "multilateral negotiations on government procurement
in services under this Agreement within two years from the date of entry into force of the
WTO agreement." Six years after GATS was signed, these negotiations are still
ongoing. There is, however, a government procurement agreement under GATT which only
What Exactly Are the
Provisions of GATS?
Some of the GATS provisions will be familiar to anyone involved in the fight against
the Multilateral Agreement on Investment (MAI). Under GATS some of these apply to all
sectors whether or not they are included in a countrys schedule of commitments.
Others apply only to those sectors included on the schedule.
Most Favored Nation Treatment (Article II) All WTO
countries must treat services and service suppliers from any member country no less
favorably than service suppliers in any other member country. This applies to ALL
services, whether or not they are on a countrys list of commitments. The only
exception is government procurement of services (see above). However, at the time the
agreement was signed, countries were allowed to take one-time only temporary exceptions
which are now up for review.
National Treatment (Article XVII) Services and
service suppliers of member countries must receive treatment no less favorable than that
given to domestic services and service suppliers. This provision only applies to the
sectors included in a countrys schedule of commitments. As with the MAI, a country
could treat foreign corporations more favorably than domestic ones. Take prisons for
example. Once the U.S. puts this sector on its schedule, it would be WTO illegal for
communities to pass an ordinance which restricts the building of private prisons to
Transparency (Article III) All member countries are
to publish all "measures" relevant to GATS. Measures include those by
"central, regional or local governments and authorities; and non-governmental bodies
in the exercise of powers delegated by central, regional or local governments or
authorities." The full implementation of this provision is a top priority for the
U.S. which wants to go even further and require proposed regulations to be published (see
Every law or regulation even in your local community relating to services is subject to
scrutiny under GATS. However, corporations are protected from the government disclosing
confidential information "which would prejudice legitimate commercial interests of
Domestic Regulation (Article VI) This requires that
domestic regulations "do not constitute unnecessary barriers to trade in
services." The disciplines developed under this section can be used to overturn
local, state or federal regulations even if there is no discrimination based on National
Treatment or Most Favored Nation.
General Obligations. Article VI could also become a vehicle for setting
"general obligations" which would not be limited to country-specific
commitments, a position already taken by the WTO Secretariat. This could be a major
intrusion on national, state and local sovereignty.
More Transparency. The U.S. negotiators want all member countries and their
political subdivisions to publish their PROPOSED regulations to allow for public comment
from other member countries. This could be a very significant burden on local communities
who would have to consider such comments from around the world before adopting, for
instance, a change to their regulations for recycling or water treatment. And who would
comment? Most likely the TNCs who have the resources to keep track of how such
proposed regulations would impact their business interests. This UNFUNDED MANDATE is not
really about democracy, it is about corporate power.
Necessity. The Council for Trade in Services is given the authority to
"develop any necessary disciplines" to ensure that such regulations are
"not more burdensome than necessary to ensure the quality of the service" and
are "based on objective and transparent criteria, such as competence and the ability
to supply the service." Currently countries are interpreting this to mean they have
to demonstrate the necessity of their regulations. This potentially gives the Council much
leeway to create international regulations that can trump domestic regulations.
The Working Party on Domestic Regulation, established by the Council, is looking at
legitimate objectives which do not have to meet the necessity test. The European
Communities (EC) has submitted a paper covering "necessity" which lists proposed
legitimate objectives which has some appealing entries such as "protection of
consumers," "protection of the environment," "promotion of welfare,
including public policy objectives," and "ensuring pluralism and a media system
based on free and democratic principles and including a public service broadcast
The WTO Secretariat has responded with its own list: economic efficiency, promoting
competition, administrative efficiency, and economic development. If these were to be
adopted, it would be a major assault on domestic environment, consumer protection and
human health regulations. Think about how this might impact health care, education,
treatment of prisoners, provision of drinking water. Fortunately, the U.S. negotiators are
opposed to adopting a list of "legitimate objectives," since there is a
significant risk that we would end up with the WTOs list.
Tribunals. To top it all off, Article VI has a domestic version of the
investor-to-state provision that has caused such folly in NAFTA and was slated to be part
of the MAI. GATS calls for each country to set up its own tribunals where service
suppliers can take their grievances and expect appropriate remedies.
It is no surprise that powerful corporate lobbies like the US-based Coalition of
Service Industries and the European Services Forum have put expanding the GATS domestic
regulation provisions on the top of their agendas.
General Exceptions (Article XIV) Here at least
measures "necessary to protect human, animal or plant life or health" are
excepted from GATS altogether ....except that the preamble has a caveat large enough to
drive a truck through. Such measures cannot be "a disguised restriction on trade in
services." It is just this language which has led the WTO tribunals to come down
against environmental regulations in cases brought before them.
While Article XIV is generally parallel to Article XX of the General Agreement on
Tariffs and Trade (GATT), it omits any mention of natural resources included in the GATT
general exceptions. But, as we have seen in the case of water, natural resources can come
under GATS. If the operation of a pipeline is a service, then is not the operation of a
coal train a service or the operation of a lumber truck a service? By not exempting such
services, could not GATS undercut the exemption contained in GATT?
Schedules of Specific Commitments (Article XX) The
member countries schedules of specific commitment were annexed to the GATS agreement
at the time of its adoption. Now the pressure is on countries to further
"liberalize" their service sector by increasing their commitments. If a country
fails to state a limitation on national treatment or market access when their schedule is
committed, they are just out of luck. This includes conditions and qualifications on
national treatment for states or provinces and communities as well as for the whole
Conclusion: Its Time
By promoting the privatization and deregulation of all services, GATS represents a
major restructuring of the global economy and a loss of sovereignty at the local, state
and federal levels. When Renato Ruggiero boasted "We are writing the constitution of
a single global economy" that "we" he was referring to is the trade
ministers in bed with the corporations, not us.
It is essential that citizens in the U.S. and around the world come together in a
massive movement to stop further deregulation and privatization of these services. There
is much that can be done locally to build this movement. Here are a few ideas.
* Let the USTR negotiators know that you dont want water included in GATS at all.
Write to U.S. Trade Representative Charlene Barshefsky with a copy to Chris Rosetti,
Director, Multilateral Services and Investment Affairs. Send your letter to : USTR, 600
17th Street, NW, Washington, DC 20508
* Get your city/town council to pass a resolution on GATS. A model resolution will be
available shortly from the Alliance. Contact Ruth Caplan in the DC office 202-244-0561 email@example.com
* Sign the WTO "Shrink It or Sink It" letter which calls for gutting GATS,
saying "areas such as health, education, energy and other basic human services must
not be subject to international free trade rules." Contact Margrete Strand
<firstname.lastname@example.org> for a copy.
* Join Alliance list serves on GATS topics -- water, health, education, prisons -- for
information and action alerts. E-mail email@example.com
* Read and discuss reports on privatization. For starters, we recommend WATER Blue
Gold (from IFG 415-229-9350); PRISONS Mother Jones May/June 2000; EDUCATION The
Nation 9/27/99; HEALTH "The WTO and the GATS: What is at stake for public
health?" Public Services International, http://www.world-psi.org
. The Alliance also has Action Packets available on each of these topics available from
the national office.
* Study the pattern of corporatization of services in your community. What changes have
taken place in the ownership and management of water, school, health, and prison
facilities? What have been proposed? Are any of the corporations headquartered outside the
* After you identify the hot issues in your community, hold a community forum to look
at the problems from both a local and global perspective, including the added threat which
further "liberalization" under GATS poses. Select materials from the Action
Packets to use as handouts.
* Join with other organizations in your community to develop a campaign around your
local issues, linking them with the expansion of GATS.
For more information, contact Ruth Caplan, Co-chair, Campaign on Corporate
Globalization/Positive Alternatives, Washington DC office, 3407 34th Place NW, Washington,
DC 20016 firstname.lastname@example.org
Phone 202-244-0561; fax 202-537-6045