Our World is NOT for SALE
By Annette Groth
GATS, the General Agreement on Trade in Services is an international deal to open up economies to competition from foreign firms. It was signed in 1994 by the members of the General Agreement on Tariffs and Trade (GATT), the predecessor to the World Trade Organisation.
Decades of negotiations under GATT have reduced tariffs on goods to low levels. Western governments now want to free up trade in services. Already in 1999 the service sector amounted to 1,35 trillion US$ which was then a quarter of the global trade in goods. Western countries and Western-based corporations account for about 80% of world total service exports. Africa, by comparison, gets about 2%, mostly in tourism.
The GATS agreement is a document comprised of 600 pages and 20 000 attachments and hardly any politician or MP has ever read this voluminous paper. Even the former WTO Secretary General Ruggiero doubted publicly that the governments were fully aware of the implications of the GATS agreement they signed.
GATS is a corporate boot sale of essential services, from water to electricity to the media. It is an attack on democracy that will lock the world into privatisation and deregulation of essential services ad infinitum.
The significance of GATS is relatively easy to grasp. “All human activities are to become, in the fullness of time, profit-oriented commodities that can be invested in and traded. And GATS will make this irreversible. “GATS is not a finished treaty but an open-ended framework agreement that mandates ‘successive rounds of negotiations’. The goal of these negotiations is to ‘achieve progressively higher’ levels of liberalisation. What's not opened up today will be dealt with tomorrow until, presumably, all services are opened to all consumers by all countries in all ‘modes’ of delivery.” (Susan George: “How GATS could effect your life”, Red Pepper, Jan. 2003)
Twelve broad categories are covered by GATS.
These are: services to business; communications; construction and engineering; distribution; education; environment; financial services; health and social services; tourism; sports, culture and entertainment; transport; and, in case anything is not covered by the preceding, it comes under "other". Energy, previously considered a good, comes under "other".
A total of 160 sub-categories cover everything from postal services to scientific research, architecture, publishing and rubbish collection.
“The truth is, "public service" is an alien concept in GATS-world. GATS' only goal is to encourage more trade. Article I of GATS starts with a proclamation that the agreement does not apply to "services supplied in the exercise of governmental authority". This sounds great, except that this exemption is immediately followed by a qualifier: such governmental services must be supplied ‘neither on a commercial basis nor in competition with one or more service suppliers!". (S.George)
Maybe in North Korea or Cuba there might just be public services that aren't delivered on a commercial basis or in competition with other suppliers, but not anywhere else.
Article VI, 4 is equally alarming. It would give GATS powers to interfere, via the WTO's Dispute Resolution Body (DRB), with government efforts to pass "measures" ("laws, regulations, rules, procedures, decisions, administrative actions or any other forms") that are deemed to constitute "unnecessary barriers to trade in services" . In other words: “don’t let your pesky national standards get in the way of foreign corporate interests.”
Referring to the DRB, any member country can challenge the laws and regulations of another country on the grounds that they violate WTO rules. “The dispute settlement panel (DSP) is comprised of appointed ‘experts’ who hear the case behind closed doors. If the DSP decides on sanctions the only way to escape them is if every member opposes them –a virtual impossibility. Environmental laws, labour standards, human rights legislation, public health policies, cultural protection, food self-reliance or any other policies held to be in the ‘national interest’ can be attacked as unfair ‘impediments’ to free trade.” (Wayne Ellwood: “the No-Nonsense guide to GLOBALIZATION”, New Internationalist Publications Ltd, London 2001, p.34,35)
There are already some cases where the WTO forced governments to change national legislation. In the organisation’s first trade complaint (a challenge by foreign gasoline refiners to the US Clean Air Act) the Environmental Protection Agency was given two options. Either remove the offending statute or face sanctions in the order of 150 million US$ a year.
A rather known case is the banana case. Under the terms of the Lome Convention
the EU had promised to give preference to bananas from former European colonies in Africa, the Caribbean and the Pacific. The Europeans stressed that this was a matter of sovereign foreign policy in relation to former colonies while the US argued that EU tariffs prohibited American banana companies in Central America from reaching lucrative markets in Europe. The WTO decided on behalf of the US, ruling that the European preference was unfair.
This decision will have a disastrous impact on the small banana producers in many countries.
Whether the EU in fact paid any compensation is unknown as this kind of information usually is not published.
The US also took the EU to the WTO’s dispute settlement panel as the EU prohibits the import of hormone-fed beef. Again the Panel decided in favour of the US and ordered the EU to remove its import controls and, when it refused, authorized trade sanctions worth more than 125 million US$.
In retaliation to the prohibition of hormone-fed beef the US imposed 100 per cent tariffs on a range of European imports including mustard, pork, truffles and Roquefort cheese.
The most recent case is about genetically modified food (GM) which is banned in the EU, now the US took the EU to the dispute settlement panel to enforce the EU to import GM food from the US.
Like these disputes held secretly at the dispute settlement panel, the GATS negotiations are also being held behind closed doors, this is the reason why GATS is still so unknown. The EU speaks with one voice in the WTO GATS negotiations and despite the strong protest raised by more than 260 MPs in the UK and the “serious concerns” expressed by the German Parliament midst March and its request to give the Parliament more time to discuss the offers and the requests of the various sectors to be “liberalised” made by the EU, the EU continues with the negotiations. It is noteworthy to emphasise that access to the Committee in which the EU bargains about its requests and offers is limited to one or two representatives of the member countries and to the representatives of two major European service enterprises but NOT to members of the European Parliament. Hence, the private sector has a strong influence on the EU negotiations as it has a vivid interest in “conquering” the public services in the developing countries.
The EU commission itself publishes on its webside that Gats is "first and foremost an instrument for the benefit of business". According to David Hartridge, former director of the WTO services division, "without the enormous pressure generated by the American financial services sector, particularly companies like American Express and Citicorp, there would have been no services agreement".
GATS is a serious attack on our democratic systems as Parliaments do not have a voice in these negotiations and as GATS is international law and practicably irreversible.
Despite the attempt to keep the EU requests secret, a document leaked out in March listing the EU requests. “This is a corporate shopping list of requests to open up service sectors in everything from water supplies to banking.”
The requests are described by an Indian NGO as "a frontal attack on the Indian constitution". The Council of the Canadians, a large and moderate consumer group, described them as "chilling". The EU demands are extraordinarily aggressive - whether they are to remove the ability to limit Wal-Mart's activities in India, or to take away the Mexican people's control of the land along their borders, or to destroy Malaysia's capacity to regulate its financial sector.
Another controversial demand is for Canada, the US, Australia, China, India, Malaysia, Indonesia, Argentina, Panama and Colombia to make no market restrictions on the distribution of alcohol or tobacco.
To add insult to injury, while the EU incarcerates increasing numbers of migrants from poor countries, it is now pushing across the board for intra-corporate labour mobility under GATS. In a nutshell, that is free movement for corporate yuppies, but not for ordinary labourers..
The most dangerous request made by the EU and other countries is the liberalisation of the public financial sector. That means governments will loose its control of speculation monies and foreign exchange. The volume of worldwide foreign exchange transactions have been exploded as many countries pressured by the World Bank and the IMF have lowered barriers to foreign investment. Today it is estimated that more than 1.5 trillion US$ are being traded on global currency markets daily, 95% of which is bet on whether currency values and interest rates will rise or fall. For every dollar that is needed to facilitate the trade in real goods, nine dollars are gambled in foreign exchange markets. As growth in the real economy declines due to over-capacity and shrinking wages worldwide, speculative investment has grown. The rules for running the global economy, laid down at Bretton Woods after World War II, specifically sought to rein in finance capital and contain it within national borders. Keynes, the British delegate to these meetings, warned that unregulated flows of international capital would remove power from elected politicians and put it into the hands of the rich investors. Critics of corporate-led globalisation charge that unregulated flows of capital pose a major threat to the stability of the global economy, turning the world into a ‘global financial casino.’
Between 1973 and 1995 there were 11 major global financial blow-ups. The last major one began in Southeast Asia in mid 1997 when ‘hot money’ panicked and fled as quickly as it had arrived. Both the IMF and the World Bank had advised the countries to deregulate their capital accounts as a way of enticing foreign investment. Starting around 1990 the Southeastern Asian countries adopted an open-door policy to foreign investment. Millions flooded into the stock market and into real estate and other easy consumer credits. Thailand’s foreign debts ballooned from 21 billion in 1988 to 89 billion US $ in 1996. In only four years foreign debts of South Korea nearly tripled from 44 billion to 120 billion US $ in 1997. When the investors realized that these countries could not repay their debts, they left with their investment. The IMF was called in with a 120 billion US$ bailout plan. Public money from Northern taxpayers (via the Fund) was handed over to indebted governments, then recycled to commercial banks in the South to pay off their debts to private investors. In Asia this bailout of international creditors was dubbed ‘socialism for the global financial elite’ by some critics.
The people in South East Asia were the victims of this financial adventure. In Indonesia, it is estimated that half of the businesses in the country went bankrupt. 20 million people were laid off in only one year (between Sept. 1997 and Sept. 98), and Oxfam estimated that more than 100 million Indonesians were living in poverty one year after the crisis - four times more than 2 years earlier.
The IMF pressured South Korea to lift up its restrictions on outside ownership so that foreigners could purchase up to 55% of Korean companies and 100% of Korean banks. A US Economist commented: “Korea is now owned and operated by our Treasury, that’s the positive side of the crisis.” The former US Trade Representative Mickey Kantor said at the time, “the recession in the Tiger Economies was a golden chance for the West to ‘reassert’ its commercial interest.” (Ellwood, page 83, 84)
As Malaysia kept at least some control mechanism on its financial system against the advice of the IMF it was the only country that was least affected by the Southeast Asian crisis.
It was liberalisation of the financial markets that plummeted many countries in absolute poverty, thus destroying substantial parts of the economies in many countries. So why has the WTO such a vivid interest in the liberalisation of the financial markets whereas the risks are very well known? Have some companies which benefited tremendously from the financial disaster the intention to bring the economies of other countries under their control by privatising national bank and financial systems?
There is another insidious objective of GATS: the new talks are aimed at developing new GATS rules and restrictions, intended to further restrict the use of government subsidies, such as those used in public works, municipal services and social programmes. “A particularly threatening development is the demand for an expansion of the bland-sounding ‘Commercial Presence’ rules. Commercial Presence allows an ‘investor’ in one GATS country to establish a presence in any other GATS country and compete not only for business against domestic suppliers but for public funds against domestic publicly funded institutions and services.” (Maude Barlow: “GATS- The last frontier of globalisation”, The Ecologist Febr. 2001, page 3). This means that a US company may open a university in Stuttgart and will be entitled to ask for German government subsidies as do the German institutions.
Water in developing countries is a major target for European companies in the current negotiations. During its recent visit to Ghana, Pascal Lamy, the European Trade Commissioner confirmed that the “EU will not change its demand of African and other developing countries to ‘liberalise’ the provision of water and other public services”. The international water market is worth billions of Dollars and most of the global players in this market are European companies.
And as the privatisation of water – a public good which is essential for our lives - will be one of the key elements in the next negotiations in September, I would like to present some examples from countries which have privatised their water supply systems.
In 1999 South Africa initiated one of five water privatization programs as part of a government policy aimed at making people pay for the full cost of having running water in their homes. The South Africans call it "total cost recovery."
Unlike many countries, where residents pay only a fraction of the total cost of having running water in their homes, the idea behind "total cost recovery" - the brainchild of private water companies and World Bank economists - is that ending subsidies will help finance improved waterworks and build the country's economy.
Free water "is not so good an idea," said Yves Picaud, managing director of Vivendi Water in South Africa." Free water, he said, "gives the impression that water is free, service is free, and you can use water as much as you want."
But in practice, total cost recovery may have caused more misery than development. In poor areas where privatization has been implemented, millions of people have been cut off because they cannot afford to pay water bills that often make up 30 percent of their incomes.
As many as 10 million South Africans have had their water cut off for various periods of time and two million people have been evicted from their homes for not paying utility bills. Many poor families pay up to 40 percent of their monthly income for water and electricity.
The water cut-offs have forced thousands of poor people to seek water from polluted rivers and lakes and has led to South Africa's worst outbreak of cholera, in which thousands of people were sickened and hundreds died. In the end, the government spent millions of dollars to control the spread of the disease and to truck clean water to the stricken areas.
"The cost recovery program sounds good, but ... it forced people to go back to the original sources of water, polluted streams and rivers and the like," stated a scientist of South Africa's Human Sciences Research Council, Africa's largest and most respected social science research organization. "That was the direct cause of the cholera epidemic," he said. "There is no doubt about that. People are saying: I have to choose between water and food - or between electricity and sending my child to school."
Many townships have put meters on communal taps. To access them, residents must buy a prepaid water card, which works like a phone card. The customer slips the card into a meter and takes water from an activated tap. The water stops when the card is removed. When the card runs out, the customer has to buy another. Trouble is that many poor people can not afford $4.02 for a prepaid water card. The prepaid meters are "the most insidious device," comments a Canadian researcher. "People won't buy what they need - they'll buy what they can afford. So people are simply cutting themselves off rather than having the state come in and do it." Although Section 27 of the South African Constitution guarantees citizens access to sufficient food and water poor families have neither.(excerpts from “Metered To Death: How a water experiment caused riots and a cholera epidemic”, February 06, 2003, The International Consortium of Investigative Journalists)
In the UK and Canada the quality of water declined drastically after privatisation which led to diseases. Compensation for serious health problems due to the bad quality of water is being sought in numerous court cases. On top of this, water prices went up considerably.
A notable example comes from a small town in Ontario, Canada, where seven people died and more than 2000 became ill as a result of E.coli contamination in the drinking water. The private company contracted to test the water knew about the contamination. But under regulations intended to encourage privatisation, the company was not required to alert government officials about a public health crisis in the making.
The UK has the longest history with privatisation introduced by Margaret Thatcher in the 80s and the impacts are all negative: privatisation of the public transport systems led to a series of train accidents with many casualties and injuries, the partial privatisation of the public health sector leads to long waiting lists for urgent operations for people who cannot afford the expensive private clinics. The result is the development of a “health tourism” to other European countries where British patients receive treatment to a much lower price.
These are only very few examples and the list of negative impacts due to privatisation of public services is long.
Considering the negative impacts of privatisation, the question arises why governments privatise their valuable public commodities. Well, our media are constantly reiterating that public services are completely inefficient and that the costumers will only get good service if governments hand over their services to the private sector. This is widely believed but this is just a myth. Arundhati Roy, a famous Indian activist and writer comments: “Privatization is presented as being the only alternative to an inefficient, corrupt state. In fact, it's not a choice at all... it's a mutually profitable business contract between the private company (preferably foreign) and the ruling élite of the Third World.” This does not apply only for elites of developing countries but equally to elites in the so-called industrialised world. In fact, Executives of Vivendi, Suez and other water companies have been convicted for bribing government officials to obtain contracts.
The World Bank and the IMF put tremendous pressure on governments to ‘liberalise’ their public goods, in particular water, and threaten them to withdraw already approved credits or to refuse to give new loans. This is pure blackmailing and the only response to that is the refusal of accepting new credits by the governments. It would be interesting to see the faces of the representatives of the World Bank or the IMF if a Kenyan Minister refused a credit by reiterating that Kenyan waters are not for sale and that he therefore would renounce of accepting a credit.
Despite the wide-spread belief that public services cannot function efficiently, some examples prove the contrary.
The water authority in Lilongwe, Malawi, reduced leakage to 17 per cent in the 1990s.
In 1994 there was a successful restructuring of SANAA, the state-owned water company in Tegucigalpa,Honduras. They dramatically improved efficiency by introducing computers, decentralizing the company's work and tightening up on overstaffing due to corruption. Leakage rates fell and the reliability of supply improved allowing the majority of the city's populations to receive piped water 24 hours a day. In Honduras the trade union at the water utility took a central role in the restructuring, whereas in the private sector the first step towards efficiency is usually to cut jobs. Public-service workers are a vital source of expertise and commitment and authorities in some countries are beginning to recognize these strengths.
In São Paulo the public water company SABESP extended water to an extra 940,000 households and sewer pipes to an extra 787,000 households in the space of four years, an increase of 25 per cent in both cases. At the same time it turned around a financial deficit and maintained employment.
In Porto Alegre, Brazil, the municipality has adopted a system of 'participatory budgeting' in which over 14,000 people take part each year. There has been far greater transparency - detailed information is made available to the Council on request. As a result of direct citizen input, resources have been redirected to small infrastructure projects in poor neighbourhoods. The idea of citizens helping to set local budgets was developed by the Workers Party, whose leader Lula is now Brazil's President. Participatory budgeting is also being tested in other municipalities where the Workers Party has been elected.
A similar system has been developed in the southern Indian state of Kerala. It is based on directing funds for services to local village councils (panchayats). The councils are then required to draw up spending plans through a series of public assemblies which are heavily publicized. All elected councillors are given three days of training and are supported in their duties by a cadre of volunteer professionals. The danger of corruption is dealt with by ensuring that all documents and decisions are open to public scrutiny. This works at the most basic level – for example the public now knows what a local doctor for the state-funded health service is paid to work.
“There is one final advantage that public-sector operators have over private companies - they can't pack up and leave when the going gets tough. Last year the US energy company AES walked away from its operations in Orissa, one of the poorest states in India, because it couldn't make enough profit. The world's leading water transnational Suez gave up running the water services for half of Manila because it couldn't cover its debts and still make a profit. And the British firm, National Express, recently walked away from its contract in Victoria, Australia - leaving the local bus company with a $55-million debt. These are not accidents. They happen because private-sector operators are obliged to maximize shareholder return. When it becomes unprofitable to stay, the private companies have to go.” (David Hall: “The ‘B’ Word”, p. 3, The Internationalist, 4/03)
For many reasons it is obvious that privatisation is not the panacea for a country’s problems like Kenya. Private companies are no charities but have to make profit. They do not care about people, for them it does not matter if thousands of people get sick due to contaminated water.
“We have to call for a GATS moratorium and should not allow any new agreements to be signed in Cancun. There is not much time left as multinational corporations push the WTO to finalise the expanded GATS round by the end of 2004. GATS will then fully be implemented by January 2005 and as mentioned before, GATS is irreversible.
We need GATS-free zones on universities, churches and local community centres. We need to go to our governments pass resolutions against GATS. We need to write letters to our governments and to our newspapers. We need ironclad guarantees from our governments that no future GATS negotiations would prevent them from providing good public services to their citizens. We must seek to create a global democracy in which governments would serve their citizens and honour their commitments on human rights and ecological stewardship. We must not sit silent by and allow these rights to be traded away.” (M.Barlow)
Already in late 1999 Charlene Barshefsky, the top US trade negotiator, hinted that the single greatest threat to globalisation is ‘the absence of public support.’ Her concerns are justified. There is a growing worldwide movement campaigning against GATS. It is a movement which is becoming stronger by the day. We have to urge our governments to act in the interests of their people and to construct a system that will put humans back in control at the centre of economic activity.
Our world is NOT for sale!!
© Annette Groth, June 2003