The Political Economy of Tourism Liberalization, Gender and the GATS

Mariama Williams, Ph.D.

Abstract: This paper gives a comprehensive background on the political economy of tourism in countries of the North and the South, both in a historic and a current context. It first highlights some of the contradictory aspects of ‘tourism development’ and economic development from a historical perspective. The second section examines tourism and development from the perspective of social and gender equity. Then the paper examines the impacts of tourism liberalization, with a particular focus on the implications of the major instrument of liberalization in the tourism sector, the GATS. This paper was released as the second paper in the Center of Concern and International Gender and Trade Network Occasional Paper Series on Gender, Development and Trade.

For more information on GATS issues, visit the International Gender and Trade Network (IGTN) website at :

“IGTN On-line Learning Project: General Agreement on Trade in Services”

These lessons will prepare the participants to enter advance discussions around the GATS as well as do research, advocacy and economic literacy on the subject.

The following is excerpted from the 4th chapter of Mariama’s tourism study:

IV. International Trade in Tourism and the GATS: Implications for economic development and social and gender equality.

The distinctiveness of tourism in global trade is that it ‘moves people to the product rather than transporting the product of the people,’ (Pera and Mc Laren, 1998). Tourism is also linked to other areas of the economy: agriculture, land and labour. It is inextricably intertwined with air transportation, the major means used by tourists arriving in the South (a US $414 trillion industry), and communication. Given this, the liberalization of tourism has major implications for social development and gender equality.

First, liberalization of tourism is linked to liberalization in other sectors such as agriculture, TRIPS, services and investment. Liberalization in agriculture and expansion of industries such as logging or mining create opportunities for tourism development. They also erode community self-sufficiency and create dependency on the market, with impacts on food security (Wallace and Sfroza, 1999 and Pera and Mc Laren, 1998). The combined effect of such interlocking liberalization may prove negative for social development, the potential for expansion of small-scale business operations, food security and gender and social equity programs.

Second, progressive liberalization of hotel, restaurant and travel agency sectors in developing countries has been undertaken within the context of structural adjustment where it was promoted by MIGA of the World Bank Group. This has been intensified even in countries not undertaking SAPs. As a result, and especially since the late 1990s, there has been increasing foreign ownership and management of tourism operations in many developing countries. This has implications for government budgets and national industrial plans. Already in some countries such as Thailand, many changes and proposed changes are occurring to expedite and consolidate this process. Thailand, which engaged in progressive liberalization of its hotel, restaurant and travel agencies since the late 1990s, is radically altering its foreign business laws in order to facilitate further inflows of foreign investment (TWN 1999, 2). Thai activists and SMEs are resisting some of these changes on the grounds that these would have would have tremendously negative impacts on small and medium sized operations.

Third, liberalization tends to ‘prioritize global commerce over everything: self-reliance of communities, human rights and health and safety’ (Pera and McLaren, 1998). AndreaYoder (1998) writes that there is already a problem in enforcing standards in the tourism industry such as prior informed consent support for local initiatives and environmental regulations. Many of these pro social and human development measures are already in conflict with WTO rules. As noted by Wallach and Sforza, WTO orchestrated uniform global standards which are designed by TNCs to promote harmonization of standards may “facilitate the growth of consumer  culture, [but they] militate against standards which reflect differences in cultural values. Such differences are seen as undesirable because they fragment the global market”(Wallach and Sforza, 1999).

Fourth, trade rules such as the proposed new issues in the WTO (investment, competition policy and government procurement) may limit opportunities to create sustainable tourism alternatives as well as put the breaks on the continued development of ‘pro poor’ oriented approaches to tourism.

Investment and competition rules will make it impossible to ensure indigenous and local control over tourism products. This is because it will limit countries’ ability to put conditions on types of investment they receive. It will grant more rights to foreign

investment and will increase the leakage of profits out of a host country.

Competition policy will impact the rights of communities to regulate which companies can set up business in their land.

TRIMs already restrict countries’ rights to require companies to purchase local materials and the Most Favoured Nation provision makes it illegal for countries to reward companies who hire locally or have good environmental practices. (Yoder 1999, Pera and Mc Laren, 1998 and Pleumarom, 1999).

In this context a great deal of attention and importance must be focused on the current

negotiations for further liberalization of tourism under the GATS. According to Equations, the GATS impacts tourism via rules and regulations on the production, distribution and marketing of tourism services (mode of supply); tour operators to supply services across borders with other countries (cross border supply); international visitors (consumption abroad); the flow of international hotel chains, branches or full ownership of hotel chains and agencies in other countries (commercial presence); and the activities of tour guides and hotel managers (presence  of natural persons). But it also has impacts on air transport and communications.

The direct impacts of the GATS as it relates to tourism would include:

·        The GATS would allow foreign companies to merge or take over local companies. This is a threat to indigenous-owned and operated sustainable tourism initiatives.

·        The GATS would allow upward pressure on the exchange rates with implications for real wages, the price of land and other resources as well as for traditional exports such as agriculture, mining and fishing.

·        Domestic regulations rules may impact governments’ use of taxation policies to prevent de-industrialization and de-agriculturalization. With liberalization governments may not be able to impose commodity taxes to increase the welfare effects of tourism.

·        Governments will not be able to mitigate or limit the impact of the outflow of repatriated earnings of FDI which will result in reduced welfare.

·        GATS may prove detrimental to eco and heritage tourism development. While eco-tourism is without substantial cost+++, it may provide more sustainable jobs, preserve and conserve the resource bases, and help to ensure that more tourist dollars remain in the country. These benefits tend to accrue more when there is planning and management with a long-term perspective and with local community participation, which may be greatly reduced under the GATS.

·        The GATS has serious implication for pro-poor tourism that attempts to generate net benefits to the poor. The core of this strategy is to ‘unlock opportunities for the poor with tourism rather than to expand the overall size of the sectors, to spread income beyond the individual earners to the wider community, and to address the negative social and environmental impacts’ (Pera and McLaren, 1998). However, this requires domestic regulations to remove some barriers to entry as well as to protect countries’ ability to participate effectively in tourism.

Currently much of what the GATS seeks to liberalize has questionable beneficial effects for the developing countries. Interestingly, in areas that would increase the beneficial impact of tourism, there is no strong push for liberalization. Rather, the favoured approach is to leave these areas in the realm of special agreements, bilateral or regional arrangements or under the umbrella of code of conduct. This is so, for example, with air transport, open skies agreements, GDS and e-commerce.

To the extent that the GATS and current review and negotiations on GATS promote further rapid liberalization resulting in the widely predicted increased tourism growth, there are some economic effects that will be important for economic development, social development and gender equity that will need to be seriously considered.

The economics behind tourism liberalization [...] are based on the idea that tourism will yield overwhelmingly positive benefits on growth linked with development. But this is based on input-output studies that show that increased tourism implies across the board expansion of economic activity, (Grassl, 1999). This ignores distributional impacts and forward and backward linkages which are endemic problems in developing countries’ economies. It also does not take into account that tourism growth may increase competition with other sectors such as domestic agriculture and other export areas. Most of these sectors are the ones which provide wages for women. While tourism may bring employment, it is often seasonal and highly exploitative.

Liberalization can also intensify the leakage factors as more money leaves in the form of management, marketing, distribution, copyright and IPR fees.

The above discussion on the economics of tourism [...] on gender and tourism raise important questions about the social and welfare impacts of GATS-driven liberalization of tourism. They also point to some kinds of strategic interventions that are important for promoting more balanced gender and social equity outcomes in relation to tourism. However, the strategic interventions dedicated to promoting the long-term strategic gender interests of women are predicated on a certain amount of latitude in developing countries’ ability to manipulate and regulate the agents, mechanisms and processes of tourism development. The fact that this latitude is a constraint, not just by the traditional conflict between the desires and influences of national elites and those of the poor, but by regional and multilateral trade rules, makes it critical that these extra national policies be fully interrogated for their social and gender accountability.

+++Endnote: As with generic tourism, eco-tourism may impact on land, water and energy. It has some problems in terms of waste disposal and compaction of soil; loss of habitat space and overuse of land. But, these problems can be mitigated by enforcing moderating instruments such as government regulation. Domestic regulations provisions of the GATS may preclude such options. In addition, the problem of managing FDI, which is increasingly involved in these areas, will be constrained by TRIMS and GATS.

NOTE: The articles introduced in this Clearinghouse do not necessarily represent the views of the Tourism Investigation & Monitoring Team (tim-team)