NGOs call for EU transparency in trade talks on services

In April, the EU Commissions draft proposals on the General Agreement on Trade in Services (GATS) were leaked to the Corporate Europe Observatory and posted on the websites of several other NGOs. The revelations were shocking as they disclosed that the EU was planning to push some 29 countries (including China, India, Indonesia, Argentina, Panama, Colombia and Mexico) to liberalise by privatising and opening up for competition a variety of services, including essential public utilities such as water and energy. The EU reacted to this exposure by accusing NGOs of publishing confidential papers and spreading scare stories. We publish below a response by NGOs to the EU charges and an open letter by NGOs to EU Trade Commissioner Pascal Lamy and EU member states calling for a full public disclosure of all the EUs proposals on GATS to other WTO members.

The leak

ON 16 April 2002, draft European Commission negotiating proposals on the General Agreement on Trade in Services (GATS) were leaked. The drafts contained proposals to 29 World Trade Organisation (WTO) member countries requesting they apply the GATS free-trade rules to a wide range of their service sectors which includes water, energy, transport, tourism, construction and distribution services.

Following the publication of the draft proposals on various NGO websites and in several newspaper articles, the European Commission has issued a reaction to the leaks. In this reaction, the Commission accused NGOs of publishing confidential papers, influencing the negotiation process and spreading scare stories. Corporate Europe Observatory (CEO), Friends of the Earth Europe (FoEE) and the World Development Movement (WDM) explain in this short statement why the documents were made public, why closed-door negotiations are unacceptable, what must happen now and what the real GATS debate is about.

Democratising trade policy: An urgent need for transparency

The decision to release the leaked documents by groups around the world was not taken lightly. The hand of NGOs has been forced by the fact that the EU:

·        has made no attempt to assess the impacts of past services liberalisation - as called for in the GATS itself;

·        has made no progress in assessing the impacts of proposed services liberalisation;

·        is pushing an agenda whereby countries will commit to greater levels of service liberalisation and lock this into a WTO agreement; and

·        despite the public interest in the GATS, has conducted negotiations behind closed doors with an unacceptable level of industry involvement.

The draft proposal documents were circulated to generate public discussion and democratise trade policy, particularly at the EU level. This is important with the onset of the intense request - offer phase of negotiations - where WTO members will request service liberalisation from other WTO member states.

So far, the Commission has made it clear to NGOs that proposals would not be made publicly available. Recently the head of the Cabinet of Pascal Lamy, Pierre Defraigne, stated that the EU requests can and WILL NOT be made public.1 With parliaments also in the dark, we are deeply concerned that important negotiating proposals are being decided by the Commission, member state trade experts (within bodies such as the Committee 133) and industry lobby groups such as the European Services Forum with little transparency and public oversight.

The GATS debate: Addressing the European Commissions response

In its reaction to the leaked documents, the Commission notes that it will not comment in detail on the drafts but make a few general points in response to some of the more exaggerated claims that have been made in the press. These general points offer nothing new to those familiar with the GATS debate.2 They simply repeat the common GATS defence. GATS critics have responded to these points on several occasions. However, as is demonstrated in the following rebuttal, the arguments used by the EC in support of the GATS are contradicted by the very content of the leaked draft proposals under discussion. In the face of this, the ECs reaction appears even more disingenuous than their previous pro-GATS statements.

The ECs claims fall into five familiar categories:

1.      The provision of basic services

The expressed concerns that future GATS negotiations may undermine the provision of public services... for example by forcing privatisation of such sectors or by prohibiting public funding or subsidies for them are completely wrong.

·        With the list of draft GATS proposals for 29 specific WTO members now available, observers can see for themselves the services in named countries that have been targeted by the EC for GATS coverage. This includes basic services such as water delivery (listed as water for human use and wastewater management) and energy services.

·        In its drafts, the EC is asking countries to make full GATS commitments to GATS disciplines in these sectors. This means applying GATS free-trade rules to the sectors in question. While the groups presenting these arguments have never claimed that GATS forces privatisation, even GATS supporters have acknowledged that opening service markets to foreign providers [which is what GATS is designed to do] is self-evidently inconsistent with retaining public monopolies.3

2.      GATS is a flexible agreement

The GATS is the most flexible agreement in the WTO system. Each country determines the list of activities for which it is prepared to offer market access and national treatment to foreign service providers.

·        The flexible negotiating structure should indeed be emphasised (often referred to as a bottom-up agreement). From the beginning, introducing services into a WTO agreement was controversial. Therefore without a more flexible negotiating structure, it is unlikely that developing countries would have ever agreed to its inclusion in the WTO.

·        The ECs defence lacks political realism. To rely on the agreements structure is inadequate as it gives a misleading impression of how the GATS works in practice. EC officials have acknowledged that pressure from the EU and US on developing countries is a fact of life. This is the political context in which the current negotiations are taking place.

·        The purpose of the GATS is for WTO members to progressively liberalise service sectors. Under Article XIX, governments enter into successive rounds of negotiations... with a view to achieving a progressively higher level of liberalisation.... directed towards increasing the general level of specific commitments undertaken by Members under this Agreement.4

3.      Maintaining the ability to regulate

WTO members maintain the sovereign right to regulate economic and non-economic activities within their territory in pursuance of public policy objectives.

·        The WTO has made the link between the GATS and deregulation clear; because the large share of trade in services takes place inside national economies... its requirement will, from the beginning, necessarily influence national domestic laws and regulation in a way that has been true of the GATT5 only in recent years.6

·        The EC fails to mention that countries ability to protect regulations depends on them listing such requirements at the time of committing services to the GATS. This demands a level of foresight and capacity unavailable to most WTO members, not least as it requires an awareness of both current and future regulations.  Developing countries  are  especially  disadvantaged  in  this  respect.

·        In their reaction the EC seems to fail to understand the conflict between their negotiating objectives and the ability of countries to regulate investment. By targeting the restrictions that countries did manage to place on their previous GATS commitments, the EC is requesting the removal of regulations that countries place on foreign investors in order to achieve certain development priorities. For example, limits that Malaysia places on foreign banks operating in its territory, or South Africas limit on the amount of local money that majority foreign-owned companies can borrow.

·        The right to regulate is likely to be even less secure when negotiations on Article VI.4 on Domestic Regulation are concluded.

4.      Service liberalisation and development

·        The much-vaunted benefits of service liberalisation for development are based on very limited evidence. There has been no adequate assessment (comprising economic, social and environmental aspects) of the impact that services liberalisation has on sustainable development.

·        The EC response does not recognise the reality of liberalisation in many service sectors. It is easy to blame flawed reform programmes but one of the principal difficulties with market liberalisation in key service sectors such as water, transport and energy sectors is the preponderance of natural monopolies. These have led to an increase in market power among a few multinationals, rather than increased competition.7

·        While the EC accepts that there needs to be appropriate institutional and regulatory framework[s] in place when countries embark on liberalisation, this is not reflected in their draft proposals. They are clearly targeting sectors in countries where this framework does not exist. In these countries the failure of weak regulatory bodies to be able to stand up to multinationals becomes all the more important when services like water are necessities and not luxuries.

5.      Provision of development assistance

·        Increasing their Trade Related Technical Assistance (TRTA) and Capacity Building (CB) funding demonstrates that the EC is aware of the sheer magnitude of the capacity problems faced by many developing countries at the WTO. Whatever recognition there is, however, is flatly contradicted by the ECs aggressive and complex negotiating proposals as represented in the leaked drafts.

·        The EC must recognise that in order for its assistance programmes to be effective, they must be fully demand-driven by recipients, based on their specific country situation, rather than driven by the ECs negotiating interests and agenda.

·        The focus of this assistance must allow countries to develop policies that deliver the best outcome for the majority of their people, especially the impoverished. There is no proof that liberalisation policies such as those in the GATS can achieve this. In fact much evidence suggests the reverse. Assistance must not be attached to the implementation of trade rules with an ideological presumption that liberalisation benefits the worlds poor and the environment.               

Notes

1.   Pierre Defraigne, e-mail to Susan George, 3 April 2002.

2.   For a more detailed response to these points see: The GATS Debate: A response to common arguments used against the critics of the General Agreement on Trade in Services, World Development Movement, May 2001.

3.   The Case for Liberalising International Trade in Services, International Financial Services London (IFSL), 1 May 2002.

4.   General Agreement on Trade in Services, 1995.

5.   GATT = General Agreement on Tariffs and Trade.

6.   An Introduction to the GATS, WTO Secretariat, Trade in Services Division, October 1999.

7.   See Chapter 5 of: GATS: A Disservice to the Poor - the high costs and limited benefits of the General Agreement on Trade in Services, World Development Movement, January 2002.

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Open letter to Commissioner Lamy and EU member states on EU General Agreement on Trade in Services (GATS) requests

7 May 2002

Dear Commissioner Lamy,

dear Committee 133 members,

THE EU, in particular the European Commissions Directorate General Trade and the Committee 133, is at the centre of the GATS request-offer process, developing a common position on services liberalisation for the 15 EU member states. The requests now being made to non-EU member states, as well as the requests now being received by the EU from other members, have profound implications for citizens everywhere, yet this process has so far been undertaken entirely by the European Commission and the Committee 133 under conditions of total opacity.

As you might know, some NGOs, MEPs [Members of the European Parliament] and the media have obtained a first list of 29 draft EU proposals which request that specific countries increase their GATS commitments in a whole range of sectors. The range of sectors included in these proposals raises concerns about the social, economic, environmental and developmental threats of the services negotiations. We know that more requests are currently being prepared behind closed doors, and will be finalised in the coming months in time for the 30 June 2002 negotiating benchmark.

We are deeply concerned about the lack of transparency around the GATS decision-making process as a whole. So far it has denied the public necessary information and thereby prevented any possibility of citizen oversight or control. Transparency is essential because of the crucial role services, particularly public services, play in all societies. As you are aware, the European Parliament has no right to co-decide on these issues but only to advise and in the present case even that limited right is being denied. We also  regret  that  business  interests  are far more closely involved and informed concerning the GATS process than other elements of civil society.

For these reasons, we ask  both the Commission and our individual governments to institute a transparent process concerning the GATS negotiations. This would imply publication of all request proposals sent by the EU to other WTO members. This must then be followed by transparency in the offers phase of negotiations.

We first ask that the European Commission and each member state make available to parliament and public, details of the requests that have been made to the EC by other WTO members in the current phase of negotiations. This must then be followed by full transparency and real consultation in the ECs offer-making process.

To begin with 30^th May is a reasonable deadline for posting the information currently available about the ECs requests on the EU website and for governments to make this information directly available to all concerned ministries and to national parliaments. The European Parliament should also be kept fully informed.

Liberalisation and market opening of services are sensitive. Our view is that no such opening should take place under GATS without full public disclosure and debate. We refuse to be confronted with a fait accompli.

Finally, we once more urge you to undertake, in co-operation with members of civil society, a full evaluation and impact assessment of the consequences of the current or proposed GATS obligations BEFORE proceeding with further GATS commitments.

Yours faithfully,

1.   UK GATS Network, UK

2.   AGEZ (Working Association for Development Cooperation), Austria

3.   Amici della Terra, Italy

4.   Anti-Globalisation Network, UK and International

5.   ARGE Weltlsden, Austria

6.   Association pour la Paix, Belgium

7.   ATTAC Austria

8.   ATTAC Belgium

9.   ATTAC Catalunya

10. ATTAC Denmark

11. ATTAC Finland

12. ATTAC France

13. ATTAC-Helles, Greece

14. ATTAC Italia

15. ATTAC Ireland

16. ATTAC London

17. ATTAC Munich

18. ATTAC Sweden

19. ATTAC-Pa’s Valencia, Spain

20. ATTAC Sevilla

21. ATTAC Vlaanderen

22. Abergavenny and Crickhowell FOE local group, UK

23. Alternative to the EU, Finland

24. Bond Beter Leefmilieu, Belgium

25. Both ENDS, Netherlands

26. Brighton and Hove Trade Justice Movement (a coalition of local groups of the World Development Movement, Oxfam, Friends of the Earth, People and Planet and Christian Aid), UK

27. Buendnis fuer Eine Welt /OeIE, Austria

28. Buergerwelle e.V. - Dachverband der Buerger und Initiativen zum Schutz vor Elektrosmog, head organisation of citizens and action groups for protection against Esmog, Germany

29. BUND, Germany

30. Burslem Bible Centre, England

31. CADTM, Belgium

32. Campagna per la Riforma della Banca Mondiale, Italy

33. CCCOMC, France

34. Center for Encounters and Active Non-violence, Bad Ischl, Austria

35. Coalition of the Flemish North-South Movement - 11.11.11., Belgium

36. Comite Afrique australe/Southern Africa Committee, Belgium

37. CODEWES, Comite voor de Opheffing van de Derde Wereldschul, Belgium

38. Comitato Scientifico Antivivisezionista, Rome, Italy

39. Corporate Europe Observatory (CEO), the Netherlands

40. Dachverbandentwicklungs-politischer Organisationen in Karnten (Umbrella Organization of Development Policy Organizations), Austria

41. DAL Federation, France

42. Devizes & Marlborough Friends of the Earth, UK

43. FIAN (Food First Information and Action Network), Austria

44. FORUM SYD, Sweden

45. Friends of the Earth England, Wales and Northern Ireland

46. Friends of the Earth Europe

47. Fylde Mid Suffolk Friends of the Earth, UK

48. ICDA, Belgium

49. Informationsgruppe Lateinamerika  (IGLA), Austria

50. K.U.L.U.- Women and Development, Denmark

51. MSOLA - JPIC NetworkMSOLA - JPIC Network

52. National Federation of Womens Institutes, England & Wales

53. La Federation CFDT Banques, France

54. Legambiente, Environmental Association, Italy

55. Leeds Central WDM, UK

56. Les Amis de la Terre, France

57. Le syndicat SUD ANPE, France

58. Maan ystevet ry (Friends of the Earth Finland)

59. Milieudefensie, Netherlands

60. Miljufurbundet Jordens Venner (Friends of the Earth Sweden)

61. National Federation of Womens Institutes, England & Wales

62. NOVIB, Oxfam Netherlands

63. North Leeds Oxfam Group, UK

64. North Staffordshire World Development Action Group, England

65. Nottingham Friends of the Earth,UK

66. Oxfam GB

67. Oxfam Ireland

68. Oxfam Solidarity, Belgium

69. Pembrokeshire local FoE group, Wales

70. People and Planet, Sussex

71. People and Planet, UK

72. Public Services International, France

73. Reading Trade Justice Group, Reading, Berkshire, UK

74. Real World Group, UK

75. Rete di Lilliput per uneconomia di giustizia, Italy

76. SOMO (Foundation for Research on Multinationals), Netherlands

77. Salzburg Forum against MAI/ WTO, Austria

78. South East Essex Green Party, UK

79. Tearfund, UK

80. Transnational Institute, Netherlands

81. Tresam, Gothenburg, Sweden

82. TU federation (Gewerkschaft der Gemeindebediensteten - gdg - Municipal Workers Union), Austria

83. URFIG, France

84. Umweltdachverband (umbrella of environmental organisations), Austria

85. UNION SYNDICALE-G10 SOLIDAIRES, France

86. Utbildning fur bistandsverksamhet (Education for Aid Activities), Sweden

87. VABIKU - weltumspannend arbeiten, Austria

88. VMD-Leiden (FoE-NL), Netherlands

89. Weltladen Villach, Austria

90. Werkgroep Globalisering Delft-Den Haag, Netherlands

91. Working Group on Trade & Finance, Lilliput Network, Italy

92. World Development Movement - Brighton and Hove Branch, UK

93. World Development Movement, UK

94. WEED, Germany

95. X minus Y Solidarity Fund, Amsterdam, Netherlands

·        Full members of the Committee 133:

·        Mr Josef MAYER, Sektionschef, Bundesministerium fyr Wirtschaftliche Angelegenheiten, AUSTRIA

·        M. Charles GHISLAIN, Ambassador, Ministere des Affaires etrangeres, du Commerce exterieur et de la Cooperation internationale, BELGIUM

·        Mr Niels Henrik SLIBEN, Ambassador, Under-Secretary, Ministry of Foreign Affairs, DENMARK

·        Mr Pekka LINTU, Under-Secretary of State for Economic Relations, Ministry of Foreign Affairs, FINLAND

·        Dr Karl-Ernst BRAUNER, Ministerialdirektor, Bundesministerium fur Wirtschaft und Technologie, GERMANY

·        M. Jean-Francois STOLL, Ministere de lEconomie, des Finances et de lIndustrie Directeur des Relations Economiques Exterieures, FRANCE

·        M. Vassilis KANELLAKIS, Direction Generale pour la Planification et la Gestion de Politique, Secretariat General des Relations Internationales Ministere de lEconomie Nationale, GREECE

·        Mr Tony JOYCE, Principal Officer, Department of Enterprise, Trade and Employment, IRELAND

·        M. Mario GERBINO, Directeur General, Ministere du Commerce Exterieur, ITALY

·        M. Jean FALTZ, Directeur des Relations Economiques Internationales, Ministere des Affaires Etrangeres, LUXEMBOURG

·        Mr Dick BRUINSMA, Director General, Ministry of Economic Affairs, the Netherlands

·        Mr Jo‹o Paulo PALHA, Principal Adviser, General Directorate for European Affairs, Ministry of Foreign Affairs, PORTUGAL

·        Mr Francisco UTRERA MORA, Secretary-General for External Trade at the State Secretariat for Trade, SPAIN

·        Mr Mats RINGBORG, Director-General for Foreign Trade, Ministry for Foreign Affairs, SWEDEN

·        European Commission: Mr Peter CARL, Mr Herve JOUANJEAN, DG Trade

·        Council Secretariat: Mr Jacques BRODIN, Mr Andre DONNADO