TWN Info Service on WTO and Trade Issues (May14/01)
6 May 2014
Third World Network  

Public services under serious threat from TISA, warns PSI
Published in SUNS #7794 dated 30 April 2014
 
Geneva, 29 Apr (Kanaga Raja) -- The Trade in Services Agreement (TISA) and its excessive breadth, under negotiation among a group of countries, poses considerable risks to safeguarding public services and vital public interests, including privacy rights, Internet freedom, environmental regulation and consumer protection, according to a new report by Public Services International, the global trade union federation.
 
The report outlines some of the proposed deregulatory disciplines that would lock in privatisations of public services and prevent reversal of national policy, extend national treatment and market access commitments to the Internet, prohibit "forced localisation" and requirements that service providers store data they collect within the country, or prohibit the sale or use of that data for commercial purposes.
 
Recalling the revelations by whistle-blower Edward Snowden of excessive surveillance and spying by the US National Security Agency (NSA), and the contemplated measures in Europe and elsewhere to prevent such spying, the PSI report says: "If the US gets its way, the TISA will also undermine user privacy by permitting the uninhibited collection and transfer of personal data."
 
On the proposed TISA measures and disciplines, including the use of ‘necessity tests' for any regulatory measures, the PSI report says that these might come in the way, for example, of the right of governments to apply universal service obligations in privatised sectors.
 
The report, titled "TISA versus Public Services", and released on 28 April, says: "Legitimate treaties to promote international trade must fully preserve the ability of governments to restore, revitalise or expand public services. On many levels, the TISA fails this critical test. Indeed, the TISA's very ethos - extreme secrecy, aggressiveness, hyper-liberalisation, and excessive corporate influence - contradicts public service values."
 
The report was released just as the TISA negotiations resume behind closed doors this week in Geneva among some 50 countries grouped under the "Really Good Friends of Services".
 
They include Australia, Canada, Chile, Chinese Taipei, Colombia, Costa Rica, the European Union, Hong Kong-China, Iceland, Israel, Japan, Liechtenstein, Mexico, New Zealand, Norway, Pakistan, Panama, Paraguay, Peru, South Korea, Switzerland, Turkey and the United States.
 
The PSI report was authored by Scott Sinclair with the Canadian Centre for Policy Alternatives, and Hadrian Mertins-Kirkwood of the Institute of Political Economy, Carleton University.
 
Referring to the TISA, Rosa Pavanelli, General Secretary of PSI, said in a media release: "This is an attempt to secretly extend the most damaging parts of the infamous GATS agreement that previously sparked global protests. The aim of public services should not be to make profits for large multinational corporations. Ensuring that failed privatisations can never be reversed is free market ideology gone mad."
 
Jan Willem Goudrian, Deputy General Secretary of the European Federation of Public Service Unions (EPSU) said: "This agreement will bind future governments, regardless of who wins elections and what the courts say. If the European Commission has nothing to hide, they must immediately release full details of these negotiations."
 
According to the media release, PSI and civil society organisations have mobilised to protest against the secret TISA negotiations, with actions being taken in Switzerland, Australia, the United Kingdom, Japan, India, the Netherlands, Austria, Belgium, Brazil, Canada, the United States, Colombia, Mexico, Panama and Costa Rica.
 
The PSI report notes that governments around the globe are currently engaged in the biggest flurry of trade and investment treaty negotiations since the "roaring nineties," when the belief in the virtues of liberalised market forces was at its peak, and that official enthusiasm for more intrusive, "21st century" treaties is at a level not seen since the creation of the World Trade Organisation (WTO) and the North American Free Trade Agreement (NAFTA) in the mid-1990s.
 
"The negative impacts on public services include: confining public services within existing boundaries by raising the costs of expanding existing public services or creating new ones; increasing the bargaining power of corporations to block initiatives when new public services are proposed or implemented; and locking in future privatisation by making it legally irreversible."
 
According to the report, early in the new millennium, campaigns to stop the GATS expansion mobilised public and political pressure to counter excessive demands for the liberalisation of public services. "Today, however, the secretive negotiation of a new, aggressive successor to the GATS poses an even more serious threat to public services."
 
The report further said that TISA negotiators are mandated to achieve "highly ambitious" liberalisation of trade in services, and that most of the nations involved have already undertaken far-reaching services liberalisation and are already bound by a dense web of services liberalisation agreements.
 
Pushing this agenda even further, as the TISA mandate dictates, would involve "truly radical liberalisation, exerting strong pressure on the few remaining excluded sectors and surviving exemptions for key programs and policies," said the report.
 
"Most observers, however, agree that the real intent of the TISA is not just radically deeper liberalisation among the current participants. Ultimately, the goal is to broaden participation by including the key emerging economies - China, Brazil, India and South Africa - and smaller developing countries under the agreement."
 
The report noted that while the TISA negotiations are taking place in Geneva, home of the WTO, they are being conducted entirely outside the framework of the WTO.
 
"The TISA is clearly being driven by developed countries and multinational services corporations frustrated with the WTO's Doha Development Agenda, launched in 2001," it said.
 
Despite gaining agreement on a limited package of reforms at the ninth WTO ministerial meeting in Bali in December 2013, the Doha Round negotiations remain stalled, and this impasse has more to do with the inflexibility of the US and the EU on agricultural and development issues than with developing countries' resistance to deeper services liberalisation, said the authors of the PSI report.
 
Nonetheless, they added, the TISA group of countries, headed by the US and the EU, has broken away to focus exclusively on achieving their key offensive interests in services. This decision "to take their ball and go home" signals that, despite official assurances to the contrary, rich countries are fully prepared to turn their backs on the Doha Round if they don't get their way.
 
The TISA negotiating sessions are not open to all WTO members - even as observers - while the negotiating texts are kept secret, the report underscored, citing, for example, that US negotiating proposals are stamped classified for "five years from entry into force of the TISA agreement or, if no agreement enters into force, five years from the close of the negotiations."
 
"It is hard to imagine why developing countries that have been so undiplomatically excluded from the TISA negotiating process would willingly accept its results," said the authors, adding that developed countries' high-stakes pressure tactics also call into question the future viability of the WTO as a negotiating forum.
 
The report also underlined that the TISA negotiations are fundamentally different from previous plurilateral negotiations in the WTO context because key participants, particularly the US, are unwilling to automatically extend the results to all other WTO members on an MFN (Most Favoured Nation) basis.
 
"Instead, the whole point of the TISA is to pressure major developing countries into joining the agreement on terms dictated by the Really Good Friends group."
 
Under WTO rules, said the report, there are only two legitimate options for refusing to extend the results of a plurilateral negotiation to all members on an MFN basis.
 
The first is to conclude a "Plurilateral Trade Agreement" within the meaning of Article II: 3 of the WTO Agreement. An example of this is the WTO Agreement on Government Procurement which, while not compulsory, is open to all WTO member governments.
 
"Adding any such agreement to the WTO, however, would require the unanimous consent of all WTO member governments. Given the continued objections to TISA by South Africa, India and other key WTO member governments, this option is not politically feasible."
 
According to the report, the second option is to classify the TISA as an economic integration agreement or Preferential Trade Agreement under the terms of Article V of the General Agreement on Trade in Services (GATS). Before this could happen, the WTO would have to be notified and the agreement would be subject to review by the WTO Committee on Regional Trade Agreements.
 
A number of conditions must be met for an agreement to qualify, including that it have "substantial sectoral coverage." This coverage is defined in terms of the number of services sectors, volume of trade affected and modes of supply.
 
GATS Article V further stipulates that within this broad sectoral coverage, the agreement must "provide for the elimination of substantially all discrimination" through the "elimination of existing discriminatory measures" and/or the "prohibition of new or more discriminatory measures."
 
The authors said that due to the rancour surrounding the breakaway TISA talks, this option can also be expected to face a rough ride in the obligatory WTO review process. In the past, the WTO has received notification of many Economic Integration Agreements covering services with little fanfare. The TISA would differ in that it only covers services, and is not part of a wider economic integration pact.
 
"Even if the TISA passes such a review, its legality could ultimately be decided by the WTO Dispute Settlement Body. This could occur if a WTO member government that was not party to the TISA insisted that its services and service providers were entitled, on an MFN basis, to the same treatment as TISA participants."
 
According to the report, dispute settlement is another area of potential dissonance between the TISA and the WTO. As a stand-alone agreement, the TISA would require a separate settlement mechanism and bureaucracy. This creates the messy prospect of TISA interpretations of GATS provisions that diverge from those of the WTO Dispute Settlement Body.
 
"Clearly, there are grave legal uncertainties surrounding the TISA and its relationship to the WTO. These obstacles raise serious doubts about the claims by the European Commission and some other TISA participants that their goal is to multilateralise the TISA and ultimately to incorporate the agreement into the WTO system," the report stressed.
 
"Given the potential adverse repercussions for the Doha Round and even the WTO itself, why would TISA participants engage in such a high-stakes gamble," the report asks, adding that the most straightforward answer is that key TISA governments, led by the US, are responding to strong corporate pressure.
 
It noted that the TISA appears to have been the brainchild of the US Coalition of Service Industries (CSI), specifically its past president Robert Vastine, who, it said, was one of the first to suggest, as early as 2009, that plurilateral negotiations on services should be conducted outside the framework of the WTO.
 
Working through the Global Services Coalition (GSC), a multinational services lobby group, the CSI then garnered the support of other corporate lobbyists for the TISA initiative, it said, adding that the TISA is a political project for this corporate lobby group.
 
"Rather than moderate their demands for radical services liberalisation in response to legitimate concerns, the GSC is pushing the WTO and the Doha Round to the brink. The group also appears to be largely indifferent to whether or how the TISA fits into the WTO or the existing multilateral system."
 
Instead, says the report, the strategy is to attain a sufficient critical mass of participants in the TISA so that multilateralisation becomes a fait accompli.
 
"Indeed, the CSI's preferred outcome is not to extend the results of the TISA on an MFN basis, but to secure a highly ambitious agreement among like-minded core participants", and that in this regard, the TISA would "form a template for the next generation of multilateral rules and levels of market access."
 
"Developing and emerging market economies would then be targeted one-by-one to join the agreement as political conditions permit - that is, when neo-liberal or more compliant governments are in power. Sadly, such a crude strategy could actually succeed," said the authors.
 
According to the report, negotiators are reportedly agreed on a core part of the TISA text that conforms fairly closely to the GATS, but that one major difference is that the TISA adopts a "negative list" approach to national treatment.
 
Under the TISA, national treatment obligations would automatically apply to all measures and sectors unless these are explicitly excluded. For example, under the TISA, like the GATS, national treatment would apply to subsidies, meaning that any financial support for public services would have to be explicitly exempted, or be made equally available to private, for-profit services suppliers.
 
"This ‘list it or lose it' approach greatly increases the risk to public services and other public interest regulations now and in the future. Any public policy that a government neglects to protect, even inadvertently, is exposed to challenge and any country-specific exemption becomes a target for elimination in subsequent negotiations," said the report.
 
It also noted that TISA negotiators are working on GATS-plus rules and restrictions that could push trade treaty restrictions into new, uncharted territory.
 
The report went on to outline some of these "new and enhanced disciplines".
 
Firstly, it said that among the TISA's most threatening characteristics are its obligatory standstill and ratchet provisions.
 
The standstill obligation would freeze existing levels of liberalisation across the board, although some parties will undoubtedly try to negotiate limited exemptions in sensitive sectors, while the TISA's ratchet clause requires that "any changes or amendments to a domestic services-related measure that currently does not conform to the agreement's obligations (market access, national treatment, most favoured nation treatment) be made in the direction of greater conformity with the agreement, not less."
 
According to the report, this ratchet provision, which has reportedly already been agreed to, would expressly lock in future liberalisation, which could then never be reversed.
 
In addition, the TISA will obligate governments to automatically cover all "new services," meaning those that do not even exist yet.
 
"Under such far-reaching rules, current neo-liberal governments can lock in a privatisation scheme for all future generations. These are precisely the types of constitutional-style restrictions that must be avoided if democratic authority over public services is to be safeguarded."
 
Secondly, the report noted that one of the key pieces of unfinished business under the GATS concerns domestic regulation. The GATS Article VI: 4 called for further negotiations to ensure that "qualification requirements and procedures, technical standards and licensing requirements" do not constitute "unnecessary" barriers to trade in services.
 
With the WTO process stagnated, TISA participants intend to come up with their own domestic regulation text. Binding domestic regulation rules in the TISA would provide corporations with a means to challenge new or costly regulations, even those that treat domestic and foreign services and service providers even-handedly, said the report.
 
The proposed restrictions on domestic regulatory authority would expressly apply to non-discriminatory government measures affecting services. In other words, the new "disciplines" would restrict domestic laws and regulations - such as worker safety requirements, environmental regulations, consumer protection rules and universal service obligations - even when these regulations treat foreign services or services suppliers no differently than their domestic counterparts.
 
The report said that it is highly probable that the TISA will contain restrictions on domestic regulation that are even more intrusive than those under discussion in the GATS process, adding that a core group of TISA countries including Chile, Hong Kong, Mexico, New Zealand, South Korea and Switzerland continue to push for the TISA to apply a necessity test to regulations affecting services.
 
Thirdly, concerning the movement of natural persons (Mode 4), the report said that the TISA, like the GATS, would prohibit so-called economic needs tests, including labour market tests, unless these measures are expressly exempted in a country's schedule of commitments.
 
In most countries, before hiring temporary foreign workers, a prospective employer is obliged to demonstrate that there is a shortage of suitably trained local workers. But under Mode 4 commitments, such economics needs tests are forbidden. Governments could not require, for example, that foreign companies conduct labour market surveys to first ensure that no local workers are available to perform the necessary work before engaging temporary foreign workers.
 
Fourthly, the report points out that TISA negotiators are also developing "new and enhanced disciplines" that relate to the Internet, electronic commerce and cross-border data flows. The "data" in question includes personal user information, financial information, cloud computing services and digital goods.
 
US industry lobbyists argue that the free exchange of data is "necessary for global business operations" and that governments have imposed too many "arbitrary and excessive measures" designed to constrain US firms. The US Trade Representative has also stated that data protections in many countries are "overbroad" and inhibit the possibility of "truly global service."
 
According to the report, if US negotiators achieve their goals, the TISA will contain provisions that extend market access and national treatment commitments to the Internet and prohibit "forced localisation" - the requirement that foreign companies store any data they collect within the country they are operating in.
 
The report noted that the EU currently enforces rules that prevent companies from transferring data outside of the 28 member states, with some exceptions, and that in contrast, the US has very lax privacy laws. In the US, corporations can collect extensive personal information about their users which can then be sold or used for commercial purposes with almost no restrictions. The EU is only willing to open up data flows in the TISA if the US can demonstrate stricter domestic privacy controls.
 
"However, it is difficult to imagine the US making a compelling case for privacy in the wake of recent revelations of extensive spying by its National Security Agency, exposed by whistleblower Edward Snowden," said the authors.
 
They also said that the TISA will apply to the Internet as it does to other service sectors, forcing liberalisation in a way that disproportionately benefits the industry's established major players. These massive corporations are almost exclusively American.
 
"If the US gets its way, the TISA will also undermine user privacy by permitting the uninhibited collection and transfer of personal data."
 
Fifthly, the report said that one of the most wide-open aspects of the TISA negotiations is the blanket authority for negotiators to develop rules "on any other issues that fall within the scope of Article XVIII of the GATS."
 
Article XVIII was the basis for the 1996 Telecoms Reference Paper and the 1997 Understanding on Financial Services Commitments, which were driven by developed countries dissatisfied with the level of commitments and regulatory restrictions in these sectors under the original GATS, it added.
 
TISA negotiators are currently working on new sectoral agreements covering the regulation of financial services, telecommunications, electronic commerce, maritime transport, air transport, road transport, professional services, energy-related services and postal and courier services.
 
These talks are aimed at developing binding, "pro-competitive" regulatory templates for a wide range of services sectors in order to facilitate the entry of foreign commercial providers and to privilege multinational corporate interests, said the report.
 
For example, it said, such rules generally acknowledge the right of governments to apply universal service obligations in privatised sectors. Yet even these vestiges of public service values are subjected to necessity tests and other pro-market requirements biased towards global service providers.
 
"The TISA is also explicitly designed as a ‘living agreement' that will mandate trade negotiators to develop new regulatory templates for additional sectors far into the future."
 
The scope of such highly customised sectoral agreements is limited only by the imagination of services negotiators and corporate lobbyists, and made even more worrisome by the near total secrecy surrounding such negotiations.
 
"Needless to say, this is totally unacceptable. Services negotiators have a core mandate to increase foreign trade and commerce. They should not be permitted to develop prescriptive regulatory frameworks that would restrict and potentially override public interest regulations that protect consumers, workers or the environment," said the report.
 
Among its conclusions, the report said that within those countries already participating in the TISA, governments must be pressed for full consultation and disclosure, and that governments that are not participating in the TISA must be lobbied not to join and to resist pressure to do so.
 
"Non-TISA governments should also be encouraged to speak out against the corrosive impact of these negotiations on multilateralism, and to block any efforts by TISA parties to access WTO institutional resources or the Dispute Settlement Body," it said.