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Brussels 27 November 2000
WTO Secretariat hits false attacks against GATS

WTO Secretariat's Director of Trade in Services, Mr. David Hartridge, in a speech at the European Services Forum on 27 November 2000 in Brussels, said recent attacks on the GATS arise from misunderstanding and misinterpretation of the Agreement.

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Speech by David Hartridge, Director of Trade in Services Division, WTO Secretariat

The new round of services negotiations has started well — a good deal better than I feared it would, in the gloomy aftermath of Seattle. A great deal of useful work has been done, the positive and cooperative spirit among delegations is still there, as it has been for the past five years, and the linkage with the agricultural negotiations, which I feared might be a very negative factor, has certainly not been that — we even hear the occasional suggestion that they are getting on faster than we are, which, if true, is excellent news. There has been a very positive development in the past days — on Friday, 23 developing countries, including many of the larger and most active ones, submitted what seems to me a very useful draft of the negotiating guidelines and procedures which the Council needs to adopt in March.

The basic position still is that inside the WTO services is a remarkably uncontroversial subject. It was the only uncontroversial issue at and before Seattle — the only one on which a text had been developed which Ministers could be expected to adopt without difficulty. This is an extraordinary transformation, for those of us who remember the great controversy over the introduction of services into the work programme of the GATT in the 1980s. The North South confrontation of those years is long past, for reasons which can be summed up in two words: investment — the value of GATS commitments under Mode 3 as an inducement to foreign direct investment is generally recognized — and flexibility, meaning the great freedom of governments to decide the level and scope of the commitments they make. The work of the past five years, including the major successful negotiations on basic telecoms and financial services, has taken place without internal discord and without great public attention or controversy.

This absence of public controversy is about to change — in fact, it has already changed. The GATS and services remain uncontroversial inside the WTO but since the start of the round in January there has been a vast increase in the volume of press comment on the GATS and in the attention paid to it by NGOs. Most of this is designed to promote controversy, and it is succeeding. It is taking the form of a concerted campaign against the GATS, stimulated by the fact that we are in negotiation, and we must expect that for the next year or more the GATS will be a major focus of the anti-WTO movement — the Seattle phenomenon. Many of the people involved are of the sort you would want to have on your side — seriously interested in important questions, and certainly not in it for the money. But many also seem to suffer from a terrible addiction to self-righteous indignation and some of their statements are simply reckless.

Controversy is fine — it would be better if there were more public debate about the reasons why we must have a stable legal framework for international trade, and about the implications for heath, education and living standards generally of a decline in trade. But for a debate to be useful both sides must be heard, and that is not happening now. There is a lot of genuine misunderstanding and misinterpretation, but a good deal of the current publicity is one-sided and frankly hostile, misrepresenting, deliberately or not, the objectives of the negotiating governments, the content of the GATS and the implications of trade liberalization for equity and welfare. In most cases, the fact that economic growth and the avoidance of trade conflict have value, and are desired by the vast majority of mankind, is simply ignored, whereas there are no limits to the threats which GATS is alleged to pose. In Canada, it has been said by some commentators to be a threat to democracy and public health; in France, a threat to the maintenance of public services and public employment. The same scare stories are repeated and elaborated elsewhere.

The Secretariat does its best to present the facts. We point out, for example, that the right to take measures necessary to protect health would override any other provision in the GATS. But our resources are small and we are naturally seen as parti pris. The positive side of the debate must be presented to the public directly by governments making the case for trade and for the liberalisation policies they have promoted, and by industry.

The attack on the GATS focuses mainly on three points — the investment aspect of the GATS, the alleged threat to public services and the alleged threat to the right to regulate.

The attack on investment is a very much wider issue than the GATS — though it was recently reported in Le Monde that the GATS had been said to be “worse than the MAI”. In fact the GATS bears no resemblance to the MAI. It is not a set of rules about foreign direct investment; under GATS, Members decide on which services they will make mode 3 commitments, and can attach to them whatever conditions they choose. We must continue to point this out, even though that may not cut much ice with people for whom investment is a dirty word. In the end, the idea that developing countries should be protected from foreign direct investment — and the associated gains in income and employment — needs to be tested not on the streets of Seattle or Prague but in the developing countries themselves.

The claim that liberalisation means deregulation, or loss of governments' right to regulate, is simply false. The GATS explicitly recognises the right to regulate, and to introduce new regulations in order to meet national policy objectives, and all governments are fiercely attached to that principle. We have seen in the negotiations on domestic regulation in the accountancy sector, which are a good guide to the likely outcome of further work on regulation, how strongly national regulators assert their functions, even in that highly internationalised industry. Some commentators claim that the WTO itself will set standards, or review national standards, which is obvious nonsense. No such power exists, and Member governments would not agree to it in any circumstances. More serious commentators claim that the dispute settlement system, which they claim is systematically biased against regulation and public services, will be used to undermine health, environmental and other standards. The possibility of disputes about specific measures is thus presented as a generalised attack on regulation. All experience so far, and their own sensitivities, suggest that it is very unlikely that governments will lightly challenge others' regulations. But the question has to be answered: should governments not have the right to challenge measures which they find discriminatory or unnecessarily restrictive? If they cannot do that within a legal framework, they will make their own law — those who are strong enough. Without the dispute settlement system international trade relations would very soon be reduced to power politics.

The charge that GATS will undermine public services, or the right to maintain them, is also false, and here it may be possible to do something practical to defend governments against the charge that they are ready to auction off public services. Services supplied in the exercise of governmental authority are explicitly excluded from the Agreement and there has never been the slightest sign that any government wants to reopen that. The original proposal to make it clear that governmental services were not covered came from the EU and it was not controversial. If it had been, the text in Article I defining them as being services supplied “neither on a commercial basis nor in competition with one or more service suppliers” might have been further elaborated. But now that this has become another scare story we in the Secretariat often have to explain the exclusion of governmental services and we have come up against the difficulty that these terms are not further defined. We need to be clear on what is meant by “not on a commercial basis” — perhaps the idea is best expressed in the French phrase “sans but lucratif”. We also have to be clear that public sector services, in health and education for example, can and almost invariably do coexist in the same jurisdiction with private suppliers without being in competition with them and therefore without losing the status of governmental services. Police services don't “compete” with the private security firms working alongside them. I doubt if there is a single WTO Member where public and private services do not coexist in this way, and where the public sector would not be seen as governmental services excluded from GATS coverage. Since the alleged threat to public services and to employment in them is being used as another stick to beat governments with, it might be worthwhile for the Services Council to develop an understanding on the interpretation of Article I:3 which would make it even more clear that there is a ring-fence around non-commercial public services. Since the right to maintain publicly-funded governmental services is vital to all WTO Members, and questioned by none, this is one scare story which can be shown up for what it is.