Topics handled by WTO committees and agreements
Issues covered by the WTO’s committees and agreements

GATS: FACT AND FICTION
Misunderstandings and scare stories



The new round of services negotiations will force WTO Member countries to open all their services sectors to foreign competition Back to top

This is quite untrue.There is no obligation on any WTO Member to allow foreign supply of any particular service—nor even to guarantee domestic competition, since it is possible to maintain a monopoly supplier, whether public or private, of any service.

Governments are free to choose those services on which they will make commitments guaranteeing access to foreign suppliers. Each Member must have a national schedule of commitments, but there is no rule as to how extensive it should be. Some least-developed Members have made commitments only on tourism, for example, and in general there is great variation in the coverage of schedules, reflecting national policy objectives and levels of economic development. There is agreement among all Governments that in the new round of negotiations the freedom to decide whether to liberalize any given service and the principle of progressive liberalization will be maintained.

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The services negotiations mean that all public services will have to be open to foreign competition Back to top

Many public services are not provided on a commercial or competitive basis and are not subject to the GATS. The Agreement excludes from its coverage all services provided in the exercise of governmental authority, which are defined in Article I:3(c) as those supplied neither on a commercial basis nor in competition with other suppliers. Since they do not fall under the Agreement, these services are not covered by the negotiations and commitments on market access and national treatment do not apply to them. This is a principle to which all Member Governments attach great importance and which none has sought to reopen. So far, Members have not expressed the need to adopt an authoritative interpretation of the criteria in Article I:3(c). They could obviously do so whenever they deem it desirable or appropriate. Also, the issue could arise if a specific measure, which had been challenged in dispute settlement, were to be defended on the ground that it applied only to services supplied in the exercise of governmental authority. There is no requirement to notify such services.

Those services which are provided on a commercial or competitive basis are covered by the GATS, but there is nothing in the Agreement which requires that they should be privatized or liberalized. Governments are free to decide whether or not to make commitments on them, as on all other services. If they make no commitments the implications of GATS coverage are minimal: monopoly suppliers, whether public or private, can be maintained, established or reestablished, for example; limitations of any other kind can be imposed on foreign supply. If they do make commitments they can exclude from them any activity where foreign competition is unwanted and can schedule limitations on the level of market access and national treatment committed.

In virtually all countries the public provision of services like education and health coexists with private-sector provision, and Governments recognize that to ensure the universal availability and the quality of these essential services is among their primary responsibilities. Governments which make commitments to allow foreign suppliers to provide education or health services in their markets are not undertaking to privatize public healthcare or education systems. Nor are they compromising standards: they can enforce the same standards for the protection of the public on foreign suppliers as on nationals, and can indeed impose additional requirements on foreigners if they so choose.

As of February 2001, less than 50 WTO Members have made commitments on education or health, no doubt reflecting the fact that in many countries these are regarded as essentially functions of the State. In its proposal for negotiations on higher education services, dated 18 December 2000 and publicly available, the United States recognizes that "education to a large extent is a government function, but that most countries permit private education to co-exist with public education. The proposal, therefore, envisions that private education and training will continue to supplement, not displace public education systems."

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Liberalization under GATS means deregulation of services Back to top

The right to regulate is one of the fundamental premises of the GATS. The objective of the GATS is to liberalize services trade, not to deregulate services, many of which are closely regulated for very good reasons. The GATS specifically recognizes "the right of Members to regulate, and to introduce new regulations, on the supply of services within their territories in order to meet national policy objectives".

Much of the concern expressed about the implications of the GATS for regulation derives from the fact that Article VI of the GATS provides for disciplines on qualification requirements and procedures, technical standards and licensing requirements with a view to ensuring that they "do not constitute unnecessary barriers to trade in services".

Disciplines of this kind have been drawn up for the accountancy sector, and can be read on the WTO website (www.wto.org). They provide the best insight currently available as to the likely outcome of further work in this area. They do not set standards for the accountancy sector nor do they provide for the review of national standards. Their main purpose is to increase transparency, meaning access to information about regulations, standards and procedures for licensing or obtaining qualifications. The objective is to ensure that applicants are treated with fairness and are given a chance to compete on an equal footing. It has been agreed that the accountancy disciplines—which will come into force at the end of the current round of negotiations—will only apply to countries which make commitments on accountancy services.

The accountancy disciplines say nothing about the level of professional qualifications or standards for accountants except that they should not be more trade-restrictive than is necessary to achieve the legitimate objective they seek. This means that if two or more measures exist which can achieve the same objective, one should choose the measure with the least restrictive impact on trade. It does not mean that Governments would have to compromise the level of quality or consumer protection they are seeking to achieve through the regulation in question. WTO Member Governments and dispute settlement panels have consistently held that it is for Governments to choose the level of protection they want to achieve (for instance when regulating for the protection of public health or the environment) and that this prerogative is not open to challenge.

It is often alleged that the WTO will start to "review" standards and "outlaw" those considered to restrict trade more than necessary. It has been suggested that the results of this work will include, for example, "reviewing the qualifications we require of doctors, engineers and other professionals to ensure they're not too high", and even that the WTO itself will set standards. Professional qualifications will not be reviewed in the WTO. The GATS does not involve setting standards in any context and does not require Member Governments to submit any legislation or regulation for review by their trading partners. The only circumstances in which a country could be asked to demonstrate that a given measure is not more trade-restrictive than necessary would be in the event of a dispute with another Member. Only then could the necessity or the trade restrictiveness of a measure become an issue.

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Once made, GATS commitments are irreversible Back to top

Governments are always free to liberalize unilaterally without making commitments in the GATS. However, GATS commitments have real value in providing secure and predictable conditions of access to markets, which benefits traders, investors, and, ultimately, all of us as consumers. This is why so many Governments have chosen to make binding commitments in the GATS framework, where they are intended to be legally secure.

Nevertheless, GATS commitments, like tariff bindings, are not irreversible. There are four ways in which a country can modify, suspend or even withdraw a commitment if it finds that to be necessary.

Any commitment may be withdrawn or modified after it has been in force for three years. On request, "compensation" may need to be negotiated with Members whose trade is affected. This does not mean monetary compensation, as some have alleged, but merely the replacement of the commitment withdrawn by another of equivalent value. This process is similar to the renegotiation of tariff bindings under the GATT, which has been in use for 50 years.
  • Secondly, in case of need the General Exceptions in Article XIV of the GATS can be invoked, where it is necessary to act to protect major public interests, including safety, human, plant or animal life or health, national security or public morals. These exceptions override all other provisions in the Agreement, entitling a Government to violate or withdraw its own commitments if necessary.
  • Thirdly, under the WTO Agreement Governments may seek a temporary waiver from any obligation.
  • It is also possible for a Government to suspend commitments in the event of serious balance-of-payments difficulties.

In addition, negotiations are now in progress under the GATS on the question of developing an Emergency Safeguard Measure, whose purpose would be to permit the suspension of a commitment in case of damage or the threat of damage to a domestic industry.

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GATS negotiations are secretive and anti-democratic Back to top

It is frequently stated by WTO critics that the organization is undemocratic, and that negotiations take place in secret.

It is true that the GATS 2000 negotiations, like other negotiations in the WTO, are taking place between Governments and that meetings are not open to the press, the public or industry. But Governments are the representatives of their countries' interests as a whole, and have a legitimacy that the self-appointed spokespersons of special interests can never have.

Moreover, great efforts are made to publicize what takes place in negotiations. Every negotiating session is followed by a briefing to inform journalists, and through them the whole world. Representatives of non-governmental organizations receive regular briefings as well, from the WTO secretariat. Most importantly, the records of meetings, the texts of all decisions and the proposals made by Governments are available to the public. They are posted on the WTO website, which contains over 11,000 pages of information and receives roughly 250,000 visits every month.

There is a vast body of public information, constantly expanding, about the work of the WTO and the Secretariat is always ready to respond to enquiries. A telephone call would have sufficed to correct the misunderstandings which underlie most of the scare stories described in this booklet.

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