December 13, 2002

GATS Attack — Little-Known Trade Agreement Threatens Democracy

By Diane Solomon


Working behind closed doors and with little attention from U.S. media, multinational corporations have started a new power-grab in the lucrative service economy.

The General Agreement on Trades in Services (GATS) could dismantle government regulations and eliminate civil service and public sector jobs in a broad range of services, including local mail delivery, energy, education and water collection and distribution.

GATS was born in 1994, at the end of the “Uruguay Round” of the General Agreement on Tariffs and Trade (GATT). The following year, the newly created World Trade Organization (WTO) adopted the agreement.

Lori Wallach, director of Public Citizen’s Global Trade Watch Campaign, says the WTO could set in place permanent trade sanctions against the United States when U.S. laws don’t conform to GATS.

“It’s like setting up a high-voltage electric cattle fence around Congress,” Wallach says. “The fence is the rules of the GATS or the WTO.”

Remember how an earlier international trade agreement, the North American Free Trade Agreement, was sold as a gold mine for U.S. workers and their communities? In fact, U.S. Census Bureau and Bureau of Labor statistics show that NAFTA caused the loss of high-paying jobs and exerted downward pressure on wages.

What NAFTA did do was help multinational corporations — mostly manufacturers — fight labor laws and environmental regulations. GATS expands that battle into services, many of which have traditionally been considered part of the public domain.

Media noticed the drive to privatize water when an international consortium took over the distribution of water in Cochabamba, Bolivia. Water bills skyrocketed for many of the poor, and several protestors were killed and hundreds injured by police when angry mobs rioted.

But water is only one of many services that multinationals seek to liberalize under GATS. Already, university presidents and major academic organizations including the American Council on Education and the European University Association have announced their opposition to the inclusion of educational services in the agreement.

Accounting practices, too, could be deregulated. In fact, Arthur Andersen, the accounting firm of the failed energy giant Enron, was a leading proponent of GATS. Recently proposed accounting reforms — such as rotating auditors every four years to keep firms from getting to cozy with their auditors — are precisely what corporations will seek to veto under GATS, labeling them “burdensome” restrictions.

“If you believe that governments and communities have the right to regulate in the public interest, pay attention to GATS, because those types of regulations may be challenged under this agreement,” says Scott Sinclair, senior research associate at the Canadian Centre for Policy Alternatives.

At stake are trillions of dollars. Services account for almost 80 percent of U.S. employment and more than 60 percent of the global economy. Worldwide expenditures on water services alone exceed $1 trillion a year.

Recently, how the secretive WTO negotiates around GATS came to light. The GATS process calls for WTO member countries to request commitments from other member countries to open new services to competition and privatization. Once a country commits a requested service, corporations from other member countries can compete for that service. Both the United States, through U.S. Trade Representative Robert Zoellick, and the European Union (EU) have kept secret their service-commitment requests. But in April, Amsterdam’s Corporate Europe Observatory, a European think tank, a obtained a draft copy of the European Union’s requests.

The leaked documents reveal that the EU intends to ask the United States to allow EU-based transnational corporations to compete with U.S. governmental and private providers in a multitude of service areas, including water collection and distribution, energy, education, tourism, insurance, legal and accounting services, transportation, and hazardous waste management.

The EU even asked that U.S. postal services be put up for sale.

The WTO claims that GATS specifically recognizes governments’ right to regulate. But Sinclair says that once a service is committed, “Governments retain their freedom to regulate only to the extent that the regulations they adopt are compatible with GATS.”

Developing nations in particular will be pressured to offer up service areas.

“When it comes to the negotiating table, the EU will demand market openings in services as a condition for opening its own markets in garments and textiles and agriculture,” wrote Kevin Watkins, policy director of Oxfam Great Britain, in the Manchester Guardian recently. “For countries desperate for foreign exchange, not negotiating with your major markets is a no-win option.”

Requests by WTO member countries to other members for new service commitments were made in June. Countries have until March 2003 to respond to these requests by offering those services they are willing to open up to outside competition. The requests and offers are part of intense, private negotiations that will continue until Jan. 1, 2005, the conclusion of the current round of WTO negotiations.

When the government’s right to regulate in the public interest is sold to the highest bidder, American jobs and democracy are at stake. It’s time to bring these secret negotiations into the light of day.

Solomon is a freelance journalist heard regularly on Radio KKUP in Silicon Valley and the nationally syndicated radio program, “Making Contact.”

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