General Agreement on Trade in Services

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General Agreement on Trade in Services

• GATS
• Presentation to Artists
• 2005

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• WTO member nations can challenge as an illegal
  trade barrier any national or local policy of
  another WTO country, bringing charges before a
  WTO tribunal comprised of three trade officials
  who meet behind closed doors.

3
WTO has managed to intervene in domestic policies
all over the planet

• India Like many countries, once had a ban on
  patenting of seeds and medicines to make them
  broadly accessible. A WTO challenge claiming that
  India had failed to implement the required
  20-year patenting system resulted in India
  reversing the ban- threatening to deprive
  millions of people of life-giving resources
• Guatemala Implementation of the UNICEF-WHO Code
  on the labeling of infant formula was gutted
  after a WTO threat.

4
WTO has managed to intervene in domestic policies
all over the planet

• Europe Consumers and producers in Europe face
  116.8 million per year trade sanctions because
  the EU has not implemented a WTO order to import
  beef containing artificial hormones WTO ruled
  that Europes standards provide too much consumer
  protection.
• Europe US WTO case forced the EU to eliminate a
  program that had set aside a small market share
  for bananas from former Caribbean colonies,
  leading to the ruin of thousands of small family
  farms in several island nations.

5
WTO has managed to intervene in domestic policies
all over the planet

• Canada Policies aimed at ensuring the continued
  existence of some Canadian news magazines in the
  face of massive US magazine imports were
  abolished after a successful US WTO case.
• USA USA saw its gasoline cleanliness standards
  weakened after a WTO assault on Clean Air Act
  regulations by several countries.

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WTO has managed to intervene in domestic policies
all over the planet

• USA Even though the USA signed the global
  environmental treaty called the Convention on
  International Trade in Endangered Species,
  American rules requiring shrimp fishers not to
  kill sea turtles were diluted after a WTO
  challenge.
• Maryland US State Department, lobbying about how
  a state law might violate WTO, pressured Maryland
  legislators to drop a procurement policy aimed at
  promoting human rights in Nigeria.

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WTO has managed to intervene in domestic policies
all over the planet

• Canda The Canadian 'Auto Pact' is designed to
  encourage companies selling vehicles locally to
  invest in, purchase parts from, and create
  employment in Canada. In 1999, European and
  Japanese vehicle manufacturers challenged the
  Auto Pact. The World Trade Organisation (WTO)
  dispute panel ruled that it fell foul of a number
  of WTO agreements including GATS.

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WTO has managed to intervene in domestic policies
all over the planet

• Thailand Whilst bringing cheaper products and
  more variety to consumers, multinational
  supermarket chains such as Tesco, Carrefour, and
  Royal Ahold brought disaster to the thousands of
  small and medium-sized local retail shops who
  went out of business, and made many people
  unemployed. This led the Government to draft new
  regulations (e.g. "Retail Business Act) aiming
  to protect the livelihoods of the small-scale
  retailers. If the retail sector is placed under
  GATS this will not be possible. EU wants Thailand
  and other countries to place its retail sector
  under GATS rules.

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In WTO forum, global commerce takes precedence
over everything democracy, public health,
equity, access to essential services, the
environment, food safety and more
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We will be able to change presidents but not
policiesGATS further shrinks domestic
policy space
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GATS The 1st Page of Introduction

• Multilateral trade agreement for goods was
  extended to cover services with the introduction
  of GATS
• Countries come under GATS when they become
  members of WTO and when they offer sectors

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GATS The 1st Page of Introduction

• Active only when foreign trade is within the
  country
• Foreign investment could challenge any domestic
  policy or a law claiming it to violate GATS rules
  for FREE TRADE

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GATS The 1st Page of Introduction

• The guideline for rules is the protection of FREE
  TRADE
• It is the WTO Tribunal that take the final
  decision

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GATS The 1st Page of Introduction

• WTO member countries are bound to accept the
  verdict of the Tribunal and make necessary
  changes to domestic policy and law, accordingly
  or have to face trade sanctions

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GATS The 1st Page of Introduction

• WTOs expansive new rules encroach into areas
  traditionally considered the realm of domestic
  policy and effectively shift many decisions from
  democratically elected domestic bodies (e.g.
  parliaments, provincial councils, etc) to WTO
  tribunals.

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GATS The 1st Page of Introduction

• WTO and GATS promote a world where free trade
  stays as the only guideline and value overriding
  diverse worldviews and development models of
  different civilizations, cultures, countries and
  communities.

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GATS Framework

• Coverage
• 4 Modes of Trade in Services
• Rules (Horizontal and non-horizontal)
• Tribunal
• Threats outside GATS framework

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Coverage

• a. No human activity remains outside the
  purview of GATS
• b. Human activity from birth (health care) to
  death (funeral services)
• The fluidity of the definition of services
  extends the scope even further
• (e.g. Banana was considered service in US-EU
  WTO banana case)

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Coverage

• d. Policies and actions of all levels, federal,
  state and local (GATS Article I-3-a-i)
• e. Actions of non-governmental bodies in the
  exercise of powers delegated by any level of the
  government (GATS Article I-3-a-ii)
• f. Government policies directly regulating
  services as well as measures affecting trade in
  services including those not specific to services
  (GATS Article I-1)

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4 Modes of Trade in Services

• Cross-border trade in services
• Use of services abroad
• Establishment of a service business in another
  country
• Movement of natural persons

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Commitments

• Most Favored Nation Commitment (MFN)
• National Treatment Commitment
• Commitments ensuring irreversibility
• Commitments prohibiting domestic controls
• Commitments promoting more liberalization of
  service sector (Nullification and Impairment)
• Commitments on Domestic Regulation

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MFN Commitment

• Selected countries are not allowed to be given
  special treatment over others

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National Treatment Commitment

• i.  A member country should treat domestic and
  foreign services and providers the same
  (GATS Article XVII)
• ii.  When setting taxes and regulatory
  requirements, governments cannot promote
  domestic or local providers (GATS Article XVII)
• iii. A policy that may unintentionally could
  have such effects (as of i. and ii) can
  considered to be GATS-illegal even if it does
  not actually affect service trade flows (GATS
  Article XVII-3)

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Commitments Ensuring Irreversibility

• i. If a sector is offered any further attempt to
  expand the role of state or return from partial
  privatization to an exclusively public system run
  against GATS and involved with paying
  compensation to all member countries whose
  service providers are affected to make up for the
  withdrawn opportunities (GATS Article XXI-2-a).
• ii. New monopolies cannot be established without
  compensation and these monopolies include
  government as well as domestic private and also
  monopolies not only at the national level but
  also at the local level (GATS Article VIII-4,
  GATS Article XXI-2-b).

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Commitments prohibiting domestic controls

• GATS Article XVI ban countries from certain
  limits on market access for any sector offering
  for GATS coverage (unless a country listed them
  in 1993 schedules)
• i.        limits on the number of service
  suppliers
• ii.       limits on total value of service
  transactions and assets
• iii.     limits on the total number of service
  operations
• iv.     limits on the total number of natural
  persons employed in a particular service
  sector
• v.     policies which restrict or require
  specific type of legal entry
• vi.     limits on foreign ownership as

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Commitments promoting more liberalization of
service sector

• Under nullification and impairment commitment
  a member country can challenge another member
  country and take to WTO tribunal even when no
  specific rule is actually violated but for
  failing to guarantee anticipated benefits of
  service liberalization as a result of any measure
  taken by the accused country (GATS Article
  XXIII-3)

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Commitments on Domestic Regulation

• In GATS article VI-4 on domestic regulation
  contain a commitment to undertake negotiations to
  develop necessary disciplines to ensure that
  measures relating to qualification requirements
  and procedures, technical standards and licensing
  procedures do not constitute unnecessary barriers
  to trade in services. This means NOT ONLY
  qualifications required and procedures, technical
  standards and licensing procedures, but also
  measures relating to them are included.

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Sports Illustrated Vs Canadian Content

• Half of Canadian English-language magazines are
  from abroad.
• Splitrun magazines Foreign editorial content
  space for domestic advertising.
• From 1965 there is a special tariff on split-run
  magazines This was to protect smaller
  Canadian-owned publications from loosing
  advertising revenue to larger US magazines.
• Time Warners Sport Illustrated started beaming
  its magazine into Canada via satellite to avoid
  tariff.
• To counter this Canada amended 1965 law to impose
  an 80 excise tax on split-run magazines in 1995.

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Sports Illustrated Vs Canadian Content

• In 1996 US launched a WTO challenge against
• i.        80 excise tax
• ii.       1965 tariff on split-run magazine
• iii.     policy of subsidizing postal rates for
  domestic magazines (to address the challenge of
  information distribution to a population that is
  widely dispersed geographically and is called as
  Canadian Heritage)

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Debate(Canada Vs USA)

• US The crux of the US challenge was National
  Treatment Commitments under GATT, that prohibited
  treating domestic and foreign like products
  differently for regulatory and tax purposes.
• Canada Canadian magazines are not like
  products so the differential tax treatment did
  not constitute a National Treatment issue.

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Debate(Canada Vs USA)

• US Canadian content does not differentiate the
  product and stay contrary to WTO (WTO Canada
  certain measures concerning periodicals
  WT/DS31/AB/R)
• The issue from the US side was the protection of
  international fair trade under GATT but not
  other interests such as protecting culture and
  heritage of Canada.

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Debate(Canada Vs USA)

• Canada Advertising revenue from US edition more
  than covered the publication cost of the Canadian
  Edition. Hence Sports Illustrated was selling
  advertising in Canadian edition in very low rates
  so that advertising in smaller Canadian
  publications are threatened. This under pricing
  amounted to dumping offense. (selling goods
  below the cost of their production in order to
  dominate the market).
• From the Canadian perspective the issue was the
  disappearance of Canadian content and writing.

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Sports Illustrated Vs Canadian Content

• WTO ruling (in March 1997)
• 80 excise tax is contradiction with National
  Treatment Commitment in GATT
• provisions of 1965 tariff code is a violation of
  WTO rules
• - grants to Canada Post for Canadian
• magazines is an illegal subsidy

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Sports Illustrated Vs Canadian Content

• Canada took new steps to introduce new
  legislation to regulate sales of advertising
  services rather than regulating magazines as
  products.

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Sports Illustrated Vs Canadian Content

• US reacted
• threatened 4 billion worth of imports sanctions
• suspension of favorable tariffs accorded to
  Canada under NAFTA
• formally challenged Canadas new policy before
  the WTO Appellate Body.

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Sports Illustrated Vs Canadian Content

• Canadas response Because Canada has made no
  commitments in the advertising sector under GATS,
  the policy should be allowed.

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Sports Illustrated Vs Canadian Content

• WTO ruling WTO ruled against all of the Canadian
  measures.
• In this instance advertising is both a good and a
  service. Therefore the absence of GATS
  advertising commitment is irrevalent (Because ads
  appear in magazines, they are also parts of the
  contents of a good)
• - Financial subsidy from Canada Heritage was
  
• not a direct subsidy of cultural
  producers
• permitted

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Sports Illustrated Vs Canadian Content

• In May 1999 Canada abandoned the new
  legislation

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WTO Tribunal

• WTOs Dispute Resolution Understanding (DSU) was
  established during the Uruguay Round.
• Once a WTO tribunal has declared a countrys law
  WTO-illegal, the country must change its law or
  face trade sanctions.

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WTO Tribunal

• When the record of WTO is scrutinized by topic,
  rather than by country, nearly every health, food
  safety or environmental law challenged at the WTO
  has been declared a barrier to trade (Wallach
  Woodall, 2004)
• WTOs expansive new rules encroach into areas
  traditionally considered the realm of domestic
  policy and effectively shift many decisions from
  democratically elected domestic bodies (e.g.
  parliaments, regional councils, etc) to secretive
  WTO tribunals.

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WTO Tribunal

• while the FSC tax subsidy may be bad tax
  policy, it is our tax policy a policy arrived
  at through the elected representatives of the
  people of this Nation. The ability of some
  international bureaucracy to effectively impose
  punitive taxes or tariffs on American goods
  should offend us all
• - In a senate floor debate on a WTO ruling
  against Foreign Sales Corporation (FSC) tax
  break, Senator Russ Feingold

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WTO Tribunal

• WTO disputes are heard by tribunals composed of
  three panelists.
• WTO tribunals are comprised of trade experts with
  the WTO Secretariat nominating panel members for
  each dispute from a roster.
• (These qualifications promote the selection of
  panelists with a stake in the existing system and
  rules, eliminating potential panelists who do not
  share an institutionally derived philosophy about
  international commerce and the primacy of the WTO
  system)

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WTO Tribunal

• A panel are allowed, but not required to, to seek
  information and technical advice form outside
  individuals and expert bodies
• The only recourse after a WTO panel ruling is to
  appeal to the WTO Appellate Body which is a
  standing committee of seven trade experts with
  three selected to hear each appeal.

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WTO Tribunal

• WTO dispute panels operate in secret. Documents
  are restricted to the countries in the dispute.
• Press and the public are excluded.
• The WTO lower panels and Appellate Body meet in
  closed sessions and the proceedings are
  confidential.

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WTO Tribunal

• All documents are also kept confidential unless a
  government voluntarily releases its own
  submissions to the public
• No outside appeal to a WTO ruling is available.
• (WTO, Understanding on Rules and Procedures
  Governing the Settlement of Disputes at Article
  14 and Appendix 3, paras. 2 and 3).

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WTO Tribunal

• Under the rules of conduct, discovery of
  panelists background is based on
  self-disclosure, leaving it up to the individual
  panelist to decide which aspects of his or her
  past should be known.

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WTO Tribunal

• GATT contained the typical sovereignty safeguards
  found in almost every international agreement
  consensus was required to bind any country to an
  obligation. Unlike GATT, WTO panel rulings are
  automatically binding and only the unanimous
  consent of all WTO nations can halt their
  adaptation.

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WTO Tribunal

• Contrary to the majority of court hearings,
  opinions expressed in the final WTO panel reports
  by individual panelists remain anonymous.

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Threats outside GATS framework

• The implications of GATS cannot be understood by
  just going through the officially declared
  procedures. How GATS negotiations happen in real
  world should also be taken in to account to
  understand the real impacts.

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Threats outside GATS framework

• When considered with the complicated nature of
  pressure tactics used by powerful developed
  countries to arrive consensus, the GATS
  statement Governments can choose the services in
  which they make market access and national
  treatment commitments and they can limit the
  degree of market access and national treatment
  they offer has little meaning.

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Threats outside GATS framework

• Pressure tactics / arm twisting within WTO
  negotiations
• a. Public and private attacks on the developing
  country groupings
• b. Divide and Rule policy by the USA and EU
• IFIs also exert pressure on developing countries
  to commit on GATS and other WTO trade agreements
• Corporate lobby groups enjoy immense influence
  over the trade policies of WTO members such as
  the USA, EU and Japan.
• .

52
Public and Private Attacks

• At the end of the Cancun Ministerial Grassley
  (Chair of the US Senates Finance Committee)
  issued a statement saying, Let me be clear. Ill
  use my position .. to carefully scrutinize the
  positions taken by many WTO members during this
  Ministerial. The US evaluates potential partners
  for free trade agreements on an ongoing basis.
  Ill take note of those nations that played a
  constructive role in Cancun, and those nations
  that didnt

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Public and Private Attacks

• Tanzania and Kenya were among countries
  threatened in the run-up to Cancun (e.g. loss of
  trade preferences, the cancellation of market
  access preferences, etc.).
• There were personal attacks to dismiss
  troublesome ambassadors from their positions,
  as was the case with Dominican Republics
  ambassador at the WTO, Dr Frederico Cuello.

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Public and Private Attacks

• EUs chief negotiator Pascal Lamy acknowledged to
  European NGOs prior to the Cancun Ministerial
  that arm-twisting and blackmailing practices
  take place at the WTO.
• How do you get some kind of agreement that 146
  countries can sign on to, given they all have
  different views? In that process, people will get
  their arms twisted. If you want more textiles in
  my market, I may twist your arm to get more
  investment. There are trade-offs, arm-twisting,
  bulling and all the rest of it going on
• - Richard Eglin, Director of the Trade and
  Finance Division

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Public and Private Attacks

• In September 2003 in an attempt to intimidate
  Brazil, Senator Chuck Grassley asked the US
  Department Agriculture to launch an investigation
  into Brazilian farmers alleged planting of
  genetically modified soybeans without paying
  licensing fees to US companies allegations
  disputed by the Brazilian government.
• Immediately before the General Council meeting in
  Geneva, US trade representative, Robert Zoellick,
  especially warned the G90 group of developing
  countries to be flexible.

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Public and Private Attacks

• In Cancun, developing countries were put in a
  position where they had to agree to the text or
  risk the collapse of negotiations.

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Divide and Rule policy

• After being threatened Guatemala, Peru, Ecuador,
  Colombia and Costs Rica all left the G20 in the
  weeks following Cancun
• According to Latin American delegates, the threat
  to their countries was direct and explicit. In
  words of one Ambassador The US said You still
  want to negotiate with us? Then get out of the
  G20.

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Divide and Rule policy

• El Salvador and Guatemala had been offered
  expanded export quotas by the USA if they would
  agree to abandon the G20.
• US held series of bilateral meetings with Arab
  countries early in the Cancun Ministerial in an
  effort to prevent them from joining G20.
• EU engaged in persuading Caribbean and Pacific
  (ACP) states not to join the G20
• Philippines came under intense pressure to
  distance itself from both the G20 and G33.

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Divide and Rule policy

• EU reportedly pressing individual African states
  to keep away from G20 and G33.
• The EU was accused of trying to undermine
  developing country unity during the Ministerial
  by spreading rumors that West African countries
  might be open to WTO negotiations on the
  Singapore issues in return for a deal on cotton
  at Cancun.

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Divide and Rule policy

• US president George Bush had personally
  telephoned the heads of state of Brazil, India,
  Pakistan, South Africa and Thailand on the eve of
  the Ministerial , putting pressure on them to
  abandon the G20s strong stance on agriculture.
• The inclusion of Brazil and India by US, EU and
  Australia to form the Five Interested Parties
  (G5) after Cancun

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IFIs pressure on developing countries

• There are several ways IFIs exert pressure.
• i.  Pressure coming as loan conditionality
• ii. Providing loans to developing countries to
• compensate impacts of trade liberalization
• iii. Providing technical assistance to develop
  country
• schedule of commitments
• iv. Working closely with WTO on a common agenda
• by compelling poor countries to liberalize
  services.

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IFIs pressure on developing countries

• We strongly believe that a successful conclusion
  of the Doha round is essential for the world
  economy and will benefit all countries. We are
  therefore working to package our support,
  building on what we are already doing in order to
  help countries to implement commitments they make
  as the Doha Development Agenda proceeds.. We are
  examining ways to use and tailor our lending
  authority to respond to the specific challenges
  posed by Doha Agenda. Such lending could take
  place at the project, sector and country levels.
  In the context of coherent country financing
  plans, we also aim to provide support in
  mobilizing donor resources
• - The letter submitted by IMF and World Bank on
  20th August 2003 to the WTO Director General,
  Supachai

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IFIs pressure on developing countries

• Supachai also angered African negotiation after
  Cancun by circulating another letter from the IMF
  and World Bank heads to WTO missions in Geneva.
  Dated 11 November 2003, the letter promised loans
  to countries willing to show flexibility to
  re-enter the negotiations.

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IFIs pressure on developing countries

• The World Bank and the IMF were urging
  countries to get talks back on the table. If
  countries went back to negotiations, they would
  be given lending facilities to meet the
  adjustment costs. Obviously developing countries
  felt extremely offended by that. Why should I
  loose revenue that I now collect (e.g. by making
  commitments to reduce tariffs), and be given a
  loan? I would rather collect revenue, especially
  if my tariffs are much lower than others. There
  is no way we are going to take on deeper
  commitments in the WTO and get deeper into debt.
  It doesnt make sense. Also, what can we use to
  repay the loans if there is no revenue to
  collect? The DG sent us copies of this letter.
  This is very weird. Im telling you, this
  organization is crazy
• - One African official

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Corporate lobby groups influence

• In the words of David Hartridge, former director
  of the WTOs services division Without the
  enormous pressure generated by the American
  financial services sector, particularly companies
  like American Express and Citicorp, there would
  have been no services agreement
• At the forefront of the campaign demanding the
  expansion of negotiations to cover Singapore
  Issues were the major international business
  lobbies such as International Camber of Commerce
  (ICC).

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Corporate lobby groups influence

• The ICC met President Chirac in May 2003, prior
  to G8s Evian summit, and handed over a statement
  calling for the WTOs negotiating agenda to be
  expended into the new areas of investment,
  government procurement and trade facilitation.
  This was duly accommodated.
• The agribusiness lobby enjoyed unprecedented
  access to the US delegation to Cancun, which had
  around 70 corporate advisers.

67
Corporate lobby groups influence

• The Business Round Table announced that it would
  be launching a multi-million dollar promotional
  campaign in June 2003 to win support for the
  successful conclusion of the Doha round of WTO
  negotiations.
• USAs rejection of the West African call for the
  elimination of cotton subsidies stemmed directly
  from its concern not to antagonize the powerful
  cotton lobby especially on the eve of an election
  year.

68
Corporate lobby groups influence

• The close relationship between the developed
  country negotiators and the corporate lobby
  groups was exemplified in an EU briefing session
  during the Ministerial, where the representative
  of one European business federation openly asked
  EU trade negotiators what action they were taking
  to break up the G20, and what the business
  community could do to help.

69
Corporate lobby groups influence

• NGOs have challenged the US system of trade
  advisory committees, the majority of which are
  filled exclusively by industry representatives.
  When NGOs won the right to have a -   seat on one
  of the trade advisory committees, however, the
  committee did not meet for two years thereafter.

70
Corporate lobby groups influence

• According to Ugandan delegates at Cancun,
  President Museveni was asked by Zoellick to
  remove NGO representatives from Ugandas
  delegation in an attempt to close down
  transparency of the negotiations yet further.

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Proposals.

• Do not offer market access to water and
  electricity sectors (agriculture, health,
  education and other essential service sectors)
  under GATS
• Join G20 (especially on agriculture) and G90
  (covers the whole range of issues related to WTO)
  and work within those developing country
  alliances to defend the rights of public in the
  developing world

72
Proposals.

• Make sure the following is done within Sri Lanka
  before the consideration of offering services
  for GATS
• a. introduce mechanisms to ensure wider
  stakeholder consultation and national consensus
  on GATS
• b. make independent sectoral and overall
  assessment of service liberalization
  (collectively with UNCTAD, UNDP) with the
  involvement of representatives of the Sri Lankan
  public.

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Request to all public, private, CS organisatons
operating in each service sector..

• To study and assess the wide range of
  implications on particular service sectors if
  they are offered under GATS