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Extend GATS Campaign to privatization, bilateral accords

by Chakravarthi Raghavan

Geneva, 11 July 2001 - - The current campaign and opposition from a range of Southern governments, non-governmental groups and unions (in the North and the South) for more market access by them in a range of service sectors need to go hand-in-hand with more broad and general support for campaigns against privatization of public services, says Corner House a UK-based NGO in a briefing paper on the new round of negotiations in trade and services under the WTO and its General Agreement on Trade in Services (GATS).

The paper points to the many-pronged attack from the International Monetary Fund, the World Bank and the WTO, as well as through the route of bilateral and plurilateral agreements that the powerful countries are using to open up export markets for their domestic industries in the health and education sectors, and the need for a cohesive strategy. “By means of GATS, the WTO is stage-managing a new privatisation bonanza. Multinational and transnational corporations, including pharmaceutical, insurance and health care companies, are lobbying hard to capture the chunks of gross domestic product that governments currently spend on public services such as health and education. Revisions to GATS are by and large being proposed by trade negotiators from countries bent on getting better market access to export markets for domestic industries. Officials in other government departments responsible for health, agriculture, or the environment may not be aware of what is being negotiated, nor the implications.

“Publicly-accountable services could be dismantled and the door effectively closed to ever reviving them.”

On the various explanations and interpretations being given by the WTO secretariat officials to counter the civil society campaigns against GATS and the threat to ‘public services’, Corner House says: “The current ostensible ‘exclusion’ of public services from GATS should be made actual for services provided in the public interest.”

Pointing to the parallel moves - via the IMF, World Bank, bilateral and plurilateral accords - by powerful countries to promote privatization of public services in developing countries and for enabling foreign corporate take-overs in these sectors, Corner House says: “Opposition to GATS should go hand-in-hand with support for campaigns against privatization more broadly and generally. It would be a hollow victory for GATS to be curtailed only for bilateral and plurilateral arrangements with the same effects to increase or for the IMF’s hold in the South to tighten.”

The Corner House briefing paper, “Trading Health Care Away? GATS, Public Services and Privatization’, notes that after the failure to launch a comprehensive revision of international trade rules at Seattle, talks are now on at the WTO to revise the GATS - with the US, EU, Japan and Canada, trying to revise GATS so that it could be used to overturn almost any legislation governing services, from national to local levels. Domestic policy making even on matters such as shop opening hours or height and location of new buildings could in effect be turned over to the WTO, with all legislation primarily aimed at increasing trade.

The Corner House paper argues that health care, education, energy, water and sanitation are among the public services that are particularly under threat from GATS. All these are already coming under the control of the commercial sector as a result of privatisations, structural adjustment and reductions in public spending. A revised GATS could give the commercial sector further access and could make existing privatisations effectively irreversible.

Experience in the USA and several Latin American countries where health services have been run for profit over the past decade or so, suggests that the result will be a decline in accessibility to health care worldwide.

Several countries are now demanding that a wide-ranging assessment of the impact of a free market in services be carried out before any more so-called trade barriers are removed. And NGOs and trade unions are demanding that services in public interest be clearly exempt from GATS.

“Rules governing international trade are certainly necessary,” says the briefing paper. “But such rules should place people before the entrenchment of corporate power.”

On services and policies of countries in liberalising services, and the irreversibility of such policies when they are scheduled under the GATS, Corner House cites a WTO secretariat document as admitting that country commitments in GATS ‘have the effect of protecting liberalization policies, regardless of their underlying rationale, from slippages and reversals.”. Also cited is the view of the WTO Services Division director, David Hartridge that GATS “can and will speed up the process of liberalisation and reforms and make it irreversible.”.

While GATS does allow countries to protect human, animal and plant life or health (Art.XIV), its preamble “has a caveat large enough to drive a truck through,” and as some of the panel rulings have shown GATS could be used “to challenge an almost unlimited range of government regulatory measures that, even indirectly or unintentionally, affect the conditions of competition of international suppliers.”

The paper notes that the GATS Council has discussed, in terms of the national treatment, restrictions in countries on large-scale retail outlets, shop opening hours, zoning and planning laws, controls on land use, building regulations, building permits, registration of contractors and professionals, regulation of professional fees, environmental regulations, worker health and safety regulations, local content and employment policies, urban planning rules and environmental protection policies. Even laws to ensure that a country benefits from foreign investment - minimum number of local jobs or content, for instance - could be considered trade restrictive. No government measure or practice is beyond GATS scrutiny.

Referring to the negotiations now under way, in terms of the built-in agenda of GATS, Corner House points that despite requirements for ‘transparency’ in GATS, the renegotiations are taking place between government representatives behind closed doors, but in close consultation with corporate lobbyists.

“Few of the results of discussions are made publicly available by the WTO or individual countries. It is next to impossible for citizens’ organizations to find out the current state of negotiations while access to many background documents are restricted. Thus, even negotiations on apparently technical issues such as reclassification of services are evading public accountability and public and parliamentary debate.”

This secrecy, combined with GATS obscure, bureaucratic, arcane and technical terminology, makes it difficult for policymakers, let alone the general public to grasp the significance of GATS.

But statements from US and EU industry associations “indicating what they want out of current negotiations gives a clearer picture.”

The US Coalition of service industries has asked US negotiators to propose broad commitments to liberalization in areas such as right to establish a business presence in foreign markets (commercial presence), the right to own all or a majority share of that business, and the right to be treated as a local business (national treatment. The US must also insist that the entire new round be completed by 31 December 2002, “in order to force closure on the existing agenda, reap what gains can be garnered, and begin again with a fresh agenda that could include items like investment.”

Several joint industry-government conferences provide examples of close collaboration between corporate employees and government officials in testing and refining their ideas for expanding GATS.

Referring to the controversies about services provided by governments, and the reassuring statements from WTO officials and policy makers in countries that these are excluded from GATS, Corner House points out that the GATS definition of government service (Art.1.3c) is so narrow - “any service which is supplied neither on a commercial basis nor in competition with one or more service suppliers” - that the exception could be almost meaningless if one country were to challenge another country’s public services at the WTO dispute panel as contravening GATS.

Governments the world over have been deregulating and privatising both the funding and the provision of public services, sometimes on their own initiative, sometimes as a condition of IMF structural adjustment programmes (SAPs) and sometimes on World Bank advice. In some cases, governments have simply sold public entities off.

Governments are transforming other public services, particularly those which it might be politically unacceptable to privatise outright, by requiring the public body to contract services out to for-profit companies or to institute a process of compulsory competitive tendering (private provision). They have separated infrastructure such as buildings from service provision, and privatised the infrastructure by means of an array of “public-private partnerships” that retain an ostensible public dimension and thus appear more politically acceptable.

As far as GATS is concerned, if a government contracts out any part of its public services, such as cleaning or catering, or if private (either for-profit or voluntary) companies supply services also provided by the government (for instance, if private schools exist alongside state ones, or if there is a mixture of public and private funding), then those services could be judged by a WTO dispute panel as not being a government service and thus subject to GATS rather than exempt from it, that is, subject to competition from operators from abroad.

The Corner House paper discusses the attempts to create health markets and privatize health care, as a result of the policies of the IMF, World Bank, and more recently the World Health Organization that has joined the privatization trend through its advocacy of “public-private partnerships.

This trend says the briefing paper “is leading “towards the partial privatisation and commercialisation of the UN system itself.” The WHO’s own approaches in this area have been criticised for benefiting commercial interests rather than public health initiatives.

To date , the paper acknowledges, the WTO/GATS have not been instrumental in privatising health care services and opening them up to foreign competition, with health and social services trailing behind other sectors in their being listed and thrown up to competition.

However, during GATS 2000 negotiations, the US has made health care a special target, and the US Coalition of Service Industries is calling for allowing majority foreign ownership of all public health facilities, and wants to gain access to “rapidly expanding public health care expenditures in many developed countries... experiencing an increase in their aged populations.”

GATS could facilitate further privatization and competition in health services if more countries could be pressured during GATS 2000 talks to list health care services in their schedules.

Challenges could also be mounted via the dispute settlement process - such as for e.g. by the US taking the UK to a panel for denying a US TNC permission to buy a British public National Health Services hospital, financed through the Private Finance Initiative.

A third way GATS could facilitate privatization and competition is if mechanisms and principles underpinning the design, funding and delivery of public services are in effect proscribed - for e.g. if the vague requirement for ‘domestic regulation’ to be ‘least burdensome’ to trade is defined as ‘pro-competitive’.

GATS could also be used to hit the widely-used principle of ‘cross-subsidization’. This could be used to hit telephone services (already being done) to rural areas, or bus and railway services to outlying areas being subsidized by routes to busy congested areas. Risk pooling and cross-subsidies between rich and poor, healthy and sick ensure that all get tolerably equal access to similar levels of care because the basis of public services aims to be redistribution.

Getting rid of cross subsidisation is an essential step in services privatization, and allows corporations to divide up integrated health care services, extract the more profitable ones and more profitable patients, usually those needing least health care, and leave behind a reduced public sector. Such break-ups threaten the principles of universal coverage and shared risk that tax-funded (as in Britain and Canada) or socially insurance funded (as in France and Germany) health care systems generally uphold.

The trend is towards something like the US health care system, dominated by for-profit-organizations, with cross-subsidisation being eliminated and hospitals being treated more and more as businesses.

While private health is promoted on the basis that it improves quality of care, it is difficult for patients to assess quality of health and social care provided by private companies in any meaningful way. Moreover, rules and regulations governing the public sector, setting for example minimum care standards, often do not apply to or are not enforced in the private sector.

The briefing paper notes that Latin America - particularly Chile, Colombia, Peru, Argentina, Brazil, Mexico and Venezuela - has become a testing ground for privatisation of health care in the name of economic reforms pushed by the World Bank, the Inter-American Development Bank, and the US trained national economists, and by the export targets of US health care providers and insurers.  Insurers tend to select ‘best risks’ and to reject those with chronic illnesses, and leave behind those who cannot afford insurance.

Yet, private operators rely on the very state health and social services that they are undermining. They take trained and experienced staff from the state system, select patients whose needs the public services have already identified, offer only the (profitable) services they want to, and set up private facilities, ranging from laboratory analysis to residential care, which can be rented or contracted out to the public service.

The WTO itself acknowledges (in its background note of 18 September 1998 on ‘Health and Social Services’ that: “private health insurers competing for members may engage in some form of ‘cream skimming’, leaving the basic public system, often funded through the general budget, with low-income and high-risk members. New private clinics may well be able to attract qualified staff from public hospitals without ... offering the same range of services to the same population groups”.

In Brazil, the private sector can now offer 120,000 doctors for one-quarter of the population, whilst the public sector has fewer than 70,000 doctors for everyone else. As Public Services International concludes, such private health care ‘is never cheaper or more comprehensive than state care’.The US is the most extreme example of this provision: it has the most administratively expensive health system in the world covering the lowest percentage of the population In India, under the influence of World Bank reforms, medical care has been handed over to the private sector without mechanisms to ensure the quality and standards of treatment. Infectious disease control programmes run by the state have been disrupted by being deprived of funds. Similar results have occurred in Sub-Saharan Africa.

“By means of GATS,” Corner House says, “the WTO is stage-managing a new privatisation bonanza. Multinational and transnational corporations, including pharmaceutical, insurance and health care companies, are lobbying hard to capture the chunks of gross domestic product that governments currently spend on public services such as health and education.

Revisions to GATS are by and large being proposed by trade negotiators from countries bent on obtaining better market access to export markets for domestic industries. Officials in other government departments responsible for health, agriculture or the environment may not be aware of what is being negotiated, nor the implications. Publicly-accountable services could be dismantled and the door effectively closed to ever reviving them.”

The paper notes that a wide range of Southern governments, unions and NGOs contend that a thorough assessment, independent of the WTO and associated bodies such as the World Bank or IMF, of the health, social, environmental and cultural impacts of existing service liberalisation (and indeed of all the WTO agreements) must be conducted, with special reference to the poorest and to women, before negotiations continue on GATS.

Some commentators believe that:”it would be reckless for governments to expand the GATS before the full implications of existing provisions and current coverage have even been assessed or become widely known. Rather, the GATS policy implications should . be reviewed, assessed, fully debated and, where necessary, the agreement should be reformed or rolled back. To expand such an agreement would be irresponsible.”

There have also been many calls, including from British Members of Parliament, for an independent and thorough assessment of the likely impact of the extension of GATS on the provision of key services, both in the UK and internationally.  And “while GATS itself mandates an assessment of trade in services, particularly of the impacts on developing countries (Article XIX), the WTO Secretariat has done little so far towards this.”

The African Group paper points out that developing countries had already made extensive concessions without receiving sufficient benefits in return. The WTO secretariat itself has acknowledged that many developing countries signed on to GATS in 1995 without appreciating the Agreement’s full implications.

Many with poorly developed public services, made some wide-ranging commitments in the belief that Foreign Direct Investment would step in to provide them.  Several developing countries were now arguing that they should not liberalise their services further, but developed countries should reduce their subsidies and open up textiles and agriculture sectors. They also complain that while there are detailed rules about movement across borders of capital related to services, there was nothing comparable about movement of people.

Public sector unions are calling for public services to be modenised and improved, but based on principles of democratic accountability, effective delivery. adequate funding, equality of access and fairness and partnership at work. “The current ostensible ‘exclusion’ of public services from GATS should be made actual for services provided in the public interest,” Corner House adds.

However, says Corner House, opposition to GATS should go hand-in-hand with support for campaigns against privatisation more broadly and generally. It would be a hollow victory for GATS to be curtailed only for bilateral and plurilateral arrangements with the same effects to increase or for the IMF’s hold in the South to tighten.

The paper says “international rules governing investment are certainly needed.  The current set, however, and the way in which they are implemented, are invariably a charter for corporations to do as they please.”

Just because the WTO, and indeed the World Bank and IMF, are doing the wrong job does not mean that international institutions are not needed to iron out the vast inequalities of the global economy or to prevent further meltdowns in financial markets.

“At issue,”the briefing paper says, is not whether to have rules governing international trade but what kind of rules to have and how they should be implemented so that they do not have adverse health, social and environmental impacts nor exacerbate inequities. “

Indeed, as UK activist Kevin Watkins points out, “we desperately need a rules-based system of global governance that places people before corporate profit, and shares the benefits of globalization more equitably.”

Health is a fundamental human right, recently defined under the Covenant on Economic, Social and Cultural Rights: “all people have the right to the highest attainable standard of health . . . as a prerequisite for the full enjoyment of all other human rights.”

“Human rights and public health policies are indispensable. Trade policies, however, are negotiable.” – SUNS4934

The above article first appeared in the South-North Development Monitor (SUNS) of which Chakravarthi Raghavan is the Chief Editor.

[c] 2001, SUNS - All rights reserved. May not be reproduced, reprinted or posted to any system or service without specific permission from SUNS. This limitation includes incorporation into a database, distribution via Usenet News, bulletin board systems, mailing lists, print media or broadcast. For information about reproduction or multi-user subscriptions please contact: suns@igc.org

 


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