GATS and Corporate Political Power

18 Mayo 2006
Article
 

GATS and Corporate Political Power
Stop the GATS Attack
GATSwatch Briefing Sheet
Compiled by Erik Wesselius
TNI Website, January 2002
Also available in PDF

Since February 2000, the member states of the World Trade Organisation (WTO) have been quietly negotiating an expansion of the 1995 General Agreement on Trade in Services (GATS). These "GATS 2000" negotiations are driven by a corporate agenda of services liberalisation and deregu-lation, pose a serious threat to democratic decision-making, development prospects of Southern countries and the provision of accessible basic public services, like water, health and education.

The Corporate GATS Agenda

According to the European Commission: "The GATS is not just something that exists between governments. It is first and foremost an instrument for the benefit of business". (1) This is not by chance. It is the result of a sustained corporate lobby campaign that was started by a small group of US banks and insurance companies in the mid-1970s. Today, a host of services industry lobby groups is influencing the WTO GATS 2000 negotiations. Many of these corporate groupings, like the US Coalition of Service Industries or the European Service Forum, have forged alliances and close co-operative arrangements with government agencies involved in the GATS negotiations. To solicit IMF/World Bank support, many developing countries have had to adopt extensive privatisation and liberalisation policies. Global services companies stand ready to capture the most lucrative privatised public services like energy provision, water supply or health care. In this context of what is misleadingly called "autonomous liberalisation", GATS merely functions as a tool to ensure lock-in of privatisation and liberalisation measures and to protect the interests (and investments) of foreign investors through enforceable multilateral rules and disciplines.

Acceleration of GATS Talks After Doha

After the WTO Ministerial Conference in Doha, November 2001, the GATS 2000 talks are likely to accelerate dramatically. WTO members have to table request lists for market access in services before 30 June 2002. They have only nine months (till 31 March 2003) to respond to these requests. An overall deal is to be brokered before December 2004: less than three years from now!

Since preparations for GATS2000 began in 1999, the big global services companies and their lobby organisations have worked closely with national GATS negotiators. As a result, WTO members such as the US, the EU, Canada and Japan have detailed lists of priority market access demands and are eager to speed up the GATS 2000 negotiations. The tight calendar agreed in Doha, is clearly not in the interest of Southern countries, but will reinforce the corporate GATS agenda.

Stop the GATS Attack: Dismantle Corporate Power

In 2001, hundreds of groups from around the world launched a campaign to Stop the GATS Attack. With the acceleration of the GATS talks after Doha, this campaign needs to be intensified. Challenging the close liaisons between services lobby groups and governments, especially in the US and the EU, is essential in any post-Doha campaigning on (public) services. Trade policy can only contribute to key policy goals like environmental sustainability and fighting poverty, when it is delinked from serving the export interests of large transnational corporations.

GATS at a Glance

The General Agreement on Trade in Services (GATS) is one of the agreements concluded at the end of the Uruguay Round of global trade talks in 1994. The agreement falls under the umbrella of the World Trade Organisation and is enforceable through the WTO’s dispute settlement system. Since February 2000, new negotiations are underway to extend the scope and the depth of GATS. After a slow start, these ‘GATS 2000’ negotiations got into higher gear when WTO members reached agreement on negotiating modalities in March 2001, and set important deadlines in the Doha Ministerial Declaration of November 2001.

Broad Coverage

The GATS:

  • applies to all services sectors, ranging from banking, construction, education, postal services, health care, tourism, transport, water supply and waste management;
  • applies to all levels of government, from the national or federal to the local level, and
  • includes all government measures which "affect trade in services".

The GATS distinguishes four types of trade in services, or ‘modes of supply’:

  • Cross-border supply: Includes e-commerce, call-centres servicing clients abroad, international postal services.
  • Consumption abroad: Includes studying at a foreign university, getting medical treatment abroad, visiting another country as a tourist.
  • Commercial presence: Includes all foreign investment related to services provision, for example bank branches to power plants or tourist resorts.
  • Presence of natural persons: Includes actors travelling abroad for film shootings, or consulting and accountancy firms sending employees on short missions abroad.

Economic Importance of the Services Sector

Services account for around two-thirds of global production and employment, but they represent less than one fifth of total world trade. As shown by the table below, global trade in services is dominated by the US and the EU.

World exports and imports of commercial services (1) (in bn euros and % of world total)

 

1992

2000

 

Exports

Imports

Exports

Imports

UE-15 (2)

148,7

(28,0%)

140,8

(26,1%)

291,1

(24,3%)

286,1

(23,8%)

USA (3)

126,4

(23,8%)

79,6

(14,8%)

297,8

(24,9%)

215,7

(17,0%)

Japan

38,1

(7,2%)

75,1

(13.9%)

74,1

(6,2%)

125,5

(10,4%)

Canada (4)

15,4

(2,9%)

23,2

(4,3%)

40,3

(3,4%)

45,4

(3,8%)

China (4)

7,0

(1,3%)

7,1

(1,3%)

32,7

(2,7%)

38,9

(3,2%)

Rest of World

195,2

(36,8%)

212,9

(39,6%)

457,7

(38,3%)

489,5

(40,8%)

World Total

530,8

(100%)

538,7

(100%)

1193,8

(100%)

1201,2

(100%)

1. Table taken from Eurostat News Release 117/2001, 8 November 2001, "The EU Figures for the Doha Conference". Data source: IMF. Figures excluding intra-EU transactions. Commercial services excluding government services.
2. Intra-EU transactions are excluded. Intra-EU-15 trade in commercial services was worth 710.8 bn EUR in 2000. Including this trade the EU-15’s share of world exports in 2000 was about 42%, and about 41% for imports.
3. Including repairs on goods & expenditures of foreign governments & international organisations in the USA. Excluding postal & courier services.
4. Not by ranking order. Figures for Canada and China are given for information.

Major Services Industry Lobby Groups

US Coalition of Service Industries

The US Coalition of Service Industries (USCSI) was founded in 1982 with the aim of putting trade in services on the agenda of the GATT multilateral trade talks. It was an initiative of three financial services firms: American International Group, American Express and Citicorp. The new coalition of firms and professional organisations from virtually all services sectors proved to be very influential.

During the 1980s, the USCSI quickly developed into an effective lobbying machinery with close relations with the US government’s departments involved in international trade negotiations, in particular with the USTR and the Treasury Department. For the past two decades, the USCSI has been the most influential services lobby group on a global level.

You have working relationships, [...] and you see the U.S. Trade Representative and the Treasury Department, and the relationships are good. U.S. government trade negotiators went to Seattle knowing exactly what they wanted in financial services. [...] We have a fifty-page wish list, and we meet with our trade negotiators as often as weekly.
At the close of the Uruguay Round, we lobbied and lobbied. We had about 400 people from the U.S. private sector. There were perhaps four Canadians and nobody from any other private sector. The private sector advocacy operations in the U.S. government are radically different from those in every other government in the world.
Harry Freeman, at that time USCSI chair

In the context of the current GATS 2000 negotiations, the USCSI has been pushing for short and quick negotiations and for an aggressive market access agenda, including sectors like energy, health, and education. This agenda has to a great extent been taken on by the US government.

Financial Leaders Group

At the end of the Uruguay Round in 1993, negotiations on financial services were left unfinished. Resumed in January 1995, negotiations got stuck a few months later. To break the deadlock, the US Government, the EU Commission and the WTO Secretariat invited Ken Whipple, then President of Ford Financial Services and Andrew Buxton, then Chairman of Barclays Bank, to form a high-level transatlantic pressure group. In the Spring of 1996, the CEO-only Financial Leaders Group and a supporting Financial Leaders Working Group, were created.

It was an informal group; [...] it had no subscription, and most of the meetings were by telephone conference calls.
Andrew Buxton, FLG co-founder and chairman

Although the Financial Leaders Group is a transatlantic grouping, and even includes some Japanese companies, it is clearly dominated by US financial services firms. This became particularly clear in the closing phase of the Financial Services Negotiations in December 1997. According to a New York Times report: "Citibank, Goldman Sachs, Merrill Lynch and numerous insurance companies – particularly the American International Group and Aetna – established command posts at the President Wilson hotel, about a half-mile from the headquarters of the World Trade Organization". (2)

[T]he Financial Leaders Group gave negotiators from Europe and the United States a forum for constructive dialogue with their constituent industry. [...] At the final Geneva negotiations [...] the Financial Leaders Group provided an on the spot service to our negotiating teams to evaluate the offers from countries as they changed so that they could have an immediate industry view.
Andrew Buxton, FLG co-founder and chairman

European Services Forum: First and Foremost for the Benefit of Business

Significantly, the European Commission also saw the benefits of strong business participation in the process, and in 1998 Sir Leon Brittan, Vice-President of the Commission, asked me to create and chair a select group of European business leaders in the service industries, to act as a link between the Commission and a wide range of service industries.
Andrew Buxton, ESF Founder and Chairman

When preparations for the GATS 2000 negotiations were started in the Spring of 1998, European Trade Commissioner Leon Brittan (3) wanted to closely involve the EU services industry in preparing and supporting EU negotiating positions for the GATS 2000 talks. Aspiring to copy the success formula of the US Coalition of Service Industries and the Financial Leaders Group, he asked Andrew Buxton, the co-founder of the Financial Leaders Group, to form a "European Services Network".

I count on your support and Input, at the company, CEO and Chairman as well as at the European or National Federations, so that we can refine our strategy and set out clear, priority negotiating objectives which will make a difference in the international expansion of service business.
EU Trade Commissioner Brittan at ESF launch meeting

The European Services Forum (ESF) was launched in January 1999. Its high-level European Service Leaders Group, comprises over forty CEOs from across the European services industry, and aims at "giv[ing] the services sector a high public profile in the GATS 2000 negotiations and to intervene on behalf of the sector at high level at critical moments of the negotiations". (4) The ESF Policy Committee, consists of the personal representatives of the CEOs in the Leaders Group and the Secretaries General of over 35 European service sector federations. Al ESF policy positions are prepared by the Policy Committee. Both the Policy Committee and the Leaders Group are serviced by a small permanent secretariat, hosted by EU employers’ organisation UNICE.

Information uncovered by Corporate Europe Observatory (5) proves that the European Services Forum has indeed developed into a privileged liaison structure between the European Commission’s GATS 2000 team and the EU services industry. ESF position papers have been extensively discussed with European Commission officials, either at ESF Policy Committee meetings (which are normally attended by European Commission officials) or at the many informal meetings of ESF/ESLG delegations with Commission officials. (6) Many of the ESF proposals have ended up in official EU GATS 2000 negotiating proposals.

As the current Deputy Head of the EU Trade Directorate, Mr. Robert Madelin, told a corporate audience in the UK in September 1999: "We are going to rely heavily on that Network. [...] We are going to rely on it just as heavily as on member state direct advice in trying to formulate our objectives". (7) From a democratic perspective such an attitude is completely unjustifiable, but due to the lack of public debate and effective democratic control of EU trade policy, it has so far remained unchallenged. Recently, the "Seattle to Brussels" network of European NGOs has chosen the privileged relationship between the European Services Forum and the EU institutions as one of the main targets for its campaign on the EU’s role in the WTO trade talks.

Global Services Lobby Web

  • US Coalition of Service Industries (USCSI)
    The central and most influential organisation within the global services lobby web. www.uscsi.org
  • European Services Forum (ESF)
    Working closely with the European Commission, the ESF has a huge influence on EU GATS negotiation proposals. www.esf.be
  • Japan Services Network (JSN)
    Hosted by the Japanese employers’ organisation Keidanren. www.keidanren.or.jp
  • Services Business Network of the Americas (REDSERV)
    Network of the services industry from North and Latin America, focusing on the services chapter of the FTAA. www.globalservicesnetwork.com/redserv.htm
  • Hong Kong Coalition of Service Industries (HKCSI)
    Organised the 2nd World Services Congress (Sept 2001). www.hkcsi.org.hk
  • Liberalisation of Trade in Services (LOTIS)
    Influential British corporate/state alliance pushing for financial services liberalisation. www.ifsl.org.uk/tradepolicy

All these services lobbies are part of a global network that meets regularly at and World Services Congresses. In 1998, an additional loose network of individuals was founded: the Global Services Network (GSN). This network is co-ordinated by the USCSI. It links key figures from services lobby groups and privately funded think tanks with academics and governmental GATS experts. Most ideas and concepts that are later taken up in the GATS negotiations are developed within this self-styled "global services movement".

For more details on the global services lobby web refer to: www.gatswatch.org/GATSlobby.html

Some key think tanks, academic institutions and research networks promoting liberalisation of trade in services

Some sectoral lobbies active on GATS

  • Energy Services Coalition (ESC)
    Coalition of US-based energy firms, founded in 1999 to promote negotiation of energy services within the GATS 2000 talks. www.pecc.org/energy/esc.html
  • Global Business Dialogue on Electronic Commerce (GBDe)
    High-level global corporate-state alliance advocating e-commerce policy issues. www.gbde.org
  • Global Alliance for Transnational Education (GATE)
    Network of multinational corporations, national associations, the professions, accrediting and licensing authorities, and institutions of higher education world-wide, incorporated as a subsidiary of telecommunications firm, Jones International, Ltd. www.edugate.com
  • World Travel & Tourism Council (WTTC)
    A global coalition of over 80 Chief Executives from all sectors of the global travel & tourism industry, "active in ensuring maximum liberalisation of services related to travel and tourism". www.wttc.org

References

1. Opening World Markets for Services, gats-info.eu.int/gats-info/g2000.pl?NEWS=bbb.
2. Edmund L. Andrews, "Agreement to Open Up World Financial Markets Is Reached", New York Times, 13 Dec 1997.
3. Soon after his resignation as EU Commissioner, Mr. Brittan became vice-chairman of investment bank UBS Warburg. In March 2001 he was appointed chairman of the High-Level LOTIS Group, a UK financial services lobby.
4. European Services Forum, Memorandum of Understanding, October 1998. www.esf.be/f_e_abou.htm.
5. Through access to documents requests and through finding the LOTIS papers, see www.gatswatch.org/LOTIS/.
6. A full list of known ESF-EC meetings is available on GATSwatch. See www.gatswatch.org/ESF.html.
7. Robert Madelin, "Preparing for GATS 2000: the European Commission Approach", speech at conference How to Open Services Markets Worldwide, London, 21 September 1999.