Reply to Patricia Hewitt on GATS

Patricia Hewitt MP, Secretary of State, DTI
Dear Patricia

Thank you for your long and detailed reply to my concerns about GATS, which I should have responded to earlier.

You will agree that many of those worried about the implications of this leap in the dark are neither scaremongers nor habitual oppositionists. The Women's International League for Peace and Freedom (UK Section) and the National Federation of Women's Institutes have written jointly to all MPs expressing concern about GATS and putting a set of questions very similar to those I put to you. They are, in their own words, "extremely concerned about the irreversible and wide-sweeping nature of the Agreement, and particularly how the liberalisation of social services will impact on women, both as citizens and as workers". Concern has been expressed by a number of councils, including those of Warwick, Warwickshire, Oxford, East Lindsey and Flintshire. Over 260 MPs have signed a critical Early Day Motion.

I would like to respond to your paragraphs in the original order.

GATS will limit Government and Local Authority regulatory powers

Your description of this claim as "exaggerated" implicitly admits that it has some substance. You say that the sovereign right of governments to regulate the supply of services within their territories is specifically recognised by the introduction to the GATS; but a number of commentators have pointed out that statements of good intentions in the preamble are likely to have little status in the minds of dispute panels, when compared to the precise wording of paragraphs in the body of the agreement.

The Counsel for the Attorney General of Canada explained "why preambles to trade treaties should not be used in the way trade officials are currently using the preamble to the GATS. He cited the relevant rules of international trade law to underline that while the purposes of a treaty set out in the preamble may be considered in interpreting a treaty, 'interpretation must be based above all on the text of the treaty.' It is only when an interpretation of the text is 'ambiguous or obscure' that the preamble needs to be referred to. Similar conclusions about the role of preambles have appeared in WTO rulings." I quote from one of the background documents available at http://canadians.inline.net.

GATS commitments are dangerously open-ended

Not all GATS commitments are negotiated in a "bottom up" fashion. Some are more global in nature, such as the proposed "test of necessity" that would force governments at every level to make sure the licensing and standards they set for all services serve "legitimate objectives" and are the "least trade restrictive" way of achieving their objectives. Can you assure us that the UK Government would withdraw from GATS rather than countenance such a generally applicable clause?

There are two very great dangers even in the so-called "bottom up" or sector-by-sector approach.
1. Governments may fail to realise, until it is too late, the extent of what they are committing their economies to, and the ratcheting nature of these negotiations means that it is difficult, if not impossible, to roll back a commitment that hindsight shows to have been unwise.
2. Negotiations take place behind closed doors, with only ministers, officials and representatives of selected commercial interests being party to them, making it dangerously easy for strong countries to lean heavily on weaker countries and force them to "liberalise" more than they would want to of their own accord. It has been reported, for example, that the EU has been applying pressure to other countries to open up their water and energy services to international competition, to the benefit of Europe-based utility companies. If this report is true, your statement that "no GATS Member government has made any commitments under the GATS about the supply of water" may soon be of historical interest only.

You say that "the GATS specifically allows members to apply measures necessary to protect human, animal or plant life or health provided that such measures are not applied in such a manner which would constitute a means of arbitrary or unjustifiable discrimination or a disguised restriction on trade in services". But who will decide what constitutes "unjustifiable discrimination"? Who will decide what pieces of legislation are in effect (whether or not in intention) restrictive of trade, and whether such restriction would be justified on wider social grounds? Except in cut-and-dried cases, any official or appointed adjudicator of the WTO, a body dedicated to trade liberalisation, is going to be inclined to give more weight to this than to public health or environmental protection, which are not the responsibility of GATS.

This "least trade restrictive" test of necessity that is now being pushed into the GATS treaty means that the onus is on the legislating authority to prove its innocence of disguised protectionism. The history of dispute resolutions in NAFTA and the wider WTO don't fill one with optimism on this score. Even without such issues being brought to a dispute panel, the mere threat - or possibility of a threat - of referral will be enough to make even rich countries think twice about embarking on any legislation to which foreign service providers and/or their client governments may possibly take exception.

The "public service" exemption is vague and open to challenge

I am pleased that the Government recognises that there is a problem here. Some of us would suggest that "the general GATS aim of progressive liberalisation" should be put on hold, at least until this issue has been resolved. You suggest that so far no service suppliers have attempted to use GATS to lever open public services for their own benefit. This may be because there has been such a proliferation of PFIs public-private partnerships and outright privatisations that they haven't needed to. It may also be because they are waiting until the GATS extensions currently under discussion are locked into place.

The business organisations behind GATS have a privatising agenda

I am willing to accept that "the UK Government has no intention of making any commitments that would call into question the provision of public services through the UK's state system", but the Government isn't necessarily able to predict how every sentence in every paragraph of such a vast and wide-ranging document will be interpreted by future disputes panels. Universal public services that are currently free or subsidised may be subject to death by a thousand cuts. And if a future government wants to take some privatised or liberalised service back into public control, it may have to pay not only for those assets directly expropriated but for any concomitant loss of business resulting from what may be seen as disguised anti-trade legislation, especially if the market in question is foreign-dominated. Once again, GATS is a one-way ratchet mechanism.

GATS will allow private firms to cherry-pick profitable industries

Since our original discussion we have seen the implosion of the UK postal service, partly as a result of cherry-picking by private service providers due to pre-GATS liberalisation. Would it be paranoid to see this pre-emptive liberalisation (plus the money wasted on the Post Office's botched re-branding) as being connected with the required opening up of the US postal service, as reported by the Guardian on April 17? In any case, it is part of the same overall process, and I understand that a German-based firm is standing by ready to pick up the pieces of what was until recently one of our most efficient and respected public services.

GATS is designed to be irreversible

You agree that "reversal is discouraged" and say that in the case of a country wishing to roll back an unwise GATS commitment, "any Member affected by such a modification or withdrawal is allowed to negotiate compensation for any lost benefit". What happens if the parties concerned can't agree on appropriate compensation? Does the matter go to one of the ubiquitous dispute panels, and is the country that wishes to withdraw laying itself open to punitive and officially-endorsed sanctions if it doesn't cave in to whatever exorbitant price may be demanded by any number of countries whose firms have invested in some part of its economy?

Issues of democracy

You say about the 133 Committee that "neither the minutes of that Committee nor the papers tabled at it are made generally available as to do so could undermine the negotiating positions that are being developed." This is at the heart of what I object to about the GATS process. It requires each negotiating team to keep its hand concealed until negotiations are at such an advanced stage that the whole thing is virtually a fait accompli to the vast majority of each government's citizens. Some confidentiality is essential in international bargaining, but it seems to some of us irresponsible to initiate a process on such a scale, whose effect is to widen government secrecy, reduce transparency and disable democratic scrutiny.

I hope to see you at the Trade Justice lobby on June 19.

Best wishes

Brian Fewster


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