GATS AS A POLITICAL PROJECT

By Christina Deckwirth

[This article published in: Z: Journal of Marxist renewal, 3/21/2005 is translated from the German on the World Wide Web, www.linksnet.de.artikel.php.]


“Water is a product that would normally be free, and our job is to sell it.”
(Gerard Mestrallet, Suez)

“One of the main objectives of the EU (European Union) in the new round of the [GATS] negotiations is to achieve real and meaningful market access for European service providers for their exports of environmental services. Therefore we very much appreciate your input to focus our negotiating efforts in the area of environmental services.”
(Email of the EU commission to four European water corporations)


These quotations of executives of the largest water corporations of the world on one side and the EU commission on the other reveal the interests in the GATS process. The goal of GATS (General Agreement on Trade in Services) is promoting worldwide liberalization in trade and investments in the service sector. The EU commission and the European service industry join forces in the current GATS negotiations.

GATS was first made known to the general public through protests that were initiated by Attac and supported by unions, church groups and other political development and student groups. The criticism of these groups is mainly directed against the possible effects of GATS on public services and the intransparency of the negotiations. The other side of “civil society” has long waged campaigns for GATS. Several influential economic lobby associations and scientific research institutes first set the theme of international service trade on the political agenda and negotiated a service agreement within GAYY or the WTO. In the years 2001 to 2003, the anti-GATS and the pro-GATS campaigns struggled over the intellectual and moral “leadership” in public discourse.

This essay will first sketch the characteristics of GATS and then analyze its political significance. Following the theoretical debates of neo-Gramscianism and Vivien Schmidt’s reflections on discourse theory, the influence of private sector strategies and discourses on the GATS negotiation will be explored. Discourses and ideas can strengthen and transform the neoliberal configuration through the political project GATS.

1. GATS – FACTS AND STATISTICS

GATS is the first multilateral agreement on trade in services. Worked out in the course of the Uruguay round of negotiation of GATT (General Agreement on Tariffs and trade), GATS entered into effect with the founding of the World Trade organization (WTO) on 1/1/1995. In the meantime 147 states have become members in the WTO and negotiating partners in GATS. The regulations of GATS cover the whole expanse of the service sector. Infrastructure areas like transportation and telecommunication are included alongside financial services, architecture, electronic data processing services and tourism. Basic public services like education, health care and water also fall under the conditions of GATS (GATS, Art. 1, Paragraph 3). GATS covers all measures of member states that affect international trade. That GATS also includes foreign investments and border-crossing trade (GATS, Art. 1,2) is very important. Therefore GATS is an investment agreement and not only a trade agreement.

The goal of GATS is to advance liberalization and market opening in the areas of trade and investments in the service sector by reducing so-called “trade barriers” worldwide. “Trade barriers” are regulations like laws, regulations, standards and qualifications that limit free trade or foreign investment in services “more than necessary.” If a transnational corporation (TNC) feels discriminated in its business activity in one of the service sectors liberalized by GATS, it can try to move a national government to file a complaint against a “trade barrier” in the WTO arbitration court. This dispute resolution mechanism makes the agreement enforceable.

According to the principle of “progressive liberalization” (GATS XIX), the long-term goal of GATS is the complete liberalization of the worldwide service market. Article XIX obligates WTO members to hold new negotiation rounds at regular intervals toward this objective. Since 2000, GATS has been renegotiated to expand the narrow range of liberalization in the area of basic services. WTO member states negotiate their liberalization obligations in the form of offers and requests. The countries of the periphery are under the special pressure of the industrial countries. In addition to negotiating liberalization obligations in the request-offer process, WTO member states negotiate general rules for trade and investment activity in services. The mandate to negotiate conditions for inner-state regulation under GATS is highly charged. (GATS, Art.IV.4)

THE CURRENT STATE OF NEGOTIATIONS

Since the requests and offers can only be publically accessed in brief summaries, the current GATS negotiations are hard to follow. In the spring, the requests of the EU gained public attention and revealed EU interests in the GAYS negotiations. The requests of the EU in the water sector were highlighted – including an opinion of the Bundestag (German parliament). The EU urges liberalization of water markets for 72 countries. On the other hand, the EU does not offer to cancel its exception clause for public services although this is urged by the US.

The GATS negotiations are only advancing very hesitatingly. First, 43 countries including many industrial- and threshold countries present their offers at the WTO. The reasons for the reserved participation of many countries of the periphery are inadequate capacities, scarcity of competitive service sectors that could profit from GATS and the extremely dubious effects of the agreement on development policy.

Tactical considerations may play a role particularly for members of the G20 who in Cancun resisted the hegemony of the US and the EU in agricultural negotiations. Experts presume that the WTO round of negotiation and an expansion of GATS can only be concluded in 2007, two years later than planned. The survival of the GATS negotiations ultimately depends on the progress of the Doha-round of the WTO. The standstill in the agricultural negotiations caused a quasi-moratorium in the GAYS negotiations.

2. THE POLITICAL SIGNIFICANCE OF GATS

Many of the principles contained in GATS are not new. Since 1948, GATT helped the liberalization of world trade with the most-favored-nation, equal treatment and market access principles. Other institutions like the IMF and World Bank enforced an international privatization policy through their credit conditions. However the world trade system became qualitatively different through GATS.

PRIVATIZATION AND COMMODIFICATION

GATS is not a privatization agreement but its market-opening clauses facilitate the entrance of transnational corporations in intensely regulated areas. GATS creates incentives for corporations in two regards. Firstly, GATS dismantles legal conditions and obligations as to investment activity and market access. Secondly, GATS produces legal certainty for corporations through the practical irreversibility of liberalization. With the acceptance of GATS in the world trade system under the WTO, services were first generally recognized as internationally exchangeable goods. Since public services like infrastructure services or the education- and health care systems are not excluded from the regulatory range of the agreement, GATS encourages the expropriation of public property through privatizations. The inclusion of water supply in the regulatory scope of the WTO illustrates the commodification of the natural resource water. David Harvey describes this process of privatization and commodification as “accumulation through expropriation” on a global plane.

INVESTMENTS

With the genesis of the WTO, the regulatory range of the world trade regime expanded its sectors, e.g. expansions involving the primary sector of agriculture, the tertiary sector of services and branches of economic activity. The WTO calls itself the world trade organization but with GATS the area of investments was also integrated in the regime of international organizations. Alongside numerous regional agreements like NAFTA for example and many bilateral investment agreements, GATS is the first and singularly important multilateral investment agreement. GATS reflects a central change in the world economy. Since the 1990s, foreign direct investments have had increasing importance in international trade. The growing service sector in which trade is only restrictedly possible is particularly affected.

The integration of the investment area in the multilateral world trade regime is extremely disputed. Foreign direct investment interferes in the economies of receiver countries more directly than border-crossing trade. Since foreign direct investment consists in large part of mergers and takeovers, this effect of GATS can be termed a form of expropriation. According to Harvey and Zeller, mergers and takeovers arise on account of unequal monopolist or oligopolist relative strengths and speculative aspects, often accompanied by a “theft of assets”. In this connection, GATS should liberate corporations from conditions that benefit the economy of receiver countries as for example local content requirements, restrictions in the return of profits and fiscal burdens.

LIBERALIZATION

Hardly any formal limits are set to the deregulation policy of GATS with its expansive range and goal of accelerating liberalization. GATS allows “flexibility”; the market access and equal treatment principles are only in force for areas released by a country for liberalization. According to the text of the agreement, these restrictions and limitations in the area of most-favored-nations must be examined for a certain time and renegotiated in mainly bilateral procedures. Stephen Gill regards this mechanism as more problematic than the current procedures of other WTO agreements. The existing regulations to protect the service sector must be listed in detail in the GATS regulations so they can be better realized and thus immediately brought under “bargaining pressure.” Bilateral negotiations between unequal negotiating partners and the compulsion to review exceptions offer possibilities for power politics and pressure by strong industrial countries. Through its negotiating procedure, GATS is not only a concluded agreement but also a powerful continuing negotiating process with the goal of the complete liberalization of the service sector.

CHANGE IN “RIGHT TO REGULATE”

Through the GATS negotiations, the focus of GATT or the WTO is on inner-state regulations and no longer mainly on tariff reductions. In the area of services, so-called “non-tariff trade barriers” like state subsidies, conditions for the integration of the domestic economy (local content requirements) in environmental- and health protection or social standards should be dismantled. The necessity test for internal state regulation is especially explosive in this area. This test reviews state measures like quality requirements, certain professional qualifications, technical norms and approval procedures as to whether they are the “least trade-inhibiting measures” to reach goals like health protection. The principle of liberalization could become the predominant ordering principle to which legislation on all planes must be subordinated.

LEGAL ANCHORING OR “NEW CONSTITUTIONALISM”

GATS as an agreement binding in international law sets privatization policy on a new legal footing. Secondly, unlike multilateral environmental agreements, the WTO with its arbitration procedures has a sanction mechanism and pressures to comply with the agreement. Thirdly, GATS only allows a revocation of liberalization obligations very restrictedly. Thus GATS is a binding legal framework by which neoliberal policy is irreversibly codified as a legal regulation. Gill describes this characteristic of GATS as a part of a “new constitutionalism.” As a legal-political counterpart to the prevailing accumulation regime, this anchors the regulation mechanism of the neoliberal configuration on a legal basis and leads to a “disciplining neoliberalism” at the beginning of the 21st century.

3. GATS AS A POLITICAL PROJECT

The analysis of GATS as a political project is directed first at the actors with their specific interests and discourses. The meaning of political project in this analysis should be defined. In the tradition of the neo-Gramscian international political economy, Bieling and Steinhuber define political projects as “concrete political initiatives offered as solutions to pressing social, economic and political problems.” Political projects become hegemonial when different interests and discourses reinforce one another so a “motivating social myth” arises for wide parts of the population.

As “programmatic and political condensations of social interests and discourses,” hegemonial projects help stabilize, extend or even transform both the historical and hegemonial block. According to Bieling and Steinhuber, political hegemonial projects are never only based on derived material interests and related rational strategies of social actors. Decision-makers must gain approval for their policy and their political project to implement changes through a political project.

Aspects like ideologies, subjective ideas and interpretations of specific problems play an important role in gaining hegemony, not only rational interests. Bieling/Steinhuber hearken back to Vivien Schmidt’s studies to consider these two planes – rational interests and the communication of these interests – in an analytically separated way. With the help of the categorizatrion of different discourses, Schmidt analyzes how governments obtain approval for their political projects. According to Schmidt, the interactive dimension of a discourse consists in “coordinated discourse” among political actors and “communicative discourse” in public to generate and legitimate a political program.

Communicative discourse is the sum of the construction and communication of a political project. On the other hand, the “ideational discourse” focused on ideas supplies the cognitive and normative dimension by producing the ideas and values of a political project, e.g. the necessity and solution capacity for specific problems.

3.1 THE GENESIS OF GATS THROUGH EXCLUSION OF THE GENERAL PUBLIC

SERVICES AS COMMODITIES

Until the 1980s, trading services internationally seemed hardly possible to trade experts. There were many reasons for this: services are largely situation-bound, are partly in the responsibility of the state and as infrastructure offer an essential foundation for the industrial sector that can be strongly regulated. At the end of the 1970s, isolated scholars first began to see and describe international insurance transactions and services as tradable commodities. Different factors caused this new perception. The border-crossing exchange in services like telecommunications, the financial sector, business counseling and accounting increased on account of technological advances. In addition, the “information society”, structural economic change and the tertiary structure were emphasized. The need for growth into the area of services was and is shown today by mere statistics. While the share of services in world trade only amounts to 20 percent, the service sector in OECD states contributes 60 to 70 percent to the gross domestic product and employs around 64 percent of all employees (OECD 2000).

The work of numerous research institutes had a decisive influence on the changed perception of services. These institutes developed the first idea-oriented components of the GATS project by strategically advancing a new definition for services. “Trade had to be redefined,” Drake and Nicolaidis wrote. These researchers were active in the projects that prepared GATS. Thus research institutes played the central role of conceptual innovators whose ideas had great influence on political decision-makers and businesses.

THE SEARCH FOR NEW SALES MARKETS

In the US, these arguments were enthusiastically accepted by the Reagan administration. They helped guide the political trade pressure existing at that time in the US on account of the massive balance of foreign trade deficit on free trade paths. Many new “trade barriers” were eliminated with the discursive change of the term service into an internationally tradable commodity. Regulations on bank supervision and restrictions on importing currency in financial services or state monopolies in areas of the infrastructure came under the pressure of being dismantled in the sense of free trade. Many investors also increasingly targeted new markets. New sales markets arose with the rise of the Asian “tiger states” and the collapse of the regime in Eastern Europe. The strongly regulated markets of Japan and Southeast Asia were target regions of free trade efforts in the service sector. As a consequence of these interests, the demand for an international service agreement within GATT was loudly praised as a solution to the “problem” of meager international trade in services. The driving force in the preparations for the Uruguay round of GATT was the US service industry led by the financial service industry that from 1982 had organized a powerful economic lobby, the United States Coalition of Service Industries (USCSI). In close cooperation with the US Department of Commerce that coordinated the research- and lobby activities of the supporters of an international service agreement, the USCSI set the theme on the agenda of the Uruguay round.

RESISTANCE AND PRODUCTION OF CONSENSUS

After a long intensive negotiation process that first broke down at the 1990 GATT conference in Brussels, GATS was finally signed at the 1993 GATT conference in Marrakesch. In this process, the actual negotiators of GATS adopted the basic ideas of the pioneering thinkers of the research institutes. However the “flexible” agreement included several concessions to the opponents or skeptics. India, Brazil and the EU oriented protectionistically in the domestic market feared a hasty opening of the service sector and endangerment of their own markets. In this context, Sell even said the private sector was “largely disappointed” with the course and result of the first GATS negotiations. Only concessions from the American side making GATS in 1995 a relatively vague and “flexible” agreement compared to other WTO agreements could induce the countries of the periphery to agree to GATS at the end of the Uruguay round. The so-called “flexibility” consisted in the possibility of gradually releasing certain service sectors to liberalization and submitting exceptions for specific regulations. The formal exception of sovereign tasks in Article 36 can be understood as a concession that was also used argumentatively by the WTO. Integrating the theme investments or “commercial presence in foreign countries” as one of the models was a crucial success for transnational service corporations (GATS, Art. XXIII).

3.2 GATS 2000: THE ROLE OF THE EU IN THE GATS NEGOTIATIONS

“I am in your hands…”
(Leon Brittan, former EU trade commissioner)

At the founding meeting of the European Services Forum (ESF), Brittan spoke about the role of the new lobby association for the EU commission… This forum had the goal of bringing the interests of the European service economy into the GATS negotiations and coordinating the European discourse in the GATS project…

The common interest of European service corporations represented in the ESF and of the EU trade commission is expansion of the European service industry. In a normative discourse, they explain this interest as a general interest by representing consumers and developing countries as profiteers of GATS… GATS is presented as a positive model… “Through the liberalization of trade in services and investment activity, GATS promotes sustainable growth, creation of jobs and competitiveness of the economy inside and outside the EU” (European Commission, 1998). The interests of the EU and European service corporations are thereby legitimated and potential counter-arguments incorporated or neutralized.

“ACT AS A LINK”: COORDINATING DISCOURSE

The central function of the ESF lobby association is coordinating the European elite discourse in the GATS process. This is not surprising since the service lobby association founded by the former EU trade commissar Sir Leon Brittan was “to act as a link between the commission and a wide range of service industries” (European Services Network, 1999)…

In an email, the EU commission urged the water corporation Vivendi (today Veolia) to comment on different “obstructive” regulations as or example restrictions on the return of profits, technical standards, awarding public contracts, limits on the extent of foreign ownership and the conditions for entering joint ventures with local businesses. The cooperation between the EU commission and the European service industry functions on the basis of numerous meetings and informal discussions of ESF with German business and finally through explicit proposals in offers and requests for the GATS negotiations.

Thus the service sector had a privileged access to information and was explicitly urged to influence GATS negotiations of the EU with the commission. This is important since NGOs (non-governmental organizations) like unions, environmental- and developmental groups and human rights organizations that also have a central interest in participating in the GATS negotiations or criticizing these negotiations are explicitly denied access to information. These groups were also not invited until 2004 to comment on the GATS documents. The cooperation between the German business of the EU and the ESF is a good example of coordinated discourse within a “transnational managerial class” consisting of state and supra-national consultants or members of research institutes alongside managers of transnational corporations. In the GATS process, the cooperation within this transnational class helps form alliances within the elite discourse without integrating the wider public.

“THE GROWING GATS DEBATE”: COMMUNICATION DISCOURSE

A communicative discourse, i.e. a top-down discourse of an elite for the purpose of gaining hegemony is clear alongside the coordinating discourse between the elites of a “transnational managerial class.” If GATS negotiations in the Uruguay round were first still shrouded in obscurity and not seen by the general public, this gradually changed with the new negotiation round. An analysis of reporting of the GATS theme by Attac Germany’s press spokesperson Malte Kreutzfeldt shows for example that GATS was not mentioned in the German media after 2001 and was discussed more broadly and often in the German press following the Europe-wide GATS action days in the spring of 2002. Something comparable occurred for the public GATS debate in other countries, according to Sinclair/Griesbaber/Otto). A communicative “pro-GATS discourse” was urgently necessary from the view of GATS advocates because of the work of numerous non-governmental organizations that critically analyzed GATS and because of the protests of a broad global justice movement. At the beginning of 2001, a year after the start of the second round of negotiation, EU commissar Leon Brittan invited the British lobby LOTIS (Liberalization of Trade in Services) to bring arguments of the service industry into the public debate initiated by NGOs: “The business voice must make itself heard above the noise being generated from other sources threatening the ongoing health of this system. […] The more responsible and serious-minded of these organizations have staked a claim in the international debate and we cannot afford to ignore them. What we have to do is to take the debate on and win it.” (Brittan 2001).

In the same address, Brittan supplied the service industry with the normative components for their PR-campaigns. He urged them to demonstrate convincingly that liberalizations were advantageous for developing countries and that the solutions offered by some NGOs would damage growth and employment both inside and outside Europe. In this context, he called on the service industry to articulate its interests more strongly in the public: “Find ways of gaining the media limelight to counter the campaigns being conducted by NGOs on and off the streets.” (Brittan 2001)

Unpublished protocols of the meeting of the British lobby LOTIS show that Brittan’s call was taken seriously and discussed. Matthew Lownds (Foreign and Commonwealth Office) welcomed the private sectors’ help in countering the anti-GATS arguments. […] If business was to convince the public, a case was needed based on the development-related benefits brought by GATS. He also emphasized coordinating business responses to the NGOs allegations. Malcolm McKennen (Department of Trade and Industry) said the pro-GATS case was vulnerable when the NGOs asked for proof of the economic benefits of liberalization.”

LOTIS’ project of conducting a pro-GATS campaign with the WTO secretariat, representatives of the British government and the news agency Reuters can be read in detail in these protocols. 50,000-70,000 pounds were earmarked for case studies showing the economic benefits of liberalizations in the service area in developing countries…

Other elements of a communicative discourse come from the years 2001 and 2002 when two brochures from the WTO and the OECD reacted to the criticism of GATS-opponents and critics. In these brochures, the arguments of GATS-critics were discredited as “scare stories” (WTO 2001, OECD 2002). Julian Arkell, a prominent consultant for many important lobby groups in the service area, referred to the GATS-criticism “by some activist NGOs” and said: “It is vitally important that the supporters of the services negotiations, government and business alike, counter destructive claims and assert reality.” Finally, a press release of the ESF on 3/13/2003 was a first sign of a communicative discourse initiated by the ESF. On a Europe-wide GATS day of action, the ESF urged the press and European and national authorities to convince the GATS-campaigners that their arguments were unfounded (ESF 2003).

Both Arkell’s Brittan’s counter-campaigns and the press release of the ESF can be described as attempts at gaining hegemony in the communicative discourse. They try to legitimate their interests by arguing that GATS would be profitable for developing countries by creating jobs in industrial- and developing countries and improving economic growth generally. At the same time they incorporate those who will presumably not profit from GATS according to critic’ statements.

4. CONCLUSION

GATS as a political project was set on the political agenda as a solution to a specific problem by research institutes, lobby groups, corporate representatives and administrative officials of the US and the EU and advanced in GATT and the WTO. GATS helped and helps the transformation of a national service economy into an international service industry with new expansion possibilities for transnational corporations in a global expropriation economy. In an ensemble of different elements and organizations for liberalizing and privatizing public services and dismantling regulations on the private service sector, GATS serves as an important instrument for anchoring liberalization in a powerful legal corset.

The analysis of its genesis shows that GATS in its core is an agreement in the interest of transnational service corporations. Secondly, GATS is not only a corporation-guided agreement. The genesis of GATS was in the sense of the “expanded state” (Gramsci) of corporations, lobby groups, research- and consultation- institutes as well as representatives of nation-states and the EU commission. The EU commission that established the European GATS lobby group ESF and urged service companies to participate in the GATS process was the source of pressure, not the corporations.

The GATS project was successful as long as it was negotiated far from the light of the public. Since the beginning of the new round of negotiation, GATS was pressed into public discussion by many anti-GATS campaigns of the social movements and subjected to growing criticism from 2001 to 2003. From the side of supporters of GATS, this necessitates a public legitimating discourse to gain the necessary hegemony for realizing the project. Through the failure of the WTO negotiations in Cancun, the WTO and GATS fell under massive legitimating pressure and negotiations came de facto to a standstill. The anti-GATS campaigns in Europe have become quieter. In Germany, the protests of the global justice movement concentrate on social cuts and local battles against privatization. The quietness around GATS is dangerous. The possibility exists of discussing GATS that was concluded away from the light of the public.

Parallel to the GATS negotiations, the EU directs its attention at new possibilities for liberalizing services. The proposal for a new guideline for services in the European domestic market worked out in the course of the domestic market strategy goes far beyond the GATS regulations and is supplemented on the regional plane. A political project is launched here again without participation of the public. This project will intensify the liberalization- and privatization policy on the European plane. Struggles on local and national planes against old and new liberalization projects seem more important then ever, particularly when they do not ignore the processes on the European and international planes. The next year will offer several new opportunities. In 2005 the 6th ministerial conference of the WTO will probably take place in Hong Kong. The 10th year commemoration of the WTO’s founding will prompt new broad public delegitimation of the WTO and GATS. This protest can only be effective when GATS is attacked as a project in the framework of a global liberalization- and privatization agenda that Zeller rightly describes as a “global expropriation economy.”