|
The European Union (EU)
prides itself on its social democracy, the core common value
that connects the people and member states. Yet the GATS negotiations
challenge this very foundation of the EU, as they further weaken
the ability of EU member states to decide social policy,
even in key areas such as health, education, water and sanitation. The GATS negotiations
give unprecedented access to business, at the expense of democratic
control and decision-making by elected representatives. The
GATS threatens the very fabric of the EU, both in its social
dimension and its democratic character. It is not surprising,
therefore, that there is an increasing pressure from social
movements, including trade unions, to stop the current negotiations.
Commercial
services:
a crucial sector for the European Union
For
Europe the service industry is of crucial importance. The EU
is the world's largest exporter of commercial services, accounting
for 26% of total global services transactions and for more than
40% in terms of balance of payments. The EU is also the world's
largest importer of commercial services. The services sector
employs 69% of all jobs in the EU and accounts for more than
70% of total output(1). The EU had
a constant 24% share of World Trade Volume in commercial services
from 1995 until 2000(2):
Table 1: World trade volume
in billions of USD
| |
1995 |
2000 |
| EU |
332.56 |
583.25 |
| USA |
252.71 |
518.56 |
| Japan |
143.54 |
201.15 |
| Rest
of the World |
668.16 |
1,146.28 |
| World
Total |
1,396.97 |
2,449.24 |
| EU
as % total |
24 |
24 |
The
European Commission -the executive arm of the EU- attaches
great priority to the General Agreement on Trade in Services
(GATS) negotiations, and
it is also quite clear about the nature of GATS. On its information
web site it introduces
the negotiations as follows: "The
GATS is not just something that exists between governments.
It is first and foremost an instrument for the benefit of business.
The Commission is keen to help business in advancing and developing
liberalisation under the GATS. But it also
needs the active involvement of business, so that the EU's policy
corresponds to the real export and economic growth interests
of our service industries."(3)
While
the Commission continues to maintain that the GATS agreement
has the purpose of creating multilateral rules for creating
a level playing field in services and will lead to potential
economic benefits for developing countries, it is
clear that the drive behind the GATS is the wish to conquer
the lucrative global market for services.
There
are several serious problems with the way the negotiations have
been conducted so far:
The preferential
access of business in setting the pace, priorities and strategies
for the negotiation, coupled with the lack of access of public
and civil society organisations to get their concerns heard and
addressed;
The absence
of defining conditions that would ensure that privatisation will be in the
public interest, not only in developing countries but also in Europe;
The
incompatibility of the objectives of the GATS negotiations with
the development objectives set out in the EU treaty;
The
possible buy-offs given for the requests for privatisation pursued
by the EU abroad.
The
preferential access of business
The
invitation for input into the GATS negotiations has been almost
entirely restricted to business. In an exchange with civil society
organisations Commissioner Pascal Lamy made it very clear where
he took most input from-even if this was disguised by a derogatory
comment on NGOs: "...it is notable that, while industry
not surprisingly has actively been providing input, few substantive
contributions have been received from NGOs."(4)
It
is also clear that the EU goes as far as to publicly identify
that it aims to target the negotiations towards business priorities:
"An active service industry involvement in the negotiations
is crucial to target the EU's negotiating objectives towards
the priorities of business."(5)
The broad
involvement of industry in the negotiations is paralleled by
tremendous secrecy of the negotiations that makes the decision-making
process entirely non-transparent. Because of unnecessarily
rushed procedures, imaginary deadlines and strict rules of confidentiality,
national parliaments, the European Parliament and the 133 Committee
of the member states have been left to rubberstamp the Commission's
negotiation tactics, without being fully informed. The Commission
justified this on strategic grounds relating to the complexity
of the negotiations of "playing a one-hundred-and-forty-plus
game in Geneva" and the "traditional way of
doing this."(6)
In
the UK, Barclays Bank Chairman and President of the British
Bankers Association Andrew Buxton, set up a structure to
assure maximum involvement of the private sector in the GATS
negotiation. On the basis of the Buxton model, a Liberalisation
of Trade in Services Committee (LOTIS) and High-Level Group
were established in 1996 to assure the maximum input of trade
in the negotiations. They achieved their objective. The Corporate
Europe Observatory (CEO)
uncovered
minutes (covering
meetings in 2000 and 2001) exposing the business sector's privileged
access to key negotiating information and the policy-making process
on GATS in the UK. According to researcher Erik Wisselius, the
distinction between public and private has become completely
blurred within the UK. He observes: "The LOTIS structures
provide a private forum where government and business discuss
strategies for ongoing WTO negotiations on liberalisation of
trade in services. This allows the UK financial service industry
an unjustified control over large parts of the UK trade policy
agenda."(7)
Business
is receiving access into the negotiations that is denied to
Non-Governmental Organisations, Members of the British
Parliament or the general public. The minutes record a civil
servant statement that "the case for liberalisation
of services was 'vulnerable when the NGOs asked for proof
of where the economic benefits of liberalisation lay.'"(8) The minutes also
note a realisation on the part of the negotiators that health,
education, water and energy
were singled out by the NGOs because these are basic services
that people "have a right to receive from their governments."(9)
The
new European business NGOs
In 1996
Buxton established with a colleague the Financial Leader's
Group (FLG). This group included
40 CEOs, mainly from Europe and the US. The group was set up
with the intention of bringing new life into the WTO negotiations on services. Commissioner
Leon Brittan (UK), previously in
charge of the negotiations on behalf of the Commission, recognised
the "usefulness" of the input provided by the service
industry
in the negotiations and invited Buxton to set up a similar structure
at the European level: the European Service Forum (ESF).(10) The ESF was launched in 1999 in
a meeting hosted by the European Commission. This structure
comprises 42 major European service companies to date, represented
by their CEO's. The services include construction and related
engineering services, distribution services (including food and water), energy services,
environmental services, financial
services, legal services and other professional services, telecommunications, postal and express
delivery services, tourism and others. The objective of the
ESF is to pursue the commercial profit-making interests of the
European service industry abroad.
Even
though the ESF is not representing a public interest it participated
as a registered NGO at the Ministerial Conference in Seattle
in December 1999 and in Doha in 2001, and, moreover, was an official
member of the EU Delegation at these two conferences.(11)
After
retiring from the European Commission Sir Leon Brittan
became chairman of the high-level LOTIS Group.(12)
The
European Water Force
One
of the members of the ESF is Vivendi. This is the company
built on the French General Water Company, original concessionaire
for public water distribution in France.
Water
is one of the big areas of the public service
industry.
The world water market is estimated to be worth more than USD
400 billion, according to some analysts. According to the World
Bank,
the water markets of the world are worth up to USD 800 billion,
which makes them comparable in scale to the fossil fuel market.
Water companies see GATS as a vehicle for opening up these water
markets(13). Water also seems
to be a key issue for the EU in the GATS negotiations, with
highly expanding and dynamic European water companies looking
at water as an enormous potential market.
The
world's leading provider of outsourced and privatised water is
Vivendi Water, headquartered in Paris, with worldwide
operations. It is part of Vivendi Environment, which had
an increase in revenues from USD 21.3 billion in 1999 to USD
29.3 billion in 2001. Water accounts for almost half of its revenues
and municipalities account for 74% of the water revenues.
In 1999
Vivendi acquired US Filter, North America's largest
water company, and is now the market leader in the US. Through US
Filter Vivendi gained important access to the lucrative
US (public) market in water,
which, according to US Environmental Protection Agency
estimates, will need a USD 151 billion injection of public financing
over the next 20 years to maintain the safety and quality of
the US water infrastructure.
Vivendi
now has several charitable foundations, among which is the Water
Force foundation, which undertakes development programmes and
emergency and rehabilitation programmes to re-establish water
facilities in areas struck by humanitarian or man-made disasters,
such as China, Albania, Kosovo, Turkey, El Salvador
and India. The Water Force
foundation has a team of a hundred volunteers. Vivendi water
is now working in over 100 countries, and in developing
countries
often through World Bank financed water programmes, as for instance
in Niger and Burkina Faso.
On its
web site the European
Commission makes only scarce mention of its intention to
advance the global access of Vivendi
and others to public and commercial water services: "Another
area which could deserve further attention in further negotiations
is water distribution, which falls under the heading of distribution
services. Further liberalisation of this sector would offer
new business opportunities to European companies, as the expansion
and acquisitions abroad by a number of European water companies
show."
On several
occasions French President Jacques Chirac has been even clearer
in promoting the interest of the European water companies, particularly
referring to the Millennium Development Goals. He estimated
the costs of basic infrastructure for water, energy and transport
for developing countries at USD 404.3 million a year. During
a roundtable on financing for development in poor
countries
Chirac referred to the need for developing countries to invest
in key sustainable development sectors such as education, health,
water and energy. He noted: "There again the priority
is the sectors of energy and water... France has established
original methods in the area of water."(14)
During the
same roundtable, UK Prime Minister Blair made clear and direct
references to the desire to privatise public services related
to the environment, including water: "Our project is
to generate financing for development by the private industrial
sector and public services which will put in place sustainable
development in the poorest countries of the world. We are looking
to associate with private investment, the power to mobilise
the states, all this in respect of the environment."(15)
But
Betram Zagema puts the success of British privatisation of water
in doubt: "In 1989, when much of Britain's water was
privatised, asset management plans and maximum price levels
were agreed between the companies and the regulator. However, most
companies underspent on investments and used their soaring profits
to pay shareholders and management. Meanwhile, the infrastructure
is crumbling, leakages are not repaired and sewers have been
overflowing. Between 1989 and 1997, the companies involved were
successfully prosecuted 128 times. Among other things, they
were charged with failure to meet leakage targets, as well as
with water pollution and illegal sewage discharge. The penalties,
however, have not been severe. Northumbrian, a subsidiary of
Suez, was fined less than £10,000 [about USD 15,700] for supplying contaminated
water to 15,000 customers in 1997."(16)
Vivendi
was involved in Buenos Aires with much the same result: "In
1999 the regulator concluded that 'the main goals set at
privatisation have not been met,
in terms of the raising of water quality standards or in expansion
of the system.' Yet the regulator has little power
to call the companies to account."(17)
Whether
in Paris, or in World Bank-induced programmes for water provision
in cities like Cochabamba, Bolivia, or Accra, Ghana, privatisation
has lead to price increases of 200% or more, hitting particularly
people living
in poverty.
The idea that profit-making companies can provide clean drinking
water for the poor cannot be substantiated by facts: "Yet
while consumers face (spectacularly) higher bills as a result
of water privatisation, the chief executives of the water companies
have seen their salaries increase by similar degrees. Privatisation
of water management also changes the logic of the system. The
public goals of sustainable water management and universal delivery
are replaced by the profit orientation of private companies."(18)
The
German United Services Trade Union also concludes that
the profits that must be generated for shareholders increase
prices and lead to cutting corners in general maintenance. There
is also evidence that the public sector continues to pay for
the protection of drinking water, while the private companies
increase their profits.(19)
In 2000
Vivendi went to the Paris Stock Exchange, then to the
New
York
Stock Exchange. Meanwhile Vivendi has expanded much beyond
water and is now the owner of major commercial pay television
stations across Europe(20), of Universal Studios in the US, and
of publishing companies, including educational, telecommunications
and music publishing.
European
water companies have received and often still receive considerable
state support enabling their expansion. The suggestion that the
GATS negotiations are aiming to create a "level playing
field" for all players needs to be seriously questioned,
as does the stated objective that the privatisation of water
distribution contributes to social and sustainable development.
The
incompatibility of GATS and development; jobs, jobs, jobs, for
whom?
The
crucial importance of the GATS for the EU is seen in the preservation
and creation of jobs, as reiterated continuously by Commissioner
Lamy. However there is concern among NGOs that this will be at
the expense of jobs and sustainable livelihoods in developing
countries.
The European
Union Treaty has a provision that European policies with
an impact on developing countries need to take development policy
objectives into account. The EC requests for liberalisation in services to
developing countries specifically focus on three stipulations:
that
developing countries give up their right to require foreign investors
to employ local people at the managerial level;
that they give up their right to require foreign companies to
form joint ventures with local companies;
that they give up their right to restrict foreign investors from
owning land in the country.
By giving
up these rights developing countries give up the conditions
that are necessary for Foreign Direct Investment to be beneficial
to the sustainable development of their countries. The Irish
group Conhlámh who researched this area concludes:
"Most developing countries have spent the last two decades
under the direction of the IMF and World
Bank
undergoing
'structural adjustment' in the expectation of becoming attractive
to foreign investors and gaining from the development potential
listed above. Now that many structural adjustment processes
are well advanced, the EU is now seeking in the GATS negotiations
to remove the very elements through which FDI could have a positive
contribution to a country's development process."(21)
Recognising
that the GATS is a bargaining forum the crucial question to
be asked is what, if anything, developing countries are receiving
in return for the concessions requested of them. In a statement
to the GATS Council by Cuba, Dominican Republic, Kenya, Nigeria,
Pakistan, Senegal and Zambia, a group of developing countries
expressed concern at the lack of reciprocity in the process
of the GATS negotiations: "Developing countries have
made what for them represented substantial commitments under
GATS with respect to many service industries but have not received
concessions of any meaningful economic value, including under
the movement of natural persons mode of supply [one of four modes of supply
of services defined in the GATS]. This imbalance was further accentuated
by the major commitments that some developing
countries
undertook autonomously including under structural adjustment
programmes… without receiving reciprocal benefits."(23)
The
EU Parliament Socialist Party Group recognised this problem of
upward pressure to liberalise. In a letter to Pascal Lamy, MEP
van den Berg wrote on behalf of his colleagues in the group:
"You make a strong point on the lessons of GATS for our
fears of upward pressure on commitments, but the acid test will
be the conduct and outcome of post-Doha GATS negotiations, where
the requests by the EU, among others, have in some cases systematically
targeted the exclusions and qualifications listed by our trading
partners."(24)
The
Socialist Group in the EU Parliament emphasises the need for
unequivocal assurance that the EU proposal would leave countries'
rights to impose limits on foreign ownership, including joint
venture obligations, intact, whether for established or new investments.
In an earlier letter, Commissioner Lamy had indeed committed
himself to this position.(24)
The
lack of the EU to liberalise and reform its common agricultural
policy, one of the major potential areas that could benefit developing
countries, and where most of its employment and income-earning
capacity is situated, is notable in this regard. It seems therefore
that many of the concessions are achieved by sticks, rather than
carrots, with the threat to withdraw aid and loans being used
as one of the instruments for macro-economic conditionality.
The
buy-off price for Europe?
Water
provision in the context of environmental services, such as waste,
is one important area of liberalisation requests from the EU
to the US(25). The important
question is, what will the EU have to give in return for gaining
greater access to the US market?
The
EU has made specific commitments to liberalise primary and secondary
education, higher education and adult education. So far the EU
has received requests to privatise some higher education facilities,
which might be regarded as a first step toward privatisation
of the whole education sector.
As
for health, the EC has committed hospital services and social
services to the GATS. So far only a limited number of requests
address health and social services, and these requests come,
according to the information provided by the Commission,
mainly from developing countries.
Mounting
pressure
The
EU Treaty of Nice, which is intended to define the competence
and ways of working of the EU after its inclusion of Eastern
Europe in 2004, has also been opposed on grounds related to GATS.
In the Irish referendum of the Nice Treaty it was argued
that the Treaty would diminish the control of EU member states
over GATS areas, including social services. The diminished control
at national level will not be matched by an increased accountability
to the European Parliament. The Treaty will, therefore,
severely limit the right of elected representatives to regulate
vital public services (defined
under article 133 of the Treaties of the EU). It is, therefore, expected
to lead to an increasing 'democratic deficit' on the issues,
which are at the very heart of European social democracy(26). Nevertheless
the Irish people voted to approve the Nice Treaty, removing
one of the last obstacles to its enforcement.
In
conclusion it is useful to observe that the pressure by European
social movements and trade unions is having some effect, and
has perhaps brought about the summary publication and consultation
process of the requests made to the EU.
This
is also seen in a strengthening of positioning in the Socialist
Group of the European Parliament, which states in a letter to
Commissioner Lamy: "Politically the stakes could hardly
be higher. In this context it is hard-perhaps impossible-to defend
politically a proposal for a new demarche in global governance,
which essentially creates new rights for multinational investors,
with no corresponding rights for employees, host communities,
etc... Many of us believe that, in the present context, such
rules can only be acceptable as part of a package which confers
equally new substantial obligations on cross-border investors.
It is, of course, hard to see how this can be achieved multilaterally
while the current US Administration is in power. This leaves
me wondering whether there is scope for an EU initiative or a
'coalition of the willing'-bearing in mind the EU's dominant
position in cross-border investment and the number of important
investors headquartered within the Union."(27)
If
such steps are unlikely to be realised the Socialist Group sends
the following warning to Pascal Lamy in conclusion: "I
am thrown back on another sentiment expressed by several Group
members: that perhaps the time is not right for the investment
negotiations-or at least that they do not deserve the degree
of priority that the EU currently accords to them."(28)
To
what extent the European Parliament and the EU national
parliaments will be able to influence, alter or set a halt to
the negotiations will perhaps be a litmus test of the democratic
character of the EU.
Notes:
[1] European
Services Forum, Information Pack, 13 November 2002.
[2] European Commission and WTO members' requests to the EC and
its member states for improved market access for services, consultation
document, undated. http://europa.eu.int/comm/trade/services/imas.pdf
[3] European Commission, Opening World Markets for Services,
http://gats-info.eu.int/gats-info/g2000.pl?news=bbo, in part
also quoted in Erik Wesselius, Behind GATS 2000: Corporate Power
at work, The World Trade Organisation Series No. 4, TNI Briefing
Series No. 2002/6, May 2002.
[4] Reply from Commissioner Lamy to the open letters from NGOs
regarding the services negotiations, July 2002.
[5] European Commission, Opening World Markets for Services,
op. cit.
[6] Reply from Commissioner Lamy to the open letters from NGOs
regarding the services negotiations, July 2002.
[7] Erik Wisselius, Liberalisation of Trade in Services: Corporate
Power at Work, http://www.gatswatch.org/LOTIS/LOTIS.html#note06,
Minutes of LOTIS Committee meeting, 22 February 2001.
[8] Ibid.
[9] Ibid.
[10] Ibid.
[11] European Services Forum, Information Pack, 13 November 2002.
[12] Erik Wisselius, op. cit., quotes from Brittan's first speech
as chairman of the LOTIS Group: "When I was the EU Commissioner
responsible for trade negotiations I invited business leaders
to become more involved... Now that I am in the private sector
myself, I am especially pleased to take on the Chairmanship of
the High-Level LOTIS Group." In: Lord Brittan of Spennithorne,
"Liberalising world trade: why business must make its voice
heard", IFSL World, Edition 1, Spring 2001: http://www.ifsl.org.uk/about/benefits.cfm.
[13] Bertram Zagema, Milieu Defensie, http://www.gatswatch.org/GATSandDemocracy/water.html
[14] Jacques Chirac, at the Roundtable on Financing for Development
in Poor Countries at the World Summit on Sustainable Development,
Johannesburg, South Africa, 2 September 2002.
[15] Jacques Chirac and Tony Blair in a joint press release at
the World Summit on Sustainable Development in Johannesburg,
South Africa, 2 September 2002.
[16] Bertram Zagema, Milieu Defensie, op. cit.
[17] Ibid.
[18] Ibid.
[19] See the German contribution in this edition of the Social
Watch Report.
[20] In France, Spain, Italy, Poland, Scandinavia, Belgium and
the Netherlands.
[21] GATS Negotiations and the Right of Host Countries to Impose
Performance Requirements, Comhlámh Briefing Paper, November
2002, p. 3.
[22] Ibid.
[23] Dated 22 November 2002, Brussels.
[24] Pascal Lamy to Max van den Berg, MEP, PES Group Vice-President,
Brussels, 7 October 2002. Lamy states in the letter: "National
treatment and possibility of joint ventures: leaving aside the
question of whether limits on foreign ownership have the pro-development
effect some might attribute to them, I would like to clarify
that our proposals would leave countries' right to impose such
limits intact. This applies both to established foreign investors
and to new investments."
[25] http://www.gatswatch.org/docs/EU%20requests/042-02.pdf.
[26] Eamon Crudden in the Irish Times, 17 October 2002: "EU
could force privatisation of services - Democratic control over
whether a member-state or the EU decides to privatise public
services must be maintained."
[27] Dated 22 November 2002, Brussels.
[28] Ibid.
*Published
in Social
Watch
2003
|
