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The World Trade Organisation - An Australian Guide
- 2006 Edition
Download the PDF version of this guide here

WTO & Services

Services are things like education, health care, transport and entertainment – not areas that trade agreements have traditionally covered. They were first included in the 1984 Uruguay Round, and in 1995, the WTO's General Agreement on Trade in Services (GATS) was signed.

"Essentially, the GATS is mandated to restrict government actions in regards to services through a set of legally binding constraints backed up by WTO-enforced trade sanctions. Its most fundamental purpose is to constrain all levels of government . . . and to facilitate access to government contracts by transnational corporations in a multitude of areas, including public health and education."
- Maude Barlow, National Chairperson, The Council of Canadians (50)

The point of the GATS is to encourage the private provision (or privatisation) of services in economies around the world. The GATS gives investors new rights and constrains government regulation of service-sector companies. It covers a huge part of the Australian economy. Sharan Burrow, President of the Australian Council of Trade Unions (ACTU) has said that "Australia's existing health, housing, education, childcare, water, energy, postal and telecommunications services are threatened by the GATS proposals" (49) .

In the GATS negotiations, countries make both requests and offers of "liberalisation" in particular sectors. The agreement is like a ratchet - once a government has made an offer of free trade in a particular sector, subsequent governments can't revoke the commitment. New offers must be made with every new round of negotiations. While government's are not yet forced to make GATS commitments, during 2005 Australia has been one of a handful of countries advocating that countries which have not made GATS offers should be forced to open some "benchmark" sectors.

GATS and Democracy

The "Necessity Test"

The GATS contains controversial rules that effectively give the WTO the power of veto over parliamentary and regulatory decisions. Article VI.4 dictates that all "technical standards" must "not more burdensome than necessary to ensure the quality of the service" (51) . Otherwise they can be deemed illegal under the WTO.

This rule is not about trade at all, but a means to challenge "burdensome" restrictions on business and industry, foreign and local. If challenged under the test, WTO member countries must prove first that their regulations were necessary in order to achieve a WTO-sanctioned legitimate objective, and second, that no alternative measure was available which would achieve the same objective and be less trade restrictive.

Parliaments Demoted?

"Members' regulatory sovereignty is an essential pillar of the progressive liberalisation of trade in services, but this sovereignty ends whenever rights of other Members under the GATS are impaired."
- WTO Dispute Resolution Panel (53)

The necessity test is completely unprecedented in that it removes decision-making power from elected parliaments, and puts it into the hands of an unelected WTO panel. It places foreign commercial interests above the public interest, with democracy, public health, regulatory standards and environmental concerns taking a back seat to the interests of large multinational corporations.

Under GATS, it becomes practicably impossible for citizens of a country to reclaim basic public services once they have been privatised. The introduction of new regulations on social or environmental grounds can also can be directly challenged by investors. Moreover, the WTO positively welcomes this anti-democratic aspect of GATS. In its own question and answer introduction to the Agreement, the WTO Secretariat recommends GATS to pro-liberalisation governments for the political assistance it can bring them in "overcoming domestic resistance to change" (52)

Water & Environmental Services

For such essential services as water provision, the GATS constitutes an attack on basic human rights. Privatised water companies must make a profit, so prices rise, quality declines and access to water becomes restricted only to people who can afford it.

European Union (EU) requests to Australia under GATS were leaked in April 2002, and included a demand for the privatisation of water services. Water services with also included in the US-Australia Free Trade Agreement, setting a dangerous precedent. Given increasing water scarcity in many Australian communities, the proposed inclusion of water collection and distribution services in the GATS raises troubling concerns about basic access to water for all people.

Track Record of Privatised Water in Australia

As a result of the 1996 privatisation of Adelaide's water, prices have risen dramatically and thousands of jobs have been lost, while profits for the company have steadily increased. Between 1993 and 2000, prices for the first 136 kilolitres of water, the standard consumption used to set charges, jumped by 59 percent or by $70.67 a year to $190.67. Privatisation led to the slashing of jobs at SA Water by 48 percent – from 2,707 to 1,390. In 1997, equipment failures and inadequate monitoring – the result of the new owners' efforts to minimise costs – allowed raw sewage to be flushed directly into the water plant's settling lagoons, causing health and environmental problems across the city (54).

The GATS' market access commitments, which prohibit quantitative restrictions, could even limit the right of governments to restrict the amount of water taken by companies from lakes, rivers and groundwater sources. In a dry and drought-prone continent like Australia, this would be disastrous.

Disturbingly, the GATS also includes authority over 'environmental services' and natural resource protection. The Australian government has already committed itself to the liberalisation of "protection of biodiversity and landscape" services. This means that state governments could have to provide foreign companies with access to the "market" for national park management. Our parks, wildlife, river systems, and forests could all become contested areas as global transnational 'environmental service' corporations demand the competitive model for their management.

GATS & Education

Australia's public education system is also under threat from GATS. Education has come to be seen as a global market opportunity worth an estimated US$2 trillion per year. This has led business lobby groups, such as the powerful European Roundtable of Industrialists, to argue that: "too often the education process is entrusted to people who appear to have no dialogue with, no understanding of, industry . . . The provision of education is a market opportunity and should be treated as such" (55)

The GATS aims to limit the government's role in education provision by moving from a public to a privately operated "market" system. The Australian government has already committed secondary education, vocational training and private tertiary education under the GATS. Australia has also received requests from other countries for full free trade in education, including public universities. According to the National Tertiary Education Union, a government which listed tertiary education in a GATS offer in an unqualified way would transform Australian education fundamentally by:

  • Making Commonwealth operating grants and subsidies previously confined to domestic public universities to be equally available to foreign providers operating in Australia.
  • Removing restrictions on the number of tertiary education institutions operating in Australia.
  • Removing restrictions on the type of legal entity, e.g. governance structures, for a provider to operate in Australia.
  • Removing restrictions on the percentage of foreign ownership of educational institutions.
  • Relaxing qualification requirements and procedures, technical standards and licensing requirements which are "more burdensome than necessary to ensure the quality of the service" (56).

GATS & Australian Culture: Coca-Colonisation?

The WTO's GATS agreement also covers cultural and audio-visual services. Such services are part of the processes which underpin and develop our society's cultural identity, so the government ensures they retain significant local content and local ownership. But their listing under the GATS means that television, radio and newspaper local content and foreign ownership laws may be negotiated away.

The Australian television industry exists largely because of local content rules which dictate that a proportion of programs must be Australian-made. The effect of a removal of these rules would be an even greater domination of our media by foreign corporations, and an end to large parts of the Australian television industry.

GATS imposing on NZ Culture

In 1999, the New Zealand Labour Party won office with a pledge to increase the quotas for local content on radio and TV airwaves. Unfortunately, the new government discovered that the outgoing minister had committed under the GATS to not discriminating in favour of local broadcasting content. As a result, the NZ government remains unable to increase local content quotas (58).

At risk from the GATS are regulations like:

  • Local content rules for television and radio
  • Support for public broadcasters
  • Regulating media ownership to promote diversity and restricting foreign ownership
  • Controlling the immigration of foreign artists and technicians and supporting employment opportunities for Australians
  • Subsidies for film and television production, the performing arts including art festivals, and the visual arts

The Australian Government has not yet offered to liberalise Australia's cultural services under the GATS, but in 2005 it partially liberalized cultural services under the US-Australia Free Trade Agreement (57). The GATS could increase this liberalisation and further threaten Australian artists, performers and cultural industries.

Next Section: WTO & "Intellectual Property"

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