What GATS is and why we need to fight it - Public services under threat

The World Trade Organisation has recently held its summit. Their aim was to skulk in Qatar in the Gulf of Arabia, as far as they could get from the 'teamsters to turtles' coalition against all that is wrong about capitalism. An important part of their agenda has been the General Agreement on Trade in Services - GATS, due to come into by the end of 2002. But what is GATS and why do we need to fight it?

The anti-globalisation movement sprang to the world's attention two years ago with the huge demonstrations in Seattle against the last summit meeting of the World Trade Organisation. The anti-capitalist protestors correctly identified the WTO as a bully boy for big business. Two years later the World Trade Organisation has just held its next summit. Their aim was to skulk in Qatar in the Gulf of Arabia, as far as they can get from the 'teamsters to turtles' coalition against all that is wrong about capitalism. An important part of their agenda has been the General Agreement on Trade in Services &endash; GATS, due to come into by the end of 2002.

The WTO is the body charged with regulating world trade. Its supporters, such as Clare Short, claim it is a 'rules-based organisation'. Otherwise, they say, we would have the domination of strong nations over the weak. Actually the WTO is the forum in which the strong nations exercise their domination over the weak. Economist Bergston confided to the receptive ears of the US Senate, "we can now use the full weight of international machinery to go after those trade barriers, reduce them, get them eliminated." As for being rules-based, genuine representatives of the wretched of the earth would probably react like Gandhi when he was asked what he thought about British civilisation. He said he thought it would be a good idea.

The WTO's brief is said to be the promotion of free trade. It has done nothing to open up the European Union's protectionist Common Agricultural Policy or strike down America's export subsidies on farm products, both of which discriminate against third world farming. GATS is supposed to be about free trade in services. Well, they want to liberalise the supply of financial services - banking, insurance and such like. As the maverick economist Joseph Stiglitz (late of the World Bank) has pointed out, "Which country is the major exporter of financial services? The US. What services were not opened up? Construction services, maritime services, services of unskilled labour that are of concern to the developing world. Those remain closed."

Clearly if its nation members were given one vote per country, or voted according to their population, the organisation could potentially be dominated by poor countries. That would never do! The WTO and its predecessor GATT (the General Agreement on Tariffs and Trade) have not taken a vote since 1959! Bergston explains, the WTO "does not work by voting. It works by consensus arrangement which, to tell the truth, is managed by four &endash; the Quads. The US, Japan, the European Union and Canada√ČThose countries have to agree if any major steps are going to be made, that is true. But no votes."

'Our' representative is a career civil servant who is not accountable even to the Prime Minister. How he votes is a closely guarded secret. And yet the WTO has enormous power over our lives, as we shall see.

The WTO is a profoundly undemocratic organisation. Most of the deals are cut in the 'Green Room', from which poor countries are excluded. Lamy, Trade Commissioner for the EU, in a moment of exasperation, described this procedure as 'medieval'. Michael Moore, the head of the WTO, cheerfully agreed, "Lamy's partly right." Readers will already be guessing that, with a structure like this, the organisation is up to no good.

Parliament has never voted for membership of the WTO or debated its rules. So 'we' were not consulted. But somebody was consulted. Before going into negotiations about the ongoing GATS 'liberalisation', Charlene Barshevsky (head of the US delegation) asked the Coalition of Service Industries, a big business forum, what they wanted. They gave her a shopping list - health care, hospital care, home care, dental care, child care, elder care; education - primary, secondary and post-secondary, museums, libraries, law social assistance, architecture, energy, water services, environmental protection, real estate, insurance, tourism, postal services, transport, publishing, broadcasting....have I left anything out? The European Commission consulted the European Services Forum, a (guess what?) big business lobbying group and got much the same advice. GATS puts the world up for sale.

They're putting all our public services up for auction in juicy chunks to the profiteers. World-wide there is reckoned to be a market of $1 trillion in water, $2 trillion in education and $3 _ trillion in health care. This is mouth-watering for the multinationals. GATS is a way of big business getting in there. In using GATS as a crowbar, the WTO tramples on democracy. Behind-the scenes discussions are going on to 'strengthen' and implement the existing GATS provisions - in other words to tighten the garrotte on our public services.

The WTO sees itself as a court. If so, it is an unusual court. It debates in private. Since its reasons are not given they cannot be challenged or subjected to public debate. But they always come down on the side of big business. And its decisions have life or death consequences for billions of people on the globe.

Let's check out Article VI.4 of GATS. It says that governments have a duty to hold "a balance between two potentially conflicting priorities: promoting trade expansion versus protecting the regulatory rights of governments." They have to balance the interests of democracy and the attempts of capitalism to undermine democracy. This is like demanding a balance between the interests of the tiger and the lamb. Who decides the balance? Not the government &endash; the one that you had a chance to vote for or not vote for, last June. You are too stupid to know where the balance should be drawn, or rather you might draw it differently from big business. The GATS Disputes Panel will decide where the balance is drawn - in the interests of big business.

The Disputes Panel uses something called the 'necessity test', also derived from Article VI.4. If we have to regulate, it should not be more burdensome than necessary. Who decides? - the GATS Disputes Panel - in the interests of big business.

They already have all this in the North American Free Trade Area (NAFTA). How has this been applied? The state of California banned a toxic chemical additive MBTE because it was leaching into their water supply. A Canadian chemical company that makes MBTE sued the State of California because it was 'burdening' free trade with the ridiculous idea that people who voted for them shouldn't be poisoned just because some Canadian company wanted to save money. What the state of California should do, apparently, is spend hundreds of millions in digging up and resealing storage tanks, to help the Canadian cheapskates out. There's capitalist efficiency for you! The USA may have to pay £635 million in penalties to the Canadian poisoners after this ruling. That's another thing. WTO rulings on penalties can only be overridden if everybody, including the complaining country, waives the fines.

Another legal provision in GATS is what is called 'horizontal' treatment. This means that the principles of 'trade-friendly' (business-friendly) liberalisation operate across the board. There are no exemptions. 'Horizontal' treatment means they can walk all over us.

The government tells us we are getting it all wrong. Completely free services that have never been provided by profit-making companies, and so cannot be opened up to competition, are not at risk. So the health service and education are safe with them. But the health service and education are no longer uncommercialised. Large sectors have already been contracted out, hived off to big business or opened up to competitive tender with the private sector. In the UK almost half of all government spending actually goes on purchases from the private sector. It was only a quarter in the 1970s &endash; there was much more direct state provision back then. And of course the Private Finance Initiative will open vast areas of our public services to the money-grubbers. That's another reason to oppose PFI.

Can we opt out? 'Horizontal treatment' means everything will be up for grabs. It also means that any firm, foreign or local, can complain about 'burdensome' rules imposed by irritating elected governments, and have them struck down. GATS is not really about trade at all. It's about overruling the state whenever it responds to its citizens' protests about looting and pillage by big capital.

Is there any defence? Can a yank service corporation just parachute in like something out of 'Band of brothers' and start stealing everything from the welfare state that's not nailed down? Pretty much. Preliminary negotiations have established that a government defence of safeguarding the public interest was rejected. Think about it. The government is not allowed to take measures which are in the public interest. It is not a defence before the GATS tribunal. And a Labour minister has participated in this and agreed to it all in the backroom negotiations.

The Trade Minister before the election was Richard Caborn, a deservedly obscure figure. If the government is not ashamed of what it is doing to co-operate with the strengthening of GATS, why don't they come clean and tell us what they are up to? When it was put to Caborn that he had effectively prepared for the dismantling of the welfare state with his secret behind the scenes manoeuvring negotiations, his reply was that "this has not been tested in WTO jurisprudence". 'Search me, gov' would have been a more honest answer. As ever, New Labour ministers are selling out shamelessly to the multinationals.

The GATS Secretariat proposes that "it may well be politically more acceptable for countries to accept international obligations which give primacy to economic efficiency." And you'll be in trouble with them if you don't. So it's a race to the bottom. GATS is about opening up services to international competition. That means getting rid of environmental protection, worker protection and quality control in services. Rules such as restrictions on the traffic in toxic waste will be outlawed. These are really just trade barriers, you see. So at least services should get really cheap &endash; right? That's not the story we're hearing so far.

Water. This journal has already reported on riots in Cochabamba in Bolivia, which were fired upon by police, leaving six dead. The riots were against the privatisation of the water supply (on the demand of the World Bank) to a British-owned company &endash; IWL. The result of the sale was a huge increase in the price of life's prime necessity. Some of the poor were paying up to a fifth of their household income for water. So far from saving people money, the profit-makers were paying six times as much as they needed to for water. Of course they were buying it from themselves! The Bolivian government was forced to take water back off IWL. Would they be allowed to renationalise under the GATS cosh?

Health. Even the British Medical Association is sounding the alarm about the likely effect of GATS. The 'Lancet' published an article in December 2000 entitled 'How the WTO could accelerate privatisation in health-care systems'. It points out, "the legal tests under consideration would outlaw the use of non-market mechanisms such as cross-subsidisation, universal risk pooling, solidarity and public accountability in the design, funding and delivery of public services as being anti-competitive and restrictive to trade". Even a conservative group such as doctors understands that the national health service was built on opposite principles to those of capitalism. The healthy pay for the care of the sick, in case we get sick one day. In fact the principle is of purest communism - 'to each according to their need.'

Prisons. Private prisons have become an ugly fact in Britain and the USA. How do firms make a profit and still tender at a lower price? They cut costs. That sounds fair enough in a textbook. But it doesn't always work like that. In economics textbooks an economic good or bad thing that happens off the balance sheet is called an externality. For instance if a factory produces smoke, the owners don't have to pay for it - but we have to pay to get it cleared up. The owners (shareholders) don't care about that. They're just maximising shareholder value.

The story of Wackenhut in New Mexico shows that private provision can really be very expensive. In the first year the company took over two prisons there were riots, nine stabbings and five murders. This has all happened because they save money by not using enough guards. Because Wackenhut prisons are short-staffed, the state of New Mexico has to bump up its supply of police to deal with the riots. This costs money &endash; it is an externality. So the state doesn't actually save any money on the Wackenhut deal. In 1999 a warden, Bob Garcia was left alone in a cell block with 60 prisoners. He died in a pool of his own blood. That was an externality for the company, but not for his wife and kids. There are a lot of riots because the facilities are dire. New Mexico gives the firm cash for education, skills training and computers. Wackenhut just trousers the money in order to maximise shareholder value. It is cheaper to keep the prisoners locked up all day. But one day these prisoners, brutalised and institutionalised by the Wackenhut regime, will be released. This is likely to be the biggest externality of all for the citizens of New Mexico. Still, it couldn't happen here, could it? Actually Wackenhut is part of the Premier consortium bidding to run prisons in Britain.

The commercialisation and privatisation of our public services is a relentless drive by international big business. Don't let anyone fool you it's about efficiency. A recent study by Allyson Pollock of University College London painstakingly proved what we have argued here &endash; privatised public services cost more and deliver less. The privateers walk off with public assets and lumber us with public debt. It's all about profit.