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The Earth Times | Posted November 13, 2001



WORLD TRADE ORGANIZATION, FOURTH MINISTERIAL MEETING

Some issues are spotlighted well
> BY DEVIKA SAHDEV
Copyright © 2002 by The Earth Times. All rights reserved
DOHA, Qatar-On the last day of the Doha meeting of the World Trade Organization, some NGOs remained concerned about pressure on developing countries to liberalize their service sectors. At the Uruguay Round, the General Agreement on Trade in Services (GATS) was pushed through even though several developing countries were not amenable to the inclusion of services in the final agreement. Under this agreement countries may unilaterally liberalize their services markets; although, ostensibly, they are not obligated to do so.

The structure of GATS allows countries to open up markets to foreign investment gradually, and they may choose which sectors or sub-sectors they want to liberalize. For instance, within the financial services sector a country may choose to open up banking, but keep the insurance sector closed. Banking and insurance are private services while education and health services, especially in developing countries, are usually public services. NGOs and some developing countries have expressed concern that though developed countries and proponents of GATS assert that liberalizing the services sector can only benefit consumers; prices will rise in both public and private sectors.

"The issue is that small countries often don't have the resources or the ability to withstand the push to privatize," said Giampiero Alhadeff, Secretary General of Solidar, an alliance of nongovernmental organizations focusing on trade unions. "It's all very well to say that the GATS agreement gives you the choice to say which services can and cannot be privatized, but in reality the push to privatize is difficult to withstand, especially if you don't have the resources to supply services to your people."

Proponents of the agreement on services say that it will increase efficiency in local markets and benefit consumers. Moreover, they say, services is the fastest growing sector in the world and opening up markets is the only way developing countries will be able to compete in a global economy.

"Services is the fastest growing sector in the world economy," said Christopher Roberts, Senior Policy Analyst at Covington and Burling in the United States. "Opening up this sector will bring trade benefits, more so than anything else, to the developing world."

The problem, according to Tetteh Hormeku of the Third World Network is that developed countries are pushing to liberalize the services sector while developing countries still do not have the capacity to compete domestically in this sector. "Areas that have been chosen for sectoral negotiations have been in areas like telecommunications and information technology where more developing countries have a disadvantage," he said. Furthermore "provisions in GATS to assist developing countries to build their own service centers have been ignored."

Public services such as water, electricity, education and health are the biggest areas of concern. "Our chief concerns are in these areas and we want it to be specifically clear that governments can say no to the opening of trade in services in these areas," said Rodney Bickerstaffe former Secretary General of Unison, the United Kingdom's largest trade union. "We don't want entrepreneurs to pick and choose where they enter to the inclusion on something like health."

Industrial concern are not as worried about this factor, because, they say, the process of liberalization is a slow one and essential public services will not be threatened by GATS. "When a certain concern must necessarily be provided by the government, like printing of money and macro-economic decisions, it cannot be opened up," said T.K Bhaumick from the Confederation of Indian Industry. "Opening up the services market, even slowly, means that there will be increased efficiency which maximizes consumer welfare. Imports always act as a stimulant to the domestic sector-both private and public."

Chakravarti Raghavan, who was present at the Doha meeting, said in an article on GATS that purportedly "as a benefit of services liberalization...there is evidence of [resultant] lower prices. However there is equally compelling evidence in the US, and many developing countries that the cost of the basics in terms of cost have actually gone up in most markets."

Hormeku agrees with this concern citing the example of Ghana, where a Canadian rubbish collection company pushed all local competitors out by entering the market with extremely low prices. As soon as they acquired a monopoly, he said, they raised prices to the detriment of consumers.

Another concern for developing countries is in the area of what is known as "modes of supply." This defines four ways that services can be provided internationally, the last of which refers to labor or "individuals traveling to different countries provide services."

"Developed countries do not want to discuss this last section even though it is their laws that restrict movement of people across borders," said another NGO representative. "Their laws and standards are higher than developing countries and people from the poorer countries are not given the same competitive advantage, even though developed countries say they are."

Delegates from developing countries also expressed their desire to see this part of GATS resolved, though this meeting will not make any real changes. "We're keen to have freedom of movement of natural persons," said Bhaumick. "There is a qualification constraint, a recognition constraint, an immigration constraint. This mode of supply should be liberalized."

According to Alhadeff this is not an issue of international agreements, but rather of domestic policies and concerns. "I think that a lot of the northern rich countries have a public view and a private view on this issue," he said. "They're very scared of losing votes and we've just seen in Australia a right wing Prime Minister come back from nowhere to win an election on the basis of what I would call a racist campaign. Migration has brought tremendous riches to Europe and what I'm seeing a hearing a willingness and understanding that we need to create the means to allow much more migration into Europe."

Article 15 of the revised draft Ministerial Declaration, expected to be finalized Tuesday evening, calls on Members to continue work on GATS through the Council for Trade in Services. Delegates speculated that the next Ministerial would have a stronger focus on services.

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