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 Day 19

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Beware of GATS Greed Without Limits

Greed Without Limits

by RALPH NADER

The ultimate downfall of the corporate globalizers may be that they know no limits.

Not satisfied with imposing pull-down agreements on the trade in goods, Big Business is looking to do the same thing for services through the General Agreement on Trade in Services (GATS). Services includes such economic sectors as finance (banking, insurance, pensions), healthcare, telecommunications, construction, travel and tourism, the professions, education and training, express delivery, energy and environmental services. GATS is part of the World Trade Organization (WTO), and now undergoing renegotiation to become more encompassing.

The Wall Street banks and the other service multinationals first want to ensure that countries do not discriminate against foreign service providers. The United States does not let foreign airlines service domestic routes, for example. Such restrictions to protect domestic firms are prevalent in developing countries, and an impediment to the expansionary dreams of the rich country multinationals.

But the multinationals want much more than non-discrimination. Their real goal is to use the language of non-discrimination (they talk about “market access” and “national treatment” for foreign companies) in order to force deregulation and privatization.

A key priority for the service companies is to place a burden on all countries to show that their regulations are the “least trade restrictive” means to achieve a legitimate purpose.

What does this mean? In case after case, the European Union has suggested that the U.S. federalist system — with overlapping regulatory powers between the states and federal government — is an impediment to trade. The argument goes like this: American companies with a bigger presence in the United States can more easily manage to deal with separate regulatory agencies in each state. Foreign companies with a smaller presence cannot negotiate this terrain as easily. Thus, goes the EU argument, regulation should be done at the federal level.

Do we really want to sacrifice important state-level consumer and civil rights protections — for example, interest rate caps, limits on corporate discriminatory practices like redlining, restrictions on predatory lending — because they are inconvenient for European companies? Of course, the real point is not that they are inconvenient for Europeans, but for business. The U.S. companies hope to use GATS to eliminate U.S. regulations — just like the European corporations want to get rid of rules in the EU.

There are relatively weak GATS rules in place now, but ongoing negotiations between nations under corporate influence to tighten them and apply them to more and more services raise serious concerns.

What might a strengthened GATS mean for the United States? It’s too early to say with certainty, but based on a careful analysis of existing proposals, Professor Patricia Arnold of the University of Wisconsin-Milwaukee has raised a set of disturbing questions:

Will GATS weaken efforts to regulate financial markets in the aftermath of the financial and accounting scandals? Already foreign companies are complaining about the reach of the modest Sarbanes-Oxley accounting reform bill, which would require foreign, as well as U.S. CEOs, if they sell stock on the New York Stock Exchange, to attest personally to the validity of their companies’ financial statements. If Wall Street gets its way and achieves a partial privatization of Social Security, will GATS make it impossible ever to bring the program back fully into the public sector? GATS requires countries to pay compensatory damage if they grant new public rights over the supply of a service, she notes, making privatization a one-way street. Would GATS limit efforts to regulate the health insurance sector? The insurance industry argues that service agreements should prohibit restrictions on the types of insurance products allowed on the market. Might this mean a ban on legal requirements that health insurance policies must cover certain medical conditions?

Some will argue these are Chicken Little sky-is-falling concerns. But if the NAFTA-WTO experience shows anything, it is that corporate lawyers will grab onto any crevice in trade rules to hoist corporate interests above the public interest.

Consider the “Chapter 11″ investment protections in NAFTA. In a case closely paralleling what might occur in other countries with a GATS agreement, UPS is suing the Canadian postal service for offering express delivery service. The postal service is subsidized for mail delivery, and that subsidy unfairly advantages Canada Post over UPS in the express delivery market, UPS claims.

If Canada Post want to compete in the market, they should set up drop-off boxes separate from mail boxes, employ delivery and sorting staff separate from the people who handle the mail, and handle delivery packages at separate facilities from the mail, UPS argues. Since Canada Post had the temerity not to pursue this economic irrationality, UPS is asking for hundreds of millions of dollars in compensation.

This is actually happening, and other companies are filing lawsuits in each others’ countries against safety regulations, court verdicts and other expressions of domestic sovereignty.

Enough cases like this — and a more dominant GATS will make sure there are many more — may eventually produce a backlash that will bring down the whole WTO-NAFTA edifice. But the damage inflicted in the meantime is too severe. Better instead to prevent new agreements that diminish our living standards and roll back existing ones. For more information on how to stop the GATS, contact Global Trade Watch.