RECOMMENDATIONS The Community and Environment Policy Forum recommends: a) That the Council adopt a position of extreme concern over international agreements, such as the General Agreement on Trade in Services, where: i. They will result in an erosion of local decision-making authority. ii. They hamper the Council's ability to deliver Best Value & Community Well-Being. iii. Their impacts have not had a comprehensive assessment, particularly with respect to the provision of public services, Local Government, the environment and vulnerable groups. iv. There has not be adequate consultation with Local Government. v. They are effectively irreversible. b) That the concerns described in (a) be communicated to the relevant individuals and bodies, including Local Councils, the Local Government Association, Members of Parliament, and Members of the European Parliament. FINANCIAL IMPLICATIONS There are no financial implications associated with this report. 1.0 Introduction 1.1 The General Agreement on Trade in Services (GATS) is an international trade agreement that was agreed in 1994 at the end of the last round of trade negotiations (the Uruguay Round). It is an agreement of the World Trade Organisation (WTO), which was set up in 1995 to administer world trade rules. 1.2 Although GATS has been signed, it is not fully operational yet. Current negotiations (referred to as GATS 2000) aim to extend GATS to as many service sectors as possible. GATS focuses mainly on removing barriers to foreign service companies that exist within each country, on the basis that removing these will stimulate more trade and create benefits for all. 1.3 However, these 'barriers' are the result of decisions made by democratic society, generally referred to as laws, regulations, policies and other forms of government intervention. These have been enacted for a range of reasons (public health, the environment, worker's rights, etc). GATS aims to deregulate - to remove those rules that restrict trade. There is concern that GATS elevates the commercial interests of multinationals over the broader public interest. 2.0 GATS - Areas of Concern for Local Government 2.1 Application to Local Authorities - Although local authorities are not signatories to the agreement, have not been involved in the current negotiations, and have not been consulted; they are bound by the agreement. 2.2 Prohibits Barriers to Foreign Service Providers - GATS requires Councils to ensure open access to foreign companies (selling from the UK or overseas) for all sectors that the British Government has signed up to, and ensure that foreign companies are not discriminated against, even unintentionally. GATS prohibits local government from enacting any regulation that the WTO rules to be an 'unnecessary' barrier to foreign service providers. 2.3 Burden of Proof - If a policy, plan or decision of a local authority is challenged, the burden of proof rests with the accused (in this case the local authority), to show that they were acting within the terms of the agreement. Challenges are heard via the WTO Disputes Settlement Procedure, from which there is no appeal. 2.4 No de minimis Provision - Any violation of GATS, regardless of how small, can be challenged. Even if the amount of trade actually being affected by a local government practice might be relatively insignificant, if a WTO country did not like the precedent being set, then it might launch a WTO dispute. 2.5 Effectively Irreversible - Once signed, a country is locked into the agreement - the procedure for getting out of GATS is so onerous and costly so that it is effectively impossible to withdraw. This means that any change in policy by a local or national government could not reverse GATS commitments --nor could a change in Government. 3.0 Potential Implications for East Lindsey District Council To date, there has been no comprehensive independent assessment of the implications of GATS. Based on available information though, the passage of GATS could have serious implications for local governments and their ability to act on behalf of their constituents. The implications for Local Government may include: 3.1 Environment GATS would make it very difficult to limit inward investment on environmental grounds. For example, exhaustion of natural resources is not on the list of exceptions that can apply in placing a limitation on trade under GATS. When countries add service sectors they lose the right to impose a wide range of restrictions on service companies. For example, a local authority may wish to place new restrictions on the use of an ecologically fragile area. Such a decision could be challenged, with the burden of proof resting on the local council. 3.2 Community Well - Being and Best Value The implementation of GATS would result in the interests of companies in removing restrictions elevated over other local government aims, such as promoting community well-being and Best Value. For example, if a local authority decides on a policy to promote community well - being that may adversely affect a foreign company, even unintentionally, it may be challenged under the WTO. 3.3 Erosion of Local Decision Making GATS would limit the discretion of local councils in stimulating the local economy. As the agreement would require foreign multinationals to be treated equally, a Council could not preferentially offer work to local employers. Similarly, Council's would be prohibited under GATS in considering the legal entity of an organisation in the supply of services. A Council could therefore not discriminate in favour of a local trust, charity or not-for-profit organisation over a foreign multi-national in, for example, the provision of social housing. 3.4 Planning and Land-use Councils may be restricted in using discretionary powers in the planning process to apply conditions or change land use policies. A foreign investor has recently challenged the land use decision of a Mexican local authority, based on a provision in the North American Free Trade Agreement. Similar provisions are currently being negotiated for inclusion in GATS. 4.0 Conclusion Members of the Community and Environment Policy Forum expressed considerable concern over the possible impacts of GATS on local democracy and decision making. Based on available information, it is felt to have the potential to limit the ability of East Lindsey District Council to protect the local environment and deliver its Best Value and Community Well - Being commitments. Although the agreement has been signed, there is considerable scope within the existing negotiations to ensure that the views of Local Government are incorporated. The precedent exists where WTO members have intervened at GATS meetings on behalf of their local governments. The Canadian equivalent of the Local Government Association has recently requested that all local government services should be exempt from GATS. It would appear therefore that there is scope for Local Authorities to influence the current negotiations. BACKGROUND DOCUMENTS At your services: The impact of GATS on Local Government Briefing Paper; July 2001, Word Development Movement. Affiliate Policy Briefing: General Agreement on Trade in Services (GATS); 5th April 2001, Local Government Information Unit.
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Co-ordinator: Steven Kelk, 72 Brunswick Street, Leamington Spa, CV31 2EQ
skelk@dcs.warwick.ac.uk, 01926 773808