Original letter sent to Warwick District Council members, Jan/Feb 2002

GATS: "At stake is not just the future of local democracy,
but the future of public services."

I am writing this letter in order to draw your attention to an issue of 
potentially profound consequence for local government. GATS - the General 
Agreement on Trade in Services - is a little-known international trade 
agreement that is designed to open up (or 'liberalise') service sectors in 
order that an internationally contestable free-market can develop in that 
sector. GATS covers virtually all services, including politically sensitive 
sectors (such as health and education) that have not traditionally been 
associated with market principles. In common with other trade agreements, this 
operates by forcing governments to comply with stringent "disciplines", where 
compliance usually entails the removal of so-called "trade distorting" 
government measures. In GATS as in other trade agreements, such as EU 
competition law, "trade distorting" measures are identified as those 
regulations and policies that confer an "unfair" advantage on domestic 
companies over foreign companies. (GATS is in fact somewhat more extreme than 
this, but I will come back to this fact in due course.) For the growing army of 
GATS critics, this negative "discipline"-based model is the crux of the 
problem, diminishing democracy and severely curtailing the regulatory freedom 
of governments to pursue policies aimed at improving social welfare and 
environmental sustainability. As the major GATS critic Friends of the Earth 
puts it,

"GATS has the potential to create adverse environmental and social impacts in a 
wide range of sectors including energy extraction and production, transport, 
water, travel and tourism, construction, power generation, and waste disposal 
and sewage."

Perhaps it is no coincidence that the major beneficiaries of agreements like 
GATS will certainly include the massive, service-exporting corporations who 
consider government regulation anathema to their goal of profit maximisation. 
As I will shortly demonstrate, this is indeed no coincidence.

FoE are joined in their criticisms of GATS by an impressive array of trade 
unions (e.g. UNISON), development groups (e.g. Save The Children, World 
Development Movement), environmental organisations (e.g. WWF) and citizens 
organisations. "But", I hear you ask, "what's this got to do with local 
government, and more specifically Warwick District Council?". Well, as the 
enclosed Local Government Information Unit (LGIU) briefing explains, GATS 
disciplines apply to all levels of government, not simply national government. 
Quoting here from the LGIU report:-

"There are huge implications for local authorities of the extension of GATS on 
the further opening up of many areas of service provision to international 
commercial competition."

Though GATS re-negotiations are only just beginning, local governments across 
the world are beginning to ask the question, "Why should local governments be 
bound by international agreements when they have not been party to these 
negotiations in the first place, and when they potentially constrain the policy 
options available to local and regional councils to improve communities’ 
quality of life and support the local economy?"  Indeed, in Canada the 
Federation of Canadian Municipalities (FCM) is demanding that the federal 
government exempt regional government from GATS disciplines. It may seem 
strange and unlikely to think that local and municipal government could ever be 
economically significant enough to trouble the enforcer of GATS - the World 
Trade Organisation (WTO) - but this is in fact a harsh reality of the global 
economy. There are many cases where nations have been found guilty of violating 
WTO rules because a regional authority was unwittingly implementing WTO-illegal 
policies. In such cases, the guilty party practically has no choice but to 
revoke the policy, lest the parent state face crippling punitive trade 
sanctions. Canada is one such country to fall foul of this, which goes some way 
to explaining why the FCM are so vociferously and confidently articulating 
their concerns.

Back in the UK, concern is also growing rapidly. Already three councils have 
passed anti-GATS motions; Brighton & Hove Unitary Authority, Oxford City 
Council and Flintshire. (I have enclosed the text of the Brighton and Oxford 
motions and I urge you to take a look.) Warwickshire County Council (WCC) has 
been alerted to the potential danger of GATS, and are looking into it, but 
seeing as Warwick District Council (WDC) is also involved extensively in 
service delivery it is equally as important that district councils formulate 
policy on this issue and take an appropriate stance.

I'll shortly add flesh to these seemingly abstract concerns but first let me 
explain why it is essential that local government takes a lead role in 
challenging GATS. There is, I fully appreciate, a temptation to pass the 
concerns upwards to be scrutinised and dealt with at the national level. After 
all, it might be argued, it is national government which deals with all these 
'macro' issues, not local government. However, at present the UK government is 
stubbornly refusing to accept any of the criticisms of GATS, and is in fact 
pursuing a far more worrying policy than simply aloof indifference. If you look 
at http://www.wdm.org.uk/cambriefs/lotis.pdf you will find details of the 
stunning LOTIS revelations. In a nutshell, these leaked minutes demonstrate 
that the UK government is colluding with a powerful city lobby group, in 
secret, to formulate government policy on GATS and discuss how the anti-GATS 
movement - which they acknowledge has a valid argument! - can be derailed. 
Clearly there is an agenda here many degrees removed from open debate, 
accountability and the public interest.

Concrete Issues

Again, I accept that this all may seem absurd and abstract, but let me 
demonstrate some of the real-life areas in which local government could 
potentially be adversely affected. This, it should be understood, takes place 
in the context that any GATS challenges, irrespective of the level of 
government at which the alleged violations take place, are decided by a closed 
panel of trade bureaucrats in Geneva.

When a service sector is committed under GATS, so-called "Market Access" 
disciplines ensure that (unless otherwise specified) it is GATS-illegal to (for 
example) limit the number of service operators in that sector, limit the amount 
of output in that sector, subject entry to the market on the basis of an 
economic needs test, stipulate that entry to the market is conditional on 
employing a certain % of local people, or utilising a certain % of 
locally-sourced materials, or engaging in partnerships with local companies. 
These are severe restrictions. Take as an example the tourist-filled streets of 
Stratford. I remember reading in the Leamington Courier some months ago that 
Stratford residents were fed up with an excessive number of tour buses on their 
roads. Although I'm not aware of how or whether this was resolved, a reasonable 
course of action might have been for the local council to limit the number of 
tour buses operating at a time. Yet this might well have been technically 
GATS-illegal! Why? GATS is being re-negotiated, but all WTO member states 
(including the EU, which negotiates as a bloc) made an original set of 
commitments back in 1995. The EU was particularly liberal in the Tourism 
Services category, to the extent that full Market Access disciplines already 
apply. This is the reality of GATS negotiations...though the UK government and 
EU re-assures worried commentators that it won't do anything silly, the fact is 
that the full consequences of even existing GATS commitments have yet to become 
apparent. Worryingly, the WTO considers the 1995-era commitments to have been 
very limited indeed, and the principle goal of the current GATS2000 agenda is 
to make it fully operationally effective and, alarmingly, achieve a far deeper 
and wider level of liberalisation.

As a further point, you may be wondering what internal affairs such as these 
have to do with an international trade agreement. Exactly:- GATS is 
unprecedented in that in certain areas it takes out the 'international trade' 
component. Market Access disciplines, it has been discovered, can be violated 
even if a regulatory action limits access to a market without penalising 
foreign companies. So governments are in fact taking on commitments to open up 
entirely, irrespective of whether a foreign company is involved, "because 
internal market opening and trade liberalisation go hand-in-hand." To further 
whet your appetite, consider that Wal-Mart (who owns Asda) have for a long time 
been pushing for the kind of policy strait-jacket that GATS enforces. In 
addition, though it is still unclear how the planning function itself is 
affected by GATS (especially in light of proposed government changes), it would 
be completely GATS-illegal even at present to have (say) a 'McDonald's Free 
Town' and deny McDonald's access on the grounds that local people and 
councillors object to their cheap and nasty food!

Secondly, nations are bound by what are known as National Treatment 
disciplines. These outlaw any measures which confer an advantage on a domestic 
company over foreign competitors, and you may well be familiar with similar 
constraints under EU competition law. National Treatment is extremely severe. 
Laws which even incidentally "discriminate "against a foreign company are 
outlawed. Furthermore, unless otherwise exempted all subsidies offered to 
domestic companies must also be offered to foreign operators in that sector. 
Since the EU has already liberalised (under GATS) refuse collection & waste 
disposal, a non-EU waste-collecting multinational must be treated exactly the 
same as a not-for-profit, co-operative waste collection/recycling programme. So 
any subsidies offered to the latter, in an attempt to foster local economic 
growth and/or economic development, are technically supposed to be offered also 
to the former! You might also have heard of how in Brighton the refuse contract 
for the French multinational SITA was revoked and replaced by a local 
co-operative. It is not difficult to imagine how, as GATS becomes fully 
operative, common-sense legislation (such as Brighton deployed in this 
instance) will become increasingly constrained by GATS dictates on monopoly 
"abuses", market access and national treatment.

Thirdly, expanding rules on 'domestic regulation' threaten to make all 
regulation pertaining to licensing, qualification requirements and technical 
standards "least trade restrictive" and "no more burdensome than necessary", 
and these rules may end up applying across the board. The significance of the 
"burdensome" requirement is that it takes the international trade element out 
of the equation, and thus is an unprecedented penetration into government 
authority inside national borders. Coupled with this is the requirement that 
local and national government may ultimately have to notify and justify to some 
as-yet uncreated third party any domestic policy changes that affect GATS. 
(Note that GATS commitments themselves have been described - by proponents of 
GATS - as "effectively irreversible".) So it is definitely time to think hard 
about how local issues such as building inspections, taxi licensing, 
subsidising low-income housing projects, park services, road maintenance, 
pesticide spraying, arts and recreation programmes, hotel and restaurants, 
architectural codes, planning, subsidised travel schemes, areas of historic 
importance, community development schemes, Local Agenda 21 projects etc. might 
all be adversely affected. 

The WTO argues that all these different disciplines are necessary to ensure a 
"level playing field". This is misleading...if local companies are not 
fostered, protected and offered special treatment they don't stand a chance 
against economic giants operating within the market. Hence, community 
development itself is threatened:- if you can't subsidise local companies and 
projects, can't give them privileged market access, can't stipulate that an 
incoming company employ local people or use local resources, can't ask incoming 
companies to form partnerships with local companies, what chance has the 
community got?

Conclusion

I will now draw this lengthy letter to a close. If you are not yet convinced, I 
urge you to look through the various materials I have provided, particularly 
the LGIU briefing. A continuing erosion of local government sovereignty would 
appear to be on the cards as central government cracks the whip to ensure 
local-level compliance with the UK's GATS commitments. Also, in this era of 
corporate power, it is not unthinkable that a foreign multinational, irked by a 
commonplace, 'best-practice' aspect of local government regulation, will lobby 
its parent state to haul the UK before a WTO arbitration panel and seek the 
removal of the "offending" regulation throughout the country.

There is clearly a lot at stake. The WarwickshireGATS team is campaigning hard 
to raise awareness of this in the area...you may have seen our exchanges with 
Phillip Bushill-Matthews in the Courier, who steadfastly refused to engage with 
the very real threat of GATS. Our website is at 
http://webalias.com/warwickshiregats and has many locally relevant links; 
please do take a look. We implore you to take this issue seriously, with a 
first positive step being the passing of a motion within WDC along the lines 
Brighton, Oxford and Flintshire have passed. (The Brighton and Oxford motions 
are included on the other side of this page.) The WarwickshireGATS team would 
be delighted to answer questions, give talks and present seminars on this 
topic, and await your response! WarwickshireGATS correspondence should be 
directed to: Steven Kelk (WarwickshireGATS co-ordinator), 72 Brunswick Street, 
Leamington Spa, CV31 2EQ, Phone: (01926) 773808, Email: skelk@dcs.warwick.ac.uk.

Yours in anticipation...

http://www.webalias.com/warwickshiregats
Co-ordinator: Steven Kelk, 72 Brunswick Street, Leamington Spa, CV31 2EQ
skelk@dcs.warwick.ac.uk, 01926 773808