Speech given at a World Development Movement meeting, March 2001.

Introduction

As an MEP who sits on the European Parliament’s Trade Committee, very happy to be here to give you what I perceive to be the EU context for this vital issue.

I plan to talk a little bit about the EU’s position with respect to a new Trade Round, and how the Services negotiations fit within that, and then go on to talk about the EU’s position on GATS, to identify some key EU players, to outline some of parliament’s concerns, and then to finish with some thoughts about challenges for the coming months.

EU world trade and WTO

Of course, the EU has historically always been a ‘free trade’ agreement. And so it comes as no surprise that it fully supports the mantra that trade is the engine of global economic growth, which will inevitably and automatically lead to prosperity for all. It is also then not surprising that the EU is committed to liberalisation and that its Trade Commissioner, Pascal Lamy, is one of the most vociferous advocates of a new trade round. The EU is the world’s largest trading partner, responsible for a fifth of all exports, and since the completion of the ‘internal single market’ in 1992, it has also become one of the worlds most open markets. It is also the biggest, with 320 million citizens, which with enlargement will continue to grow, to around 500 million people. The key factor for the EU and for worldwide prosperity, the Commission argues, is a rule-based, open, multilateral trading system. And a new trade round, they would have us believe, is key to that. And while the GATS negotiations are happening independently of any new Round, it is the Commission’s view that it will be virtually impossible to conclude the services negotiations in isolation, and it will need to be integrated within a broader negotiation - and so the Services Agenda and the new Trade Round are intimately connected.

And while Commissioner Lamy acknowledges that the WTO is in need of reform - particularly in order to address issues of accountability and transparency - (and remember it was he who memorably called it a medieval institution just 18 months back in Seattle) - his message is clear: first and foremost we need the round, we can deal with the rest later: as he put it in the Financial Times a few months ago - "Efficient functioning must come before accountability. That is a hard fact of life."

However, the Commission believes that reforms are not only needed at the WTO but in the EU itself. Mr Lamy made it very clear the day before the start of the Intergovernmental Conference in Nice that questions of efficiency are equally important when it comes to EU trade policy decision-making processes within the Article 133 Committee - the shady and somewhat secretive committee of representatives of member state governments, which meets in Brussels to ‘guide’, give advice and agree on the Commission positions. In particular, you may recall, he wanted to see negotiations on services, intellectual property and investment treated in the same way as negotiations on trade in goods - namely by qualified majority voting. "Unanimity," he said, "particularly in an enlarged EU of 30 states, makes no sense in external trade negotiations." In terms of pure efficiency alone, he is undoubtedly right. However, given the Commission’s tendency to put "hard facts of life" such as efficiency before issues that we might regard as equally, if not more, important - like accountability - it is perhaps not surprising that many parts of civil society waged a very successful campaign to stop the Commission from gaining these new powers at this particular moment.

So Mr Lamy was only partially successful. Although the EU gained community competence to negotiate and sign agreements in a number of service areas, it appears that education services and social and human health services still remain excluded - and therefore still require unanimity. So it would seem, then, that we can breathe a sigh of relief, having safe-guarded vital public services from the unilateral grip of the Commission. But will the Commission stop there? What is the EU’s position when it comes to the trade in services?

EU position on GATS

It is clear that for the EU, services are a central offensive interest. The services sector contributes more to world wide economic growth and job creation than any other and in Europe is it is fast replacing the manufacturing industry as a source of profit. So in our supposedly ‘post-industrial’ society, European services are seen as key tools for European business and central to the future of the world economy. The EU is a world leader in this field - largely due to its openness to competition. Services account for two-thirds of EU GNP. However, only 25 % of total exports are currently services - so there is a gap between the importance of trade in services in our economy and its importance in terms of our trade. Mr Lamy is committed to correcting what he sees as "this imbalance", because, and I quote, "our service industry is very competitive, and that means jobs, jobs, jobs." What quality of jobs, and jobs for whom, of course, is another matter which I’m sure we’ll come back to later.

A central driving force of the EU’s approach is the need to be ever more internationally competitive - indeed it is fast becoming regarded as the single most important indicator of society’s health. At last year’s EU Lisbon Summit, a new commitment was agreed - to make the EU the "most competitive and dynamic knowledge-based economy in the world" - a pledge that was reinforced at last week’s Stockholm Summit. And services, as the new lead sector, will be at the heart of this.

But why are we so concerned about the trade in services and the GATS? The politicians and technocrats seem to think there is nothing at all to worry about, that this is a ‘bottom-up’ process where governments actively offer up the sectors that they are willing to liberalise and can protect sectors, such as public services, if they so choose to. And people like Clare Short and Pascal Lamy keep telling us that public services like education and health are not on the menu and neither will GATS threaten the right of governments to regulate.

The proponents of the GATS tell us that services provided under government authority and without a commercial purpose are safe from the GATS. However, a clever shift in language has already taken place. Public services are now often referred to as "services of general interest" thus allowing them to be much more easily classified as commercial. Further, services that are provided under mixed private-public competence are potentially open to the GATS. In reality, most public services such as health, education or prisons already are mixed competence. So, what is to protect them?

Supposedly domestic regulation. However, the Commission has made it very clear that "given the existence of regulatory barriers which significantly detract from the opening of markets, we should like to stress the considerable importance of the work being undertaken in the Working Party on Domestic Regulation." Although the Commission is not going as far as saying that it proposes the abolition of domestic regulation, it is nevertheless concerned that such regulation leads to undue trade barriers. Moreover, many developing countries simply don’t have that level of existing domestic regulation, nor necessarily the resources to invest in harnessing expertise in this enormously complex area. As Pascal Lamy replied to one of the questions we posed to him on Services a few weeks ago, I quote "It’s hard to understand unless you are very clever!"

Well, perhaps I’m not very clever, but it seems to me that, in terms of presenting the EU’s objectives with respect to the Services Agenda, the Commission hasn’t done itself any favours by listing comprehensiveness and openness as its first priority - because the Commission goes on to assert that there should be "no a priori exceptions" - which, given the level of quite legitimate suspicion from civil society in this area, can be read to mean that some services of general interest may be included in the Commission’s ambit. Indeed Michel Servoz from the Commission has explicitly suggested that health and education services are ripe for liberalisation.

And in truth both the WTO and Commission seem to be trying to be giving out very different messages to different audiences, seeking to talk up the scope and importance of the Services agenda to business, and to talk it down to civil society, giving the impression they are either deliberately misleading, or desperately muddled.

One example. The WTO website used to claim "The GATS is the world’s first multilateral agreement on investment" since it covers "not only cross-border trade but every possible means of supplying a service, including the right to set up a commercial presence in the export market."

But in a recent WTO publication ‘GATS - fact and fiction’ - appears the following quotation: "The fact that under GATS WTO members can make commitments allowing foreign suppliers to establish in their markets has led to criticism from some anti-WTO activists who opposed the negotiations for a Multilateral Agreement on Investment. But the GATS bears no resemblance to the MAI."

Key EU Players

Corporate Sector Interests

But what might have otherwise seemed only a muddle becomes perhaps more sinister when we start to examine who the other key EU players are in this game, and to ask in whose interests they are acting. It soon becomes clear that the corporate sector is wielding its not so invisible hand in all of these negotiations. The European Commission is unashamedly explicit about this, and claims that "the GATS is not just something that exists between Governments. It is first and foremost an instrument for the benefit of business."

The WTO admits that, and I quote David Hartridge, the WTO Services Division, Director, "without the enormous pressure generated by the American financial services sector, particularly companies like American Express and Citicorp, there would have been no services agreement and therefore perhaps no Uruguay Round and no WTO."

Let’s continue with the US, and quote from the President of the hugely powerful US Coalition of Service Industries, J.Robert Vastine:

"The overarching objective of the global business community in the coming negotiations should be both to broaden and deepen countries’ GATS liberalisation commitments. A contestable, competitive market in every sector and in every WTO member country is the ultimate goal."

Again: "The new GATS negotiations must secure commitments to national treatment, market access, and cross border services in as many sectors as possible. Current scheduled exceptions are too broad, and must be honed so only the most sensitive issues are excluded from liberalisation."

Their specific requirements also include "to allow majority foreign ownership of health care facilities, and to seek inclusion of health care into WTO government procurement disciplines."

Unfortunately for the plans of these companies, up until now, I quote "health care services in many foreign countries have largely been the responsibility of the public sector [making it] difficult for US private sector health care providers to market in foreign countries." But the WTO offers a way out. One of the barriers that first Ms Barchefsky and now Robert Zoelick are expected to help demolish are "restricting licensing of health care professionals."

So there seem to be some legitimate grounds for concern.

But a similar picture emerges in the EU, with the active encouragement of the Commission. The Commission has, for example, co-funded various key business lobby events. Last year’s European Business Summit is a case in point, at which Gerhard Cromme, a member of the European Roundtable of Industrialists, expressed quite clearly the direction he would like to see the education sector going when he derided the "culture of laziness which continues in the European education system", where students "take liberties to pursue subjects not directly related to industry and which have no practical application." He went on to suggest that all schools be privatised to encourage competition and ensure that schools be subject to market forces, because "schools will respond better to paying customers, just like any other business."

Another event that was co-funded by the Commission was the European Services Forum of last November. Here Mr Lamy said that of course he would protect services such as education and health in Europe, but in the developing world countries are desperate for these services (implying they could not provide them for themselves, and thus it would be most beneficial to them if they open up their markets so we can enter and provide!). As he explained: "We have offensive export interests in the field of those services which are regulated as public services. That is an important distinction between GATS and GATT. With GATS, reciprocity is not the same - there is none. If we have a strong interest in the field of health we’re not obliged to make commitments but can take advantage of opening up other markets."

The picture, I think, is all too clear. While our own education and health sectors may be safe - we’ll have more discussion on that later today - those of the developing countries most certainly are not.

This kind of publicly funded corporate lobbying does not bode well for democracy.

European Parliament

But how does it stand for the elected body of the European Union?
What kind of player can the Parliament be? Well, the European Parliament is still not allowed observer status to the Article 133 Committee which meets behind closed doors - nor did the Parliament gain co-decision powers in those areas which shifted to QMV in Nice. So it seems that here too the democratic deficit is all too visible. Questions of transparency and accountability are thus still very pertinent ones to raise at the EU level.

Within the parliament, the recent Schwaiger Report led to a European Parliament resolution with recommendations to the Commission on the WTO built-in Agenda negotiations. In the context of services, the report did have some good points - because although it broadly supported the Commission in its efforts to achieve progressive liberalisation of trade in services, it nevertheless calls for an impact assessment of the effects of the liberalisation of services for EU and developing countries, and calls for GATS agreements not to be allowed to restrict the scope of the member states of the WTO to adopt rules which recognise the special character of the provision of public services, within, for instance, the health, education and cultural services fields.

It has to be admitted, of course, that such a Resolution is of an entirely advisory nature, and is not in any way binding.

European Parliament Concerns

So in summary, some of parliament’s concerns are, in a nutshell, that even if Pascal Lamy can be trusted when he tells us that the Commission has no intention of putting European health and education services on the Services agenda, his corporate friends have other ideas, and they are extremely influential. Moreover, it is quite explicitly stated that the EU has offensive interests in other countries’ public services, and that these are seen as fair game for exploitation.

Moreover, the Parliament’s powers are extremely limited in this area, the issues themselves extremely complex, and therefore public scrutiny is almost non-existent.

The real risk at national level is that many governments don’t appear to be aware of the significance of the deals that they are negotiating, nor of the fact that they could have serious repercussions on society. The Commission’s own preliminary impact assessment of the Services negotiations reinforces our concerns. Now remember the Commission is very proud of its impact assessments, and although it refuses to undertake a retrospective assessment of existing liberalisation under the Uruguay Round - although it’s something that has been asked for on numerous occasions - it is very keen to demonstrate its responsibility and seriousness by its impact assessments of possible future negotiations. But this is its summary of what it calls the Base Scenario in Services:

"For the EU, there are likely to be economic, social, and environmental impacts, positive and negative, associated with the existing situation, as compared to the ‘policy-off’ scenario."

Frankly, that doesn’t advance the debate in any way at all.

Moreover, the assurances by the Commission about the reversibility of the treaty, about countries capacities to stop the process where and when they want, seems to be wilfully ignoring the political context that surrounds the WTO. Anyone who believes that the governments of the poorer developing countries are not bullied and marginalised by the richer nations has been looking other way - and since many of those countries don’t even have a mission in Geneva covering the WTO and Services, much less in house expertise on the issue, it seems almost inevitable that some of our worst fears will indeed take place.

As Lamy has said, the Agreement is a very complex one - so much so that any corporate lawyer will confirm, its impact will depend upon its interpretation. That being so, almost any claim can be made about what it will or will not do. It’s very hard to prove or disprove. What we do know from the legacy that the WTO has already left us is that its undoubted tendency, when faced with the choice of promoting private interests on the one hand, or public interests on the other, is to support the former.

Strategies/challenges ahead Over next few months we can expect broad sectoral negotiating proposals put forward by WTO members to be discussed - the next major milestone will be the Fourth WTO Ministerial in Qatar, which will need to agree a deadline date for the exchange of requests for liberalisation to individual WTO members, and set a date for responses to the requests by way of initial offers. The earliest date now possible for exchange of requests is end 2001. The date for the exchange of initial offers could be 12 months or more after the exchange of requests - ie not before end 2002. Then a period of possibly protracted direct negotiation is inevitable.

But we should not be fooled into thinking that the WTO is the only place where the GATS agenda is making headway. Far from it. The EU is engaged in completing a whole series of bilateral trade negotiations in which the Services agenda goes far beyond anything even dreamed of in the GATS Agreement at the WTO. I’ve just been working on the EU-Mexico Agreement, for example, and the Services component of that is moving at a much faster rate than anything at the WTO. The liberalisation envisaged is much deeper and much faster, and there are no a priori exceptions, except air travel. And these are taking place far from the scrutiny of the public or of pressure groups.

And that means that all of us will need to keep very vigilant on all fronts in the months ahead.