UK Development Minister writes MPs on Leaked GATS Documents

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Clare Short's Letter to Members of the UK Parliament

From the Secretary of State
DFID
Department for International Development
1 Palace Street, London SW1E 5HE

Telephone 020 7023 0134
E-mail: c-short@dfid.gov.uk

April 2002

Dear

Thank you for your letter of 19 March, enclosing one from the Women's International League for Peace and Freedom and the National Federation of Women's Institutes on the General Agreement on Trade in Services (GATS).

Let me start by saying that the recent campaigning against GATS has been very misleading. The GATS is a bottom-up agreement, which means that countries themselves decide whether - and when - to open up services where they think this will be beneficial. For example, opening up banking, tourism, telecommunications and similar services can help developing countries increase investment and stimulate greater economic growth. The GATS does not require or encourage the privatisation of public sector services. Moreover, services supplied in the exercise of governmental authority and which are supplied neither on a commercial basis nor in competition with other service suppliers are excluded from GATS coverage.

It is true that once GATS make bound commitments under the GATS, these become legally binding. Nevertheless, in the event of serious balance-of-payment and external financial difficulties, WTO members are allowed to place temporary restrictions on their commitments. The members may also opt unilaterally to withdraw their commitments, a process which is known under the GATS as modifying a schedule. In such cases, some compensation will normally have to be made. The GATS Agreement also commits Members to negotiations on the question of additional emergency safeguard measures, and these are currently ongoing within the Council for Trade in Services. However it has proved difficult to reach agreement on this issue with the result that the deadline for negotiations has recently been put back to March 2004.

On the impact of GATS commitments on the powers of national and local governments to regulate. The commitment to liberalise services does not imply the foregoing of domestic regulation. Moreover, the GATS makes clear in its preamble that the right to regulate should be protected, and this right is further emphasised in the negotiating guidelines adopted for the current negotiations.

On the subject of impact assessment of the GATS, I can assure you that we are fully aware of the importance of this issue and indeed it is built in as part of the GATS negotiations. An objective assessment is difficult to achieve at present, as the impact of commitments in services has been negligible. However, much academic research has been carried out in the area of services liberalisation generally, for example by the World Bank and the OECD (see www.worldbank.org and www.oecd.org). On the basis of this and other research, we support continuing reductions in barriers to trade in services in both developed and developing countries. We also believe that liberalisation under the GATS would be a positive step for developing countries as a significant source of growth. Without such growth, sustainable poverty reduction will not be achieved. The UNCTAD services project and the World Bank's Trade Policy Development Project (TPDP), both funded by DFID, will help build the capacity of developing countries to identify areas of interest to them and be effectively involved in the GATS discussions.

Finally, on the UK's position in the forthcoming GATS negotiations. The UK does not negotiate separately on WTO matters, including the GATS, but comes to an agreed negotiating position as part of an EU process approved by the Council of Ministers who act constitutionally on behalf of each EU Member government. Papers which the EU submits to the WTO as part of the negotiating process are rapidly made public and are available on the WTO web-site (www.wto.org). Discussions will continue throughout the lengthy negotiating process with industry, unions and a wide range of NGOs. We will continue to be as open and transparent as possible about our negotiating objectives for the new Round, which are well known and communicated to Parliament. However, I am sure you will appreciate that in the context of complex international negotiations, it is not desirable to reveal detailed negotiating positions in advance.

Information on the EU's current commitments under the GATS can be found on the WTO website and instructions to access these are attached.

Yours sincerely

CLARE SHORT


Instructions for accessing the official texts of WTO Member's commitments under the GATS

  1. Go to the WTO documents web-site: http://docsonline.wto.org/gen_home.asp;
  2. Click on 'search', then type GATS/SC/ in the 'document symbol' box;
  3. Click on the '?' symbol against 'countries' and select required country. (Note: for information on Member States of the European Union, select 'European Union', NOT the individual country name). To access Article II (MFN) exemptions, repeat process but type GATS/EL/ in the 'document symbol' box. To print, download the documents following the instructions given.

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