Local Government

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GATS and local communities: what do local decision makers need to know about GATS?

Rules on the global economy are becoming more intrusive into the lives of people, the fabric of communities and the powers of local government. Never before have local powers been so under threat by an international trade treaty. The General Agreement on Trade in Services (GATS) affects government policy on services at a national, regional and local level, as Article I of the GATS agreement says:

"This agreement applies to measures by Members affecting trade in services… For the purposes of this Agreement, 'measures by members' means measures taken by central, regional or local governments and authorities."

[General Agreement on Trade in Services, Article I - Scope and Definition]

GATS rules apply to 160 different service sectors - from education provision to rubbish collection, tourism services to transport policy, health delivery to the setting up of retail stores.

Basic Services

As with other World Trade Organisation (WTO) agreements the purpose of GATS is to liberalise service provision, which will result in a reduction of government involvement in the service sector. In some cases this could mean the privatisation of public utilities, in others it would mean further de-regulation of an already privatised sector. Across Europe a core duty of local governments is to ensure that all citizens have access to affordable, adequate basic services. Their power to determine this in areas as fundamental as waste collection and library services is being gradually eroded.

The future for health and education services is certainly unclear. Under growing public pressure, European Trade Commissioner, Pascal Lamy, was forced to issue a guarantee that further health and education concessions would not be made in the current GATS negotiations. However, guarantees that they will not be included in the future are weak. Meanwhile, European government's argue that 'public services' will be exempt from GATS rules, referring to Article 1.3b of the agreement. This states that all services are covered by GATS except those "supplied in the exercise of government authority, [i.e. those] supplied neither on a commercial basis, nor in competition with one or more service suppliers". However, lawyers analysing the text have pointed out that even in health and education many countries are now using commercial firms to supply parts of the service, thus potentially opening the sectors up to GATS rules. For more info, see: Public Services & the Scope of GATS.

Whatever governments believe to be the interpretation, they must be aware that corporate service providers, anxious for new markets, will use all their legal might to persuade the WTO to rule in favour of liberalisation.

Signing away the right to regulate large companies in your local area

The sorts of local council functions that could be affected by GATS include:

How are they affected?

Governments must open up services markets to foreign companies, by signing them up to the GATS agreement and steadily removing "barriers to trade." Once these service sector 'commitments' have been made to GATS, they are 'effectively irreversible'. The democratic freedom of local governments to create policies that best suit their communities at any given time are eroded. Any exclusions must be listed at the time governments sign the service up to GATS. A local authority will not be able to place, for example, a new restriction on retail developments for ecological or social reasons, if this specific restriction had not been listed by the government at the time of signing up the retail services sector to GATS. If it does place the restriction, it makes itself vulnerable to a challenge at the WTO dispute settlement panel.

Rules on domestic regulation

Much concern has been raised by local governments about current negotiating proposals to develop new rules on 'domestic regulation', under the GATS. These are set to target regulations deemed to be 'more burdensome than necessary'. For example, zoning, building permits and other local government regulations over the construction industry may be treated as "barriers to trade". Environmental regulations in the public interest may be considered to be "unnecessary barriers to trade". Local governments may have to subject all measures affecting services to a necessity test which would oblige them to take the "least trade restrictive" measure possible if they wanted to fulfil a public policy objective.

Negotiating in secret

Given the potentially great impact of this agreement it is surprising that there has not been more debate throughout Europe. Following public outcry, the European Commission was forced to disclose its initial negotiating offer in April 2003. However, since then, there has been no further indications of how trade officials are conducting these talks which threaten to give large companies unprecedented control over services. The big decisions are being made in secret. We will not know the full implications of the agreement until after it has been signed and sealed. It will be up to a panel of 'experts' at the WTO to decide whether local government regulations made in the future break GATS commitments or not.

Practise safe town planning

Proof your city town against GATS. Join hundreds of local councils across Europe who have passed resolutions to make local communities 'GATS-free zones'. Demand information and consultation with national Governments.

More information

This document has been prepared by the Seattle to Brussels Network, which is a pan-European NGO network campaigning to promote a sustainable, democratic and accountable system of trade that benefits all.