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EUROPEAN COMMISSION ASKS FOR SWEEPING OPENING UP OF INDIA'S SERVICE ECONOMY

Manthan Adhyayan Kendra, Press Release, 27 Feb 2019

Leaked Requests Under The WTO's General Agreement on Trade in Services (GATS) Negotiations Show EC Demands for Opening Up of India's Construction, Water, Energy, Financial, Tourism and other Sectors

The European Commission (EC), acting on behalf of the 15 countries of the European Union, has asked for sweeping, extensive and practically unconditional opening up of India's service economy to EC companies, firms, agencies and individuals. In its "requests" made to the Government of India under the ongoing negotiations for the expansion of the World Trade Organisation's (WTO) General Agreement on Trade in Services (GATS), the EC has demanded virtually unlimited and unconditional access to service sectors like urban water supply, sewage and waste water service; energy distribution services including oil, gas and electricity; retail sale of fuel oil, bottled gas and wood; postal services; wholesale and retailing; construction of roads, highways, bridges, dams, buildings etc.; tourism; rail and road freight services; financial services and many others.

As the service sector now accounts for 49% of India's GDP the EC requests amount to an attempt to completely dominate the country's economy.

It may be pointed out that under GATS rules, if India accepts EC demands, then it will have to provide the same access to these sectors to all the countries that are WTO members.

The EC requests were made to the Government of India in July 2002, but have been kept secret from the people of India. Even today, it is only a leak that has enabled the people of India to have access to these demands. Earlier in this week, the demands of the EC to 109 countries were leaked out, making them available for the first time to common citizens.

The Government of India is to make its "offers" by March 2003.

The GATS - and the "Requests and Offers"

The GATS - General Agreement on Trade in Services - is that part of the WTO which deals with services (as against goods). GATS was a part of the WTO agreement signed in 1995. Since 2000, the process of expansion of GATS has started (the so called GATS 2000 round). This complex process is to be undertaken by means of a "Request and Offer" method. Under this, by June 2002, all countries were to make their initial "requests" to any other WTO member country. The Requests detail the sectors and sub-sectors that the requesting country wants the other country to open up, and the restrictions that are in place that need to be removed. By March 2003, all countries are to make their "offers", which detail which sectors / sub-sectors they are willing to open up, and under what terms and conditions. The negotiations are to be closed by 1 Jan 2019.

The GATS recognizes four modes of trade in services:

  • MODE 1 : Cross border - Services that are delivered to consumers in another country by a person sitting in the provider country. (E.g. Call Centres)
  • MODE 2 - Consumption Abroad. The service consumer comes to provider country to avail of service. (For example, a tourist; or an international ship getting repaired in workshop in provider country)
  • MODE 3 - Commercial presence. The service provider opens up a company in the consuming country. (For example, legal firm of Britain opens office in India and starts legal consultancy)
  • MODE 4 - Movement of natural person. Temporary movement of persons from provider country who go to consumer country for delivering services. (For example, computer software engineers from India going to USA on assignments. MODE 4 is of special interest to India)

GATS - Undermining of National Democratic Decision Making and Sovereignty

Under the GATS agreement, the country "committing" a service sector has to grant full access to its market to companies, firms and individuals of another country (the so called "Market Access"). It has also to ensure that it will not discriminate between national and foreign companies (the so called "National Treatment".) Further, any commitment given to one country will have to be given to all other WTO member countries. (The so called "Most Favoured Nation"). While GATS does allow for certain restrictions to be placed on all these three, in practice it is very difficult, and committing a sector under GATS means opening it fully.

In fact, the EC Requests are now pushing for removal of even the restrictions placed by India in its limited commitments made under the GATS in 1995.

Committing a sector also means that it is virtually impossible for the Government to revoke this later on. Thus, the GATS commitment will lock up the country's service economy to foreign participation, preventing succeeding Governments in taking policy decisions that they deem necessary in public interest.

The GATS allows the country making the commitments to put in place rules and regulations to implement national policy goals, "provided the relevant measures are compatible with GATS" (Quote from Frequently Asked Questions on GATS in "India and WTO", Newsletter of Ministry of Commerce, Government of India,). Indeed, Article XIV of GATS specifies that Members may take measures to "protect public morals or maintain public order" or "to protect human, animal or plant life or health", provided they are not "a disguised restriction on trade in services". Whether the measures are compatible with GATS or not, whether they are disguised restriction on trade in services or not, will be determined by the WTO and its mechanisms, not by the country. The WTO mechanisms have no provision for information to, access or intervention by citizens.

The Article VI of GATS, dealing with Domestic Regulation, aims to ensure that "measures relating to qualification requirements and procedures, technical standards and licensing requirements" for service providers "do not constitute unnecessary barriers to trade in services" and to ensure this, requires that "such requirements are inter alia……not more burdensome than necessary to ensure the quality of service". Again, domestic regulations could, if challenged, have to potentially go through the so called "Necessity Test" by which the WTO will determine if domestic regulation is really necessary and that it is not "more burdensome that necessary" - for trade - not for the citizens of that country!

Implications of EC Requests

The range of the sectors and sub-sectors requested to be opened is vast and it is not possible to present a comprehensive analysis of the impact in the short few days since the requests have been publicly available. We intend to carry out detailed analysis especially of the water and energy sectors. A few preliminary implications are being presented here.

The EC wants access to large chunks of the Indian service market. This will have a massive impact in terms of employment and transfer of payments outside the country. For example, EC wants Retailing to be opened up. This will open the way for huge shopping chains to enter the country, wiping out livelihoods of lakhs of small shop-owners and vendors. This is what has happened in Thailand after it liberalized its retail sector.

However, the most serious implications are likely to be in sectors like water, energy, biodiversity, tourism.

It should be pointed out that the EU countries have some of the world's biggest water companies - Suez and Vivendi in France, RWE in Germany, Thames Water in Britain (now taken over by RWE) and so on. So EC is extremely keen on the water supply market. Committing the water sector will mean effectively the privatization of water supply - at least the urban water supply.

All over the world, privatization of urban water supply has resulted in huge increase in water tariffs, which the common people have not been able to pay. This has resulted in cutting off of water supply in many cases. Excessively high tariffs have meant that people have had to pay over 25% of their earnings for domestic water supply. This has led to widespread resistance and opposition, forcing large number of privatization projects to be abandoned. In the process, however, privatization has locked local and national Governments agencies into massive debts, has destroyed efficiently working public systems and has eliminated space for participatory and accountable water supply systems.

In addition, privatization of water supply is invariably accompanied by the effective privatization of the water source - since a private company wants its source to be assured.

In India, where privatization of water supply has begun in a small manner (currently outside ambit of GATS), all these problems are being seen. In Chattisgadh, privatization of the Sheonath river for industrial water supply has deprived the locals of access to the river for fishing and for irrigation as the private company claims that it now "owns" that part of the river.

When water comes under the GATS ambit, the problems will be greatly aggravated. For one, GATS rules will heavily constrain the Government with respect to the nature and amount of regulation it will be able to place on the sector. Regulations imposed by the Government could face challenge from the foreign service providers in form of the necessity tests. Secondly, the GATS commitment will lock the Government into this policy. Right now, if it is found that the policy of privatization of water is not working, the Government will be able to change it. Once the sector is committed under GATS, revoking it will be virtually impossible - even if there are adverse public opinion and mass protests. It is more likely then, that the mass protests will be put down with increased repression and use of state power.

Thirdly, when ability of even the central Government to regulate the sector will be severely constrained, there will be little role for bodies like district panchayats, village panchayats, municipal bodies. This will strike a body blow at the democratic structure of our society, which envisages decentralization especially under the 73rd and 74th amendment.

All this will be applicable in sectors other than water also.

It has been well known that the EC requests would heavily involve water, and hence an international campaign has been active on this issue. Possibly in deference to this, the EC Request specifically mentions that the request "does not imply access to water resources". Yet, it is impossible to believe that once the market access is granted, the companies will not insist on access and even control on water resources. Indeed, the heading of the Sector is "Water Collection, purification and distribution services…". Collection is certain to include the water source, and will lead to establishment of control (if not "ownership") on the water resources themselves.

Opening up of the energy services is likely to have a similar impact. Allowing foreign companies into retail sale of wood, as asked for is also a very sensitive issue.

India's Offers

India has to make its offers by March 2003. While the contents of this offer are not known, Government of India has indicated that MODE 4 (its professionals going abroad for work) will be a very important aspect, especially for its "large pool of well-qualified professionals in the service sectors like computer and related services, education services, audio-visual services, accountancy services, construction, health…". India's request to the other countries are sure to have made unlimited and unrestricted access for its professionals as an important component. However, in order for other countries to accept this, India will have to give something in return. This "something" is most likely to involve two things (a) similar access to professionals of other countries into India and (b) opening up of its other sectors like water, energy, tourism and so on as asked for by the EC

No doubt, access for India's professionals to markets of other countries is likely to bring in benefits. However, in return, allowing professionals of other countries in India will have a big impact on employment here. Most important, in order to gain access for our professionals to other countries, India will have to concede access to crucial sectors like water, energy and so on. The privatization and liberalization of these sectors will profoundly and adversely affect the poorest and weakest sections most. In short, there is a real fear that India will try and get benefits for its comparatively small section of professionals at the cost of livelihoods and subsistence of millions of its poor citizens.

Make the Process Transparent

What is shocking is that this process that will have a far -reaching and vast impact on millions of our people is being conducted in complete secrecy. It is only the leaks of the EC demands that have allowed us to get a feel of what is at stake. It is therefore imperative that

  • Indian make public ALL the requests it has received so far from all countries
  • India make public its own requests to other countries
  • Carry out an extensive public debate and discussion on this, including in the parliament, state assemblies, district panchayats etc.
  • The public debate should also include public hearings where the common citizens can participate, apart from stakeholder consultations, media discussions, seminars and so on
  • Refuse outright the opening up of crucial and sensitive sectors like water, energy, tourism etc.
  • Protect and safeguard adequately the powers and role of local bodies in the planning and development of resources like water
  • Prepare its Offers in an open and transparent manner and after extensive public debate as above

Shripad Dharmadhikary
Swathi Sheshadri

Manthan Adhyayan Kendra
Badwani (MP)


Manthan Adhyayan Kendra is a centre set up to monitor, research and analsye water and energy issues with a focus on the implications of the liberalization, privatization and globalisation of the economy. It is located in the district town of Badwani in western Madhya Pradesh near the banks of the Narmada.

Please feel free to contact us for any further information at 07290-224 867 or by email.

You may also contact: Benny Kuruvilla, EQUATIONS, Bangalore,
Tel & Fax : 91.80. 5244988/5247127/5247128,
bennyk@equitabletourism.org
(Especially for tourism sector and GATS)


Manthan Adhyayan Kendra
119 Satpuda Colony,
Badwani (M.P.) 451 551
Ph: 07290-224 867 Fax: c/o: (07290) 223 467
Email: manthan_b@sancharnet.in,
shripad@narmada.org

GATSwatch is a joint project of Corporate Europe Observatory and Transnational Institute
Paulus Potterstraat 20, 1071 DA Amsterdam, The Netherlands