The idea of ‘Trade in services’ is an artificial creation of the late 1970s and 1980s, designed to bring the social and public phenomenon of services under international ‘trade’ rules that would work for corporations. The big services corporations of the time– airlines, finance, telecommunications, etc – developed and promoted the idea as they sought to shape a globalised economy.
They got their way with help from the US Trade Representative, and the rich countries in the OECD. The US insisted on the negotiation of new ‘trade’ rules that became part of the World Trade Organization (WTO). The General Agreement on Trade in Services (GATS) entered into force in January 1995, under which countries would promise to create open-ended markets for their services and lock them open to transnational corporations (TNCs), abandoning support for those who provided services for their local and national communities for economic and/or social purposes. The US wanted GATS to go even further, and cover all investment, but India and Brazil said no. Instead, the agreement was designed only for the services corporations.
The ‘international trade’ in services is the foreign supply of a service to local users, whether through foreign investment or from across the border. The other form of foreign supply of a service - people travelling to another country to deliver a service - is only considered ‘trade’ when it involves elites, such as professionals or executives working for TNCs. In theory, temporary migration for remittances also qualifies, but in practice, this is relegated to an immigration issue.
Over time, services have become the largest part of countries’ economies, and largest source of employment. They are dominated by TNCs that control the infrastructure of finance, communications, transport and more recently by digital technologies, platforms and interfaces. Those TNCs are the beneficiaries of governments’ trade in services commitments to liberalise their markets, remove restrictions on foreign investment, and adopt light handed regulation, all of which further consolidates economic and strategic power in the global North.
The GATS, and greatly expanded subsequent versions in free trade agreements (FTAs), required a fundamental rethink of services. Sanitation, tourism, broadcasting, finance, retail, telecommunications, transport, entertainment, healthcare, education, even lawyers and accountants, are an integral part of people’s daily lives. People don’t think about services as commodities that are bought and sold in markets like a can of sardines. Services are hugely important as relationships, sources of jobs, transmitters of culture, and as public goods that central and local governments provide for their people’s wellbeing. Yet trade in services agreements reduce them to tradeable commodities in lightly regulated markets.
That aligned perfectly with the neoliberal agenda, whether it was adopted voluntarily by OECD countries or imposed on the global South. Trade in services agreements don’t formally require countries to privatise their services – except for the mainly very poor countries that joined the WTO later and often promised to privatise as part of the price for entry. The combination of competitive services markets that operate on purely commercial, profit-focused criteria, and pressures for governments to reduce the size, capacity and cost of the state, achieves the liberalisation of services anyway. Privatisations, reducing restrictions on foreign investment, and signing away the rights to give preferences or supports for domestic services suppliers, let the TNCs cash in.
The corporate power grab through the guise of trade in services has been resisted from its inception, both by countries of the global South and by internationally coordinated national campaigns, with considerable success.
For the global South, the GATS was a way to lock in the deregulation, privatisation and foreign control of their services sectors that structural adjustment programmes the IMF and World Bank had imposed. Many governments bitterly opposed it. During the Uruguay Round of negotiations when the GATS was negotiated, they fought to limit its scope to the sectors governments would agree to commit and to secure development flexibilities. Although the rhetoric about promoting development has never been delivered, the structure of positive list schedules of commitments and limits on future negotiations have provided tools for staunch resistance to its expansion in the WTO, led by South Africa and India, and largely enabled developing countries to hold the ground during the Doha round.
The patron states of the services TNCs, led by the US and Japan, with support from other neoliberal devotees such as Australia, New Zealand, Chile and Singapore, tried to bypass these obstacles in various ways. As the ‘Friends of Services’, they tried to negotiate in plurilateral groups to build a critical mass and pressure developing countries to expand their commitments and the rules. When that failed, they formed the ‘Really Good Friends of Services’ and began negotiations for a Trade in Services Agreement (TiSA) on the margins of the WTO, with the aim of exporting it back in. But that also failed, because the governments of the rich countries could not agree among themselves.
Meanwhile, the web of rules and obligations was expanding through bilateral, regional and mega-regional free trade agreements. The positive list approach, which allowed countries some control over their exposure to the rules, was replaced by negative lists where governments had to state explicitly what measures or sectors would not be covered i.e. liberalised. One of those two standard annexes still limited future options, by imposing a standstill that prevented the adoption of rules that were more restrictive of corporations and a ratchet that automatically locked in any new liberalisation. Negative lists futureproofed the rules for the corporations, ensuring that new technologies and services benefited from the rules.
Some of the new mega-agreements, such as the Transatlantic Trade and Investment Partnership (TTIP), the Trans-Pacific Partnership Agreement (TPPA) and the Canada EU trade deal (CETA) added new rules to the mix. The most potent were designed to empower Big Tech corporations to operate globally in an almost regulation-free zone. Those rules then went full circle as a breakaway group of countries launched negotiations on ‘electronic commerce’ in the WTO.
International people’s campaigns to stop the GATS, TiSA and the mega-regionals have been a constant thorn in the side of trade in services negotiations over all this time. There have been many successes. Leaked texts broke down the secrecy of negotiations and forced governments, and the WTO, to defend themselves. Rich countries were exposed as demanding developing countries open their water and other public services to TNCs. Trade unions mobilised nationally and internationally to defend public services, whether in education, health, local government or the environment. Union confederations of workers in private sectors, such as food, transportation, finance, mining, communications, highlighted the ‘servicification’ of their sectors, bringing them under the corporate trade rules. Anti-poverty campaigners, indigenous Peoples, consumer advocates, health activists, among others, broke down the barriers to entering the ‘trade’ debate. Activists educated themselves so that they could lead debates and force negotiators to defend themselves, and explain to their legislatures what was happening behind their backs.
As the corporations and their patron states keep coming back with new ways to consolidate and expand their grip on our economies, jobs, lives and ecosystem, we need to update our knowledge, rethink our strategies and renew our determination. The COVID-19 pandemic provides the latest challenge and opportunity to demand an end to neoliberal globalisation and to develop new global and national norms that put social justice at the centre of how we think about and regulate our services.
Contributed by Jane Kelsey, Professor of law, University of Auckland
Photo: Rob Beechey/World Bank (CC BY-NC-ND 2.0)
last update: May 2020
CSI is the leading US business organization dedicated to the reduction of barriers to US services exports, and to the development of constructive domestic US policies, including tax policies, that enhance the global competitiveness of its members. Website covers bilateral FTAs.
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