An op-ed published in the Globe And Mail by WTO Director General Mike Moore.
The world needs an international agreement on services - not rhetoric from merchants of fear about threats to national autonomy, says WTO boss MIKE MOORE MIKE MOORE
Wednesday, February 21, 2001
A monstrous plot is afoot. Public schools and hospitals are under threat. So is the right of governments to set standards that protect our health and our environment. The World Trade Organization is trying to resurrect the ill-fated Multilateral Agreement on Investment (MAI). It must be stopped before it's too late. The WTO's critics have always taken liberties with the truth. But the lies and distortions they are peddling about the WTO's services agreement, known as GATS, are truly astounding. Freeing up trade in commercial services -- everything from telecoms and tourism to finance and freight transport -- offers huge benefits for every part of the world. That is why the WTO's 140 member governments are currently negotiating further services liberalization in Geneva. Those negotiations, and the WTO's existing servic Commercial services account for three-fifths of the world economy, but only a fifth of world trade. Clearly, there is huge scope to expand services trade. Just as liberalizing trade in goods has boosted economic growth over the past 50 years, so liberalizing trade in services could bring huge benefits over the next 50. Allowing foreign suppliers to compete with domestic ones lowers prices, improves quality and increases choice.
For developing countries, it also means access to vitally needed technology and capital investment in underdeveloped infrastructure. An efficient service sector is also the backbone of a successful economy: Without efficient finance, telecoms and transport, a country cannot competitively produce textiles, tomatoes or whatever. A bonus of liberalizing at the WTO is that governments can credibly commit to keep their markets open. That provides stability and predictability for business, which encourages trade The GATS is an incredibly flexible agreement. It spells out a few general obligations, notably that countries must not discriminate between foreign suppliers. But otherwise, governments have huge scope to choose the areas to which they want to commit themselves. They can choose the sectors they want to agree to open up to foreigners. (Every WTO member must have a services schedule, but schedules can be as short as they want: Some cover only a small part of one sector.)
In the sectors in which they choose to make commitments, governments can set limits on how far they want to open their markets to foreigners, and the extent to which they want to treat foreign suppliers like domestic ones. Governments can also limit their commitments to one or more of the four "modes of supply" through which services are traded. For instance, they might allow cross-border software trade, but prevent a foreign software company from setting up shop in their domestic market. Or they might enc This is hardly an MAI Mark II by the back door. Unlike the mooted MAI, the GATS is not a set of rules about foreign direct investment (FDI). True, governments can, if they want to, use the GATS to attract FDI by guaranteeing to potential investors that they will not suddenly change the rules of the game. But multinationals or other service suppliers cannot simply go into any WTO member country and buy anything and everything.
Member governments decide which services foreigners are allowed to provide and under which conditions. Nothing stops governments from favouring domestic suppliers of a service over foreign ones, if they want to. Of course, most governments now welcome FDI with open arms rather than trying to protect themselves from it. (It's the lack of investment that's the problem for many countries: Singapore gets more investment than all of Africa.) But the GATS allows governments to do as they see fit. It bears mentio It is also nonsense that the GATS undermines governments' ability to set standards to protect the public or the environment. The right to regulate the supply of services is one of the basic principles of the GATS. Foreign suppliers have to comply with all domestic regulations; the rules do not have to be modified for their benefit. Liberalization means allowing foreign suppliers to compete; it does not imply deregulation.
Moreover, governments with services commitments can take any measures necessary to protect human, animal or plant life or health, so long as they do not constitute unjustifiable discrimination or disguised protectionism. This overrides any other provision in the GATS.
Perhaps the most damaging claim is that the GATS threatens governments' ability to provide the public services that we all cherish, such as schools and hospitals. The GATS, it is said, will force governments to privatize public services and open them up to foreign competition. That is just not true. The GATS explicitly excludes services supplied by governments. True, governments can agree to allow foreign suppliers to provide private health care or education. But that is not the same as privatizing public Even if we only reduced barriers to trade in services by one-third, we would add $390-billion to the world economy, according to a study by Robert Stern of the University of Michigan. That means more jobs, higher living standards and more revenue for governments to spend on health, education and pensions. It is too big a prize to let slip because of misplaced fears about the WTO's services negotiations. Mike Moore is director-general of the World Trade Organization.:
