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"The System is always Fair", the Cat says to the Mouse

Behind closed doors, the WTO negotiated GATS, an agreement on liberalization of services. Health conglomerates all over the world can steal solvent patients. That is the warning. The existential necessity water could soon be much more expensive. This article is translated from the German in: DIE ZEIT, 2003.
"The System is Always Fair, the Cat says to the Mouse"

Insurance, Water and Health Care: 145 Countries argue over opening service markets

By Christiane Grefe and Petra Pinzler

[This article originally published in: DIE ZEIT 15/2003 is translated from the German on the World Wide Web,  http://www.zeit.de.]

In German repertoire cinema, the "very honored public" sees an irritating commercial. "The announced film must unfortunately be removed from the program" is seen in white letters on a black screen. "The film was financed with the help of public film promotion." Cut. "This represents a clear violation of the principles of free trade." Cut.

What is a violation of free trade? The cinema notice defines violation. The General Agreement on Trade in Services, GATS in short, "becomes effective on January 1, 2005." The future vision of the globalization-critical network Attac ends: "They see an actual blockbuster. "Good entertainment. Your WTO.", Hollywood Productions adds.

The message of the commercial is the fear of globalization critics: the final Disneyification of the world, the final selling off of public institutions. Behind closed doors, the World Trade Organization negotiated GATS, an agreement on liberalization of services. Health conglomerates all over the world can steal solvent patients. That is the warning. The existential necessity water could soon be much more expensive. Migrant workers from Bangladesch could underbid low-wage workers from Portugal and Poland. "Stop GATS!", the globalization critics urge. Demand a moratorium for the complex negotiation.

Are these only scare tactics or a real perspective? At the beginning of this week, the turbulent phase of the most controversial themes of the current round of world trade began. Liberalization offers and demands for the service sector appeared since March 31. Governments all over the world will judge in other countries. Compromises will be negotiated. In September, the ministers must negotiate in Mexican Cancun. The new GATS agreement should be signed by 2005.

"This will be a quick success", hopes Claudio Murri from the EDS technology firm. In the present economic depression, the economy needs signals for better times. The liberalization of the service sector could offer a glimmer of hope. Trade experts are not alone with this expectation. American postal services like UPS and German insurance companies support this appeal just like the Dutch supermarket chain Royal Ahoid and the French water multinational Vivendi. Pressure on politics.is applied by powerful associations.

Services are a giant business. Last year alone, services to people, machines and the environment amounted to $1.34 trillion. In OECD countries, this sector constitutes 60 percent of the gross domestic product and employs two of three employees. Europe now exports services worth $300 billion in purifying waste water, selling insurance companies and operating telephone networks, However the share of services is limited to only a fifty of all world trade. Tariffs and national conditions inhibit growth. If they were dismantled, a profit of $130 billion could arise according to an OECD study. No wonder that all trade barriers are quickly cleared away in the blossoming dreams of liberalization fans.

This is more simply dreamt than done. Every economics student in the first semester realizes the advantages of border-crossing trade with cloth or wine. However some services are not commodities like others because they are based on traditions, values and existential necessities. Should education and the work of a teacher or health care in a hospital be exposed to market forces? Or "public goods" like water? The functions of the state are traditional because quality and just distribution should be guaranteed for everyone.

Private clinics and schools always existed as limited and controlled in a publically financed structure. GATS could undermine this structure in the long-term. GATS requires equal treatment of all public and private businesses in incentive funds and subsidies. All those state functions practiced "in exercise of sovereign authority" and without competitors are withdrawn. "Where are there still areas where no private persons compete?" Barbara Unmussig from the Heinrich Boll foundation asks skeptically.

Axel Gerlach knows about the explosiveness of this theme. The German state secretary who organized many rounds of trade in the economics ministry says that unrestricted liberalization is in no way the goal of the German government. Corresponding to the inner logic of GATS, the agreement signed by the German government and more than 140 other countries in Marrakesch as part of the 1995 world trade agreement urged the "progressive liberalization" of all service markets. Global trade should be continuously expanded with insurances and social services in more and more countries in twelve fields from transportation to tourism, from postal- and messenger services to energy supply, in a market without borders.

"No", the state secretary insists. What the EU (European Union) commissar Pascal Lamy sent to Geneva as a possibility in the continuing round of GATS is actually miles behind the free spaces long allowed in the common domestic markets of European competitors. Limited foreign businesses should be permitted in transportation, messenger services and airport ground personnel for example. Skilled labor and executive personnel may also have a restricted access to the European market.

No Black Screens in Europe's Movies

The most sensitive areas of education, health care and audio-visual services are explicitly left out. Thus international chains of clinics are not possible. Attac spokesperson Oliver Moldenhauer made a retreat at a discussion session. Confronted with an Attac brochure that asks: "What if a cigarette company takes over an elementary school?", he admitted: No one is presently urging this. But "this could happen in the future."

What should we say about education? The inscrutable rounds of trade have sown mistrust. Even the economics ministry emphasizes that many things could change "at any time". In the turbulent phase, the negotiators in Geneva haggle vigorously. They mix offers from agricultural negotiations with demands for service liberalization and at the end present a whole package whose meaning must be slowly decoded by the experts.

No wonder that Michael Schoneich, leader of German communal enterprises, is nervous. He fears that the territorial monopoly of the communes will be undermined. On the subject of water, the economics ministry and the EU commission suggest "movement is still possible". The situation is contradictory. On one side, the EU doesn't offer market access to any country. On the other side, the same commission argues in close discussions with European water corporations in the WTO where water supply was previously included in the category environmental services. Is there a supply poker for interested industrial countries in the back of the house?

"The WTO doesn't force market opening on anyone"

Brussels declares this new business field to be a political charity for the third world and presses the third world to open their water economy to foreign corporations. Many6 countries lack the money to publically finance the necessary infrastructure. This was the substantiation. Why not leave these functions to private persons?

In some privatization cases, water became a luxury. Non-governmental organizations fear that GATS will force the same technologies, the same systems and the same paths of development on very different countries. Whoever once accepted market opening with GATS must pay massive compensations for a reversal.

"The WTO forces no one to open service markets for foreign competitors", declares WTO head Supachai Panitchpaktai. Every country decides freely whether foreign suppliers are allowed in certain sectors and with what restrictions and conditions. The European parliamentarian Erika Mann even regards GATS as the "fairest form of negotiation" since it includes an obligation to mutuality. When Germany opens transportation, then Gabun in a countermove opens telecommunications. The changes don't improve conditions. More possibilities for national peculiarities should be allowed, Mann urges.

"They are not forced. We coerce no one", the German economics ministry protests. However observers of the trade rounds know the reality. At the end, pressure is exerted according to the motto: Give me and I will give you. This is not always injurious. Europe must be able to resist indecent or immoral requests. Strong countries can control liberalization and use it to their advantage. What about the poorer countries?

"We negotiate very fairly, the cat said to the mouse", as Peter Wahl of the third world organization Weed explained. Mike Waghorn from the Public Services International union complains: "First, they force countries through the WTO to liberalizing. Then the World Bank and the International Monetary Fund press to privatizing." The journal New African calls this "open extortion".

Are these only conspiracy theories? Despite good intentions, industrial countries have not managed to improve the image of the rounds of world trade. The odor of selling off the poor is always attached to that image. EU trade commissar Pascal Lamy admonishes member governments again and again: "If we want to improve our own access to foreign markets, we cannot keep our protected sectors from the sunlight." Business still clings to mutuality.

The "dismissals of workers", political dynamite at least for Europe, are hidden behind the technical jargon. Since many poor countries can export well-trained elites and not technologies, they hope for technologies from GATS. "Without concessions in this area, developing countries cannot draw any appreciable advantages from the negotiations", Indian trade expert Bhagirat Lai Das recently wrote to the negotiators of the poor countries.

Foreigners to Sinai and Foreign Travel Agents to Grenada

Unions in industrial countries make demands. Therefore the EU sets narrow limits to these demands: limiting residence to a few months every year, defining the circle of persons as narrowly as possible, setting visa restrictions and a "market test" that always has a negative effect for the affected branches and then bolting the door.

23 states including many threshold countries have long aimed GATS demands at the EU while GATS urges liberalization steps in 109 countries. This shows who has the greatest power in these development rounds. Gabun should open its telecommunication market to European businesses. El Salvador should allow foreigners in container transport, Egypt should permit foreign property owners in new hotels in the Sinai and Grenada should be open to foreign travel agents. Conflict exists regarding the demands for opening financial markets. The mammoth banks have placed many ideas on the EU wish list.

"Without fulfilling their promises, they force their interests on us", says Aileen Kwa. The scholar from Bangkok draws a sad conclusion in a study for the third world organization Focus on the Global South. "Many developing countries are very nervous that their little service industries will be soon handed over to competition from the North." They fear that new rules protecting direct foreign investments and new rules on international competition will further limit their possibilities.

In addition, the interests of the poor states at the WTO in Geneva are not represented as well as those of the rich. Developing countries often can only afford one representative and then face a battery of well-trained trade lawyers from Washington and Brussels. Who would not surrender? Critics of the trade rounds like Peter Wahl from Weed urge "Fast speed. Complexity out and democracy in" given the labyrinth regulations of the GATS agreement, the ambiguities and time bombs in small print.

Something must change, India's former WTO negotiator Bhagirat Lai Das insists. "In the past, industrial countries obtained firm irrevocable promises from developing countries. They only promised their best efforts." While Lai Das doesn't threaten, one conclusion resounds: If the rich oblige the weak with GATS to liberalization while screening themselves, they destroy their own credibility. They play into the hands of the globalization critics with new arguments against worldwide liberalization. That would be the beginning of the end to every trade round.


WTO

The War hinders a Just Globalization. The North only seeks its own Advantage in World Trade

By Christian Ternbrock and Wolfgang Uchatius

[This article originally published in: DIE ZEIT 15/2003 is translated from the German on the World Wide Web,  http://www.zeit.de.]

The Iraq war is not yet ended but losers are already marked out: people who were never in conflict, milk producers in India, small farmers in Burkina Faso and Aids sufferers in Uganda... The war against terrorism begins "by allowing the poor of the world to share in the growth of prosperity", the American president George W. Bush said at that time. Representatives of 142 states met at the World Trade conference to demonstrate a new solidarity of North and South. In Doha in the Persian Gulf, they resolved to give new rules to world trade so the developing countries could profit more strongly from globalization.

Today in Doha the generals draft their combat orders. In Geneva where negotiations take place at the headquarters of the World Trade Organization (WTO), the diplomats count the setbacks.

For a long time, the industrial countries thought first of themselves. Patent protection is one example. America was the only WTO member to block an agreement providing poor states with inexpensive medicines. Agriculture is another example. The negotiators in Geneva were to agree on a proposal to reduce agricultural tariffs and subsidies, the basis of a world trade that is profitable for the developing countries. The date passed without an agreement.

Is this only a familiar show battle in political negotiations that ends in compromise? Optimists believe this. Despite all the conflicts, the negotiations are on a good way as the European trade commissioner Pascal Lamy said in Brussels.

Or are blocking and breaking the first collateral damage of the Iraq war? Will the arguments between America and continental thwart the WTO negotiations and the hope for a more just globalization? The pessimists fear this. Believing that the world situation has no influence on the negotiations is na´ve, says Walden Bello, leader of the third world organization Focus on the Global South in Bangkok. "National interests have top priority", says Thomas Straubhaar, president of the Hamburg world economy archive.

Nowhere is this clearer than in the conflict around patents. In Doha, Europeans and Americans seemed ready for compromise. They agreed to modify the so-called TRIPS agreement that granted a 20-year patent protection to inventors of medicines. Other countries are prohibited from importing cheaper versions of very expensive medicines. The originals are hardly affordable for many countries of the third world. The TRIPS agreement allows them to manufacture imitations which doesn't benefit countries like Uganda, Angola or Mali. They have millions of Aids- and lung patients but no pharmaceutical industry. Therefore they depend on importing cheap imitations. Around 15 million people worldwide die of curable sicknesses every year.

In Doha, the North and the South announced a solution. "At that time, we regarded this as a genuine progress", said Thomas Luppe of the relief organization Doctors without Borders. However the regulation now breaks down in the US which sees the profits of American pharmaceutical companies endangered by trade with copied medicines.

The incomes of American farmers are also at President Bush's heart. Only a few months after the Doha conference, the American Congress resolved to increase state subsidies for American farmers around 80 percent. These subsidies weren't insignificant. Around $180 billion should be poured out for soybeans, rice, peanuts, cotton and wheat. Bush moves entirely in the tradition of old Europe. According to the calculation of the relief organization Oxfam, the European Union supports every cow at the cost of two dollars a day. Thus European cattle receive more than what keeps half of the world's population alive every day. Europeans with their grants then cheaply export milk powder to Africa or to the Caribbean where local farmers suddenly lose their customers. The EU imposes a tariff of 150 percent on foreign butter.

Every year the farmers of the South lose $26 billion through the agricultural policy of the North, the International Food Research Institute in Washington estimates. In Doha, the government representatives of industrial countries agreed to reduce import restrictions and subsidies. However Europe refused WTO diplomat Stuart Harbinson's recent proposal to reduce tariffs on agricultural products around 60% and cut in half export assistance in the next five years.

Agriculture is "the key theme of the negotiations", the Thai WTO chief Supachai Panitchpakdi declared. Compliance of the South is actually impossible without offers of the North like opening markets for services so important to the industrial nations.

Americans and Europeans - the elephants of world trade to whom 60 percent of the global exchange of goods and services falls - must agree on concrete concessions. This will make a success of the world trade round "much more likely", the American trade commissioner Bob Zoelick said in the British Economist. This was in December before the fury about the supposed unsolidarian attitude of Europeans swelled. In Europe, there is indignation about America's supposed ruthless war policy. An agreement on trade policy is now more difficult than ever. "The atmosphere between the blocs is poisoned", says Clyde Prestowitz, the head of the Washington Economic Strategy Institute (ESI).

This poisoning could strengthen those voices in the US that see only annoying hindrances in the WTO - and in the UN and other multilateral organizations. "This administration has no regard for international agreements", Jens van Scherpenberg, America expert of the Berlin foundation Science and Politics, judges the Bush administration. "The WTO doesn't fit in their way of thinking and the world round of trade isn't their interest any more."

Instead the American government relies increasingly on direct negotiations with individual countries. With a "coalition of the willing", George W. Bush marched to the Iraq war. When America speaks with states like South Africa, Morocco or Chile about its trade agreements, this is called "working with willing partners" (Bob Zoelick). The interests of the US can be enforced more easily in one on one encounters than in multilateral negotiations.

The WTO consists of 100 developing countries of the 145 members. To gain this arithmetical majority on their side and to demonstrate the unity of the North and the South, the diplomats of the industrial nations described present negotiations as a "development round".

A year and a half later, Supachai Panitchpakdi fears that this term "is becoming a hollow phrase".

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