General Agreement On Trade in Services - Historical Background

Historical Background

While the overall goal of GATS is to remove barriers to trade, members are free to choose which sectors are to be progressively "liberalised", i.e. marketised and privatised, which mode of supply would apply to a particular sector, and to what extent liberalisation will occur over a given period of time. Members' commitments are governed by a "ratchet effect", meaning that commitments are one-way and are not to be wound back once entered into. This reason for this rule is to create a stable trading climate. However, Article XXI does allow Members to withdraw commitments, and so far two members have exercised this option (USA and EU). In November 2008, Bolivia notified that it will withdraw its health services commitments.

Some activist groups consider that GATS risks undermining the ability and authority of governments to regulate commercial activities within their own boundaries, with the effect of ceding power to business interests ahead of the interests of citizens. The concerns of these groups would seem to be borne out by the facts: witness the example of the UK and the now-rapid privatisation of all public services — health care, police, education — following the earlier privatisation of telecoms, railways, air traffic control, and so on In 2003 the GATSwatch network published a critical statement which was supported by over 500 organisations in 60 countries. At the same time, countries are not under any obligation to enter international agreements such as GATS. For countries that like to attract trade and investment, GATS adds a measure of transparency and legal predictability. Legal obstacles to services trade can have legitimate policy reasons, but can also be an effective tool for large scale corruption (De Soto, Hernando. The Mystery of Capital: Why Capitalism Triumphs in the West and Fails Everywhere Else.)