(EU) and the Common Market of the South (MERCOSUR)? - FDCL

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allowed by law to give preferential treatment to local suppliers and producers (“local
content”). A country which has signed the agreement can, according to the Mode 3
of GATS (“commercial presence”, cross-border supply of services), no longer make
any so-called “performance requirements” of foreign investors (like, e.g., the minimum
percentage requirement for employing the local workforce or for technology
transfers). Even environmental and social regulations of each member state run the
risk of infringing upon the NT principle.
In contrast to the GATT treaty, which was a so-called “top-down” agreement
(i.e., the rules apply automatically to all member states unless a country has explicitly
negotiated exceptions for some sectors in the form of so-called negative lists),
the GATS is a so-called “bottom-up” agreement (the rules apply if they appear in
the so-called “list of commitments” of the respective country). It is in particular this
“bottom-up”mechanism, which the WTO commonly quotes as an argument for the
democratic legitimacy of GATS: Democratically elected governments would in the
end decide which sectors in their country would be assigned to GATS and which
would remain under national sovereignty, i.e., “in the exercise of governmental authority.”
99
The problem in this case is the unclear definition of “in the exercise of governmental
authority” and secondly, the fact that everytime a (domestic or foreign) private
supplier competes with public services, the set of regulations under GATS can be
applied and with it the possibility of a legal complaint before the WTO arbitration
court.
Considering the rules under GATS, the danger exists, for example, in the case of
education, that a private school, which is mainly owned by a foreign investor, could
take legal action against the “market-distorting subsidies” of a neighboring public
school, even if the educational sector was explicitly excluded in the form of a negative
sector list: Even if the sovereignty clause within the GATS applies:
“Article I(3) of the GATS excludes “services supplied in the exercise of governmental
authority”. These are services that are supplied neither on a commercial
basis nor in competition with other suppliers. Cases in point are social
security schemes and any other public service, such as health or education,
that is provided at non-market conditions.” 100
The formulation “neither on a commercial basis nor in competition with other
suppliers” 101 is quite dubious. If a private school, mainly owned by a foreign investor,
99
http://www.wto.org/english/docs_e/legal_e/26-gats_01_e.htm.
100
http://www.wto.org/english/tratop_e/serv_e/gatsqa_e.htm.
101
See: Hartmann, Eva / Scherrer, Christoph: Negotiations on Trade in Services – The Positions of the Trade Unions
on GATS, in: Friedrich-Ebert Foundation, Occasional Papers No. 6, Geneva, May 2003, p. 12.