REPA Booklet - Stop Epa

14
Capturing the ACP’S Services
What does ‘trade in services’ mean?
Buying and selling services – ranging from banking, telecoms and hotel stays to healthcare, schooling and
cultural performances. International trade in services means the buyer and seller come from different countries.
In most services where there is big money to be made, the seller is a transnational corporation from a rich
country. They have the capital and technology, the global marketing capacity, an educated workforce and size
to swamp many smaller, especially local, service providers. Poorer countries (like the Pacific Islands) have
limited services ‘markets’ that are generally not attractive to transnational companies.
How do services fit into a trade agreement?
The main rules are found in the General Agreement on Trade in Services (GATS) at the WTO, although some
regional and bilateral agreements now go much further. Governments promise to let foreign firms invest in a
particular service, or supply that service across the border (say by Internet), or send people temporarily to the
country to provide the service (engineers, tour guides), or let their own people travel overseas to ‘consume’ the
service (for surgery, study or a holiday). Governments also promise not to discriminate in favour of local people
who supply those services or to regulate the services in a way that unnecessarily impede foreign firms. When
governments introduce social, cultural or environmental policies that interfere with these commitments, they can
face trade sanctions. These rules potentially cover most public services, unless they are run as a government
monopoly that has no commercial dimension (such as school fees or doctors fees).
“As long as the wider
impact of EPA
provisions on
liberalisation of
services and
investment is not
assessed and
publicly discussed,
they should be
excluded from EPAs.”
(Vander Stichele,
SOMO, 2004)
Are all services automatically covered?
No. Governments are asked to commit specific services to these rules for the indefinite future. They can hold
back any services they think might become vulnerable to foreign control. But it is almost impossible to predict
what the effects might be – recently, Antigua successfully complained that a ban on Internet gambling breached
the US commitments under the GATS, despite the US saying it never intended to make such a commitment.
Is an Economic Partnership Agreement required to include ‘trade in services’?
No. In Article 41 the European Commission and ACP States agreed
on the objective of extending under the economic partnership agreements, and after they have
acquired some experience in applying MFN (non-discrimination) treatment under the GATS, their
partnership to encompass the liberalisation of services.
Most ACP States have made very limited GATS commitments so they could argue for a lengthy delay. Pacific
Island states that are not members of the WTO and have no services commitments in any other agreements
could delay indefinitely! But the Commission insists there is a commitment to negotiate. It initially wanted to begin
by 2006 and complete the negotiations in 2007, allowing some scope for delay. Now the ACP and European
Commission will decide on the starting date during the 2006 review. Some may have already begun by then –
for tactical reasons, the Pacific Islands have identified services as a priority for negotiation.
Why would ACP States want to include services in an Economic Partnership Agreement?
The standard argument is that foreign firms will be more willing to invest in ACP countries if they have guarantees.
Their presence will bring competition, increase efficiency, improve the infrastructure for the rest of the economy,
reduce costs to consumers and bring technology and know how that can be passed on to locals. The European
Commission argued during Phase 1 that services negotiations
represented a not-to-be-missed opportunity for the ACP countries, which now had an occasion to
use gradual services liberalisation as a means to foster the development of their own services.
Is that true?
There is no empirical evidence that making commitments on trade in services attracts any more foreign investment.
Foreign firms invest – or don’t invest – for diverse reasons. In ACP countries factors of size, poverty, remoteness,
local education levels and lack of support services are usually much more important. When foreign firms do
invest, they are often picking over the privatisations. Lack of effective regulation encourages them to make quick
profits then move on to new pastures, leaving the government to pick up the pieces.
A People’s Guide To The Pacific’s Economic Partnership Agreement 31