Why Local Governments Should Be Concerned

The General Agreement on Trade in Services is an existing World Trade Organization agreement that is currently being renegotiated to expand its impact. Two proposals currently on the negotiating table are particularly significant for local governments:

• The European Commission’s request that Canada open up its water supply services to create business opportunities for European water corporations;
• The targeting of “zoning and hours of operation” as examples of what will have to be limited to only what is “necessary”.

Federal trade officials have dismissed the concerns raised by local governments, denying that local government authority is at risk. However, Canada has already lost a number of WTO cases - challenges to the Auto Pact, rules on generic drugs, dairy marketing boards, Canadian magazine subsidies - due to failure to anticipate the full consequences of the legally binding obligations Canada negotiated.

Trade officials are currently trying to convince local governments that they will be unaffected by the GATS. They make three major claims:

Claim #1) Local government service delivery will not be jeopardized because there are exemptions in the GATS.
However, all of the terms exempting particular kinds of service delivery are not defined and negotiators do not agree on what they mean. No-one can say what is definitely exempt, and trade officials cannot point to any official WTO document where this has been clarified by negotiators. For example, there is no agreement on whether contracting out of services is covered by commitments governments make. It is being left to a WTO panel to decide in the event of a dispute.

Claim #2) The GATS does not limit local governments’ ability to regulate.
Negotiators are discussing new provisions that would oblige governments to regulate only when “necessary.” Local government rules dealing with “zoning and hours of operation” are explicitly being targeted as barriers to trade that need to be restricted. Negotiators are considering WTO imposed regulatory “reform” that would constrain what local governments are permitted to do, regardless of the authority local governments have under Canadian law. Without question, if the GATS is amended to include these new restrictions on regulation, local governments will have to change how they operate.

Claim #3) The GATS allows countries complete flexibility to liberalize whatever sectors they choose - no country has to deregulate or privatize a sector if they do not want to.
The GATS is supposed to allow countries to liberalize at their own pace. But while WTO members are theoretically free to make any commitments they want in this round of negotiations, the new round was launched due to the dissatisfaction from the major European and American transnational service companies with the existing levels of commitments. In their view, when it was signed in 1994 the GATS did not do more than lock in place the liberalization governments had undertaken voluntarily. They wanted a new round of bargaining process to achieve more, to get governments to commit sectors they had not liberalized. That is why, for example, Canada is now facing European requests to open up all water services through the GATS.

The following pages document with original WTO sources the real jeopardy local governments face in the GATS negotiations.