Fact Sheet 2: Download PDF version

The General Agreement on Trade in Services (GATS) is one of 18 trade agreements administered and enforced by the World Trade Organization (WTO). The GATS was established in 1994, and negotiations to expand the agreement were launched in 2000.

What is at stake?

In the past four years, the WTO set many deadlines for new offers to be made in service sectors that have yet to be privatized by individual countries. These deadlines were meant to intensify the pressure on all countries to achieve a “substantive outcome.” However, deadlines passed and, although more offers trickled in, proponents of service liberalization, including Canada, considered them insufficient and disappointing. In the lead-up to the Hong Kong ministerial meeting, two new methods of negotiation, known “benchmarks” and “plurilaterals” were proposed to accelerate liberalization and privatization. Both proposals ran counter to the principles and structure of the GATS, which enables countries to select individual services that they want to commit – or not. For the moment, only the plurilateral approach has been retained.

What is contentious?

The GATS is mandated to restrict government actions in regard to services, through a set of legally binding constraints backed-up by WTO-enforced trade sanctions. The mandate is clear and ambitious. It aims to remove restrictions and provide “market access” to critical areas like health care, dental care, child care, elder care, education, libraries, culture, social services, water services, postal services, food safety and environmental services – to name but a few. The GATS interferes in the exercise of governmental authority by eliminating policies that conflict with WTO rules. This means that the responsibility of balancing the public interest with trade considerations is taken away from elected officials and transferred to WTO panels concerned exclusively with trade.

1. Privatization and deregulation.
   Commitments made under the GATS are virtually irreversible. Article XXI states that countries can withdraw a commitment three years after it has entered into force but, in order to do so, they must negotiate substitute commitments subject to the approval of all WTO members. If not, they must compensate all WTO member countries.
   
   
2. National sovereignty and local control.
   Negotiators are drafting new requirements under the GATS that would mean that governmental regulations on services would have to be “no more burdensome than necessary.” In other words, governments would have to prove to the satisfaction of the WTO that their regulations interfere as minimally as possible with commercial interests. The GATS negotiations to deregulate services pose particular problems for Canada, where most services fall under provincial or municipal control. Decisions made by these governments would be restricted or eliminated by commitments made to the WTO by the federal government.
   
   
3. Ongoing expansion.
   The agreement commits governments to “progressive liberalization.” Therefore, even if a country initially limits its commitments under the GATS, it will eventually have to liberalize all sectors. The U.S. and Europe have already indicated that they expect countries to remove restrictions “across all service sectors.” For developing countries and for small economic powers like Canada, the pressure from the U.S. and Europe will be hard to resist.
   
   
4. Public services.
   Article I:3 of the GATS excludes “services supplied in the exercise of governmental authority.” However, Article I:3(c) goes on to define such services as “any service that is supplied neither on a commercial basis, nor in competition with one or more service suppliers.” In effect, what would seem to be a very large exemption is really very narrow, given the trend in Canada toward commercialization, public-private partnerships, and the substantial amount of privatization that has already taken place in this country, and around the world.