European Commission:
asks for sweeping opening up of india's service economy.
OPENING THE FLOODGATES
European Commission asks for sweeping opening up of india's service
economy.
Leaked Requests Under The WTO's General Agreement on Trade in
Services (GATS) Negotiations Show EC Demands for Opening Up of India's
Construction, Water, Energy, Financial, Tourism and other Sectors.
The European Commission (EC), acting on behalf of the 15 countries
of the European Union, has asked for sweeping, extensive and
practically unconditional opening up of India's service economy to
EC companies, firms, agencies and individuals. In its "requests"
made to the Government of India under the ongoing negotiations for
the expansion of the World Trade Organisation's (WTO) General
Agreement on Trade in Services (GATS), the EC has demanded virtually
unlimited and unconditional access to service sectors like urban
water supply, sewage and waste water service; energy distribution
services including oil, gas and electricity; retail sale of fuel oil,
bottled gas and wood; postal services; wholesale and retailing;
construction of roads, highways, bridges, dams, buildings etc.;
tourism; rail and road freight services; financial services and many
others.
As the service sector now accounts for 49% of India's GDP the EC
requests amount to an attempt to completely dominate the country's
economy.
It may be pointed out that under GATS rules, if India accepts EC
demands, then it will have to provide the same access to these
sectors to all the countries that are WTO members.
The EC requests were made to the Government of India in July 2002,
but have been kept secret from the people of India. Even today,
it is only a leak that has enabled the people of India to have
access to these demands. Earlier in this week, the demands of the
EC to 109 countries were leaked out, making them available for
the first time to common citizens.
The Government of India is to make its "offers" by March 2003.
The GATS - and the "Requests and Offers"
The GATS - General Agreement on Trade in Services - is that part of
the WTO which deals with services (as against goods). GATS was a
part of the WTO agreement signed in 1995. Since 2000, the process
of expansion of GATS has started (the so called GATS 2000 round).
This complex process is to be undertaken by means of a "Request and
Offer" method. Under this, by June 2002, all countries were to make
their initial "requests" to any other WTO member country. The
Requests detail the sectors and sub-sectors that the requesting
country wants the other country to open up, and the restrictions
that are in place that need to be removed. By March 2003, all
countries are to make their "offers", which detail which sectors /
sub-sectors they are willing to open up, and under what terms and
conditions. The negotiations are to be closed by 1 Jan 2005.
The GATS recognizes four modes of trade in services:
MODE 1 : Cross border - Services that are delivered to consumers
in another country by a person sitting in the provider
country. (E.g. Call Centres)
MODE 2 - Consumption Abroad. The service consumer comes to provider
country to avail of service. (For example, a tourist; or
an international ship getting repaired in workshop in
provider country)
MODE 3 - Commercial presence. The service provider opens up a
company in the consuming country. (For example, legal firm
of Britain opens office in India and starts legal
consultancy)
MODE 4 - Movement of natural person. Temporary movement of persons
from provider country who go to consumer country for
delivering services. (For example, computer software
engineers from India going to USA on assignments. MODE 4
is of special interest to India)
GATS - Undermining of National Democratic Decision Making and
Sovereignty
Under the GATS agreement, the country "committing" a service sector
has to grant full access to its market to companies, firms and
individuals of another country (the so called "Market Access"). It
has also to ensure that it will not discriminate between national
and foreign companies (the so called "National Treatment".) Further,
any commitment given to one country will have to be given to all
other WTO member countries. (The so called "Most Favoured Nation").
While GATS does allow for certain restrictions to be placed on all
these three, in practice it is very difficult, and committing a
sector under GATS means opening it fully.
In fact, the EC Requests are now pushing for removal of even the
restrictions placed by India in its limited commitments made under
the GATS in 1995.
Committing a sector also means that it is virtually impossible for
the Government to revoke this later on. Thus, the GATS commitment
will lock up the country's service economy to foreign participation,
preventing succeeding Governments in taking policy decisions that
they deem necessary in public interest.
The GATS allows the country making the commitments to put in place
rules and regulations to implement national policy goals, "provided
the relevant measures are compatible with GATS" (Quote from
Frequently Asked Questions on GATS in "India and WTO", Newsletter
of Ministry of Commerce, Government of India,). Indeed, Article XIV
of GATS specifies that Members may take measures to "protect public
morals or maintain public order" or "to protect human, animal or
plant life or health", provided they are not "a disguised restriction
on trade in services". Whether the measures are compatible with GATS
or not, whether they are disguised restriction on trade in services
or not, will be determined by the WTO and its mechanisms, not by the
country. The WTO mechanisms have no provision for information to,
access or intervention by citizens.
The Article VI of GATS, dealing with Domestic Regulation, aims to
ensure that "measures relating to qualification requirements and
procedures, technical standards and licensing requirements" for
service providers "do not constitute unnecessary barriers to trade
in services" and to ensure this, requires that "such requirements
are inter alia.....not more burdensome than necessary to ensure the
quality of service". Again, domestic regulations could, if challenged,
have to potentially go through the so called "Necessity Test" by which
the WTO will determine if domestic regulation is really necessary and
that it is not "more burdensome that necessary" - for trade - not for
the citizens of that country!
Implications of EC Requests
The range of the sectors and sub-sectors requested to be opened is
vast and it is not possible to present a comprehensive analysis of
the impact in the short few days since the requests have been
publicly available. We intend to carry out detailed analysis
especially of the water and energy sectors. A few preliminary
implications are being presented here.
The EC wants access to large chunks of the Indian service market.
This will have a massive impact in terms of employment and transfer
of payments outside the country. For example, EC wants Retailing to
be opened up. This will open the way for huge shopping chains to
enter the country, wiping out livelihoods of lakhs of small shop-
owners and vendors. This is what has happened in Thailand after it
liberalized its retail sector.
However, the most serious implications are likely to be in sectors
like water, energy, biodiversity, tourism.
It should be pointed out that the EU countries have some of the
world's biggest water companies - Suez and Vivendi in France, RWE
in Germany, Thames Water in Britain (now taken over by RWE) and so
on. So EC is extremely keen on the water supply market. Committing
the water sector will mean effectively the privatization of water
supply - at least the urban water supply.
All over the world, privatization of urban water supply has resulted
in huge increase in water tariffs, which the common people have not
been able to pay. This has resulted in cutting off of water supply
in many cases. Excessively high tariffs have meant that people have
had to pay over 25% of their earnings for domestic water supply.
This has led to widespread resistance and opposition, forcing large
number of privatization projects to be abandoned. In the process,
however, privatization has locked local and national Governments
agencies into massive debts, has destroyed efficiently working public
systems and has eliminated space for participatory and accountable
water supply systems.
In addition, privatization of water supply is invariably accompanied
by the effective privatization of the water source - since a private
company wants its source to be assured.
In India, where privatization of water supply has begun in a small
manner (currently outside ambit of GATS), all these problems are
being seen. In Chattisgadh, privatization of the Sheonath river for
industrial water supply has deprived the locals of access to the
river for fishing and for irrigation as the private company claims
that it now "owns" that part of the river.
When water comes under the GATS ambit, the problems will be greatly
aggravated. For one, GATS rules will heavily constrain the Government
with respect to the nature and amount of regulation it will be able
to place on the sector. Regulations imposed by the Government could
face challenge from the foreign service providers in form of the
necessity tests. Secondly, the GATS commitment will lock the
Government into this policy. Right now, if it is found that the
policy of privatization of water is not working, the Government
will be able to change it. Once the sector is committed under GATS,
revoking it will be virtually impossible - even if there are adverse
public opinion and mass protests. It is more likely then, that the
mass protests will be put down with increased repression and use of
state power.
Thirdly, when ability of even the central Government to regulate the
sector will be severely constrained, there will be little role for
bodies like district panchayats, village panchayats, municipal bodies.
This will strike a body blow at the democratic structure of our
society, which envisages decentralization especially under the 73rd
and 74th amendment.
All this will be applicable in sectors other than water also.
It has been well known that the EC requests would heavily involve
water, and hence an international campaign has been active on this
issue. Possibly in deference to this, the EC Request specifically
mentions that the request "does not imply access to water resources".
Yet, it is impossible to believe that once the market access is
granted, the companies will not insist on access and even control on
water resources. Indeed, the heading of the Sector is "Water
Collection, purification and distribution services...". Collection
is certain to include the water source, and will lead to
establishment of control (if not "ownership") on the water resources
themselves.
Opening up of the energy services is likely to have a similar impact.
Allowing foreign companies into retail sale of wood, as asked for is
also a very sensitive issue.
India's Offers
India has to make its offers by March 2003. While the contents of
this offer are not known, Government of India has indicated that
MODE 4 (its professionals going abroad for work) will be a very
important aspect, especially for its "large pool of well-qualified
professionals in the service sectors like computer and related
services, education services, audio-visual services, accountancy
services, construction, health...". India's request to the other
countries are sure to have made unlimited and unrestricted access
for its professionals as an important component. However, in order
for other countries to accept this, India will have to give
something in return. This "something" is most likely to involve two
things (a) similar access to professionals of other countries into
India and (b) opening up of its other sectors like water, energy,
tourism and so on as asked for by the EC.
No doubt, access for India's professionals to markets of other
countries is likely to bring in benefits. However, in return,
allowing professionals of other countries in India will have a big
impact on employment here. Most important, in order to gain access
for our professionals to other countries, India will have to concede
access to crucial sectors like water, energy and so on. The
privatization and liberalization of these sectors will profoundly
and adversely affect the poorest and weakest sections most. In short,
there is a real fear that India will try and get benefits for its
comparatively small section of professionals at the cost of
livelihoods and subsistence of millions of its poor citizens.
Make the Process Transparent
What is shocking is that this process that will have a far -reaching
and vast impact on millions of our people is being conducted in
complete secrecy. It is only the leaks of the EC demands that have
allowed us to get a feel of what is at stake. It is therefore
imperative that:
· Indian make public ALL the requests it has received so far from
all countries
· India make public its own requests to other countries
· Carry out an extensive public debate and discussion on this,
including in the parliament, state assemblies, district panchayats
etc.
· The public debate should also include public hearings where the
common citizens can participate, apart from stakeholder
consultations, media discussions, seminars and so on
· Refuse outright the opening up of crucial and sensitive sectors
like water, energy, tourism etc.
· Protect and safeguard adequately the powers and role of local
bodies in the planning and development of resources like water
· Prepare its Offers in an open and transparent manner and after
extensive public debate as above
Shripad Dharmadhikary
Swathi Sheshadri
Manthan Adhyayan Kendra
Badwani (MP)
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Manthan Adhyayan Kendra is a centre set up to monitor, research
and analsye water and energy issues with a focus on the implications
of the liberalization, privatization and globalisation of the economy.
It is located in the district town of Badwani in western Madhya
Pradesh near the banks of the Narmada.
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