Strategies and tactics at WTO - II

Umberto Mazzei

30/11/2009

Opinión

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The WTO negotiation has two other very important issues, besides agricultural and industrial goods. That is, Trade in Services and protection of Intellectual Property. The first one is about free circulation of services and the second is about prevention of free circulation of knowledge. The first seeks to privatize public services monopolies and the second seeks to expand private monopolies of science.

Services

To open trade in services can be risky. Whoever doubts it, take a look at the result of opening trade to fake financial "products" from Wall Street. In classical economics, services are almost ignored. Adam Smith despised them. Now, they are given such importance, as to be considered main actors of an alleged "post-industrial” economy. A vision that may apply to the United States and Singapore, but not to the Chinese or the European models. The greatest openness in services occurs in FTAs (Free Trade Agreements), but openness is also being negotiated at the WTO.

The barriers to services trade are not tariffs, but rules and regulations at any level of legislation: national, regional, municipal or guild norms. The measures that restrict trade in services are classified under Article XXVIII of the General Agreement on Trade in Services (GATS) of WTO, which is then reflected in US-FTAs, Decision 439 of the Andean Community or in the Montevideo Protocol of ALADI.

Defining services is a bit complicated. The Economist's defined them as "what can be sold and you can not drop on your foot." Services are intangible, invisible and instantaneous (no accumulation). We must also differentiate between the tangible good and the service delivery, as with the telephone and the phone call.

Some define services by their effect[1], because the "change on the status of the person or property affected”. However, there are services to prevent changes - security - or over unwanted changes - insurance. Some, empirically, define them as any economic activity outside agriculture or industry. The services would be a tertiary sector, which supports the others with education, communication, distribution, transfer, supply, transport and so on. The services are divided into service areas and I believe that the most basic division is between public services and private services. It's not clear, since there are grey areas in distribution, but I consider as public those infrastructural services that cater a physical community.

The strategic importance of public services.

Curzio Malaparte, in "The Technique of the Coup," reveals the strategic importance of public services, when he recommends to occupy first the distribution centres for electricity, water, transport, fuel and telecommunications. Centres that are aimed at also by airplane bombers. Therefore, it is dangerous for national security reasons to leave public services in the hands of foreign companies. The United States is one example, it prevented a Dubai company to tender for administration of a port terminal or a Chinese oil company to buy an U.S. oil company in difficulties and also prohibits foreign costal sailing between its ports.

Public services are of utmost importance, because they channel development in any country. Any inequality in coverage and quality increases the gap between economic development and social fabric, which in turn increases public insecurity and diminishes salubrity. It also affects both, the quality of intellectual and technical development and the production and circulation of private goods and services.

There is talk about the ineffectiveness of the services run by the public sector in developing countries and also in some developed ones. It is true that there is inefficiency and corruption in essential services like health, sanitation, electricity, environmental, water, education, but that is not solved by their privatization. Whoever doubts it, take a look at the case of Reliant and Enron supplying electricity in California (blackouts).

In public service, coverage and quality are the measure of success. That means reaching all inhabited places, even the unprofitable ones, which is unattractive for a private company. Public services administration can improve quality with public oversight, one that involves participation of the communities served, so they can point out failures. There are successful examples in Europe and some in Latin America[2]. Public services are often monopolies, is that which attracts private companies, so they can set prices at the highest profit; prices which the poor can not easily reach.

Private services in WTO

Trade in services has been classified into four modes of supply. Mode 1, called cross-border trade, such as Internet access. Mode 2, called consumption abroad, such as tourism. Mode 3, commercial presence authorizing the presence of juridical persons such as banks, etc.. Mode 4 Presence of Natural Persons, which is the temporary presence of persons to perform a job, such as consulting, construction, etc..

The first two modes of delivery are scantly mentioned in the negotiation. The controversy revolves around the two presences. Developed countries - agents of the international corporations - ask for Commercial Presence on every thing, with emphasis in public services and government procurement. Developing countries – with plenty of labor – demand Presence of Natural Persons.

For now, negotiations in the WTO are limited to whatever is of interest to large corporations. They want full opening, because when they move, they wish to skip local business or professional services support. They want to keep their entourage, who are the same companies that support their headquarters in accounting, advertising, distribution, legal support, etc.. The international corporation, in Bogota or Lima, wants to keep the same Arthur Andersen that attests their accounts in New York or London, perhaps (Enron et al.) with creative accounting practices.

The interest of developing countries in opening the temporary presence of natural persons at the WTO is only proposed, but not even discussed. It is obvious that the negotiation is seen by some as a one way avenue.

The point of the negotiation

These days, the debate is focused on domestic regulations. Since a couple of weeks a group of countries including Australia, Chile, India and New Zealand want to talk first about national rules before negotiating market access. Some rich countries, the financial services providers, are not interested. They want others to open doors without altering any thing on their side. Ron Kirk, USTR said, speaking of the Doha Round "... there will be no agreement without a good result in services that open new market opportunities." We assume that he refers to market opportunities also for the banks that pack and sale fraudulent "derivatives".

The point is that since the explosion of the financial crisis, many countries - developed and developing - are aware of the need for national financial regulations and pay more attention to the issues raised at the Committee on Trade in Financial Services. There they have discussed proposals over the regulatory framework.

There are three proposals:
a) The United States, for greater exchange of information, mainly on life insurance.
b) Pakistan, on a regulation for banking and electronic commerce, because of the problems raised by an increasing traffic.
c) Argentina, Ecuador, India and South Africa on rules to control financial services.
There is no consensus on any.

At the Services Council it was offered then, to brake ground, a technical study in two stages. The first would be a list of GATS provisions on financial services and a bibliography on the subject, to be presented at a special session. There was no opposition. The second phase, would be an analysis of how and if the given incentives affect international trade of financial services. The conclusions would be "non imputable", it means without accusing the measures taken by countries. The US refuses, as if the grotesque props given to its banks were a secret and not something reported and commented upon by the world press.

Intellectual Property

Most of the work going on is over the protection of wines and spirits, with a multilateral system of notification and registration of geographical indications[3]. The purpose is to segment the market to create artificial monopolies. The discussion turns over when to notify, how to notify and how to register. There are three positions over the mandate from the Hong Kong Ministerial. An hybrid one, from Hong Kong (Host). A broad and strict European one, that besides wines also wants to include food. A "joint proposal", which follows the mandate of Hong Kong, made by countries that also produce wine and alcohol: Australia, Argentina, Chile, USA, etc[4].. (Cheers, Salud!)

Recommendations

At WTO economic policies are tied with agreements on trade, but there are also links to other multilateral institutions. In Intellectual Property, for example, ideas move first at WIPO. Those links can be used to improve the balance between economic, labor and social issues. It is good to defend national interests at WTO, but is even better if defended also at other entities besieged by stateless greed.

The International Labor Organization (ILO), is a very important multilateral centre. The organization is split in three branches: governments, employers and unions. The unions want to harmonize labor laws to prevent international corporations from moving jobs to countries with weak and complacent labor laws. There is a coincidence with free governments that want normal and democratic policies of greater employment and good working conditions.

The World Health Organization (WHO), is another multilateral centre to keep on sight in order to avoid complicity with drug manufacturers. The hysteria of WHO with the "swine flu" (H1-N1) is notorious. It declared a global pandemic with a few deaths (141)[5] with a dubious diagnosis, while it waited for millions of deaths to declare AIDS a pandemia. Of course, in the AIDS case, African governments were not upfront buying untested vaccines.

A successful example to follow, is the presidency of the UN general assembly by Miguel Escoto. His presence there was crucial to organize a team with serious experts to study the causes of the financial crisis. The panel's recommendations are an effective counterbalance to the frivolity emanating from the G-20, whose solution is more of the same. The G-20 also usurps an authority over WTO that nobody has given, asking for decisions and reports while the Director-General, Pascal Lamy, cheerfully complies .

M. Lamy obeys, because the G-20 is ordering what he asked for. No member has protested. It is about time that the representatives of free countries reminded M. Lamy, that the WTO will belongs only to its 153 members and there is a WTO will only if there is consensus.

The WTO Ministerial begins in Geneva on November 30th. We wish, not luck, but firmness.

Geneva, 25/11/09

[1] Thomas P. Hill; On goods and services, Review of Income and Wealth, December , 1977, p. 318

[2] Brazil, Costa Rica and Cuba have successful cases in energy, transportation, insurance, education and health.

[3] Multilateral system of notification and registration of geographical indications for wines and spirits.

[4] The whole list includes: Argentina, Australia, Canada, Chile, Costa Rica, Dominican R., Ecuador, El Salvador, Guatemala, Honduras, Japan, Mexico, N. Zealand, Nicaragua, Paraguay, Taipei and the U.S.

[5] In France alone, each year more than 5000 people die of flu. WHO has also cheated. They changed the rule for pandemic. Before it was necessary a new subtype of virus to discuss pandemic. Now it needs to be just a mutation of a virus subtype already existent. This creates more scares and sells more vaccines.

https://www.alainet.org/pt/node/138089