by Manuel Pérez Rocha L.

The contracting out of public services consists of the establishment of rules that will guarantee maximum returns to investors across all borders. The prevailing concern for many, is that the new “global rules” will place severe limits on governments’ ability to:

• maintain and create new initiatives that will promote economic and social development at the local level;
  
• protect the environment;
  
• improve the standard of living; and
  
• attend to all aspects of public life.

The rules of the new privatization process are based upon the liberal thesis that private entities, such as large multinational corporations, are more capable and better equiped to undertake economic activities than the State. The “global rules” that are presently being negotiated at the WTO could limit the economic participation of regional and local governments.

Large corporations are pressing for changes that will extend the restrictions on the utilization of government funds for public programs and public works to all possible public services. In effect, capitalist expansion, euphemistically understood as ‘globalization’ in its current phase, implies the establishment of new rules for the multilateral trade of services, as well as the protection and promotion of global foreign investment. This is why many local governments are participating in the global resistance process against these developments. For example, in 1999 a battle was won against the Multilateral Agreement on Investment (MAI) when various local governments in Canada and the United States (including the city of Seattle!) declared themselves as “MAI Free Zones.” One must be concerned that the essential clauses of the Multilateral Agreement on Investment (MAI) are being applied and extended to free trade agreements such as the Free Trade Agreement of the Americas (FTAA). Likewise, this continues to be one of the main aspects within the proposed extension of powers sought after by the WTO. Of equal concern for local governments, are the ongoing WTO negotiations on the General Agreement on the Trade of Services (GATS). The effects of the eventual ratification of the extension of this treaty will be one of inconceivable magnitude. A wide range of public services and civil rights across the world will be affected. Its extension will bring with it an increase in the subordination of democratic governments, both national and regional, to the rules that the WTO puts into place. In essence, behaving like a supranational economic world government.


The Problem with the GATS

Since its inception in 1994, corporate interest groups have been interested in extending the GATS’ reach to include all imaginable public services. This has lead the National Union of Public and General Employees (NUPGE) to denounce that the aim of the GATS is to create global conditions necessary for the liberalization of the trade of services. These include those that are duly constituted and managed at the local level by municipal administrations. In time, the treaty could eliminate the decision making capacity that municipal governments now have because this right would be seen as an obstacle to free enterprise. If broadening of the GATS goes ahead, municipal governments will no longer be able to govern for the good of the people who elected them and who are expecting their governments to defend their interests. As NUPGE has indicated, the GATS’ negotiations, would, in effect, make it possible for the whole range of services provided by all levels of government to be put up for tender to well organized private entrepreneurs.

As indicated in the public statement, “Stop the GATS Attack Now!”, which was signed by hundreds of organizations from dozens of countries, the WTO’s new negotiations on GATS that are just beginning aim to facilitate the monopolization of public services by corporations in the following ways:

• Imposing new and severe constraints on the ability of governments to maintain or create environmental, health, consumer protection and other public interest standards through an expansion of GATS Article VI on Domestic Regulation. Proposals include a ‘necessity test’ whereby governments would bear the burden of proof in demonstrating that any of their countries’ laws and regulations are ‘not more burdensome than necessary, (in other words, the least trade restrictive) regardless of financial, social, technological or other considerations.
  
• Restricting the use of government funds for public works, municipal services and social programs. By imposing the WTO’s National Treatment rules on both government procurement and subsidies, the new negotiations seek to require governments to make public funds allocated for public services directly available to foreign-based, private service corporations.
  
• Forcing governments to grant unlimited Market Access to foreign service providers, without regard to the environmental and social impacts of the quantity or size of service activities.
  
• Accelerating the process of providing corporate service providers with guaranteed access to domestic markets in all sectors - including education, health and water – by permitting them to establish their Commercial Presence in another country through new WTO rules being designed to promote tax-free electronic commerce worldwide. This would guarantee transnational corporations speedy irreversible market access, especially in Third World countries. (www.tradewatch.org)

The Loss of Voice for Local and Regional Governments

Faced with this menace to the economic and civil rights of communities, one instrument that nations have in reserve to promote social and economic development is the process of public tenders and government acquisitions. Without a doubt, the large corporate consortiums and associations (for example the International Chamber of Commerce and the European Round Table) constitute a very intense lobby that is actively calling for the liberalization of public spending and the awarding of national treatment to multinationals in developing countries. Should they be successful, multinationals would avoid practically all limits to their activities. For example, government spending corresponds to 20% of the global GDP, which is greater than the total value of all exports. Government spending applies to a wide variety of sectors such as health, transportation, education and construction. Both the United States and the European Union are hoping that the WTO can convert itself into a supranational organization to pave the route for the liberalization of these markets. This could have serious consequences for both the local and national development of developing countries. Liberalization of government spending would further concentrate the world’s wealth into the most powerful corporations located in the richest countries, because it is the large transnational corporations that find themselves in the best position to compete in foreign markets. In developing countries, such as Mexico, local companies run the risk of being further displaced, and the national and local governments run the risk of losing their purchasing power as well as their ability to assist economic development by supporting small to medium sized enterprises.

Although the Multilateral Agreement on Investment (MAI) has essentially failed, it continues to exist in draft form. Reciprocal agreements between countries dealing with investments and the policies of the WTO maintain the spirit of the MAI, endowing new powers to the GATS with the aim of achieving unprecedented economic deregulation. Traditionally, local governments have been responsible for local development. The World Federation of United Cities has stressed that this responsibility is becoming increasingly important and diverse. Cities now present some of the most significant challenges for economic, social and political development. Local governments are charged, not only with the responsibility of ensuring that people have access to public services but also, to guarantee that people’s civil rights are upheld and that the general interests of the municipality are represented. Furthermore, local governments have been converted into one of the main actors in social and economic development. In effect, local governments occupy the level of government where the immediate decisions affecting the daily lives of citizens are taken. This role implies the delivery and regulation of a vaste quantity of services. These governments need to conserve their capacity to establish social programs based on the delivery of public services and to control foreign investment so that it is beneficial for the community. Foreign investment should contribute by respecting local public policies, creating more and better jobs, protecting people’s health and the environment, and by establishing practices that serve the public interests of citizens.

Sao Paulo Mayor, Marta Suplicy, insists that there is a need for the direct involvement of cities in the general discussion on the course of all aspects of globalization. This would in effect, provide a safeguard to the quality of life of their population by protecting health, education, housing, and the betterment of working conditions. “It is a pre-requisite that globalization no longer remains a reality only for large economic groups, and rescues those populations, which have been up until now, excluded from the free market.” As such, Mayor Suplicy says “it is becoming increasingly necessary for the local authorities to position themselves in the discussions on the process of trade and financial liberalization, as well as on the formation of regional blocks. In our case, this translates into an involvement in Mercosur and a positioning vis-a-vis the Free Trade Area of the Americas”.

Without a doubt, the new “global rules” impose inescapable challenges upon all democratic actors. In his study on Municipalities and the MAI, Barry Appleton found “local governments are also finding that the rules placed upon them are changing. The understanding of these changes could be very difficult for local governments because traditionally, they have no experience with the interpretation of international treaties dealing with investment.” Nor would they have much knowledge of international agreements on the privatization of public services. This is especially worrisome for developing countries. Given the profound nature of the changes that may result from the privatization of public services and the enormous number of people who will be affected, it should come as no surprise that the number and variety of actors who are expressly opposed to the globalization of corporations, grows daily. The arguments by those in opposition are also becoming increasingly well articulated. For example, at the World Social Forum taking place in Porto Alegre, members of parliaments, representatives of social movements, local authorities and others from all walks of life are joining forces to create effective answers to the expansion of corporate interests through multilateral organizations such as the WTO. This is not about a return to the protectionist measures of the past. This, above all else, is about the defence of democracy and the promotion of the civil, political, economic, social and cultural rights of all of humanity.

Manuel Pérez Rocha L. works with the Mexican Action Network on Free Trade, Investment and Global Economic Justice. He holds an MA from the Politics of Alternate Development Studies Department at the Institute of Social Studies in the Hague

References

• Action Aid. “Government Procurement: Action Aid’s Concerns and Recommendations”. November, 1999. www.actionaid.org
• Appleton Barry. “Municipalities and the MAI”. Appleton & Associates International Lawyers. 1998.
  
• Federación Mundial de Ciudades Unidas, Documento de Trabajo para el Seminario Internacional “Financiar de Manera Sostenible el Desarrollo Urbano”, Lisboa 30-31 de marzo, 2000.
• Friends of the Earth. “License to Loot, The MAI and How to Stop It”.Washington, D.C. 1998.
  
• Hemispheric Social Alliance. “NAFTA Investors Rights Plus”. June 19, 2001. www.asc-hsa.org
• Manuel Pérez Rocha L. “El AMI: Un Secreto que Involucra al Mundo”, en La Otra Cara de México, Equipo Pueblo, Diciembre, 1997.
• Manuel Pérez Rocha L. “De AMIs, APPRIs, Acuerdos con la Unión Europea y Gobiernos Locales”, en Roberto Rico y Luis Reygadas, “Globalización Económica y Distrito Federal; Estrategias desde el Ámbito Local”. Plaza y Valdez, México, 2000.
  
• Suplicy Marta, Alcaldesa de Sao Paulo, Pronunciamiento ante el Congreso de Unidad de la Federación Mundial de Ciudades Unidas y la International Union of Local Authorities, Río de Janeiro, Brasil, 2001.
• Syndicat National des Employées Géneraux et du Secteur Public. “Les Répercusions de L’Accord Général sur le Commerce des Services (GATS) sur les Administrations Municipales”. Canada, Decembre, 2000.
• Western Governors’ Association. “Multilateral Agreement on Investment: Potential Effects on State & Local Government”. April, 1997.