Services are key factors in today's transnational production chains that shape the global economy. They touch nearly every aspect of the natural world and the environment, including energy extraction and production, transport, water, travel and tourism, construction, distribution, waste disposal and sewage. The activities of multinational service corporations – including oil companies, electricity producers, waste disposal businesses, private water companies, and hotel chains – have major environmental impacts around the world.

The General Agreement on Trade in Services (GATS) was created as part of the formation of the World Trade Organisation (WTO) in 1994. Under the terms of the GATS member countries were obligated to continue further liberalisation of services and to begin negotiations in 2000 to achieve that goal. Now underway, the negotiations to expand the reach of the GATS will have substantial implications for the environment around the world.

When the market access and national treatment provisions of the General Agreement on Trade in Services (GATS) apply to particular sectors the following kinds of regulatory actions to protect the environment could be found WTO illegal:

• limitations on the number of oil or gas extractive operations in a particular market or community;

• restrictions on the volume or number of bulk surface or groundwater extractions by a water service operator;

• requirements for the use of a certain percentage of renewable sources in electricity supply that disadvantage the cross-border provision of electricity from another country that does not use such renewable sources;

• a ban on the use of nuclear energy in electricity supply that disadvantages a foreign nuclear power producer;

• limitations on the number of diving boats allowed on coral reefs;
• preferences for granting of resource extraction licenses (such as for fishing) to members of local or indigenous communities.

In addition, Article VI of the GATS imposes restrictions on the domestic regulatory efforts of governments, including environmental laws and regulations affecting service operations. These restrictions currently apply to the particular sectors in which countries have taken commitments, but the current negotiations could expand the restrictions to all service sectors.

The Article VI criteria restrict "technical standards," which can include almost any type of environmental law or regulation. To be acceptable under Article VI, environmental protection must be "based on objective and transparent criteria" and must "not be more burdensome than necessary to ensure the quality of the service." That effectively means that a country must cross a number of hurdles to show that its environmental regulatory efforts are appropriate.

First, the country must prove to a WTO trade panel, in the event of a challenge, that its environmental standards are objective. Under that requirement, panels might demand proof that the environmental standard is based on absolute evidence that the harm that will be caused is scientifically ascertainable. Such a requirement would depart from the standard precautionary approach, which requires scientific proof of environmental safety for a product or service and would allow for regulation even when there is a lack of full scientific certainty of possible harm. While environmental protection has traditionally rested on the principle of requiring producers to demonstrate safety, past WTO decisions have shifted much of the burden of proof to the regulators.

Second – in what has come to be known as a "necessity test" – a country must prove to a panel that its environmental protection rules are the least burdensome ones available. In other words, a country cannot simply adopt a reasonable regulatory approach, but must instead identify a full range of alternative approaches and adopt the approach that will affect the economic interests of foreign service operators the least.

Such requirements under the GATS can clearly hinder – if not entirely halt – reasonable efforts to protect the environment. Proposals in the current negotiations are aimed at extending the reach of these requirements to all service sectors. The GATS requires that any disciplines needed to implement these domestic regulation requirements be adopted across all sectors, and negotiations are currently underway that would do just that. The adoption of a "necessity test" across-the-board, as the European Union has proposed, would have a significant and chilling impact on domestic regulatory efforts.

The GATS agenda is very similar to other efforts – like the Multinational Agreement on Investment (MAI) – that would give greater rights to multinational corporate investors. If the GATS regime is broadened, these investors will have much easier access to foreign countries and powerful new tools to fight attempts to regulate their activities. Internationally mobile corporations – not citizens or the environment – will be the primary beneficiaries of an expanded GATS.

FoEE demands that the GATS negotiations should be

• placed on hold until these critical environmental and social issues are addressed.
• A full and complete assessment of the actual and potential environmental and social impacts of the GATS agreements, including impacts on local communities, and developing countries, and all sectors currently covered or proposed for inclusion should be conducted.

In addition, the following steps need to be taken:

• clear and strong exceptions in the GATS ensuring that no reasonable environmental laws and regulations will be undermined or challenged by GATS rules, including and environment exception for measures relating the conservation of exhaustible natural resources;
• removal of Article VI provisions, including a necessity test, that restrict the right of government to adopt laws and regulations protecting the public interest and the environmen;
• the clear exclusion from any GATS disciplines of any services related to the extraction of energy fuels, minerals and water.

(1) Written by Vice Yu, David Waskow and Alexandra Wandel. Submitted to the ‚GATS and Democracy‘ Brochure of the Seattle to Brussels Network.

June 2001.

Contact for further information:
Alexandra Wandel
Trade and Sustainability Co-ordinator
Friends of the Earth Europe
29, rue Blanche
B-1060 Brussels
Tel: ++32-2-542 01 85
Fax: ++32-2-537 55 96
E-mail: alexandra.wandel@foeeurope.org
http://www.foeurope.org

HOME