Critique of U.S. Summary Position on Services in FTAA
by Ruth Caplan, Alliance for Democracy
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CRITIQUE OF U.S. SUMMARY POSITION ON SERVICES IN THE FTAA by Ruth Caplan, Alliance for Democracy

In promoting U.S. corporate interests in marketing services throughout the Western Hemisphere, the U.S. Summary Position on Services has selected provisions from NAFTA and the WTO’s General Agreement on Trade in Services (GATS) which are most favorable to this agenda.

PRIVATIZATION OF SOCIAL SERVICES

While the U.S. position pays lip service to not having the FTAA negotiations promote privatization of social services - including education and health care services - it does not propose to carve out these services. Instead it relies on the deeply flawed exemption for government services in GATS. Further, since privatization of social services has been mandated for indebted countries through the IMF and World Bank’s structural adjustment programs, the U.S. looses little in Latin America by saying: "the United States is not seeking nor would we agree to use the FTAA negotiations to promote privatization of such public services."

U.S.-based insurance companies such as Aetna International, Cigna International and the American International Group have already profitably entered the Latin American market with managed care by appealing to the healthy segments of the population. The poor are left to rely on a defunded public sector. The prestigious New England Journal of Medicine lays out the corporate agenda quite clearly in "The Export of Managed Care to Latin America." The authors say:

As for-profit managed-care plans expand in the United States, the rate of profit begins to fall and the market becomes increasingly saturated....Under these circumstances, corporations seek new markets abroad.....The executives of corporations that have entered the managed-care market in Latin America have reported substantial revenues relative to expenditures. They have predicted strong profit margins in the next several years and have expected high rates of return for investors....

Karen Stocker et al, April 8, 1999, page 1131

Similarly, the explosion of "distance learning" via the internet will open up markets throughout the Western Hemisphere to corporate profits. Under "market access," the U.S. specifically calls for an obligation to "guarantee access to and use to [sic] publicly-provided telecommunications networks."

If the U.S. is serious about protecting public health and education from corporate intrusions, it should propose excluding them entirely from the FTAA through carve outs, as it proposes for transportation services. The same protection should also be given to drinking water supplies.

SIGNIFICANT EXPANSION OF COVERAGE

Top Down: The U.S. proposes "that the scope and coverage of the services chapter of the FTAA Agreement should be comprehensive and should cover, in principle, all service sectors and service suppliers." To implement this, the U.S. supports a "top-down ('negative list’) approach." This means all services will be covered unless "a particular FTAA country negotiates a reservation for a particular sector or measure." With this, the U.S. hopes to get what they failed to achieve in the original GATS and are unlikely to get in the current GATS negotiations which allow countries to schedule their commitments on specific services.

Local Jurisdictions: The U.S. position conforms with GATS which covers all levels of government, rather than NAFTA which excludes local jurisdictions from major provisions.

With these two provisions, corporations are in a much better position to pry open local markets.

Energy: The U.S. includes energy services which are excluded from the NAFTA services chapter. In the GATS context, the USTR states: "To realize fully the benefits of an efficient, competitive energy sector, we need to consider the entire chain of activities involved in resource identification, preparation/production and conversion, transmission and transportation and distribution, sales and marketing (both wholesale and retail), and information management." This expansive definition of energy services could have serious environmental implications.

Non-governmental Bodies: The U.S. wants to cover non-governmental bodies exercising delegated governmental powers, e.g., churches providing social services with government funds.

THE CORPORATE STICK OF INVESTOR-TO-STATE DISPUTE SETTLEMENT

The U.S. wants the provision of a service through "commercial presence" placed in the Investment Chapter. This is no minor technicality. Under investment, the U.S. supports giving investors the right to sue governments directly using the dispute settlement provision. This "investor-to-state" provision is found in NAFTA but not in GATS. Combined with proposed local coverage, this provision would leave all local, state and federal laws and regulations pertaining to public and private services vulnerable to corporate challenges by the service providers as well as their investors.

NO LIMIT ON NUMBER OF SERVICE PROVIDERS

The U.S. wants to prohibit mandatory requirements to "restrict sales of goods or services within the host Party’s territory." This means no limit on the number of private education or health care or prison or water supply companies that can operate in a given state or community. This supports privatization of these services since the exemption for services supplied "in the exercise of governmental authority" is defined as "any service which is supplied neither on a commercial basis, nor in competition with one or more service suppliers." Once there is a private school or private hospital in a community, the floodgates are open.

TRANSPARENCY--COMMENTS ON PROPOSED REGULATIONS

The U.S. wants to require "advance notification of proposed regulations and solicitation of comments from interested parties." This would give corporations, which can afford the resources to track all such local, state and federal regulations, an easy way to put pressure on local jurisdictions to pass laws and adopt regulations which favor opening up markets.

RESTRICTING DOMESTIC REGULATION

Limitations on domestic regulation through "no more burdensome then necessary" language could further curtail the ability of national and local jurisdictions to protect their residents. So far, the U.S. only says " the issue of domestic regulation is important and [they] will be giving further consideration to what provisions on domestic regulation might be appropriate."


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