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There used to be a time when regulations were put in place to constrain business activities in order to protect the public interest. But in the brave new world of globalisation, regulations have to be “disciplined” to protect business interests.
A working party of the World Trade Organisation (WTO) has been discussing how best to “discipline” these pesky regulations so they don’t interfere with international trade in services. Members of the WTO have already agreed in the Hong Kong Ministerial Declaration that they will “develop disciplines on domestic regulation” by the end of the current round of negotiations on the General Agreement on Trade in Services (GATS).
The Australian government has supported a draft text for this purpose proposed by delegates from Chile, Hong Kong, Taiwan and others. It states: “The purpose of these disciplines is to facilitate trade in services by ensuring that measures relating to licensing requirements and procedures, qualifications requirements and procedures, and technical standards do not constitute unnecessary barriers to trade in services.”
GATS is designed to enable transnational corporations to compete with local firms and government enterprises to provide a wide range of services in WTO member countries. It prohibits governments from discriminating against these transnational firms or putting limits on foreign ownership for those services that nations have agreed to ‘open up’ or ‘liberalise’.
In the first round of negotiations Australia committed to opening up legal, accounting, architectural, urban planning, dental, veterinary, real estate, engineering, a range of telecommunication, private secondary education and other services to GATS. It has further offered to commit services covering sewage and wastewater, hazardous and non-hazardous waste, soil and water remediation and clean-up, biodiversity protection and other services in the current round.
Once commitments are agreed to, they cannot be changed, even if the majority of voters in a nation wish to. This ensures that the interests of foreign investors are protected but undermines the ability of democracies to reregulate these services or reverse any regretted privatisations or lowering of standards.
The Department of Foreign Affairs and Trade claims that by making this offer “we offer to lock in, or bind, our deregulation, thereby providing WTO Members with the benefits of enhanced transparency and a guarantee that Australia will not unilaterally wind back its regulatory regime in those areas where specific commitments are made.”
The proposed disciplines will further protect the interests of trading companies from WTO member countries from democratic review and popular demands for tighter regulations. The draft text requires that regulation of standards, licensing and qualifications are “not more burdensome than necessary to meet specific national policy objectives including to ensure the quality of service” and do not restrict “supply of service”.
If adopted these “disciplines” would mean that foreign governments, acting on behalf of companies, could challenge Australian national, state or local government regulations. The outcome of a challenge would be decided by a WTO panel of trade lawyers and bureaucrats. And it would be decided on the basis of whether the regulation is the cheapest and most trade-friendly way of providing a reasonable level or protection rather than whether it is the most effective and certain way of achieving the level of protection that the public has decided it wants.
An early indicator of the shape of things to come occurred in 2004 when a WTO panel ruled that the US government could not ban internet gambling. The panel conceded “that the measures at issue were indeed designed so as to protect public morals or to maintain public order” but decided that the measures were not allowable because “the United States had failed to demonstrate that they were ‘necessary’ since it had not shown that there was no WTO-consistent alternative measure reasonably available that would provide the United States with the same level of protection against the risks it had identified.”
The panel agreed that ‘Members’ regulatory sovereignty is an essential pillar of the progressive liberalization of trade in services, but this sovereignty ends whenever rights of other Members under the GATS are impaired.” According to the ruling, if the US wants to protect public morals it has to find a way to do it which does not restrict trade. Otherwise the onus is on the US government to prove no such alternative exists.
Australians could also learn from South Africa where an unrepresentative extremist apartheid regime signed up to GATS in 1994, “locking in” the inequitable delivery of health services. Consequently the current government is now hindered in its attempts to reverse these inequities for fear of breaching obligations to foreign private providers.