...
The 'freest economies in the world'
By John Berthelsen
In the late 1990s, Hong Kong's consumers were thrilled by news that Carrefour, one of the world's most efficient food purveyors, was going to establish a series of hypermarkets in the territory and drive down prices.
For decades, Hong Kong's supermarket business had been dominated by two companies - Wellcome, owned by the venerable British trading company Jardine Matheson, and Park'N Shop, a unit of Hutchison Whampoa, controlled by Li Ka-Shing, the Hong Kong-based tycoon.
Today, however, the French retailer is gone, and Hong Kong's consumers are continuing to pay prices well above those in the rest of Asia for their produce as well as products in health, beauty and pharmaceutical shops owned by the two hongs. This comes up because each year the Cato Institute, a US-based conservative think-tank, and 50 other libertarian organizations rate Hong Kong and Singapore the two freest economies in the world. Like Groundhog Day, this has just recurred. On a 10-point scale, Hong Kong was ranked at 8.6, Singapore at 8.5 and the United States at 8.3. New Zealand and the United Kingdom were at 8.2 (see HK, Singapore, top 'economic freedom' index, July 10).
Both the Cato Institute and its libertarian fellow travelers see the two Asian economies' free ports, where there are few tariffs and where currencies are freely convertible. Taxes are low, and Hong Kong's flat-tax scheme is a libertarian vision that conservatives would like to see instituted in the United States. These fit comfortably into the criteria apparently used for the survey - small government, enforceability of contract, free trade, and a stringent attentiveness to the deregulation of the business, credit and labor markets. But, while both Hong Kong and Singapore have incrementally liberalized in recent years, neither the Cato Institute nor its allies apparently has ever heard of Singapore, Inc, or understand Hong Kong's domestic economy.
Between Singapore's government and Hong Kong's oligarchs, the two own almost enough of the means of production to qualify their economies as socialist - or perhaps "market socialist", as the confused Chinese Communist Party a few years ago attempted to label its transition away from a command economy. (This is a phrase difficult to find on Google without a comma between the words "market" and "socialism".) The fact is, certainly in Hong Kong, that Adam Smith has no hidden hand agitating competition. The hidden hand is on the consumer's wallet and squeezing hard. There is a big difference between "free" and "business-friendly".
Carrefour, the poster child for the primacy of Hong Kong's oligarchs, never knew what hit it. What hit it was a combination of government policy and ruthless capitalism. Prices couldn't come down in Hong Kong because the cartel made sure that suppliers were not going to sell produce or foodstuffs subject to the harsh winds of market economics. The company was unable to find prime locations to site its stores. Ultimately, Carrefour provided Hong Kong's Consumer Council with a list of 22 companies that it said had pressured it not to cut prices. Carrefour eventually quit Hong Kong. The Hong Kong government of Chief Executive Tung Chee-hwa, just as the British colonial government before it, turned a blind eye.
There will be no big-box bargain barns like Wal-Mart or COSCO in Hong Kong. Nor are Park 'N Shop and Wellcome alone. Mannings and Watson's, the two health, beauty and pharmaceutical chains owned respectively by Jardine's and Hutchison, likewise do not compete, and if any competing chain raised its head, it would get it shot off just as Carrefour did. In fact, Jardine's and Hutchison each own a wide range of companies from cars to cafes. In none of them is it possible to find anything remotely approaching competition.
Gasoline stations do not compete for motorists' business through the price of fuel. In fact, anyone who has ever owned a car in Hong Kong can testify that prices are probably double anywhere on Earth - probably not a bad thing, considering the increasingly jammed highways.
Under British rule, Hong Kong's government rigorously protected Cathay Pacific, the patrician flag carrier owned by Swire, from competition by slots at the terminal, the most convenient flight times, and by keeping out any startup that had the temerity to try to set up shop. Today, no matter how the People's Republic of China seeks to squeeze Hong Kong's citizens over such as the right of abode or sedition and press restrictions, "one country, two systems" is alive and well in the marketplace. The post-1997 government has enthusiastically perpetuated the system put in place by British colonials. Ten property companies dominate Hong Kong, among them the descendents of the British trading companies that ran the colony from its founding, although some have since fallen into the hands of the local Chinese. These conglomerates include Hutchison and its associate, Cheung Kong, under the control of the tycoon Li Ka-shing; Jardine's, Swire, Wharf and Wheelock, and others. The other dominant corporate entity in Hong Kong is HSBC, now one of the world's biggest banks. The colonial government and its successor, throughout the 1980s and 1990s, made these property companies unimaginably wealthy by metering the amount of land on which housing could be built.
By restricting its supply, the developers in the mid-1990s were bringing home annual returns of 400 percent and making Hong Kong briefly the most expensive place on Earth. Its merchants, once famously willing to bargain on any sale, were forced by high rents to raise their prices to the point where they could no longer compete with other, more consumer-friendly cities. And, when the inevitable property crash finally happened, it left enormous numbers of the territory's citizens in negative equity - their houses worth considerably less than their mortgages.
Nor was Hong Kong's share market any more subject to free-market economics. When currency speculators went after the Hong Kong dollar in 1997 and accompanied this with a twin drive to short-sell shares, the Hong Kong government stepped in to buy any and all shares on the Hang Seng Index to prop up the oligarchs. In a single day, the government bought US$15.2 billion in private shares. Its Tracker Fund is still dealing with the overhang.
Singapore is a different case. Its shops and its groceries are a good deal freer. But Singapore was not built by competition. Its industrial base was, and to a great extent still is, run by the Singaporean government. The government either wholly or largely owns six of the island republic's top 10 listed companies. They include Singapore Telecom, Singapore Airlines, DBS Group Holdings, ST Engineering and Chartered Semiconductor. A special case in point is Singapore Press Holdings, which in turn owns Singapore's media - the Straits Times and the pilot fish that surround it. While the editors and reporters at the Straits Times take umbrage at being described as government poodles, in fact the papers do not print anything that the government does not want printed, a fact that the Cato Institute and its 50 libertarian colleagues apparently do not find important enough to include in the factors that make up a free economy.
And, while their groceries may be cheaper, the minority shareholders in Singapore Inc are hardly treated as first-class citizens. Singapore has for decades tried to widen its commercial base by using its companies to buy into corporate entities in other countries, sometimes with disastrous results and sometimes with just lackluster ones. DBS Group, the banking arm, paid an exorbitant 3.2 times book value to acquire Dao Heng Bank in Hong Kong in 2002, which caused its share price to sink. Singapore Telecom paid 50 times 2001 earnings to acquire Australia's Cable & Wireless in 2001, only to run into the world telecom glut. Its share price fell by 25 percent in the ensuring months. Singapore Inc has lately been buying into Indonesian companies. The jury is still out. In fact, most of Singapore Inc's forays into other countries have been problematical. The country's businesses tried to be first into Myanmar, building hotels and other facilities, only to discover the opprobrium in which the rest of the world holds Myanmar's pariah regime.
Taken together, the governments of the two territories thus make it easy to believe that the Cato Institute's criteria for economic freedom do not include a category for a country's common citizens and consumers. (Copyright 2003 Asia Times Online Co, Ltd. All rights reserved. Please contact content@atimes.com for information on our sales and syndication policies.)
extracts from :
http://www.atimes.com/atimes/Asian_Economy/EG12Dk01.html
Thursday, March 16, 2006
Development Trick
...
Services-Development trick - Protests in Hongkong and worldwide
We will be making a proposal for this call to action tomorrow (15 Dec) at the OWINFS Inside-Outside meeting in Hong Kong for folks to do actions or press work in home countries related to Services-Development trick.
Wed, 14 Dec 2005 -- Deborah James, Global Economy Director Global Exchange 415.575.5537 direct line 415.255.7296 x245 415.255.7498 fax 2017 Mission Street #303, San Francisco, CA 94110 http://www.globalexchange.org
Call to Action to Protest the WTO Negotiations in Hong Kong
This week, government negotiators from around the world are meeting in Hong Kong to negotiate the fate of public services, the global food supply, and jobs and development. In particular, this Ministerial is shaping up to focus on a developed country proposal to force the permanent liberalization of services, purchased by a so-called ìdevelopment package that is a misnomer of epic proportions.
Civil society organizations from around the world are in Hong Kong protesting the WTO. At the same time, developing countries are facing strong pressure from the US and EU to give in to their demands on the negotiations.
We call on our counterparts in our home countries to help us ensure that the truth about the WTOís threat to our livelihoods, services, agriculture, environment, democracy, sand sovereignty is covered in the media.
We especially ask for help in putting pressure on our representatives here in Hong Kong by reminding them that they are in Hong Kong to represent us, the people back home, and not to give in to developed country pressure.
Therefore we issue a call to action, asking for solidarity to:
1. Protest the unfair negotiations of the WTO that have had disastrous effects on farmers, workers, women, and the environment in the last ten years, and promise more of the same unless the WTO is turned around. In particular, to draw attention to the trick of the Services-for-Development scheme that is being cooked up in the WTO, detailed below.
2. Send a press release to your local media ensuring that the truth about the negotiations gets out. A sample press release is attached, which we encourage you to edit for your use.
We have attached a short summary on the technical aspects of the negotiations; an explanation detailing why the sectoral services negotiations are dangerous; and a short paper detailing the scam of the so-called Development package.
Civil Society Rejects Current Draft WTO Ministerial Text on Services
Civil society organizations and trade unions reject the current negotiations in the World Trade Organization, particularly the current text on Services called ìAnnex C of the draft declaration being discussed in Hong Kong this week.
We are appalled by the severe push by the developed countries in the current round of negotiations on the General Agreement on Trade in Services (GATS) to fundamentally re-write the way negotiations in services are to be conducted, in order to force countries to privatize services, and ensure that this privatization is locked in forever.
This will put countries, particularly developing countries, on a rapid and premature path of liberalization ñ forcing the selling off of domestic public and privatize services to foreign multinational corporations, cutting off access to essential services for the poor and damaging prospects for development ñ by seriously eroding the already limited flexibilities available to members in the negotiations.
In particular, financial services, telecommunications, energy, transportation, express delivery, distribution, water, education, and health are being targeted, among others.
We demand that OUR COUNTRY join others in safeguarding the developmental principles and priorities in the current WTO negotiations on services.
In addition, we denounce the bribe of a so-called ìdevelopment package that countries are being offered in order to accept the trick of expanding the breadth and scope of services negotiations. This so-called ìdevelopment package is a scam designed to pull the wool over the eyes of the developing countries with a few financial bribes, such as new development aid money; a promise of allowing unrestricted market access for the poorest countries;
But the US will not be offering any new aid money, and cannot deliver on promises of zero tariff or zero quota for the poorest countries. Also, the aid-for-trade cash is part of the old dependency building aid program and in fact strengthens the hold of the IMF and World Bank on developing countries. In addition, a significant part of this aid will be in the form of loans, which will simply drag developing countries deeper into debt.
The real aim of the scheme is to enable developing countries to comply with their WTO commitments to liberalize trade, not to make trade compatible with development.
This trick is worse than the Grinch that Stole Christmas. The US and EU are masquerading as Santa Claus, offering gifts of a so-called Development Package. But when you the so-called ìgift you find that the Package is empty. Or worse, that it is full of coal, because we will have been tricked into privatizing our services in exchange.
We therefore urge OUR COUNTRY to take leadership and be steadfast on this issue at the WTO ministerial meeting and completely reject the Annex C of the Hong Kong draft declaration.
WTO negotiations, particularly the services negotiations in Annex C, if accepted, will have a profoundly adverse impact on the needs and interests of developing countries.
Technical Information on the GATS negotiations in the World Trade Organization, December 2005
The current GATS negotiations are premised on the principles of progressive liberalization and by the right of member states to regulate. These negotiating precepts and parameters derived from the GATS agreement are carefully codified in the document known as the ìthe Guidelines and the Procedures for the Negotiations on Trade in Services (S/L/93). By virtue of paragraph 15 of the Doha Ministerial Declaration, the guidelines provide the mandate for the ongoing services negotiations.
These principles are important, for they allow member states to determine for themselves the breadth and depth of services liberalization they are ready to undertake in the current negotiations.
At present, the GATS uses a positive list approach where countries list only the commitments they are willing to undertake. Moreover, the negotiations are on a bilateral request-and-offer basis, and countries have the right to make offers according to what they consider appropriate in their national interests.
These principles are now being threatened by Annex C to the draft WTO ministerial declaration that trade ministers are negotiating in Hong Kong during the 6th WTO Ministerial Meeting from the 13-18th Dec 2005.
Despite the strong opposition raised by many developing country members during the negotiations, some these proposals of the developed country members managed to find their way into this annex which deals with the services negotiations.
In accordance with what the developed country members have proposed, paragraph 1 of Annex C attempts to get all countries to bind their existing levels of actual liberalization for modes 1 and 2 of supply; and in relation to mode 3 of supply countries would have to make commitments on ìenhanced levels of foreign equity participation and ìallowing for greater flexibility on the types of legal entity permitted. This is a back-door entry of the issue of Investment that was strongly and successfully rejected by developing countries in the Cancún Ministerial and codified in the July Package.
Furthermore, paragraph 7(b) of Annex C obliges all countries to participate in plurilateral negotiations in services. Members who have received requests in a specific sector or mode of supply ìshall enter into plurilateral negotiations to consider such requests. The use of the word ìshall means that developing countries will be forced to enter into negotiations in sectors in which they are asked by developed countries, and not the sectors of their own choosing.
Taken together, developing countries would be forced institutionally to commit a significant number of commercially important sectors to liberalization and to deepen that liberalization by removing restrictions on market access and national treatment, and other state regulations regardless of whether it is in their interests to do so.
Sectoral Negotiations and the Pitfalls for Development: Examples of Key Sectors*
In 1997, the WTO completed sectoral negotiations in Telecommunications and Financial Services. These negotiations, together with Maritime and Mode 4 had been carried over from the Uruguay Round. The negotiations on Telecoms and Finance, sectors US and EU were most keen on liberalizing, were successfully completed, whilst negotiations in the other two sectors collapsed.
In the current Round, it was agreed by all Members in 2001 that liberalisation can be advanced through bilateral, plurilateral or multilateral negotiations, but that the main mode of negotiations would be the request-offer approach. Negotiations are to also respect the flexible bottom-up approach enshrined in the GATS where countries can choose their pace and level of commitments. However, the EU, US, Japan, Australia etc are exerting great efforts in Hong Kong to change the rules and launch mandatory sectoral negotiations through Annex C and para. 21 of the draft Ministerial text. If launched, these negotiations would result in a framework of regulation in each sector that favours the interest of foreign investors or at least demands that foreign investors are given equal treatment as local suppliers.
Domestic suppliers in most developing countries are hardly competitive in comparison with the multinational giants. Aggressive liberalisation through sectoral negotiations will have serious implications on the survival of local suppliers, employment and the economy. The following are some examples of the demands and implications in key sectors.
DISTRIBUTION
A key objective of the negotiations in distribution, is to allow the access of foreign supermarkets into all countries. In practice, this means that the few large supermarket chains such as Wal-Mart, Tesco, Carrefour and Metro, which already dominate the retail market in most continents, will expand even further. These large supermarket chains use practices that lower prices for consumers but squeeze their suppliers and sometimes exploit their employees. For instance, Carrefour and Walmart Korea have been fined for bringing prices down by too large a margin, affecting other local retailers. The demand for supply in large volumes and high quality by supermarkets has also excluded small farmers and local suppliers from accessing the market.
If sectoral negotiations are launched, a pro-liberalisation framework of regulation would be put in place, including: eliminating economic needs tests which are currently used by governments to assess whether new supermarkets or hypermarkets have any negative economic, social or environmental impact.
elimination of any domestic regulation disallowing foreign supermarkets from carrying certain items. Such exclusion is sometimes implemented to promote the interests of domestic suppliers.
elimination of zoning laws that keep some small shops in town centers viable.
FINANCE
The GATS agreement already has a model for rapid liberalisation of investment and trade by foreign banks, insurance companies and other financial services, called the Understanding on Commitments in Financial Services. If sectoral negotiations are again launched, the liberalisation agenda would build on the current Understanding.
Already, this model requires far reaching liberalisation, and only very few developing countries have undertaken full commitments according to this framework. Apart from listing the many financial services that need to be liberalised, this model requires governments:
to remove any obstacle to foreign financial services to guarantee that foreign financial service suppliers will be permitted to introduce new financial services (in other words, without an assessment if this will cause financial instability or meet the needs of the domestic economy)
governments not to apply exemptions allowed by the GATS agreement. This ensures, for example, giving the same treatment to foreign and domestic service providers for procurement of financial services by public entities.
The US, EU and others, argue that financial liberalisation helps developing countries become more efficient. But this ignores the fact that:
foreign banks and insurance companies target the rich clients, excluding small companies and poorer clients from credit and other financial services, which stifles the economy and increases the gap between the rich and the poor, foreign financial services increase cross border capital flows which can lead to financial instability and crisis , the EU is requesting many developing countries to eliminate regulation that governments have in place to avoid a new financial crisis or to stimulate loans to poorer companies and clients.
GATS negotiators from the North have ignored the lessons learnt from the Asian financial crisis that liberalisation of financial services and capital require the necessary regulation and a well organised sequencing, rather than swift liberalisation.
HEALTH
If the health sector is fully liberalised, this would mean the prohibition of any limits on the numbers or activities of service providers (even if such policies are completely non-discriminatory, applying equally to foreign and local service providers). This prohibition is completely at odds with public policies that are designed to allocate health resources more equitably, for example between urban and rural areas, rich and poor people and between the public and the private not-for-profit sectors. Also, the application of the GATS national treatment rule in the health sector conflicts with policies that call for greater community-based control and decision-making (e.g. requirements that a majority of the board of directors of hospitals or health providers be chosen from the community they serve.) Such planning policies and local accountability measures are essential for ensuring access to health care as a basic human right. The strong pressure being put on WTO member governments to make substantial GATS commitments therefore poses a serious threat to redistributive health policies around the world.
ENERGY
Establishing a sectoral initiative on energy services, including gas and oil, would shift control of the most strategic resource for the global economy, from governments to private oil services giants like Halliburton. Energy-consuming nations claim that the free access to 70 percent of the world's 1 trillion barrels of proven oil reserves is "restricted" by regulation in energy-exporting nations and that stability of energy markets requires their opening up to more foreign investment and energy service providers by adopting new WTO rules. The Bush White House has made WTO Energy Services a top trade priority and the institutional centerpiece of its overarching foreign policy goal of establishing "global energy security."
A decision in Hong Kong to approve so-called plurilateral sectoral approaches would allow the US and other "Friends of Energy" to require all WTO Member energy exporters to open up their sectors to more privatization and the implementation of regulation favoring foreign companies. This will not result in a transfer of "ownership" per se over resources but will lock in a set of rules that will allow others to decide if, how, and by whom their resources would be utilized. This will effectively handcuff energy-rich nations from developing sectors that create domestic employment and technological expertise, as well as shift decision-making over future greenhouse gases from the UN Kyoto Protocol to the WTO.
EDUCATION
Foreign education providers want to remove regulatory settings which affect governance and ownership of institutions, accreditation, recognition of qualifications, educational materials, and quality. For example they object to joint venture and minimum foreign equity requirements, restrictions on setting up branch campuses overseas, restrictions on recruitment of students and on marketing, and requirements for local representation on the board of educational institutions. Countries such as New Zealand have had problems with unsustainable booms in the number of private English language schools, followed by financial failures leaving international students financially disadvantaged with uncompleted courses. GATS would prevent governments regulating the number of such schools or the number of students. Neither could they direct overseas owned private schools or tertiary education institutions into particular locations or courses needed for development reasons. If local private providers may receive government funding, foreign owned providers would be entitled to at least the same level of funding. Preferential access for local private higher educational institutions to public research grants and funding would not be allowed.
TRANSPORT & MARITIME
Domestic and coastal shipping is still heavily regulated. There are barriers in many domestic shipping services. In some countries foreign ships are banned from coastal trade, and only its own flagged ships are able to transport goods internally. Those with a competitive edge would like to eliminate some of the restrictions on foreign equity ownership and management in ports. Any sectoral negotiations would push de-regulation of this sector in such a direction.
* This document was collectively written by Scott Sinclair, Myriam Vander Stichele, Victor Menotti, Yvette Pena Lopes, Bill Rosenberg, Toni Verger and Aileen Kwa.
The Development Package: Deceptive and Dangerous
Statement at Press Conference of Walden Bello, Focus on the Global South, Hong Kong, Dec. 13, 2005*
With the negotiations stalemated in the key areas, the WTO Secretariat and the big trade powers are using the scheme of a "development package" to pass off the current ministerial conference as a success. The idea is to gain consensus for the development package now, then push for agreement on the more controversial areas of services, agriculture, and non-agricultural market access in a more protracted process extending over the next few months, possibly culminating in another ministerial by the middle of 2006.
The only problem is that the developing countries are not likely to fall for it, because they realize that this development package is empty.
The so-called development package consists of several elements:
duty free and quota free access for exports from Least Developed Countries (LDCs);
aid for trade;
Expansion and deepening of the ìIntegrated Framework for Trade Related Capacity Building (IF);
incorporation of the TRIPs and Health implementation decision of August 2003 as an amendment to the TRIPs Agreement;
a package of proposals passed of as providing Special and Differential Treatment for LDCs.
The duty and quota free access proposal comes up against extreme reluctance by the United States (US) to grant this, as shown by the US reserving the right to invoke safeguard measures in the form of tariff increases against such imports when it deems this necessary. The European Union (EU) has also indicated that it could seek concessions to protect its own domestic markets from excessive duty and quota free imports through safeguard measures on specific products.
The aid for trade scheme is hollow for various reasons. One, there are few concrete commitments from key developed countries, and certainly not from the US. Indeed, there is no new money at all, and the aid-for-trade cash is part of the old dependency building aid program and in fact strengthens the hold of the IMF and World Bank on developing countries. Two, a significant part of this aid will be in the form of loans, which will simply drag developing countries deeper into debt. Three, the real aim of the scheme is to enable developing countries to comply with their WTO commitments to liberalize trade, not to make trade compatible with development. What is this except trade facilitation, which is already part of the negotiations? Again, this is a case of smoke and mirrors. Four, the scheme is built around upgrading the capacities of developing countries to export specific products to the donor countries, meaning it is the needs of the latter that predominate. This is certainly the case with the Japanese aid for trade package being proposed, which clearly outlines how Japanese expertise, technology, goods and services will be used to develop niche products for Japanese markets. This niche market development is an economically risky strategy since it would structure production capacity of LDCs around the changing needs and preferences of external markets over which producers have no control.
The third major problem with the development package of the draft ministerial text has to do with its call for the ìeffective implementation of the Integrated Framework. What this means is to more strongly coordinate trade liberalization policies committed under the WTO with the structural adjustment policies imposed by the World Bank and the International Monetary Fund (IMF). These controversial policies are the primary cause of economic stagnation, increase in unemployment and poverty, and the increase in inequality in so many of the ìadjusted countries.
Fourth, the incorporation of the TRIPs and Health implementing decision cannot count as a positive element development-wise since the export of life-saving drugs from developing countries with manufacturing capacity to countries with no capacity is so hemmed in with onerous restrictions by the transnational corporate patent holders that few, if any, countries have sought a waiver from the TRIPs Agreement to take advantage of it.
Fifth, the so-called Special and Differential Treatment provisions do not really respect the special structural conditions of LDCs that have hindered development, but speed up their capacity to live up to their WTO commitments, to undertake what the draft ministerial text calls ìtheir implementation obligations.
How can the LDCs take the commitments of the developed countries seriously when the US continues to maintain cotton subsidies that have wrought tremendous suffering among West African farmers, including the Step 2 Program? How can they take this seriously when what the US is considering as compensation--$7 million to five countries--is miniscule compared to the tremendous losses in incomes and livelihoods that African farmerss have suffered?
The problem is the current rules and institutions governing trade; no amount of aid can ever substitute for the fundamental transformation of these rules and institutions. This development package is like the so-called debt reduction schemes that make countries even more indebted and economically vulnerable than when they entered the program.
In conclusion, the development package is deceptive and dangerous. Its purpose is not to assist developing countries integrate trade into development, but to trick them assenting to a problematic deal. It is meant to split the ranks of the developing countries, thus facilitating an agreement that only serves the interests of the rich countries. We urge the developing country governments to stand together and reject this package.
extracts:
http://www.nadir.org/nadir/initiativ/agp/free/wto/hongkong2005/reports/1214services_development_trick.htm
Services-Development trick - Protests in Hongkong and worldwide
We will be making a proposal for this call to action tomorrow (15 Dec) at the OWINFS Inside-Outside meeting in Hong Kong for folks to do actions or press work in home countries related to Services-Development trick.
Wed, 14 Dec 2005 -- Deborah James, Global Economy Director Global Exchange 415.575.5537 direct line 415.255.7296 x245 415.255.7498 fax 2017 Mission Street #303, San Francisco, CA 94110 http://www.globalexchange.org
Call to Action to Protest the WTO Negotiations in Hong Kong
This week, government negotiators from around the world are meeting in Hong Kong to negotiate the fate of public services, the global food supply, and jobs and development. In particular, this Ministerial is shaping up to focus on a developed country proposal to force the permanent liberalization of services, purchased by a so-called ìdevelopment package that is a misnomer of epic proportions.
Civil society organizations from around the world are in Hong Kong protesting the WTO. At the same time, developing countries are facing strong pressure from the US and EU to give in to their demands on the negotiations.
We call on our counterparts in our home countries to help us ensure that the truth about the WTOís threat to our livelihoods, services, agriculture, environment, democracy, sand sovereignty is covered in the media.
We especially ask for help in putting pressure on our representatives here in Hong Kong by reminding them that they are in Hong Kong to represent us, the people back home, and not to give in to developed country pressure.
Therefore we issue a call to action, asking for solidarity to:
1. Protest the unfair negotiations of the WTO that have had disastrous effects on farmers, workers, women, and the environment in the last ten years, and promise more of the same unless the WTO is turned around. In particular, to draw attention to the trick of the Services-for-Development scheme that is being cooked up in the WTO, detailed below.
2. Send a press release to your local media ensuring that the truth about the negotiations gets out. A sample press release is attached, which we encourage you to edit for your use.
We have attached a short summary on the technical aspects of the negotiations; an explanation detailing why the sectoral services negotiations are dangerous; and a short paper detailing the scam of the so-called Development package.
Civil Society Rejects Current Draft WTO Ministerial Text on Services
Civil society organizations and trade unions reject the current negotiations in the World Trade Organization, particularly the current text on Services called ìAnnex C of the draft declaration being discussed in Hong Kong this week.
We are appalled by the severe push by the developed countries in the current round of negotiations on the General Agreement on Trade in Services (GATS) to fundamentally re-write the way negotiations in services are to be conducted, in order to force countries to privatize services, and ensure that this privatization is locked in forever.
This will put countries, particularly developing countries, on a rapid and premature path of liberalization ñ forcing the selling off of domestic public and privatize services to foreign multinational corporations, cutting off access to essential services for the poor and damaging prospects for development ñ by seriously eroding the already limited flexibilities available to members in the negotiations.
In particular, financial services, telecommunications, energy, transportation, express delivery, distribution, water, education, and health are being targeted, among others.
We demand that OUR COUNTRY join others in safeguarding the developmental principles and priorities in the current WTO negotiations on services.
In addition, we denounce the bribe of a so-called ìdevelopment package that countries are being offered in order to accept the trick of expanding the breadth and scope of services negotiations. This so-called ìdevelopment package is a scam designed to pull the wool over the eyes of the developing countries with a few financial bribes, such as new development aid money; a promise of allowing unrestricted market access for the poorest countries;
But the US will not be offering any new aid money, and cannot deliver on promises of zero tariff or zero quota for the poorest countries. Also, the aid-for-trade cash is part of the old dependency building aid program and in fact strengthens the hold of the IMF and World Bank on developing countries. In addition, a significant part of this aid will be in the form of loans, which will simply drag developing countries deeper into debt.
The real aim of the scheme is to enable developing countries to comply with their WTO commitments to liberalize trade, not to make trade compatible with development.
This trick is worse than the Grinch that Stole Christmas. The US and EU are masquerading as Santa Claus, offering gifts of a so-called Development Package. But when you the so-called ìgift you find that the Package is empty. Or worse, that it is full of coal, because we will have been tricked into privatizing our services in exchange.
We therefore urge OUR COUNTRY to take leadership and be steadfast on this issue at the WTO ministerial meeting and completely reject the Annex C of the Hong Kong draft declaration.
WTO negotiations, particularly the services negotiations in Annex C, if accepted, will have a profoundly adverse impact on the needs and interests of developing countries.
Technical Information on the GATS negotiations in the World Trade Organization, December 2005
The current GATS negotiations are premised on the principles of progressive liberalization and by the right of member states to regulate. These negotiating precepts and parameters derived from the GATS agreement are carefully codified in the document known as the ìthe Guidelines and the Procedures for the Negotiations on Trade in Services (S/L/93). By virtue of paragraph 15 of the Doha Ministerial Declaration, the guidelines provide the mandate for the ongoing services negotiations.
These principles are important, for they allow member states to determine for themselves the breadth and depth of services liberalization they are ready to undertake in the current negotiations.
At present, the GATS uses a positive list approach where countries list only the commitments they are willing to undertake. Moreover, the negotiations are on a bilateral request-and-offer basis, and countries have the right to make offers according to what they consider appropriate in their national interests.
These principles are now being threatened by Annex C to the draft WTO ministerial declaration that trade ministers are negotiating in Hong Kong during the 6th WTO Ministerial Meeting from the 13-18th Dec 2005.
Despite the strong opposition raised by many developing country members during the negotiations, some these proposals of the developed country members managed to find their way into this annex which deals with the services negotiations.
In accordance with what the developed country members have proposed, paragraph 1 of Annex C attempts to get all countries to bind their existing levels of actual liberalization for modes 1 and 2 of supply; and in relation to mode 3 of supply countries would have to make commitments on ìenhanced levels of foreign equity participation and ìallowing for greater flexibility on the types of legal entity permitted. This is a back-door entry of the issue of Investment that was strongly and successfully rejected by developing countries in the Cancún Ministerial and codified in the July Package.
Furthermore, paragraph 7(b) of Annex C obliges all countries to participate in plurilateral negotiations in services. Members who have received requests in a specific sector or mode of supply ìshall enter into plurilateral negotiations to consider such requests. The use of the word ìshall means that developing countries will be forced to enter into negotiations in sectors in which they are asked by developed countries, and not the sectors of their own choosing.
Taken together, developing countries would be forced institutionally to commit a significant number of commercially important sectors to liberalization and to deepen that liberalization by removing restrictions on market access and national treatment, and other state regulations regardless of whether it is in their interests to do so.
Sectoral Negotiations and the Pitfalls for Development: Examples of Key Sectors*
In 1997, the WTO completed sectoral negotiations in Telecommunications and Financial Services. These negotiations, together with Maritime and Mode 4 had been carried over from the Uruguay Round. The negotiations on Telecoms and Finance, sectors US and EU were most keen on liberalizing, were successfully completed, whilst negotiations in the other two sectors collapsed.
In the current Round, it was agreed by all Members in 2001 that liberalisation can be advanced through bilateral, plurilateral or multilateral negotiations, but that the main mode of negotiations would be the request-offer approach. Negotiations are to also respect the flexible bottom-up approach enshrined in the GATS where countries can choose their pace and level of commitments. However, the EU, US, Japan, Australia etc are exerting great efforts in Hong Kong to change the rules and launch mandatory sectoral negotiations through Annex C and para. 21 of the draft Ministerial text. If launched, these negotiations would result in a framework of regulation in each sector that favours the interest of foreign investors or at least demands that foreign investors are given equal treatment as local suppliers.
Domestic suppliers in most developing countries are hardly competitive in comparison with the multinational giants. Aggressive liberalisation through sectoral negotiations will have serious implications on the survival of local suppliers, employment and the economy. The following are some examples of the demands and implications in key sectors.
DISTRIBUTION
A key objective of the negotiations in distribution, is to allow the access of foreign supermarkets into all countries. In practice, this means that the few large supermarket chains such as Wal-Mart, Tesco, Carrefour and Metro, which already dominate the retail market in most continents, will expand even further. These large supermarket chains use practices that lower prices for consumers but squeeze their suppliers and sometimes exploit their employees. For instance, Carrefour and Walmart Korea have been fined for bringing prices down by too large a margin, affecting other local retailers. The demand for supply in large volumes and high quality by supermarkets has also excluded small farmers and local suppliers from accessing the market.
If sectoral negotiations are launched, a pro-liberalisation framework of regulation would be put in place, including: eliminating economic needs tests which are currently used by governments to assess whether new supermarkets or hypermarkets have any negative economic, social or environmental impact.
elimination of any domestic regulation disallowing foreign supermarkets from carrying certain items. Such exclusion is sometimes implemented to promote the interests of domestic suppliers.
elimination of zoning laws that keep some small shops in town centers viable.
FINANCE
The GATS agreement already has a model for rapid liberalisation of investment and trade by foreign banks, insurance companies and other financial services, called the Understanding on Commitments in Financial Services. If sectoral negotiations are again launched, the liberalisation agenda would build on the current Understanding.
Already, this model requires far reaching liberalisation, and only very few developing countries have undertaken full commitments according to this framework. Apart from listing the many financial services that need to be liberalised, this model requires governments:
to remove any obstacle to foreign financial services to guarantee that foreign financial service suppliers will be permitted to introduce new financial services (in other words, without an assessment if this will cause financial instability or meet the needs of the domestic economy)
governments not to apply exemptions allowed by the GATS agreement. This ensures, for example, giving the same treatment to foreign and domestic service providers for procurement of financial services by public entities.
The US, EU and others, argue that financial liberalisation helps developing countries become more efficient. But this ignores the fact that:
foreign banks and insurance companies target the rich clients, excluding small companies and poorer clients from credit and other financial services, which stifles the economy and increases the gap between the rich and the poor, foreign financial services increase cross border capital flows which can lead to financial instability and crisis , the EU is requesting many developing countries to eliminate regulation that governments have in place to avoid a new financial crisis or to stimulate loans to poorer companies and clients.
GATS negotiators from the North have ignored the lessons learnt from the Asian financial crisis that liberalisation of financial services and capital require the necessary regulation and a well organised sequencing, rather than swift liberalisation.
HEALTH
If the health sector is fully liberalised, this would mean the prohibition of any limits on the numbers or activities of service providers (even if such policies are completely non-discriminatory, applying equally to foreign and local service providers). This prohibition is completely at odds with public policies that are designed to allocate health resources more equitably, for example between urban and rural areas, rich and poor people and between the public and the private not-for-profit sectors. Also, the application of the GATS national treatment rule in the health sector conflicts with policies that call for greater community-based control and decision-making (e.g. requirements that a majority of the board of directors of hospitals or health providers be chosen from the community they serve.) Such planning policies and local accountability measures are essential for ensuring access to health care as a basic human right. The strong pressure being put on WTO member governments to make substantial GATS commitments therefore poses a serious threat to redistributive health policies around the world.
ENERGY
Establishing a sectoral initiative on energy services, including gas and oil, would shift control of the most strategic resource for the global economy, from governments to private oil services giants like Halliburton. Energy-consuming nations claim that the free access to 70 percent of the world's 1 trillion barrels of proven oil reserves is "restricted" by regulation in energy-exporting nations and that stability of energy markets requires their opening up to more foreign investment and energy service providers by adopting new WTO rules. The Bush White House has made WTO Energy Services a top trade priority and the institutional centerpiece of its overarching foreign policy goal of establishing "global energy security."
A decision in Hong Kong to approve so-called plurilateral sectoral approaches would allow the US and other "Friends of Energy" to require all WTO Member energy exporters to open up their sectors to more privatization and the implementation of regulation favoring foreign companies. This will not result in a transfer of "ownership" per se over resources but will lock in a set of rules that will allow others to decide if, how, and by whom their resources would be utilized. This will effectively handcuff energy-rich nations from developing sectors that create domestic employment and technological expertise, as well as shift decision-making over future greenhouse gases from the UN Kyoto Protocol to the WTO.
EDUCATION
Foreign education providers want to remove regulatory settings which affect governance and ownership of institutions, accreditation, recognition of qualifications, educational materials, and quality. For example they object to joint venture and minimum foreign equity requirements, restrictions on setting up branch campuses overseas, restrictions on recruitment of students and on marketing, and requirements for local representation on the board of educational institutions. Countries such as New Zealand have had problems with unsustainable booms in the number of private English language schools, followed by financial failures leaving international students financially disadvantaged with uncompleted courses. GATS would prevent governments regulating the number of such schools or the number of students. Neither could they direct overseas owned private schools or tertiary education institutions into particular locations or courses needed for development reasons. If local private providers may receive government funding, foreign owned providers would be entitled to at least the same level of funding. Preferential access for local private higher educational institutions to public research grants and funding would not be allowed.
TRANSPORT & MARITIME
Domestic and coastal shipping is still heavily regulated. There are barriers in many domestic shipping services. In some countries foreign ships are banned from coastal trade, and only its own flagged ships are able to transport goods internally. Those with a competitive edge would like to eliminate some of the restrictions on foreign equity ownership and management in ports. Any sectoral negotiations would push de-regulation of this sector in such a direction.
* This document was collectively written by Scott Sinclair, Myriam Vander Stichele, Victor Menotti, Yvette Pena Lopes, Bill Rosenberg, Toni Verger and Aileen Kwa.
The Development Package: Deceptive and Dangerous
Statement at Press Conference of Walden Bello, Focus on the Global South, Hong Kong, Dec. 13, 2005*
With the negotiations stalemated in the key areas, the WTO Secretariat and the big trade powers are using the scheme of a "development package" to pass off the current ministerial conference as a success. The idea is to gain consensus for the development package now, then push for agreement on the more controversial areas of services, agriculture, and non-agricultural market access in a more protracted process extending over the next few months, possibly culminating in another ministerial by the middle of 2006.
The only problem is that the developing countries are not likely to fall for it, because they realize that this development package is empty.
The so-called development package consists of several elements:
duty free and quota free access for exports from Least Developed Countries (LDCs);
aid for trade;
Expansion and deepening of the ìIntegrated Framework for Trade Related Capacity Building (IF);
incorporation of the TRIPs and Health implementation decision of August 2003 as an amendment to the TRIPs Agreement;
a package of proposals passed of as providing Special and Differential Treatment for LDCs.
The duty and quota free access proposal comes up against extreme reluctance by the United States (US) to grant this, as shown by the US reserving the right to invoke safeguard measures in the form of tariff increases against such imports when it deems this necessary. The European Union (EU) has also indicated that it could seek concessions to protect its own domestic markets from excessive duty and quota free imports through safeguard measures on specific products.
The aid for trade scheme is hollow for various reasons. One, there are few concrete commitments from key developed countries, and certainly not from the US. Indeed, there is no new money at all, and the aid-for-trade cash is part of the old dependency building aid program and in fact strengthens the hold of the IMF and World Bank on developing countries. Two, a significant part of this aid will be in the form of loans, which will simply drag developing countries deeper into debt. Three, the real aim of the scheme is to enable developing countries to comply with their WTO commitments to liberalize trade, not to make trade compatible with development. What is this except trade facilitation, which is already part of the negotiations? Again, this is a case of smoke and mirrors. Four, the scheme is built around upgrading the capacities of developing countries to export specific products to the donor countries, meaning it is the needs of the latter that predominate. This is certainly the case with the Japanese aid for trade package being proposed, which clearly outlines how Japanese expertise, technology, goods and services will be used to develop niche products for Japanese markets. This niche market development is an economically risky strategy since it would structure production capacity of LDCs around the changing needs and preferences of external markets over which producers have no control.
The third major problem with the development package of the draft ministerial text has to do with its call for the ìeffective implementation of the Integrated Framework. What this means is to more strongly coordinate trade liberalization policies committed under the WTO with the structural adjustment policies imposed by the World Bank and the International Monetary Fund (IMF). These controversial policies are the primary cause of economic stagnation, increase in unemployment and poverty, and the increase in inequality in so many of the ìadjusted countries.
Fourth, the incorporation of the TRIPs and Health implementing decision cannot count as a positive element development-wise since the export of life-saving drugs from developing countries with manufacturing capacity to countries with no capacity is so hemmed in with onerous restrictions by the transnational corporate patent holders that few, if any, countries have sought a waiver from the TRIPs Agreement to take advantage of it.
Fifth, the so-called Special and Differential Treatment provisions do not really respect the special structural conditions of LDCs that have hindered development, but speed up their capacity to live up to their WTO commitments, to undertake what the draft ministerial text calls ìtheir implementation obligations.
How can the LDCs take the commitments of the developed countries seriously when the US continues to maintain cotton subsidies that have wrought tremendous suffering among West African farmers, including the Step 2 Program? How can they take this seriously when what the US is considering as compensation--$7 million to five countries--is miniscule compared to the tremendous losses in incomes and livelihoods that African farmerss have suffered?
The problem is the current rules and institutions governing trade; no amount of aid can ever substitute for the fundamental transformation of these rules and institutions. This development package is like the so-called debt reduction schemes that make countries even more indebted and economically vulnerable than when they entered the program.
In conclusion, the development package is deceptive and dangerous. Its purpose is not to assist developing countries integrate trade into development, but to trick them assenting to a problematic deal. It is meant to split the ranks of the developing countries, thus facilitating an agreement that only serves the interests of the rich countries. We urge the developing country governments to stand together and reject this package.
extracts:
http://www.nadir.org/nadir/initiativ/agp/free/wto/hongkong2005/reports/1214services_development_trick.htm
Tuesday, March 14, 2006
'Air rage'
...
Airplane Hooligans
'Air rage' is now a major concern following moves by airlines to draw up a passenger blacklist after a number of violent in-flight incidents. German flight attendants report that one thing is certain, with the growth in air travel the number of in-flight violent incidents is also increasing. Otto Ziegelmeier, Director of the Independent Flight Attendants' Organisation (UFO) reports that the range of incidents by people described as "unruly passengers" varies from racist remarks all the way to fistfights on board.
A security expert for a pilots' association agrees that it is a serious problem. British Airways registered 260 incidents in 1997, four times the figure of three years earlier. There are no statistics in Germany, but officials estimate that each year some 100,000 passengers on board German airplanes misbehave seriously.
While a number of foreign airlines are starting to take action against unruly passengers, the topic is not taken too seriously in Germany. Flight attendants and pilots groups feel that airlines, out of concern for their reputation, are covering up the problem. For example, Lufthansa officials speak only of some isolated incidents and say that so far there have been no serious cases reported. Compared to the total number of air travelers, unruly passengers remain a small minority. But then, a single passenger can become a security hazard if he starts to play with the doors, tries to force his way into the cockpit or secretly smokes a cigarette in the toilet.
Experts say that often the fear of flying is a cause of aggressive behaviour. Usually alcohol plays a role because in the extremely low humidity of the airplane it has a much greater effect than on the ground. In many cases, when flight attendants deny a passenger another drink, there is a heated reaction. In one instance, a man struck a stewardess so violently in the face that she suffered a broken jaw.
Airlines often have problems with business passengers because they are always used to being in control. However, as one airline official stated, "but up in the sky, it's the pilot who's in charge." Other agencies agree that many business passengers have a problem with following someone else's instructions. He said that American Airlines has even observed that the majority of unruly passengers are to be found in the first-class and business-class sections.How do airlines deal with these passengers? A pilot for a German charter airline once had to deal with a group of 10 to 15 vacationers who were dancing through the aisle while carrying a portable stereo playing loud music. He warned the vacationers that if he was forced to make an unscheduled stop in New York, it would cost them $25,000. That quickly calmed them down. British Airways has begun warning passengers that they would be banned from flying with the airline after two incidents.
Airplane Hooligans
'Air rage' is now a major concern following moves by airlines to draw up a passenger blacklist after a number of violent in-flight incidents. German flight attendants report that one thing is certain, with the growth in air travel the number of in-flight violent incidents is also increasing. Otto Ziegelmeier, Director of the Independent Flight Attendants' Organisation (UFO) reports that the range of incidents by people described as "unruly passengers" varies from racist remarks all the way to fistfights on board.
A security expert for a pilots' association agrees that it is a serious problem. British Airways registered 260 incidents in 1997, four times the figure of three years earlier. There are no statistics in Germany, but officials estimate that each year some 100,000 passengers on board German airplanes misbehave seriously.
While a number of foreign airlines are starting to take action against unruly passengers, the topic is not taken too seriously in Germany. Flight attendants and pilots groups feel that airlines, out of concern for their reputation, are covering up the problem. For example, Lufthansa officials speak only of some isolated incidents and say that so far there have been no serious cases reported. Compared to the total number of air travelers, unruly passengers remain a small minority. But then, a single passenger can become a security hazard if he starts to play with the doors, tries to force his way into the cockpit or secretly smokes a cigarette in the toilet.
Experts say that often the fear of flying is a cause of aggressive behaviour. Usually alcohol plays a role because in the extremely low humidity of the airplane it has a much greater effect than on the ground. In many cases, when flight attendants deny a passenger another drink, there is a heated reaction. In one instance, a man struck a stewardess so violently in the face that she suffered a broken jaw.
Airlines often have problems with business passengers because they are always used to being in control. However, as one airline official stated, "but up in the sky, it's the pilot who's in charge." Other agencies agree that many business passengers have a problem with following someone else's instructions. He said that American Airlines has even observed that the majority of unruly passengers are to be found in the first-class and business-class sections.How do airlines deal with these passengers? A pilot for a German charter airline once had to deal with a group of 10 to 15 vacationers who were dancing through the aisle while carrying a portable stereo playing loud music. He warned the vacationers that if he was forced to make an unscheduled stop in New York, it would cost them $25,000. That quickly calmed them down. British Airways has begun warning passengers that they would be banned from flying with the airline after two incidents.
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