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up Call


Click here to subscribe to the print edition. [image, unknown] New Internationalist 334[image, unknown] [image, unknown] [image, unknown] May 2001[image, unknown] Click here to search the mega index.

Sleeping through the wake-up call
David Ransom meets the people he can vote for and listens to what they can tell him about a club whose rules everyone apparently wants to obey.
Transparent: Verifiable. [Invisible]

‘Well, I don’t think I can have much influence on the World Trade Organization,’ says David Penwarden. ‘It’s too big for me, to be honest.’

I’ve recently moved house, and it’s not been easy to discover who my representatives on the Oxford City Council are. When I eventually find him, David Penwarden turns out to be worldly-wise, benign and a Liberal Democrat. He’s made his way via the army and commercial catering to run, at one point, the ubiquitous Little Chef chain of roadside eateries.

‘You do respond, in local politics certainly,’ he says, ‘to what people say on the doorstep. World trade is not normally mentioned, although globalization is, occasionally.’

He is not at all happy, however, with the state of local democracy. ‘I think local government has been emasculated in my lifetime,’ he says. ‘The money comes in extremely oddly. We get, say, $5 million for a programme. There’s no consultation with local councillors. A private-sector body is appointed. Wonderful people. But then they have somehow to insert themselves into a local community...’

What’s this got to do with the WTO? Well, the General Agreement on Trade in Services (GATS), now being negotiated in Geneva, covers all services in which private, commercial providers have some kind of a stake. These services will have to be run on a ‘least-trade-restrictive’ basis which opens them up to international competition.

There is, of course, a fundamental difference between private and public service. The former is based on the ability to pay. The latter is based, however tenuously, on some measure of need and equity, and is usually funded from taxation. You can use public funds to turn public services into private ones, and private contractors are often very keen to get their hands on them. But it’s not so easy to shift concepts of need or equity into services run for profit.

This is what the people of Cochabamba in Bolivia discovered when their water supplies were sold off to a private consortium of foreign investors and prices skyrocketed. Massive popular protests, which continue today, have meant that the deal has had to be revised.

So the issue is really quite simple. The more services are privatized, the more unmet needs and inequality there is likely to be. The GATS ‘liberalization’ of services is just one of the ways the WTO is responsible for increasing inequality.

Although individual governments will, in theory, be allowed to choose which services to include in the Agreement, they will not be able to exclude those where the private sector already has a foothold. There are virtually no areas of public service in Britain – or anywhere else – in which the private sector is not now deeply involved. And WTO rulings apply as much to local as to national governments. In the US the State of Massachusetts lost a WTO case brought by the European Union and Japan for discriminating against companies doing business with Burma.

Rose Hill, the area of Oxford where we live, is one of the poorer parts of a very rich city, with relatively more to lose. For example, there’s a shortage of homes so house prices have soared. Much of Rose Hill is still occupied by public housing for low-income tenants. I suggest to David Penwarden that, encouraged by GATS, the Council might decide to sell off this ‘service’, and its valuable land, to the highest international bidder. Or am I being fanciful?

‘Not at all,’ he says. ‘As a matter of fact, it’s happening already.’

In view of this, is he willing or able to do anything about the WTO?

‘Well, I suppose if people became desperately concerned about it then I think we’d have meetings and get a little whirlpool going. We certainly would.’

So, what does he, personally, think of the WTO?

‘Well, I tend to think of it as American imperialism, actually. Which I am bitterly opposed to. Well, you can’t really be bitter about it.’

Andrew Smith, my local Member of Parliament, is Chief Secretary to the Treasury, a Cabinet Minister in the New Labour Government and rather grand. You have to be very determined indeed to get to see him. There’s a general election anticipated for the coming Spring – the Labour Party has reportedly instructed all its candidates to give no more than 30 seconds to any individual ‘constituent’ during the election campaign, and not to discuss Labour Party policy in detail. When I ring for an appointment I’m given 15 minutes several weeks later. When I ring to confirm I am told he’s gone to Glasgow. Eventually, I spend ten minutes freezing outside a community centre before I’m let in. Hardly a good advertisement for the democratic way of life.

The interview does not begin well. In fact, it very nearly doesn’t begin at all. Andrew Smith says that trade is not one of his responsibilities as a Cabinet Minister. He normally has a choice about granting an interview to a journalist. Because I am a constituent of his he is legally obliged, though visibly displeased, to see me. I offer not to interview him. He agrees to answer the questions I’ve sent him in writing beforehand.

‘The issue here, of course, is globalization,’ he says. ‘The challenge is how, in what circumstances, can globalization be steered, influenced, shaped to work in a way which is fairer? Now, if you say “how can we make the WTO more democratic?” – this country has not been uncritical of international institutions and is saying that they need reform.’

The GATS ‘liberalization’ of services is just one of the ways the WTO is responsible for increasing inequality

Does he think, for example, that the WTO should pull in its horns, shrink its ambitions a trifle?

‘Isn’t there a danger,’ he asks, ‘that that can play to a fundamentally protectionist agenda? I’m not saying it necessarily does. But I’m apprehensive. There can be some very plausible reasons put forward by – I don’t use the term in an especially derogatory fashion – vested interests in rich countries to keep out the products and services of the rest. The ultimate effect is to deny the opportunity to poorer and weaker people, and to retrench the position of richer and more powerful people. And I am always concerned with that.’

So free trade, and the WTO, aim to protect the weak from the strong?

‘Shall we get through the rest of your questions?’ he replies.

Does he have any personal views on the matter?

‘Of course!’ he says. ‘That we should try to fashion global institutions on a more democratic basis is unarguable. And because it takes multilateral agreement to reform a multilateral institution, there is almost an in-built institutional inertia there. I think that is a real challenge.’

The inertia doesn’t seem to me to be limited to the ‘institutions’. The idea that reforms to the WTO are at once highly desirable and dangerously ‘protectionist’ is, I’m afraid to say, common currency in the political establishment.

Time to speak to the Trade Minister, Richard Caborn. Before I do so I must receive an ‘off-the-record’ briefing from a senior official in the Department for Trade and Industry (DTI) in London. The very name of this Department says quite a lot about how trade has been viewed for years by successive British Governments – as an adjunct of business.

I ask the official whether it might not be a sensible precaution to do some kind of ‘impact assessment’ of the WTO’s record so far. No, this cannot be done. Economists don’t have the tools. Then how, I ask, can the Department advocate ‘liberalization’ in future while being quite unable to evaluate the past? Well, perhaps I have a point. As a matter of fact, I have a good deal more than a point. The impact assessment hasn’t been done, it seems perfectly obvious to me, because everyone knows what the results would show: growing inequality and environmental destruction.

Richard Caborn tells me that the WTO ‘needs to be more transparent and it needs to be more accessible. That’s what we’re working towards. I was in Geneva last week. I had a couple of hours with Mike Moore [the Director General] expressing our concerns and trying to be helpful in making the WTO more transparent...’

Words like ‘transparent’ sound worthy enough, so long as you don’t look too closely at what they actually mean: don’t change a thing, just make it more visible – or invisible, as the case may be.

Does Mr Caborn think that all of us might be better off if the WTO scaled down its ambitions?

‘Well, we don’t accept that, you see, as a government,’ he says. ‘We think that is wrong... We don’t believe that a narrow agenda will achieve, and can’t achieve, the objectives of a more liberalized system...’

As an elected politician, does he sometimes feel that he’s strayed into the world of big business?

‘Well, it is a political issue,’ he insists. ‘If anything showed us whether it was bloody political, it was Seattle! That was a wake-up call, was it not?’

Is it anything more than a public-relations problem that just needs smoothing over?

‘The WTO is a club that everyone wants to bloody join,’ responds Mr Caborn. ‘What we’ve got to make sure is that it is fair, it’s transparent and it’s a rules-based organization where those rules are respected by everybody.’

That surely depends on what the rules are and who makes them. Time to take the next step along a path that seems to lead inexorably towards Brussels, the headquarters of the European Union.

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GATS - General Agreement on Trade in Services

WTO definition:* ‘Under GATS, if a country allows foreign competition in a sector, equal opportunities in that sector should be given to service providers from all other WTO members. This applies even if the country has made no specific commitment to provide foreign companies access to its markets under the WTO.’

WTO explanation:* ‘Ranging from architecture to value-added telecommunications and beyond, services are the largest and most dynamic component of both developed and developing country economies.’

NI assessment: All public services are threatened by GATS. Large multinational companies want to get their hands on them. The rich world dominates international trade in services, and will profit the most.

Vital statistics from WTO website: [www.wto.org]
* From WTO website: www.wto.org

Forced Landing
The relaxing muzak and friendly, well-groomed airline crews are a pleasant facade that conceals the sordid war over routes unleashed by the privatization of much of Latin America’s passenger-airline industry in the 1990s.

One extreme case is Aerolíneas Argentinas, which was privatized in 1991. It is now a mere shadow of what it was 15 years ago. Alicia Castro, secretary-general of the trade union representing the employees, believes there is ‘a plan to downsize Aerolíneas until it disappears’.

Castro, who is also a Parliamentary Deputy for Argentina’s governing centre-left Alliance, says Aerolíneas Argentinas had been one of that country’s best-run public enterprises. Today it owes $900 million and loses $25 million a month, according to its board of directors – each of whom collects a salary of $20,000 a month. The privatization was so strongly opposed by trade unions and the Alliance – which was then in opposition – that the authorities considered nationalizing the company once again.

The Spanish airline Iberia acquired 85 percent of the shares but did not pay with its own cash. It used a mortgage on the planes and sold off assets, including offices in Madrid, Paris, Rome, London and Amsterdam. Nearly 6,500 employees were laid off and the salaries of the remaining 4,000 employees were frozen. The company’s travel agency, Optar – the largest of its kind in Latin America – was dismantled. Its pilot-training centre fell by the wayside and three flight simulators were shipped out to Madrid. Now pilots are sent to be trained in Israel.

The deterioration of infrastructure led to greater vulnerability of domestic flights to accidents. In 1998 flight attendant Liliana Almada fell – in mid-flight – out of a door that was not properly closed. The plane was owned by Austral, a domestic carrier taken over by Aerolíneas Argentinas. Repair of the door had been repeatedly requested in writing.

Some analysts suggest that acquisition of routes is the main motive behind larger companies’ involvement in privatization. Aero Perú seems to have come under attack for this reason. In 1992 Cintra, a subsidiary of the Aero México group, became the main shareholder in the company, which accounted for 63 per cent of the weekly flights from Peru to the US and Europe.

‘There was apparently a conspiracy between the US firm Delta and Mexico’s Cintra to do away with Aero Perú and get hold of its routes,’ said Luz García, a member of the Peruvian airline’s Committee of Judicial Administration. Aero Perú was declared bankrupt in 1999.

Venezuela’s Viasa was put out to tender in 1991. It ceased operating in 1997 when it was abandoned by Iberia – the same Spanish public company that took control of Aerolíneas Argentinas. All 25 international routes that Viasa flew are now controlled by Iberia.

Nearly a decade after privatization began, the industry in Latin America is deeper in debt, customers have fewer available routes and ticket prices are no lower. Experts say the ‘war’ will end only when the giants finish taking over the Latin American market and can set prices in line with their newly dominant position.

Marcela Valente in Argentina, in collaboration with Abraham Lama
in Peru, and Andrés Cañizales in Venezuela / InterPress Service.

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New Internationalist issue 334 magazine cover This article is from the May 2001 issue of New Internationalist.
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