Ed George edgeorge at usuarios.retecal.es
Mon Jul 19 08:02:55 MDT 2004

Background to the changes to QMV

One interpretation of the draft Constitution is that there is simply a
contradiction between the stated competences of the Member States to
determine policy on Health and Education and the competence of the
Commission to make trade deals relating to these services in the GATS.
And that this contradiction will be resolved in favour of the Member
States, either on the principle of 'subsidiarity' (further discussion
below), or because the EU's social commitments would not allow for
commercialisation of these services. A contrary interpretation is that
the proponents of QMV for trade decisions are aware that this change
will facilitate the progressive liberalisation of trade in health,
education, and cultural & audio-visual services.

An examination of the background to the change to QMV reveals that the
latter interpretation is the more plausible. For starters, the EU Trade
Commissioner, Pascal Lamy, said at the signing of the GATS agreements in
1995 that he believed health and education were "ripe for
liberalisation" (see WDM. Nov 2002.)

He later told the US Council for International Commerce "if we want to
improve our own access to foreign markets then we can't keep our
protected sectors out of the sunlight. We have to be open to negotiating
them all if we are going to have the material for a big deal. In the US
and EU, that means some pain in some sectors but gain in many others,
and I think we both know that we are going to have to bite the bullet to
get what we want." (June 8th 2000)

And then on 18 December 2000 he declared: "Let me get really
controversial. ... I am talking, of course, about updating the EU's
common commercial policy as set out in Article 133 of the Treaty [of
Nice], to permit qualified majority voting in the Council to determine
our position in international trade negotiations in services,
intellectual property and investment." (Speech to the American
Enterprise Institute, Washington DC)

Commissioner Lamy was unable to present a 'consolidated list' - ie: any
EU offers, at the GATS talks in March 2003 - because of his inability to
get unanimity in the Council of Ministers on offers in relation to
Health and Education. A qualified majority however - especially one
composed of 13 out of 25 states representing 60% of the population - is
much easier to achieve. It is worth noting that in response to the lack
of an EU offer in 2003 the assistant US trade representative told a
conference co-organised by the US Coalition of Service Industries (a US
industry lobby group), that an audiovisual exemption for the EU is 'not
something that we could agree to' (WDM Sept 2003).

As to who would benefit from liberalization of trade in Health and
Education services, the American healthcare industry is candid. Dean
O'Hare, the outgoing president of Chubb - one of the world's biggest
insurance companies - led the lobbying for GATS in Washington. He told
Congress: "We believe we can make much progress in the negotiations to
allow the opportunity for US businesses to expand into foreign
healthcare markets." (see WDM Nov. 2002).

Then there's the European business interest, the European Round Table of
Industrialists (ERT) - a forum of around 45 leaders of large
internationally operating companies based in Europe. These include
Vivendi, Siemens, Fiat, Unilever, Nestlé, BP and Diageo. The ERT' s
objectives are to get the best operating environment for business. To
that end the ERT carries out intensive lobbying of the European Council,
the European Commission, the Council of Ministers and the European
Parliament. In its Discussion paper on EU Governance published in May
2002, the ERT states: "In the view of the ERT, QMV should be extended to
all areas relevant to effective cross-border business within the Single
Market as well as to external economic relations." A perfect fit with
the approach of Pascal Lamy and the Commission.

The implications of liberalization are highlighted by Liese Prokop, the
Assembly of the European Regions President. Referring to the draft
Constitution and commenting on a recent European Parliament decision
calling for unanimity in Council of Ministers votes as provided in the
Treaty of Nice, she said ... "concerning European decision making
processes in the field of culture and of the media; currently, these
open the way towards liberalization and further commercialization in
cultural and audiovisual services and are likely to jeopardize cultural
and linguistic diversity in Europe" (AER press release, 26/1/2004. See
also European Parliament Resolution A5-0477/2003, passed 14/1/2004).

This is not to allege any conspiracy by Pascal Lamy: he has been
explicit in where he wants EU trade policy to go. He and his co-thinkers
- like the conservative European Peoples Party leader Elmar Brok, the
paid lobbyist for the Bertelsmann publishing and media multinational and
a participant in the drafting of the Constitution - want de-regulation
of European public services and access to US and other markets for the
European service industries. They are seeking to facilitate trade in the
GATS - in vital services like Health and Education - as part of the
overall liberalization process. But that process entails an erosion of
political accountability and democracy.

Why all the fuss about the GATS?

But why all the fuss about the GATS and about how trade deals in the
GATS are made? Because trade deals in the GATS increasingly impact on
the formation and implementation of domestic policy, such as public
service objectives and provision.

" The GATS is not just something that exists between governments. It is
first and foremost an instrument for the benefit of business" declared
the European Commission in 1998. Central to the GATS is the principle of
progressive liberalisation. Article XIX.1 mandates WTO members to 'enter
into successive rounds of negotiations, ... with a view to achieving
progressively higher levels of liberalisation.' Should countries want to
withdraw a commitment, they have to embark on a complex 'modification'
procedure outlined in Article XXI. The arduous nature of this reversing
procedure has led even the WTO Secretariat to call the agreement
'effectively irreversible' (Hartridge, D (1997) Director of Trade in
Services Division, WTO. Quoted in WDM Nov 2002.)

The rules and commitments in the Agreement apply to all national, state,
regional and local government measures affecting services. The GATS does
state that countries have the 'right to regulate', but this is only
mentioned in the preamble so is not legally binding. Conversely, the
specific Articles of the GATS requiring deregulation, such as Article VI
on domestic regulation and Article XVI on market access, are legally

In order to provide a meaningful basis for its rules, the GATS uses a
list to define the sectors it covers. The current list is as follows:
Business Services; Communication Services; Construction and Related
Services; Distribution Services; Environmental Services; Financial
Services; Health Related and Social Services; Recreational, Culture,
Sport; Tourism and Travel Related Services; Transport; 'Other Services
Not Included Elsewhere'. These sectors are further broken down into 160
sub-sectors which are further broken down into defined activities. See
the WTO's website (www.wto.org) for the full text of the GATS.

The GATS covers all provision of services in the listed sectors except,
as stated in GATS Article I.3, "services supplied in the exercise of
governmental authority." These are defined as services "supplied neither
on a commercial basis, nor in competition with one or more service
suppliers." This Article is perceived as exempting from GATS rules the
provision of public services by governments.

However, a range of problems exists with the wording of Article I.3.
When it was asked for an interpretation of the GATS Article 1.3, the WTO
Secretariat recently declared: "The coexistence of private and public
hospitals may raise questions concerning their competitive relationship.
The hospital sector in many countries is made up of government and
privately owned entities which both operate on a commercial basis. It
seems unrealistic in such cases to argue for the continued application
of Article 1.3 and/or maintain that no competitive relationship exists
between the two groups of suppliers of services." The WTO says that
"subsidies or similar economic benefits" must either be abolished or be
given to private competitors. (Nick Cohen. New Statesman, December

This would undermine the principle of access for all citizens to health
care, because the upshot would be an increasing polarization of public
and private services - due to the presence of private companies
providing services based upon ability to pay. Although still under Irish
control, the difference in the quality of service between the 'Mater
public' and 'Mater private' hospitals shows what can happen when the
state provides only a residual public service. And as Titmuss put it,
"Services for the poor were always poor services" (quoted in Baumann

Further liberalisation can only make this sort of service inequality
worse. Indeed it may only be a matter of time before the Irish
government offers market access to the Irish health insurance industry
in its GATS commitments. The Irish government may in the future decide
to sell the VHI to an American or European insurance corporation, but
that cannot be predicted here. The arrival, through GATS, of other
private companies operating in competition with the VHI, combined with
the possible definition and prohibition of the Irish regulation on
community rating as 'overly burdensome', would bring pressure on the VHI
to act in a purely commercial way. Commercial considerations then would
determine its premiums and range of cover to the likely detriment of
high-risk categories of clients.

This is because private healthcare or educational companies are in
business to make a profit - otherwise they go out of business. That
profit either comes from cherry-picking the most lucrative parts of a
service, free-riding on state-owned facilities, higher charges - to the
state or the service-users - or a lower level of service. Private
provision of services means that some of the funds that should go into a
service go into the pockets of the shareholders.

The 'liberalisation' winners are the service companies. The people who
lose out are the service users - especially women and people on low
incomes - and the people who work in the services. When it comes to
having high-quality public services, democratically accountable and
available to all, who provides them does matter.


In its response to the European Commission's Green Paper on Services of
General Interest (public services), the Irish Government argued that 'in
accordance with the principle of subsidiarity, we believe that the
Member States are generally better placed to design regulatory policies
in specific sectors'... (available from National Forum on Europe:

Subsidiarity is generally meant as the implementation of EU law at the
most appropriate level closest to the population. In this instance it
means the competence of Member States to develop and implement national
policy preferences within the overarching framework of EU policy.

But such competence is undermined by the enhanced powers being granted
to the Union vis a vis the member states in the draft Constitution. Art
III-6 states that in relation to the 'principles and conditions' whereby
public services are provided, 'these principles and conditions are laid
down by European law'. This goes against the principle of subsidiarity
and would give the Union a competence that at present it does not have
in some services - such as drinking-water supply, waste and wastewater
disposal, social services as well as education and culture.

Similiarly, giving the Union exclusive right to negotiate trade
agreements in Services means that Member States and regions lose their
rights to determine policy for those Services. Subsidiarity would be
made meaningless. Once again there is an erosion of democracy, as the
electors would lose their democratic right to determine how services are
structured and delivered through the election of parties on account of
their commitment to provide public services.

Art III-6 also undermines Regional Policy. Art III-117 states that the
Union's policies and action should take into account the objectives of
reducing disparities between the levels of development of the various
regions. Determining policies on the basis of 'European law' - as
provided for in Art III-6 - would give primacy to competition rules and
thereby undermine measures to reduce regional inequality - such as
providing subsidies for regional projects that would not be commercially
viable on their own.

The rail network in Poland, for example, would probably collapse if
required to run on a commercial basis - leaving large parts of the
country without a public transport system. How it will survive the
continuing public spending cuts of €11 billion - designed to bring the
Polish budget deficit to 4% of GDP next year under the requirements of
the EU's Stability and Growth Pact - remains to be seen (Irish Times

Some regional governments are critical of the powers that the
Constitution gives the EU. The Austrian Lander are opposed to decisions
on how public services should be provided being determined by the EU.
They argue that giving exclusive rights to the EU to make trade
agreements for these services means the rights of Regional Governments
are at an end; and that considerations other than commercial values
should be taken into account in the provision of public services. In
this they are defending democratic accountability and a 'social' model
for the EU - as against the commercial framework in the new EU
Constitution (see Austrian Lander, 2003).

The Irish Government are happy to make complaining noises about the loss
of the veto in the areas of Foreign Policy and Taxation Policy but have
completely ignored the implications of the loss of a veto when it comes
to the possible forced liberalisation of core public services.

If we are concerned with sovereignty and democracy therefore, both the
entire GATS framework and that of the Common Commercial Policy in the
draft EU Constitution must be challenged. For what would be the value in
electing a government committed to providing universal access to
essential services such as health, education, water or environmental
services if those very services are being progressively commercialized
through GATS agreements which require that they be opened to provision
by transnational service companies - for whom the priority is making a
profit. Likewise a challenge must be raised against the provisions of
the draft Constitution which remove the veto on trade in health,
education and cultural & audio-visual services and give the Commission
increased power to make deals on these services in the GATS.


In summary, the enlargement of the EU to include ten new countries
(eight CEECs, Malta and Cyprus) with Bulgaria and Romania to follow
shortly has been done on the basis of neo-liberal socio-economic
policies insisted upon by the EU and the IMF. These conditions for EU
entry have created increased regional disparities, with the
peripheralisation of the CEECs and within them the creation of
impoverished regions with low GDP per capita, high unemployment, poverty
and social deprivation. These regional disparities are not seriously
addressed by EU Cohesion Fund measures. In all likelihood, the current
pattern of development around capital city and western border regions
will persist, since EU policy is anchored on a neo-liberal model of FDI
export-oriented development.

This model has failed to redress the historic pattern of regional
disparity within the existing EU 15 countries, and has been disastrous
in developing countries (see Davis 2004). But a qualitatively new
situation is emerging, where almost one third of the population of the
enlarged EU will be living in regions with GDP per capita of less than
75% of the current EU15 average. There is thus the potential for
increased social tensions, including an increase in racism as immigrants
are scapegoated for socio-economic problems generated by the policies
both of the EU and the Member States.

In these circumstances the draft EU Constitution is a step to further
deepening the neo-liberal trajectory of EU policy, facilitating the
commercialization of key social services and entrenching neo-liberalism
as the doctrine of the EU. Far from providing steps towards a solution
to present and future socio-economic problems, this Constitution would
take us further into the quicksand. The provisions of the draft EU
Constitution which facilitate trade in essential services through the
GATS are an attack on democracy and should be resisted.

The solution is not a neo-liberal free-for-all, with unaccountable
transnational companies profiting at the expense of the standards of
living - and in the case of developing countries - the lives of
millions. Nor is it a return to national protectionism, as will tend to
be the case if Europe-wide solutions cannot be found. The gains of the
far-right are a warning in this regard.

The first step in any solution that puts people before profit is to
break with neo-liberalism. This would mean an end to the de-regulation
drive, and in particular an end to the anti-democratic GATS. It would
also mean opposing the draft EU Constitution and in particular the
priority given to the EU to make international trade deals in public

More appropriate is the proposal for a united Europe from Ireland to the
Urals, free of militarised borders and tariff barriers (why should the
Ukraine, Belarus and Russia be excluded from development as part of the
rest of Europe?). The implementation of neo-liberal measures should not
be the condition for access to western European markets and financial
aid for any country, and especially eastern European countries that wish
to become part of the western European trade bloc. Central EU policies
should not be price and currency stability but full employment,
reduction of working time, social and environmental protection.

There should be substantial financial transfers from wealthier to poorer
regions and planning mechanisms to control location of capital
investment. Trade relations with the countries of Africa, Latin America
and Asia should be restructured for the benefit of the non-European
countries. As to the institutional structures of the EU, the Commission
and Council of Ministers should be downgraded, with policy formulation
being given to the Parliament. While current arrangements remain, all
states should have equal say. The states of the EU should withdraw from
PfP and NATO, and there should be no development of an EU military

Whether the draft EU Constitution is agreed and ratified, or the ruling
classes of the EU are forced back to the drawing board, their agenda of
developing the EU on their own terms will remain. An opposition based
upon democratic accountability and prioritising the needs of Europe's
working people will therefore continue to be necessary during the coming

References and sources.

Austrian Lander. 2003. Common Position of the Austrian Länder to the
European Commission's Green Paper on Services of General Interest.
September 2003 (VST-4763/6). Assembly of the European Regions.

Baumann, Zygmunt. 1998. Work, Consumerism, and the New Poor. OUP.

Boduszynski, Monica. 2003. Challenges of EU Expansion: can the CAP be

Boltho, Andrea. 2003. What's Wrong with Europe. New Left Review 22,

Brenner, Robert. 1998. The Economics of global turbulence. New Left
Review 229, 1998.

Brenner, Robert. 2004. New Boom or New Bubble. New Left Review 25, 2004.

Davis, Mike. 2004. Planet of the Slums. New Left Review 26, 2004.

DIW - EPRC, 2001. The Impact of EU Enlargement on Cohesion. DIW (German
Institute for Economic Research) & EPRC (European Policies Research
Centre. European Commission Tender PO/00-1/RegioA4. 2001

DAPSE. Democracy and Public Services in Europe. dapse at eircom.net

Dunford, Michael. 1988. Capital, the State, and Regional Development.
Studies in Society and Space. Pion

Fagan and Kilmister. 2001. The EU's eastward expansion and the response
of the Left. Paper presented to Conference of the European Left,
Stockholm, August 2001. Available from: Labour Focus on Eastern Europe,
30 Bridge St, Oxford OX2 OBA England.

Gowan, Peter. 2000 Peripheralisation of Central and Eastern Europe in
the 1990's. Labour focus on Eastern Europe No. 65, 2000

Heidenreich, Martin. 2003. Regional inequalities in an enlarged Europe.
Journal of European Social Policy 13:4. Sage. 2003

Janicki & Wunnava. 2004. Determinants of foreign direct investment:
empirical evidence from EU accession candidates. Applied Economics 36,

Lowy, Michel. 1993. Combined and Uneven Development. Verso

Mandel, Ernest. 1995. Late Capitalism. Verso

Morgan & Price. 1999. West Wales and the Valleys: The Case for Objective
1. Institute of Welsh Affairs. Cardiff

OEF. 2004. Oxford Economic Forecasts. www.oef.com

Third Cohesion Report on economic and social cohesion. 2004. European
Commission. www.europa.eu Includes Main Regional Indicators.

WDM. April 2003. Whose Development Agenda. wdm.org.uk

WDM. November 2002. Serving (up) the Nation. wdm.org.uk

WDM. September 2003. From Doha to Cancun. wdm.org.uk

DAPSE was formed after a workshop on the GATS at the Irish Social Forum
in October 2003. It is an open campaign group that welcomes
participation. For copies of briefing papers or details of meetings,
please contact:

DAPSE, c/o IPSC, p/o Box 9124, Dublin 1. Email: dapse at eircom.net

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