TCS Daily


Don't Gut GATS

By Richard Tren - September 8, 2003 12:00 AM

A casual observer of the WTO negotiations could be forgiven for thinking that the only things being discussed are agriculture and access to drugs. These are of course important issues, but a less well-known WTO agreement, the General Agreement on Trade in Services (GATS), is also very important for developing countries. Unfortunately misinformation and bias, particularly with regard to education, could undermine the benefits that will come from GATS.

 

GATS aims to reduce trade barriers for service industries and to open these industries up to competition. Initially the focus has been on financial services and telecommunications. As someone who lives in a country where the state has a telecommunications monopoly, the liberalisation cannot come too soon. But GATS also covers many other areas such as tourism and, most controversially, health and education.

 

GATS is crucially important as services account for a large and increasing share of global trade. The World Bank estimates that the contributions of the services sector to world gross domestic products was 64% in 2000 compared to 57% in 1990. Most importantly exports of services have been growing far faster in developing countries than they have in developed countries. It is directly in the interests of developing countries to have a more liberal services trading regime.

 

Fundamentally GATS calls on member states to guarantee non-discriminatory treatment to foreign service providers. Contrary to popular beliefs, GATS does not force governments to privatise services such as health and education. While GATS requires transparency in regulations, it does not stipulate how governments should regulate. Opponents of GATS claim that the agreement will force governments to privatise education and health services, but this is clearly a local matter and nothing to do with the WTO.

 

It seems that the assurances given by the WTO on this matter have done little to dampen the damaging attacks against GATS. Indeed, South Africa's Minister of Education, Kader Asmal, made some outspoken, if misguided comments about the agreement. In Business Day, South Africa's leading daily newspaper, the Minister is quoted as saying that a more liberal trade in services will be "devastating" for African higher education. With an added flourish he went on to say that "we must avoid at all cost a GATS in education that puts our education, our culture and our future in peril."

 

Our future in peril? Although over 90% of South Africa's 11 million children enrol in the first year of school, only 40% of 18 year olds actually finish the final year of school. It seems that the government schooling system is already putting our future in peril without GATS. According to Simon Lee of the Independent Schools Association of South Africa, private schools only cater for around 3% of the total number of pupils; yet they account for around 15% of the passes in mathematics in the final examinations. So the private schools seem to punch above their weight and drag up the total number of final year passes. Given that, one would think that the Minister would encourage private education and more liberal education services rather than the reverse.

 

Eustace Davie of South Africa's Free Market Foundation argues that the government should be encouraging as much competition in education as possible. Competition creates far more discipline to offer a good product than any government regulation. Lee supports this thesis and argues that the mere fact that both state and private exam boards exist means that they are constantly improving each other.

 

Selling educational content and services is much like any other product. If an institution has a good product, the right price and is able to market it properly, it will most likely do well. Any attempt to restrict this trade undermines the choices and individuals have which is particularly problematic for poor people who already have few choices. "Just because people are poor or live in Africa, doesn't mean that are stupid. They can make choices for themselves and are usually spend their own money cautiously" asserts Davie.

 

Many of the anti-GATS campaigners consider health and education to be sacrosanct services that only the government should offer. Their fears resonate with those of the Asmal who is clearly attempting to protect his state employees, who clearly are not doing a sterling job. His fears however are exaggerated as Davie explains that were there more foreign providers of education the employment opportunities for our local teachers would increase rather than decrease.

 

By disingenuously arguing that the GATS treaty will undermine African education, culture and our future, Asmal is undermining crucial trade liberalisation. Africa has a great deal to benefit from trade liberalisation in agriculture, services and industrial goods. A World Bank study estimated that developing countries would gain around $1500bn by 2015 from the elimination of trade barriers.

 

Contrary to Asmal's assertion, our future is imperilled from a lack of trade liberalisation and not from an agreement that allows foreign institutions to market their courses in Africa. Developing countries should avoid the scaremongering of anti-WTO protesters and the protectionists within some countries and do what is right for their people.

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