Trade in Services Agreement (TISA)

Trade in Services Agreement (TISA)

About the Trade in Services Agreement (TiSA)

The Trade in Services Agreement (TiSA) is a trade deal being negotiated by 50 countries, including the EU member states and most of the world’s major economies except for the ‘BRICS’ (Brazil, Russia, India, China and South Africa). Negotiations for TiSA began in 2013 and were expected to conclude late 2016, although there were delays at the eleventh hour. It was negotiated entirely in secret, with the text of some areas to remain classified for five years after its ratification. Leaks by WikiLeaks and others have enabled civil society to scrutinise some aspects of the deal. The EU has published some of its proposals and positions, and summaries of some of the negotiating rounds but these lack the kind of detail that would allow for genuine assessment of the likely impacts of the deal.

TiSA could have far reaching implications in areas such as financial services, telecommunications (including the internet), and public services such as healthcare. There is a significant risk that the deal will lock in the privatisation of public services, hamper regulation and grant international investors legal rights far in excess of those available to most people.

In depth

A deal driven by global corporations

TiSA has not emerged from the demands of global citizens or from nations pondering how best to provide each other with high-quality, affordable services – rather it has been, “propelled by the private sector and disgruntled services exporters.”

Since 1995, international trade in services has been governed by the WTO’s General Agreement on Trade in Services (GATS). Although the stated aims of GATS are decidedly corporation-friendly – to oblige member governments to ‘progressively liberalize trade in services’ – progress on some rich country priorities has been slow. In response to this, groups such as the Coalition of Service Industries and the Global Services Coalition have been vocal in calling for progress on services in deals outside of the WTO. The Global Services Coalition are clear about their aims, stating in 2013, that they view TiSA as an opportunity to secure “new market access opportunities for business” and to provide “the new cornerstone for the rules governing services trade in the 21st century”.

Market access and exemptions, necessity, standstill and ratchet: A one-way street to liberalisation

The TiSA text is unequivocal in demanding that global corporations have full ‘market access’, and that rules that could limit their involvement in providing services are swept away. Article I-3 states that governments will not limit the size of a corporation’s role in any particular market, nor the kind of legal entity it can take. This means for example that countries cannot insist that schools or hospitals are run only by not-for-profit organisations. The EU has been particularly keen to achieve this level of liberalisation, and submitted a paper in 2012 that requests that countries’ market access commitments should, “substantially cover all sectors and modes,” and, “where performance requirements exist in practice and/or legislation, they should be removed.”

Some politicians have called for public services to be exempt from these treaty terms. However, experience suggests that even where exemptions appear to exist, the definitions used may be too narrow for most of our public services to qualify. Article 1 of the WTO’s General Agreement on Trade in Services (GATS) contains clauses that seem to entirely exclude public services paid for by government from the requirements of the agreement. However, only services that are not ‘in competition with one or more service suppliers’ count, so the NHS and state schools are unlikely to be covered, as private health and education providers compete with government in supplying these services. One study found that of 44 attempts by countries to defend their public services using this exemption, only one was successful. Another report finds that in the UK the only service likely to qualify would be the fire brigade, and in other countries where private fire-fighting services exist even this may not be exempt.

The right of governments to regulate in the public interest is challenged even further by the ‘necessity test’ on domestic regulation. Even where new government rules apply equally to domestic and foreign companies, they have to be ‘reasonable’, ‘objective’ and ‘not more burdensome than necessary’ if they are to avoid challenge under TiSA provisions.

Normally, governments are answerable to their citizens on the reasonableness of their rules. Citizens may demand that companies recycle all their waste, or employ a certain proportion of people with disabilities, and they may say no to the building of shopping centres or to fracking. Most citizens expect to be able to make these choices, without having to persuade the parties to a global trade agreement that they are correct. TiSA may therefore have serious implications for democracy, and may place major limits on how we are able to improve our society through regulation.

Furthermore, once markets have been opened up by TiSA, these changes could have been made irreversible, as TiSA proposals included ‘standstill’ and ‘ratchet’ clauses which expressly prevent the reversal of any privatisation or liberalisation once it has taken place. This is a one-way street to a more ‘open’ service economy, where the rules appear to answer the ‘needs’ of global corporations, while citizens may struggle to regulate or re-nationalise the services they rely on.

Financial services, privacy, labour rights and energy

The impact of TiSA on financial services is an area of particular concern, as it appears to promote lobbying by banks, and encourage rushed decision-making about new financial institutions and products.

Rules proposed in the Transparency in Financial Services submission to TiSA include item 4, which states that ‘interested parties’ (i.e. foreign banks) must be notified and allowed to comment on proposed regulation before it is adopted, and governments must respond in writing to these comments. Inputs from citizens are afforded no such privileges, thereby giving banks unique front-row access to lobby politicians.

Item 11 gives countries 120 days to make a decision about whether or not to grant a banking licence to a firm that has applied. This requirement may be particularly difficult to meet in countries with lower administrative capacity, and may lead to licences being rushed through without proper scrutiny.

It is also proposed that countries be obliged to allow foreign banks, “to offer in its territory any new financial service,” and even that they should be allowed to do so without having to wait for any related new laws or amendments to be passed. This is despite widespread acknowledgement that the 2008 financial crisis was partly caused by under-regulation of new, poorly understood financial ‘innovations’. Far from creating better financial transparency, the European Parliament finds that provisions like these are risky, stating that the changes would, “create opportunities not only for business and economic prosperity, but also for abuse through money laundering and tax fraud.”

Information technology services are also challenged by TiSA provisions, although the extent of the threat is not yet clear as countries disagree significantly as to the wording of the relevant annex. The agreement in general seeks to open up flows of data across borders, and it seeks to address issues including ‘forced localisation and technology transfer’, net neutrality and data protection.

Business groups have raised a number of complaints in respect of forced data localisation. They consider that it is unreasonable for governments “in an attempt to protect privacy and security and to promote economic growth” to take “troubling measures to require that data be stored, processed or handled within their borders.” Potential TiSA provisions proposed by the U.S. would place a ban on localisation rules, meaning that data could be transferred across borders without restriction and handled according to a potentially entirely different set of regulations to those of the originator country.

TiSA also threatens to put net neutrality – the principle whereby internet services providers cannot favour particular kinds of content – at risk. The U.S. has put forward a proposal that states: “Consumers should be able to access any services and applications on the internet, subject to reasonable management of the network,” (our emphasis). The term ‘reasonable management’ is very flexible. Internet service providers (ISPs) could decide, for example, to slow down some sites while speeding up others, because big companies pay them to do so and it is considered ‘reasonable management’ for ISPs to seek out the profits from this.

Data protection and privacy are challenged by the proposed requirement that data, including personal and sensitive data, can be moved across borders to any country. Many countries’ rules on data protection are less stringent than those in the UK and EU, but our data may still be transferred to these areas and used or released in ways that would not be acceptable according to our own laws. The extent of this threat depends considerably on which version of proposed final wording is used in TiSA.

TiSA does not contain a chapter on labour or social rights, and where ‘natural persons’ are mentioned it is generally in terms of the rules that will apply for visas for work in the service sector. The agreement seeks to make it easier for companies to bring in workers from elsewhere, including intra-company transferees and contractual service suppliers. However, these workers can be particularly vulnerable to exploitation: because their visa is dependent on them having a job in the destination country, it can be difficult for them to challenge poor employment practice or secure their labour rights for fear of being dismissed and thereby forced to return home. In the UK, many domestic workers are already brought in using tied visas, and it is widely recognised that this puts them at risk of abuse, at times akin to modern slavery. Expanding this system to cover other categories of service workers, who could be denied labour rights in similar ways, and entrenching it within a trade deal would be at odds with the UK’s commitments on labour and other human rights.

Who gets a say: risks for developing countries

A few middle-income countries, such as Colombia, Turkey and Pakistan, are involved in the TiSA negotiations, but the majority of the world’s poorer nations are not. This poses potential risks both for less well-off member countries, and on those who are excluded from discussions.

One example is TiSA’s approach to State-Owned Enterprises (SOEs). In the past, many rich countries have helped to build up their public services by granting advantages to publicly-owned companies, including effective monopolies, subsidies and cheap loans, and gifted land or premises. Many developing countries still rely on SOEs to generate essential income and provide a number of services. In the case of India, the OECD found that SOEs have acted as growth engines, redressed socio-economic inequities, generated productive employment and provided the wherewithal for economic development. Yet this route to public service development will be closed by TiSA, as the annex of TiSA gives countries the right to challenge each other if they give ‘non-commercial assistance’ to publicly-owned service providers. This could place significant restrictions on companies attempting to expand their services provision, including in the provision of free health and education.

Creating services in public ownership and using local companies can be of particular importance in countries where incomes are low and jobs are scarce. Many general provisions of TiSA, including requirements relating to National Treatment (Article I-4) and Market Access (Article I-3) may therefore have significant impacts on low income countries, as protections for affordable services and local jobs are stripped away. Furthermore, in these countries regulation is often much-needed but less developed, so countries will be especially affected by the necessity test, standstill and ratchet clauses.

Finally, this trade agreement may have significant impacts even on non-TiSA countries. Firstly there is a risk that an exclusive TiSA trading bloc may emerge, leading to losses of service trade – and related jobs and export income – for non-TiSA countries, especially the BRICS that have large emerging service industries. Secondly, it is expected that non-TiSA countries may end up being de facto bound by TiSA rules anyway, despite having been allowed no input in their creation, both through them being adopted as expected norms within international trade, and because of the possibility the terms will be duplicated in trade agreements by which non-TiSA countries are bound. Some TiSA participants including the EU have already made it clear they hope the agreement will one day become part of WTO rules, effectively binding most of the world’s countries to terms not of their own choosing

What is TJM calling for?

TJM believes that TiSA is designed to benefit corporations at the expense of citizens, and is therefore uniting with trade unions and civil society organisations worldwide to call for TiSA to be scrapped. Closer to home, TJM aims to persuade the UK and EU to pull out of negotiations, by informing and mobilising citizens and organisations to lobby their representatives.

These campaigns can succeed in delaying, altering and derailing trade deals. Negotiations on TTIP have stalled, thanks in large part to of awareness-raising and campaigning by citizens. TJM will work together with social movements to do the same for TiSA.

Further information