An Uninvited Guest, from Issue 5 of Combat Law

Combat Law, Issue 5 - As early as a decade ago policy makers in developing countries were circumspect about the ability of free trade to foster all round economic growth in their countries. At the 1986 ministerial meeting of the General Agreement on Tariffs and Trade (GATT), in the tourist resort of Punta del Este, Brazil and India led the fight in opposing the entry of so-called “new issues” into the already burgeoning basket of free trade.

The position of the Group of Ten - G 10 - was as simple as it was unquestionable. They had lost faith in the GATT system to function as a fair trading platform and believed that unless fundamental inequities were addressed they would oppose the entry of new issues. The new issues also happened to be areas where they had little to gain from multilateral trade

• investment measures, services, and patents. The most controversial issue was the question of services and the formal position of the Group of Ten was that there could be no negotiation of services in the new round. Inspite of their spirited opposition the ministerial meeting decided to launch the most comprehensive round of trade negotiations in the history of the GATT.

The compromise at Punta del Este was that the proposed agreement regulating trade in services should be reflective of the concerns of the G-10. Among other things it would have a clear developmental orientation and there would be due respect for national laws and regulations. Suffice to say that what emerged in Marakkesh in 1994, at the end of the Uruguay Round of negotiations, was anything but that. The developmental aspects were couched in preambulatory language, hence not legally enforceable, and the General Agreement on Trade in Services (GATS) clearly intruded deeply into the hitherto sovereign space of domestic policy. After the formation of the World Trade Organisation (WTO), India continued to consistently raise issues of inequity in the GATS negotiations, albeit removed from her earlier principled position of absolute opposition.

The Doha ministerial of the WTO, concluded in November 2001, is thus a cause for alarm as it saw very little dissent from developing countries on the issue of services. This lack of resistance mandated a substantial work programme on the GATS. Countries were required to submit their initial list of service sectors to be committed to GATS rules by March 31, 2003.

Beyond Trade Issues

The push for the inclusion of services and investment was the result of the US acquiring a decisive competitive edge in trade in services in the 1980s; both the WTO staff and the European Commission now acknowledge that there would be no GATS without the push and support of services multinationals from the developed countries . In fact as early as 1985 the Indian Commerce Secretary Prem Kumar voiced India’s apprehensions in the New York Times when he said, ‘Liberalisation of trade in services may not result in comparative advantage and the protection of infant industries in less developed countries. Besides it may impinge on national sovereignty and economic ambitions’.

The GATS is the first multilateral agreement to provide legally enforceable rights to trade in services. The Punta del Este compromise, though largely violated, proved to be a strong factor in deciding the basic framework of the GATS. The agreement that countries acceded to, in Marakkesh 1994, was unique in two important respects in that it followed both a top-down and a bottom-up approach. The WTO principles of Most Favoured Nation (MFN) and transparency apply to all services sectors in the GATS classification list. National Treatment and Market Access provisions currently apply only to those sectors that a member country lists in its schedules of commitments.

The agreement applies to all forms of government and government measures regulating trade in services. Article 1[3] of the legal text of the GATS which talks of the scope of the agreement mentions that in ‘fulfilling its obligations and commitments, each member shall take such reasonable measures as may be available to it to ensure their observance by regional and local governments and authorities and non governmental bodies within its territory.’ The GATS classification list consists of twelve services sectors, which are further sub divided into 160 sub sectors.

Services have tended to be a more regulated sector than others because some of them are not just commodities which consumers can do without if they cannot afford them. These include basic services like the provision of health, water and education. The agreement has been strongly attacked for the inclusion of these non- trade issues that the WTO secretariat responded in February 2001 with a booklet titled ‘GATS - Fact and Fiction.’ In page 12, the secretariat agrees that most public services will be covered under GATS clauses but mentions that governments are free to decide if they should be privatised or liberalised.

This is at best a partial truth as horizontal principles of MFN and Transparency are thus applicable to virtually all services. The ‘freedom to commit’ clause is predictably devoid of any understanding of the political context in which negotiations in the WTO take place. Over 50 years of multilateral trade have clearly shown that the developed countries hold the cards in these deliberations.

The unequal power relations within the WTO are now well documented and the presence of basic services in the classification list is a veritable threat to millions in developing countries who need a high level of subsidised, if not free, service delivery for survival. Ensuring adequate and affordable access to basic services for all citizens is frequently seen as one of the core jobs of governments. Inspite of its potential impacts, the GATS - unlike the TRIPS and Agreement on Agriculture - has received little public attention in India and other developing countries but this is unlikely to last.

In April 2001, over 400 organisations from 53 countries called on their governments to immediately invoke a moratorium on the GATS 2000 negotiations and devote the remaining two years of the scheduled talks to conducting a comprehensive sectoral assessment and removing clauses in the GATS that tie the hands of governments.

In August 2001, the United Nations Sub-Commission on the Promotion and Protection of Human Rights adopted three resolutions calling into question the impact of key aspects of the globalisation process on human rights. Applying, for the first time, a human rights perspective to the GATS, the sub-commission recommended that the WTO include consideration of the human rights implications of the GATS on the provision of basic services, such as affordable and accessible health and education services. An important signal and clear message to all governments as well as international economic policy forums to take international human rights obligations and principles fully into account in international economic policy formulation. It also called for a report on this matter from the United Nations High Commissioner for Human Rights.

The issues at stake

In the ongoing debate on the GATS much attention has been focussed on the above mentioned non-trade aspects of the agreement. Tourism, seen as a tradeable service, has escaped the attention of many critical groups fighting this fundamentally flawed document. This section, drawing largely from an understanding gained from over sixteen years of research and advocacy in tourism issues, will show that the reasons to oppose tourism in the GATS span environmental, economic, sovereign and livelihood imperatives.

Multilateral trade in tourism is expected to bring in substantial amounts of foreign exchange, generate income and employment and hence bring development to countries of the south, particularly those that are faced with a crisis in their primary and secondary sectors. Predictably it is an important sector in the GATS, listed under Tourism and Travel-Related Services (sector 9 in the classification list). Notions of development have continually evolved keeping in consonance the definitions provided by western theories and prescriptions. The tourism led development model is one such avatar, promising not only to bring visible and ostensible benefits in terms of infrastructure and employment but also to protect the environment. Peddled by multilateral agencies, as an export industry that supposedly fills foreign exchange coffers, it has been readily embraced by most southern governments.

India’s initial economic argument against multilateral trade in services is especially true for the tourism industry. International tourism continues to be characterised by huge imbalances in the share of business and distribution channels, between tourist sending and receiving countries, with the bulk of economic and political power held by the former. It is today the largest industry in the world and is fast expanding. Tourism’s continuous geographical spread and diversification of products has implied that the share of Europe and the US - the major tourism players - has decreased and is expected to fall further. In 1995 Europe’s share of tourist arrivals was 60% of the world total. By 2000 it had fallen to 57.7%. The World Tourism Organisation (WTO-OMT) forecasts that it will fall further to 45.9% by 2020. With Nature and culture as today’s catchwords more travelers set out in search of exotic cultural experiences the developing world has to offer. The signs are clear - destinations will shift south. A destination maybe halfway across the globe but the design of the GATS ensures that they can be controlled by multinationals from the north.

It is in this unequal context that GATS’ promises of development to the south must be understood and critiqued. The Tourism developmental debate in India is also intricately linked to the reasons that attract tourists and hence the industry. It is the rich natural heritage spread along the forests, mountains, coasts and rivers, all of which are the living spaces of communities, which constitute the ‘Tourism product.’ Even Protected Areas, which have by definition prohibited commercial activities, are now being seen as potential tourism areas. It is the location of tourism, a resource-intensive activity, in these areas that gives rise to a conflict of interests between the needs of local communities and conservation with the needs of a consumer-oriented industry which understands nature as an economic commodity.

Understanding the GATS through Tourism has its advantages. Tourism is prominent in the GATS and is advanced as a sector in which developing countries have much to gain. Being a complex and fragmented industry it is connected to virtually all the services sectors in the classification list. An examination of Toursim thus simultaneously throws light on problems with the GATS in general. GATS rules go beyond what is normally understood as trade and the agreement is primarily driven not by member governments but by a potent corporate agenda. Many regional and local governments have begun to understand this language as more light is thrown on the negative impacts of this industry. An equitable tourism requires careful planning at all levels and the involvement of all stakeholders, especially local communities who are directly and most profoundly impacted by it. Tourism’s presence in the GATS also goes against other international commitments of member countries in Multilateral Environmental Conventions and Protocols. Once these simple principles are accepted and internalised in policymaking the WTO can achieve its purported objectives and tourism can play a more important role in meeting important environmental and social objectives.

Ecotourism

Ecotourism has become the developmental paradigm of a reformed tourism industry but it remains a fashionable phrase that everyone pays homage to but none cares to define clearly. Conservationists, the industry, indigenous peoples and developmental organisations have varying definitions of what they believe is genuine ecotourism. To a large extent the danger of the phrase lies in its ambiguity. It has allowed the tourism industry access into hitherto untouched areas around the world without having to compromise its raison’d etre, profit. The Indian state tourism ministers’ conference on ecotourism virtually declared the whole of the country as potential ecotourism destinations. While this conference gave the much-needed fillip to industry, a conservation-led effort on regulating ecotourism in forest areas was stymied. The Wildlife Tourism guidelines initiated by the Ministry of Environment and Forests in 1994 still continue to be in the draft stage. National parks and wildlife sanctuaries thus allow tourism in the absence of well-defined regulatory mechanisms.

There are signs of change, though. Communities and local bodies are asserting themselves in gaining a hold of tourism development in their areas. In a historic declaration on biodiversity conservation and ecotourism the Gram Sabha Lata of Chamoli, Uttaranchal resolved on October 14, 2001 to follow a community-based method of tourism management. The declaration has twelve salient points. Point 4 mentions that in any tourism related enterprise in the area preference would be given to unemployed youth and underprivileged families. Point 5 ensures the involvement and consent of the women of the region at all levels of decision making while developing and implementing conservation and tourism plans. The Declaration acknowledges the spirit of Agenda 21 of the 1992 Earth Summit in Rio and draws inspiration from the Chipko movement, which was born in the surrounding hills.

In Jharkhand, ‘Johar’ - a group representing indigenous peoples of the area - has formulated a conservation-oriented and people-centered tourism policy even before the government could get its act together. The policy has been sent to the Jharkhand government forcing it to respond to the aspirations of the people who were part of the struggle for statehood. In Goa, following an intensive struggle, there is now the practice of issuing shack/restaurant licenses only to locals. Similarly only tourist taxis whose owners are from within the village are permitted to park their taxis in front of the hotel in the village. One of the main messages from the recent South Asian Regional Conference on Ecotourism held in January 2002 in Gangtok, Sikkim was on the involvement of local communities in tourism development thereby contributing to biodiversity conservation. Delegates felt that before tourism was planned for any region it was important to study some key issues of which the most crucial was to find whether the local community wanted tourism in the area.

Internationally a visible area of success is policy-makers’ acceptance of tourism’s impacts on the environment. Though at the 1992 Conference of Rio no separate chapter in Agenda 21 was devoted to tourism, it is now an issue in the Rio follow-up process with the United Nations Commission on Sustainable development (CSD) adopting an international programme of work on tourism and sustainable development since April 1999. Tourism’s adverse impact on bio diversity is also a significant area of deliberations in the Convention on Biological Diversity (CBD) that 183 countries are party to. Since the fourth meeting of the Conference of Parties [COP4] in May 1998 efforts have intensified at the international level to develop tourism programmes that are in agreement with the three objectives of the CBD, which are contained in Article 1.

• The conservation of biological diversity
• The sustainable use of its components
• Fair and equitable sharing of the benefits and in particular to encourage the knowledge and practices of indigenous people.

The fifth meeting of the Conference of Parties to the CBD [COP-5], May 2000 accepted formally the invitation to participate in the international work programme on sustainable tourism development under the UN CSD. The CBD secretariat requested for a workshop to be convened that would prepare a proposal for contribution to guidelines related to sustainable tourism. The workshop on Biological Diversity and Tourism, convened in Santo Domingo in June 2001, was asked to use as a basis for their work concepts developed in other documents that were relevant to the subject matter such as the Berlin Declaration on Biodiversity and Tourism, 1997, the World Tourism organisation (WTO-OMT) Manila declaration on the Social impact of Tourism, 1997, the United Nations Environment Programme guidelines for sustainable tourism, declarations by indigenous and local populations, and the WTO-OMT Global Code of ethics for Tourism The draft guidelines have already been presented to the necessary technical bodies like the Subsidiary Body on Scientific, Technical and Technological Advice. When the CBD endorses these guidelines they become binding on member states.

The GATS dilemma

It is into this complex web of tourism that the GATS enters as an uninvited guest. Tourism’s presence in the GATS is as far removed from local realities in tourism destinations as the language of sustainability, benefit sharing, conservation and democratisation is from the WTO lexicon. As of March 2001 commitments under Tourism and Travel Related Services (sector 9 in the classification list) ranked higher than for any other service sector with 120 of the WTO’s 142 members opening up at least one of the 4 tourism sub-sectors. The sub sectors include Hotels and Restaurants (including catering), Travel Agencies and Tour Operator services, Tourist Guide Services, and others.

There is no questioning the fact that Tourism is an immensely lucrative activity and a source of employment -both direct and indirect, for millions worldwide. But the commitments of developing countries, reflecting this blinkered understanding of tourism, need to be questioned. While much research has gone into the multiplier effect of tourism in an economy, less talked-about but crucial to developing countries that rely excessively on international tourism is the question of leakages.

Leakages are inherent in any industry that has a substantial level of foreign participation but when it exceeds specific levels it can virtually negate the positive impacts of that economic activity. In tourism leakages can take the form of repatriated profits to the country of origin of the hotel chain, repayment of foreign loans, imports of equipment, materials and consumer goods to cater to the needs of the tourist. As Benavides (2001) points out huge corporations control a substantial chunk of the mass tourism market. In Europe integrated tour suppliers sell more than 60% of the packages. Without the clauses of the GATS, the tourism industry has used various anti-competitive techniques like de-racking, exclusive use of the Global Distribution Systems (GDS) and Computer Reservation Systems (CRS) as barriers to market entry to secure higher commissions from the smaller tour operators and hotel chains in the developing countries. In India the Swiss Multinational Kuoni, by taking over the major domestic player SITA, controls a majority of both the inbound and outbound tourists. With the GATS clauses coming into effect it is clear that the domestic economy gets only a nominal amount of the profits generated.

Article XVII on National Treatment implies that there can be no discriminatory treatment of foreign players. Selective promotion of SMEs (Small and Medium Scale Enterprises) and restrictions regarding cross-border payments will be ruled as violations if a country has committed to National Treatment and Market Access under GATS disciplines. There are a few major domestic hotel chains in India but the huge chunk of the tourism industry consists of SMEs. They have borne the brunt of the anti-competitive practices of the big tour operators and most of them are likely to go under if there is unrestricted foreign entry. They do not have access to cutting-edge technologies to get direct bookings and the possibility of imposing labour and environmental standards will ensure their exit from the market. Most of the SMEs are locally based, and thus backward linkages to the economy - like local employment and purchase of local commodities - are strong. These are important factors to note while India makes further commitments in the tourism sector. The Caribbean countries have already expressed concerns about the possible impacts of the deregulation of their tourism sector under the GATS.

The numerous violations by the tourism industry are now being recognised by the judiciary. The recent judgement of the Supreme Court in the Span Motel case underlines the need for local laws to regulate excessive tourism development. In a far-reaching judgement the Supreme Court ordered, on March 15 2002, the former Union Environment minister Kamal Nath to pay a fine of Rs. 1 million for environmental damage caused by ‘callous interference with the natural course of a river’. The company, Span Motels, has also undertaken to bear its share of the project cost of ecologically restoring the environment around the Beas River in the Kulu-Manali region.

The imminent danger in the GATS is that it only vaguely addresses environmental concerns in Articles XIV and XX dealing with “general exceptions” and ” exhaustible natural resources”. With respect to measures to control trade the GATS says that it “could take the form of defining certain standards for the service concerned or limiting the effect of the service activity”. The GATS text goes on to say that this does not imply that Article XIV can be used to justify the imposition of these restrictions and an alternative available for members would be to request renegotiations of their commitments.

These restrictions will result in a number of complexities, especially if a country has unlimited commitments in a sector. The renegotiation process is devoid of any meaning through what is known as the ‘ratchet’ effect. Article XXI, which allows for modification or withdrawal of a commitment states that due notice of three months must be given after the commitment has been in place for three years. It requires negotiations with all the affected members and is subject to compensation for the affected parties. Ultimately, it may be subject to retaliation within the rules, of the dispute settlement body, by affected countries.