Bring on the GATS!

While much of the bluster in Hong Kong has been over agriculture, it seems that the General Agreement on Trade in Services (GATS) is rapidly becoming another controversial sticking point.

Left-wing activists and trade unions are pushing the line that the GATS will require wholesale privatisations of public services and utilities, bringing with it extortionate user charges and social chaos. This spin is being eagerly lapped up by certain developing countries.

This is misleading.  GATS retains flexibilities which allows signatories to opt in and opt out of what they choose.

But the real shame is that poorer countries stand to gain a great deal from the GATS.  Competition and private provision of utilities such as water would be a good thing . The majority of public utility monopolies in poorer countries provide a woeful service. Access to water is often determined by bribes or favour-calling from friends in the bureaucracy.

Where water has been privatised - such as in Chile and Guinea - both supply, quality and access rates have increased dramatically.

More broadly, it is worth pointing out that no country has ever got rich from agriculture alone. Services are where the money is.

Lower-income countries should be doing everything in their power to encourage the development of service sectors in order to provide both jobs and prosperity. The GATS is a useful tool for moving in this direction.