Castan Centre for Human Rights Law

Submission to the Senate Foreign Affairs, Defence and Trade Committee
Inquiry into the General Agreement on Trade in Services and the Australia / United States Free Trade Agreement

March 2003

1. Introduction

The focus of the present submission is the effect of GATS on the realisation of human rights, including the potential effect of any expansion of GATS resulting from the current round of negotiations and the built-in mandate for ever-increasing liberalisation of services (1) (and therefore limitations on regulation). This submission concentrates on GATS rather than the proposed Australia / United States Free Trade Agreement, but the arguments made in relation to GATS will be at least partially relevant to the bilateral agreement.

This submission makes no comment on the desirability of trade liberalisation per se. It is not disputed that increased trade activity (of both goods and services) has both positive and negative consequences for virtually every area - economic, social, environmental and so on - and human rights is no exception. Instead, this submission focuses on the manner in which liberalisation of trade in services is currently undertaken and is likely to be undertaken in the future, through the legal framework of GATS and its ongoing expansion, and comments on the consequences of that method for human rights, proposing alternative approaches where appropriate and highlighting areas of concern.

2. The importance of service delivery to the realisation of human rights

(a) The state's human rights obligations

Under international human rights law, it is the state that has the primary responsibility for ensuring the realisation of the human rights of everyone within its jurisdiction. The state's duty can be considered to have three parts: a duty to respect human rights (meaning that the state and its agencies do not themselves violate human rights); a duty to ensure respect for human rights (meaning that the state must act to prevent human rights violations by others); and a duty to promote human rights (meaning that the state must take positive steps for the continuous improvement of the human rights situation). Delivery of social services by the state has historically been a principal means for states to meet their obligations for the realisation of human rights, particularly in relation to the duty to promote human rights. Health services, education, housing, welfare services and water utilities are just some of the services traditionally operated by governments that directly contribute to the realisation of human rights.

Australia, like all states, has very detailed human rights obligations under international law, many of which relate directly to the ability of all people to access social services. The right to health, (2) to take but one example, includes an obligation to ensure access to health care for those who might otherwise be unable to pay, especially for vulnerable or marginalised groups, (3) and an obligation "to ensure equitable distribution of all health facilities, goods and services." (4)

The state's international human rights obligations do not prevent non-state entities from providing social services, either in place of or in competition with the state. Privatisation or the liberalisation of trade in services are therefore not prohibited per se by the application of international human rights law. However, the mere fact that the state might not be responsible for the actual provision of the service does not relieve it of its responsibility for human rights associated with that service.

Thus, to continue the example of the right to health, the state will violate its duty to respect human rights if the requisite standard of health care is absent altogether, but it will also violate its duty to ensure respect for human rights if the conduct of the private entities engaged to deliver health care results in inadequate accessibility. For this reason, it might be necessary for the state to impose contractual or regulatory conditions on private service providers or provide some form of subsidisation where market forces alone would not lead a profit-motivated private provider to provide the required level of accessibility, for example the provision of health services in isolated geographic regions that might not be profitable. Failure by the state to take such measures could render it in violation of its obligations under international human rights law. The potential of GATS to restrain states in taking such measures in certain circumstances is of major concern in that it may then oblige states to violate their obligations under human rights law in order to meet their obligations under trade law. This is discussed in greater detail in part 3, below.

(b) Private service providers' human rights obligations

While the primary responsibility for human rights under international law remains with states, private entities are also obliged to respect human rights within their sphere of activity and to ensure that others under their control or influence also respect human rights. (5) In the context of service provision, this means that the provider must itself respect human rights in the course of delivering the service, as well as ensuring that employees, contractors, clients or anyone else involved in the process similarly respects human rights. This obligation covers both a negative duty - that is, do no harm - and a positive duty - that is, provide satisfactory standards and access where the service itself is important to the realisation of human rights. An example of a negative duty would be of a private operator of a prison treating prisoners with dignity and respecting all their human rights other than the deprivation of liberty involved in detention. (6) A positive duty, on the other hand, would be the duty of a private water utility to provide clean drinking water of an acceptable standard and to ensure that it is available to all people within the utility's designated area on reasonable terms, including the poor. (7)

Given that commercial operators are motivated by profit, one would generally not expect them to implement measures for the realisation of human rights if those measures were not profitable - especially in the case of a positive human rights duty - in the absence of a legal obligation to do so. While legal obligations exist under international human rights law, the reality is that those obligations are not enforceable against corporations unless they are reflected at the domestic level through legislation or regulation.

It is therefore essential for the state to develop appropriate regulatory measures to protect and promote human rights in the course of commercial operations, on the one hand for the state to discharge its own obligation to secure the human rights of all within its territory or jurisdiction, and on the other hand to give practical effect to the human rights obligations of corporations and other private entities.

3. Potential problems for human rights posed by the extension of GATS

(a) Background: coerced privatisation and the narrow exemption of government services

In response to fears that public services will be affected and government regulation of those services constrained by the expansion of GATS, the WTO and other trade liberalisation advocates commonly argue that government services are excluded from GATS, thus protecting vital public services. (8) However, that exclusion is limited to "any service which is supplied neither on a commercial basis, nor in competition with one or more service suppliers." (9) The exclusion therefore applies only to government-run monopolies, and even then will not apply if the monopoly runs at a profit and possibly even if any charge is applied to the service, depending on the interpretation of "a commercial basis". On the narrowest reading, a government service provider that applies a charge to one kind of service in order to subsidise another would not fit within the exclusion for government services. All services that do not fit within that category are subject to the obligations under part II of GATS, meaning that any government regulation of those services must comply with GATS rules.

In Australia, some of the services that have an impact on human rights and come within the scope of part II of GATS would include water and power utilities, sewage and waste disposal, health services, education, telecommunications, prisons and detention centres and security services.

A complicating factor in this definition of the scope of GATS is the pressure frequently placed on governments to privatise social services or to implement 'full cost recovery', whereby the charge for a service should at least meet the full cost of its supply, therefore arguably rendering it a supply on a commercial basis and within the scope of GATS. In the case of developing countries seeking loans and development assistance from the World Bank and the International Monetary Fund, where privatisation and commercialisation are common conditions for assistance, (10) it is questionable whether the application of the general obligations in part II of GATS to privatised sectors is truly consensual, especially where the privatisation or commercialisation occurred after the country in question acceded to GATS.

(b) Pressure to expand specific commitments

In addition to pressure from entities outside the WTO process (which can have the effect of expanding general commitments under GATS), many countries are also under pressure to expand their specific commitments. Developing countries in particular are frequently faced with pressure to open markets to services - particularly professional services that are non-existent or embryonic in those countries - in return for commitments that are vital to the developing countries' interests, such as access to affordable essential medicines under the TRIPs Agreement. (11) While such deals may look legitimate on the surface, the effect might be that the ability to protect human rights in one area - in this example, medical treatment for epidemics - is traded off against the ongoing ability to protect human rights in the course of service provision. Such negotiation pressures should be borne in mind when considering GATS negotiations and their apparently consensual nature.

(c) Restrictions on cross-subsidisation and the meaning of 'discrimination'

While both human rights standards and international trade agreements are largely grounded in the principle of 'non-discrimination', the meaning of the term as between the two fields differs. Discrimination in human rights law includes actions or measures that have a discriminatory effect on a particular individual or group, even if they appear non-discriminatory at face value. For example, a policy that required everyone to pay the full cost of water provision to them might appear to treat everyone equally, but could be considered to discriminate against those without the capacity to pay or those to whom service provision is more expensive due to geographical isolation. To meet the human rights principle of non-discrimination, such a system might need to include a degree of cross-subsidisation by wealthier or urban-based consumers.

Non-discrimination in trade law, on the other hand, is concerned with the way that importers and exporters are treated by government regulations. To the extent that governments try to implement targeted regulation of essential social services, whereby private service providers are treated differently according to the social needs of their customers, such measures could potentially breach the trade principle of non-discrimination, depending on the formulation of those measures and the providers' countries of origin. Thus it is possible that measures taken to satisfy human rights requirements of non-discrimination will necessarily breach obligations of trade non-discrimination, and vice versa. The extension of the coverage of the GATS agreement over more regulatory areas is likely to exacerbate that potential conflict unless appropriate human rights safeguards accompany any such extension.

(d) Restriction of the state's ability to regulate or intervene

In relation to service areas that states have nominated as specific commitments, regulatory measures are required to be transparent and to be "not more burdensome than necessary to ensure the quality of the service". (12) The WTO Council on Trade in Services is mandated to create rules based on those criteria, but for the time being they remain undefined. The principle is potentially problematic in that regulation directed towards accessibility of a service or government monitoring of private service provision is arguably not directly related to the "quality of the service", depending on how that term is defined. The clear risk is that regulation of services that is designed to meet human rights standards could be deemed "unnecessarily burdensome" and potentially in breach of GATS.

A related concern is that where two or more options for human rights protection related to services regulation are available, states will be required to choose the "least trade restrictive" option, even where that might be less effective. Equivalent rulings under GATT - most infamously the Tuna/Dolphin cases - have been widely criticised by environmentalists and human rights advocates. These concerns could be addressed in the formulation of rules by the Council of Trade Services, or through an authoritative interpretation by the WTO General Council; (13) amended of the text of the agreement is not required.

(e) The general exceptions clause

Article XIV of GATS provides exceptions to the rules of the agreement, provided that the measures taken under the exceptions are not considered "arbitrary or unjustifiable discrimination". (14) Among these is an exception for measures "necessary to protect human, animal or plant life or health". (15) While these exceptions on their face provide an avenue for human rights protection, the restrictions on their scope by the requirement of [trade] non-discrimination and the requirement that the measures be "necessary" are currently unclear. In any case, they do not contribute to the protection of human rights unrelated to the rights to life and health.

4. Comments on the proposed Australia / United States Free Trade Agreement

This submission is directed towards GATS and does not seek to make any detailed comment on the proposed Australia / United States Free Trade Agreement. However, in so far as the negotiating agenda for the latter agreement includes privatisation or commercialisation of social services or other amendments to regulatory schemes covering certain social services, (16) the arguments made above regarding the necessity to maintain a strong power of the state to monitor and intervene in private service provision apply equally to the bilateral agreement. The importance of defining the human rights obligations of public and private bodies and implementing an effective enforcement mechanism for those obligations naturally remains unchanged in the bilateral negotiating context.

5. Conclusion: a human rights approach to trade liberalisation

(a) Trade liberalisation as a means rather than an end

In conclusion, this submission neither supports nor opposes individual proposals under negotiation in relation to either GATS or a bilateral free trade agreement with the United States, not least because a significant proportion of the content of those negotiations is shrouded in secrecy. Instead, this submission advocates an approach to international economic negotiations, including the negotiation of the two instruments considered in this inquiry, which perceives international trade and economic co-operation as a means to achieve global development and improve the wellbeing of all people, rather than an end in itself. This approach is supported by the United Nations Charter, (17) as well as the preamble of the Agreement Establishing the World Trade Organisation, which proclaims the aim of the WTO as facilitating international trade and economic relations:
"...with a view to raising standards of living, ensuring full employment and a large and steadily growing volume of real income and effective demand, and expanding the production of and trade in goods and services, while allowing for the optimal use of the world's resources in accordance with the objective of sustainable development, seeking both to protect and preserve the environment and to enhance the means for doing so in a manner consistent with their respective needs and concerns at different levels of economic development." (18)

In our submission, it is important that this intention behind the WTO is given real meaning in the course of negotiating agreements under its auspices. Australian negotiators, and indeed all negotiators, should evaluate all trade proposals by the degree to which they meet or impede these goals, including their impact on the protection and promotion of human rights.

(b) Australia's obligations under international law and its approach to WTO negotiations

Australia's existing obligations under international law, particularly in relation to human rights, should also be borne in mind in determining its approach to trade negotiations. The UN High Commissioner for Human Rights has noted that:
"whatever the human rights treaty obligations undertaken by particular States, WTO members have concurrent human rights obligations under international law and should therefore promote and protect human rights during the negotiation and implementation of international rules on trade liberalization." (19)

(c) Recommendations

With regard to Australia's approach to the current and future GATS negotiations and the development of new international trade rules in general, the Castan Centre makes the following recommendations:

1. That Australia, as a matter of policy, recognise the primacy of human rights under international law, derived from the inherent dignity of human beings. As such, Australia should bear in mind its pre-existing and evolving international human rights obligations in the course of its international relations, particularly the negotiation of new international legal instruments, and ensure that such endeavours are in full compliance with those human rights obligations.
2. That Australia, as a matter of policy, recognise that international trade is a means towards securing peace, based on respect for human rights and fundamental freedoms, including the improvement of living standards through development, rather than an end in itself.
3. That Australia, in the course of the current GATS negotiations, insist on retaining and strengthening the ability of states to regulate private service provision for the purposes of protecting and promoting human rights, including economic, social and cultural rights.
4. That Australia, in the course of the current GATS negotiations, advocate a new general exception to GATS, namely that states may take any measures it considers necessary to fulfil its international human rights obligations, including the obligation to prevent human rights abuses by private entities within its jurisdiction.
5. That Australia develop effective regulation of private service provision within Australia to ensure that Australia's international human rights obligations are met.
6. That Australia, in the course of ongoing international trade negotiations, advocate an approach to treaty interpretation and dispute settlement that considers international trade agreements in the context of all co-existing international obligations and subject to fundamental human rights norms, reflecting established principles of interpretation under international law.
7. That Australia, in the course of the current GATS negotiations and future trade negotiations, allow public scrutiny of all negotiations before reaching final agreement, including offers and requests for specific commitments under the current GATS negotiations.
8. That Australia, in the course of the current GATS negotiations, refrain from requesting specific commitments in service sectors that are particularly sensitive for human rights.
9. That Australia, in the course of the current GATS negotiations and future trade negotiations, refrain from placing undue pressure on developing countries to make additional GATS commitments or other concessions that might impact upon human rights by making such concessions a condition for support of unrelated issues of concern to those countries, such as the greater facilitation of access to essential medicines under the Agreement on Trade Related Aspects of Intellectual Property Rights.

Appendix: The Castan Centre for Human Rights Law

The Castan Centre for Human Rights Law was established in 2000 to meet the need for and interest in the study of human rights law, globally, regionally and in Australia. It seeks to bring together the work of national and international human rights scholars, practitioners and advocates from a wide range of disciplines in order to promote and protect human rights. It does so by way of teaching, scholarly publications, public education (lectures, seminars, conferences, speeches, media etc), applied research, collaboration and advice work, consultancies and advocacy. The Centre is named after Ron Castan AM QC (1939-1999), who was a passionate advocate for the recognition and protection of human rights and a distinguished member of the Victorian Bar.

One area of the Castan Centre's particular expertise is the human rights responsibility of corporations, which is the subject of a major three year research project currently underway. The project is facilitated by an Australian Research Council Linkage Grant, funded by the ARC and the project's industry partners. More information about the project and about the Castan Centre in general is available at http://www.law.monash.edu.au/castancentre.

Castan Centre for Human Rights Law:
Adam McBeth, PostGraduate Research Fellow, adam.mcbeth@law.monash.edu.au
Dr Sarah Joseph, Associate Director, sarah.joseph@law.monash.edu.au
Professor David Kinley, Director, david.kinley@law.monash.edu.au

1 GATS, Article XIX.
2 Australia is obliged to ensure the realisation of the right to the highest attainable standard of health (referred to here as the 'right to health') by virtue of its ratification of the International Covenant on Economic, Social and Cultural Rights 1966 (Article 12(1)) and the Convention on the Rights of the Child 1990 (Article 24), among other instruments.
3 Committee on Economic, Social and Cultural Rights, General Comment 14, The Right to the Highest Attainable Standard of Health, 11 August 2000, UN document no E/C.12/2000/4, (hereinafter 'CESCR General Comment 14') paragraphs 19 and 43(a). The Committee's General Comments are the most authoritative interpretation of the provisions of the International Covenant on Economic, Social and Cultural Rights.
4 Id, paragraph 43(e).
5 The obligations of private entities are indicated by human rights treaties expressing that obligations are owed by everyone (rather than merely by states), including the Universal Declaration of Human Rights, which places obligations on "every individual and every organ of society" in its preamble. For a more precise formulation, see the Draft Norms of Responsibility of Transnational Corporations and Other Business Enterprises with Regard to Human Rights, 15 August 2002, UN document no E/CN.4/Sub.2/2002/13.
6 Australia is obliged to ensure the humane treatment of detained persons to this standard by virtue of its ratification of the International Covenant on Civil and Political Rights 1966 (Article 10), among other instruments.
7 These obligations arise from the right to health (n2, above): see CESCR General Comment 14 (n3, above), paragraph 11.
8 For example, World Trade Organization, Director-General of WTO and chairman of WTO services negotiations reject misguided claims that public services are under threat, 28 June 2002, WTO press release 299, www.wto.org/English/news_e/news02_e/news02_e.htm (last visited 13/2/03), claimed that "WTO negotiations to liberalize trade in services were no threat to Government services and that such sectors of the services economy were in fact excluded from the negotiations." ... "Government services supplied on a non-commercial basis by each of the 144 [now 145] WTO Member Governments are explicitly excluded from the scope of the negotiations."
9 GATS, Article I:3(c).
10 For example, the World Bank's Operational Directive OD 8.60, Adjustment Lending Policy (which is currently under review), assumes that privatisation, commercialisation and the abolition of state monopolies "typically form a difficult but necessary component of trade reforms".
11 For example, Australian negotiators in the current round have made clear their intention to link their support for better access to essential medicines under the TRIPs Agreement to support by developing countries for Australia's position on geographical indicators under the same agreement. There is nothing to prevent similar trade-offs operating across different agreements, although the confidential nature of the negotiations makes it difficult to determine exactly what deals have taken place.
12 GATS, Article VI:4(b).
13 The Marrakesh Agreement Establishing the World Trade Organization, Article IX:2, makes provision for authoritative interpretations of WTO agreements by the Ministerial Conference or the General Council.
14 GATS, Article XIV, chapeaux.
15 GATS, Article XIV(b).
16 For instance, John Quiggin, A deal not in our interest, Australian Financial Review, 30 January 2003, p54, claims that the negotiating agenda "extends to include such items as the privatisation of Telstra and, ultimately, the removal of any restrictions on foreign ownership." Such restraints on the state's regulatory capacity, even though not on their face concerned with human rights, should be considered in the context of the need to preserve the state's ability to intervene to protect human rights, as discussed above in relation to GATS.
17 Note the characterisation of human rights protection in the preamble of the UN Charter as a purpose of the UN, while economic co-operation is mentioned only as a means to achieve the aforementioned ends.
18 Marrakesh Agreement Establishing the World Trade Organization 1994, preamble (emphasis added).
19 High Commissioner for Human Rights, Liberalization of trade in services and human rights, 25 June 2002, UN document no E/CN.4/Sub.2/2002/9, paragraph 5.