The liberalisation of trade-in-goods and of trade-in-services in international trade agreements are very different in nature.
Most EU trade internally and externally, both incoming and outgoing, is in services.
Trade-in-goods includes agricultural goods and non-agricultural goods, which is manufactured goods and also fishing (in trade terms NAMA – Non Agricultural Market Access). Trade-in -goods liberalising in trade agreements is about reducing at-the-border tariffs and also subsidies, for goods.
Tariffs are taxes. While the free trade lobby maintains the assumption that all tariff reductions are overall beneficial , this reduction or removal of tax is a shift of resource from governments to corporations that bring goods across borders, much of the time as part of their global value chains.
These corporate cost reductions may or may not be passed onto consumers, while government revenue, the basis of public service funding, has been reduced.
Therefore the effects of the liberalisation of trade-in-goods are more nuanced than the unquestioned overall outright benefit that trade-in-goods tariff reductions are usually presented as.
(This is particularly an issue in poor countries where, because of very low incomes, little tax is collected from the population to fund public services such as education and health. In these circumstances, tariffs can boost government income to provide services, and these are lost when countries take on trade-in-goods liberalisation commitments.
In addition, with powerful country trading partners maintaining their subsidy systems, local income and markets may be negatively affected by the ‘dumping’ of very cheap agricultural goods, such as subsidised US rice into Africa, facilitated through trade agreement tariff reductions exchanged for access for other goods, into bigger markets. )
These are the all-encompassing ‘trade-in-services’ categories according to the WTO. These categories are generally used in other trade agreements too:
Business, Communications, Construction and Engineering, Distribution (includes food) Educational, Environmental (includes water, energy, toxic and nuclear waste), Financial, Health and Social Services, Tourism and Travel Related, Recreational, Cultural and Sporting, Transport, Other.
Trade-in-services liberalising means opening service investment opportunities to transnational and foreign investors.
A country may do this unilaterally as the UK always liberalises all such investment opportunities, in both the public and private sector, even without trade agreement commitments.
When these ‘trade-in-services liberalisations become part of trade agreements, incoming service investors are automatically granted rights, and the country commits to keeping the service liberalised.
These rights include ‘National Treatment’ so that incoming investors have to receive the same or better treatment as that afforded by the government to domestic service providers, including any subsidies.
It also includes the Market Access rule, whereby the country, having liberalised the service and committed that liberalisation to a trade agreement, cannot limit the number of service providers who enter that market, or limit the number of services they provide.
For instance in financial services, the country cannot limit the number of new financial ‘products’ that financial service firms offer, and may struggle to regulate to keep up with their introduction.
There are two ways of including services in a trade agreement, by positive or by negative listing.
The WTO, and EU agreements until now (apart from the uncompleted Canadian/EU free trade agreement –CETA) have used positive listing. With positive listing, countries nominate the services that they choose to commit to the trade agreement.
With negative listing, as has been included in the CETA and will be in the TTIP, countries list the services exceptions they want to make, and all the rest are included. This is much more coercive than positive listing and exceptions cannot be added after the agreement is finalised. This means the ‘living agreement’ aspect of these current trade deals does not allow countries the on-going opportunity to list further exceptions.
The main lobby mechanism for ‘trade-in-services’ in Brussels is the European Services Forum (ESF).
BusinessEurope, the main representative body of big business firms including US corporations (i.e. not necessarily ‘European’ corporations), is a member of ESF.
The City of London Corporation’s lobby group TheCityUK has a major voice in ESF, representing transnational financial service corporations, lobbying directly at the Brussels level.
In London, TheCityUK has a secretive Liberalisation Of Trade in Services committee ( LOTIS) in which representatives of major transnational banks, insurance companies, trade law firms and the big 4 audit firms dictate UK trade policy to bureaucrats from the Department of Business, Innovation and Skills (BIS), who then carry that message to the EU Trade Policy Committee in Brussels. This means that UK trade policy comes directly from the City financial services, bypassing the UK government and the public.