Water and the GATS: mapping the trade – development interface

Water and the GATS: mapping the trade – development interface

Trade liberalisation in the water market: what does it mean for development?

In the context of efforts to liberalise the market in services according to the General Agreement on Trade in Services (GATS) principles, this paper assesses the consequences for the water market. Since the early 1990s development banks and donors have been supporting promotion of Private Sector Participation (PSP) in developing countries as a means of financing water and sanitation service delivery and improving its performance. PSP-sceptics note, however, that subsequent experience of PSP has been mixed and they doubt the benefits which would be achieved by countries (further) opening up their water services to PSP, including foreign participation.

The briefing paper highlights the following:

  • many of the obstacles to achieving universal water coverage are not in fact trade-related
  • the current scope for PSP in developing country markets, especially in poorer "non revenue" areas, is in practice rather limited
  • GATS rules currently represent a "moving target" so that making of future GATS commitments in relation to water services involves uncertainty
  • there are some legitimate concerns that GATS rules might restrict the policy-making autonomy of national government, or disenfranchise progressively decentralised local governments by "locking in" a particular set of policy choices
  • if alignment of trade-oriented reforms and development objectives is to be achieved in developing countries, a gradual approach to making market access and national treatment commitments in the water sector is advisable
  • regulatory authorities in developing countries which have little experience of PSP and GATS will not be able to regulate for things they do not (or cannot) foresee
  • a cautious step-by step approach to making GATS commitments will increase the likelihood of anticipating correctly how they will take effec
  • a great level of dialogue and learning is required at the GATS-water sector interface: trade officials need to familiarise themselves with the special features of the water sector and water officials need to build up their understanding of the content of the different GATS rules and how they are interpreted internationally under WTO procedures/auspices
  • GATS presents a particular capacity challenge for developing countries, not least their ability to negotiate GATS commitments effectively with other WTO Members.