Europe at the Crossroads: Health and Education as Business Opportunity?

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The General Features of the New Constitution in Relation to Public Services
The proposed new EU Constitution is meant to incorporate all of the existing Treaties of the EU but it goes much further than that. The Constitution not only sets out how the EU should be run but it also determines what economic and social policies should be followed in the Member States.

The new EU Constitution must be viewed in the context of the evolution of the social and economic policies of the Union. As it stands, the new Constitution signals the abandonment of the ‘social’ or ‘Welfare State’ model of the EU – in which state provision of high quality public services, protection against unemployment, citizens and workers rights, environmental protection, etc. were the priority. A framework for the further advance of neo-liberal globalization, which clearly points to this abandonment, is embedded in the new Constitution. Key to this framework are the changes which will allow the European Commission to negotiate trade agreements involving the commercialization of public services at the World Trade Organisation through the mechanism of the General Agreement on Trade in Services (GATS).

  • The new Constitution would remove the existing power of veto on commercialisation of Health, Education and Cultural Services that Member States have in the Council of Ministers. It shifts decisions on trade in these services to Qualified Majority Voting (QMV). No details of voting would be published, so Irish citizens would not know how Irish representatives in the Council of Ministers voted. The European Commission would then have exclusive right to make agreements at the WTO through the GATS agreement which could liberalise international trade in these Services, and only inform us of the details after the deals have been done.
  • The Irish State is already part of ongoing GATS negotiations, making offers to other WTO members on what services it will agree to open up to competition. None of this can be monitored by Citizens / Opposition Parties / The Dáil / The Social Partners etc. It is done in secret by the Article 133 Committee, which has Irish members. In the aftermath of the Nice Treaty referendum, thirty two Freedom of Information requests were made about the activities of the Irish members of the Article 133 Committee: only one was granted.
  • The exclusive right given to the European Commission to make trade deals in all Services, combined with the commitment in the common commercial policy to liberalise trade in all Services, means that the new Constitution would prepare the way for commercialising Education, Health and Cultural / Audiovisual Services. It would put a framework for commercialising these Services into basic EU law – a framework that democratically elected governments would be powerless to change in the future.
  • To those who say that Member State control of Education, Health and Cultural / Audiovisual Services is protected by various Articles in the Constitution, we say this: protection by such Articles is contradicted by giving the EU exclusive rights to make international agreements to open trade in these Services. If democratic control is to be retained, decisions must remain unanimous: any Member State must have the right to use a veto in the Council of Ministers against proposals to open trade in these Services.
  • Some regional governments are critical of the powers that the Constitution gives the EU. The Austrian Lander are opposed to decisions on how public services should be provided being determined by EU ‘framework law’. They argue that giving exclusive rights to the EU to make trade agreements for these services means the rights of Regional Governments – subsidiarity – are at an end; and that considerations other than commercial values should be taken into account in the provision of public services. In this they are defending democratic accountability and a ‘social’ model for the EU - as against the commercial framework in the new EU Constitution. The Irish Government are happy to make complaining noises about the loss of the veto in the areas of Foreign Policy and Taxation Policy but have completely ignored the implications of the loss of a veto when it comes to the possible forced liberalisation of core public services.

The New Constitution and the General Agreement on Trade in Services (GATS)
At present, public services are still provided by the state in some of the countries of the EU. But steady pressure from the Commission via the Common Commercial Policy, the new Constitution, and the GATS agreements, will progressively bring that to an end. The state which carries out the most commercialization of public services will set the agenda for all the other Member States – note the British experience. So rather than providing protection against globalization, the EU – and especially the new Constitution – is actually advancing the agenda of neo-liberal globalization. The new Constitution is designed to create the optimal conditions for big business, while removing mechanisms for democratic accountability and control.

Why is the GATS so important? "The GATS is not just something that exists between governments. It is first and foremost an instrument for the benefit of business." - European Commission (1998). Agreements at the WTO, in negotiations on the GATS, to open services to trade on the international market are irreversible, binding commitments. Opening services to trade means restructuring public services so that they can be run on a commercial basis, for a profit. The upshot is that infrastructure like schools and hospitals are privately provided at high cost to the state and the taxpayer. And two tier services emerge – private and high-quality services for those who can afford it; and low quality state services for those who cannot. When it comes to having high-quality public services, democratically accountable and available to all, who provides them does matter.

The Proposed New Constitution
The Irish government will hold the EU Presidency for six months starting on January 1, 2004. During the Irish Presidency, the Member States of the EU, and the ten new Accession States, will be working to get final agreement on the proposed new EU Constitution. The Constitution is scheduled to be formally agreed by the Heads of State on May 9, 2004. It must then be ratified by all states before December 31, 2005. Ratification in Ireland will be by referendum, but no date has been set.

There are conflicting commitments within the Constitution in relation to the Common Commercial Policy, Art III 216 and 217, and to the competencies of the EU versus the member states as laid down in Art 16 – which says the EU may take Supporting, Coordinating or Complementary action in relation to education, health and culture, industry and civil protection; and that such action may not harmonise laws or regulations. The common commercial policy is one of the fundamental elements of the EU, based on "uniform principals" in relation to "the conclusion of tariff and trade agreements relating to trade in goods and services" and "uniformity in measures of liberalisation" (Art. III 217-1). In practise this means that the State which pushes the furthest with liberalisation – and the Commission is also actively promoting liberalisation - will set the terms for all of the others.

While Art 16 formally restricts EU input to a ‘supporting’ role, it also gives the EU a significant input into these areas of policy. But the common commercial policy will take precedence in any aspects of the provision of health and education and cultural services that are regarded as commercial – e.g.: catering, cleaning, transport, maintenance, and even operational management – as in Britain.

Common commercial policy is decided exclusively by the EU. The Commission takes the initiative, and the Council of Ministers decides on policy by Qualified Majority Vote (QMV). Present proposals are that any aggregate of States’ votes representing more than 60% of the population of the enlarged EU will constitute a majority. No details or minutes of Commission / Council debates and voting are published – citizens of the Member States cannot find out how their representatives vote or call them to account.

At present, Article 133 of the Nice Treaty states that any changes in common commercial policy on Education, Health and Cultural Services have to get a unanimous vote in the Council of Ministers. They are exempt from QMV – so a veto is available to Member States if they don’t agree with a particular policy.

Liberalisation and Commercialisation Under the New Constitution
Dr. Stummann of the Assembly of the European Regions argues that failure to get unanimity for further liberalisation of Education and Health in the GATS negotiations earlier this year was the reason that the Commission was unable to make more offers to open these services up to trade at that time. He also notes that those pushing hardest for liberalisation in these services - Britain, the Netherlands, and chief EU negotiator at the GATS Pascal Lamy - are also pushing strongly for QMV to determine policy on Health and Education. They evidently think they can get a majority vote for liberalisation, where they could not get a unanimous vote. So some States will have liberalisation forced upon them.

The present exemption of Education and Health from QMV is not included in the proposed new Constitution. Under the new Constitution, the Commission would make proposals to the Council of Ministers, which could decide by QMV to open up trade in the commercial aspects of Education and Health Care.

This can include almost anything – from catering to full operational management, as in Britain. The Commission and the Council of Ministers would decide by QMV what constitutes ‘commercial aspects’ of these services. So attention should be paid to the commercialisation of these Services in Britain; and to what parts of these Services are already up for trade in the GATS.

As more and more aspects of public service provision in Europe, such as health and education, are opened up to commercial forces, the greater will be the influence of the common commercial policy on the provision of these services. The increasing use of public private partnership (PPP / PFI) contracts, allowing private operators to design, build, maintain and sometimes manage schools is a case in point. Member States would only be allowed to formulate general policy with regard to these services, not how or by whom they should be delivered, despite the provisions of Articles 179 on Health and 183 on Education.

Articles Providing Protection Against Liberalisation?
It might be argued that Articles 16, III-179-7 on Health, III-181 on Culture, III-183-1/4 on Education, III-217-4 of the common commercial policy on cultural and audiovisual services, and III-217-5 of the common commercial policy on the delineation of the competences of Member States as against those of the EU - protect the rights of the Member States to determine policy on Health, Education and Cultural / Audiovisual Services.

But these Articles offer little legal protection against the provisions of Article 12-1 which gives the Union exclusive right to determine common commercial policy; and thence 217-1 of the common commercial policy, which includes the right to make ‘trade agreements in relation to trade in goods and services’. This element of the common commercial policy allows the Commission, after a QMV vote in the Council of Ministers, to make deals in the GATS and the WTO on what the Commission itself defines as the ‘commercial aspects’ of these Services. The commercial aspects of these Services are not defined in the Constitution or elsewhere. So a Member State would have to go to the European Court of Justice to challenge the Commission, arguing a defence that would have to show that the Commission was opening trade in non-commercial aspects of these Services.

This would be a very difficult legal argument to make, since many parts of these Services can be broken into individual functions and contracted out. Examples of this can be seen in Ireland and in especially in Britain.

Formal ‘harmonisation’ of laws and regulations would be unnecessary, since it would take place in practise through the application of trade agreements.

In practise the so-called protection Articles are but a fig-leaf covering the overriding drive towards uniform liberalisation of trade in Services contained in the common commercial policy. If those who cite these Articles are serious about protecting Health, Education, and Cultural / Audiovisual Services from commercialisation, they should at least press for the retention of the unanimity requirement in the Council of Ministers on decisions to open trade in these Services.

Cultural and Audio Services
With regard to culture, Art III 217-4 of the Constitution gives a veto on changes in the common commercial policy only in ‘the conclusion of agreements in the field of trade in cultural and audiovisual services, where these risk prejudicing the Union’s cultural and linguistic diversity’.

How such risk is defined, when it is defined, and by whom it is defined, is open to interpretation. Would a general opening up of the University sector, or of the primary school sector (as is happening in Britain), to unlimited competition pose a threat to cultural and linguistic diversity? Would the same levels of support to linguistically specific radio and TV – like TG4 and projects it supports – also have to be given to private commercial channels like TV3? How would defenders of linguistic diversity establish, in advance - rather than when deals have been made and the damage is done - that certain trading agreements pose risks to culture? Who decides what constitutes a risk is not defined, so those who might see their culture as being at risk will not have veto powers. In practise the European Court will determine which services should be protected and which should be commercialised.

Subsidiarity and Regional Policy
‘Subsidiarity’ and EU Regional Policy will be heavily undermined by the new Constitution. In Austria subsidiarity means a choice by the communities as to how public services are provided – people can vote for different political parties and proposals. The Länder, the regional and local territorial authorities can freely decide whether they provide public services themselves, by means of a hived off structure (possibly in the form of in-house allocation), or – after the completion of a public allocation procedure - by means of a third party.

The Austrian Länder are against the introduction of a general obligation for open competitive tendering in the ‘services of general interest’ (public services) in Europe. But Art III-6 states that in relation to the ‘principles and conditions’ whereby these services are provided, ‘these principles and conditions are laid down by European law’. The Länder argue that this goes against the principle of subsidiarity and would give the Union a competence that at present it does not have in some services - such as drinking-water supply, waste and wastewater disposal, social services as well as education and culture. Similarly, giving the Union exclusive right to negotiate trade agreements in Services means that regions, such as the Länder, lose their rights to determine policy for those Services. Subsidiarity would be made meaningless. The people of these regions would lose their democratic right to control how their Services are structured and delivered.

Art III-6 also undermines Regional Policy. Art III-117 states that the Union’s policies and action should take into account the objectives of reducing disparities between the levels of development of the various regions. Determining policies on the basis of ‘European law’ - as provided for in Art III-6 – would give primacy to competition rules and thereby undermine measures to reduce regional inequality - such as providing subsidies for regional transport links that would not be commercially viable on their own.

In the Altmark Trans decision of 24 July 2003 the European Court of Justice established that certain state subsidies for public transport services were not ‘improper state aids’, as outlawed by the current European aid and competition rules. The common position of the Austrian Länder is that this judgement should be extended to cover other public services so that considerations other than market forces – including security of supply, continuity, sustainability, general right of access, territorial and social cohesion, should be taken into account.

Direction of a future EU: welfare for citizens or profits for the service industry
In summary, the proposed new Constitution would take the EU further away from a ‘social’ or ‘Welfare State’ model and closer to a commercial model of Public Service provision. Liberalising trade in Health, Education, Cultural and Audiovisual Services in the GATS will not improve the quality of service or the conditions of work for those who deliver them. To quote again the European Commission: "The GATS is not just something that exists between governments. It is first and foremost an instrument for the benefit of business."

The Commission, via the new Constitution, is working to create the best conditions for big business to reap profits from the provision of essential Public Services. Is this what the people of Europe want from a new Constitution?

The Lander in Austria are the regional states. They have considerable powers, including the power to determine policy on education. The Lander in Germany have similar powers; as have the Cantons in Switzerland. (back)

This briefing draws on the work of Dr. Franz-Josef Stummann, Executive Secretary of the Assembly of the European Regions. Legal comment by Rania Georgoutsakou of the Assembly of the European Regions. Drafting is by Brendan Young in collaboration with Deirdre DeBurca, Eamonn Crudden and Orla Drohan.

DAPSE was formed after a workshop on the GATS at the Irish Social Forum in October 2003. It is an open campaign group that welcomes participation. For copies of briefing papers or details of meetings, please contact:
DAPSE, c/o IPSC, p/o Box 9124, Dublin 1.

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