The movement for Fair Trade in Tourism has to be seen in the context of the global trade system and the trade agreements governing it. The decisions that are taken at international level affect what happens at local level in tourism destinations. They also affect whatever decisions or strategies might be decided in terms of ensuring greater benefits for local people in the destination. As will be outlined later in detail, some of the consequences of the international trade negotiations could undermine and act against the objectives of fair and sustainable tourism. This is the reason why the Fair Trade in Tourism Network has decided to consider international trade agreements as one of the main areas for intervention, to monitor and influence negotiations. In this respect, our work is linked to the work of other non-governmental organisations.

The GATS and Tourism Services
The General Agreement on Trade in Services (GATS) is administered by the Geneva-based World Trade Organisation (WTO-OMC) which became operational in 1995 with the implementation of GATS.
The GATS is the first multilateral and legally enforceable agreement governing trade and investment in services and is regarded as the main instrument to facilitate liberalisation. According to Trade and Investment briefings from the Institute of Development Studies, trade in services more than tripled between 1985 and 1996. Services currently contribute an average of 50% of value-added to developing countries? GDP, and are a significant source of growth and development. Roughly 60% of current foreign direct investment is in service activities.
Small developing countries have specialised particularly in tourism. Under GATS, commitments under tourism-related services ranked higher than for any other service sector, including financial and business services. In many countries, GATS commitments reflect the objectives of national tourism policies.
In the tourism sector, GATS has served to create a legal framework for services that will already have largely been liberalised in some countries. For example, according to a recent study by WWF International, the government of Turkey has undertaken greater liberalisation in respect of foreign direct investment than provided in its GATS schedules. In the Dominican Republic, in 1994 almost 57% of all overnight capacity was in the hands of foreign companies, through ownership or co-operation agreements. In Hawaii, in 1991, 66% of the existing hotel rooms in the state were owned by foreign investors, especially Japanese (61%).
By legalising this kind of development in tourism and by opening up other services linked to tourism in addition, in over 120 countries who are the signatories, the GATS might benefit large corporations and domestic investors. However, it leaves little room for strengthening the capacity of smaller domestic investors and the informal sector because of the terms of the agreement. It also raises questions as to how the rights of local and indigenous residents in tourism destinations will be respected when their homes and their land are taken over by foreign developers, and foreign personnel are doing the jobs that they have not been trained to do.

The Agreement
Liberalisation under GATS is based on three specific pillars:

  • Market Access (Foreign owned companies have free access to domestic markets)
  • Most Favoured Nation Status (concessions granted to any one country must also be made available on a non-discriminatory basis to all other signatories of the Agreement)
  • National Treatment (Foreign investors must be treated on an equal basis with domestic investors, domestic investors must not receive any favourable treatment that could be conceived as protectionist)

Developing countries, particularly the Least Developed Countries (LDCs) are given special attention through provision for technical assistance and specific market opening commitments to industrialised countries in the area of technology transfer and access to computerised networks.

The GATS has identified four modes of supply for services which represent different forms of international trade:

  • Cross-border (services that are provided from abroad into the territory of another member country)
  • Consumption abroad (services consumed by nationals of one country travelling to another country)
  • Commercial Presence (opportunities for foreign tourism businesses to establish a presence in another country, such as hotels, restaurants and tour operators)
  • Presence of natural persons (opportunities to move key personnel, such as managers and chefs, or tourist guides into foreign markets in order to provide a service)

Considering the fact that the essence of tourism is based on all these factors, particularly the modes of ?consumption abroad? and ?commercial presence?, it can be considered that tourism represents the driving force for liberalisation and globalisation.

Tourism in the context of GATS has been defined in a sector called «Tourism and Travel-related Services» (TTRS). The four modes apply in tourism only in the following sectors:

  • Hotels and restaurants
  • Travel agencies and tour operator services
  • Tourist guide services
  • Other (unspecified)

The overlap of tourism with other sectors, such as transport, finance, telecommunications and construction, has not been addressed in the present agreement. The World Tourism Organisation is therefore in the process of preparing an annex to extend the present provisions of the agreement to be discussed in future rounds of negotiation. This annex will include a so-called «Tourism Cluster». It will facilitate liberalisation of certain services in other sectors that specifically relate to tourism, such as accommodation services, food and beverage, passenger transport, cultural services (recreation and entertainment). Implementing proposals from the Dominican Republic, El Salvador and Honduras, calling for the recognition of tourism as a development issue, the World Tourism Organisation also emphasises the need for «sustainable development of tourism» in the annex, defining it as:

  • meeting the needs for additional capacity to supply tourism services in the future
  • implementing and enforcing internationally-agreed quality and environmental standards
  • integrating local communities in the conception, management and upgrading of all activities in the tourism cluster.? (WTO-OMT, September, 1999)

Controversy over the GATS and further liberalisation

Whether this annex will be discussed or agreed will depend on whether there will be another round of negotiations of the World Trade Organisation. Highly controversial plans exist for further liberalisation of essential public services such as Health and Education, mainly on the initiative of the United States and the other industrialised countries, heavily lobbied by transnational corporations. The ministerial meeting in Seattle in December 1999, which was intended to set the agenda for the next round of negotiation, was seriously thwarted by civil society demonstration (mainly environmentalists and trade unionists), protesting against the unsustainable and undemocratic nature of the World Trade Organisation, free trade and globalisation. Opening the door to private foreign investment in a nation’s basic infrastructure, in services that have been financed through public taxes and are intended for the wider public good, without examining the impact of the present agreement first, is regarded as highly questionable, particularly by anti-poverty campaigners and civil society organisations.

Tourism Concerns position on the GATS in respect of fair trade in tourism

In favour:
Tourism Concern is supporting trade as a means to eradicate poverty, to empower local and indigenous communities to be self -sufficient and to be recognised stakeholders in the sustainable economic development of their environment. In that context, Tourism Concern recognises the need for an international trade agreement, including tourism that promotes those objectives.
In theory, the basic idea of the GATS as a way of regulating international trade, creating a transparent, ?fair? and non-discriminatory, level-playing field for all the partners involved, giving particular attention to the needs of developing countries to strengthen their capacity, and by gaining market access to industrialised countries, is regarded as positive and welcomed by Tourism Concern.

Yet, Tourism Concern is critical of the following factors:
World Trade Organisation

1. The present structure of The World Trade Organisation and the way in which negotiations are carried out, is undemocratic, and against the principle of transparency. Many developing countries and civil society organisations are disadvantaged and marginalised in the discussions due to their lack of economic bargaining power and due to lack of resources and expertise in a very technical and complex field of negotiations.

Sustainable Development

2. The GATS does not integrate sustainable development as identified in major international treaties and agreements, such as the Berlin Declaration on Biological Diversity and Sustainable Tourism (1997) which also emphasises the importance of legislation to ensure the flow of benefits to local communities.

For example:

  • It does not address the specific environmental, social, economic and cultural impacts of tourism in a destination. As such, it does not allow for the harmonisation of the conflict between implementation of environmental standards in a particular country, and protectionism. The application of internationally agreed environmental standards by a government can thus be construed by foreign investors as a non-tariff trade barrier and as such can be legally challenged.
  • It does not legislate for the right of local people in a destination to be able to compete fairly with foreign investors. In many developing countries tourism is a new industry. Foreign investment is dominated by private businesses from industrialised countries in control of both the demand and supply. They are thus powerful enough to buy out and take over domestic investors without safeguards to the domestic industry. Generous investment incentives and free trade zones are available to encourage this trend. This undermines the efforts of a Fair Trade in Tourism movement to strengthen small scale providers and community-based tourism initiatives to ensure that benefits from tourism flow to them, rather than primarily to the government or to local elites with foreign links.
  • Indigenous world views are not taken into consideration nor consulted as "scientific knowledge" when policies and decision-making regarding the trade of indigenous medicines and plants for scientific purposes are made. This highlights the threat that the expanding global tourism industry brings to indigenous communities in the way of biopiracy, which can often happen under the guise of ecotourism.

Transnational Corporations

3. The GATS and liberalisation is driven by the strong lobbying power of Transnational Corporations (TNCs). 80% of the mass tourism market is dominated by TNC?s. Although some European TNC?s such as the German Operator Touristik Union International (TUI) who have committed a whole department to environmental management issues, are beginning to take action towards greater sustainability, many others are responsible for seriously irresponsible practices. They include the building of golf courses in fragile ecosystems, abundant use of water in dry residential areas, the building of hotels on sacred sites. In particular, the centralised systems of resourcing staff, materials, food and beverages and specific internal pricing methods, which are used to avoid national tax regulations, contribute to the leaking of financial and human resource benefits from local communities in destinations to the TNC and its home country.

Rather than giving TNCs free reign through a trade agreement, provision needs to be made for monitoring and, if necessary, regulating TNC?s to implement internationally agreed policy commitments on sustainability and to include greater transparency, accountability and social responsibility in their trade practices.

Structural Adjustment

4. Structural Adjustment programmes imposed by the IMF on many developing countries as a result of debt payment arrears, present a heavy financial burden on those countries. They have to direct their economy towards exporting goods and services, devalue their currency, cut down public expenditure in health and education, and privatise government owned enterprises. This does not represent a favourable climate in which domestic tourism businesses in developing countries can compete on a ?level playing field? with foreign tourism businesses. These will have a head start in respect of owning tourism expertise and controlling the markets.

Therefore Tourism Concern through its Fair Trade in Tourism work supports

A restructuring of the World Trade Organisation to integrate greater democracy and accountability, including consultation of civil society.
A review of the GATS to include

  • provision for adherence to internationally agreed policy commitments on biological diversity and sustainable tourism.
  • provision for adherence to internationally agreed conventions on Labour Standards and Human Rights, specifically the rights of children
  • provision for poverty reduction objectives
  • provision to allow developing countries to retain flexibility to shelter vulnerable and newly emerging sectors from competition to achieve overall national tourism development goals
  • provision to respect the rights of indigenous peoples to self determination and to be safeguarded against erosion through corporate bodies

The suspension of discussions on further extended liberalisation of tourism services until

  • a relevant body of research is available to assess the impact of liberalisation in tourism services according to sustainable development criteria in a selected number of developing countries
  • market access for developing countries to industrialised countries is increased
  • international laws and legally binding guidelines on tourism investors
    responsibilities (with respect to, for ex. human rights, environmental objectives, restrictive business practices, tax avoidance, technology transfer) have been multi-laterally agreed.

Angela Kalisch, Tourism Concern

This paper is based on the following resources:

Trading Places. Tourism as Trade, Tourism Concern, London 1996.
Lee Pera and Deborah McLaren: Tourism & Indigenous Peoples. What You Should Know About the World’s Largest «Industry», November 1999.

Jorg Seifert-Granzin and D. Samuel Jesupatham: Tourism at the Crossroads.    Challenges to developing countries by the new World Order, Germany 1999.
Christine Plüss: Tourismus und Liberalisierung, Basel 2000.     WWF International: Preliminary assessment of the environmental and social effects of liberalisation in tourism services (Draft), Geneva 2000.Institute of Development Studies: Trade and Investment Background Briefing No. 7. Trade in Services, BrightonWorld Tourism Organisation (WTO-OMT): Tourism and the General Agreement on Trade in Services (GATS), Madrid 1994World Tourism Organisation (WTO-OMT): Tourism Negotiations under the General Agreement on Trade in Services (GATS). Draft Annex on Tourism, Geneva 1999      UKNGO Trade Network: For whose benefit. Making trade work for people and the planet (Draft), , London 2000