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HEALTH POLICY AND ETHICS |
Ellen R. Shaffer and Joseph Brenner are with the Center for Policy Analysis on Trade and Health, San Francisco, Calif. Howard Waitzkin is with the Department of Family and Community Medicine, and Rebeca Jasso-Aguilar is with the Department of Sociology, University of New Mexico, Albuquerque.
Correspondence: Requests for reprints should be sent to Ellen R. Shaffer, PhD, MPH, Center for Policy Analysis on Trade and Health, 98 Seal Rock Dr, San Francisco, CA 94121 (e-mail: ershaffer{at}cpath.org).
| ABSTRACT |
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Global trade and international trade agreements have transformed the capacity of governments to monitor and to protect public health, to regulate occupational and environmental health conditions and food products, and to ensure affordable access to medications. Proposals under negotiation for the World Trade Organizations General Agreement on Trade in Services (GATS) and the regional Free Trade Area of the Americas (FTAA) agreement cover a wide range of health services, health facilities, clinician licensing, water and sanitation services, and tobacco and alcohol distribution services.
Public health professionals and organizations rarely participate in trade negotiations or in resolution of trade disputes. The linkages among global trade, international trade agreements, and public health deserve more attention than they have received to date.
| INTRODUCTION |
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In this article, we analyze key global trade issues that affect public health, briefly tracing the history of international trade agreements and describing the forces shaping agreements such as the North American Free Trade Agreement (NAFTA). The recent shift to treating services as tradable commodities is of particular importance; we analyze the General Agreement on Trade in Services (GATS) as a case in point. We also discuss the implications for public health of the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) and the proposed Free Trade Area of the Americas (FTAA) agreement. Although many agreements contain implications for public health, as we summarize in Table 1
and the box on page 26, we emphasize those features of agreements currently under negotiation that warrant attention by public health practitioners and organizations.
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| EMERGENCE OF INTERNATIONAL TRADE AGREEMENTS |
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During the 1980s and 1990s, these international financial institutions embraced a set of economic policies known as "the Washington consensus." Advocated primarily by the United States and the United Kingdom, these policies involved deregulation, privatization of public services, measures designed to achieve low inflation rates and stable currencies, and mechanisms enhancing the operations of multinational corporations. As the pace of international economic transactions intensified, facilitated by technological advances in communications and transportation, the World Trade Organization (WTO) in 1994 replaced the loose collection of agreements subsumed under GATT.
Trade Rules
The WTO and regional trade agreements have sought to remove both tariff and nontariff barriers to trade. Tariff barriers involve financial methods (e.g., taxes on imports) of protecting national industries from competition by foreign corporations. Nontariff barriers refer to laws and regulations affecting trade, including those that governments use to ensure accountability and quality. In more than 900 pages of rules, the WTO set criteria for permissible and impermissible nontariff barriers, for example domestic policies governing environmental protection, food safety, and health services. These rules aim to increase cross-border trade under the assumption that increased trade may enhance nations wealth or well-being. While aiming to achieve "free" trade across borders, the rules in trade agreements limit governments regulatory authority over trade and enhance the authority of international financial institutions and trade organizations.2
Examples of Actions Under International Trade Agreements That Affect Public Health
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Although the WTO (under general exceptions of GATT, Article XX) permits national and subnational "measures necessary to protect human, animal or plant life or health," other provisions make this exception difficult to sustain in practice. For example, a country can be required to prove that its laws and regulations represent the alternatives that are least restrictive in regard to trade and that they are not disguised barriers to trade.3 Such rules also can restrict public subsidies, including those designated for domestic health programs and institutions, labeling them potentially "trade distortive." Requiring that such subsidies apply equally to domestic and foreign companies that provide services under public contracts can preempt public policies directing subsidies to domestic corporations.
Of particular relevance to public health, 1 WTO provision requires "harmonization," that is, reducing variations in nations regulatory standards for goods and services. Proponents have noted that harmonization can motivate less developed countries to initiate labor and environmental standards where none had previously existed.4 However, harmonization also can lead to erosion of existing standards, because it requires uniform global standards at the level least restrictive to trade.5 The WTO encourages national governments to harmonize standards on issues as diverse as truck safety, pesticides, worker safety, community right-to-know laws regarding toxic hazards, consumer rights regarding essential services, banking and accounting standards, informational labeling of products, and pharmaceutical testing standards.
Trade Enforcement and National Sovereignty
WTO and regional agreements such as NAFTA supersede member countries internal laws and regulations, including those governing public health. Under these agreements, governments at all levels are facing loss of sovereignty in policymaking pertinent to public health and health services. Technically, nations apply voluntarily to become WTO members. However, most less developed countries perceive that they will experience disadvantages in trade relations if they do not join.6 Traditionally, government agencies at the federal, state, county, and municipal levels have been responsible for protecting the publics health, for example by ensuring safe water supplies, controlling environmental threats, and monitoring industries in regard to occupational health conditions. Trade agreements can reduce or eliminate such governmental activities to the extent that they represent barriers to trade.
Glossary of Key Terms
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In cases of dispute, an appointed 3-member WTO tribunal, rather than a local or national government, determines whether a challenged policy conforms to WTO rules. This tribunal includes experts in trade but not necessarily in the subject matter of the cases in question (e.g., cases involving health or safety) or in the laws of the contesting countries.3 Documents and hearings are closed to the public, the press, and state and local elected officials; the WTO considers only federal governments as members.
When a tribunal finds that a domestic law or regulation does not conform to WTO rules, the tribunal orders that the contested transaction in question must proceed. If a country fails to comply, the WTO can impose financial penalties and authorize the "winning" country to apply trade sanctions against the "losing" country in whatever sector the winner chooses until the other country complies. In challenges decided by WTO or NAFTA tribunals, corporations and investors have caused governments to suffer financial consequences and trade sanctions because of governments efforts to pursue traditional public health functions (box p24). Losing countries in these cases experience pressure to eliminate or to change the legislation in question and not to enact similar new laws.
| TRADE AGREEMENTS AND PUBLIC HEALTH |
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North American Free Trade Agreement (NAFTA)
Initiated in 1994, NAFTA focuses on expanding opportunities for new investments, acquiring property, and opening services to competition by private corporations in the United States, Canada, and Mexico. NAFTA provisions have proven controversial, in that numerous US-based manufacturing industries have moved to Mexico, where environmental and occupational health standards are less strict and most companies pay lower wages. Unemployment and cuts in benefits for workers remaining employed in the United States have resulted in a growing number of uninsured workers and families.7 Overall, NAFTA did not create the new jobs in the United States that proponents predicted and has contributed to increasing inequality of wages.8
In Mexico, NAFTAs impact has proven more dramatic. Jobs lost in agriculture owing to the increases in imports have far outweighed the jobs created by export manufacturing. Unemployment has increased most dramatically in rural areas.8 After NAFTA lowered tariffs on US agricultural products, crop prices dropped, and even Mexican subsistence farmers could not compete with US agribusiness, which receives large government subsidies. Between 1994 and 2003, 9.3 million workers entered Mexicos labor market, but only 3 million new jobs were created during that period; in the same time span, real wages lost approximately 20% of their purchasing power.9 NAFTA also has led to widespread environmental damage as agriculture has seen a shift to large-scale, export-oriented farms that rely on water-polluting agrochemicals and more use of water for irrigation.8 Chronic public health problems along the border between the United States and Mexico persist.10
Chapter 11 of NAFTA, concerning investments, includes a unique "investors rights" mechanism by which individual foreign corporations (referred to as "investors") can directly sue any of the 3 participating national governments. Before the establishment of NAFTA, trade agreements permitted only country-to-country enforcement by governments. However, companies can now sue for loss of current or future profits, even if the loss is caused by a government agencys prohibiting the use of a toxic substance.11
Several landmark cases filed under Chapter 11 have dealt with environmental laws or regulations. For example, a NAFTA tribunal awarded the US-based Metalclad Company $16.7 million in its suit against Mexico. The state of San Luis Potosí had refused permission for Metalclad to reopen a waste disposal facility after a geological audit showed that the facility would contaminate the local water supply and after the local community opposed the reopening. Metalclad claimed that this local decision constituted an expropriation of its future potential profits and filed a successful suit against the country of Mexico.12,13
In addition, the Methanex Corporation of Canada initiated an approximately $1 billion suit against the United States after the state of California banned the use of methyl tertiary butyl ether (MTBE), a gasoline additive, because of its demonstrated carcinogenicity. Methanex produces methanol, a component of MTBE. This case remains under consideration by a closed appeal tribunal, while MTBE remains in use in California.
Such cases can exert a chilling effect on environmental protection efforts. For instance, several other states have deferred their planned bans on MTBE as a result of the threat posed by the pending Methanex case.14 Similar investors rights provisions have appeared in other regional and bilateral agreements, such as those recently negotiated by the United States with Singapore and Chile.
Free Trade Area of the Americas (FTAA)
The FTAA proposes that most provisions of NAFTA be extended to all 31 of the remaining nations in the Western hemisphere with the exception of Cuba.15 Ongoing negotiations include efforts to introduce an investors rights clause, similar to NAFTAs, as well as to replicate features of GATS and other WTO agreements. If completed on schedule, negotiations will conclude in early 2005.
The FTAA agreement would foster participation of multinational corporations in administering programs and institutions, such as public hospitals and community health centers, currently managed in the public sector. US-based insurance companies have expressed their interest in delivering services now provided by public sector social security systems throughout Latin America,16 as indicated in their testimony on the FTAA (Washington, DC, March 28, 2000): "public ownership of health care has made it difficult for U.S. private-sector health care providers to market in foreign countries. . . . Existing regulations . . . present serious barriers . . ., including restricting licensing of health care professionals, and excessive privacy and confidentiality regulations."17
Proponents of privatization emphasize the inefficiencies and corruption that have occurred in some countries public sector programs. However, in many countries privatization and the participation of multinational corporations in public services have led to problematic effects. Such changes in Latin America have resulted in barriers to access stemming from copayments, private practitioners refusal to see patients because corporations have not paid professional fees, and bureaucratic confusion in the assignment of private providers; public sector expenditures increasingly have covered the higher administrative costs and profits of investors as clinical services have decreased for the poor at public hospitals and health centers.16,18,19 Similar trends have occurred in Africa and Asia.20,21
Although, at present, countries are free to privatize public services, the FTAA would impose the threat of a trade challenge against countries decisions to maintain or to expand public services, as well as costly trade sanctions if privatized services were to be returned to the public sector. FTAA chapters directly related to public health cover trade in services such as health care, water, education, and energy; intellectual property, which addresses access to affordable medications; standards for plant and food safety; and rules regarding governments allocation of subsidies and procurement of goods and services. Also important to public health, the FTAAs language on financial investments adopts Chapter 11 of NAFTA as a model, and rules on trade in products could restrict governments regulation of product safety.
The FTAA process is entirely "top down"; all services are covered by all FTAA rules unless a country takes action affirmatively to exclude specific services. The Central American Free Trade Agreement (CAFTA), awaiting final review by Congress as of late 2004, and recently concluded US bilateral agreements with Chile, Singapore, Vietnam, and Jordan contain similar provisions.
General Agreement on Trade in Services (GATS)
Recognizing the increasing proportion of economic activities worldwide devoted to services, this WTO agreement encourages private investment and deregulation in terms of a wide spectrum of services. GATS treats human services such as health care, water and sanitation, energy, and education as commodities subject to trade rules. According to its stated aims, GATS will progressively cover an increasing number of services over time. The current round of GATS negotiations is scheduled to conclude in 2005.
A majority of GATS rules, including "most favored nation," are "top down" (Table 2
). That is, they already apply to all services in all WTO member countries. For example, according to the domestic regulation rule, government regulations regarding services should not be "more burdensome than necessary to ensure the quality of the service," and qualification requirements and procedures for service providers, technical standards, and licensing requirements should not constitute unnecessary barriers to trade in services.1 When the process of minimizing trade restrictions comes into conflict with health standards, trade tribunals under WTO usually have decided that the former take priority.22 GATS sections on subsidies and government procurement, described subsequently, also apply to all services offered.
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There is no formal process for public debate in GATS decisions about committing services; countries make confidential requests regarding services that they would like other countries to commit, and the respondents can agree or disagree. Regarding public health, the European Union has requested that the United States drop restrictions on private corporate involvement in water and sanitation systems, as well as in the retail distribution of alcohol products.25 While the European Union has announced that it will not commit further any of its own human services, both the EU and the United States seek removal of barriers to trade in other countries covering health services, energy services, higher education, and environmental services.26
Several countries have submitted GATS requests with important implications for US health services (Table 4
). For instance, India has asked that the United States recognize foreign licensing and other certified qualifications of medical, nursing, and dental professionals. Mexico has requested that the United States no longer limit foreign direct investment in hospitals and health facilities. Both Mexico and Paraguay have asked the United States to eliminate the "restriction of federal and state reimbursement to licensed, certified [health] facilities in the United States or a U.S. state."25
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Nations commitments under GATS so far have varied.4,31 The European Union has committed to including medical, dental, nursing, and hospital services, but not health insurance coverage, which therefore would remain in the public sector. Canada has not committed in regard to any health services. Although the United States has committed for hospital services, health facility services, and health insurance coverage and proposes to expand its commitment under "environmental services" to include wastewater, it has not made commitments in regard to professional licensing, alcohol and tobacco distribution, or drinking water. If the GATS objective of eventually including all services is achieved, however, these limits will prove temporary.3234 Tables 2
4
presents health-related services in the United States now covered by GATS, and those that could be covered in the future.
Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS)
The TRIPS agreement protects patents, copyrights, trademarks, and industrial designs across national boundaries. On the basis of the argument that such protections enhance economic incentives for creativity and invention, this agreement covers patented medications and equipment, textbooks and journals, and engineering and architectural innovations for health institutions, as well as computer technologies and entertainment products. TRIPS rules mandate that all WTO member countries implement intellectual property protections that provide 20-year monopoly control over patentable items. Entry into the WTO required that the United States extend patents from 17-year terms to the WTOs 20-year standard.
TRIPS can limit governments ability to provide generic medications under publicly funded programs. For instance, federal and state government health programs such as Medicare and Medicaid have paid substantially higher drug prices as a result of these patent extensions. Overall, TRIPS has adversely affected US health care cost containment efforts by extending the period during which purchasers have had to pay higher prices for medications covered by patents.3,35
Provisions of TRIPS also could block proposals to reimport affordable prescription drugs from Canada into the United States.36 Similar provisions have appeared in bilateral agreements such as the Australia Free Trade Agreement.37
TRIPS especially affects access to medications for life-threatening conditions in low-income countries. TRIPS rules required most developing countries to change their rules by 2001, while the "least developed countries" must do so by 2016. One policy tool designed to deal with this problem in low-income countries, permissible under TRIPS rules, involves "compulsory licensing." Under this provision, a country may require that a pharmaceutical company obtain a government license to market a needed medication under patent at a lower price than the company could charge under usual market conditions. The US government has supported efforts under TRIPS to prevent the governments of South Africa, Thailand, and Brazil from initiating compulsory licenses for production of generic alternatives to patented AIDS medications.3840
As a result of concerns among professionals, legislators, and advocates, the Doha round of WTO negotiations in 2001 involved a proposal to relax some of TRIPSs most severe rules regarding patent protection for medications useful in treating AIDS.41,42 Partly by threatening to impose compulsory licensing, Brazils government obtained low prices from pharmaceutical companies; this change has facilitated improvements in the countrys AIDS morbidity and mortality outcomes.43 In August 2003, the US pharmaceutical industry abandoned its insistence that the relaxed rules apply only to medications for AIDS, tuberculosis, and malaria.44 The resulting agreement has led to WTO control over a complex process for approving lowered medication prices under limited circumstances and leaves the issue of accessible medications in less developed countries unresolved.4547
| ACTIONS TAKEN BY PUBLIC HEALTH PRACTITIONERS |
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Alternative projects favoring international collaboration have countered some of the adverse effects of global trade on public health. For instance, the Brazilian Workers Party, which won the countrys presidency in late 2002, has emphasized expansion of public hospitals and clinics at the municipal level. Adopting the principle of community participation in municipal budgets, the new government has encouraged strengthening municipal public services and has attempted to limit the participation of multinational corporations in the area of public health. Such efforts have occurred in the context of a growing network of organizations that emphasize a strengthened public sector, critically assess the corporatization in health care that international trade agreements encourage, and express concern about the impact of global trade on public health, health services, and democracy.50,51
Because critical trade negotiations are taking place now and in the near future, we recommend that public health practitioners engage in several actions to address the growing challenges of global trade:
The Center for Policy Analysis on Trade and Health maintains a listserve on globalization and health and also has posted on its Web site (available at: http://www.cpath.org) brief descriptions and contact information for key organizations attempting to address the public health effects of global trade.
| CHALLENGES FOR PUBLIC HEALTH |
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Linkages between global trade and public health deserve more critical attention. A growing number of advocacy organizations and professional associations have drawn attention to such linkages.5256 Those concerned with health and security worldwide cannot afford to ignore the profound changes generated by global trade.
| Acknowledgments |
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Ellen R. Shaffer and Joseph Brenner thank Alicia Yamin, Erica Frank, and Kristen Smith for their contributions to this work. Howard Waitzkin and Rebeca Jasso-Aguilar are grateful to Ron Voorhees, Carolyn Mountain, Celia Iriart, Angela Landwehr, Francisco Mercado, and Lori Wallach for their contributions to this project.
Note. The views expressed in this article do not necessarily represent those of the funding agencies.
| Footnotes |
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Accepted for publication July 1, 2004.
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