Lecture 18: Globalization and Health

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Lecture 18Globalization and Health

• Richard Smith
• Reader in Health Economics
• School of Medicine, Health Policy Practice

Health Economics SOCE3B11 Autumn 04/05
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Overview of lecture

• What is globalization?
• Relationship between globalization and health
• Aspects of globalization that may effect health
• Health, international trade and WTO
• Trade in health services and GATS

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What is Globalization?

• Easier travel communication
• Mixing of customs cultures
• Integration of national economies (removal of
  barriers to international trade finance)
  liberalization or openness
• Means cannot view national health, interventions
  and policies in isolation from
• other countries
• other sectors (e.g. travel, finance)

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Globalization
economic opening
cross-border flows
goods, services, capital, people, ideas,
information
international rules and institutions
national economy and health-related sectors
health services
risk factors
household economy
HEALTH
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Aspects of Globalization thatmay effect Health

• General effect on health from changes in national
  economic growth link between health and
  wealth
• Environmental degradation (e.g. air, water
  pollution)
• Improved access to knowledge and technology
• Marketing of harmful products unhealthy
  behaviours
• Conflict security
• Cross-border transmission of disease

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Emerging/re-emerging infectious diseases 1996 to
2003
Legionnaires Disease
Multidrug resistant Salmonella
Cryptosporidiosis
E.coli O157
E.coli non-O157
Typhoid
BSE
SARS
Malaria
nvCJD
Diphtheria
West Nile Virus
Reston virus
Influenza (H5N1)
Echinococcosis
Lassa fever
Nipah Virus
Yellow fever
Cholera 0139
Reston Virus
RVF/VHF
Venezuelan Equine Encephalitis
Buruli ulcer
Dengue haemhorrhagic fever
Onyong-nyong fever
Ebola haemorrhagic fever
Human Monkeypox
Dengue haemhorrhagic fever
Cholera
Cholera
Equine morbillivirus
Ross River virus
Hendra virus
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Health and International Trade

• Context Effects of trade liberalisation on
  public health
• Trade removal of impediments to
• liberalisation trade in goods and services
  (especially via WTO)
• Public health organised measures (public /or
  private) to prevent disease, promote health
  or prolong life of the population as a whole

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Specific Public Health Issues

• Infectious disease control
• Food safety
• Tobacco
• Environment
• Access to drugs
• Food security
• Emerging issues (biotechnology.)
• Health services

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WTO Agreements

• Goods GATT
• Technical barriers to trade SPS, TBT
• Intellectual property and trade TRIPS
• Services GATS

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Specific Health Issues and most relevant WTO
Agreements
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Trade in Health Services/GATS Background

• International trade growing, trade in services
  is increasing percentage of this overall growth
• Of this trade, health sector is already affected
  by liberalization in other areas (e.g. finance)
• Many countries see health as a sector where they
  may have a comparative trade advantage
• More countries seeking to ascend to WTO and
  therefore make commitments under GATS

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General Agreement on Trade in Services (GATS)

• GATS emerged from 1994 Uruguay Round of
  negotiations that created the WTO (Members agree
  to progressive liberalization)
• Subject services trade to same treatment as
  goods (GATT)
• Basis liberalization increases global
  efficiency (comparative advantage lower cost,
  higher quality, innovation)
• Provides multilateral legal framework for
  liberalizing international services trade (based
  on existing int. trade law)
• Debate is polarized - Tale of Two Treaties
• GATS is worst of treaties undermines national
  sovereignty
• GATS is best of treaties increase health
  (sovereignty)

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The House that GATS Built
GATS (Services)
GATS Council
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GATS Timetable

• 1994 Uruguay Round of WTO negotiations saw
  initial commitments in health services made by a
  handful of countries
• Current negotiations began following WTO meeting
  in February 2000
• initial requests for specific commitments made by
  end June 2002
• initial offers due by end of March 2003
• finalised agreement by end of January 2005

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The GATS Process

• Countries (via MoT) select service sector(s) they
  wish to open to foreign suppliers
• A commitment is then made within this sector
  within each mode individually or combined
  stating limitations to how much access foreign
  providers are allowed
• Commitments are multilateral no favourites

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Key Aspects of GATS

• Creates binary system either solely public
  provided (hence not covered by GATS) or not
• Commitments potentially irreversible changes
  possible (gt 3 years) but entail compensation
  (offering new commitments in other sectors with a
  view to restoring the balance of commitments
  which existed prior to the modification)
• GATS excludes services supplied in the exercise
  of governmental authority debate on coverage
• MFN principle
• Structure four modes of supply

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Threshold Question Does GATS Apply?
S T A R T
Is the health-related service supplied by a
private actor pursuant to delegated governmental
authority?
No
Is the health-related service supplied by the
government?
Yes
Yes
Is the health-related service supplied on a
commercial basis?
No
Yes
No
Is the health-related service supplied in
competition with one or more service providers?
GATS applies to measures of WTO members that
affect trade in health-related services
Yes
No
GATS does not apply
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Structure of GATSFour Modes of Supply

1. Cross border delivery (e-health)
2. Consumption abroad (movt. of patients)
3. Commercial presence (FDI hospitals)
4. Movement of personnel (doctors abroad)

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Mode 1Cross border delivery of services

• Shipment of laboratory samples, diagnosis and
  clinical consultations by mail
• E-health
• Telediagnostic
• Telesurveillance
• Teleconsultation
• Teletreatment
• Teleproducts (especially phamaceuticals)

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Mode 1 Opportunities

• Enable health care delivery to remote and
  underserviced areas promoting equity
• Alleviate (some) human resource constraints
• Enable more cost-effective disease surveillance
• Improve quality of diagnosis and treatment
• Upgrade skills, disseminate knowledge through
  interactive electronic means

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Mode 1 Risks

• Relies on telecommunications and power sector
  infrastructure
• Capital intensive, possible diversion of
  resources from basic preventive and curative
  services
• Equity issue if it caters to a small segment of
  the population - urban affluent

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Mode 2Consumption abroad

• Movement of patients from home country to the
  country providing the diagnosis/treatment
• Movement of health professionals from home to
  another country to receive medical education and
  training

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Mode 2 Opportunities

• For exporting countries
• Generate foreign exchange earnings to increase
  resources for health
• Upgrade health infrastructure, knowledge,
  standards and quality
• For importing countries
• Overcome shortages of physical and human
  resources in speciality areas
• Receive more affordable treatment

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Mode 2 Risks

• Create dual market structure
• May crowd out local population unless these
  services are made available to local population
• Diversion of resources from the public health
  system
• Outflow of foreign exchange for importing
  countries

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Mode 3Commercial presence

• Establishment of hospitals, clinics, diagnostic
  and treatment centres and nursing homes and
  training facilities through foreign direct
  investment cross border mergers/acquisitions,
  joint venture/alliance
• Opportunities for foreign commercial presence
  also in management of health facilities and
  allied services, medical and paramedical
  education, IT and health care

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Mode 3 Opportunities

• Generate additional resources for investment in
  upgrading of infrastructure and technologies
• Reduce the burden on public resources
• Create employment opportunities
• Raise standards, improve management, quality ,
  improve availability, improve education (foreign
  commercial presence in medical education sector)

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Mode 3 Risks

• Large initial public investments to attract FDI
• If public funds/subsidies used - potential
  diversion of resources from the public health
  sector
• Two tier structure of health care establishments
• Internal brain drain from public to private
  sector
• Crowding out of poorer patients, cream skimming
  phenomena

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Mode 4Movement of Health Professionals

• Includes doctors, nurses, paramedics, midwives,
  consultants, trainers, management personnel
• Factors driving cross border movements
• wage differentials between countries
• search for better working conditions/standards
  of living
• search for greater exposure/training/qualificatio
  ns
• demand and supply imbalances between countries
• Approach towards mode 4 trade in health services
  by exporting and receiving countries varies -
  some countries encourage outflow, others create
  impediments

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Mode 4 Opportunities

• From sending country
• Promote exchange of knowledge among professionals
• Upgrade skills and standards (provided service
  providers return to the home country)
• Gains from remittances and transfers
• From host country
• Meet shortage of health care providers, improve
  access, quality and contain cost pressures

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Mode 4 Risks

• From sending country
• Permanent outflows of skilled personnel -
  brain drain
• Loss of subsidised training and financial capital
  invested
• Adverse effects on equity, availability and
  quality of services

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Scope of analysis
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Status of GATS Commitments(No. WTO Members by
Sector)
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Commitments of WTO Members in Health Services
Number of WTO Members number (2004) with
commitments in health (developed/developing) Med
ical/dental services 62 (18/44) (excl.
USA) Nurses/midwives 34 (17/17)
(excl.USA) Hospital services 52 (15/37) (incl.
USA) Other human health 22 (2/20) (excl. USA
EC) No commitments at all 39 (e.g.
Canada, Brazil)
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Commitments Market Access
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Commitments National Treatment
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Summary of GATS Commitments

• Generally, number of sectors committed positively
  related to the level of economic development
• But - pattern in health services less clear
• Far more developing than developed country
  commitments
• E.g Canada no commitments, USA/Japan only one
  whereas LDCs (Burundi, Gambia, Zambia etc) have 3
  or 4 subsectors
• Of 4 subsectors medical/dental most heavily
  committed (62), followed by hospital (52).
• Highest share of full market access recorded for
  mode 2
• Developed countries use limitations on modes 2
  3 more than developing countries
• No Member undertaken full commitments for mode 4
  (highly restricted area)

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GATS 3 Key Questions

• Why are current levels of trade in health
  services low?
• presence of government monopolies likely to be
  rare
• no pace setters in health (c.f.
  telecommunications/financial services)
• different economic value (c.f.
  telecommunications/financial services)
• How will GATS effect a countrys health
  sovereignty/system?
• depends on interpretation of commercial basis
  and in competition
• general obligations MFN, pursuing increased
  liberalization, exception for measures
  necessary to protect health, dispute
  settlement
• horizontal commitments made for other sectors
• What effect might liberalization have on national
  health/wealth?
• currently data free environment even extent of
  openness/liberalization!
• research required on impact of liberalization on
  population health status, distribution of health
  services/status, economic factors (GDP, BoP etc)
  and how GATS compares with other agreements

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Further References

• See references for Seminar 6
• Smith RD. Foreign direct investment and trade in
  health services a review of the literature.
  Social Science and Medicine, 2004 59 2313-2323.
• For future ref
• Blouin C, Drager N, Smith RD (eds). Trade in
  Health Services, developing countries and the
  GATS. Oxford University Press (in press).
• Smith RD. Trade in Health Services Current
  Challenges and Future Prospects of Globalisation.
  In Jones AM (ed). Elgar Companion to Health
  Economics. Edward Elgar (in press).