Trade, foreign policy, diplomacy and health

1. Global Public Goods and Health: concepts and issues

David Woodward, Richard D Smith

Financing GPGH: Mechanisms

  • Voluntary contributions
  • Ear-marked national taxes coordinated between countries
  • Taxes imposed and collected at global level
  • Market-based mechanisms

    Funding for the production of GPGH may be achieved in four main ways.
    1. Voluntary contributions - most straightforward option, but prone to free-rider problem since each country has an incentive to minimise its contribution, whether these are coordinated (divided between parties according to an agreed formula) or uncorordinated contributions.
    2. Ear-marked national taxes coordinated between countries - achievement of health improvements rests on the discouragement of particular activities, such as tobacco consumption or pollution. However, there may be resistance to taxation policies being decided outside the country of enaction, and intractable disagreements over their design (e.g. activities on which taxes should be levied, set in absolute or percentage terms and the rates).
    3. Taxes imposed and collected at the global level, such as the ‘Tobin tax’. However, wide variations in estimates of the amount of, and the competing uses for, the proceeds, make this likely to be resisted by some major developed countries: as a matter of political principle, because of commercial interests, or because it threatens their dominance in international decision-making.
    4. Market-based mechanisms, such as trading of emission rights, can only be used where there is something to trade, and they do not generate additional resources unless transactions are taxed. It is clear, therefore, that whatever system, or combination of systems, of financing is considered, significant attention will have to be paid to the potential losers and gainers, and the means by which incentives can be created for collaboration and collective action to finance and/or produce the GPG in question.