Trade, foreign policy, diplomacy and health

General Agreement on Trade in Services (GATS)

The General Agreement on Trade in Services (GATS) came into force in 1995 and constitutes the legal framework through which World Trade Organization (WTO) Members progressively liberalize trade in services, including health-related services. Within the GATS framework, trade in health services is understood as the provision of specialized and general health personnel, nursing services, hospital services, ambulance services, and physiotherapeutic and paramedical services provided by medical and dental laboratories.

GATS allows WTO Members to choose which service sectors to open up to trade and foreign competition. To date, only 50 WTO Members have made some type of commitment on health services under GATS, much less than in financial services (100 Members). Liberalization of financial services may have implications for health systems through its impact on health insurance.

Individual Members' commitments to open markets in specific sectors - and how open those markets will be - are the outcome of negotiations. The commitments appear in “schedules” that list the sectors being opened, the extent of market access offered in those sectors (e.g. whether there are any restrictions on foreign ownership), and any limitations on national treatment (whether some rights granted to local companies will not be granted to foreign companies). For example, a Member could require all foreign-owned hospitals to provide 25% of beds to care for the uninsured, but this would have to be scheduled as a national treatment limitation (if it were not already a requirement for locally-owned hospitals).

The overall aim of GATS is to liberalize trade in services. The agreement covers four different modes (modes 1-4 trade in services) all of which affect health:

Mode 1 Cross-border supply. Health services provided from the territory of one Member State in the territory of another Member State. This is usually via interactive audio, visual and data communication. The patient therefore has the opportunity to consult with physicians in a different country, as do local doctors. Typical examples include Internet consultation, diagnosis, treatment and medical education. This form of supply can bring care to under-served areas, but can be capital intensive and divert resources from other equally pressing needs.

Mode 2 Consumption abroad. This usually covers incidents when patients seek treatment abroad or are abroad when they need treatment. This can generate foreign exchange, but equally can crowd out local patients and act as a drain on resources when their treatment is subsidized by the sending government.

Mode 3 Foreign commercial presence. Health services supplied in one Member State, through commercial presence in the territory of another Member State. This covers the opening up of the health sector to foreign companies, allowing them to invest in health operations, health management and health insurance. It is argued that, on the one hand, FDI can make new services available, contribute to driving up quality and create employment opportunities. On the downside, it can help create a two-tier health system and an internal brain-drain - and thus exacerbate inequity of health provision.

Mode 4 Movement of natural persons (individuals rather than companies). The temporary movement of a commercial provider of services (for example, a doctor) from their own country to another country to provide his or her service under contract or as a member of staff transferred to a different country. This is one of the most contentious areas for health, as there is concern that it will increase the brain drain of health personnel from poor to rich countries. However, GATS is concerned only with health professionals working in other countries on a temporary basis. Brain drain refers to the emigration of educated, qualified, and skilled people from poorer countries to richer countries. WHO's Human Resources for Health initiative aims to increase individual countries' pools of qualified health staff.

The extent to which GATS will have an impact on public services such as health and education is controversial. GATS comes into the equation when countries decide to allow foreign private suppliers to provide services.

Opponents of GATS are convinced that it will limit a state's sovereign powers to protect human health, and ensure provision of good quality, affordable health services. Specifically, they fear that progressive liberalization of services under GATS will force WTO Members to privatize health care currently provided by governments, and that these changes will be irreversible. They are also concerned that the capacity of states to regulate health-related services will be eroded.

The counter-argument stresses that GATS allows WTO Members to decide for themselves which sectors will be liberalized and to define country-specific conditions on the form that liberalization will take. Some WTO Members have already indicated they will not be requesting or offering commitments on health services in the current negotiations. Those states that do proceed are not obliged to respond positively to any particular request. Nor is there any requirement for reciprocity. Moreover, the Doha declaration specifically reaffirmed the right of Members to regulate or introduce new regulations on the supply of services. Defenders of GATS therefore argue that national control over policy and practice has been enhanced.

The political dynamic around GATS may be somewhat different from that affecting the Trade-Related Aspects of Intellectual Property Rights (TRIPS) agreement. Many developing countries are keen to welcome foreign direct investment and to secure access in the north for their professionals. Many developed countries, on the other hand, are nervous about the political and economic effects of liberalization on publicly-funded health services.

GATS is a complex treaty and it does not lay down minimum standards as TRIPS does. Rather, it takes shape through the process of negotiation. Overall, there is lack of empirical data on the level of international trade in health-related services, as well as on the effects of liberalization in specific countries. Finally, trade in services is increasing in any case (often through bilateral negotiations), thus making attribution to GATS very difficult.

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