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Doctors Reform Society
Gosford NSW 2250
Tel 02 9264 9084
Fax 02 9267 4393
drs@nlc.net.au
www.drs.org.au
Submission
to the
Senate
Foreign Affairs, Defence and
Trade
Committee
on
The
General Agreement on Trade in Services (GATS) and
A
Proposed Australia-US Free Trade Agreement
April
2003
CONTENTS:
1. INTRODUCTION
2. BACKGROUND
2.1 Economic Globalisation
2.2 Inequality and Health
2.3 Government Regulation and Public Services
2.4 The Free Market in Health Care
2.5 Medicare and the Pharmaceutical Benefits Scheme (PBS)
3. THE GENERAL AGREEMENT ON TRADE IN SERVICES (GATS)
3.1 General
3.2 Exclusions and Exceptions
3.3 General Obligations with Specific Impacts on Health Care:
VI Domestic Regulation
VIII Monopolies
XV Subsidies
3.4 Specific Obligations:
XVI Market Access
XVII National Treatment
3.5 Progressive Liberalisation
3.6 The Right to Regulate and Dispute Resolution
3.7 Flexibility
4. A PROPOSED AUSTRALIA-UNITED STATES FREE TRADE AGREEMENT (FTA)
5. IMPACT ON DEVELOPING NATIONS
6. TRANSPARENCY, ACCOUNTABILITY, EVALUATION & CONSULTATION
7. CONCLUSIONS
8. REFERENCES
1. INTRODUCTION
The Doctors Reform Society (DRS) is an organisation of
doctors formed in 1973 to support the introduction in
The DRS has addressed health implications of economic
globalisation, the General Agreement on Trade in Services (GATS) of the World
Trade Organisation (WTO) and a proposed bilateral
free trade agreement (FTA) between
A free trade agreement (FTA) is an agreement between
two or more nations to remove 'substantial barriers to trade'. This may be in the form of bilateral, regional or
multilateral agreements. The prime objective of FTAs is to facilitate
international trade by private corporations. This is via the liberalisation of
trade in goods and services and the protection of direct foreign investment and
intellectual property rights by limiting government regulation. FTAs generally
favour market-based as opposed to government-administered
structures and promote privatisation.
International
trade in services has increasingly been included in FTAs and in 1994 within the
framework of the World Trade Organisation (WTO). Since 1995 the General
Agreement on Trade in Services (GATS), one of the free trade agreements of the WTO, has subjected
this significant sector, including health services, to multilateral trade rules.
“Barriers to trade in services” have become the subject of international trade
negotiation. Barriers to trade in
services in contrast to trade in goods are largely domestic regulatory barriers
rather than tariffs or barriers at the border (Sanger, 2001;
Shaffer et al., 2002).
The DRS believes universal public health
care,
The DRS believes economic
globalisation and the narrow free-market agenda of FTAs and the WTO is flawed. Narrow economic values have assumed
dominance at the expense of other values. This neo-liberalism of privatisation,
market and capital deregulation, tax cuts for the wealthy, reduced social
services and replacing the concept of ‘community’ with ‘individual responsibility’
have lead to increased inequality, social exclusion and poverty. Measurements
of benefit by Gross Domestic Product (GDP) do not take into account the costs
of economic growth and the distribution of benefits. Lack of government regulation and involvement in
resource distribution through socio-economic policies and delivery of public
services causes increasing socio-economic inequity. This contributes to poor
health outcomes and good health is
a prerequisite for human development and prosperous economies.
The DRS strongly believes health services should not
be negotiated in trade agreements. This submission will deal specifically with health
implications of economic globalisation and free trade agreements and the
ramifications on health care policy.
2. BACKGROUND
Many
receive no benefit from
economic globalisation. Growing inequalities both between and within nations
cannot be ignored (Cornia, 1999; World
Bank, 1999; World Bank, 2000; UNDP, 2002; UNICEF, 2002). According to the
United Nations (UN), the gap between the rich and poor has been growing over
the last 50 years and the rate of growth has been greatest during the economic
liberalisation of recent decades. Although global wealth has never been
greater the distribution is ‘extraordinarily unequal’ (World Bank, 2000).
The ratio
between the average income of the world’s wealthiest five per cent of people
and the poorest five per cent increased from 78:1 to 123:1 in the five years
from 1988 to 1993 (UNDP 1999). The ratio
between the income of the richest 20% of the world’s population to the poorest
20% has increased from 30:1 in 1960 to 78:1 in 1994 (UNDP, 1999). In 1990 the annual income per person in
industrialised countries was 60 times greater than that in the least developed
countries; in 1999 it was almost 100 times greater (UNICEF, 2002). The gap between the average income in the richest
20 countries and the poorest 20 countries has doubled in the past forty years (World Bank, 2000).
Reports such as St Vincent de Paul’s Two Australias - Addressing Inequality and Poverty 2001 and Harding and Greenwell’s
Trends in Income and Consumption
Inequality in Australia highlight growing inequalities in Australia (St Vincent de Paul, 2001; Harding &
Greenwell, 2002). Poverty among adults has increased steadily during
the past decade (Harding et
al., 2001). Benefits from wealth generated in recent
decades has gone largely to the wealthiest in society. A comparison of data
between the 1993/4 and 1998/9 Household Expenditure Surveys by the Australian
Bureau of Statistics (Docs 6530.0) shows Australians in the lowest quintile of
household incomes in the five year period received an average weekly increase
of $9 - that is a 5% increase to $160 per week. In contrast, the top 20% of
income earners over that same period received an average weekly increase of
$343 (23.4%) to $1,996 per week.
Until the mid-1990s, rising market income inequalities
in many OECD nations were offset by progressive tax and public transfer systems
(UNDP, 1999). As public spending and investment
declines, post-tax and transfer income inequalities in several countries,
notably the US, are now growing more rapidly than market income inequalities
alone (Aba & Mintz, 2001). Many governments are actively
participating in globalisation's upward redistribution of wealth and power. The
'economic stimulus' tax packages in the United States have given three-quarters
of US$212 billion in tax relief over three years to the top 10 per cent of
taxpayers with six per cent going to the bottom three-fifths of the population.
More over, two-thirds of the tax breaks are destined for corporations (Borger, 2001). Thirty six per cent of the
most recent US $1.35 trillion tax cuts went to the richest one per cent of
taxpayers who have an average annual income of US $1.1 million and get tax
breaks to the tune of $80,000 each (Krugman, 2003; Weisbrot, 2003).
The neo-liberal, free market agenda may regard
inequality as a positive virtue (Margaret Thatcher’s
‘glory in inequality’), inevitable and/or necessary. The proponents may
support this with the claim that ‘there are
more winners than losers’ and see inequality both as a necessary by-product of
a well-functioning economy and as ‘just’, as one’s activities are related to
subsequent ‘rewards’ (Coburn, 2000). The ideology is that the free market will generate wealth by stimulating
economic growth so that both poorer nations and poorer people within nations
will generally be better off. Poverty is claimed to be best reduced through
growth-orientated rather than distributive policies.
Studies
by the United Nations University/ World Institute for Development Economics
Research (UNU/WIDER) and the United Nations Development Programme (UNDP) have
indicated that benefits and costs of market liberalisation reforms have not
been clear cut (Cornia, 1999; Jha,
2000; Singh & Dhumale, 2000; Taylor, 2000). Evidence suggests
that for most countries, the last two decades have brought about slow growth
and rising inequality (Braun, 1997; Shen
& Wiliamson, 1997; Beyer et al.,
1999; Cornia, 1999; Harrison & Hanson, 1999).
In a report on eighteen transitional and developing countries, evidence
indicated that few, if any, found a sustainable growth path, that employment
growth was slow to poor and that increasing income inequality was the rule (Taylor, 2000). Analyses have
indicated that, compared to the two earlier decades of 1960–1980, economic
growth over the last two decades of increasing trade liberalisation (1980–2000)
slowed dramatically, especially in the less developed countries. Two exceptions
were India and China where the increase in growth began a decade before their
opening to trade (Weisbrot et al., 2000). Real GDP per
capita in sub-Saharan Africa has halved in relative terms and in Latin America
has fallen by 30 per cent from 1971 to 1996 (Woodward, 1996). World Bank
evidence from poorer countries undergoing structural adjustment also points to
stagnating per capita income, rising poverty and or declining life expectancy (World Bank, 1999).
The free market offer of escape from
poverty through access to vast
export markets does not necessarily advantage small farmers and manufacturers
even where the markets are actually open to developing countries. Technologies
of large-scale farming and manufacture are reinforced through the conviction
that it is advantageous to only produce items you can produce more cost-effectively
than elsewhere in the world and then trade them for whatever else you need.
This benefits multinational corporations that are capable of investing in
large, centralised production facilities which are increasingly concentrated in
a few places like China where wages are low and regulations are lax and works
against anything that can be done on a small scale or locally. (Venkat, 2003)
The argument that free markets enhance
welfare by ensuring more efficient production ignores the fact that there are
vast multitudes of people with little or no ability to participate in market
processes. The
more unequal the distribution of income, the fewer are the benefits of growth
to poor people (UNDP, 2002). Social
factors such as education and health influence economic participation.
Increasing inequality
has serious ramifications for health, as inequality is the most powerful factor
affecting population health. Socio-economic
inequalities in mortality rates are observed in almost every country for which
data is available. These inequalities
are seen for over 75% of all causes of deaths and are found for all age groups (Najman & Davey Smith, 2000). The effect is linear rather than a
threshold effect (Adler et al.,
1993). Income inequality within a population is an
important determinant of both individual and population mortality (Davey Smith, 1996; Wilkinson, 1996; Davey Smith et al., 2002). Cross-national research shows that the
greater the degree of socioeconomic inequality within a society, the steeper
the gradient of health inequalities (Daniels et al.,
1999). In other
words, inequality causes ill health.
The US is the
‘richest country’ in the world, but it is not the whole country that is rich -
only the one per cent of the population who own 40 per cent of the wealth (Bezruchka, 2000). Of fifteen OECD nations, the USA has the
highest level of income inequality (Anderson & Poullier, 1999a) and worse health outcomes. In the USA,
life expectancy has consistently been lower and infant mortality higher than
other developed nations in the OECD. In ranking for life expectancy of nations
in 1997 the USA was 25th, behind all other rich nations and some poor nations (UNDP, 1999).
Kerala, one of India’s smaller and poorer states, provides an example of a poor community achieving
high health outcomes and literacy levels through redistributive policies such
as egalitarian social services and a land tenure system (Franke & Chasin, 1992; Kloos, 1994; Herring &
Knight, 1999). There has been radical land reform,
public food distribution, special measures for agricultural workers, employment
opportunities for low-caste people and health service availability of 100% for
urban and 91% for rural people. The literacy rate was around 90% (>86% for
women), life expectancy 72 years (national average 61 years) and infant
mortality rate of 17 per 1,000 in 1991. The life expectancy in Kerala
approaches that of the United States and is greater than that for Washington DC
(World Bank, 2000; Wilkinson & Bezruchka, 2002).
Resources generated through economic
growth do not automatically help the poor or disadvantaged (UNDP, 2001). The free market does not deal
with social justice, wealth distribution or inequities. Political, social and legal non-market forces do. Corporations are not society's custodians but
commercial entities that act in the pursuit of profit. Their business interests
may coincide with society's but this is not guaranteed. Governments are
supposed to respond to citizens and act on their behalf (Hertz, 2001).
There is an
increasing consensus among economists that while markets may be important for a
successful economy, there is an essential role for the state (Shaffer et al., 2002). Government regulation is seen to play a positive
role in economic growth. The
recent much publicised view of Joseph Stiglitz, ex-chief economist of the World Bank, that institutions
like the International Monetary Fund (IMF) and the WTO have mismanaged the
global economy and exacerbated poverty and hunger in developing countries are an example (Stiglitz, 2002).
Governments have traditionally been
responsible for distributing and channelling resources, for instance via public
services such as health care. The World Bank’s World Development Report
2000/2001 Attacking Poverty stresses
the importance of political, state and social institutions along with public
investment in education and health in dealing with poverty (World Bank, 2000).The basis of public services is redistribution. Risks are pooled
across society and entitlement is based on need not the ability to pay.
Government action is required to direct resources towards public social
services. FTAs, however, favour market-based
as opposed to government-administered structures (Johnson, 2002).
There are individual
and social objectives in health care delivery. Health care reflects societal
values and its delivery is influenced by philosophical viewpoints. There may
arise a dichotomy between the view that health and health care are a shared
civic good with community responsibility and the view that it is an individual
responsibility best left to market influences (Siedlecky,
1999/2000). The
balance between individual and community responsibility, private and public
coverage and the extent of government involvement has been a matter for
national policy and debate.
There has been a
drive towards privatisation and market provision under the neo-liberal push of
economic globalisation (World Bank, 1993;
Buse & Gwin, 1998). The relatively
recent free market definition of health care as a tradable commodity threatens public health strategies and
universal health care delivery. It conflicts with public health principles and multiple international
accords that define access to health care a basic public health and rights
issue (United Nations,
1948; United Nations, 1969; United Nations, 1976; United Nations, 1979; United
Nations, 1990).
Privatisation and deregulation pose barriers to population health.
A UN report concluded that a
comparatively high level of government involvement is required to ensure that
health services are accessible, efficient and adequately funded (Saltman & Figueras, 1998). Major health accomplishments are products
of government action, legislation and regulation (such as vaccination programs,
access to safe housing, food and water, education, safety regulations for work places, living spaces,
prescription drugs and consumer products) and not the result of unregulated
market forces.
There are strong reasons why the public sector has
generally been the main contributor in the delivery of health care services.
These include market failure in the health care sector and that the competitive
market does not deal adequately with issues of public interest and equity. In
the delivery of health care there are often overriding benefits of public
interest that bring about a common good. These factors are not taken into
account in the private competitive market. The government has been considered
to be the best provider in these circumstances to ensure access and equity.
Other advantages of a public system are more effective controls of expenditure
limits; monopsonic buying power; low administrative costs; and the ability to
better serve population and public health needs as well as individual needs (Chernichovsky, 1995).
The situation seen in the USA indicates
the failure of market provision of health services backed with only limited
government subsidies and involvement. It is more expensive, less efficient, less equitable and has worse
health outcomes (Woolhandler & Himmelstein, 1991; Pearson, 1994;
Goldberg & White, 1995; Pollock & Rice, 1997; Woolhandler & Woodlander,
1997; Anderson & Poullier, 1999b; Anderson & Poullier, 1999a; Iglehart,
1999; Wagstaff et al., 1999; Anderson
& Hussey, 2001).
The US health care industry is being destabilised by
falling profits (Levit et al.,
1998) and is intent on expanding its markets. Australia’s
health care sector would provide a lucrative market. The
Coalition of Service Industries (CSI), a coalition of US service corporations
whose top 12 corporate members had combined revenues of around US$700 billion
in 2000 (CNES, 2003), is a powerful lobby group
that has been intensively pushing the US and other government representatives
to decrease barriers in trade in services and delivery of services. Dr Supachai Panitchapakdi
Director-General of WTO Services Negotiations has said that the “CSI has successfully served to advance and secure
the interests of its members and, more importantly, in shaping US policies and
promoting US interests within the international fora” (Panitchapakdi, 2002).
The CSI’s 1998 submission
to the US Trade Representative (USTR) before the 1999 WTO Seattle Ministerial
Meeting stated that in relation to health care services:
Three general objectives are to encourage
more privatization, to promote pro-competitive regulatory reform, and to obtain
liberalization. Specific objectives are:
• Transparent
licensing of health care professionals and facilities, which do not place unnecessary or discriminatory burdens
on US providers.
• Obtain
market access and national treatment commitments allowing provisions of all health care services cross border.
• Allow
majority foreign ownership of health care facilities.
• Obtain
a commitment for the cross border provision and transfer of health care information.
• Seek
inclusion of health care in WTO government procurement disciplines.
• Strengthen
international cooperation to promote pro-competitive reform across countries.
• Negotiate
Mutual Recognition Agreements (MRAs) for licensing of professionals and cooperative agreements on
regulation of facilities.
• Develop
principles to guide regulators so as to minimize unnecessary costs on trade and investment in the health care
sector.
• Simplify
regulations and provide transparency for
the movement of personnel, both
professionals and patients
(CSI, 1998)
In Australia, there is universal health care coverage with a mixed
system of funding and provision from Commonwealth government, State governments
and public and private sectors (Donato & Scotton, 1999). At the time of writing, Australia’s
Medicare is a universal, national, compulsory system of health care financing.
It is funded from general taxation and a Medicare levy. The government-funded
Pharmaceutical Benefits Scheme (PBS) supports access to pharmaceuticals for all
Australians (Duckett, 1995). Medicare coexists with a large,
voluntary private health insurance industry subsidised by the government (Hall, 1999). Key principles behind
Medicare are universality and the solidarity principle of paying according to
means and receiving care according to need. Medicare recognises health care as
a public good.
Universal health
insurance schemes, such as Medicare, with risk pooling across society in both
funding and service delivery, provide the most effective and efficient health
systems (Chernichovsky, 1995;
Goldberg & White, 1995; Saltman & Figueras, 1998; Schoen et al., 1998; Deeble, 1999; Blendon et al., 2002). The
success of the PBS has been recognised internationally (Productivity
Commission, 2001).
By international comparisons, Medicare in Australia performs well in overall health care costs, outcomes and equity issues (Donato & Scotton, 1999; Friends of Medicare Alliance, 2001a; Friends of Medicare Alliance, 2001b). Medicare’s administrative costs are relatively low. As a proportion of total funds, administrative costs of private health funds are around four times those of Medicare through the Health Insurance Commission (HIC) (Livingstone, 1997; Friends of Medicare Alliance, 2001a). Studies in Australia have shown public hospitals to be more efficient than private hospitals (Duckett & Jackson, 2000). The USA’s fragmented health care funding arrangements, with numerous insurers as opposed to a universal health insurance scheme, is considered to be contributory to their rising health care expenditure (Pearson, 1994; Goldberg & White, 1995).
The situation
was different in Australia before the introduction of first Medibank and then
Medicare. The 1969 Nimmo Report on Australia’s then voluntary private insurance
system (the Earl Page Scheme) found many people had no insurance cover,
insufficient insurance coverage was widespread and there was hardship for the
low-incomed (Report of the Commonwealth Inquiry into Health
Insurance (Nimmo Report), 1969). In 1973 a study in South Australia found
failure to pay health care bills was the most common cause of imprisonment for
debt (Gray, 1996).
Private insurance coverage with only limited safety
nets for the ‘poor’ or aged as seen in the USA has resulted in many people not
having access to health care and many more having inadequate coverage. In 1998, 43 million US citizens had no health
insurance coverage (Feyerick, 1998). Inability to pay medical bills has been
the greatest cause of personal bankruptcy in the USA (Pearson, 1994).
Only the wealthiest portion of the US population are well served by
their health system and the DRS does not want to see this situation reproduced
in Australia.
The Pharmaceutical Benefits Scheme (PBS) has also
served the Australian community well. It has kept prices down and enabled
access to prescription medicines at affordable prices. The
success of the PBS has been recognised internationally and is highlighted in
the Productivity Commission’s 2001 research report International Pharmaceutical Price Differences (Productivity Commission, 2001). Support for maintaining the
PBS on efficiency and equity grounds is further supported by research
commissioned by The Pharmacy Guild of Australia and Eli Lily Australia
conducted by independent economic consultants M-TAG Pty Ltd (The Pharmacy Guild of Australia, 2001). In comparison prices for pharmaceuticals
are at least double in the USA and out of reach of many people. A study of seniors and prescription drugs
in the US found that nearly one quarter skip medication doses or fail to get
prescriptions filled because of cost concerns; one quarter spent $100 or more
per month on their prescription medicines in 2001; and in some states, nearly
one third were without prescription coverage (Safran et al.,
2002).
Australia’s Medicare and PBS, however, may be at odds with the market
driven principles which underlie FTAs. The Australian Government must protect Medicare and
the PBS in FTAs allowing for policy flexibility and the right to regulate. This
should not be just to maintain Medicare and the PBS at their current state but
to allow for policy flexibility that enables expansion of services. The right
to regulate the price of all drugs including those subject to patents should be
protected.
Service
industries constitute by far the largest part of the global economy and the
fastest growing area of world trade. Service sectors account for 76 per cent
of Australia’s GDP and employ 81 per cent of the Australian workforce (Drake-Brockman,
2002). In Australia, Health Services expenditure
comprises 8.5% of GDP of which around 71% is funded by governments (AIHW, 2002).
The
General Agreement on Trade in Services (GATS) of the WTO is one of
the free trade agreements of the WTO that deals specifically with services. The goal of the GATS is to
remove “barriers to trade in services”. Social equity and democracy are not
identified as goals. The agreement is dedicated solely to strengthening the
ability of the private market system to generate wealth. Barriers to trade in services in contrast to trade
in goods are largely domestic regulatory barriers rather than tariffs or
barriers at the border (Sanger, 2001;
Shaffer et al., 2002).
The scope of the GATS is extremely broad.
The GATS applies to all government measures and covers all means of supplying a
service across 160 service sectors. Measure is defined as “any measure by a
Member, whether in the form of a law, regulation, rule, procedure, decision,
administrative action, or any other form” (GATS Article XXVIII, (WTO, 1994a). This applies to any level of government,
by “central, regional, or local governments and authorities; and
non-governmental bodies in the exercise of powers central,
regional or local governments and authorities” (GATS Article I.3(a), (WTO, 1994a). The means of supplying
services is covered by four “modes of supply”: cross-border; consumption
abroad; commercial presence; and natural persons (GATS Article I.2, (WTO, 1994a).
The GATS has
a set of general obligations and a set of specific obligations. Nation members
of the WTO are committed to the full range of general obligations across all
service sectors including health care. Each nation has a schedule of specific
commitments to which they commit particular service sectors they are prepared
to open up to competition from overseas service providers under Articles XVI
Market Access and XVII National Treatment. Nations will come under increasing
pressure to commit more of their service sectors to specific obligations under
the requirements of Article XIX Progressive Liberalisation.
There are a few provisions within the GATS
to exclude certain government measures from the general obligations of the
GATS. These, however, are narrowly defined and unlikely to exempt most public
services including health care from the provisions of the GATS (Sanger, 2001; Sinclair &
Grieshaber-Otto, 2002).
Article I.3 of GATS defines the services covered in
the agreement:
3. For the purposes of this Agreement:
(a) “measures by Members” means measures
taken by:
(i) central, regional or local governments
and authorities; and
(ii) non-governmental bodies in the
exercise of powers delegated by central, regional or local governments or
authorities;
In fulfilling its obligations and
commitments under the Agreement, each Member shall take such reasonable
measures as may be available to it to ensure their observance by regional and
local governments and authorities and non-governmental bodies within its
territory;
(b) “services” includes any service in any
sector except services supplied in the exercise of governmental authority;
(c) “a service supplied in the exercise of
governmental authority” means any service which is supplied neither on a
commercial basis, nor in competition with one or more service suppliers. (WTO, 1994a)
There is ambiguity in I:3(c) and this has not been clarified by WTO
jurisprudence. The phrases “on
a commercial basis” and “in competition with one or more service suppliers” are
both open to interpretation. Most government services are on a partial
commercial basis and/or in competition with commercial service suppliers. The
scope for interpretation of I:3(c) has potentially worrying results. A narrow
interpretation of “government services” is quite possible.
Health care services in Australia involve both commercial provision and competition and therefore would not necessarily be exempt under this article. The presence in Australia of a private sector in competition with the public sector in health service delivery could undermine the “exemption”. The private sector could be said to compete with Medicare both in the sense of selling services as an alternative to Medicare funded care and as a provider of care under schemes such as the Public Private Partnerships (PPP). The Australian government’s promotion of the private health system in competition with the public system also serves to undermine the exemption (e.g. advertisements showing public versus private hospital beds racing down a road). The charging of privately insured and overseas patients in public hospitals in Australia and the government supplying public hospital services through private-for-profit hospitals such as Port Macquarie could be considered to be operating under a commercial basis.
The WTO has stated:
39. The hospital sector in many countries,
however, is made up of government- and privately- owned entities which both
operate on a commercial basis, charging the patient or his insurance for the
treatment provided. Supplementary subsidies may be granted for social, regional
and similar policy purposes. It seems
unrealistic in such cases to argue for continued application of Article 1:3
and/or maintain that no competitive relationship exists between the two groups
of suppliers or services. In scheduled
sectors, this suggests that subsidies and any similar economic benefits
conferred on one group would be subject to the national treatment obligation
under Article XVII. [italics added] (WTO, 1998)
Members drew attention to the variety of
policy objectives governing the provision of health and social services,
including basic welfare and equity considerations. Such considerations had led
to a very substantial degree of government involvement, both as a direct
provider of such services and as a regulator. However, this did not mean that the whole sector was outside the remit of the
GATS; the exceptions provided in Article 1:3 of the agreement needed to be
interpreted narrowly. [italics added] (Minutes of a WTO Council for Trade
in Services meeting from (Sanders, 2001)
The WTO clearly
sees health care on the bargaining table and open for liberalisation as the
following quotes demonstrate:
.…the health services sector - a domestic
economic giant representing, for example, close to 6% of U.S. GDP - has
remained a minor contributor to trade …. However, the picture appears to be
brightening over time, owing in particular to two complimentary developments:
first, regulatory regimes in various
countries have been moving towards stronger market orientation - opening space
for increased private involvement, domestic and foreign…. [italics added] (WTO, 1998).
The forthcoming round of negotiations under
the GATS offers an opportunity for WTO Members to reconsider the breadth and depth of their commitments on health and
social services which are currently trailing behind other large sectors.
[italics added] (WTO, 1998).
Article XIV(b) General Exceptions allows Members to
adopt measures “necessary to protect
human, animal or plant life or health”. There is the proviso, however, “that such measures are not
applied in a manner which would constitute a means of arbitrary or
unjustifiable discrimination between countries where like conditions prevail,
or a disguised restriction on trade in services”. In over 50 years of the General Agreement on Tariffs and Trade
(GATT) with an identically worded exception clause
(Article XXb), there has only been one recent case where a dispute panel has
upheld an inconsistent measure on the basis of this exception (Sanger, 2001).
The DRS believes there should be clarity of definitions and exemption of public services and “governmental authority” that are not open to discretionary interpretation such as in Article I.3 c). There should be a self-defining exemption for health policies similar to the national security exceptions in the GATT (Article XXI) and the GATS (Article XIV bis) and all health related fields such as professional services, health insurance, electronic health services, research and development should be included in health care definitions.
VI Domestic Regulation
Article VI Domestic
Regulation is of concern. It covers general non-discriminatory
regulation which covers the processes of service delivery that are conceived to
be potential barriers or obstacles to trade. These include professional
qualifications and licensing, and licensing and accreditation of facilities, financing and funding of services and overall
administration. Article VI. 4 states:
4. With a view to ensuring that
measures relating to qualification requirements and procedures, technical
standards and licensing requirements do not constitute unnecessary barriers to
trade in services, the Council for Trade in Services shall, through appropriate
bodies it may establish, develop any necessary disciplines. Such disciplines
shall aim to ensure that such requirements are, inter alia:
(a) based on objective and transparent criteria, such as
competence and the ability to supply the service;
(b) not more burdensome than
necessary to ensure the quality of the service; [italics added]
(c) in the case of licensing procedures, not in themselves a
restriction on the supply of the service. (GATS Article VI .4)
Member nations would have to show that regulations were "not
more burdensome than necessary”. Further interpretation by the WTO in relation
to health and social services states that this is not clear and would be open
to interpretation:
42. Three types of regulation seem to be particularly relevant as
they may directly affect supply or demand of medical and health services. These
are, first, qualification and licensing requirements for individual health
professionals; second, approval requirements for institutional suppliers such
as clinics or hospitals; and, third, rules and practices governing
reimbursement under mandatory (public or private) insurance schemes.
…. Since health-related quality criteria may differ significantly
between individual activities, Member’s scope for operating qualification and
licensing requirements under these provisions would need to be assessed
case-by-case. (WTO, 1998)
Worrying aspects of the Domestic Regulation Article
are that it applies to non-discriminatory measures or regulations; that the
subject matter covered is very broad and not only covers the four broad
categories but all measures relating to them such as subsidies conditional on
technical standards or levels of accreditation; the development of ‘necessity
tests’; and the likelihood of trade tribunals deciding whether professional
requirements are unnecessary, burdensome, or restrictions on the supply of a
service. (Pollock & Price, 2000; Sinclair &
Grieshaber-Otto, 2002; Shaffer, 2003)
The GATS Working Party
on Domestic Regulation (WPDR) has been established to develop the ‘necessary
disciplines’. The WTO Secretariat has directed that potential necessity tests
should require that regulations be both necessary to achieve a legitimate
objective and not be more trade restrictive than necessary (WTO Secretariat, 2000). In WTO
dispute decisions made on the basis of existing necessity clauses in other WTO
agreements, the WTO Appellate Body has interpreted “necessary” as tending to
mean “indispensable” (Gould, 2002).
The CSI testimony to the US Congress on the GATS
stated they wanted across-the-board disciplines so that “onerous” regulations
could be challenged if they were “more burdensome than necessary.” Among the
standards identified as problems were “Excessive privacy and confidentiality
regulations” in the health care field (O'Hare, 1999).
VIII Monopolies
Article VIII Monopolies
and Exclusive Service Suppliers is a general obligation but only some sections
apply to all services. Other sections apply only where specific commitments
have been made. Article VIII states:
1. obliges governments to ensure that the actions
of monopolies, public or private, conform with the most-favoured nation
obligation and a government’s specific commitments.
2. obliges governments to ensure that a monopoly supplier—where
it supplies services outside the scope of its monopoly rights, but that are
covered
by a government’s specific commitments—does not
“abuse its monopoly position.”
3. stipulates that, if a government grants a
monopoly in sectors where it has previously made GATS commitments, it must
negotiate compensation with other member governments or face retaliation.
5. Finally, all these provisions “also apply to
cases of exclusive service suppliers, where a member formally or in effect a)
authorizes or establishes a small number of service suppliers, and b)
substantially prevents competition among those suppliers in its territory”.
Although it is possible for governments to maintain
monopolies there are several restrictions and concerns. Monopolies are
inconsistent with GATS in committed sectors unless an exception was
listed in the schedule at the time. If a government wants to designate a new
monopoly in a committed sector compensation has to be negotiated with affected
member governments or face trade sanctions. Existing government monopolies may be charged with
competing unfairly in listed services outside the scope of their monopoly. For
example, although
DFAT contends otherwise, compulsory
public health insurance is generally considered a monopoly supplier. Consequently, any plan to expand coverage of Medicare to areas where
Australia has made specific commitments such as health insurance and dental
services could result in claims for compensation from member governments of
affected international corporations. In potential disputes under WTO/GATS rules, self-definition
does not apply. (Sinclair & Grieshaber-Otto, 2002)
The DRS believes there should be adequate
provisions in trade agreements for governments to designate and maintain
monopolies and allow for policy
flexibility that enables expansion of services.
XV Subsidies
There is concern that government funding of public services is perceived as a subsidy. Article XV on Subsidies is a general obligation and applies to all 160 service sectors including health care and includes the statement:
1. Members recognize that, in certain circumstances,
subsidies may have distortive effects on trade in services. Members shall enter
into negotiations with a view to developing the necessary multilateral
disciplines to avoid such trade-distortive effects. (WTO, 1994a)
Subsidies to
services may be threatened and open to legal challenge if governments are not
allowed to discriminate between government and overseas service providers. The
DRS believes from the negotiations there should be a clear definition of
subsidy such as in the Agreement on Subsidies and Countervailing Measures (SCM)
of the WTO that clearly excludes public health care systems.
3.4 Specific Obligations
Articles XVI Market Access
and XVII National Treatment apply to areas where governments have made specific
commitments. In the area of health care the Australian Government has
already made commitments to liberalise dental services, podiatry and chiropody
services and health insurance (WTO, 1994b).
Article XVI. 2 Market Access states:
2. In sectors where market-access
commitments are undertaken, the measures which a Member shall not maintain or
adopt either on the basis of a regional subdivision or on the basis of its
entire territory, unless otherwise specified in its Schedule, are defined as:
(a) limitations on the number of service suppliers whether in the form of numerical quotas, monopolies, exclusive service suppliers or the requirements of an economic needs test;
(b) limitations on the total value of
service transactions or assets in the form of numerical quotas or the
requirement of an economic needs test;
(c) limitations on the total number of service
operations or on the total quantity of service output expressed in terms of
designated numerical units in the form of quotas or the requirement of an
economic needs test;
(d) limitations on the total number of natural persons that may be employed in a particular service sector or that a service supplier may employ and who are necessary for, and directly related to, the supply of a specific service in the form of numerical quotas or the requirement of an economic needs test;
(e) measures which restrict or require
specific types of legal entity or joint venture through which a service
supplier may supply a service; and
(f) limitations on the participation of
foreign capital in terms of maximum percentage limit on foreign share-holding
or the total value of individual or aggregate foreign investment.
These market access
obligations apply to non-discriminatory measures. The WTO Secretariat has
stated:
Another confusion that sometimes arises is the
idea that only discriminatory measures should be scheduled under Article XVI.
This is not the case. Article XVI covers all measures that fall within the six
categories listed, whether they are discriminatory or not. (WTO, 1999b)
Article XVII on National Treatment states:
1. In the sectors inscribed in its
Schedule, and subject to any conditions and qualifications set out therein,
each Member shall accord to services and service suppliers of any other Member,
in respect of all measures affecting the supply of services, treatment no less
favourable than that it accords to its own like services and service suppliers.
2. A Member may meet the requirement of
paragraph 1 by according to services and service suppliers of any other Member,
either formally identical treatment or formally different treatment to that it
accords to its own like services and service suppliers.
3.
Formally identical or formally different treatment shall be considered
to be less favourable if it modifies the conditions of competition in favour of
services or service suppliers of the Member compared to like services or
service suppliers of any other Member.
Australia has
committed to liberalise dental services with no limitations on market access
and national treatment for cross-border supply, consumption abroad and
commercial presence. Health insurance, which is classified under financial
services, has also been committed to liberalisation with no limitations on
national treatment and no limitations on market access for commercial presence.
(WTO, 1994b)
Fundamental protection for public health insurance is
undefined and may be open to interpretation (Sanger, 2001). The Understanding
on Commitments in Financial Services attached to the Schedule of Specific
Commitments states “Each Member shall list
in its schedule pertaining to financial services existing monopoly rights and
shall endeavour to eliminate them or reduce their scope” (WTO, 1994b).
It is not assured that the
WTO would consider Medicare as “part of a statutory system of social security”
under the GATS Annex on Financial Services 1. b) ii) and thus exempt from
specific commitments on health insurance as DFAT has claimed. Public compulsory
health insurance is more likely to be considered a public service than as
social security. In potential disputes under WTO/GATS rules self-definition
cannot be relied upon.
There are two other grounds for concern. First, whether Medicare
is a monopoly supplier and therefore any future expansion of Medicare coverage to encompass dental services
and health services currently covered by private health insurance such as
allied health would be open to challenge under
rules restricting monopolies (Article VIII.4).
Second, the potential ramifications of the market access and national treatment
commitments that already apply to dental services and health insurance.
These commitments put present and future public dental
programs in jeopardy. Governments could be required to match support of public
dental services with support for dental services offered by overseas
corporations. Implementation of Article XVI would mean government regulation of
dental care and health insurance is lost to market forces. This takes no
account of distribution of services, access or equity issues.
Decisions regarding those qualified to practise in
dental care are open to interpretation and possible legal challenge. The United
Nations Central Product Classification (CPC) used in the GATS describes dental
services as involving the “diagnosis and treatment services affecting the
patient’s teeth…” with no reference made to the qualification of the professionals
involved (UN Statistical Papers, Series M No.7).
This is in contrast to general and specialised medical services that specify
diagnosis and treatment by “doctors of medicine”. (WTO, 1998)
The commitments
made by Australia expose Australia to the threat of trade challenges that
restrict options for health reform. The DRS is concerned the risk of
compensation or lengthy legal challenges could deter any such policy
initiatives.
Under the provisions of the GATS, WTO
members are committed to progressively ‘liberalise’ their service sectors. The
GATS mandates WTO members to return to the negotiating table on a regular basis
and expand their GATS commitments (World Trade Organization, 1994; WTO
Secretariat, 1999). The process involves regular rounds of negotiations
where governments progressively negotiate away their regulatory authority. Article XIX in Part IV, “Progressive
Liberalization” clearly sets the agenda on liberalisation:
Members shall enter into successive rounds
of negotiations, beginning not later than five years from the date of entry
into force of the WTO Agreement and periodically thereafter, with a view to
achieving a progressively higher level of liberalization. (Article XIX.1.(WTO, 1994a)
The process of progressive liberalization
shall be advanced in each such round through bilateral, plurilateral or
multilateral negotiations directed towards increasing the general level of
specific commitments undertaken by Members under this Agreement. (Article XIX.
4.(WTO, 1994a)
Committing governments to repeated efforts
to enlarge opportunities for international trade in services,….. Article XIX is
a guarantee that the present GATS package is only the first fruit of a
continuing enterprise.… (WTO Secretariat, 1999)
Each government’s schedule of
liberalization commitments to trade in services is only a first step..… Among
the most important elements in the GATS package is the promise that successive
further rounds of negotiations will be undertaken to continue opening up world
trade in services. (WTO Secretariat, 1999)
The DRS believes there should be
documented evidence that liberalisation has achieved economic growth, equitable
distribution of wealth and measures of population health as a condition of
further liberalisation. The DRS is concerned that
under the GATS agenda of ‘progressive liberalisation’ and aggressive free
market principles, health care will be progressively open for negotiation.
The European Commission (EC) has stated in its draft
responses to GATS that it will not make further undertakings regarding health
services. We believe the Australian government should give such a commitment
but also insist on a general exception for health care in the GATS negotiations
applying to all WTO members and for health care not be targeted in future
rounds of negotiations. The diversity of national health care systems means
that the exception must be self-defining.
The GATS and FTAs aim
to restrict the regulatory ability of governments
so as to allow a freer flow of services to facilitate international business (Campbell et al., 2002).
As barriers to trade
in services are largely domestic regulatory barriers (Sanger, 2001;
Shaffer et al., 2002), the GATS extends
far beyond traditional trade matters to influence how a government regulates
within its borders (WTO Secretariat,
1999). The GATS is thus more than just an economic
trade agreement, it is explicitly political. The WTO has stated of the GATS:
… because such a large share of trade in
services takes place inside national
economies, that its requirements will from the beginning necessarily influence
national laws and regulations. (WTO Secretariat, 1999)
Articles XVI.2
on Market Access and XVII on National Treatment, which apply to specific
commitments, are examples of the undermining of government regulation of
services. Implementation means government regulation is lost to market forces.
Regulations are clearly listed among government measures
restricted by the GATS. The right of governments to regulate over specific
commitments cannot be assumed. The affirmation of the right to regulate in the
GATS preamble has limited legal effect and does not exempt a government from
conforming to their GATS commitments. Legal advice is that the preamble does not provide enforceable rights or
obligations but provides a context in which the rights and obligations of the
GATS should be interpreted. Governments retain their freedom to regulate only
to the extent that the regulations they adopt are compatible with the GATS, a
judgement made not by governments but by appointed WTO dispute panellists. (Sinclair & Grieshaber-Otto, 2002; CNES, 2003) The WTO has stated that the GATS
recognises
the right of Members to
regulate, and to introduce new regulations on the supply of services within
their territories in order to meet national policy objectives, provided the relevant measures are
compatible with the GATS. [italics added] (WTO, 2001)
The Appellate Body of the WTO has repeatedly quoted the
Vienna Convention on the Law of Treaties (VCLT) (1969) that “a treaty interpreter
must begin with, and focus upon, the text of the particular provision to be
interpreted. It is in the words constituting that provision, read in the
context, that the object and purpose of the state parties to the treaty must
first be sought.” A basic principle of treaty law is pacta sunt servanda, “agreements are to be kept”. The Appellate
Body has taken a strongly textual approach and tended to favour market-based
solutions in dispute settlements. (Johnson, 2002; Sinclair &
Grieshaber-Otto, 2002)
Rules
under the GATS have not yet been fully tested. The WTO has stated -
The fact that the GATS rules are still necessarily untested, and that the services schedules are much more complex than those for goods, adds to the difficulty of assessing exactly what rights and obligations WTO members have assumed under the services package. (WTO Secretariat, 1999)
To date, two cases have gone to the full panel of the WTO courts under the GATS. In each case, the defendant government has lost (EC over distribution of bananas (WTO, 1997b); Canada over motor vehicle trade services (WTO, 2000)). Another case between the USA and Mexico in relation to telecommunications is currently before the WTO courts (WTO, 1997a). WTO trade tribunals tend to interpret rules restrictively. The disputes panel, according to the context of WTO agreements, is obliged to give priority to free trade over other issues in the dispute process. Defendant nations must demonstrate that measures under dispute are the least trade restrictive. The WTO Agreements set out binding international norms.
Unlike with
most international bodies, the WTO dispute settlement is both compulsory and
binding and held in secret. Member states have no choice but to accede to it
and accept the consequences of the WTO ruling. The panel’s decisions are
building up a body of trade law precedents on an ad hoc basis which can undermine legitimate national regulation in
areas like health and safety, the environment and industry development policy. Democratic and accountable policy making is undermined by
transferring responsibility for balancing the public interest with commercial
considerations from elected governments to appointed tribunals or WTO panels.
Foreign commercial interests are placed above the public interest.
DFAT’s reassurances that a dispute has not already
occurred and is unlikely in the future are unconvincing. This
does not mean that such a dispute is not possible. Although the objective of maintaining public
health would not be likely to be challenged, the particular means a government
adopted to pursue its objective could be. It could be challenged that the
objectives could be achieved through less burdensome means to trade (Gould, 2002).
To say that one
does not need to worry unless a challenge occurs appears incongruous. It is imperative that that the Australian Government
protects our health care system before it can become a target of a trade
challenge. We believe it is irresponsible for the government and its relevant
departments not to prepare for this possibility.
The Australian government has stated that they ‘will not agree to any diminution of our overall right to regulate that would constrain our ability to pursue legitimate policy objectives in the regulation of services sectors, or compromise the capacity of governments to fund and maintain public services’ (DFAT, 2003) but has not stated how this will be pursued.
Although it has been said that governments have ‘remarkable
flexibility’ to open their service sectors at their own pace and place
limitations on their specific commitments there are serious limitations to this
flexibility (WTO, 2001). There is pressure under Article XIX
Progressive Liberalization for member nations to progressively expand their
GATS commitments and liberalise more of their services. Most governments have
already made substantial commitments and all limitations have to be scheduled
at the time the commitment is made.
There was no phase-in period during which governments could
consult, reflect or add to their limitations. Recognising how and when to make
an exception and impose limitations when sectors are committed requires an
unrealistic level of foresight and capacity. Identifying all potential
non-conforming measures in a sector or sub-sector is enormously difficult.
Errors and inconsistencies are widespread within nation schedules including
limitations. Limitations cannot be added for non-conforming measures that may
have been overlooked and poorly drafted limitations that do not provide the
protection that was intended cannot be revised. Limitations can only apply to
existing measures not future measures. (Sinclair & Grieshaber-Otto, 2002) The
WTO Secretariat has said that: “(B)indings undertaken in the GATS have the
effect of protecting liberalization policies, regardless of their underlying
rationale, from slippages and reversals…” (WTO, 1999a)
While GATS Article XXI Modification of Schedules (WTO, 1994a) allows a government to change the commitments it
has made after three years, the conditions imposed are so difficult, it is
unlikely ever to be used (Sinclair & Grieshaber-Otto, 2002). The nation modifying or withdrawing a commitment
is required to make ‘compensatory adjustments’ to other nations whose service
suppliers are allegedly adversely affected. This may go to a disputes panel and
if not adhered to, result in trade penalties or retaliatory sanctions.
The overall effect of binding of commitments is to
“lock in” liberalisation and make it irreversible. Sectors are “locked in” as they are
progressively liberalised, thereby denying nations policy flexibility (CNES, 2003). EC Trade Commissioner, Pascal
Lamy has admitted that it is effectively an irreversible process (PSI & EPSU, 2003). This is an erosion of
democracy. A single government can bind all future governments. It does not
allow for reversal of policy even if found to have negative consequences. It
does not take into account change in government or public opinion. The GATS
thus interferes with the usual fluctuations in policy-making in democracies.
Democratic choice is diminished (Sinclair & Grieshaber-Otto, 2002). The increasing privatisation
of health care may become almost impossible to reverse under GATS rules even
if subsequent events demonstrate negative consequences for public health.
The GATS is more of a governance agreement than a trade
agreement.
The DRS believes benefits for Australia from an FTA
with the USA are doubtful and the potential cost to the community great. The
predicted economic gains from an Australia-US FTA determined in a study by the
Centre for International Economics (CIE, 2001) are extremely modest, less than half a
percent of GDP per year if all trade barriers are removed. The study’s
conclusions are hedged with many qualifications and it is conceded that all
trade barriers are unlikely to be removed so predicted benefits are likely to
be far less than predicted.
The DRS is concerned that in negotiating a bilateral
FTA with the USA, Australia has an unequal bargaining position against the
economic might of the USA. The US would be in a position to maximise its
demands on Australia with US interests favoured at the expense of our own. The
focus of US policy has lately shifted strongly
towards bilateral and regional agreements as the provisions go far beyond what
has been possible to negotiate in the WTO. The US agreement with Singapore
provides far stronger protection to US patent holders and investors than
offered through the WTO (Watkins, 2002).
The DRS believes that
public services such as health care and water services will be targeted that
could result in a compromise of public policy. It is concerning that DFAT has
stated that aims of an FTA with the USA “will
be to liberalise trade in goods and services, to facilitate trade and
investment and to address government-level impediments to increased commercial
exchanges”. US Trade Ambassador Robert Zoellick has also stated that they
seek "enhanced access for US
services firms to telecommunications and any other appropriate services
sectors" (USTR Robert B. Zoellick, 2002). As US services firms already have access
to commercial services in Australia the targets would be public services such
as health care.
The Australian
Pharmaceutical Benefits Scheme is clearly in the sights of the USA. The PBS was
a target of US interests at the US Congressional hearings into the FTA held in
Washington DC. US drug industry lobbyist Joe Damond lobbied that Australia’s
PBS meant new US medicines were being priced the same as older products (Allard, 2003). Assistant US trade representative Ralph
Ives, head of the US negotiating team, confirmed at the conclusion of the first
week’s negotiations in Canberra that the scheme was on the agenda at the behest
of the Pharmaceutical Research and Manufacturers of America (PhRMA). Steven
Haynes, the director of strategic relations for Medicines Australia, PhRMA’s
Australia counterpart, confirmed meeting with US trade negotiators. There is strong
community opposition, however, to any proposals that seek to include public
services of community benefit such as the PBS and Medicare in trade agreements. A recent opinion poll, undertaken by UMR
research and commissioned by trade deal opponents, showed that 89% of
respondents would oppose a trade deal if that "could make it more
expensive to buy prescription drugs." (Burton, 2003)
Australia should closely examine and heed the
experiences of both Canada and Mexico as well as the
USA in the North American Free Trade Agreement (NAFTA). NAFTA has encompassed rules to open services
markets, created legal rights for foreign investors, adopted competition
policies for government monopolies and set rules for technical standards and
recognition of qualifications. The scope of bilateral or regional agreements
such as NAFTA has been wider than that of WTO agreements.
Chapter 11 of NAFTA on Investment has been of
particular concern especially in relation to expropriation and compensation and the provision for
investor/state dispute settlement procedures. This allows foreign companies to
make claims for compensation for nationalisation or expropriation of their
services directly to the relevant national government. The definition of expropriation is broad covering direct
and indirect expropriation as well as any government administrative measures, policies or laws that are ‘tantamount to expropriation’. It includes
compulsory compensation for losses that include the loss of future or potential earnings. This means that private corporations are allowed
to sue over any government act that may diminish their profits bypassing national courts and nullifying
local laws and regulations designed to enforce local planning, health, and
environmental policies.
NAFTA Article 1110 ‘Expropriation and Compensation’ with the enforceable requirement for compensation makes expansion of the public component of the health system expensive and impracticable and deregulation irreversible. This greatly diminishes policy flexibility as expansion of public services is only possible with monetary compensation. If Australia had been privy to an agreement with such a provision and the accompanying investor/state dispute settlement procedures at the time, Medibank or Medicare may never have come into existence.
Since the agreement’s enactment the majority of the
investor-to-state cases filed have had little to do with the seizure of
property. Corporate investors in all three NAFTA countries have challenged a
variety of national, state and local environmental and public health policies,
domestic judicial decisions, a federal procurement law and even a government’s
provision of parcel delivery services as NAFTA violations. Such cases where investors have challenged non-discriminatory regulatory measures as expropriatory
include S.D. Myers, Pope and Talbot, Ethyl Corp, Crompton Inc, United Parcel
Service of America Inc, Sun Belt and Ketcham versus Canada; Metalclad
Corporation, Azinian, et al, Waste Management, Karpa and Adams versus Mexico;
and Methanex, Loewen, Mondev and ADF Group versus the USA (Bottari et al., 2001; Mann, 2001). In the S.D. Myers case,
Canada was ordered to pay out US$3.8 million plus interest in compensation for a temporary ban on exporting Canadian
polychlorinated biphenyl (PCB) wastes for disposal (Chase, 2002).
Action has also been
threatened by the US tobacco giant Philip Morris against Canada claiming
Canadian anti-smoking health proposals were NAFTA-illegal trade barriers. In
1994 this was against generic packaging of cigarettes (the proposal was later
dropped) and in 2002 against a plan to ban the words ‘light’ and ‘mild’ from
cigarette packaging (Mokhiber & Weissman, 2002; Public Citizen, 2002). In a submission to the Canadian government,
Philip Morris argued that the proposed ban of the descriptors ‘light’ and
‘mild’ would be “tantamount to an expropriation” of its tobacco trademarks
containing those words. Philip Morris argued that if the Canadian regulation
was to go into effect, the company would deserve compensation under NAFTA
Chapter 11 from Canadian taxpayers because it had invested millions “developing
brand identity and consumer loyalty” (Philip Morris, 2002).
Government
decision-making in relation to the public interest can be compromised as a
result of the current interpretations of NAFTA’s Chapter 11. In Canada, only
two new environmental laws have been adopted at the federal level since NAFTA
came into force, and both have been successfully challenged under Chapter 11.
This critical impact arises as governments have been required to compensate
investors for any costs or losses they incur as a result of adopting new laws (Mann, 2001).
Investor-state
provisions in bilateral agreements signed by Latin American governments have
had damaging impacts on democratic control of critical services such as water
supply. Examples include a subsidiary of the US-based Bechtel corporation
threatening Bolivia with an investor-state lawsuit over the cancellation of its
contract to take over the water supply of the city of Cochabamba; and under a
France-Argentina investment treaty, Compagnie Générale des Eaux (a subsidiary
of the French transnational Vivendi) launching an investor-state suit against
Argentina for US$300 million in compensation for rate caps and regulatory fines
imposed by local authorities over a sewer and water services contract in the
province of Tucuman. This was despite having signed a contract that said
conflicts would be resolved by provincial tribunals. (Gould, 2001)
There have been reservations in Canada over investment
provisions in free trade agreements. After public consultation and obtaining legal opinions on the impacts
of trade agreements, the regional authority in Vancouver, Canada decided
against proposals to contract out their water filtration system to a short list
of corporations that included Bechtel and
Vivendi (Gould, 2001). The Canadian government has called for clarification or reform of Chapter
11 (World Trade Online, 1999).
In California a
resolution regarding concerns with international investment agreements such as
Chapter 11 of NAFTA was passed in the California legislature (2002). This resolution serves as a strong
statement from the California legislature that investment agreements such as
Chapter 11 of NAFTA threaten democracy and should not be included in future
trade agreements.
These provisions have been long-standing objectives of
US foreign economic policy and key features of bilateral investment treaties
that the USA has pursued with trading partners around the world (USTR, 1998; Sinclair, 2001). The
US Trade Representative Robert Zoellick, has indicated that he would not
consider shrinking the regulatory rights given to corporations under NAFTA’s
Chapter 11 (World Trade Online, 2001). Worryingly, despite concerns
and objections, the draft Free Trade Agreement of the Americas (FTAA) chapter on investment basically replicates NAFTA Chapter 11,
including its “investor-state” provision (Gould, 2001; Hemispheric Social Alliance, 2001).
It can be seen that free trade agreements such as
NAFTA, the GATS and the proposed FTAA and Australia-US FTA are likely to create
a lot of work for lawyers and problems for
every level of government accused of protectionism by private corporations or
other governments.
The DRS
strongly believes that trade agreements should not include investment provisions like chapter 11 of NAFTA. There should be
no provisions for compulsory compensation or investor-state dispute settlements
that allow investors to directly challenge public policy measures. Any agreement
should not include a narrow definition of expropriation so that public
expansion of Medicare or the PBS could be interpreted as an expropriation.
5. IMPACT ON DEVELOPING NATIONS
The DRS has concerns
about potential impacts of the Australian Government’s GATS requests of
developing nations. The Doha round of negotiations emphasised the need for all
peoples to benefit from the GATS and placed the needs and interests of
developing nations at the heart of the Work Program adopted in the Ministerial
Declaration. Australia must consider the consequences of its requests on health
care delivery within developing nations.
The DRS believes Australia’s involvement should
strengthen the role of government rather than markets in the provision of
health services. The World Health Organisation’s universal health for all
should be a guiding principle. If Australian companies are seeking market
access in developing countries assisted by the Department of Foreign Affairs
and Trade there should be obligations to progress
the Doha Development round and universal health care access. This should
include support for government service provision as well as capacity building
in developing countries. This could be facilitated via an integrated approach
to the Australian overseas aid program.
In the 1990s, international financial
institutions such as the World Bank and International Monetary Fund encouraged
developing countries through ‘structural adjustment programs’ to privatise health care,
leaving only the poorest population in the public sector. The resulting
privatisation of formerly public health systems has diverted funds and other
resources from critical health needs to administration. Co-payments and other
mechanisms have driven up the cost of care, increasing family spending on
health care, and presenting barriers to access. (Shaffer et al., 2002) Private companies have failed
to deliver to the poorest and neediest while filtering benefits to the richest
sections of society (UNISON, 2002). The policies have undermined the rights of public sector workers and lead to a decline in
wages and employment (PSI, 2001).
At the same time the WTO has promoted
developing nations to export health services by attracting foreign patients to domestic hospitals
and doctors, or by temporarily sending their health personnel abroad (Panitchapakdi, 2002). This can
lead to brain drain of key professionals and a revolving pool of temporary
immigrant workers who can effectively maintain the depressed state of the host
labour market (PSI & EPSU, 2003).
The GATS can serve as an
excuse to continue the structural adjustment programs and force many developing
nations to dismantle their public services and allow foreign-based corporations
to provide services such as health care on a for-profit basis. The liberalisation of trade
in services under FTAs and the GATS assumes the existence of private markets
and encourages privatisation. (UNISON, 2002)
Developing
nations under the GATS are deprived of the ability which developed nations had
to develop their public services under the cover of protection. Flexibility and the
ability to choose what to liberalise depends on a fair process conducted on an
equal footing. There have been cases where developed nation governments have
threatened to withhold aid if their companies are not granted concessions from
a particular regulation (UNISON, 2002).
The
European Commission has committed ‘to make progressive liberalisation of trade
in services not only consistent with, but also supportive of, sustainable
development, while ensuring that WTO members can adequately protect their
national policy objectives’. The DRS is alarmed, however, that the EC’s
requests have included bids to liberalise the distribution of tobacco in
developing countries such as Mexico, Korea, and China (which leads to increased
consumption) and to remove restrictions on alcohol distribution (which
threatens alcohol control policies designed to protect public health).
WTO agreements affect many areas of government policy and should be open, publicly discussed and accountable before agreements are signed. There has been inadequate analysis of costs and benefits of trade agreements. This should go beyond purely economic considerations but should examine the social, health and environmental impacts. Community interests and concerns need to be taken into account as there will be profound long-lasting consequences for Australian society.
Despite declarations of transparency, secrecy abounds in WTO procedures with meetings still held behind closed doors. The disputes process of the GATS, unlike most national and international judicial processes, is also conducted privately with limited public access to documents.
The incident of
leaked documents from the European Commission (EC) on WTO GATS negotiations in
February 2002 is an illustration of negotiations occurring behind closed doors.
The EC condemned the publication of the documents stating they were
confidential and their release could influence the negotiating process. Strong
input from the European Services Forum (the European industry services lobby
organisation), however, had been actively sought in the preparation of the
documents. It appears business input is prioritised over the views of individual
Member States and civil society groups. The DRS believes this is an example of
secret negotiations conducted within the WTO involving a high level of industry
involvement to the exclusion of public debate.
There is frequent communication between the EC and the
European Services Forum about the GATS negotiating agenda. In 2000 the EC Trade
Directorate gave the European Services Forum a grant to finance a conference on
how to promote GATS (Cohen, 2001). The EC has said on its website that GATS
is "not just something that exists between governments, but it is first
and foremost an instrument for the benefit of business" (Joy
et al., 2001).
The German parliament has shown concern in that, with
the votes of the coalition partners, it passed a resolution demanding more
transparency in the GATS negotiations sharply criticising the dealings of the
EC (Fritz, 2003).
Adequate mechanisms do not currently exist to ensure that both the WTO
and the Australian government are accountable for decisions that are taken. The
DRS believes the WTO and member nations have largely failed to engage with the
wider community on the issues. Usually only governments are heard by the
disputes panel. Panels are not bound to consider evidence of public interest
groups in spite of environmental organisations
having established a legal right to appear as amicus curiae representing the broader public interest.
The DRS is concerned that very limited information has
been made available to the public of the current proposals or their
ramifications. This is both of requests made to and from Australia and of the government’s
intentions. In DFAT documents both requests and proposals are generalised with no
specific details given.
The DRS believes there must be adequate protection of
public services and provision for governments to
determine issues of national concern in trade treaties. In all trade treaties
there should be adequate provisions for governments to designate and maintain
monopolies, provide subsidies to public services, maintain public policy
flexibility and regulate in the public’s interest. Nebulous definitions that
are open to narrow discretionary interpretation such as in the GATS Article 1.3
c) should be excluded.
The DRS strongly
believes health care services should not be negotiated in trade agreements.
The DRS believes services must not be traded off
for agriculture gains. Health care services must be exempt from international
trade agreements. Export interests in the health care sector are minor in
relation to the importance of the domestic health care sector.
The
Australian Government must protect Medicare and the PBS allowing for policy
flexibility and the right to regulate. This should not be just to maintain
Medicare and the PBS at their current state but to allow for policy flexibility
that enables expansion of services. The right to regulate the price of all
drugs including those subject to patents should also be protected. The DRS is concerned that
decisions by one government cannot be reversed by a future government.
National governments must take responsibility for
ensuring equity in health and access to health care in the 21st century. This
is the only way to adequately ensure accountability to citizens when health
systems and services involve a multitude of players such as private companies,
non-governmental organisations and the public. The free market notion that
health is merely a commodity and, as such, has a price and can be traded off
against other commodities threatens public health strategies, universal health
care delivery and the belief that health is a human right.
The looming crisis in international health, with
increasing inequities and worsening access to health care for the world’s most
vulnerable populations requires global solutions. The DRS believes an
international organisation such as the World Health Organisation (WHO), rather
than the World Trade Organisation (WTO), is more appropriate to take a
leadership role in coordinating international health initiatives and in setting
the direction of international health policy. The world needs a strong body to
take the lead in health matters, to act as an advocate for equity in economic
and social development, to set priorities for the use of limited resources, to
provide neutral territory for debating sensitive issues and to give technical
advice and support (Sterky et al.,
1996).
IN NEGOTIATING INTERNATIONAL FREE TRADE AGREEMENTS THE
DRS CALLS ON THE AUSTRALIAN GOVERNMENT TO ENSURE:
·
Greater
participation and full public scrutiny in the negotiating process. All
proposals and requests must be made public. Adoption of the UN treaty making
process in which negotiating sessions are open and all documents are public;
·
Health
care consumers, advocates, researchers and representatives from all major
sectors involved in Australia’s health care system are involved and informed;
·
Safeguarding
Australia’s public service sector including health care will take precedence
over free market agreements and securing market access for Australian exports;
· Clarity of definitions and exemption of public services and “governmental authority” that are not open to discretionary interpretation such as in Article I.3 c) of the GATS;
·
Effective exceptions for health care systems are incorporated
into any treaties or trade agreements;
·
A
self-defining exemption for health policies in all international trade and
investment agreements similar to the national security exceptions in the GATT
(Article XXI) and the GATS (Article XIV bis);
· Inclusion in health care definitions are all health related fields such as professional services, health insurance, electronic health services, research and development;
· The protection of Medicare and the Pharmaceutical Benefits Scheme (PBS) are paramount and any possible ramifications for these are thoroughly investigated;
·
Public
health insurance is explicitly
shielded from any commitments to health insurance;
·
Steps are taken to reverse Australia’s
commitment on liberalisation of dental services and prevent its application;
·
The
ability for governments to designate and maintain monopolies;
·
A
clear definition of subsidy such as in the Agreement on Subsidies and
Counterveiling Measures (SCM) of the WTO that excludes public health care
systems;
·
A
narrow definition of expropriation in any agreement so that public expansion of
Medicare or the PBS is not interpreted as an expropriation. This should not
include compulsory compensation;
·
There
are no investor-state dispute settlements procedures that allow investors to
directly challenge public policy measures;
· Provisions for the ‘right to regulate’ should be explicit and decisions on “legitimate domestic political objectives” should not to be determined by trade tribunals;
· Professional Qualifications and Licensing standards rules should not be determined by trade tribunals;
·
That the necessity of any
measures “necessary to protect human, animal or plant life or health” should be
determined by a central, regional or local government body, or designated
non-government authority rather than a trade tribunal;
· Alternative avenues for dispute resolution to trade tribunals;
· Dispute panels are not held in secret;
·
The primacy of international
human rights law over international trade and investment treaties is
recognised;
· Support for measures to promote and protect the right to health.
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