This was the Doctors Reform Society (DRS) submission of February 2003 to the Department of Foreign Affairs and Trade

on Australia’s Offers and Requests for Opening Sectors in the Current Round of GATS Negotiations.

It was prepared by Dr Tracy Schrader, a Brisbane general practitioner.

The DRS welcomes the opportunity to make a further submission to the Department of Foreign Affairs and Trade (DFAT) on Australia’s offers and requests for opening sectors in the current round of the General Agreement on Trade in Services (GATS) negotiations leading to the Fifth WTO Ministerial Conference Cancun, Mexico 2003.

The DRS has addressed health and health care implications from economic globalisation, the General Agreement on Trade in Services (GATS) and othera free trade agreements (FTA) in previous submissions to DFAT. In this submission, we would like to reiterate our concerns in relation to healthcare ramifications and in particular to the current negotiations.

The DRS believes the General Agreement on Trade in Services (GATS) threatens the existence of public healthcare, the Pharmaceutical Benefits Scheme (PBS) and mandatory universal health insurance schemes such as Medicare. The DRS is concerned about the effects on society of unregulated free-market globalisation.

The DRS believes universal public health care, Australia’s Medicare and the Pharmaceutical Benefits Scheme (PBS) are seriously threatened by the market-driven principles which underlie the GATS. The free market definition of health care as a tradable commodity is a relatively recent concept which conflicts with an array of international accords that construe access to healthcare as a basic public health and rights issue. Protecting population health requires adequate funding for public health systems and universal coverage for individual medical care.

There is sound international evidence that 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; Blendon et al 2002). The success of the PBS has been recognised internationally and is highlighted in the Productivity Commission’s 2001 research report International Pharmaceutical Price Differences. The failure of market provision of health services is clearly demonstrated in the USA (Goldberg & White 1995; Anderson & Hussey 2001). Recent experience in Australia confirms the spiralling costs associated with increased reliance on private provision of health care.

The DRS is concerned that very limited information has been made available to the public of the proposals or the implications. 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. Specific comment and analysis are therefore impossible.

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.

The DRS strongly believes health services should not be negotiated in trade agreements.

The DRS believes services must not be traded off for agriculture gains. Healthcare services must be exempt from international trade agreements. Export interests in the healthcare sector are minor in relation to the importance of the domestic healthcare sector.

Despite assurances to the contrary, the DRS believes public health services along with other public services are not automatically exempt from the GATS. There is obvious ambiguity in Article I:3(c) of the GATS which defines government services that are exempt from GATS obligations as:

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. This applies to the health sector in Australia and would undermine the "exemption" for public health services. The scope for interpretation of I:3(c) has potentially worrying results.

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

The DRS is concerned that under the GATS agenda of ‘progressive liberalisation’ and aggressive free market principles, healthcare will be progressively open for negotiation. The European Commission 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 healthcare in the GATS negotiations applying to all WTO members and for healthcare not be targeted in future rounds of negotiations. The diversity of national healthcare systems means that the exception must be self-defining.

The DRS is also concerned that Articles XVI on Market Access and XVII on National Treatment already apply to Australia’s specific commitments on dental services and health insurance. This has grave implications for the ability of the government to regulate and leaves open to market forces. Fundamental protection for public health insurance is undefined and may be open to interpretation.

The DRS believes the GATS undermines the role and power of governments to determine domestic policy including healthcare. We do not believe that the GATS protects Medicare or permits the establishment of public dental programs or expansion of Medicare’s coverage to include dental services under our current commitments.

The right of governments to regulate in spite of 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 (Sinclair & Grieshaber-Otto 2002). Governments retain their freedom to regulate only to the extent that the regulations they adopt are compatible with the GATS. Regulations are clearly listed among government measures restricted by the GATS. The Appellate Body of the WTO has repeatedly quoted the Vienna Convention 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". Rules under the GATS have not yet been fully tested.

The DRS believes 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. Before committing any sector there must be evidence of benefit.

The DRS has concerns about Australia’s GATS requests of developing nations. The Doha round of negotiations emphasised the need for all peoples to benefit from the GATS. Needs and interests of developing nations were placed at the heart of the Work Program adopted in the Ministerial Declaration. Australia must consider the consequences of its requests of developing nations on healthcare infrastructure and delivery.

The DRS believes Australia’s involvement should strengthen the role of government rather than markets in the provision of health services. 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). The WHO’s universal health for all should be a guiding principle.

We believe 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 healthcare access. This should include support for government service provision as well as capacity building. This could be facilitated via an integrated approach to the Australian overseas aid program.

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 include 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).

• make public all relevant information on negotiations, including details of specific requests sought by and from Australia and Australia’s responses prior to the March 2003 deadline for initial offers in the GATS negotiations;

• delay responding to the requests of other governments until time has been allowed for public discussion of the Australian government’s proposed responses;

• submit all policies on GATS to full parliamentary debate and a parliamentary vote before commitments are made;

• affirm that safeguarding Australia’s public service sector including healthcare will take precedence over free market agreements and securing market access for Australian exports;

• support research into the impact of free trade agreements on population health and public health infrastructure;

•  conduct a systematic and comprehensive assessment of the health impact of our existing commitments under the GATS agreement;

•  support the incorporation of objectives such as equity, democracy and well-being, rather than merely wealth creation, into trade agreements along with minimum standards in relation to human rights, labour conditions, democratic practice and environmental protection;

• pursue the issue of the "governmental authority" exclusion in Article I.3 at the GATS negotiations so that its meaning is clarified and made fully effective. If the intention of Article I:3 is to exclude public services from the GATS, steps should be taken to ensure that there is less discretion for interpretation. This may involve an amendment of GATS or the adoption of an authoritative interpretation by the WTO Ministerial Conference and the General Council (on the recommendation of the Council on Trade in Services). This should ensure that mixed public-private services, including healthcare, are fully excluded from the GATS;

• voice Australia’s opposition to the extension of GATS commitments over healthcare services. Insist on a general exception for healthcare in the GATS negotiations applying to all WTO members and for healthcare not be targeted in future rounds of negotiations. The diversity of national healthcare systems means that the exception must be self-defining (as is the existing general exception for national security measures). This should be a precondition for agreeing to any further commitments;

•  ensure the protection of Medicare and the Pharmaceutical Benefits Scheme (PBS) are paramount and any possible ramifications to these are thoroughly investigated;

• take steps to reverse Australia’s commitment on liberalisation of dental services and to prevent its application;

• enter a limitation to Australia’s GATS schedule which explicitly shields public health insurance from any commitments to health insurance;

The DRS welcomes the opportunity to contribute our views and hope that the best interests of both the Australian and world population are taken into account in the negotiations. We hope for continuing discussion, consultation, clarification and feedback during this important process.