The General Agreement on Trade in Services (GATS)
Historically trade agreements involved reducing
tariffs, eliminating trade barriers like quotas on imports on goods
produced in a country and sold elsewhere. However, this has changed
drastically in recent years in the North as manufacturing has ceased to
be profitable because of global competition. Presently, the services
sectors have expanded and are growing in importance to the North.
According to the EC ‘The service sectors accounts for two thirds of
the Union’s economy and jobs, almost a quarter of the EU’s total
exports and a half of all foreign investment flowing from the Union to
other parts of the world’ (Price, Pollock, Shaoul 1999).
In the US, more than a third of economic growth over
the past five years has been because of service exports. In the words of
Charlene Barshefsky the importance of the services trade to the US in
1998 was ‘$265 billion in services exports supporting four million
jobs…an indicator of how much we can achieve in an open market (Cohen
2000). The World Bank estimates that in less developed countries alone,
infrastructure development involving some private backing rose from
US$15.6 billion in 1990 to $120.0 billion in 1997. Some 15 percent were
direct foreign investment in public schemes (Price, Pollock, Shaoul
1999).
As the service sectors of the First World economies
grew, trade in various types of services were exported. The TNCs lobbied
for new trading rules that will expand their share of the global market
in services as governments everywhere spend a considerable amount of
their budget on social services. For example, the OECD countries spend
more than eight percent of GDP on health alone. In the mid 1990s, this
amounted to some US$2,000 billion annually. In the Third World health
expenditure was five percent of GDP, which included public and private
spending on both goods and services and social or compulsory health
insurance (WTO: Sept 1998).
According to the WTO, the GATS covers some 160
separate sectors including telecommunications, transport, distribution,
postal services, insurance, environment, tourism, the construction
industry, real estate, entertainment and leisure industries. The
corporate lobby is bent on opening up every conceivable area that covers
the trade in services; the US Coalition of Service Industries (CSI),
which was responsible in getting the US to initiate a services agreement
in the Uruguay Round, has advised the WTO to adopt a ‘flexible’ and
‘innovative’ negotiating strategy as they ‘need flexibility to
include some services which may not be captured by (existing)
definitions’ (Bertrand & Kalafatides 1999).
In the new round of negotiations which was to have
begun in Seattle, the US specifically wanted to focus on the free trade
in services in the professions, health and education as the US had a
trade advantage because of the new technologies (Cohen 2000). The GATS
covers all services including health and social services. ‘It covers
not just cross border trade but every possible means of supplying a
service, including the right to set up a commercial presence in the
export market’ (Ibid). This agreement is so comprehensive that
analysts consider it the ‘world’s first multilateral agreement on
investment’ as it covers ‘the kinds of rights that corporations in
general would have received through the Multilateral Agreement on
Investment (MAI), (had it not failed as a result of international public
action), can be granted to investors in services through the existing
GATS’ (Ibid). The framework of obligations that applies to all
member states in the WTO is valid in GATS which provides for ‘national
treatment’ i.e. no discrimination in favour of national providers; and
the most favoured nation (MFN) principle which states that no
discrimination between other member states is allowed.
GATs negotiations is being pushed and binding
agreements set without countries being able to make proper assessment of
costs and benefits because of the absence of data. Opening up the
services sector will not benefit the Third World countries as most have
hardly any supply capacity in the services sector for export to the
North. The vast differential in this area makes the achievement of
reciprocal benefits nearly impossible with the pattern of negotiations
adopted in the Uruguay Round of trade talks (which resulted in the
establishment of the WTO) (Das 2000).
The GATS as in all the other agreements contains
provisions which allow further ‘rollbacks’ i.e. further deregulation
of any national legislation which is seen to be hostile to free trade.
This is referred to as a ‘built-in agenda’ to liberalise services
and allows for the negotiations to be a continuous (on-going) process.
GATS identify the specific commitments of member states that indicate on
a sector by sector basis the extent foreigners’ may supply services in
the country. The negotiating process in GATS allows for countries to
decide, through ‘request offer’ negotiations, which service sectors
they will agree to cover under GATS rules. This refers to the extent to
which member states want their services like health and education to be
open up to free trade.
Selling Health
As GATS allows for negotiations in services in the
various areas to be an ongoing process; the deliberations over free
trade in these areas have received little public attention or debate. So
far agreements have been reached on information technology (1996),
telecommunications (1997) and financial services (1997). The health
services involves a handful of countries: only 27 percent of WTO members
have agreed to open up hospital services to foreign suppliers and 35
percent have done so for medical and dental services (Kinnon 1995).
The new negotiations for services through the Council
for Trade in Services began at the end of February 2000. These
negotiations are to ‘achieve a progressively higher level of
liberalisation (which shall ) be directed to the reduction or
elimination of the adverse effects on trade in services ……as a means
of providing effective market access’. (Cohen 2000). In many countries
in the Third World and the North the health and social services sector
is traditionally the responsibility of governments.
However, with the increasing trend towards
deregulation and privatisation of services provided by the public sector
together with the expansion of contractual arrangements (through World
Bank policies and economic reform in the North), the role of private
actors is set to expand with the inclusion of government procurement
into the multilateral trade negotiations, the framework for broader GATs
implementation will be provided which will further facilitate the trade
in services. This will lead to competitive bidding for various public
sector services and increased investments in health. The private
insurance companies, managed care firms, health care technology
companies and the pharmaceutical industry of the North will be looking
for opportunities to expand health care markets. With the advances in
telemedicine, surgery, consultation and patient (customer)-doctor
services across borders will be easier, facilitating global health care
operations and trade in health services (Koivusalo 1999).
Thus in the US, the CSI is calling for a majority
foreign ownership to be allowed for all health facilities. ‘We believe
we can make much progress in the negotiations to allow the opportunity
for US businesses to expand into foreign health care markets….public
ownership of health care has made it difficult for US private sector
health care providers to market in foreign countries’ (Price, Pollock
& Shaoul 1999). Already ‘the US is of the view that commercial
opportunities exist along the entire spectrum of health and social care
facilities, including hospitals, outpatient facilities, clinics, nursing
homes, assisted living arrangements and services provided in the home
(Kuttner 1999). In the US the multibillion-dollar business of health
maintenance organisations (HMOs) which rely heavily on public funding,
private health insurance and user charges was achieved with the
acquisition of non-profit hospitals in the country. It has tried to
capture new markets abroad by acquiring publicly run facilities
(Kuttner, R, 1996). The industry has received influential support for
its foreign acquisitions policy from the US government, the World Bank
and multilateral financial institutions like the Inter-American
Development Bank. The IFIs are behind the move for ‘managed care
initiatives that convert public health care institutions and social
insurance funds to private management, private ownership or both’
(Stocker, Waitzkin & Iriart 1999). HMOs target the public funding
behind foreign health care systems: multibillion-dollar social security
or tax pools are effectively privatised when public health care is
redirected through private sector organisations (Price, Pollock, Shaoul
1999).
In the Third World, private health services were by
and large provided by nongovernmental organisations like charities,
religious societies and community oriented associations which were not
entirely profit driven. This will change when health services and
investments in health expand and the corporate sector is poised to play
a prominent role especially in countries where there is an affluent
elite willing to pay or where there exists a private health service
base: Latin America, Southeast Asia, China and the Pacific have been
targeted as potential areas for growth (Koivusalo 1999). This move to
open up the health and social sectors to allow for privatisation and
competition from the private sector will mean private corporations
taking over the health and social services of countries for profit
undermining the equitable distribution of health care.
Equity in health care can be defined as the
provisions of services according to need and the financing of those
services according to the ability to pay. Comparative studies suggests
that progressive taxation and public provision is the least regressive
approach; whereas financing through private insurance and out-of-pocket
payments is the most regressive; whilst universal insurance systems fall
somewhere in between (Koivusalo 1999).
The US, the world’s richest nation has the highest
health spending rate as a percentage of GDP, on earth. In 1990 the US
consumed 41 percent of the global total spent on health care (World Bank
1993:4). The presence of strong private actors has meant that a large
proportion of the population (44 million out of a total of 258 million)
remains uninsured and have no access to healthcare; while another more
than 20 million people have inadequate coverage (Sidel 1992). In a
recent report from the US Consumers Union, the privately managed
healthcare system imposes a heavy financial burden on millions of
seriously ill patients and on middle and lower income families: a family
earning $45,000 has to spend 6 percent of its income on healthcare,
twice as much as a family earning $100,000. The present system forces
the sickest ten percent of Americans to spend seven times more on
medical costs than others (Aravind Adiga Aug. 11, 2000). The US health
system dominated by the profit hungry private sector is not only the
most expensive in the world: US health statistics are among the worst in
the North. Washington D. C. has poorer child and maternal mortality
rates than Jamaica (Werner 1992). The US has the highest mortality rate
of children under five of the 19 major industrial countries (Werner
& Sanders 1997:109). In the US, between 21,000 to 10,000 children
die of poverty related diseases yearly (Ibid). Wealth has never
been more concentrated with the wealthiest one percent controlling 40
percent of the nation’s wealth. Inequality has widened not only in
access to health care and essential services; poverty and hunger have
worsened dramatically in the US in the last 15 years (Ibid:109).
The US healthcare system is illustrative of what can
develop when GATs is implemented: the global trade in health and social
services and the privatisation of healthcare will lead to costlier and
inequitable health systems which will adversely affect the health and
well being of the majority of peoples everywhere.
Prise Open Markets
The GATs negotiations will be based on four modes or
methods in which the service is supplied namely cross border trade eg
telemedicine, and internet services; consumption abroad which involves
movement of consumers eg health resorts, spas and tourism; foreign
commercial presence, eg international hospital and managed care chains;
health insurance firms, and the presence of natural persons eg the
movement of physicians, consultancy services, nurses etc. In all the
modes of service supply, the obligations and commitments under the
Agreement relate to the treatment accorded to the service or the service
supplier and not to the consumer of the service (Das 1999: 334).
The market driven orientation of GATs will allow
foreign health service providers legal protection to capture every
aspect of the health sector under a wide range of trading activities. In
all these areas of trading activities in health services, barriers to
trade have been identified. Under the EC, the European Services Network
of Transnational Industries has been set up to ‘advise EC negotiators
on the key barriers and countries on which they should focus’ (Ibid
1999). All non-trade barriers will be scrutinised and whatever
programmes and practices which are exempted will be targeted in
subsequent rounds of negotiations. As the President of USCSI has
declared, any minimal agreement in GATS that would at least get
countries to list the areas they wanted protected under each service
would be ‘useful as a transparency exercise, forcing countries to
demonstrate explicitly their laws and practices that are trade
restrictive’ (Vastine 1998).
Corporate moves to enlarge wider market access in
services have been made advocating the adoption of the ‘horizontal
approach’ to rule across all sectors; such that if a particular
measure is conferred or agreed in one sector e.g. telecommunications, it
is automatically applied to all other sectors including health. Thus in
the case of telemedicine which involves patients (customers) consulting
distant doctors and receiving prescriptions via videophone, this will be
liberalised since member countries have already signed on the Agreement
on Telecommunications (Bertrand & Kalafatides 1999: 367). Thus
according to the CSI President, if ‘national treatment’ is applied
across all sectors it works to the benefit of private service providers
(Cohen 2000).
Under GATS rules government protection of health and
social services was accorded by defining them as government services
which ‘is supplied neither on a commercial basis nor in competition
with one or more service suppliers’. However, whenever there is a
mixture of public and private funding as in user charge or public
insurance, or subsidies for non-public infrastructure exists, such as
private - public partnerships or competitive contracting for services,
the service sector should be open to foreign corporations. What this
means is that for governments to protect their health services it must
be given free of charge. But if the treatment is free for the patient,
but paid for by ‘subsidies or other similar forms of financial
advantages’, then not only must the sector be opened to competition
but the same ‘subsidies’ should be offered to competing commercial
suppliers (Bertrand & Kalafatides 1999: 367).
More than this, the inclusion of public procurement
under WTO rules would enable the release of massive amounts of
government spending e.g. in health infrastructure and in social security
contributions to the private sector.
The ‘Agreement’ On Government Procurement
Under the proposed ‘Agreement on Government
Procurement Policy’ the North wants to introduce a process in the WTO
whereby their companies are able to obtain a large share of the
lucrative business of providing supplies to and winning contracts for
projects of the public sector in the Third World. Presently, such
government expenditure is outside the scope of the WTO unless a member
state voluntarily joins the plurilateral agreement on government
procurement. This means that states are free to set up their own rules
on procurement and project awards and most Third World countries give
preferences to locals in such awards.
The aim of the North is to bring government spending
policies, decisions and procedures of all member countries under the
umbrella of the WTO, where the principle of ‘national treatment’
will apply. Under this principle, governments in their procurement and
contracts for projects (as well as privatisation deals) would no longer
be able to give preferences or advantages to citizens or local firms.
The bids for supplies, contracts and projects would have to be opened up
to foreigners, who should be given the same (or better) chances as
locals.(Khor 1999). Thus the EU in its reform proposals focus on ‘unlocking
new potential market by extension of private firms’ involvement with
public services and by creation of contracting rules to ensure
acceptable returns for investors. (European Commission: 1996) It was
further proposed that foreign firms that are unhappy with the government’s
decision could bring the matter to the dispute settlement body in the
WTO.
Since government procurement expenditure in some
countries is bigger in value than imports, such an agreement to bring
procurement under the WTO rules would tremendously enlarge the scope of
the WTO and its rules. As most Third World countries would object to
having their public sector spending policies changed so drastically, the
rich North have a two - stage plan for this issue: firstly, have an
agreement only to bring in greater transparency in government
procurement; secondly, to have a broader agreement that would cover the
national treatment principle. On the agenda at Seattle, the North wanted
to wrap up an agreement on ‘transparency in government procurement’.
Governments need not apply the ‘national treatment’ principle and
can still favour locals. But they must make public (to the world) what
they are purchasing and the projects they are opening up for awards, who
are eligible for the bids and what the terms are. After such an
agreements is obtained, the North would then push for an expansion of
the agreement so that it incorporates the market access element i.e.
that foreign firms be given national treatment.
Should the Third World countries agree to
negotiations for a transparency agreement, they would put themselves on
the road to a full-scale procurement agreement incorporating national
treatment. At stake is the right of governments to reserve some of their
business for local firms. With the removal of this right, a very
important instrument for national development and for socio economic
engineering would be removed. (Khor, 1999: 10). Through the government
procurement issue, the North will enable its corporate bodies to tap the
vast public resources available in the health and social services sector
and dismantle the public provision of health care. Public procurement
will be the golden goose providing the crucial link to open up the
services sector.
The ‘Agreement’ on Competition Policy
Privatisation of health care will also be facilitated
under the proposed ‘Agreement on Competition Policy’. The
competition issue focuses on establishing ‘constraining principles’
and ‘disciplines’ that will affect market access. Member states ‘will
have to consider making reforms to their regulatory regimes’ such that
national regulations should have four central attributes: adequacy,
impartiality, least intrusiveness and transparency’, towards corporate
interests. (Bertrand & Kalafatides 1999: 367). In this regard, the
EU is advocating a new agreement that would look unfavourably on
domestic laws or practices in Third World countries that favour local
firms on the basis that it is against free competition. The EU has
argued that WTO obligations (national treatment and non-discrimination)
should be applied through a WTO agreement on competition policy.
Under such an agreement, Third World countries would
be forced to establish domestic competition policies and certain type of
laws. Distinctions that favour local firms and investors would not be
allowed. For example, if there are policies that give importing or
distribution rights (or more favourable rights) to local pharmaceutical
companies (including government agencies or enterprises), or if there
are practices among local firms that give them superior marketing
channels, these are likely to be targeted and even banned. The North is
arguing that such policies or practices create a barrier to foreign
products or firms, which should be allowed competition. If smaller Third
World enterprises were treated on par with the large foreign
conglomerates, they would not be able to survive. The North will insist
that their giant firms be provided a ‘level playing field’ to
compete equally with smaller domestic companies. Competition of this
type will invariably lead to foreign monopolisation of Third World
markets (Khor 1999:10).
The ‘Agreement’ on Investment
Similarly on the investment issue, the Northern
governments want to introduce new rules that make it legal to give
foreign investors the right to enter and establish themselves with 100
percent ownership. Governments then will lose the right to regulate
investment to achieve and protect social, environmental and health well
being in the national interest both long term and short term. Under the
principle of ‘national treatment’ foreigners and foreign companies
should be treated like locals and restrictions on the free flow of
capital into and out of the country would be prohibited. ‘Performance
requirements’ that host governments now place on foreign companies
(like technology transfers, the use of local professionals,
reinvestments of profits) would be banned. With regards to public health
protection laws, to protect public health and environment could be
challenged if they prevent a foreign company from investing eg a
cigarette company could then claim compensation for ‘expropriation of
trade mark rights’ if advertising or sponsorship was restricted or ‘expropriation
by taxation’ for losses from raised taxes. Similarly junk foods like
KFC, & McDonalds, must be allowed to operate freely.
Discussions on the three issues on government
procurement, competition and investment had been planned for the WTO
Ministerial Round in Seattle which would have been the basis for new WTO
agreements in the ‘Millenium Round’. Despite the shutdown of the WTO
at Seattle by democratic forces there is no gainsaying the WTO will push
to widen the coverage of GATS to create wider market access for global
corporations. This can be done once any minimal agreement is agreed
upon, as it will allow the North to launch an attack in subsequent
rounds of negotiations.
Corporations Shape Health
We have seen how WB - IMF SAPs and conditionalities
have created the conditions for the expansion of privatised health care
and the dismantling of public health services in the Third World. It’s
bias toward privatised health care is explicitly stressed even ‘if
market monopolies in public services cannot be avoided then regulated
private ownership is preferable to public ownership’ (Stocker,
Waitzkin & Iriart 1999). With the GATS instrument, countries will be
forced to remove all barriers to foreign participation in their health
and social services sector; with implications for redistributive health
and social services. These policies conflict with the principles of
universal health care and public responsibility. Commercialised health
services will lead to a growing health gap in society, between those who
can afford and the vulnerable groups who cannot.
Already the privatisation of health in many countries
in the North have revealed disturbing trends. Privatised health care has
resulted in state-of-the art hospitals (also in the South) with the most
sophisticated technologies that cater to the wealthy few. Health care is
dominated by insurance companies, pharmaceutical firms and enterprises
involved in technologies for treatment and diagnosis. This will lead to
emphasis on private insurance within health systems and the promotion of
curative technical fixes rather than preventive measures. New health
technologies also raises ethical and political concerns eg genetics.
Public hospitals operating under tight cutbacks
suffer shortages of equipment, deteriorating health care services,
longer hours and less pay for health workers, and longer patient queues
and waiting lists. Health reform in France will lead to the closure of
100 hospitals in the Paris region alone in the next five years (Bertrand
& Kalafatides 1999: 366). In the UK, competition in the health
services from autonomous health providers has destabilised the provision
of health care and diverted planning and service priorities away from
local community needs. The goals of universality and equity are being
replaced by consumer sovereignty (Price, Pollock, & Shaoul
1999:1892). In South America, public and voluntary hospitals have to
compete with commercial providers for per-person public funds, private
insurance and co payments. Unlike previous tax-funded or social
insurance funded health system which provided universal coverage and
community shared risks, changes in the financing and delivery of health
care provide insurers and private health providers to make maximum
profit the incentive to engineer favourable risk pools. This has left
the public sector to bear the risk for more vulnerable populations but
with diminished risk pools (or pooled funding) to finance health care
(Stocker, Waitzkin & Iriart 1999).
If Third World countries commit to fully cover health
services under the existing GATS rules, this will lead to irreversible
changes in the financing and delivery of health and social services.
Governments will have to open up their health sectors to foreign health
service providers. Foreign health suppliers are guaranteed access to the
health services market, which includes the right to invest, to provide
health services from abroad and to send health professionals to
practise. Any preferential treatment for local hospitals, nursing and
handicapped homes, etc. will have to be eliminated or given to foreign
service providers. Requirements that first preference be given to locals
will be eliminated. Conditions must be created for the private health
sector to provide or supply any service (like resorts, spas, exotic
therapies, laundry, food catering, cleaning, health management
consultancies, etc.); the private sector will effectively tap funds that
the government spends on health by directing government spending towards
the private sector in this way funding the privatised health services.
This is already happening in the North where private prison and welfare
service providers rely on government funding to buy their services
(Cohen: 2000). Public grants or tax incentives for health research and
development must also be made available to foreigners and foreign health
research institutions.
The dismantling of the public health service means
public funds will be siphoned to cater for a minority; private health
insurance will make profits at the expense of the most vulnerable groups
in the community; universal and equitable health care will be replaced
by commodity based health. The welfare state health system will be a
thing of the past. This assault on public health will severely undermine
the health and well being of the majority in the Third World.
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