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Trade liberalization in services, the GATS way Implication for the health industryAnkur Gupta- B14067Mahboob Reza-B14086Raja Reddy- FB14004General Agreement on Trade in Services (GATS)GATS emerged from 1994 Uruguay Round of negotiations that created the WTO (Members agree to progressive liberalization)

Subject services trade to same treatment as goods (GATT)

Basis = liberalization increases global efficiency (comparative advantage lower cost, higher quality, innovation)

Provides multilateral legal framework for liberalizing international services trade (based on existing int. trade law)

2WTO AgreementsGoods: GATTTechnical barriers to trade: SPS, TBTIntellectual property and trade : TRIPSServices: GATS

3GATS Timetable1994 Uruguay Round of WTO negotiations saw initial commitments in health services made by a handful of countriesCurrent negotiations began following WTO meeting in February 2000:initial requests for specific commitments made by end June 2002initial offers due by end of March 2003finalised agreement by end of January 20054Main Elements of the GATS AgreementGeneral Agreement on Trade in services provides basic disciplines and a framework for negotiations on liberalisation of services sectors. The agreement does not define the services but provides that the term service covers any service in any service sectors including their production, distribution, marketing, sales and delivery according to the four modes (Article 1.3).GATS also covers government measures affecting services which are provided on a commercial basis.

How does GATS work? Successive rounds of negotiations with a view to achieving a progressively higher level of liberalization in their service sector (art. XIX)WTO members make liberalization requests / offers of other member countries in bilateral secret meetings in GenevaDebate is polarized - Tale of Two TreatiesGATS is worst of treaties undermines national sovereigntyGATS is best of treaties increase health (sovereignty)

Threshold Question: Does GATS Apply?Is the health-related service supplied by the government?Is the health-related service supplied on a commercial basis?Is the health-related service supplied in competition with one or more service providers?Is the health-related servicesupplied by a private actorpursuant to delegated governmental authority?GATS applies to measures of WTO members that affect trade in health-related servicesNoYesYesNoNoYesGATS does not applyNoYesSTART7GATS in health care systems: Four modes of supplyCross border deliveryConsumption abroad Commercial presence Movement of personnel8Cross border delivery Example: E-health, Consultation by mailsOpportunitiesEnable health care delivery to remote and underserviced areasImprove quality of diagnosis and treatmentUpgrade skills, disseminate knowledge through interactive electronic meansRisksPossible diversion of resources from basic preventive and curative servicesRelies on telecommunications and power sector infrastructure

9Consumption abroad Example: Movement of patients from home country to the countryOpportunitiesGenerate foreign exchange earnings (for exporting country)Overcome shortages of physical and human resources in speciality areas (for importing country)RisksOutflow of foreign exchange (for importing country)Diversion of resources to service foreign nationalsCreate a dual market structure higher quality for the wealthy foreign nationals and lower, resource constrained segment for the poorCommercial presenceExample: Establishment of hospitals through FDIOpportunitiesUpgrading of infrastructure and technologiesReduce the burden on public resources Create employment opportunitiesRisksTwo tier structure of healthcare establishments corporate segment and public sector segmentInternal brain drain from public to private sectorCream skimming (Thailand)Movement of personnelExample: Doctors and nurses settling permanently in foreign countryOpportunitiesFor sending countryPromote exchange of knowledge among professionalsUpgrade skills and standards (provided service providers return to the home country)For host countryMeet shortage of health care providersRisksPermanent outflows of skilled personnelLoss of subsidised training and financial capital investedGATS provision adversely affecting poorer nationsMost Favored NationsFavor one favor all: Treat trading partners equallyA country cannot be selective in permitting a foreign country in offering services based on national interestNational TreatmentTreating domestic and foreign service providers equallyForeign service provider entitled to all the subsidies that is given to a national institutionIncreased pressure on public health system; government may withdraw subsidy altogether

Why are current levels of trade in health services low?

Administrators are skeptic about the potential benefits as health outcomesPresence of government monopoly offering free or below cost serviceLack of any pace setters in the health sector (unlike US/OECD countries for telecomm/financial services)StatisticsOnly 88 countries have made specific commitmentIn case of Europe, only 12 countries have made commitments14Implication of GATS for healthcare sector in IndiaCross border delivery such as e-health not possible due to lack of power and telecomm infrastructure in India

Diversion of public resources which can be used to provide facilities for disease prevention and cure

Private sector might threaten to take over the most profitable segments

Rural communities might risk access to healthcare as private sector draw personnel from public sectorMost important issue for adopting GATSUnlike a countrys own unilateral decisions, which can be reversed if they are found to be damaging, the GATS commitment is binding and effectively irreversible

Question for Policy makersWill increased trade in these services lead to better health outcomes?Will increased liberalization of trade (more competition from foreign private health care companies) lead to better health outcomes?Will making a GATS commitment in these sectors offer any additional advantage that will lead to better health outcomes?

If No for any of these -> Country Should not make GATS CommitmentsRecommendationsCall for full and independent impact assessment of GATS and other WTO agreements

Recognition of national sovereignty over liberalisation commitments

Stronger exemption for public services and exemption of subsidies from national treatment standards

Developing countries should not come under pressure to liberalise their basic service

Call for a change to GATS rules which restrict countries from retracting commitments already made under GATS

ReferencesPollock, Allyson M., and David Price. "The public health implications of world trade negotiations on the general agreement on trade in services and public services."The Lancet362.9389 (2003): 1072-1075.Smith, Richard D., Rupa Chanda, and Viroj Tangcharoensathien. "Trade in health-related services."The Lancet373.9663 (2009): 593-601.Timmermans, Karin. "Developing countries and trade in health services: which way is forward?."International Journal of Health Services34.3 (2004): 453-466.Woodward, David. "The GATS and trade in health services: implications for health care in developing countries."Review of International Political Economy12.3 (2005): 511-534.Nick Drager 1 and David P. Fidler2, MANAGING LIBERALIZATION OF TRADE IN SERVICES FROM A HEALTH POLICY PERSPECTIVE, WHOChantal Blouin ,Nick Drager and Richard Smith book on International Trade in Health services and the GATS current issues and debatesKarin Timmermans, Developing Countries and Trade in Health Services: Which Way is Forward?, International Journal of Health ServicesBiswajit Chatterjee, book on Globalisation and Health Sector in IndiaThank You!