Global Policy Forum

GATS, Trade Liberalisation and Children's Right to Health

By John Hilary

Executive Summary

In an era of unprecedented global wealth, millions of children across the world are facing a health crisis. A total of 150 million children still grow up malnourished, prevented from developing to their full mental and physical potential. Every year over 10 million children die from readily preventable causes. While the international community has set challenging targets for reducing child mortality and morbidity, in many of the world's countries the situation is getting worse, not better.

Much of this health crisis reflects the underlying economic reality of globalisation. The greatest gains from trade liberalisation have accrued to the wealthiest nations, and to the most powerful economic actors within each country. While some people within developing countries have also benefited, trade liberalisation has threatened the livelihoods of the world's most vulnerable communities by exposing them to global market forces. The resulting impoverishment of poor families across the developing world has in many instances led to increased health problems among children.

The trade liberalisation agreements of the World Trade Organisation (WTO) have themselves generated specific problems for children's right to health. Through its downwards pressure on tariffs and non-tariff barriers to trade, the Agreement on Agriculture requires further liberalisation of the most sensitive markets and threatens the food security of whole communities. The WTO's TRIPS Agreement (on trade-related intellectual property rights) undermines the ability of developing countries to provide affordable medicines for their people.

The WTO's General Agreement on Trade in Services (GATS) poses its own challenges to children's right to health. While trade in services has long been recognised as a potential source of income and investment for many countries, GATS was originally conceived in order to expand business opportunities for transnational corporations. This includes opportunities in service sectors which have a direct impact on children's health: private sector health care and health insurance companies from the USA and Europe have already expanded their operations into the lucrative markets of Latin America, while European water companies aim to gain greater market access in countries across the world.

Some developing countries see increased trade in health services as a potential source of gain for their own economies. Health facilities in countries such as Cuba and India offer high standards of care to foreign consumers at prices well below those charged by the private sector in industrialised states. Other developing countries send their own medical personnel abroad to work in foreign health systems, and benefit from the remittances which they send back to their home countries.

In these limited cases, developing countries may make balance of payment gains. However, diverting resources and personnel towards foreign consumers for economic reasons leads to increased pressure on public health systems which are in most cases already overstretched. In health terms, countries might stand to gain more from imports rather than exports of health services - as in the potential gains which telemedicine or medical technology transfer offer developing health systems.

In particular, given the shortage of official funding from donor and domestic governments alike, increased foreign investment in health services might seem a potential benefit for developing countries. The commercial presence of foreign health care companies in domestic systems is counted as trade in health services under GATS, and several companies see the expansion of investment opportunities as one of their chief gains from ongoing GATS negotiations.

Yet the commercial presence of such companies in the health sector threatens to exacerbate existing problems of equity, quality and capacity. Commercialisation of health services has already been shown to exclude whole communities from access to care, just as commercial considerations commonly exert a downwards pressure on health service quality. Moreover, instead of adding extra capacity, the commercial presence of the private sector threatens to undermine public services by drawing away key medical personnel and 'cream skimming' the healthiest and wealthiest consumers, destroying the possibility of cross-subsidisation and risk pooling on which universal access is based.

These problems are familiar in many parts of the developing world from the cost recovery programmes based on user fees which have been imposed as loan conditions by the World Bank and IMF. GATS takes this process one stage further through the commodification of health services for trade on international markets. The increased involvement of foreign companies in the health sector of developing countries threatens to raise more problems than it solves.

One key method of ensuring that the private health sector does not undermine public health objectives is through close regulation of its activities. As the World Health Organisation (WHO) has attested, this is doubly important when dealing with foreign companies, especially powerful transnational corporations. Yet GATS undermines a country's ability to regulate its health services: restricting domestic regulation in order to remove 'unnecessary' trade barriers threatens to drive down regulatory standards rather than raising them to provide the best possible guarantee of public health.

There are similar threats to public health objectives under GATS market access and national treatment disciplines. Progressive liberalisation of services through successive rounds of GATS negotiations requires countries to commit an increasing number of their service sectors to the market. Yet the particular conditions of market access and national treatment rules expose public health provisions to challenge under GATS. Worse still, the 'lock-in' feature of GATS means that liberalisation commitments are effectively irreversible once they have been made.

Whatever the advantages and disadvantages in other service sectors, Save the Children's analysis suggests that liberalisation of trade in health services is the wrong model to follow if countries wish to develop strong public health systems for all their people. In addition, the specific provisions of GATS undermine the ability of countries to implement their own public health priorities, and the Agreement must be reformed so that national policy objectives are explicitly protected. Governments must ensure that public health concerns are guaranteed absolute precedence over the economic aspects of services trade, in order to fulfil their responsibilities to children and to society as a whole.

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