Trading Health Care Away? - The Corner House · Briefing 23: Trade and Health Care This briefing...

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July 2001The CornerHouseBriefing 23: Trade and Health Care

THE CORNER HOUSE

THE CORNER HOUSEPO BOX 3137STATION ROADSTURMINSTER NEWTONDORSET DT10 1YJUKTEL: +44 (0)1258 473795FAX: +44 (0)1258 473748EMAIL<[email protected]>WEBSITE http://cornerhouse.icaap.org

Trading Health Care Away?GATS, Public Services andPrivatisation

Amid the shouts of demonstrators, the protests of South-ern delegations and the disagreements between the USand European Union, the World Trade Organisation

(WTO) failed to launch a comprehensive revision of interna-tional trade rules in November 1999 in Seattle, USA. But talkshave since begun to change one of the 28 agreements overseenby the WTO – the General Agreement on Trade in Services orGATS.1

The US, EU, Japan and Canada are trying to revise GATSso that it could be used to overturn almost any legislation gov-erning services from national to local level. Domestic policymaking, even on matters such as shop opening hours or theheight and location of new buildings, could, in effect, be turnedover to the WTO. All legislation would primarily be aimed atincreasing trade.

Particularly under threat from GATS are public services –health care, education, energy, water and sanitation, for instance.All of these are already coming under the control of the com-mercial sector as a result of privatisation, structural adjustmentand reductions in public spending. A revised GATS could givethe commercial sector further access and could make existingprivatisations effectively irreversible. Experience in the UnitedStates and several Latin American countries, where health serv-ices have been run for profit over the past decade or so, sug-gests that the result will be a decline in accessibility to healthcare worldwide.

Most elected officials and civil servants, let along the gen-eral public, are not aware of GATS, nor of its implications. Butseveral countries are demanding that a wide-ranging assess-ment of the impact of a free market in services be carried outbefore any more so-called trade barriers are removed. And non-government organisations (NGOs) and trade unions are de-manding that services in the public interest be clearly exemptfrom GATS.

Rules governing international trade are certainly necessary.But such rules should place people before the entrenchment ofcorporate power.

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July 2001The CornerHouse

Briefing 23: Trade and Health Care

This briefing outlines the growth in services in recent years, themain provisions of GATS, the proposed revisions to the Agreement,and some key corporate aims in extending it. It details how public serv-ices may not in fact be excluded from GATS and explores the implica-tions for public health care. It also considers what may happen to pub-licly-provided and -funded health care services if private companiescapture their most profitable components and the public money subsi-dising them.

Everything Under the SunHeart surgery and electricity transmission, education and childcare,water purification and pesticide application, sewerage and sports cen-tres, road construction and film making, toxic waste disposal and mo-bile ‘phone communication – all are services, not tangible commodi-ties. Some services are luxuries, such as tourism and entertainment.Others are essential: health care, education, transport, water and energy.

Services have become an important part of many countries’ econo-mies, overtaking manufactured goods in significance in some places.

The World Trade OrganisationThe 1986-94 Uruguay Round ofGATT, the widest-ranging multilat-eral trade agreement ever negoti-ated, covered for the first time notonly services but also agriculture,investments and intellectualproperty rights, such as patents,trademarks and copyright. The 28agreements which now comeunder the WTO fall into six broadcategories:

I Multilateral Agreement on Tradein Goods

II General Agreement on Trade inServices (GATS)

III Agreement on Trade-RelatedAspects of Intellectual PropertyRights (TRIPs)

IVUnderstanding on Rules andProcedures Governing theSettlement of Disputes (DSU)

V Trade Policy Review Mechanism(TPRM)

VIPlurilateral Trade Agreements

The first category governing tradein goods contains the largestnumber of agreements:1. General Agreement on Tariffsand Trade (GATT) (8 agreementsmodifying the original GATT),whose mandate is to eliminatetariff and non-tariff barriers tothe movement of capital andgoods between countries.

2. Agreement on Agriculture (AoA).3. Agreement on the Application ofSanitary and PhytosanitaryMeasures (SPM).

4. Agreement on Textiles andClothing.

5. Agreement on Technical Barriersto Trade (TBT).

6. Agreement on Trade-RelatedInvestment Measures (TRIMs).

7. Agreement on the Implementa-tion of Article VI of the GATT1994 (anti-dumping).

8. Agreement on the Implement-ation of Article VII of the GATT1994 (customs valuation).

9. Agreement on PreshipmentInspection.

10.Agreement on Rules of Origin.11.Agreement on Import Licensing

Procedures.12.Agreement on Subsidies and

Countervailing Measures.13.Agreement on Safeguards.

A WTO member has to abide by allthe agreements which fall into thefirst five categories. It can chose,however, whether to sign any of thefour plurilateral trade agreementswhich make up the sixth category:

1. Agreement on Trade in CivilAircraft

2. Agreement on GovernmentProcurement

3. International Dairy Agreement4. International Bovine MeatAgreement

The WTO administers and imple-ments the various agreements, actsas a forum for multilateral tradenegotiations, resolves trade disputes,oversees national trade policies andcooperates with other internationalinstitutions involved in globaleconomic policy-making.

When the WTO came intoeffect on 1 January 1995, 76countries became members. ByMay 2001, membership hadalmost doubled to 141 countries.The largest financial contributorto the WTO is the US, which paysabout 16 per cent of its budget.

Disputes between twocountries are brought by govern-ments before tribunals of threetrade bureaucrats which hear thecases in secret. If a WTO dispute(and appeal) panel decides that acountry’s rules are contrary to aWTO agreement, that country hasto conform to the WTO require-ment, pay permanent compensa-tion to the country which broughtthe case, or face trade sanctions.

The procedures promote theleast trade-restrictive regulation –voluntary rather than compulsory,consumer information rather thanbans, and individual rather thanpublic responsibility.

The WTO’s legislative andjudicial power to challenge thelaws, policies and programmes ofcountries that do not conform toall its agreements, particularly ifthey are regarded as too “traderestrictive”, sets the WTO apartfrom other internationalagreements.

Source: Griesgraber, J.M. and Gunter,B.G., (eds.) World Trade: Toward Fairand Free Trade in the Twenty-firstCentury, Pluto Press, London, 1997.

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Providing services (excluding public services) now represents over 60per cent of the GDP of industrialised countries and 50 per cent of thatof others.2 Most services are provided and consumed domestically. InEurope:

“The service sector accounts for two-thirds of the [European]Union’s economy and jobs, almost a quarter of the EU’s totalexports and a half of all foreign investment flowing from theUnion to other parts of the world”.3

The US Coalition of Service Industries estimates that services accountfor four-fifths of US GDP.4

International trade in commercial services was worth US $1.35 tril-lion in 1999 – about one-quarter of the global trade in goods – up fromsome $400 billion in 1985 and from $1.2 trillion in 1995.5 This trade isfirmly in the grip of the industrialised countries, which exported nearly71 per cent of services traded internationally in 1997 and imported 67per cent.

The EU regards itself as the biggest services exporter in the world,6

while more than one-third of US economic growth over the past fiveyears has been due to exports of services.7 The largest single US exportindustry is entertainment, in particular, films and television pro-grammes.8

Services account for 60 per cent, or US$210 billion, of annual for-eign direct investment, much of which is connected with privatisationof state entities.9

Developing countries import and export less than one-third of theservices traded internationally.10 Because of the vast differences be-tween the capacities of developed and developing countries to supplyservices, it is major traders in the industrialised world which have mostto gain from increased access to services markets. The US Coalition ofService Industries is confident that any increase in the consumption ofservices anywhere in the world effectively means an increase in con-sumption of US services.11 The European Union acknowledges the dis-parity in financial services:

“In many instances we will be interested in exporting our com-petitive banking activities to developing countries but they willnot be as interested in establishing a bank in the European Com-munity since the market is already highly competitive”.12

The EU attributes “the fact that services represent a smaller proportionof the economy in developing countries . . . to their lesser developedfinancial and business service sectors”.13

The world’s largest employer is tourism, accounting for one in tenworkers worldwide and for one-third per cent of global services ex-ports.14 Many of the workers in service industries are low-paid women.Some 80 per cent of women workers in the European Union are em-ployed in services.15

General Agreement on Trade in Services (GATS)Services first came under the rules of the world trading system in 1995when the WTO came into effect.16 The ambitious and ambiguous Gen-eral Agreement on Trade in Services (GATS) sets out rules governinginternational trade in practically all services.17 It does not define whatit means by a service, instead offering a classification list of 160 ofthem based on a United Nations system which, according to Canadian

Major traders inthe industrialisedworld have most

to gain fromincreased access to

services markets.

Some 80 per cent ofwomen workers in

the EuropeanUnion are

employed inservices.

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US and EU Service Exports•Travel and tourism contributedover $25 billion to the US tradesurplus in service exports overimports in 1997, the largestsectoral contribution to theoverall services surplus. TheEuropean Union is the mainsource and the main destinationof international tourist flows.

•In 1997, the US exported morethan $21 billion in business,professional and technicalservices (including accounting,legal, engineering, architecturaland consulting services) and hada $16 billion trade surplus,excluding substantial earningsfrom foreign investments andforeign affiliates. US legalservices exports approach $1.0billion. US law firms produceservices exports when billingforeign clients.

•The global telecommunicationsservices market is estimated atover US$725 billion. The EU, anet exporter of telecommun-ications services, has a 28 percent share of total world telecomrevenues. US revenues are

expected to increase at about 20per cent annually for the next fiveyears for outbound calls from theUS to foreign markets. The WTOestimates that sales over theInternet will double each year forthe next five years.

•The US asset managementindustry is the largest in the world,handling billions of dollars ofprivate investments and fundseach year. By the year 2002, anestimated 51 per cent of total USasset management revenue of$160 billion will come fromoutside the US. Today, US-domiciled investment managersmanage 14 per cent of the total ofnon-US retirement plan assets and5 per cent of non-US mutual fundassets.

•Foreign students, after scholarshipand local assistance, spend some$8 billion in the US. The US has asurplus in trade in educationservices of $7.0 billion.

•Medical services rendered in theUS to foreign citizens produced anexport surplus of $0.5 billion.

•The energy industry – whichaccounts for about 7 per centof US GDP – is pressing forglobal trading rules againstmonopoly power, anti-competitive practices anddiscrimination against newmarket entrants, such as UScompanies.

•Some 160 US and EUconstruction firms account for85 per cent of the worldmarket for constructionprojects, the US taking 49 percent and the EU 36 per cent.The EU is a major market forUS firms, while EU firms arestrong in Africa, the MiddleEast and Asia. Constructionaccounts for up to 10 per centof GDP in industrialisedcountries but much less indeveloping countries.

Sources: Statement of Robert Vastine,Coalition of Service Industries, 21October 1999; “Opening WorldMarkets for Services: A Guide to theGATS: Which Sectors Are Covered byGATS?”, website: http://gats-into.eu.int/gats-info/guide.pl?MENU=ccc

researcher and activist Scott Sinclair, “reads like a catalogue of occu-pations and human needs”.18 The classification makes no distinctionbetween public (or voluntary) services and those provided on a for-profit basis. Because distribution is a service, moreover, GATS alsoencompasses goods. As the EU says, “Goods cannot walk, they need tobe distributed and transported”.19

Because the main way of governing services has traditionally beenvia complex national rules and regulations, GATS is also “fiendishlycomplex”.20 Like the GATT agreement before it covering trade in goods,GATS encourages trade across national borders in services by requir-ing a WTO member country to treat all countries the same (most-fa-voured nation) and to treat foreign companies as if they were domestic(national treatment).

But GATS differs from the agreement governing international tradein goods in several critical ways. At present, some of its rules and re-quirements do not apply to all services, but only to those sectors whicheach country has indicated it is prepared to open up to foreign compe-tition.

Moreover, whereas trade in goods involves simply transporting prod-ucts from one country to another (cross-border trade), trade in servicesis more varied because services are not so tangible or physical. Air-lines, telephone companies, banks and accountants all provide theirservices in different ways. Thus GATS lists another three ways (or“modes”) in which services can be supplied besides cross-border supply –movement of consumers, foreign commercial presence and movement ofpersons – because “the supply of many services is possible only throughthe simultaneous physical presence of both producer and consumer”.21

Some services can be supplied in several ways, others not. A business

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adviser, for instance, can supply her services to a client in another coun-try by mail, by the client visiting her, through an office in the client’scountry or by visiting the client. To be a tourist, someone has to go toanother country to consume tourism-related services, as does an “ex-ported” street cleaner to carry out “environmental services”. A govern-ment thus provides the WTO with a “schedule of specific commitments”listing which services and the ways of supplying that service it is pre-pared to open up to competition under GATS (see Box, p.6).22

The majority of the WTO’s 141 member countries have so far com-mitted themselves to liberalising just a small part of their services. Mostcommitments have been made in tourism, hotels and restaurants, com-puter-related services and value-added telecommunications. The leastnumber of concessions have been made in river transportation, basictelecommunications, recreational and cultural services, education andpostal services.

A country can alter a commitment but has to wait three years after ithas listed it before it can do so. The country also has to negotiate asubstitute commitment as compensation in a way which satisfies allother WTO members. The WTO Secretariat admits that country com-mitments undertaken in GATS “have the effect of protecting liberaliza-tion policies, regardless of their underlying rationale, from slippagesand reversals”.23 The former WTO Services Division Director, DavidHartridge, said that GATS “can and will speed up the process of liber-alisation and reform, and make it irreversible”.24 India’s former ambas-sador to GATT, Bhagirath Lal Das, stresses that liberalisation underGATS is different from a country undertaking liberalisation on its ownwithout making a binding commitment to the WTO:

“The developing countries have lost the flexibility of modifyingtheir policy in the light of future experience . . . even if it isassumed that they benefit by importing services.”25

The power of GATS, as with all WTO agreements, is that its rules canbe enforced by trade sanctions (see Box, p.2). GATS does allow coun-tries to protect human, animal and plant life or health (Article XIV)through measures which might otherwise contravene the Agreement,but its preamble, according to the US Alliance for Democracy, “has acaveat large enough to drive a truck through”.26 WTO dispute panelshave interpreted exemptions and exclusions narrowly and forcefully infavour of trade in GATT disputes and have usually ruled against envi-ronmental protection measures.27 These rulings “show that GATS canbe used to challenge an almost unlimited range of government regula-tory measures that, even indirectly or unintentionally, affect the condi-tions of competition of international service suppliers”.28

The GATS standard for “national treatment”, for instance, extendswell beyond conventional notions of non-discrimination between do-mestic and foreign companies. It applies to any measure from any levelof government – national, provincial, state, regional, municipal orlocal – that alters the conditions of competition in any way that mightdisadvantage a foreign service or supplier. The WTO’s Council for Tradein Services (the permanent body responsible for GATS) has discussedrestrictions on large-scale retail outlets, shop opening hours, zoningand planning laws, controls on land use, building regulations, buildingpermits, registration of contractors and professionals, regulation ofprofessional fees, environmental regulations, worker health and safetyregulations, local content and employment policies, urban planning rulesand environmental protection policies. Even legislation to ensure that

GATS could speedup service

liberalisation andmake it

irreversible.

GATS could beused to challenge

almost anygovernment

regulatorymeasure affecting

competitionbetween

internationalservice suppliers.

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GATS Main Obligationsonly de jure discrimination (discrimi-nation specifically set out in regula-tions) but also de facto discrimina-tion (discrimination resulting fromregulations or measures not formallydiscriminatory).

• Transparency (Article III) requiresgovernments to publish all relevantlaws and regulations governing allservice sectors. By 1997, govern-ments should have set up enquirypoints for foreign companies andgovernments to obtain this inform-ation.

Specified Services

The other two GATS obligations,market access and national treat-ment, apply only to those serviceswhich a country lists in its Scheduleof Specific Commitments.

• Market access (Article XVI)allows foreign companies to providecross-border services in a country.But a country can restrict suchaccess by limiting the number ofsuppliers, operations or employees ina specific sector; the value oftransactions or assets; the legal formof the supplier (for instance, limitingit to a branch or joint venture); orthe participation of foreign capital.

• National treatment (Article XVII)means that once foreign companieshave been permitted to enter acountry, they must be treated in thesame way as domestic ones. TheWTO explains that “the key require-ment is to abstain from measureswhich are liable to modify, in law orin fact, the conditions of competitionin favour of a Member’s own serviceindustry”. Thus the test for non-discrimination is whether anymeasure puts a foreign supplier at adisadvantage.

Modes of Supply

The Schedule of Specific Commit-ments also identifies which of fourdifferent ways (or “modes”) ofsupplying services are covered.

• Cross-border supply (Article I.2a).Services can be supplied from onecountry to another: internationaltelephone calls; Internet services;telemedicine; a purchase of labora-tory services from another country;

a purchase of medicines oradvice on the Internet. Only theservice itself crosses the border.

• Consumption abroad (ArticleI.2b). Individuals or companiescan go to another country to usea service there. Tourism is aprime example. This modeencompasses travel to anothercountry to obtain a medicaltreatment that is better, faster orcheaper than that availabledomestically.

• Commercial presence (ArticleI.2c). A company can set upsubsidiaries, branches, jointventures or representative officesor can lease premises in anothercountry to provide services there.For instance, banks can set upoperations in another country,and US health care companiescan set up hospitals or clinics inEuropean countries.

• The presence of naturalpersons (Article I.2d). Individualsfrom one country can be admit-ted temporarily to anothercountry to provide services there,for instance, fashion models,doctors or nurses. GATS does notapply, however, to people seekingpermanent employment or toconditions for obtaining citizen-ship, permanent residence orpermanent employment. Of allfour ways of supplying a service,WTO member countries havemade the least number ofcommitments in this mode.

Once a government has com-mitted itself under GATS toopening a service sector toforeign competition, it must notkeep money from being trans-ferred out of the country to payfor the relevant services (ArticleXI), except when the country isexperiencing serious balance-of-payment difficulties (Article XII).Such exceptions must betemporary and justified by anInternational Monetary Fundassessment of the country’sfinancial situation.

GATS thus provides almostguaranteed conditions for foreignexporters and importers ofservices and investors in anysector which a country has listedin its Schedule.

Trade in services used to beconsidered ancillary to manufac-turing and trade in goods. In themid-1980s, however, manyWestern governments, faced withworldwide recession, inflation andunemployment, decided thatremoving obstacles to inter-national trade in services,particularly national regulations,could increase the momentum toexport services.

The US thus pushed for theprovisions of the agreementsgoverning trade in goods to betransposed into the area ofservices as a whole (althoughfinancial services were of primeinterest), a move which “couldeasily have sunk the UruguayRound and crippled the GATT”,according to current WTODirector-General Mike Moore.Many countries reluctantly agreedto GATS only if they couldchoose which of their serviceswere covered by the Agreement.The US took care, however, toinclude clauses mandating furtherliberalisation in future.

All Services

Two GATS obligations applydirectly and automatically to allWTO members for all services –most-favoured-nation treatmentand transparency.

• Most-favoured-nation (MFN)treatment (Article II) does notmean one country is preferredover another – it means theopposite. Favour one, favour all.Treat all countries the same.

If a WTO member countrygrants favourable treatment toanother country (even a non-WTOmember) regarding the import ofa service, it must grant all otherWTO signatories the sametreatment. If a country allows anyforeign competition in a servicesector, it must allow serviceproviders from all WTO membercountries to compete to supplythat service.

A country could list anyexemptions to this MFN principleby 1995, but exemptions were tobe reviewed after five years andcould not last more than 10 yearsanyway. The WTO interprets thisMFN obligation as prohibiting not

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a country benefits from foreign investment – minimum number of lo-cal jobs or content, for instance – could be considered trade restric-tive.29 No government measure or practice, whatever its aim, is beyondGATS scrutiny if it might affect trade in services. Countries could thususe GATS to “frustrate government policies, practices and programsthat allegedly adversely affect foreign commercial interests in serv-ices”.30

David Hartridge, WTO’s former director of services, describedGATS as “the first multilateral agreement to provide legally enforce-able rights to trade in all services” and “the world’s first multilateralagreement on investment, since it covers . . . every possible means ofsupplying a service, including the right to set up a commercial pres-ence in the export market.”31 According to the EU, GATS “aims to endarbitrary regulatory intervention, and assure predictability of laws, togenerate growth in trade and investment”.32

Unsurprisingly, critics call GATS “the MAI in disguise”. Accord-ing to them, rules and disciplines with effects similar to those of theabandonded Multilateral Agreement on Investment are being incorpo-rated in the WTO through the back door.33 The former WTO Director-General, Renato Ruggiero, acknowledged in 1998 that GATS extendedinto “areas never before recognised as trade policy” and warned that“neither governments nor industries have yet appreciated the full scopeof these guarantees or the full value of existing commitments”.34

Researcher Scott Sinclair says that GATS “is designed to facilitateinternational business by constraining democratic governance”.35 In-deed, the WTO expressly states that the Agreement will help its mem-bers overcome “domestic resistance to change” and that it will facili-tate “more ambitious reforms . . . than would be attainable on a na-tional basis alone”.36

GATS 2000GATS is innovative, complex and without legal precedent. Few of itsprovisions have been tested or clarified by challenges brought to theWTO dispute panel. Little information exists on the impact of GATSso far in facilitating trade in services, or on the economic benefits coun-tries have accrued from services liberalisation, let alone their socialand environmental effects. There is little baseline data upon which tomake comparisons. The WTO Secretariat recognises this lack of dataupon which to base an assessment of trade in services, while the UKgovernment says it has yet to work out how such statistics can even becollected.37 Nonetheless, WTO representatives have begun to negoti-ate to extend the scope of GATS.

When the Agreement was signed in 1995, some countries consid-ered it to be incomplete.38 A clause (Article XIX) was therefore in-cluded mandating “successive rounds of negotiations . . . aimed atachieving a progressively higher level of liberalization” – in practice,privatisation and deregulation. It specifies that the first “successiveround” of negotiation should begin within five years of GATS cominginto effect, that is, by the year 2000. As Canadian trade and investmentresearcher Ellen Gould points out, “under the GATS, liberalization couldjust keep on going and going, presumably until negotiators run out ofsectors to open up to foreign competition and ownership”.39 The WTOSecretariat describes Article XIX as “a guarantee that the present GATSpackage is only the first fruit of a continuing enterprise.”40 Other clauses

GATS is the firstmultilateral,

legally-enforceableagreement covering

trade andinvestment in

services.

GATS mandatessuccessive roundsof negotiations toachieve more and

more liberalisation– in practice,

privatisation andderegulation.

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Regulating Governments, Not CorporationsArticle VI of GATS covers domes-tic regulation. Its aim is to encom-pass any regulation that affectsservices but which is not coveredby other GATS obligations.

Its fourth clause aims to ensurethat “qualification requirementsand procedures, technical stand-ards and licensing requirements donot constitute unnecessarybarriers to trade in services”.

Although undefined in GATS,“technical standards” couldencompass most types of govern-ment control. The WTO Agreementon Technical Barriers to Trade, forinstance, defines them as:

“product characteristics ortheir related processes andproduction methods, includingthe applicable administrativeprovisions, with whichcompliance is mandatory”.

In the context of services, “techni-cal standards” could apply to theprocesses and methods of produc-ing services, including administra-tion. This could encompass theirfunding and delivery, includingreimbursement under mandatory(public or private) insuranceschemes.

A wide swathe of governmentregulations concerning environ-mental protection, consumerprotection and industrial policywould seem to be covered by thisfourth clause: legislation accredit-ing professionals as competent topractise; awarding licences totelevision or radio stations; givinguniversity status to academicinstitutions; licensing hospitals;and granting waste disposalpermits.

So that these national require-ments and standards do notconstitute an “unnecessarybarrier” to trade in services, ArticleVI.4 states that they should be“not more burdensome thannecessary” and should not restrictthe supply of the service. But whatdoes “burdensome” mean? Howwould restriction be determined?In case of a dispute betweencountries, the clause does notprovide a clear legal formula that aWTO dispute panel could refer to.

A Working Party on DomesticRegulation – one of the three sub-groups of the Council for Trade inServices (the body within theWTO that oversees GATS) – hasbeen drawn up to discuss “reform”

of domestic regulation. This involvesdrafting a “necessity test” – a legalformula which could be used “toassess the level of trade-restrictive-ness of a measure”.

If proposals for this test areadopted, a government challengedby another through the WTO wouldfirst have to show that a disputedregulation met a “legitimate objec-tive” – and the WTO would deter-mine what counted as “legitimate”.

Then, to clarify “burdensome”and “restrictive” as applied to themeans of achieving that objective,the Working Party has consideredimporting into Article VI.4 thedefinition of “least burdensome”from a GATS Annex on Telecommu-nications: “pro-competitive”.

The European Union has gonefurther and identified “anti-competi-tive practices”, including cross-subsidising by monopoly providers ofnetwork infrastructure and services.It argues that this practice restrictscompeting suppliers from being ableto provide services in a market.Instead, it maintains that charges foreach part of a service should be at:

“cost-oriented rates that aretransparent, reasonable, havingregard to economic feasibility,and sufficiently unbundled sothat the supplier need not payfor network components orfacilities that it does not requirefor the service to be provided”.

Governments that currently use non-market mechanisms, such as riskpooling, social insurance funds,block contracts and cross-subsidis-ing, to deliver public services to asmuch of their population as possiblecould find such practices challengedas anti-competitive (see p.19).

The European Union has alsosuggested that a measure should notbe considered trade-restrictive if it is“proportionate” to the objectivepursued. But what might be consid-ered proportionate, reasonable orrational would be a matter ofjudgement, reflecting the values ofthose with decision-making power.

Worse, Article VI.4 could beinterpreted as applying to all serv-ices, not just to those which acountry has offered to liberalise. Theother clauses in Article VI clearlyapply only to those services listed ina country’s schedule of commit-ments. The WTO Secretariat believesthe different phrasing of Article VI.4is “intentional”.

If these proposals wereadopted, all domestic regulationswould have to be “pro-competi-tive”, even if no foreign firm wasinvolved. A WTO disputes panelcould require countries tounbundle a public monopoly suchas health care and substitutecompeting service providers orcompeting health care insurers.Health systems researchersAllyson Pollock and David Pricepoint out that these proposals“would transform the WTO from abody combating protectionism to aglobal agent of privatisation”.

“The WTO’s strategy isshifting from persuasion to thedevelopment of new globalregulations which will over-ridenational sovereignty in domes-tic policy and impose unprec-edented market reform obliga-tions on all the processes ofservice delivery and throughoutall service sectors”.

In essence, the aim of GATS is toregulate governments, not corpora-tions. Compared to markets ingoods, those in services andaccess to them are more con-strained by government interven-tions. The power of a GATS articleon domestic regulation clause isthat many governments maycensor themselves by not institut-ing legislation or public policyobjectives which could be inter-preted as being against WTOrules. There has been no challengeto any domestic regulation underGATS as yet, but at the WTOSecretariat itself acknowledges,“cases may arise in the future”.GATS sets in place a legal frame-work which governments coulduse in future to challenge othercountries’ domestic regulations.

The WTO stresses thatgovernments can still regulateunder GATS. Discussions aboutdomestic regulation, however,raise the question: how?

Sources: Pollock, A.M. and Price, D.,“Rewriting the Regulations”, TheLancet, 356, 9 Dec. 1999, pp.1995-2000; “Opening World Markets forServices: A Guide to the GATS: WhichSectors are Covered by GATS?”,website: http://gats-into.eu.int/;Sinclair, S., GATS: How the WorldTrade Organization’s New “Services”Negotiations Threaten Democracy,Canadian Centre for Policy Alternatives,Ottawa, 2000; WTO Secretariat,“International Regulatory Initiatives inServices”, S/C/W/97, 1 March 1999.

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provide for further rules to be developed for domestic regulation, gov-ernment procurement of services, subsidies and emergency safeguards(see Boxes, p.8 and p.10).

When he was European Commission Vice President, Leon Brittanmade clear that “the aim [of GATS 2000 negotiations] must be . . . toconclude an ambitious package of additional liberalisation by develop-ing as well as developed countries, in politically difficult as well as inother sectors”.41 The EU Commissioner for Trade, Pascal Lamy, hasargued that “if we want to improve our own access to foreign markets,then we can’t keep our protected areas out of the sunlight. We have tobe open about negotiating them all if we are going to have the materialfor a big deal.”42

The US, European Union, Japan and Canada (known as the Quadri-lateral or “Quad” governments) are pushing hard to:– increase the services and ways of supplying services that WTO

member countries agree to open up to foreign competition (marketaccess);

– re-classify services to get around some countries’ reluctance to openthem up to foreign competition;43

– insert new rules and restrictions that apply to all members, services,sectors of services and ways in which services are supplied, irre-spective of whether countries have agreed to open such services tocompetition;44

– place new constraints on domestic regulation (see Box, p.8).

They are seeking more access to Southern markets, to each other’s publicservices, and further deregulation of services already in private handsbut publicly-regulated, such as media, publishing, telecommunications,energy, transport, financial and postal services. Northern countries areinterested in service liberalisation in Southern countries in construc-tion and engineering; distribution; education; environmental, health andsocial services; and recreational and cultural services.

These revisions, if they are agreed upon, could mean that the volun-tary nature of GATS – under which a country decides which services tolist as open to foreign competition – would in effect be meaningless. Itcould be irrelevant whether a country offers up its services or not ifother rules apply to all services. Guarantees, such as those from theUK’s Department of Trade and Industry that “the UK government hasno intention whatsoever of offering to privatise public health care oreducation under the GATS 2000 negotiations”, would have little force.45

Following the GATS “built-in agenda” mandating successive roundsof negotiations, talks opened on 25 February 2000 in Geneva, home toWTO headquarters. The United States would like these negotiations tobe completed as soon as possible, and suggested the end of the year2002 as a deadline. Other countries, however, want the negotiations tobe open-ended, or integrated within a broader and comprehensive revi-sion of all the WTO agreements.46

Despite the requirement for “transparency” in GATS (see Box, p.6),the renegotiations are taking place between government representa-tives behind closed doors (but in close consultation with internationalcorporate lobbyists). Few of the results of discussions are made pub-licly available by the WTO or individual countries. It is next to impos-sible for citizens’ organisations to find out the current state of negotia-tions while access to many background documents is restricted.47 Thuseven negotiations on apparently technical issues such as reclassifica-tion of services are evading public accountability and public andparliamentary debate.

A revised GATScould threaten

domestic andinternational

regulation aimedat providing publicservices for all and

protecting theenvironment.

Proposed revisionscould mean that

the voluntarynature of GATS

would bemeaningless.

10



Business Objectives in GATS 2000This secrecy, combined with GATS’s obscure, bureaucratic, arcane andtechnical terminology, make it difficult for policymakers, let alone thegeneral public, to grasp the significance of the Agreement. But state-ments from US and EU industry associations indicating what they wantout of the current negotiations give a much clearer picture.

The president of the US Coalition of Service Industries (CSI), RobertVastine, has said that his “most salient criticism” of GATS is that

GATS 2000 Negotiations–New Rules and RestrictionsGATS mandates specific rules tobe drawn up covering subsidies,government procurement andemergency safeguard measures.

• GATS already covers subsidiesin effect as part of the nationaltreatment and most-favourednation provisions. If a governmentprovides a subsidy to a nationalservice supplier (including a publicone), in theory, it has to provide itto a foreign-based service supplieras well. As WTO research staffhave said, this requirement is apowerful argument for abandoningthe subsidy altogether. In practice,it would eliminate public servicesand encourage privatisation.

Article XV, however, promisesto develop further rules onsubsidies to avoid “trade distor-tive effects” and as such goesfurther than previous internationalfree trade agreements such as theearlier GATT or the North Ameri-can Free Trade Agreement(NAFTA). The Article sets no datefor these negotiations.

Further rules could, however,be drawn up to protect nationalsubsidies and grants related to theprovision of universal publicservices such as health care andeducation or to public interestobjectives such as health andsafety.

• For the most part, governmentprocurement – governmentagencies buying in goods andservices for governmental pur-poses – falls outside WTOobligations. GATS Article XIIIcurrently exempts it from themost-favoured nation, nationaltreatment and market accessobligations (but not transparency),but mandates further negotiationsby the beginning of 1998.

Negotiations on governmentprocurement are taking place in

other WTO fora, however. Forinstance, the Council for Trade onGoods is trying to negotiate anagreement on transparency as partof the separate Agreement onGovernment Procurement whichwould apply to services as well asgoods. The plurilateral Agreementcurrently covers goods only and hasbeen signed by just 27 (mainlyindustrialised) countries.

The US has been pushing hardfor an agreement on transparency. Itwants binding rules on the notifica-tion and announcement of tendersfor government procurement con-tracts in order to give companiesenough information and time tosubmit bids.

Reform of government procure-ment could be another mechanismby which public services are openedup to competition. GATS does notdefine “governmental purposes”. TheWTO Secretariat has stated that themandated negotiations “are expectedto lead to commitments to open upsome government purchases toforeign service suppliers.”

• Safeguards are emergencymeasures taken by a government toprovide temporary protection against“fairly traded” products that eithercause or threaten to cause “seriousinjury” to domestic service suppliers,for instance, if the domestic markethas been flooded with these prod-ucts, or if the country has a balanceof payments crisis. They are permit-ted under the GATT rules on goods,but have not yet been introducedinto GATS. “Serious” has not beendefined.

GATS Article X provides fornegotiations on emergency safeguardmeasures to be completed by thebeginning of 1998, a deadline whichthe Working Party on GATS Rulesagreed to extend to December 2000and then again to March 2002.

Southern countries argue that

safeguards rules would addressconcerns about the difficulty ofreversing GATS commitments.Many countries are seekingmeans by which they might, atleast temporarily, suspend GATScommitments when faced withadjustment problems or until theirdomestic industries have devel-oped to the extent that they canwithstand foreign competition.

Citizen groups in both Northand South are concerned to keepenvironmental, health and safety,and consumer measures, to limitcommercial encroachment onpublic services, and to reversecommercialisation if it provesharmful. Indeed, such safeguardscould be part of a process toreform GATS so that it was lessdetrimental to sustainable devel-opment or human health.

But Northern country negotia-tors have strongly resistedsafeguard provisions, contendingthat GATS provides enoughflexibility already.

Negotiations on these rules areproceeding in parallel with thoseon market access (that is,increased country commitmentson their schedules) and could beused as trade-offs between thetwo. For instance, the prospect ofan emergency safeguard mecha-nism might be used to persuadeSouthern countries to make morecommitments.

Sources: “Opening World Markets forServices: A Guide to the GATS: WhichSectors are Covered by GATS?”,website: http://gats-into.eu.int/gats-info/guide.pl?MENU=ccc, accessed 1November 2000; Sinclair, S., “Expand-ing the WTO Services Agreement:What’s on the GATS 2000 Re-negotiating Table?”, GATS: How theWorld Trade Organization’s New“Services” Negotiations ThreatenDemocracy, Canadian Centre for PolicyAlternatives, Ottawa, 2000, ch 4.

11


countries have specified so few services to be opened up to liberalisa-tion.48 He argues that:

“the new negotiations must secure commitments to national treat-ment, market access, and cross border services in as many sec-tors as possible. Current scheduled exceptions are too broad, andmust be honed”.49

US negotiators must:

“propose broad commitments to liberalization in areas such asthe right to establish a business presence in foreign markets (com-mercial presence), the right to own all or a majority share of thatbusiness, and the right to be treated as a local business (nationaltreatment).”50

Vastine is adamant that the WTO:

“must . . . provide that the entire new ‘round’ be completed by31 December 2002, in order to force closure on the existingagenda, reap what gains can be garnered, and begin again with afresh agenda that could include items like investment”.51

The European Union has been actively reaching out to companies. Itdeclares that:

“GATS is not just something that exists between Governments.It is first and foremost an instrument for the benefit of business,and not only for business in general, but for individual servicescompanies wishing to export services or to invest and operateabroad.”52

“In short”, it concludes, “the GATS should be one of the key referencetexts used by any corporate planner seeking to do business on a worldlevel”.53

The EU encouraged the establishment in 1998 of the European Serv-ices Network (now Forum – ESF) of multinational industry representa-tives, led by Barclays plc chair Andrew Buxton, to “advise EuropeanUnion negotiators on the key barriers and countries on which they shouldfocus” and to ensure “that the EU’s policy corresponds to the real ex-port and economic growth interests of our service industries”.54 TheESF still represents a limited group of companies, primarily financialservices, telecommunications, postal, tourism and engineering/construc-tion, but is determined “to support and encourage the movement toliberalise service sector markets throughout the world and to removetrade and investment barriers for the European services sector”.55 TheESF says that “foreign investors should have the same access to do-mestic markets as domestic companies” and that barriers such as na-tionality or residency requirements should not apply to the posting ofkey personnel.56

Several joint industry-government conferences provide examplesof the close collaboration between corporate employees and govern-ment officials in testing and refining their ideas for expanding GATS.In the US, one of the goals of the World Services Congress, a largethree-day international conference in November 1999 attended by cor-porate executives and WTO, World Bank and government officials,was to “shape government policies”. The 100 or so comprehensive re-search papers presented at the Congress serve “as a guide not just tothe topics under consideration but also to the intended direction of theGATS re-negotiation itself”.57 In November 2000, the US Departmentof Commerce and the US Coalition of Service Industries jointly held aconference on “Services 2000: A Business-Government Dialogue on

Via GATS, privatecompanies could

prise open forthemselves public

funding forservices.

12



US Trade Expansion Objectives”, the purpose of which was “to focusindustry’s priorities in the current WTO negotiations” and to “allowparticipants to make detailed recommendations to negotiators”.58 TheTrade Directorate of the European Commission, meanwhile, co-fundedthe November 2000 European Services Forum international conferenceon “The GATS 2000 Negotiations: New Opportunities of Trade Liber-alisation for All Services Sectors”.59

GATS Privatisation of Immigration?Many developing countries havepointed out that GATS containsclear, specific and detailedobligations facilitating the move-ment of capital, but not for themovement of labour. Yet as USsociologist Saskia Sassen notes:

“it is the increased circulationof capital, goods and informa-tion under the impact ofglobalization, deregulation,and privatization that hasforced the question of thecirculation of people onto theagenda.”

GATS encourages industrialisedcountries to poach the brightestand the best from poor countriesand to put up barriers to the rest.Highly-skilled professionals oftengravitate toward countries offeringbetter pay and working conditions.In Jamaica, over 50 per cent ofnursing positions are vacantbecause Jamaican nurses areworking in North America. Filipinonurses also move in large numbersto the US.

India and Cuba train doctorswho wind up working abroad.Indian finance minister YashwantSinha pointed out at the WorldEconomic Forum in Davos inJanuary 2001 that 38 per cent ofall doctors in the US are Indians,as are 34 per cent of the scien-tists at NASA. For developingcountries, such mobility can meanincreased remittances sent backhome, but also a drain of theirmost-needed skills. The invest-ment these countries put intotraining such professionals is anexample of aid flowing from Southto North.

The British public healthsystem, meanwhile, has estimatedthat it is short of 17,000 nursesand several thousand doctors, notleast because of deteriorating payand working conditions, and cutsin training. At least one quarter ofdoctors and nurses working in thepublic sector qualified in countriessuch as Spain, Scandinavia, thePhilippines, Australia, New Zealand

and, recently, China. South AfricanPresident Mandela appealed toBritain to stop “leaching” his coun-try’s health workers.

This trend is largely controlled byNorthern countries wanting extraskilled workers. The use of foreignlabour keeps wages and conditionslow. Encouraging the movement ofhealth care professionals also createspressure to standardise medicaltraining and qualifications, but thepressure is often for lower standardsrather than higher ones. The WTOSecretariat has said that:

“the most significant benefitsfrom trade are unlikely to arisefrom the construction andoperation of hospitals . . . buttheir staffing with more skilled,more efficient and/or less costlypersonnel than might be avail-able on the domestic labourmarket”.

Indeed, it is professional workerswho are the main focus of GATS.Sassen describes GATS as “aprivatized regime for the circulationof service workers” which has notbeen subject to the public scrutinyapplied to national immigrationpolicy.

GATS amounts to a migrationpolicy (albeit one applying totemporary labour) under the over-sight not of a national governmentbut a separate, autonomous entity.Sassen argues that:

“this can be seen as yet anotherinstance of privatization of thatwhich is profitable and manage-able . . . In this case, it wouldbe a privatizing . . . of immigra-tion policy components that arecharacterized by high-valueadded (persons with high levelsof education and/or capital),manageability (they are likely tobe temporary and working inleading sectors of the economyand hence are visible migrants,subject to effective regulation),and benefits (given the newideology of free trade andinvestment). Governments areleft with the supervision of the‘difficult’ and ‘low-value added’

components of immigration –poor, low-wage workers,refugees, dependants, andpotentially controversial brain-drain flows. This can clearlyhave a strong impact on whatcomes to be seen as thecategory ‘immigrant’ withpolicy and broader political

implications.”

“Human capital” can be imported,but borders are closed to “immi-grants”, who are invariably as-sumed to be “black”, resulting ininstitutionalised and legitimised

racism.

Several developing countriessupport GATS’ facilitation of themovement of people because, asIndia’s ambassador to the WTO,Srinivasan Narayanan, said, “this isan area where developing countrieshave some competitive advantage”.Narayanan has pointed out thatNorthern countries cite the “politi-cally sensitive issue” of immigrationas a reason for not making morecommitments under the “presenceof natural persons” way of supply-ing services – even though South-ern countries have had to madecommitments under other WTOagreements in politically sensitiveareas such as intellectual propertyrights and cannot renege on them.Yet long-standing WTO observerspoint out that countries such as theUS are unlikely to allow in Indianworkers unreservedly.

Sources: Sassen, S., “UnstoppableImmigrants”, The Guardian, 12September 2000, p.21; Sassen, S.,Globalization and Its Discontents:Essays on the New Mobility of Peopleand Money, The New Press (W.W.Norton& Co.), New York, 1998; SrinivasanNarayanan, statement at “The GATS2000 Negotiations: New Opportunitiesof Trade Liberalisation for all ServiceSectors”, European Services ForumConference, 27 November 2000,Brussels, website: www.esf.be/esf_%20conf_speeches.htm, accessed24 March 2001; WTO Secretariat,“Background Note on Health and SocialServices”, S/C/W/50”, 18 September1998.

13


Turning Public Into PrivateAlthough GATS encompasses all services, many civil servants andgovernment ministers believe that it makes an exception for public serv-ices – those “supplied in the exercise of governmental authority” (Arti-cle I.3b) – such as health care, education or utilities. But GATS definesgovernment services so narrowly – “any service which is supplied nei-ther on a commercial basis, nor in competition with one or more serv-ice suppliers” (Article I.3c) – that the exception could be almost mean-ingless if one country were to challenge another country’s public serv-ices at the WTO dispute panel as contravening GATS.60

Governments the world over have been deregulating and privatis-ing both the funding and the provision of public services, sometimeson their own initiative, sometimes as a condition of IMF structural ad-justment programmes (SAPs) and sometimes on World Bank advice.61

In some cases, governments have simply sold public entities off. Forinstance, in Britain, the railways, telephones, and electricity, gas andwater utilities have been transferred to the for-profit sector. Govern-ments are transforming other public services, particularly those whichit might be politically unacceptable to privatise outright, by requiringthe public body to contract services out to for-profit companies or toinstitute a process of compulsory competitive tendering (private provi-sion). They have separated infrastructure such as buildings from serv-ice provision, and privatised the infrastructure by means of an array ofpublic-private “partnerships” that retain an ostensible public dimen-sion and thus appear more politically acceptable. Examples include theUK’s Private Finance Initiative (PFI), build-own-transfer (BOT)schemes, and build-own-operate-and-transfer (BOOT) projects. Gov-ernments have also introduced internal markets, that is, divided pur-chasers from providers within a public service sector (see Box, pp.21-24).62 Management from the private sector has been introduced to in-fuse the public service sector with market-oriented methods and prin-ciples. As David Hall of the Public Services International ResearchUnit points out:

“The corporatisation of public service organizations . . . usuallyinvolves the introduction of business accounting . . . and may bea change as significant as that to private ownership itself.”63

As far as GATS is concerned, if a government contracts out any part ofits public services, such as cleaning or catering, or if private (either for-profit or voluntary) companies supply services also provided by thegovernment (for instance, if private schools exist alongside state ones,or if there is a mixture of public and private funding), then those serv-ices could be judged by a WTO dispute panel as not being a govern-ment service and thus subject to GATS rather than exempt from it, thatis, subject to competition from operators from abroad.64

As a result of existing deregulation and privatisation, national – andincreasingly transnational – companies have sprung up and made in-roads into a wide range of public services in many countries, particu-larly utilities (water, energy, telecommunications, transport), refusecollection, prisons, housing, social services, and support services (clean-ing, catering, information technology).65 Via GATS, they could gainaccess to many more.

The European Union, for example, wants all WTO member coun-tries to open up their water delivery systems to competition becausethis “would offer new business opportunities to European companies,as the expansion and acquisitions abroad by a number of European

Global trade rulesthreaten to

dismantle publicservices such as

health, educationand welfare.

14



water companies show”.66 French-based companies such as Vivendi,Suez-Lyonnaise and Bouygues (SAUR) have taken the lead in watersupply.67 Education has been described by investment group LehmanBrothers as “the final frontier of a number of sectors once dominatedby public control”.68 Other targets include museums, libraries, energyand transport.

Via GATS, private companies could prise open for themselves pub-lic funding for services. The EU and US spend a substantial amount ofpublic money on public services. In the countries of the OECD

Creating Health Markets: Privatising Health Care . . .To establish a trade in services, asGATS aims to do, there has to be amarket in services – services haveto be bought and sold. Untilrecently, however, many countrieshave not had markets in healthcare, education, water andsewerage, or energy. All have, byand large, been provided bygovernment or non-profit organisa-tions. The state has set up schoolsand paid the teachers, built thehospitals and trained the nursesand doctors.

Markets are now being createdby enabling entities other than thestate to provide services. Privatisa-tion of ownership – outrightlyselling-off water suppliers, forinstance – is an obvious means.Other means are more hidden andgradual: privatisation of serviceprovision (by requiring contractingout, leasing or competitivetendering); privatisation of finance(charging users of the service,private capital, private healthinsurance) and the introduction ofinternal markets (dividing purchas-ers from providers of services).

Health care services have notgenerally been explicitly privatised.Instead, there has been anincremental process of governmentretrenchment accompanied byprivate sector enlargement as theservices have been commercial-ised. Markets – and thus thepotential for trade – have crept inthrough the back door.

IMF and World Bank

Governments such as those in theUS, Britain, Chile and New Zealandhave themselves instigated thegradual commercialisation of theirpublic health services. Others,however, have been unable toavoid doing so because of debt

and the influence of the InternationalMonetary Fund (IMF) and the WorldBank.

IMF programmes have compelledmany countries to reduce their publicspending on health, which is nolonger regarded as a productiveinvestment for human developmentand economic growth, but as anunnecessary financial burden andexpense which governments shouldavoid.

Moreover, a “cost recovery”strategy for public services hasinvariably involved the introductionof “user fees” or charges to patients,even for basic health care, which arenow widespread through the South.A 1998 World Bank report notedthat “about 40 per cent of projectsin the Bank’s [health, nutrition andpopulation] portfolio and nearly 75per cent of projects in sub-SaharanAfrica included the establishment orexpansion of user fees”. Studieshave shown that such fees simplydecrease people’s use of medicalservices. The results are often anincrease in child mortality, sexually-transmitted diseases and tuberculo-sis (TB). People die of easily-treatable diseases because theycannot afford to buy the medicines.

In Nigeria, Kenya and Ghana,people’s use of hospitals and clinicsdropped by half within one or twoweeks of charges being introduced.In one region of Nigeria, maternaldeaths rose 56 per cent whilehospital births declined 46 per centafter user charges for emergencyadmissions were introduced. InGhana, user fees in rural clinicscontributed to a doubling of childmortality between 1983 and 1993.Infant mortality has risen by onequarter in Zambia since 1980, whilelife expectancy has dropped from 54years to 40. In Zimbabwe, the poorwere supposed to be exempt fromuser fees levied on health services,but a World Bank evaluation found

that just one-fifth of the poor couldobtain the necessary waivers.

The World Bank has been directlyinvolved in health policy planning inthe South since the mid-1980s. Its1993 annual report, Investing inHealth, described public services asa barrier to the abolition of worldpoverty. It still maintains that “ifmarket monopolies in public servicescannot be avoided, then regulatedprivate ownership is preferable topublic ownership” and that, in mostcircumstances, “the primary goal ofpublic policy should be to promotecompetition among providers.” Thereport advocated incentives for thepurchase of private insurance,privatisation of public services andpromotion of market competition.

The Bank’s health “reform” policyhas included making people pay fortheir health care, reducing publicprovision to a few programmes, andturning over the rest of governmentservices to profit-making organisa-tions and individuals.

The Bank currently operates over200 health care projects, manyeffectively requiring further privatisa-tion of public health systems. TheBank’s health spending is now threetimes the budget of the World HealthOrganisation. In 1998, Mexicoreceived the largest loan the WorldBank had ever made for health care,$750 million, to change the “struc-ture” of public health care opera-tions.

In the west Indian state ofMaharashtra, the World Bank isproviding half the funding (Rs300million/£4.4 million) for a privatehospital treating heart disease in ajoint venture with one of India’slargest pharmaceutical companies,Wockhardt. Wockhardt is linking upwith a large US health care insurerand with the US Harvard MedicalSchool, which will train Wockhardt’smedical staff and introduce them tonew medical technologies.

15


(Organisation for Economic Cooperation and Development), public ex-penditure on health services and education accounts for more than 13per cent of gross domestic product.69 Much of this spending now goesto public or voluntary bodies but could end up being channelled to for-profit groups. Nearly 50 per cent of UK tax revenue now goes to profit-making companies.70

It is often argued that the privatisation of public services bringsmore competition, more private finance so as to lessen public expendi-ture, less bureaucracy, more flexibility, greater opportunities for the

. . . The IMF, World Bank and World Health OrganisationIn the 1990s, the Philippines

instituted a cost cutting and privati-sation programme in the healthsector. Now half of hospital beds areprivate and most costs are paid forby patients. An insurance systemcovers just one-third of the popula-tion. The government now spendsless than three per cent of its budgeton public health, but nearly 30 percent on servicing its debt.

Just three per cent of the WorldBank’s $1.8 billion poverty allevia-tion programme in the Philippinesgoes to fund health care –and mostof that goes towards projects relatedto women’s reproduction. (Theproject’s real intent is populationmanagement, comments AntonioTujan, a Philippine NGO worker.) TheWorld Bank pays more for theservices and infrastructure for theSubic Bay freeport zone, the formerUS naval base which is being turnedinto a base for US corporations suchas Oriental Petroleum, than onhealth.

Other World Bank and IMFpolicies have undermined people’sability to pay for health care: thelifting of price controls; the freezingof wages; the devaluation of localcurrencies; and the reduction ofsubsidies on basic essentials such asfood and transport. Many people,especially women, now work longerhours for lower wages and have lessfood. Falling incomes, increasedprices for essential commodities,declining basic services and anincreased women’s workload have allled to more illness and deaths.

All these “reforms” have helpedcommercial interests to cater towealthier people in developingcountries through private health careinsurance and private hospitals. Mostpeople are left dependent on apoorly-equipped, shrinking publicsector; it is the affluent who callupon rapidly-expanding and increas-ingly high-cost private services.

“Before, everyone could gethealth care”, said one personinterviewed during the World Bank’s1999 poverty consultations, “butnow everyone just prays to God thatthey don’t get sick because every-where they ask for money.” Con-clude medical researchers KasturiSen and Meri Koivusalo:

“Strong private and increasinglytransnational interests are . . .altering the nature and even theexistence of public health care. . . systems throughout thedeveloping world with thehelping hand of internationalagencies such as the WorldBank.”

The World Trade Organisationregards itself as the coordinator ofthe international transfer of suchpolicies. It asks “How can WTOMembers ensure that ongoingreforms in national health systemsare mutually supportive and, when-ever relevant, market-based?” TheEU, similarly, states that one purposeof the WTO is:

“to provide a forum for negotia-tions on trade relations, with aview to achieving greatercoherence in global economicpolicy making. In practice thiswill involve close co-ordinationwith the policies of the Interna-tional Monetary Fund and theWorld Bank.”

World HealthOrganisation

More recently, the World HealthOrganisation (WHO) has joined theprivatisation trend through itsadvocacy of “public-private partner-ships”, a trend which is leading tothe partial privatisation and commer-cialisation of the UN system itself.Cuts in national government contri-butions to WHO have been one of

the forces driving it into “partner-ship” with industry and the privatesector. WHO’s budget for thefinancial year 2000/2001 isUS$1.86 billion, while that ofbaby food producer Nestlé isUS$7.9 billion for its promotionalactivities alone. The WHO ap-proach has been criticised forbenefiting commercial interestsrather than public health initia-tives.

Efforts are also being made torestrict the WHO from regulatingindustry in areas with healthimplications such as baby food,pharmaceuticals, tobacco andalcohol. In 2000, WHO itselfadmitted that tobacco companyconsultants have had staff posi-tions at WHO.

Sources: Hall, D., Globalisation,Privatisation and Healthcare—APreliminary Report, Public ServicesInternational Research Unit, Greenwich,January 2001, website:www.psiru.org; Price, D., Pollock, A.M.and Shaoul, J., “How the World TradeOrganisation is Shaping DomesticPolicies in Health Care”, The Lancet,354, 27 November 1999, pp.1889-1892; “Health Hazard: How theSystem Makes Us Sick”, New Interna-tionalist, Issue 331, Jan/Feb 2001,website: www.newint.org; Sen, K. andKoivusalo, M., “Health Care Reformsand Developing Countries: A CriticalOverview”, International Journal ofHealth Planning and Management, Vol.13, 1998, pp.199-215; Koivusalo, M.and Ollila, E., Making a Healthy World:Agencies, Actors and Policies inInternational Health, Zed Books,London, 1997; TRAC, Tangled Up InBlue: Corporate Partnerships at theUnited Nations, TRAC, 2000, website:www.corpwatch.org; Richter, J.,Holding Corporations Accountable:Corporate Conduct, International Codesand Citizen Action, Zed Books, Londonand New Jersey, (forthcomingSeptember 2001); HAI, Public-PrivatePartnerships: Addressing Public HealthNeeds or Corporate Agendas?, HealthAction International, Amsterdam, May2001, website: www.haiweb.org/campaign/PPI/seminar200011.html.

16



workforce, and more modern management practices. In practice, how-ever, cartels develop and corruption is rife. Public money provides guar-antees for private companies which simply avoid competition from thepublic sector. There is little or no accountability or regulation withinthe private sector, and job cuts or reduced conditions of work are com-mon.

The bulwarks of public health – air quality, safe drinking water,food safety, road safety, drainage and sanitation – have been under threatbecause of privatisation for some time now; under GATS, they couldbe permanently dismantled. The consequences are apparent in manypoorer countries today and in nineteenth century Europe: high mortal-ity rates, especially high maternal death rates, a proliferation of conta-gious diseases, and high levels of poverty and homelessness.71

The WTO Secretariat has acknowledged that restricting domesticregulation creates a tension between trade expansion and national sov-ereignty. But another critical tension is that between the goals of trademore generally, as facilitated by privatisation, and the public interest.As David Hall points out:

“Whether the private companies involved are national or for-eign is arguably a less important issue for public services thanthe impact of privatisation on financing or service provision . . .There may still be negative development consequences ofglobalisation of these services, from the entry of foreign capital,but the distinctive damage to public services happens throughprivatisation”.72

Health care researchers Allyson Pollock and David Price stress that“the crucial factor is not so much domestic sovereignty as the way inwhich public interest and public-health objectives can be over-riddenby objectives that further trade”.73 Health care researcher MeriKoivusalo argues that what the WTO really deals with “is not tradebarriers between nations or interests between the North and the South,but . . . incentives and mechanisms which deal with the respective rights,responsibilities and capacities of the private and public sector.”74

Turning Health Care Into Health MarketsHealth care is just one example of a public service threatened by GATS.Commercial interests now provide some of the health services in manycountries, sometimes in competition (albeit limited and regulated) withpublic providers.75 In the UK, for instance, for-profit nursing homesand privately-financed hospital buildings provide health services incompetition with public ones.76

This dual system gives the WTO a useful rationale for encouragingfurther competition and privatisation through GATS:

“The hospital sector in many countries . . . is made up of govern-ment-owned and privately-owned entities which both operate ona commercial basis, charging the patient or his [sic] insurancefor the treatment provided . . . It seems unrealistic in such casesto argue for continued application of Article 1.3 [that the serviceis a government service] and/or to maintain that no competitiverelationship exists between the two groups of suppliers of serv-ices”.77

The stakes are huge: expenditure on health in OECD countries is esti-mated at more than US$3 trillion annually.78

The objective ofGATS is toincrease trade inservices, not toimprove health orsocial equity.

The damage topublic serviceshappens throughcommercialisationand privatisationrather than theentry of foreigncapital.

17


Marketing Health in ChileAt the beginning of the twentiethcentury, Chile was a pioneer ofequal access to health servicesfor all. By the end of that century,it had become a pioneer in freemarket policies in health care.

Between 1979 and 1985, thegovernment sharply reducedgovernment and employercontributions to health careservices, passing more and moreof the costs on to users throughwage and salary withholdings andco-payments.

By 1995, seven per cent ofthe gross pay of every personformally employed was withheldfor health care. The employeenow decides where this deduc-tion goes. Since 1981, oneoption has been into a “plan” orcontract offered by an ISAPRE,(Instituto de Salud Previsional), ahealth insurance companymodelled on those in the UnitedStates. Another is to the publicsector’s National Fund for Health,FONASA (Fundacion Nacional deSalud) and a third option is to thepublic health care facilities, theremnants of the national healthservice, the SNS (SistemaNacional de Salud).

According to neo-liberal freemarket thinking, these changeswere meant to foster the rise offor-profit providers of healthservices which have to competewith each other in the medicalmarketplace and are thus forcedto provide better care and to keepcosts down. While less is spentfrom the public purse for healthservices, reducing employers’expenditures on health benefits issupposed to enable more workersto be hired and Chilean industriesto become more competitive inworld markets.

But while a greater number ofhealth care systems (both publicand private) offering an array ofoptions at various prices is nowavailable to each person, they arenot necessarily accessible toeach person. The determiningfactor is not “choice” but one’sability to pay. This is clearlyindicated by looking at who takesadvantage of which “options”.The health insurance companies,the ISAPREs, have captured mosthigh-income Chileans while thepublic system has wound up withall the low-income workers.

Almost three-quarters of theISAPREs’ clients are in the top 30per cent of Chileans by income,while 41 per cent of those in thepublic system are in the bottom 30per cent. The average income of anISAPRE client is about seven timesthat of the average wage earner inthe public system. In 1989, 21 percent of the users of the publicsystem – over two million people –were too poor to have withholdingsor make co-payments.

A beleaguered public healthservices system is meanwhilesupposed to attend to the healthneeds of 70 per cent of Chileans,not to mention 100 per cent of thenation’s public health costs (environ-mental health, sanitation control andoccupational safety).

It has become grossly under-resourced: the government cut backsharply on its contribution to thepublic system on a per-person basisby 43 per cent between 1974 and1989. Between 1973 and 1988, thenumber of employees in the publichealth system was slashed from110,000 to 53,000, even thoughthe number of people dependentupon it grew by one million duringthe same period. The remaining SNNemployees have seen their realwages fall while they are assignedgreater workloads in deterioratingworking conditions.

Investment in equipment andfacilities has also been drasticallycut. A doctor at the Central Emer-gency Hospital admitted:

“We don’t even have enoughsheets. We have to tell patients’relatives to bring sheets,syringes, medicines. It’s embar-rassing and it’s demoralizing towork now in a public hospital.The patients we see here andtheir families – they have to selleverything, their furniture,everything, to afford the medi-cines. Sometimes, it’s better notto tell them that, yes, we coulddo something to cure you oryour loved one because youknow they won’t be able, evenwith the help of relatives andfriends, to come up with themoney for the medicines.”

The sharp curtailment in governmentfunding for health care, togetherwith the flight of higher-incomepeople from the public system, havegenerated inefficiencies. A patientwho has to stay in hospital for seven

days waiting for an X-ray takesup space and other resources.

Excessive waiting periodsmean that many patients end upin emergency care, placing theirlives in extra jeopardy and usingup more resources. One hospitaladministrator said that an ulceris not likely to be attended tountil it bleeds when it will betreated as an emergency at agreater financial cost. Between1984 and 1987, the greatestincrease of all categories formedical treatments was in“emergencies”, accounting for40 per cent of the total.

The net impact of health careliberalisation has been to shiftmost of the cost of healthservices onto consumers. In1989, over 81 per cent of allhealth expenditure in Chile camefrom the wallets of consumersthemselves (up from 19 per centin 1974). The governmentcontributed only 17 per cent(down from over 61 per cent in1974). Employers contributeonly 1.6 per cent at most – byand large voluntarily at that; yetin 1974, their mandatorycontributions had amounted toover 19 per cent of total healthexpenditure.

The shift does not fall evenlyon all Chileans. Middle-class andpoorer Chileans have seendramatic increases in what theymust pay for health insuranceand services. Many higher-income Chileans are likely to bepaying less; those 15 per cent ofChileans with higher incomeswho use ISAPREs contribute nota peso to the public system. Bythe late 1980s, the governmentwas paying for only 38 per centof the public system’s budget. Itis the comparatively low wageearners in the public system –mostly hard-pressed lowermiddle-class Chileans – whosubsidise heavily the health careof over two million poorerChileans. In the words of Dr RaulDonckaster of the MedicalAssociation, “It’s the poor whohelp the poorest”.

Source: Collins, J. and Lear, J.,Chile’s Free Market Miracle: ASecond Look, Food First Books,Oakland, California, 1995.

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To date, however, GATS has not been instrumental in privatisinghealth care services and opening them up to foreign competition.79

Health and social services are “trailing behind other sectors” in the ratethey are being listed under GATS as open to competition. The WTOacknowledges that some governments do not want to commercialisetheir hospitals because they are part of their “national heritage”.80

As of 1998, 59 countries had put one or more aspects of their pro-fessional (medical, dental, veterinary, nursing, midwifery, physi-otherapy) services or health-related and social services (including hos-pitals) under GATS. Medical and dental services had the highest tallywith 49 countries while 39 countries had agreed to open up hospitalservices to foreign suppliers. In the financial services sector, includinghealth insurance, however, 76 countries have made commitments.81

Poorer countries have made more commitments in the hope of attract-ing services they lack. Sierra Leone is the only country to have in-cluded all eight health service categories under GATS, while the UShas included just hospital and health insurance services.

Even if they have made such commitments, however, such coun-tries can still limit foreign suppliers’ market access and specify whichways of supplying the service are open to competition (see Box, p.6).The highest number of restrictions in ways of supplying health serv-ices is in “commercial presence”.

Health Care for the FewIn Chile, the ISAPREs (Instituto deSalud Previsional), health insur-ance companies modelled onthose in the US, illustrate whathappens when the private sectoris given free rein in providinghealth care within the free marketmodel.

• The essence of an ISAPRE’sprofitability is discrimination.Most of the 30 or so ISAPREs donot themselves operate healthservice facilities: they sell healthinsurance, and by the profit-seeking logic of the marketplace,they sell insurance only to thoseleast likely to need it. MostISAPREs screen out people withcertain congenital diseases andpre-existing cancer and thosethought to be at high risk ofcontracting AIDS. They refuseapplicants over 60 or 65 years ofage or charge them very highpremiums; by 1990, only two percent of ISAPRE subscribers wereretired. Psychiatric and dental careare rarely covered. The ultimatesafeguard for the ISAPREs is thatthe annual premium for customerswho have used health careservices over the course of asingle year is substantially hiked orthe customers are dumped withlittle prospect of buying coveragefrom another ISAPRE. ISAPREsinitially rejected women of child-

bearing age or required women tocertify that they were not pregnantwhen they took out insurance.

• Government interventions consist-ently favoured ISAPREs to thedetriment of the public healthsystem and the public purse.When ISAPREs were authorisedlegally in 1981, they took off slowly.The government then intervened toexpand their market. In 1983, itincreased mandatory health carewithholdings from four per cent ofwages and salaries to five per cent,and then to six per cent in 1984 andto seven per cent in 1986. The 1986Health Law mandated the publicsystem (FONASA) to take on thepayment of all medical and maternityleaves and of neo-natal care forthose insured under ISAPREs. It wasalso decreed that FONASA reimbursewages lost by ISAPRE subscribersdue to illness after the tenth day ofabsence from work and during the90 days of maternity leave. SinceISAPRE members tend to be higherearners, it is more expensive to covertheir leaves of absence than those ofpeople who are not with an ISAPRE.Yet again, the majority of Chileans,lower middle class and lower income,wind up subsidising the higher-income minority.

• ISAPREs are allowed to use publicfacilities for emergency cases and

major procedures such as heartand brain operations, therebyavoiding costly investments in suchfacilities.

• Private medical care insurers, bytheir very nature, do not invest inpreventive health care.

• Advertising and sales expendi-ture have become a major part ofthe “costs” of privatised medicalcare. In 1989, one-sixth ofISAPREs’ expenditure went onadvertising, sales and relatedadministrative expenses. ManyISAPREs spent more than that,some over one-third.

• It is meaningless to argue thatISAPREs give “more efficient” oreven “better” health care than thepublic system since they have somany more resources. In 1989, theISAPREs had 6.5 times morefinancial resources per person thanthe public system. ISAPRE clientsconsume 70 per cent of the totaldeductions for health care, eventhough they are less than 15 percent of the national population.With the public system run into theground, most Chileans today wouldchoose to be in the private systemif they could afford to do so.

Source: Collins, J. and Lear, J., Chile’sFree Market Miracle: A Second Look,Food First Books, Oakland, California,1995.

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During GATS 2000 talks, US negotiators have made health care aspecial target:

“The United States is of the view that commercial opportunitiesexist along the entire spectrum of health and social care facili-ties, including hospitals, outpatient facilities, clinics, nursinghomes, assisted living arrangements, and services provided inthe home”.82

The US Coalition of Service Industries is calling for majority foreignownership of all public health facilities to be allowed:

“We believe we can make much progress in the [GATS] negotia-tions to allow the opportunity for US businesses to expand intoforeign health care markets . . . Historically, health care servicesin many foreign countries have largely been the responsibility ofthe public sector. This public ownership of health care has madeit difficult for US private-sector health care providers to marketin foreign countries.”83

The US private health care sector also wants to gain access to “rapidlyexpanding health care expenditures in many developed countries” ex-periencing “an increase in their aged population”.84

Using GATS to Privatise Public Health CareGATS could facilitate further privatisation and competition in healthcare services if more countries are pressured during GATS 2000 nego-tiations to list health care services on their schedules of commitmentsin all ways of supplying the service.

In the longer term, challenges under GATS to public services couldbe another way. The US could take Britain to the WTO disputes panel,for instance, if the British government or any other body refused a USmultinational permission to buy a British public National Health Serv-ice hospital which had been financed through the Private Finance Ini-tiative. Similarly, the Canadian province of Alberta plans to allow pri-vate, for-profit hospitals to provide services previously provided onlyby public hospitals. If any of these private entities are based outsideCanada (and a US-based company could use NAFTA to gain access),Alberta would be obliged to extend the same rights to every other “like”foreign provider under the GATS most-favoured nation rule.85

A third way GATS could facilitate privatisation and competition isif mechanisms and principles underpinning the design, funding anddelivery of public services are in effect proscribed – for example, if thevague requirement for “domestic regulation” to be “least burdensome”to trade is defined as “pro-competitive” (see Box, p.8).86 “Universalrisk pooling”, for instance, is a key principle of public health care serv-ices and would be at risk because it is not “pro-competitive”. It meansthat the different risks that people will need health care services arepooled together across society. Some people are healthy most of thetime and need little health care, while others are chronically ill foryears on end and need more. Access and entitlement to health careservices are based on an individual’s need for them, not on their abilityto pay.

Also threatened is another widely-used principle: “cross-subsidisation”. Under this principle, areas or services which cost lesssubsidise areas and services which cost more. In many countries, prof-itable services such as international telephone calls have subsidised

The UnitedStates has the

most expensivehealth system in

the worldcovering the

lowest percentageof its population.

Private healthproviders do not

aim to providehealth care to

society, buthealth products

and procedures toindividuals.

20



Privatised healthservices whichcan be bought andsoldinternationallywill lead to lesseffective, morecostly and moreinequitable healthcare.

less profitable but socially beneficial telephone services in rural areas.In transport, bus services or railway branch lines serving outlying areasare easily paid for by routes in busy, more congested areas.87 Risk pool-ing and cross subsidies between rich and poor, healthy and sick ensurethat all get tolerably equal access to similar levels of care because thebasis of public services aims to be redistribution.

Getting rid of cross-subsidisation is an essential step in service pri-vatisation. It allows corporations to divide up integrated health careservices, extract the more profitable ones and the more profitable pa-tients (usually those who least need health care) and leave behind areduced public sector. Such break-ups threaten the principles of uni-versal coverage and shared risk that tax-funded (as in Britain andCanada) or social-insurance-funded (as in France or Germany) healthcare systems generally uphold.88

The trend is toward something like the United States’ health caresystem, which has become dominated by for-profit organisations overthe past decade. There, researcher Robert Kuttner observes, tacit cross-subsidies are being eliminated and hospitals treated more and more asbusinesses:

“Temporary losses are defensible only as investments in futureprofits, so cross-subsidy must be avoided . . . There is no placefor uncompensated care, unprofitable admissions, research, edu-cation, or public health activities – all chronic money losers froma strictly business viewpoint”.89

A revised GATS could not only reduce equitable access to health careservices. It could also undermine mechanisms for containing the costsof public sector health care. It could override national regulations gov-erning health care and affect the kind of services provided, restrictingrather than enlarging people’s choice of services and of the places inwhich they are provided.90 With reduced public expenditure on healthand social services, women will increasingly have to take up the slackand nurse the sick who cannot find or afford health care.91

Public versus PrivateThe main argument put forward for private health care is that it im-proves the quality of care. If patients have to pay for services and canchoose where they spend their money (or the public money they aredoled out), then health and social services will be compelled to becomemore economically responsible and efficient because they have to re-spond to competition.

But it is difficult for patients to assess the quality of the health andsocial services provided by private companies in any meaningful way.Despite “performance” data such as league tables ranking hospitalsaccording to death rates or operations performed, most people will notbe equipped to decide where they should be treated, by whom and withwhat, without the advice of their doctor. Moreover, rules and regula-tions governing the public sector, for instance, setting minimum carestandards, often do not apply to or are not enforced in the private sec-tor.

In the UK, cost has become the only relevant factor. But “the relent-less drive towards ever greater cost savings through contracting outhas, in many cases, had a disastrous effect on service quality”.92 Hospi-tal trusts which have contracted out “hundreds of millions of pounds ofsupport services over the past 17 years admitted that cost-cutting had

continued on page 25 . . .

The WTO iscontemplating thesystematicdestruction ofpublicly-owned,funded andaccountableservices.

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Britain’s National Health ServicePrivatisation by the Back Door

The UK’s National Health Service(NHS) has been a beacon to theworld. Despite being under-funded and over-worked, particu-larly over the past two decades,it still provides high-qualityhealth care to most of the peoplein Britain more cheaply and moreefficiently than almost any othermedical system in the world,according to the OECD.

The health service is paid forout of general taxation, which isconsidered, even by the FinancialTimes, to be the fairest, mosteconomical, most efficient andleast bureaucratic way of fundingthe great bulk of health care.

But under the guise ofmodernisation and reform –which many of those workingwithin the NHS believe isnecessary – the country’s healthand social services are beingcommercialised and privatised.

Given the general popularityof the NHS and its entrenchedpublic nature, however, thisprocess has been ad hoc,fragmented and covert. A firststep has been to undermineconfidence in public provisionthrough unrelenting criticism ofpublic services.

Some of the methods toencourage for-profit involvementin the NHS are well-known:compulsory competitive tender-ing for “support” services suchas cleaning, catering, laundry,computing and laboratoryanalysis, for instance. But other,more subtle mechanisms, areless familiar, mechanisms whichthe World Bank is recommendingto other countries:

- separating the purchaser fromthe provider of health services;

- introducing commercialaccounting and privatefinancing;

- allocating resources on thebasis of each patient’s healthrisks rather than a population’shealth needs;

- introducing user charges andprivate insurance.

Purchaser-ProviderSplit

In 1991, the Conservative govern-ment introduced an internal marketto the NHS by separating theproviders and purchasers of healthcare services from each other.Whereas health authorities through-out the country used themselves toplan and provide hospital services toa local population within a geo-graphic area on the basis of itsanticipated health needs, now theyhad to purchase care from NHStrusts (or the private sector) provid-ing these services.

The NHS trusts running thehospitals, meanwhile, had to com-pete with each other to obtainpatients. Services were separatedfrom each other and other activities,packaged into saleable and market-able items, priced separately andoffered to purchasers, who began toshop around for the best financialdeals. Despite further organisationalchanges in 1999, the purchaser-provider split remains.

CommercialAccounting

At the same time, commercialresource accounting procedures wereintroduced. Since 1991, NHS trustshave had to pay a “capital charge” tothe government for the use ofbuildings and equipment – eventhough the state already owns themoutright. The cost of replacing theseassets as new is estimated; thetrusts then pay 6 per cent of thisvaluation out of their annual income(even though if the state were toreplace the assets, it could borrowmoney for about 3 per cent).

Trusts also became legally boundto break even, ensuring that theirexpenditure matched or was lessthen their income. Indeed, the onlylegal requirements of NHS trustsproviding hospital and communityservices are now financial and arenot related to health care at all.

There are no legal mechanisms toensure that they serve theinterests of the local communi-ties from which they draw theirpatients.

In 1996-7, one-third of NHStrusts failed to meet at least oneof their financial targets. Manycontinue to fall short. Currentproposals would enable privatefirms or other trusts to take overtrusts which do not meet theirstatutory financial targets.

In an attempt to balance theirbooks and pay the capital charge,trusts have had to reduce theirexpenditure or increase theirincome. Many have made majorcuts in staff and in the servicesthey provide, such as long-termcare, rehabilitation and electivesurgery (surgery for non-life-threatening conditions).Unsurprisingly, waiting lists foroperations have grown. Trustshave also reduced their capitalcharge by selling off assets: thehigher the value of the assetbase, the higher the capitalcharge and the lower the budgetavailable for clinical care.

Trusts have also tried togenerate extra income by gettingin more private patients or morefunds for commercial research, orby treating more patients morequickly. “In effect, the hospitalbecomes a factory for conveyorbelt care”, says health policyprofessor Allyson Pollock and hercolleagues.

Thus hospitals and servicesare now planned more accordingto the financial demands of truststhan to the clinical needs of thepeople in the area they serve.Affordability has become farmore of a critical constraint inplanning priorities in whichclinicians and public healthdoctors are not required to beinvolved. Administrative runningcosts within the NHS areestimated to have doubledbecause of the imposed marketprocesses, rising from 5 per centto 12 per cent of total costs.

Moreover, the introduction of

22



the capital charge provided astream of funding that could beused to pay for new capitalinvestments – one that could bechannelled directly towards thefor-profit sector.

The Privatisation ofPublic Funding

Capital spending within the NHS,allocated by the government tomaintain, refurbish or replacebuildings, has been insufficientfor years. The backlog of mainte-nance and repair in the NHS isnow over £3.1 billion.

But public capital funding hasnow been virtually eliminated.Trusts, which became responsiblefor capital financing (by theintroduction of the capital charge)instead of the government, havethus had to turn to the privatesector to finance new invest-ments if they want to remain“competitive” in attractingpurchasers of their services (eventhough private finance is moreexpensive than public financing).

The Private Finance Initiative(PFI), launched in 1992 by theConservative government, wasextended to the National HealthService in 1997 by the Labourgovernment. A source of finance,not funding, PFI allows privatecompanies and consortia to buildand own hospitals which theylease to the NHS for between 20and 60 years. The NHS pays forthe building’s capital and runningcosts out of its incoming (mainlypublic) revenue. In effect, publicfunds subsidise the expansion ofthe private sector.

PFI hospitals cost the NHSmore than if it were to build itsown hospitals. A new hospital inEdinburgh, for example, wouldhave cost the state £180 million,but will cost it £30 million a yearfor 30 years at current prices –£900 million in total. The healthauthorities will meet these costsby selling three existing hospitals,and cutting 33 per cent of itsbeds and 20 per cent of its staffbudgets.

Most PFI schemes involvecentralising hospitals on a single,usually cheaper, site and sellingthe land on which previoushospitals were built. Private

money is now funding the largesthospital rebuilding programme inBritain for 30 years. And, ironically,as Allyson Pollock points out, it “isbeing paid for by the largest serviceclosure programme in the history ofthe NHS”.

Overall, the introduction of theprivate finance initiative to hospitalsin the National Health Service hasresulted in a 30 per cent reduction instaffed acute beds and a 20 per centreduction in clinical budgets andworkforce. Some 12,000 NHS bedshave closed since 1997. Governmentconsultants have calculated thatevery £200 million spent through thePFI leads to the loss of 1,000doctors and nurses. The costs ofproposed developments have soared75 per cent.

Even in the short term, paymentsfor a PFI hospital are usually higherthan the capital charge to thegovernment. Annual payments rangefrom 11-18 per cent of the construc-tion costs, compared to the 6 percent capital charge. Additionalpayments cover cleaning, lightingand laundry services that the privatehospital provides. Shareholders in PFIschemes can expect annual returnsof 15-25 per cent. As hospital trustswould never be allowed to gobankrupt, there is no risk to theconsortia’s funds.

The planning, supply and supportof PFI hospital services is left toprivate sector consortia. Detailedinformation about PFI hospitalschemes, particularly planningassumptions about the numbers ofbeds and services needed, is rarelypublicly available because of com-mercial confidentiality. The data thathas been obtained, however, sug-gests that projections about clinicalactivity and beds are lower thancurrent trends and health authorities’projections.

Although ostensibly financing theinfrastructure only, the private sectordecides how to supply the servicesand the investment needed tosupport these services. Healthauthorities and trusts no longercontrol the number of hospital bedsor the levels of service they believeare required for the people in theirarea. The government health ministersaid in November 2000:

“We had to get the hospitalbuilding programme started. Ifyou like . . . we had to create amarket in PFI because there wasnot a market.”

Although PFI is an expensive way tobuild new hospitals and leaves lessmoney to be spent on patient care,the government recently extendedthe initiative to some 3,000 localdoctors’ premises, communitypharmacies, health centres and long-term care facilities. Already healthcare companies and propertydevelopers are expanding into theownership and provision of primarycare premises. The government isalso considering encouraging theprivate sector to coordinate payroll,administration and computer servicesfor local doctors, and even theprovision of clinical services underPFI arrangements.

In the year 2000, the UKgovernment promised £20 billion($31 billion) of extra money to thenational health service over fouryears. But where will this taxpayers’money end up? A large chunk of thebillions the government has promisedto the National Health Service couldsimply disappear into the for-profitsector.

Per-Patient Funding

Health authorities receive blockbudgets from central government onthe basis of the anticipated needs ofall the people in the geographicalarea they serve. But the new NHSprimary care trusts which came intoeffect in April 2001 will be reim-bursed not on the basis of geo-graphic populations but on that ofgeneral practitioner’s patient lists.This fundamental shift in fundingallocation is similar to the USinsurance based system (see pp.25-26). It gives local health carepractices incentives to selectcarefully the patients they enroll(“cream skimming”) and to argue forreimbursement linked to individuals’needs. Both undermine the riskpooling and risk sharing basis ofresource allocation on a geographicbasis.

Moreover, the governmentrecently introduced legislation whichallows trusts to put a time limit onthe care they provide to a patient(rather than providing it for as longas a patient needs it). The legislationalso creates an incentive for them toredefine some care as “personal”care (which can be charged for)rather than “nursing” care. Takentogether, these changes pave theway for replacing public sources of

23


funding with private in some areas ofcare. Trusts will be under financialpressure to encourage patients totake out private, voluntary insurance.

Overall, the reimbursementmechanisms are being altered inways that facilitate a shift towardspersonal insurance and user chargesfor care that used to be free at thepoint of delivery.

Private Insurance

Despite the running down of theNHS, private medical insurance inthe UK has barely grown in adecade, certainly not to a level that itwould erode the social solidarityneeded to support a state-run,taxation-based medical service. Just11 per cent of the UK population,6.5 million people, have privateinsurance, largely through theiremployer – and they are concen-trated in the richest quarter of thepopulation.

Many people in Britain still thinkof private medicine as “hernia fixesin nice surroundings” and assumethat if you are seriously sick, youneed to be in an NHS hospital. Anadvertisement for one private healthcare insurance scheme plays on justthese assumptions: “We use theprivate facilities of the NHS [teach-ing hospitals] in London, so you getthe best of both worlds. First classmedical treatment when you needit.”

Those who want to leapfrog NHSwaiting lists tend to ignore theinsurance market and simply usetheir own “out-of-pocket” money forprivate treatment. The proportion ofelective treatments (for non-life-threatening conditions) paid forprivately is just over 13 per cent andhas changed little since 1981.

Moreover, most private medicalinsurance does not cover emergencytreatment. It tends to cover unfore-seen (acute) medical conditions, butonly if treatment is likely to lead to afull recovery. It does not usually payto treat long-term or “chronic”conditions that have no known cure,such as arthritis or asthma, or thatlead to permanent disability. Privatemedical insurance focuses on thosewho are good medical risks andrarely extends to the over-75s whoare most in need. Where it does, thecost of premiums escalates dramati-cally to reflect the presumed higherrisk.

If those who could afford to doso opted out of the public healthservice, for instance, by claimingrebates for taking out private healthinsurance, the NHS would still retainthe vast bulk of its business –children, the elderly and chronicsick– but it would lose large parts ofits income.

Looking further into the future,health care financing could haveimplications for the genetic testingof individuals for their predispositionin later life to certain illnesses. Thereis concern that people could becharged higher health or life insur-ance premiums, or refused insurancealtogether, if they had to tell theprospective insurer the results of anygenetic test they have had, particu-larly results indicating a susceptibil-ity to a disease. The British govern-ment recently stated that moregenetic tests would soon be availableon the NHS, but that they would nothave these discriminatory effectsbecause the health service is publiclyfunded from taxation, not frominsurance. But the market changesintroduced into the health serviceover the past decade which pave theway for private health care insurancecast doubt on these assurances. AsNGO activist Pat Mooney points out,“if your doctor is also your insuranceagent, the fight for genetic privacy isgoing to seem a little silly.”

Private Hospitals tothe Rescue?

Britain’s 300 or so private hospitalspredominantly treat five ailments:replacement hips, hernias, hysterec-tomies, heart conditions and haemor-rhoids. At present, they do littlework at either end of the medicalspectrum where most patients useor need the health system: primarycare such as visits to the localgeneral practitioner which accountfor nine of ten patients using theNHS (a market the private sector istrying to enter), and catastrophicinjuries and illnesses. The NHS didbuy in 30,000 operations from theprivate sector in 1999, but carriedout 6.5 million itself. In the year2000, the private sector carried outsome 800,000 elective surgicalprocedures.

But private hospitals could, ifpermitted, corner the market inconditions such as hip replacements,

cataracts and heart bypass grafts,and then drive prices up. Morepublic services could be con-tracted out and more chargesintroduced. As The Observerpoints out:

“what the Government – andtherefore all taxpayers – canachieve with its healthbudget will diminish becauseprivate providers, which haveto make profits, will bedearer”.

The need for commercial returns,particularly for companies withshareholders, could increase thecost of providing health care.

When the US governmentsent patients to private hospitalsrun by the Hospital Corporation ofAmerica (HCA), the companysent back inflated bills andexpenses. The case has nowbecome the largest fraud investi-gation in US history. The UKDepartment of Health has noexperience of preventing privatehospitals finding imaginaryillnesses or performing unneces-sary operations.

Costs, moreover, still fall onthe public sector for the trainingof nurses and doctors and foremergencies when operations gowrong – private hospitals tendnot to have emergency backup.Observer journalist Nick Cohenpoints out that the NHS does not“appear to know that their[private sector] record of treatingpatients who suddenly developcomplications and need emer-gency care is terrible”. In the year2000, there were nearly 142,000admissions from private hospitalsto the NHS.

But instead of restoring publicprovision of beds or abandoningprivate finance, the governmenthas turned to the private sectorto make up the shortfall which ititself produced. In October 2000,it signed a “concordat” withprivate hospitals and nursinghomes to treat NHS patients forwaiting list operations, intensivecare, and rehabilitation andpreventive services for the elderly(intermediate care). The arrange-ment will make it easier forprivate sector companies tooperate former NHS facilities andclinical services and to take overthe clinical workforce. Thegovernment is also consideringallowing private contractors to

24



manage health authorities andprimary care groups, and to runspecialist services such asdiagnostic centres, cardiac andneuro surgery, and radiotherapy.

Just half the private hospitalsector’s 10,000 beds are usuallyoccupied compared to the186,000 in the public sectorwhich are now almost alwaysoccupied. Two-fifths of generaland acute hospital beds areoccupied by people, mainlyelderly, who are not well enoughto go home but not ill enough toneed to stay in hospital. Newlegislation passed in 2001 allowsNHS bodies in future to redefinewhat health care shall be free andto charge patients for “personal”care (washing, feeding, toiletingand dressing) but not “nursing” or“medical” care. There are noregulation or accountabilitymechanisms for this increasinguse of the private sector.

These proposals could enablethe private sector to expandrapidly as hard-pressed hospitaltrusts shift elderly patients fromhospital beds into for-profitintermediate care. The trustswould pay for the first six weeksof their stay, but subsequentlycharge for personal care, which itwould be in the trusts’ financialinterests to define as broadly aspossible. Ultimately, publicfunding could be further reducedor withdrawn altogether. This wasthe pattern followed by long-termnursing and residential care in the1980s.

Privatisation ofLong-term Nursingand Residential Care

In 1983, the government allowedpeople entering private homes toclaim social security (welfare) topay for their care, an option notavailable to residents in publichomes provided by local authori-ties or the NHS. This systemcreated an incentive for publicauthorities to switch the elderly,disabled and mentally-ill into theprivate sector, close down theservices and homes they didprovide, and thereby release fundsfor themselves through reducedexpenditure and the sale ofassets.

This “unrestricted availability ofan untapped funding stream”, saysconsultant geriatrician Peter Crome,fuelled the extraordinary growth inprivate institutional care in the1980s and 1990s: 175,000 placesin 1985 had nearly quadrupled by1998 to 650,000 places, a growthfunded almost entirely out of thepublic purse. Today, the stateprovides not even one-fifth of placesbut pays for the care for 70 per centof people in private residential andnursing homes. Residential andnursing home care firms make muchof their profit by paying low wagesto casual labour, mainly women. Lowstaffing levels are associated withpoor quality of care, but there are nolegal minimum staffing requirements.

Once the private sector haddeveloped, the government switchedthe funding for long-term care fromthe national social security budget tothat of local authorities, which couldset eligibility criteria. An increasingnumber of some of the most vulner-able groups in society —the elderly,disabled and the long-term sick –now pay for their own care, or gowithout. There are widespreaddifferences across the country inassessing needs and determiningeligibility for services or for financialsupport, creating inequities. Accessto care is increasingly based onability to pay. Long-term care hasbecome primarily an individual ratherthan collective responsibility. Con-cludes health care researcher AllysonPollock:

“there is little evidence to showthat the shift to private-sectorfinancing and ownership of long-term care by these companieswill save money, especially if thecorporations in the UK havesimilar patterns of spending onadministration, capital andprofits to those in the USA.”

Conclusion

Since it was set up in 1948, theNHS has made great gains in ironingout inequities throughout Britain inthe availability and accessibility ofhealth and social care services. Thevarious structural changes made tothe financing and delivery of theseservices over the past decade,however, could reverse these efforts,conflicting as they do with theprinciples of universal coverage,shared risk and redistribution thattax-funded or social insurance-

funded systems generally upholdand aim for.

The NHS would not bedismantled but reconfigured. Itcould be left as a “sink service”trying to cope with emergenciesand complex health conditions,while the private sector made itsprofits from the more lucrativeparts of health care such aselective operations and intermedi-ate care – and from publicsubsidies

Once the NHS model ofuniversal care, free at the point ofdelivery, is lost, it will be difficult,if not impossible, to get it back. Apublicly-accountable healthsystem, resourced with adequatepublic funds, is the most effectiveway of providing decent healthcare to the majority of a country’scitizens.

Thanks to Allyson Pollock.

Sources: Gaffney, D and Pollock, A.,Putting a Price on the PFI, UNISON,1998; Eversley, J. and Sheppard, C.,Thinking the Unthinkable: The CaseAgainst Charges in Primary HealthCare, HealthMatters, 2000; Cohen, N.“Perils of Going Private”, The Observer,13 August 2000, p.27; Pollock, A.,Price, D. and Dunnigan, M., DeficitsBefore Patients, University CollegeLondon, 2000, website:www.ucl.ac.uk/spp; “Do Old PeopleHave a Future? And Is Any of it in theNHS?” Health Matters, Issue 40,Spring 2000, website:www.healthmatters.org.uk; New Lifefor Health by the Commission on theNHS, Vintage Press, London, 2000;Pollock, A., “PFI–You’ll Pay For Itlater”, Health Matters, Issue 38,Autumn 1999, pp.10-11, website:www.healthmatters.org.uk; Gaffney,D., Pollock, A.M., Price, D. and Shaoul,J., “The Private Finance Initiative”(four articles), British Medical Journal,3, 10, 17 and 24 July 1999;Macfarlane, A. and Pollock, A.,“Statistics and the Privatisation of theNational Health Service and SocialServices” in Dorling, D. and Simpson,S. (eds.), Statistics in Society, Arnold,London, 1998, pp.252-262; Pollock,A.M., Player, S. and Godden, S., “HowPrivate Finance is Moving Primary Careinto Corporate Ownership”, BritishMedical Journal, Vol 322, 21 April2001, pp.960-963; Pollock, A.M.,“Will Primary Care Trusts Lead to US-style Health Care?”, British MedicalJournal, Vol 322, 21 April 2001,pp.964-967; Harrington, C. andPollock, A.M., “Decentralisation andPrivatisation of Long-term Care in UKand USA”, The Lancet, Vol 351, 13June 1998, pp.1805-1808; Player, S.and Pollock, A.M., “Long-term Care:From Public Responsibility to PrivateGood”, Critical Social Policy, Vol 21(2), pp.231-255; ; Mooney, P.R., “TheETC Century”, development dialogue,March 2001.

25


directly led to the filthy NHS wards, dirty bed linen and inedible hospi-tal food of public infamy”.93 In the past three years, private companiescontracted to provide support services to the NHS have incurred morethan £2 million in penalties because they did not meet performancestandards. Low pay and poor working conditions are two of the maincauses of poor quality care, yet the benchmark of tendering and award-ing contracts is cost rather than quality. Many NHS managers now rec-ognise that “privatisation is not an infallible cure for service inefficien-cies”.94

Pressure from the families of hundreds of those who have died orbeen left disabled, brain-damaged or in severe pain as a result of inad-equate care in private facilities led to a Care Standards Act in 2000 toenforce standards in private hospitals, and residential and nursing homesin the UK.95 “Almost without exception, all of the tragedies . . . havebeen due to private hospitals being inadequately staffed”.96

Analysis of the quality of care provided by for-profit entities in theUnited States casts further doubts on the assertion that the private sec-tor provides better quality.97 Says Peter Julian of the Council of Cana-dians, “Virtually every credible study ever done has shown that pri-vate, for-profit health care is more expensive, less efficient and of lowerquality than public health care”.98

But if quality of private (and public) care could be assured, evalu-ated by public health concerns rather than economic benchmarks suchas the number of patients being treated or the length of waiting times,99

it may be argued that using state money to pay a commercial companyto provide health care services is no different from using it to fundpublic services. Moreover, private services, it is said, can fill the gapsin the public system.

In practice, the move to for-profit providers undermines the publicsector in several ways (even though this private sector depends uponthe public sector). When public and voluntary hospitals and health serv-ices have to compete with commercial providers for funding, whetherprovided by the state in the form of per-person public funds or privateinsurance or co-payments (additional payments by patients), less moneyends up flowing into the public system. Competition also leads to com-petition for patients – the private sector tends to take the healthier andwealthier. Typically, the public sector is left to care for more vulner-able people whilst at the same time contending with cutbacks in fund-ing.

The inevitable result is a loss of preventative services: the publicsector has less money for these services, while the private sector is notinterested in them. Private health providers do not aim to provide healthcare to society, but health products or surgical procedures to individu-als. They will not supply inherently unprofitable care to anyone, leastof all to those who are in no position to pay for it.100 And as publicservice activist Dexter Whitfield points out, “the penultimate privati-sation system is one in which taxpayers fund service provision, but theprivate sector own and mange the infrastructure and operate services”,the system that Britain is embarking upon.101 Health care, moreover,cannot be planned on the basis of individuals or highly-segmentedmedical practice: it is about populations and matching resources toknown priorities.

Changes in health care provision in the United States and LatinAmerica over the past two decades illustrate these trends clearly. In theearly 1990s in the US, a growing number of hospitals, health mainte-nance organisations (HMOs, or insurer-type intermediaries between

. . . continued from page 20

Many UKNational Health

Service managersnow recognise

that privatisationis not an infallible

cure for serviceinefficiencies.

Private insurerstend to select the

“best risks”,mainly young and

healthy people andreject those withchronic illnesses.

26



employers and hospitals), nursing homes, home care services and hos-pices became for-profit companies publicly traded on stock exchanges.HMOs, transformed from a social form of medicine into multibillion-dollar businesses depending on a mixture of public funding, privatehealth insurance and user charges, acquired non-profit hospitals cheaplyand gained effective control over US hospitals. The pursuit of marketshare, the search for profitable admissions and relentless cost-cuttingcame to dominate all aspects of health care, even that provided by so-cially-oriented entities. By the late 1990s, pressure to protect profitmargins had led to insurers and hospitals avoiding sick patients, themicro-management of physicians, a worsening of staff-to-patient ra-tios, and the outright denial of care to many. Instead of exercising greaterefficiency in the use of available resources and greater integration ofpreventive and treatment services, the industry merely tries to avoid

Health care ispublic rather thanprivate orindividual andshould be funded,managed andgoverned as such.

Trade Encroaching on HealthThe World Trade Organisation, notthe World Health Organisation, is,according to some, the interna-tional agency with the greatestimpact on health. Trade policieshave a substantial influence onhealth and the environment, whilemeasures to protect the environ-ment and human health are oftenregarded as trade barriers. WTOagreements do allow regulationsto be exempt from their rulesbecause of public health con-cerns, but the exemptions havebeen narrowly formulated andinterpreted on the grounds thatcountries could use health andsafety regulations as covert tradebarriers.

The dispute settlement processcompares like commodities withlike, ignoring to a large extent theprocesses and practices involvedin producing them. It requires anyregulations stricter than interna-tional standards to be based onscientific risk assessment. Theimplications for health, safety andenvironmental concerns areserious. For instance, no accountis taken of the differences be-tween a small-scale manufacturerand a multinational company, norbetween production processesbased on high labour standardsand those based on low standards.There is no requirement for thetrade experts who comprisetribunals to concern themselveswith public health. Public healthand safety measures which arethe “least trade restrictive” arefavoured. Voluntary measures arefavoured over compulsory ones –labelling or fines over taxation,bans or advertising restrictions.

Individual responsibility is favouredover public responsibility.

Other WTOAgreements

Three other WTO agreementsbesides GATS have particularimplications for health:

• The Trade Related IntellectualProperty Rights Agreement (TRIPs)sets minimum standards of protec-tion for all forms of intellectualproperty: patents, copyrights,trademarks, and industrial designsand licences. It obliges governmentsnot to disclose of information ofcommercial value provided formarketing licences, for instance, forpharmaceuticals and agriculturalproducts. TRIPs allows patents to begranted on products and processesfor 20 years. It allows patents onseeds, pharmaceutical drugs, genesand diagnostic tests, and also onminor innovations which are more“discoveries” than an “inventions”.

TRIPs does not promote freetrade: it protects monopoly rightsrather than encourages competition.Even free trade advocate JagdishBhagwati has described the WTO’sintellectual property protection as “asimple tax” for most poor countrieson their use of such knowledge,“constituting therefore an unrequitedtransfer to the rich, producingcountries”.

But TRIPs is justified on thegrounds that it ensures investment inresearch and development (R&D),and balances the interests of rights-holders with those of consumers andthe public. In practice, however, ithas probably hampered R&D in areas

of little commercial interest, whilethe “balance” is tilted in favour ofthe rights-holders, not leasttransnational corporations.

TRIPs has recently gainedinternational public attention becauseof its implications for the accesspeople in the South have to pharma-ceutical drugs, particularly AIDSdrugs in Africa. But this is just thetip of the iceberg of TRIPs-relatedhealth concerns.

Patents increase the prices ofpharmaceutical drugs which are paidfor in most countries by the sick orfrom health budgets, whether publicor insurance based. Patents do notdirect corporate R&D towardsserious or prevalent diseases ortowards more cost-efficient drugs.Thus research on products whichhave large potential markets –obesity, ageing, impotence andbaldness – prevails over health policyinterests. R&D costs are rarelyrevealed, although it is known that apharmaceutical company’s marketingbudget usually exceeds its R&Dcosts. Public institutions and publicfunding often carry out and supportmuch of the basic research andproduct development needed beforepharmaceutical drugs are brought tomarket, but this input is rarelyrecognised in the awarding ofpatents. The use and promotion ofTRIPs thus encourages themisallocation of public funds tocorporate marketing efforts, shiftingmoney from the sick and the poor tocorporate shareholders.

Moreover, intellectual propertyrights are hindering the dissemina-tion of knowledge and technology.Industrial countries currently hold 97per cent of all patents worldwide,

27


“Health care isnot a commodity

and thus not atradable good”.

International LabourOrganisation

while 80 per cent of patents grantedin developing countries belong toresidents of industrial countries.

• The Agreement on Applications ofSanitary and Phytosanitary Measures(SPS) covers food safety andregulations governing human, animaland plant health. Any measure agovernment takes to protect human,animal or plant life or health shouldbe based on international standards,guidelines and recommendationsdrawn up by recognised bodies suchas the FAO/WHO Codex AlimentariusCommission which deals with foods,hormones and additives. Any countrywishing to implement stricterstandards has to base them onscientific risk assessment.

The interpretation of this riskassessment, and thus the possibilityof stricter standards, has implica-tions for health policies. Disputesinvolving the SPS Agreement haveraised issues about the burden ofproof, the use of precaution, anddefinitions of risk assessment,scientific evidence and necessity.

Take, for example, regulationscovering potentially hazardousmethods of production, such asthose which have potential carcino-genic or hormonal impacts if peopleare exposed to them over the long-term or at low-level doses. Suchregulations are more open to chal-lenges under the WTO than regula-tions governing finished productsbecause of known evidence of theimmediate and specific hazardscaused by such products.

The WTO disputes panel hasgenerally ruled that public policymeasures not supported by sufficientquantitative scientific evidenceviolate WTO rules. For example, the

WTO ruled that the EU’s ban onhormone-treated beef was higherthan international standards, was notsupported by scientific evidence anddid not address defined risks.Precautionary measures, however,may be appropriate for risks whichare small but which have potentiallycatastrophic consequences.

The Codex Commission has longbeen dominated by representativesof the industries for which theCommission sets standards (althoughthe industry representatives attendas part of a WTO member country’sdelegation). The US has recentlycalled for sections of Codex invokingthe precautionary principle to beremoved entirely.

• The Agreement on TechnicalBarriers to Trade (TBT) encouragescountries to use internationally-agreed standards for their technicalregulations but the regulationscannot be more “trade restrictive”than necessary. It does not identifythe standards it favours – those ofthe WHO or of a manufacturer couldbe considered equally valid.

The International StandardsOrganisation (ISO), for example, isan industry-based organisation (notan inter-governmental one likeCodex) which has been accepted bythe TBT as eligible to draw upinternational standards. The ISO hasrecently become involved in settingwater standards, raising concernsthat such standards will be ratcheteddownwards to reflect industrypreferences and priorities rather thanpublic health.

TBT thus has implications for theproduction, labelling, packaging andquality standards of pharmaceuticals,biological products and foodstuffs.

Poverty and Hunger

Besides these specific WTOagreements, various socio-economic factors associated withthe current expansion of interna-tional trade have direct impactson health as well. Poverty remainsthe main cause of ill health.Economic liberalisation, which theWTO facilitates, has contributedto unemployment, low wages andhigher food costs. The environ-mental impacts of economicgrowth – climate change, defor-estation, loss of agricultural land,desertification, air and waterpollution – all have negativehealth impacts as well.

In many poorer countries, themajor cause of ill-health andmortality is not infectious diseasebut simply hunger. Malnutritioncauses death and disease. Anadequate diet and clean water areprobably the best drugs againstmany infectious diseases. Asks DrDorothy Logie of Medact, a UKlobby group of health profession-als working to alleviate thethreats to health of poverty,environmental degradation andviolent conflict: “What is thepoint of immunising children ifwe’re then going to starve them?”

Sources: Koivusalo, M., World TradeOrganisation and Trade-Creep in Healthand Social Policies, GASPP OccasionalPaper 4/1999, Helsinki, 1999,website: http://www.stakes.fi/gaspp;Rowson, M., “Globalization andHealth-Some Issues”, Medicine,Conflict and Survival, Vol. 16, 2000,pp.162-174; Wallach, L. and Sforza,M., Whose Trade Organization?, PublicCitizen, Washington, 1999, website:www.citizen.org.

costs.102 “More than any other country”, concludes The Economist,“America has turned health care into a business”. Health care is thelargest sector of the US economy; over $1 trillion is spent on it everyyear, 46 per cent coming from government insurance programmes.103

Nonetheless, some 44 million US Americans – one in six people – donot have health insurance, while millions of others are underinsured.104

Latin America, meanwhile, (particularly Chile, Colombia, Peru,Argentina, Brazil, Mexico and Venezuela) has become a testing groundfor the privatisation of health care in the name of “reform”, pushed bythe World Bank, Inter-American Development Bank and US-trainednational economists, and by the export targets of US health care pro-viders and insurers. Private insurers tend to select the “best risks”, mainlyyoung and healthy people. They reject those with chronic illnesses andleave behind those who cannot afford the insurance. Private companies

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tend not to operate in the countryside where health services have al-ways been sparse.105 As The Economist points out, “The poor in ruralcommunities are unattractive clients for managed-care organisations,and may languish outside the new systems.”106 Many “informal” orcasual workers are also outside the public health system.

Yet private operators rely on the very state health and social serv-ices that they are undermining. They take trained and experienced stafffrom the state system, select patients whose needs the public serviceshave already identified, offer only the (profitable) services they wantto, and set up private facilities, ranging from laboratory analysis toresidential care, which can be rented or contracted out to the publicservice. The WTO itself acknowledges that:

“private health insurers competing for members may engage insome form of ‘cream skimming’, leaving the basic public sys-tem, often funded through the general budget, with low-incomeand high-risk members. New private clinics may well be able toattract qualified staff from public hospitals without . . . offeringthe same range of services to the same population groups”.107

In Brazil, the private sector can now offer 120,000 doctors for one-quarter of the population, whilst the public sector has fewer than 70,000doctors for everyone else. As Public Services International concludes,such private health care “is never cheaper or more comprehensive thanstate care”.108 The US is the most extreme example of this provision: ithas the most administratively expensive health system in the worldcovering the lowest percentage of the population.109

In India, under the influence of World Bank reforms, medical carehas been handed over to the private sector without mechanisms to en-sure the quality and standards of treatment. Infectious disease controlprogrammes run by the state have been disrupted by being deprived offunds. Similar results have occurred in Sub-Saharan Africa.110

Private provision, in other words, is not an effective means to pro-mote public health. Yet without good public health, the health of everyindividual is endangered.111 As food policy analyst Tim Lang pointsout, many public health gains such as clean air, clean water and foodsafety were won once the affluent and the middle classes recognisedthat they could not escape the consequences of unhealthy conditionsand that it was in their interests to tackle the causes of ill-health to-gether.112 Many of the pioneers striving for more and better housing inBritain, for instance, argued that housing improvements were not just asocial right but also a health gain for all. As Geof Rayner of the UKPublic Health Association points out, “a market-based approach to healthnot only drives up the costs of health care, but it can also lead to disin-terest in the factors that make people ill. A consumer society promises– falsely – that medical technology can fix diseased individuals, andthat good health can be bought and sold in the marketplace rather thanbeing something to promote or work for.”113

ConclusionBy means of GATS, the WTO is stage-managing a new privatisationbonanza. Multinational and transnational corporations, including phar-maceutical, insurance and health care companies, are lobbying hard tocapture the chunks of gross domestic product that governments cur-rently spend on public services such as health and education. Revi-sions to GATS are by and large being proposed by trade negotiatorsfrom countries bent on obtaining better market access to export mar-

Servicesliberalisation willresult in the massmarketisation andprivatisation ofhealth, education,social care andother public andwelfare services.

Publicly-fundedhealthcare carriedout by the privatesector is not apublic good but aprivate subsidy.

29


The WorldTrade

Organisation isone of the most

importantinfluences onhealth today.

Trade issues andTNC interests

“will increasinglyoverride publicpolicy, distort

planning, divertresources . . .

marginalise socialand human needs,

impose newcharges and createtwo-tier systems.”

Dexter Whitfield,Public Services or Corporate

Welfare,Pluto Press, 2001.

kets for domestic industries. Officials in other government departmentsresponsible for health, agriculture or the environment may not be awareof what is being negotiated, nor the implications. Publicly-accountableservices could be dismantled and the door effectively closed to everreviving them.

A wide range of Southern governments, unions and NGOs contendthat a thorough assessment, independent of the WTO and associatedbodies such as the World Bank or IMF, of the health, social, environ-mental and cultural impacts of existing service liberalisation (and in-deed of all the WTO agreements) must be conducted, with special ref-erence to the poorest and to women, before negotiations continue onGATS. Some commentators believe that:

“it would be reckless for governments to expand the GATS be-fore the full implications of existing provisions and current cov-erage have even been assessed or become widely known. Rather,the GATS policy implications should . . . be reviewed, assessed,fully debated and, where necessary, the agreement should beformed or rolled back. To expand such an agreement would beirresponsible.”114

Many British Members of Parliament, too, have called on the govern-ment to ensure that there is an independent and thorough assessment ofthe likely impact of the extension of GATS on the provision of keyservices, both in the UK and internationally.115 GATS itself mandatesan assessment of trade in services, particularly of the impacts on devel-oping countries (Article XIX), but the WTO Secretariat has done littleso far towards this..

The African Group of countries believes that developing countrieshave already made “extensive concessions” without receiving suffi-cient benefits in return. The WTO Secretariat acknowledges that manydeveloping countries signed on to GATS in 1995 without appreciatingthe Agreement’s full implications. Many of them have poorly-devel-oped public services and made some wide-ranging commitments in thebelief that foreign direct investment would step in to provide them.Several developing countries are arguing that they should not liberal-ise their service sectors further, but that the developed countries shouldreduce their subsidies and open up areas such as textiles and agricul-ture in which developing countries often have a comparative advan-tage.116 Developing countries have also pointed out that GATS outlinesseveral clear specific and detailed rules to ensure the movement acrossborders of capital related to the supply of services, but nothing compa-rable concerning the movement of people (see Box, p.12)117

Public sector unions are calling for public services to be modern-ised and improved, but based on principles of democratic accountabil-ity, effective delivery, adequate funding, equality of access and fair-ness and partnership at work.118 The current ostensible “exclusion” ofpublic services from GATS should be made actual for services pro-vided in the public interest.

Opposition to GATS, however, should go hand-in-hand with sup-port for campaigns against privatisation more broadly and generally. Itwould be a hollow victory for GATS to be curtailed only for bilateraland plurilateral arrangements with the same effects to increase (seeBox, p.30) or for the IMF’s hold in the South to tighten. After all, manygovernments are already themselves restructuring public services; inseveral respects GATS is merely a mechanism for “locking-in” exist-ing commercial practices. In Ecuador and Brazil, various groupingsand coalitions of physicians, public health activists, trade unions and

30



If Not Multilateral, Then BilateralThe Proliferation of Other Avenues

One aim of including serviceswithin the rules governinginternational trade was toimprove upon the time-consum-ing, laborious and chaoticprocess of negotiating separatetreaties bilaterally or regionallybetween countries. But thebilateral or regional approachhas not only continued butproliferated from the EU to theAmericas, Africa and Asia.When he was Vice President ofthe European Commission, LeonBrittan acknowledged in 1998that the Commission was:

“using regional negotiationsto open up the serviceseconomy in our partnercountries . . . to the East,in the Mediterranean, withSouth Africa, with Mexicoand the US.

Over 400 wide-ranging bilateraltreaties have been agreed in thepast two decades, but havelargely evaded public scrutiny.The number of bilateral invest-ment treaties quintupled in the1990s from 385 in 1989 to1,857 at the end of 1999.More than half of them (1,013)were between Western coun-tries and developing or Centraland Eastern European countries.Except for 11 between Westerncountries, the rest wereconcluded between Third Worldand Central and EasternEuropean countries.

The treaties are designed toensure the security of foreigndirect investments. The UnitedNations Conference on Tradeand Development (UNCTAD)describes bilateral investmenttreaties as “the most importantprotection of internationalforeign investment” to date.

The main provisions of suchtreaties are not dissimilar fromthose of GATS or the aban-doned OECD MulilateralAgreement on Investment(MAI). They usually cover thescope and definition of foreigninvestment; admission ofinvestments; national and most-favoured nation status; fair andequitable treatment clauses;compensation guarantees forexpropriation, war and civil

unrest; guarantees of fund transfersand the recuperation of capital gains;subrogation of insurance claims; anddispute settlement provisions.

US President Clinton said thatthe US-Uzbekistan treaty created“conditions more favorable for USprivate investment” and was de-signed to “protect US investment”.The underlying goal would seem tobe not to facilitate Uzbek investmentin the US, but to enable US intereststo extract raw materials more easilyand take advantage of cheap labour.

The majority of treaties designatethe World Bank’s InternationalCenter for the Settlement of Invest-ment Disputes (ICSID) as thearbitration body. This supra-nationaland private transnational organisa-tion has the task of adjudicatingvirtually all investment disputeswithout democratic structures ortransparency.

Deeper than GATS

The announcement of a bilateraltrade deal between Singapore andAustralia highlighted, according tothe Financial Times, “the increasingview among some world leaders thatthe bilateral may be the best, evenonly, way to stimulate global liberali-sation”.

Indeed, a fervour for free tradeagreements has been sweepingthrough the Asia-Pacific area withAustralia, Canada, Chile, Japan,South Korea, Mexico, Singapore andNew Zealand rushing to sew up aweb of bilateral deals spanning theregion. Asean (Association of SouthEast Asian nations) leaders haveproposed an ambitious free tradearea with China, Japan and SouthKorea. Much of this activity is due tothe WTO renegotiations beingstalled, although many Asiangovernments also do not want to beleft outside other trade groupingssuch as NAFTA, the EU andMercosur (the South Americancustoms union).

Of the proposed US-Singaporeagreement, the President of the USCouncil of Service Industries, RobertVastine, stressed that it “will be thebasis for bilateral agreements withChile and with other countries, andfor services negotiations in the WTO

and in the FTAA [Free TradeArea of the Americas]”. Vastineadded that “a safeguardprovision for services . . . wouldboth be harmful and a badprecedent”. Meanwhile, accord-ing to Member of the EuropeanParliament Caroline Lucas, theEU is:

“completing a whole seriesof bilateral trade negotia-tions in which the servicesagenda goes far beyondanything even dreamed of inthe GATS agreement”.

The services liberalisationenvisaged in these agreementsnot only goes much deeper thanGATS but would also beimplemented much faster. TheEU’s agreement signed withMexico, for instance, has alarger scope than any otheragreement the EU has everconcluded with a third country,and exceeds the services,investment and intellectualproperty provisions in the NorthAmerican Free Trade Area(NAFTA).

The US and the EU havedominated the development ofthe WTO and have also led thetrend by which countries getwhat they want through othermeans, using whatever avenuebest suits their purposes,including numerous hard-to-scrutinise bilateral deals. Aspublic service activist DexterWhitfield points out, “states arebound up in a web of multina-tional trade and financialtreaties, agreements andmembership of regional andworldwide bodies.”

Sources: Sorensen, N., “BilateralInvestment Treaties and Disputes”,memo, Institute for Agriculture andTrade Policy, February 2001;McNulty, S., “Bilateral Trade DealsGain Favour”, Financial Times, 16November 2000, p.17; deJonquières, G., “Asian Ambition”,Financial Times, 28 November 2000,p.24; Lucas, C., EU-Mexico Report,(mss), January 2001; Vastine, R.,letter to USTR Barshefsky on US-Singapore FTA Negotiations,December 15 (no year given),website: www.uscsi.org/publica-tions/papers/ustr.htm, accessed 24March 2001; Whitfield, D., PublicServices or Corporate Welfare, PlutoBooks, London, 2001.

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community groups resisting the privatisation of health care servicesand supporting alternatives to strengthen public services are workingalong similar lines to GATS critics. So are activists in other countrieswho stress that the public sector can be cheaper, as efficient, more flex-ible, more transparent and accountable than privatisation or public-private partnerships.119

International rules governing investment are certainly needed. Thecurrent set, however, and the way in which they are implemented, areinvariably a charter for corporations to do as they please. Just becausethe World Trade Organisation, and indeed the World Bank and IMF,are doing the wrong job does not mean that international institutionsare not needed to iron out the vast inequalities of the global economyor to prevent further meltdowns in financial markets. At issue is notwhether to have rules governing international trade but what kind ofrules to have and how they should be implemented so that they donot have adverse health, social and environmental impacts nor exacer-bate inequities. As Kevin Watkins of Oxfam stresses, “We desperatelyneed a rules-based system of global governance that places people be-fore corporate profit, and shares the benefits of globalisation moreequitably.”120

Health is a fundamental human right, recently defined under theCovenant on Economic, Social and Cultural Rights: “all people havethe right to the highest attainable standard of health . . . as a prerequi-site for the full enjoyment of all other human rights”. Human rights andpublic health policies are indispensable. Trade policies, however, arenegotiable.

Notes and References

11. Vastine, R., op. cit. 4.12. “Opening World Markets for Services: To-

wards GATS 2000”, website: http://gats-info.eu.int/gats-info/g2000.pl?NEWS=aaa,accessed 1 November 2000.

13. “Opening World Markets”, op. cit. 5.14. After oil, tourism earns the most foreign cur-

rency for some 30 developing countries. Butsome 60 to 90 per cent of the money that tour-ists spend goes to transnational companieswhich own networks of airlines, hotel, touroperators and travel agents. See Seifert-Granzin, J. and Jesupatham, S., Tourism atthe Crossroads: Challenges to DevelopingCountries by the New World Trade Order,Equations/Tourism Watch, Frankfurt, 1999;“Liberalising Tourism under the GATS: Pit-falls for Developing Countries”, “Notes onGATS”, (msss), Equations, Bangalore, May2001, email <[email protected]>; WWF,“Preliminary Assessment of the Environmen-tal & Social Effects of Liberalisation in Tour-ism Services”, WWF International DiscussionPaper, Gland, February 2001, website:www.panda.org, email: [email protected]

15. “Trade in Services Liberalisation and GenderImpacts in the European Union”, EuropeanWomen’s Lobby, Brussels, September 2000,website: www.womenlobby.org

16. The GATS text is available at www.wto.org/english/tratop_e/serv_e/gatsintr_e.htm. Seealso WTO Secretariat, Trade in Services Di-vision, An Introduction to the GATS, October1999, website: www.wto.org/english/tratop_e/serv_e/gsintr_e.doc. For a range of articles anddocuments on GATS, see: www.xs4all.nl~ceo/gatswatch/gatswatch/html. A WTO Council for Trade in Services is

Services: A Guide to the GATS: The GeneralAgreement on Trade in Services”, website:h t t p : / / g a t s - i n t o . e u . i n t / g a t s - i n f o /guide.pl?MENU=bbb, accessed 1 November2000.

6. European Services Forum, “Set of Principles”,26 January 1999, website: www.esf.be/f_e_abou.htm

7. Office of the United States Trade Representa-tive, “USTR 1998 Trade Policy Agenda and1997 Annual Report”, USTR, Washington,DC, 2 March 1998, quoted in Price, D. et al,op. cit. 3.

8. Human Development Report 1999, UNDP,New York, p.3. If proposed GATS revisionsgo ahead, any government measure to encour-age national or regional culture, includingfunding for national film boards, could bechallenged.

9. European Services Forum, op. cit. 6.10. Estimated from WTO Annual General Report,

Geneva, 1998, cited in Balasubramaniam, K.,“Globalisation & Liberalisation of Health careServices: WTO & the General Agreement onTrade in Services”, paper prepared for Peo-ple’s Health Assembly, Dhaka, December2000, website: www.pha2000.org. The World Bank has calculated that in lessdeveloped countries, infrastructure develop-ment involving at least some private backingrose from US$15.6 billion in 1990 to $120billion in 1997. Around 15 per cent of thiswas direct foreign investment in publicschemes. See Roger, N., “Recent Trends inPrivate Participation in Infrastructure: PublicPolicy for the Private Sector”, World BankGroup, 1999, pp.1-4, note 196, quoted inPrice, D. et al., op. cit. 3.

1. Negotiations have also begun to change theAgreement on Agriculture (AoA). Since the1947 General Agreement on Tariffs and Trade(GATT) governing trade in goods betweenthose countries who signed the Agreement,there have been seven major GATT negotia-tion sessions: the Conference of Annecy,France, 1949; the Conference of Torquay, UK,1950; the Conference of Geneva, 1956; theDillon Round, 1962; the Kennedy Round,1964-67; the Tokyo Round, 1973-77; and theUruguay Round, 1986-94.

2. Public Services International, The WTO andthe General Agreement on Trade in Services:What is at Stake for Public Health?, PSI,Ferney-Voltaire, France, 1999, p.5, website:www.world-psi.org, email: [email protected].

3. “The European Union and World Trade”,Frontier-Free Europe, 1-4, August-Septem-ber 1999, quoted in Price, D., Pollock, A.M.and Shaoul, J., “How the World Trade Organi-sation is Shaping Domestic Policies in HealthCare”, The Lancet, Vol 354, 27 November1999, pp.1889-1891, website: www.thelancet.com.

4. Vastine, R., statement before the Senate Fi-nance Committee Subcommittee on Interna-tional Trade, 21 October 1999, website:www.uscsi.org, accessed on 25 October 2000.

5. Public Services International, op. cit. 2, p.5.The estimate is calculated from WTO figuresof national balance of payments records andthus represents cross-border trade. The valueof services provided in one country by com-panies based in another (commercial pres-ence) could be at least as large as cross-bor-der trade. See “Opening World Markets for

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responsible for the workings of the GATSAgreement. It currently has three sub-groups:a Committee on Specific Commitments,a Working Party on Domestic Regulation anda Working Party on GATS Rules (emergencysafeguards, subsidies, government procure-ment).

17. Air transport services are largely excludedfrom GATS, but a mandated renegotiation ofthe air transport Annex at least once every fiveyears is expected to define these services moreconcisely so as to restrict exclusions. “TheWTO approach . . . will means a death sen-tence for airlines in developing countries” saysone international air transport official. SeeWilliams, F., “WTO Seeks to Spread its WingOver Air Services”, Financial Times ,29 September 2000, p.13.

18. Sinclair, S., GATS: How the World TradeOrganization’s New “Services” NegotiationsThreaten Democracy, Canadian Centrefor Policy Alternatives, Ottawa, September2000, pp.24, 68, website: http://www.policyalternatives.ca; email: [email protected]. One effect of not defining services is thatmore (as yet unthought of) services can be in-corporated in future. GATS does define, how-ever, “sector”, “measures”, “supply” and “per-son”. A WTO guide to GATS identifies 11broad service sectors, each divided into sev-eral sub-sectors:

* Business (professional including legal,accounting, auditing, bookkeeping,architectural, real estate, engineering,medical and dental, veterinary, computer,management consultancy, advertising);

* Communication (telecommunications, postal,courier, audio-visual, radio, television, film,video, satellite);

* Construction and related engineering services;* Distribution (retail, wholesale, franchising);* Educational;* Environmental (water delivery, refuse dis-

posal, sewage, sanitation);* Financial (insurance, reinsurance, underwrit-

ing, banking, provision of financial informa-tion, asset management);

* Health-related and social;* Tourism and travel-related (travel agencies,

tour operators, hotels, restaurants, catering,tourist guides);

* Recreational, cultural and sporting (entertain-ment, news agency);

* Transport (sea, water, air, space, rail, road,pipeline); and

* Other (including energy). Most WTO members used the WTO/UN clas-sification system as the basis for schedulingcommitments, but not the US. For the EU’sinterpretation of these services, see “Open-ing World Markets for Services: A Guide tothe GATS: Which Sectors Are Covered byGATS?”, website: http://gats-into.eu.int/gats-info/guide.pl?MENU=ccc, accessed 1 No-vember 2000.

19. “Opening World Markets”, op. cit. 12. The International Chamber of Commercestresses that manufacturing industries are in-fused with services from beginning to end:research and development, inventory manage-ment and control, transport, marketing, adver-tising, insurance, and “backroom” functions,such as accounting and legal services. Like-wise, agriculture requires research and devel-opment, finance, insurance, storage, transport,distribution, marketing, and a host of techni-cal services. See website: http://www.iccwbo.org/

20. The WTO Secretariat states that “the fact thatthe GATS rules are still necessarily untested,

and that the services schedules are much morecomplex than those for goods, adds to the dif-ficulty of assessing exactly what rights andobligations WTO members have assumedunder the services package”. See WTO Sec-retariat, op. cit. 16.

21. WTO, “The GATS: Objectives, Coverage andDisciplines”, website: www.wto.org/english/tratop_e/serv_e/gatsqa_e.htm The “supply” of a service includes its deliv-ery, production, distribution, marketing andsale.

22. The WTO website lists each country’s Sched-ules of Specific Commitments: http://www.wto.org/english//tratop_e/serv_e/22-specm_e.htm. The GATS text itself (see ref.16) explains how to read a schedule. Moreaccessible is the EU’s information point onworld trade in services which enables com-mitments to be viewed by country or by serv-ice sector, website: http://gats-info.eu.int. The WTO Secretariat has identified over1,400 errors and inconsistencies made by gov-ernments in scheduling their commitments.Such errors would become more significantif the agreement was expanded. See Gould,E. and Joy, C., In Whose Service? The ThreatPosed by the General Agreement on Trade inServices to Economic Development in theSouth, World Development Movement, Lon-don, December 2000, p.16, website:www.wdm.org.uk. Canada believed it had protected from GATSits 1965 national trade agreement (Auto Pact)to encourage domestic car manufacturing, butthe WTO ruled otherwise in May 2000. SeeSinclair, S., op. cit. 18, pp.42-43. More than 70 WTO members, mainly North-ern countries familiar with the system, havelisted many exemptions to the Most-FavouredNation clause. But in a US challenge arguingthat the EU’s preferential banana import ar-rangement with Caribbean countries discrimi-nated against US “service providers” involvedin banana distribution, a WTO dispute panelruled that the EU’s arrangement contravenedGATS – the EU had forgotten to list it as anexception to the MFN clause. See Sinclair, S.,op. cit. 18, pp.48-49.

23. WTO Secretariat, “Recent Developments inServices Trade”, 9 February 1999, S/C/W/94,website: http://docsonline.wto.org, quoted inGould, E., “The 2001 GATS Negotiations: ThePolitical Challenge Ahead”, The Alliance forDemocracy, March 2001, website:www.thealliancefordemocracy.org/cam-paigns/2000.

24. Hartridge, D., “Opening Markets for Bank-ing Worldwide: The WTO General Agreementon Trade in Services”, speech to internationalbanking seminar, 8 January 1997, London,UK, quoted in Gould, E., “The WTO GeneralAgreement on Trade in Services: SeparatingWTO FACT from FICTION”, Council of Ca-nadians, website: www.canadians.org, re-ceived May 2001.

25. Lal Das, B., “Negotiations in Agriculture andServices in the WTO: Suggestions forModalities/Guidelines”, paper presented at“Current Developments in the WTO: Perspec-tive of Developing Countries”, Third WorldNetwork seminar, Geneva, 14-15 September2000. Many of the deregulatory and privatisationaspects of GATS are similar to the structuraladjustment measures imposed on developingcountries by the IMF and World Bank.

26. Caplan, R., GATS Handbook, Alliance forDemocracy, Waltham, Massachusetts,website: http://www.thealliancefordemocracy.org/, accessed 24 February 2001.

27. For example, a WTO dispute panel decidedin 1996 that a US ban of gasoline imports fromBrazil and Venezuela because they did notmeet its Clean Air Act standards contravenedGATT rules. In September 2000, however, aWTO dispute panel upheld a French ban onimports of “white” asbestos, challenged byCanada – the first time that a trade-restrictivemeasure has been exempted from WTO ruleson health grounds. In March 2001, moreover,the WTO’s appeals body ruled that a prod-uct’s health risk was a legitimate factor indetermining whether it was “like” anotherproduct. See Waskow, D. and Yu, V.B., A Disserviceto the Earth: The Environmental Impact ofthe WTO General Agreement on Trade inServices (GATS), Friends of the Earth US,Washington, June 2001, website: http://www.foeeurope.org/trade/wto/wto.htm

28. Sinclair, S., op. cit. 18, p.1. GATS Articles XIV and XIV bis provide forgeneral exceptions and more specific nationalsecurity exceptions. The Article XIV exemp-tion for measures “necessary to protect hu-man, animal or plant life or health”, is bor-rowed from GATT (Article XX), but leavesout an additional GATT exemption for meas-ures “relating to the conservation of exhaust-ible natural resources”, an omission fromGATS which could be interpreted as inten-tional. Article XIII provides exceptions forgovernment procurement from most-favourednation, market access and national treatmentprinciples, but not transparency.

29. For details of laws in countries of the Southwhich could be threatened by GATS rules ofnational treatment and market access, seeGould, E. and Joy, C., op. cit. 22, pp.10-12.

30. Sinclair, S., op. cit. 18, pp.1, 6, 40. The term “measure” is a broad one. It coversany law, regulation, rule, procedure, decisionor administrative action taken by central, re-gional or local governments and authoritiesand non-governmental bodies exercising pow-ers delegated to them by these governmentsand authorities. GATS could therefore restrictthe ability of governments to use subsidiesand grants; nationality requirements; labourstandards; residency requirements; licensingstandards and qualifications; registrationagreements; performance measurements;technology transfer provisions; local contentor employment provisions; economic quotasor needs tests; licensing or training require-ments; restrictions on ownership of propertyor land; limitations on access to markets; en-vironmental and consumer protection meas-ures; and some tax measures. See also p.X ondomestic regulation.

31. Hartridge, D., op. cit. 24.32. “Opening World Markets”, op. cit. 5.33. The Multilateral Agreement on Investment

(MAI) was negotiated among the 29 indus-trial country members of the Organization forEconomic Cooperation and Development(OECD) from 1995 until 1998, when nego-tiations were abandoned because of wide-spread citizen opposition. As many featuresof the GATS renegotiations resemble aspectsof the MAI, the issues raised by GATS aresimilar to those underlying the MAI: loss ofsovereignty on the part of nation-states; lossof governments’ ability to protect the socialsecurity system and national culture; anddoubts about the future of public services in acontext of trade and investment liberalisation.Rules on investment may also be negotiatedelsewhere, for instance, the TRIMS agree-ment. See Khor, M., “The WTO and the Pro-posed Multilateral Investment Agreement:

33


Implications for Developing Countries andProposed Positions”, Third World Network,Penang, (undated); MAIgalomania, CorporateEurope Observatory, Amsterdam, February1998; License to Loot: The MAI and How toStop It, Friends of the Earth, Washington,1998; Clarke, T. and Barlow, M., MAI: TheMultilateral Agreement on Investment and theThreat to Canadian Sovereignty, StoddartPublishing, Toronto, 1997.

34. Ruggiero, R., “Towards GATS 2000–A Eu-ropean Strategy”, address to the Conferenceon Trade in services, organised by the Euro-pean Commission, 2 June 1998, Brussels,cited in Gould, E. and Joy, C., op. cit. 22, p.4.

35. Sinclair, S., op. cit. 18.36. WTO, op. cit. 21.37. “There is not a single empirical study analys-

ing on a comprehensive basis – across coun-tries, sectors and modes – the effects on serv-ices trade attributable to scheduled commit-ments”. See WTO Secretariat, op. cit. 23. Such statistics were also missing from theUruguay Round. See Raghavan, C.,Recolonisation: GATT, the Uruguay Roundand the Third World, Zed Books, London,1990.

38. At the conclusion of the Uruguay Round, itwas agreed that negotiations had to continueimmediately on a number of service sectors:financial, maritime transport and basic tel-ecommunications services and on the move-ment of natural persons supplying services.These led to various Annexes. The Annex onFinancial Services, which came into force inJanuary 1999, removed many obstacles for fi-nancial services corporations wanting to en-ter “emerging markets”. It is predicted to lib-eralise over 90 per cent of the world marketin insurance, banking and brokerage services.See Corporate Europe Observer, no 4, July1999, “Special WTO Edition”, website: http://www.xs4all.nl/~ceo/observer4/index.html,accessed 24 February 2001. The Annex on telecommunications estab-lished the right for any service supplier to haveaccess to and make use of public telecommu-nication networks and services (telephone,telegraph, telex and data transmission, but notradio or television) on reasonable and non-discriminatory terms.

39. Gould, E., “The Next MAI”, Fall 1999, Coun-cil of Canadians, website: www.canadians.org, accessed 25 October 2000. The WTO Secretariat stated in 1999: “TheGATS rules are not quite complete, and arelargely untested. The process of filling thegaps will require several more years of nego-tiations . . . Among the most important ele-ments in the GATS package is the promisethat successive rounds of negotiations will beundertaken to continue opening up world tradein services”. See WTO Secretariat, op. cit. 16.

40. WTO Secretariat, op. cit. 16. Former WTO Services Director DavidHartridge said, “It [GATS] has a built-in com-mitment to continuous liberalization throughperiodic negotiations, a far more solid com-mitment than the old GATT ever had.” SeeHartridge, D., op. cit. 24.

41. Brittan, L., “European Objectives For Serv-ices Worldwide: How the WTO Can Help”,speech, 2 June 1998, Brussels, website: http://gats-info.eu.int/gats-info/gnews.pl?NEWS=ccc, accessed 1 November 2000.

42. Speech to the US Council for InternationalBusiness, New York, 8 June 2000, website:h t t p : / / e u r o p a . e u . i n t / c o m m / t r a d e /speeches_articles/spla23_en.htm

43. Negotiators aim to reclassify services by:- narrowing the description of service sub-

sectors in which governments have made theleast number of commitments (such as health,education and social services) and broaden-ing that of those in which members have madethe greatest number;- disaggregating services to make it easier forcountries to demand or to offer access to aparticular sub-sector;- clustering related services together so that acountry’s specific commitment applies to thewhole group rather than just one sector;- reclassifying new services so that they areencompassed by existing commitments. Hospital management, for instance, could bereclassified under business services andthereby hived off from health-related servicesectors in which WTO members have notmade many commitments. Or health informa-tion systems could be classified under “com-puter and related services” instead of “health-related and social services”. Or ancillary serv-ices such as catering, laundry and cleaningcould be classified not under health servicesbut elsewhere. The EC has proposed that wa-ter supply should be considered part of an en-vironmental services “cluster”, while the UShas argued that all energy-related servicesshould be treated as a cluster. Thesereclassifications would affect the interpreta-tion of existing commitments as well as fu-ture commitments. Canadian researcher ScottSinclair regards service reclassification, aseemingly simple technical procedure, as ameans “to expand GATS coverage by stealth”.See Sinclair, S., op. cit. 18, pp.67-71; Gould,E., op. cit. 24.

44. Some commitments could be negotiatedwhich would apply to all members, sectorsand/or modes of supply, for instance, each gov-ernment could make a minimum level of com-mitments in each sector; countries could in-clude under GATS a specified percentage oftheir services by GDP; governments could re-duce limitations in their schedules by a fixedpercentage; or members could eliminate cer-tain measures such as residency requirementsin certain sectors or modes.

45. UK Department of Trade and Industry, “GATS2000, Health and Education Services”, brief-ing note, 2 December 1999, cited in Pollock,A.M. and Price, D., “Rewriting the Regula-tions: How the World Trade OrganisationCould Accelerate Privatisation in Health-CareSystems”, The Lancet, Vol. 356, 9 December2000, p.1996. See also website: http://www.dti.gov.uk/worldtrade/service.htm

46. Many governments might prefer to be able tomake concessions in one agreement, for in-stance, the Agreement on Agriculture, in re-turn for concessions in another agreement,such as the TRIPs agreement, instead of re-negotiating an agreement such as GATS onits own. The world’s three leading service in-dustry organisations (the US Coalition of Serv-ice Industries, the European Services Forumand the Japan Services Network) called ontheir governments in May 2001 to launch anew round of WTO renegotiations on thegrounds that substantial agreement on serv-ices would most likely be achieved in the con-text of a wider and broad-based WTO round. The Council of Trade in Services finallyagreed guidelines and procedures in March2001 for the rest of the GATS 2000 negotia-tions, having agreed to various requests fromdeveloping countries. But no completion dateswere set. Countries now enter the more de-tailed “request-offer” phase: countries requesteach other to liberalise a particular serviceunder GATS and respond with offers of theirown. Southern countries will more often be

the “requestee” rather than the “requester”.Bilateral trade-offs are then extended on amost-favoured nation basis to all WTO mem-bers. The US and European Communitieshave already submitted their initial negotiat-ing proposals for specific service sectors; seewebsite: www.wto.org/ddf/ep/. See alsoRaghavan, C., “Revised GATS Guidelines At-tempt to Mollify Developing World”, ThirdWorld Economics, no 254, 1-15 April 2001,pp.2-4.

47. The WTO has made some original WTO docu-ments public on its website: http://docsonoline.wto.org, and, because of criti-cism, has started to post many of its new docu-ments. For a range of articles and documentson GATS, including WTO documents notmade public, see: www.xs4all.nl~ceo/gatswatch/gatswatch/html; and Gould, E., op.cit. 24.

48. CSI members are drawn from the insurance,financial, telecommunications, travel, trans-portation and air cargo, information technol-ogy and internet, energy, management con-sultants, entertainment and retail distributionsectors. Vastine says that the group “playedan aggressive advocacy role in writing theGeneral Agreement on Trade in Services”.The objectives of all government regulation,according to CSI, should simply be to pro-mote fair competition. In 1998, CSI set up aworking group to prepare for the GATS nego-tiations which “has continued to work withthe WTO, the USTR [US Trade Representa-tive], Congress, the diplomatic community inWashington, and international organizationsto influence the current services negotiations.”

49. Vastine, J. R., statement before the InteragencyTrade Policy Staff Committee, 19 May 1999,website: www.uscsi.org, accessed on 25 Oc-tober 2000.

50. Vastine, R., op. cit. 4, emphasis added.51. Ibid.52. “Opening World Markets”, op. cit. 12.53. “Opening World Markets for Services: A

Guide to the GATS: What GATS Means toBusiness”, website: http://gats-into.eu.int/gats-info/guide.pl?MENU=aaa, accessed 1November 2000. While the US and EU may agree on wantingother countries to open up more of their serv-ice sectors to competition, they disagree whenit comes to their own sectors. For instance,the US is now “seeking to gain greater accessto European markets, particularly for satellitetransmissions, pay-TV networks, and the new-est media”. But the EU claims that the Euro-pean film industry has undergone a dramaticdecline because of competition with US pro-ducers. France insists on restricting importsof US films, television programmes, musicand videos. To date, the EU has not made anymarket access commitments in the audio-visual sector and has listed comprehensivemost-favoured nation exemptions. See “Open-ing World Markets”, op. cit. 18. The US is frustrated that the EU will not al-low, on precautionary health grounds, theimport of meat from cattle which have beengiven hormones, despite a WTO ruling. TheUS has therefore increased import tariffs onEU goods unconnected with the disputed prac-tice. See also ref. 22. The US, meanwhile, hasnot changed its tax legislation governing aForeign Sales Corporation (FSC), despite aWTO ruling that its provisions are in effectexport subsidies, which are prohibited byWTO rules, and should be withdrawn by 1October 2000. The US and EU have also disagreed over aplan for US and EU regulators to recognise

34



each other’s certification procedures for thesafety of six types of industrial product in-cluding computers, telecommunicationsequipment and other electronic devices. See“It’s Not Mutual”, Financial Times, editorial,13 November 2000, p.24; Alden, E., “Mis-match on Product Safety Puts Accord on Dan-ger List”, Financial Times, 9 November 2000,p.23; website: www.europa.eu.int/com/trade

54. “Opening World Markets”, op. cit. 12.55. European Services Forum, website:

www.esf.be/56. European Services Forum, op. cit. 6.57. See World Services Congress 1999, website:

www.worldservicescongress.com. quoted inSinclair, S., op. cit. 18.

58. Website: http://www.uscsi.org/events/services2000conf.html, accessed 24 March2001.

59. Cohen, N., “Brussels Puts Everything Up ForSale”, New Statesman, 2 April 2001; Euro-pean Services Forum website: http://www.esf.be/. The Trade Directorate of the EU has createda special electronic mail list serve (“ServicesInformation System”) through which it dis-tributes draft EU GATS negotiating propos-als to solicit business comments and sugges-tions. See Wesselius, E., “GATS: Undermin-ing Public Services World-wide”, mss, CEO/TNI, Amsterdam, May 2001, website: http://www.xs4all.nl/~ceo/gatswatch/

60. The WTO’s Council for Trade in Servicescommented in November 1999 that excep-tions provided in Article I.3 needed to be “in-terpreted narrowly” when applied to healthservices. Council minutes are used by disputepanels to interpret WTO agreements. See“GATS and Public Service Systems: TheGATS ‘Governmental Authority’ Exclusion”,discussion paper from international branch ofthe Ministry of Employment and Investment,Government of British Columbia, Canada, 2April 2001. website: www.ei.gov.bc.ca/Trade&Export?FTAA-WTO or http://m e m b e r s . i i n e t . n e t . a u / ~ j e n k s /GATS_BC2001.html; and Krajewski, M.,“Public Services and the Scope of GATS”,Center for International Environmental Law,Geneva, May 2001, website: www.ciel.org

61. See Martin, B., In the Public Interest? Privati-sation and Public Sector Reform, Zed Books,London, 1993; Hildyard, N., The World Bankand the State: A Recipe for Change?, BrettonWoods Project, London, 1998.

62. Public Services International, Health and So-cial Services, PSI, Ferney-Volataire Cedex,1999, p.9. For details of the mechanisms bywhich public services in Britain have beenmarketised over the past two decades, seeWhitfield, D., Public Services or CorporateWelfare; Rethinking the Nation State in theGlobal Economy, Pluto Books, London, 2001;Centre for Public Services, “What Future ForPublic Services?” Private Finance Initiativeand Public Private Partnerships”, June 2001,website: www.centre.public.org.uk/briefings,email <[email protected]>

63. Hall, D., Globalisation, Privatisation andHealth care–A Preliminary Report, PublicServices International Research Unit, Green-wich, January 2001, p.17, website:www.psiru.org.

64. Under the North American Free Trade Agree-ment (NAFTA), for instance, US for-profithospitals argued that the user fees charged bythe Canadian public health system to patientswere commercial charges and that denying UScompanies entry to the Canadian health mar-ket was a denial of the right of US companiesto profit from that market. European trade

officials, moreover, have emphatically reas-sured WTO members that an exemption forgovernmental services in the European Treatyhad offered no protection at all in practice.See Gould, E., op. cit. 24. Article XIII of GATS currently exempts gov-ernment procurement – the services a govern-ment buys directly for its own use – from theobligations of most-favoured nation, marketaccess and national treatment. The EuropeanServices Forum proposed in 1999 that this ar-ticle be deleted or that the WTO Agreementon Government Procurement covering goodsbe extended to services. The EU estimates thatgovernment procurement may cover as muchas 15 per cent of European GDPs. See Euro-pean Commission, Directorate General I,Seattle Conference Preparations, website:h t t p : / / w w w. e u r o p a . e u . i n t / c o m m /dg01.newround/seaproc.htm, accessed 5 June1999, cited in Koivusalo, M., World Trade Or-ganisation and Trade-Creep in Health andSocial Policies, GASPP Occasional Paper4,1999, Helsinki, 1999, website: http://www.stakes.fo/gaspp

65. Public Services International, Transnationalsin Public Services, PSI, Ferney-VolataireCedex, 1998, p.3. website: www.world-psi.org

66. “Opening World Markets”, op. cit. 18. The “market” for “environmental services”is significant. One-fifth of the world’s popu-lation has no access to clean water and two-fifths have no acceptable means of sanitation,according to WHO and Unicef. But many areunlikely to be a target for utility companiesbecause they are unlikely to be able to pay forthese services. See Williams, F., “Many in De-veloping World ‘Still Lack Clean Water andSewerage Services’”, Financial Times, 23 No-vember 2000, p.12.

67. Hall, D., The Water Multinationals, PSIRU,Sept, 1999, website: www.psiru.org/reports/9909-W-U-MNC.doc.

68. quoted in “Don’t Gamble With Canada: Don’tGamble With Public Education!”, The Coun-cil of Canadians, website: www.canadians.org. The UK has already laid the groundwork forcommercialisation of higher education. SeeNunn, A., “GATS and Resistance: The Caseof UK Higher Education and Knowledge-Based Restructuring in an International Con-text”, (mss), email <[email protected]>; People and Planet, The Threatto Higher Education, Oxford, 2000, website:www.peopleandplanet.org/tradejustice/GATS; Education International/Public Serv-ices International, The WTO and the Millen-nium Round; What is at Stake for Public Edu-cation?, EI-PSI, Brussels/Ferney-VoltaireCedex, website: www.ei-ie.org/pub/english/epbeipsiwto.html, accessed 1 November2000; Oxfam, Break the Cycle of Poverty,Education Now, Oxfam, 1999, http://www.oxfam.org/educationnow. Corporations have also moved into schoolclassrooms by providing computers and textbooks. Banks send CDs and games that teachpersonal finance; other companies send freeexercise books displaying advertising fromsoft drink companies and sportswear groups.As the head of telecoms company said, “Weget the reputation for being a good corporatecitizen. But it’s not an esoteric holier-than-thou thing. We’re in business.” Commercialcompanies are also involved in education un-der the Private Finance Initiative (PFI). Nearly20 per cent of the £9 billion committed by theBritish government since 1997 to rebuildschools is earmarked for schemes under PFI.Companies are also providing teachers, and

proposals have been made for the for-profitsector to run schools directly. See Baby MilkAction, Seeing Through the Spin (SchoolsPack), website: www.babymilkaction.org;Mathiason, N., “Can Schools Survive Com-mercial Drive?”, The Observer, 11 February2001, p.5; Regan, B., Our Schools Are NotFor Sale: The Case Against Privatisation ofEducation, Socialist Teachers Alliance, 2001.

69. Pollock, A.M. and Price, D., op. cit. 45,p.1996.

70. Calculated by Allyson Pollock from 1999 data.71. Public Services International, op. cit. 62, p.4.72. Hall, D., op. cit. 63, p.5.73. Pollock, A. and Price, D., op. cit. 45, p.1999.74. Koivusalo, M., op. cit. 64.75. The multinational expansion of private health

care companies has not been as coherent orextensive as that of other public service sec-tors such as water, waste management andenergy. But companies active in insurance,hospitals, laboratories (clinical diagnosis andtherapy such as dialysis and MRI scans) andsupport (cleaning and catering) services allhave an impact on health care services. Sup-port service multinationals with many con-tracts in hospitals in many countries includeISS (Denmark), Sodexho (France), Rentokil/Initial (UK), Granada/Compass (UK) andEDS (US). Some of the main multinationalcompanies involved in health insurance in-clude Aetna (Netherlands), Allianz (Ger-many), Aon (US), CIGNA (US), UnitedHealthcare International (US) and AIG (US). In theUK, Bupa and PPP have 70 per cent of thehealth insurance market. Among the largestfor-profit chains of hospitals are Hospital Cor-poration of America (HCA), Sun Health care(US), Tenet (US), Humana (US) and NationalMedical Enterprises (NME) (US). Private health care companies, particularlyUS ones, are targeting countries which havea sufficiently affluent elite willing to pay forhealth care or which have an existing privatehealth service base. Countries and regions ofspecial interest are Latin America, South-EastAsia, China and the Pacific Rim, the Middle-East and, to some extent, in South Asia. SeeKoivusalo, M., op. cit. 64; Price, D., Pollock,A.M. and Shaoul, J., op. cit. 3; Hall, D., op.cit. 63.

76. Pollock, A.M. and Price, D., op. cit. 45,p.1996. Health-related services include not only pro-fessional and clinical services (hospitals anddoctors) but also insurance, occupational,laboratory, infrastructure, support, nursing,community care and pensions services.

77. WTO Secretariat, “Health and Social Services:Background Note by the Secretariat S/C/W50”, 18 September 1998. State involvement in health care is usuallybased on compulsory social insurance or gen-eral taxation.

78. WTO Secretariat, op. cit. 77. Hospital services represent between 40-50per cent of this expenditure, pharmaceuticalsbetween 30-40 per cent and out-patients theremainder. OECD countries account for about90 per cent of worldwide health care expendi-ture. The public share of total health spend-ing in the US is 45 per cent, lower than anyother industrial country. The OECD averageis about 75 per cent.

79. Ibid. GATS schedules list several categories ofhealth services divided into three areas:- professional services, encompassing medi-cal, dental, veterinary, nursing and midwives,laboratory, services;- health-related and social services,

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encompassing hospital, other human health,social, community care (including of the eld-erly) and other services;- health and pensions insurance.

80. Ibid.81. Ibid; EU, op. cit. 22.

The WTO Secretariat points out that 19 ofthe 59 countries that have made commitmentson medical or hospital services have not madecommitments on health insurance services,while 35 of the 76 members with commit-ments on health insurance have not make com-mitments on medical or hospital services.

82. Kuttner, R., “The American Health Care Sys-tem: Wall Street and Health Care”, New Eng-land Journal of Medicine, 340, 1999, pp.664-68.

83. Website: www.uscsi.org.84. Gould, E., op. cit. 39.85. This is despite the fact that Canada has not

made any commitments under GATS to lib-eralise professional, health or social services.See Sanger, M., Reckless Abandon: Canada,the GATS and the Future of Health Care, Ca-nadian Centre for Policy Alternatives, Febru-ary 2001, website: www.policyalternatives.ca

86. See Pollock, A.M. and Price, D., op. cit. 45.87. A cross-subsidy equivalent in the commercial

world is “loss leaders”: selling something atless than cost price to draw in customers, butwith the costs paid for by other higher-pricedgoods.

88. Pollock, A.M. and Price, D., op. cit. 45,p.1996. See also Evans, R., “Health Reform:What Business is it of Business?” in Drache,D. and Sullivan, T., (eds), Health Reform:Public Success: Private Failure, Routledge,London 1999, pp.25-47. A general principle to ensure equity in healthcare has been to provide services accordingto need and to finance them according to abil-ity to pay. A comparison of different financemechanisms suggests that general taxationand public provision is the least regressive ap-proach, while financing health care servicesthrough private insurance and patients’ out-of-pocket payments is the most regressive.Universal social insurance, such as is com-mon in continental Europe, falls somewherein the middle. The privatisations in Britain ofutilities (electricity, gas, water), transport andlong-term care have adversely and dispropor-tionately affected the poor, elderly, disabledand unemployed. See Koivusalo, M., op. cit.64; Pollock, A. and Price, D., “Globalisation?Privatisation!” Health Matters, 41, Summer2000. website: http://www.healthmatters.org.uk/stories/

89. Kuttner, R., “Columbia/HCA and the Resur-gence of the For-Profit Hospital Business”,New England Journal of Medicine, 335 (5),1 August 1996, pp.362-367.

90. GATS could also enable pharmaceutical com-panies to run hospitals. In the US, the phar-maceutical industry, one of the most profit-able and fastest-growing sectors of the worldeconomy, is integrating vertically into man-aged care companies (those that act as an in-termediary between doctor and patient) andother services. Merck, for example, has ac-quired Medco, the largest US prescriptiondrugs provider. Zeneca, the world’s secondlargest manufacturer of cancer drugs, hastaken over the management of 11 cancer treat-ment centres in the US. Meanwhile, the confidentiality of medicalrecords could be undermined. For instance, acountry may not have opened up its healthservices to competition under GATS, but mayhave opened up data processing or databaseservices. Would national measures relating to

the confidentiality of health records be clas-sified under health services or under databaseservices? See Sinclair, S., op. cit. 18, pp.36-37. See also Sanger, M., op. cit. 85.

91. Allaert, B. and Forman, N., “Gender, Tradeand Rights: Moving Forward”, WIDE Bulle-tin, Brussels, May 1999; Macdonald, M.,“From Seattle to Beijing+5: How Can Wom-en’s Economic Human Rights be Safeguardedin Times of Globalisation? The Impact ofMacroeconomy on Women,” WIDE Bulletin,Brussels, December 2000, website:www.eurosur.org/wide/porteng/htm. See alsoZarilli, S. and Kinnon, C. (eds.) InternationalTrade in Health Services: A Development Per-spective, UNCTAD/WHO, June 1997.

92. Butler, P., “Dirty Work”, Guardian Society, 2August 2000, pp.10-11.

93. Ibid.94. Ibid.95. The Care Standards Act provides for regula-

tion of children’s homes, independent (notNHS) hospitals, independent clinics, carehomes, residential family centres, independ-ent medical agencies, domiciliary care agen-cies, fostering agencies, nurses agencies andvoluntary adoption agencies.

96. Ennals, R., “A Very Messy Business”, HealthMatters, issue 42, Autumn 2000. The detailed rules and regulations have stillto be worked out; the largest group of thosebeing consulted are those hospital groups andmedical bodies whose employees and mem-bers were responsible for the tragedies in thefirst place. Separate quality controls for pub-lic and private medicine could reinforce a two-tier health care system.

97. Saltman, R., “The Sad Saga of Managed Carein the United States”, Eurohealth 4, 1998,pp.35-36, quoted in Koivusalo, M., op. cit.64.

98. Quoted in “Failure to Stop Health Care Priva-tization in New Deal Increases Likelihood ofTrade Attacks”, press release, 11 September2000, The Council of Canadians, Ontario.website: www.canadians.org. A 1997 study in the New England Journal ofMedicine analysing 1994 data of over 5,000acute care hospitals in the US found that for-profit hospitals were 25 per cent more expen-sive than non-profit facilities. A 1999 report,Private Profit or Public Good: The Economicand Politics of the Privatization of HealthCare, from the Parkland Institute at the Uni-versity of Alberta, Canada, concluded thatprivate, for-profit health care consistently fellshort of non-profit and publicly-providedhealth care in various countries over severaldecades. A July 1999 study, “Quality of Carein Investor-Owned vs Not-for-profit HMOs”in the Journal of the American Medical As-sociation by Dr. Sidney Wolfe and Dr. DavidHimmelstein examined 1996 quality of caredata from 248 investor-owned and 81 not-for-profit HMOs providing coverage in total to56 per cent of all Americans in HMOs. Forall 14 quality indicators, for-profit HMOsscored lower than non-profit ones. Althoughthe patient treatment costs in both type ofHMO were almost identical, spending on ad-ministration and profits was 48 per cent higherin for-profit HMOs. Concluded Dr.Himmelstein, “If all American women wereenrolled in for-profit HMOs instead of non-profits, 5,925 more would die [each year] frombreast cancer . . . Your chances under a for-profit HMO are much worse if you are seri-ously ill.” As important as quality of care, however, isthe range of health care services provided: for-profit facilities tend to develop care only in

those areas which make money, avoidinglong-term care in areas such as burns orasthma. As the driving forces in health carebecome profit and avoidance of responsibil-ity, the non-profit sector is starting to avoidlong-term patients as well.

99. “A radical critique of medicine has to dealwith the things that make people sick andthe kind and quality of health care peopleget”. See Levins, R., op. cit. 97.

100. Public Services International, op. cit. 62, p.9.101. Whitfield, D., op. cit. 62, p.29.102. Kuttner, R., op. cit. 82; Kuttner, R., op. cit.

89; Kuttner, R., “The American Health CareSystem: Health Insurance Coverage”, NewEngland Journal of Medicine, 340 (2), 1999,pp.163-168; Kuttner, R., “The Commerciali-zation of Prepaid Group Health Care”, NewEngland Journal of Medicine, Vol. 338, No.21, pp.1558-1563; “Health Care: Thirty-SixPlaces to Go”, The Economist, 24 June 2000,pp.72-73. Before the 1990s, a “fee for service” sys-tem dominated: doctors and hospitals re-couped expenditure from insurers, which re-covered their costs from their clients’ em-ployers, who passed this cost onto the pub-lic in their products. Since the 1990s, how-ever, the concept of managed care was in-troduced to contain costs and is replacingthe fee system. Managed care is health serv-ices provided under the administrative con-trol of large, private (mostly for-profit butmany originally mutual) organisations charg-ing flat fees per patient enrolled per month.Employers have begun to purchase pre-paidarrangements based on inclusive “managed”arrangements, while public health effortshave been dismantled to make way for them.Prepaid group health care plans began in theUS in the 1940s as a social form of healthcare, some originating in occupational healthschemes. In the early 1970s, national legis-lation enabled such plans to become for-profit health maintenance organisations(HMOs). Today, nearly three out of fourHMOs (now generally called managed careorganisations) are for-profit, shareholder-owned plans run by non-clinicians preoccu-pied with holding down costs. The conflictof interest between a plan’s desire to savemoney and a patient’s need for good carehas been described as “managing costs” ver-sus “managing care”. This industrialisationof US health care has turned the system fromone run by the professions into one run byinsurance companies managing the profes-sions and telling them what kind of healthcare they can offer.

103. The US spends more than any other countryon health care in absolute terms and as aproportion of GDP. It accounts for 3-4 percent of the world’s population, yet spends35-40 per cent of the world’s spending onhealth care. Despite its high expenditure ofhealth care, however, the US has some ofthe worst health indices of OECD countries.Increased spending does not mean increasedhealth or health care: one-fifth of the spend-ing is on administration; those who needhealth care do not receive or have access toit; the spending is driven by a technologicalmodel of health and medical consumerism;and the underlying causes of sickness are in-creasing. “The irrationality of the system ex-tends even to the rich,” points out RichardLevins , “who are overtreated”. Nearly200,000 people in the US die each yearthrough improper medical interventions,while many more die from misuse of heav-ily-advertised prescription drugs, over-the-

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counter remedies and other preparations. SeeLevins, R., “Is Capitalism a Disease? A Re-port on the Crisis in US Public Health,Monthly Review, Vol. 52, No. 4, September2000, pp.8-33.

104. The US health care system is financed byinsurance, although programmes and com-panies vary from state to state. For nearlytwo out of three Americans, this health in-surance is paid for by their employers. Pub-licly-funded national insurance schemes,paid for out of national and state budgets,were introduced in 1965, modelled on pri-vate health insurance schemes and based onthe needs of doctors and hospitals rather thanpatients. Medicare pays for hospital and doc-tor treatment (but not drugs outside hospi-tals) for some 39 million people over the ageof 65, while Medicaid pays for some 34 mil-lion people on low-incomes or with disabili-ties. But today, the vast majority of the 44million uninsured are employed. More thanone-third of Hispanics and one fifth of blacksdo not have regular insurance, comparedwith 12 per cent of white Americans. De-spite state-sponsored insurance programmes,America’s poor have little access to medicalcare of any sort. Moreover, the number ofpeople who are underinsured is growing asemployers cut back on their costs. Like theuninsured, they pay for care themselves outof pocket or forego it. Medicare and Medic-aid have insufficient resources to check thattreatment is necessary or that bills are accu-rate. The US Department of Health estimatesthat it overpays private hospitals $23 billiona year. Medicare and Medicaid together un-derwrite about three-quarters of the costs ofthe $86 billion long-term care industry. SeeThe Economist, op. cit. 102.

105. Hsiao, W., Director of Harvard School ofPublic Health, reported in New York Times,17 June 1999, cited in Public Services In-ternational, Great Expectations: The Futureof Trade in Services, PSI, Ferney-Voltaire-

SUMMARYTrading Health Care Away?GATS, Public Services and PrivatisationLast year, the World Trade Organisation (WTO) began talks to expandone of its agreements – the General Agreement on Trade in Services orGATS. Services are now a significant part of the economies of industrialisedcountries and are governed by complex domestic regulations. Thesecountries are now trying to revise the Agreement to increase internationaltrade in services. If they are successful, GATS could be used to overturnalmost any legislation governing services from national to local level.

Particularly under threat from GATS are public services – health care,education, energy, water and sanitation, for instance. All of these arealready coming under the control of the commercial sector as a result ofprivatisation, structural adjustment and reductions in public spending. Arevised GATS could give the for-profit sector further access and could makeexisting privatisations effectively irreversible. Experience in the UnitedStates and several Latin American countries, where health services havebeen run for profit over the past decade or so, suggests that the result willbe a decline in accessibility to health care worldwide.

This briefing outlines the growth in services in recent years, the mainprovisions of GATS and its proposed revisions, and some key corporateaims in extending the Agreement. It details how public services may notin fact be excluded from GATS. It considers what may happen if privatecompanies are enabled to capture the most profitable components ofpublicly-provided and -funded health care services: a two-tier health systemin which a reduced public sector has to cope with the elderly, chronicallysick and the poor who most need health care and who can least afford it.

Cedex, February 2000, website: http://www.world-psi.org

106. “The Americas Shift Toward Private HealthCare”, The Economist, 8 May 1999, pp.69-70.

107. WTO Secretariat, op. cit. 77.108. Public Services International, op. cit. 62,

p.10.109. Ibid., p10.110. Price, D., Pollock, A.M. and Shaoul, J., op.

cit. 3.111. Public Services International, op. cit. 62,

p.16112. Lang, T., “The New GATT Round: Whose

Development? Whose Health?”, Journal ofEpidemiology and Community Health, No-vember 1999; Lang, T., “Trade, PublicHealth and Food” in McKee, M., Garner, P.and Stott, R., (eds), International Co-opera-tion and Health, Oxford University Press,Oxford, 2001 (forthcoming).

113. Rayner, G., personal communication, 11June 2001. No amount of expenditure of health care willsolve health problems caused by rising ratesof diabetes explained by a higher consump-tion of high-fat, high calorie, fast food andsugary drinks, declining rates of exercise orextended hours of sedentary entertainment.The explosion of obesity in the US, Britainand Germany, however, will result in a mas-sive increase in health costs over the next20 years. If broader measures of health are the goal,spending more on housing or education of-ten does more to reach it. The WTO Secre-tariat itself points out that “Given theamounts spent on health care in some coun-tries, the question may arise whether alter-native approaches aimed at improving thehealth situation (investments in environmen-tal measures, traffic safety, non-smoking andanti-drug campaigns, etc.) carry higher re-turns.” See WTO Secretariat, op. cit. 77, foot-note 4.

114. Sinclair, S., op. cit. 18, p.60.115. Early Day Motion 260, website: http://

edm.ais.co.uk/116. Article IV requires WTO members to facili-

tate the increasing participation of develop-ing countries by “the liberalization of mar-ket access in sectors and modes of supply ofexport interest to them [developing coun-tries].” EU Trade Commissioner Pascal Lamy ad-mitted in November 2000 that the EU has“offensive export interests in the field ofthose services which are regulated as publicservices. That is an important distinction be-tween GATS and GATT. With GATS, reci-procity is not the same – there is none. If wehave a strong interest in the field of health,we’re not obliged to make commitments butcan take advantage of opening up other mar-kets”. Quoted in Caroline Lucas MEP,“GATS-The EU Perspective”, speech atWDM GATS seminar, 29 March 2001.

117. Articles XI and XVI state that:- restrictions must not be applied on trans-fers and payments for current transactionsrelating so specific sectoral commitments;- there must not be any restrictions on capi-tal transactions inconsistent with specificsectoral commitments;- a country is obliged to allow a cross bordermovement of capital if it is an essential partof the movement of service covered by spe-cific sectoral commitments.

118. UNISON, Public Services Manifesto, Lon-don, website: www.unison.org.uk. See also“Stop the GATS Attack, International State-ment”, website: http://www.citizen.org/pctrade/GATS/GATSsignon.htm

119. Hall, D., “The Public Sector Water Under-taking”, PSIRU, Greenwich, February 2001.website: www.psiru.org

120. Watkins, K., “Behind Closed Doors: Whythe Poor will Suffer if Globalisation is notControlled”, The Guardian (Society),13 December 2000, p.9.

This briefing was compiled bySarah Sexton, TheCornerHouse, drawing on thework and comments of thefollowing to whom immensethanks are due: Meri Koivusalo,GASPP/STAKES; AllysonPollock, University CollegeLondon; David Price,University of Northumbria;Clare Joy and Petra Kjell,World Development Movement;Ellen Gould; Mike Rowson,MEDACT; Erik Wessilius,Adam Ma’anit and OlivierHoedeman, CorporateObservatory Europe; GeofRayner, UK Public HealthAssociation; David Hall, PublicServices International ResearchUnit; Caroline Lucas MEP;Kasturi Sen, University ofCambridge; Alexander Nunn,University of Manchester; andJames Munro, HealthMatters.

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