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Lecture 18: Globalization and Health Richard Smith Reader in Health Economics School of Medicine, Health Policy & Practice Health Economics – SOCE3B11.

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Presentation on theme: "Lecture 18: Globalization and Health Richard Smith Reader in Health Economics School of Medicine, Health Policy & Practice Health Economics – SOCE3B11."— Presentation transcript:

1 Lecture 18: Globalization and Health Richard Smith Reader in Health Economics School of Medicine, Health Policy & Practice Health Economics – SOCE3B11 – Autumn 04/05

2 Overview of lecture What is globalization? Relationship between globalization and health Aspects of globalization that may effect health Health, international trade and WTO –Trade in health services and GATS

3 What is Globalization? Easier travel & communication Mixing of customs & cultures Integration of national economies (removal of barriers to international trade & finance) – liberalization or openness Means cannot view national health, interventions and policies in isolation from: –other countries –other sectors (e.g. travel, finance)

4 HEALTH health services risk factors household economy national economy and health-related sectors Globalization economic openingcross-border flows international rules and institutions goods, services, capital, people, ideas, information

5 Aspects of Globalization that may effect Health General effect on health from changes in national economic growth – link between health and wealth Environmental degradation (e.g. air, water pollution) Improved access to knowledge and technology Marketing of harmful products & unhealthy behaviours Conflict & security Cross-border transmission of disease

6 Cryptosporidiosis Lyme Borreliosis Reston virus Venezuelan Equine Encephalitis Dengue haemhorrhagic fever Cholera E.coli O157 West Nile Fever Typhoid Diphtheria E.coli O157 Echinococcosis Lassa fever Yellow fever Ebola haemorrhagic fever Onyong- nyong fever Human Monkeypox Cholera 0139 Dengue haemhorrhagic fever Influenza (H5N1) Cholera RVF/VHF nvCJD Ross River virus Equine morbillivirus Hendra virus BSE Multidrug resistant Salmonella E.coli non-O157 West Nile Virus Malaria Nipah Virus Reston Virus Legionnaires Disease Buruli ulcer SARS W135 SARS Emerging/re-emerging infectious diseases 1996 to 2003


8 Health and International Trade Context:Effects of trade liberalisation on public health Traderemoval of impediments to liberalisation:trade in goods and services (especially via WTO) Public health:organised measures (public &/or private) to prevent disease, promote health or prolong life of the population as a whole

9 Specific Public Health Issues Infectious disease control Food safety Tobacco Environment Access to drugs Food security Emerging issues (biotechnology….) Health services

10 WTO Agreements Goods: GATT Technical barriers to trade: SPS, TBT Intellectual property and trade : TRIPS Services: GATS

11 Specific Health Issues and most relevant WTO Agreements


13 Trade in Health Services/GATS: Background International trade growing, & trade in services is increasing percentage of this overall growth Of this trade, health sector is already affected by liberalization in other areas (e.g. finance) Many countries see health as a sector where they may have a comparative trade advantage More countries seeking to ascend to WTO and therefore make commitments under GATS

14 General Agreement on Trade in Services (GATS) GATS emerged from 1994 Uruguay Round of negotiations that created the WTO (Members agree to progressive liberalization) Subject services trade to same treatment as goods (GATT) Basis = liberalization increases global efficiency (comparative advantage – lower cost, higher quality, innovation) Provides multilateral legal framework for liberalizing international services trade (based on existing int. trade law) Debate is polarized - Tale of Two Treaties GATS is worst of treaties – undermines national sovereignty GATS is best of treaties – increase health (sovereignty)

15 The House that GATS Built GATS (Services) Trade Liberalization Preservation of the Right to Regulate Services Multilateral Framework Front Wall: General Obligations and Disciplines Side Wall: Market Access Commitments Side Wall: National Treatment Commitments Back Wall: Exceptions Floor: Dispute Settlement GATS Council Health Sovereignty

16 GATS Timetable 1994 Uruguay Round of WTO negotiations saw initial commitments in health services made by a handful of countries Current negotiations began following WTO meeting in February 2000: –initial requests for specific commitments made by end June 2002 –initial offers due by end of March 2003 –finalised agreement by end of January 2005

17 The GATS Process Countries (via MoT) select service sector(s) they wish to open to foreign suppliers A commitment is then made within this sector – within each mode individually or combined – stating limitations to how much access foreign providers are allowed Commitments are multilateral – no favourites

18 Key Aspects of GATS Creates binary system – either solely public provided (hence not covered by GATS) or not Commitments potentially irreversible – changes possible (> 3 years) but entail compensation (offering new commitments in other sectors with a view to restoring the balance of commitments which existed prior to the modification) GATS excludes services supplied in the exercise of governmental authority – debate on coverage MFN principle Structure – four modes of supply

19 Threshold Question: Does GATS Apply? Is the health-related service supplied by the government? Is the health-related service supplied on a commercial basis? Is the health-related service supplied in competition with one or more service providers? Is the health-related service supplied by a private actor pursuant to delegated governmental authority? GATS applies to measures of WTO members that affect trade in health-related services No Yes No Yes GATS does not apply No Yes STARTSTART

20 Structure of GATS: Four Modes of Supply 1.Cross border delivery (e-health) 2.Consumption abroad (movt. of patients) 3.Commercial presence (FDI hospitals) 4.Movement of personnel (doctors abroad)

21 Mode 1: Cross border delivery of services Shipment of laboratory samples, diagnosis and clinical consultations by mail E-health –Telediagnostic –Telesurveillance –Teleconsultation –Teletreatment –Teleproducts (especially phamaceuticals)

22 Mode 1 Opportunities Enable health care delivery to remote and underserviced areas – promoting equity Alleviate (some) human resource constraints Enable more cost-effective disease surveillance Improve quality of diagnosis and treatment Upgrade skills, disseminate knowledge through interactive electronic means

23 Mode 1 Risks Relies on telecommunications and power sector infrastructure Capital intensive, possible diversion of resources from basic preventive and curative services Equity issue if it caters to a small segment of the population - urban affluent

24 Mode 2: Consumption abroad Movement of patients from home country to the country providing the diagnosis/treatment Movement of health professionals from home to another country to receive medical education and training

25 Mode 2 Opportunities For exporting countries Generate foreign exchange earnings to increase resources for health Upgrade health infrastructure, knowledge, standards and quality For importing countries Overcome shortages of physical and human resources in speciality areas Receive more affordable treatment

26 Mode 2 Risks Create dual market structure May crowd out local population – unless these services are made available to local population Diversion of resources from the public health system Outflow of foreign exchange for importing countries

27 Mode 3: Commercial presence Establishment of hospitals, clinics, diagnostic and treatment centres and nursing homes and training facilities through foreign direct investment – cross border mergers/acquisitions, joint venture/alliance Opportunities for foreign commercial presence also in management of health facilities and allied services, medical and paramedical education, IT and health care

28 Mode 3 Opportunities Generate additional resources for investment in upgrading of infrastructure and technologies Reduce the burden on public resources Create employment opportunities Raise standards, improve management, quality, improve availability, improve education (foreign commercial presence in medical education sector)

29 Mode 3 Risks Large initial public investments to attract FDI If public funds/subsidies used - potential diversion of resources from the public health sector Two tier structure of health care establishments Internal brain drain from public to private sector Crowding out of poorer patients, cream skimming phenomena

30 Mode 4: Movement of Health Professionals Includes doctors, nurses, paramedics, midwives, consultants, trainers, management personnel Factors driving cross border movements wage differentials between countries search for better working conditions/standards of living search for greater exposure/training/qualifications demand and supply imbalances between countries Approach towards mode 4 trade in health services by exporting and receiving countries varies - some countries encourage outflow, others create impediments

31 Mode 4 Opportunities From sending country Promote exchange of knowledge among professionals Upgrade skills and standards (provided service providers return to the home country) Gains from remittances and transfers From host country Meet shortage of health care providers, improve access, quality and contain cost pressures

32 Mode 4 Risks From sending country Permanent outflows of skilled personnel - brain drain Loss of subsidised training and financial capital invested Adverse effects on equity, availability and quality of services

33 Scope of analysis specific commitments Cross-industrial commitment Business T elecommunication Construction Distribution Environment Finance Education Health & Social services Culture & sport Tourism/Courier T ransportation Othe rs National treatment Market access 1-4 = modes 1 2 3 4 1 2 3 4

34 Status of GATS Commitments (No. WTO Members by Sector)

35 Commitments of WTO Members in Health Services Number of WTO Members number (~2004) with commitments in health (developed/developing): Medical/dental services62 (18/44) (excl. USA) Nurses/midwives34 (17/17) (excl.USA) Hospital services52 (15/37) (incl. USA) Other human health22 (2/20) (excl. USA & EC) No commitments at all39 (e.g. Canada, Brazil)

36 Commitments – Market Access

37 Commitments – National Treatment

38 Summary of GATS Commitments Generally, number of sectors committed positively related to the level of economic development But - pattern in health services less clear –Far more developing than developed country commitments E.g Canada no commitments, USA/Japan only one whereas LDCs (Burundi, Gambia, Zambia etc) have 3 or 4 subsectors –Of 4 subsectors – medical/dental most heavily committed (62), followed by hospital (52). –Highest share of full market access recorded for mode 2 –Developed countries use limitations on modes 2 & 3 more than developing countries –No Member undertaken full commitments for mode 4 (highly restricted area)

39 GATS – 3 Key Questions Why are current levels of trade in health services low? –presence of government monopolies – likely to be rare –no pace setters in health (c.f. telecommunications/financial services) –different economic value (c.f. telecommunications/financial services) How will GATS effect a countrys health sovereignty/system? –depends on interpretation of commercial basis and in competition –general obligations – MFN, pursuing increased liberalization, exception for measures necessary to protect health, dispute settlement –horizontal commitments made for other sectors What effect might liberalization have on national health/wealth? –currently data free environment – even extent of openness/liberalization! –research required on impact of liberalization on: population health status, distribution of health services/status, economic factors (GDP, BoP etc) and how GATS compares with other agreements

40 Further References See references for Seminar 6 Smith RD. Foreign direct investment and trade in health services: a review of the literature. Social Science and Medicine, 2004; 59: 2313-2323. For future ref: –Blouin C, Drager N, Smith RD (eds). Trade in Health Services, developing countries and the GATS. Oxford University Press (in press). –Smith RD. Trade in Health Services: Current Challenges and Future Prospects of Globalisation. In: Jones AM (ed). Elgar Companion to Health Economics. Edward Elgar (in press).

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