Lecture 18: Globalization and Health
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Transcript of Lecture 18: Globalization and Health
Lecture 18:Lecture 18:
Globalization and HealthGlobalization and Health
Richard Smith
Reader in Health Economics
School of Medicine, Health Policy & Practice
Health Economics – SOCE3B11 – Autumn 04/05
Overview of lectureOverview 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
What is ‘Globalization’?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)
HEALTH
health services
riskfactors
household economy
national economy and health-related sectors
GlobalizationGlobalizationeconomic opening cross-border flows
international rules and
institutions
goods, services,capital, people,
ideas, information
Aspects of Globalization thatAspects of Globalization thatmay effect Healthmay 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
Cryptosporidiosis
Lyme BorreliosisReston virus
Venezuelan Equine Encephalitis
Dengue haemhorrhagic fever
Cholera
E.coli O157
West Nile Fever
Typhoid
Diphtheria
E.coli O157
EchinococcosisLassa feverYellow fever
Ebola haemorrhagic fever
O’nyong-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
Legionnaire’s Disease
Buruli ulcer
SARS
W135
SARS
Emerging/re-emerging infectious Emerging/re-emerging infectious diseases 1996 to 2003diseases 1996 to 2003
World Health Organization
Economic impact, selected infectious disease Economic impact, selected infectious disease outbreaks, 1990outbreaks, 1990––19991999
UKUK——BSEBSEUS$ > 9 billionUS$ > 9 billion
19901990--19981998
UR TANZANIA Cholera
US$ 36 millionUS$ 36 million19981998
INDIAINDIA——PlaguePlagueUS$ 1.7 billion, US$ 1.7 billion,
19951995
PERUPERU——CholeraCholeraSeafood Seafood
Export BarriersExport Barriers19911991
MALAYSIAMALAYSIA——NipahNipahPig destruction, 1999Pig destruction, 1999
HONG KONG SARHONG KONG SARInfluenza A (H5N1) Influenza A (H5N1)
Poultry destruction, 1997Poultry destruction, 1997
USAUSA——E. coli 0157E. coli 0157Food recall/Food recall/destructiondestruction
PeriodicPeriodic
Health and International TradeHealth and International Trade
• Context: Effects of trade liberalisation on public health
• Trade removal of impediments toliberalisation: 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
Specific Public Health IssuesSpecific Public Health Issues
• Infectious disease control• Food safety• Tobacco• Environment• Access to drugs• Food security• Emerging issues (biotechnology….)• Health services
WTO AgreementsWTO Agreements
• Goods: GATT
• Technical barriers to trade: SPS, TBT
• Intellectual property and trade : TRIPS
• Services: GATS
Specific Health Issues and Specific Health Issues and mostmost relevant WTO Agreements relevant WTO Agreements
WTO AGREEMENTS SPS TBT TRIPS GATS HEALTH ISSUES
Infectious Disease Control * * Food Safety * Tobacco Control * * * Environment * * Access to Drugs * Health Services * Food Security * Emerging Issues Biotechnology * * * Information Technology * Traditional Knowledge *
Trade in Health Services/GATS: Trade in Health Services/GATS: BackgroundBackground
• 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
General Agreement on Trade General Agreement on Trade in Services (GATS)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 sovereigntyGATS is best of treaties – increase health (sovereignty)
The House that GATS Built
GATS(Services)
Trade Liberalization Preservation of the Right to Regulate Services Multilateral Framework
Front Wall:General
Obligations
andDisciplines
Side Wall:Market AccessCommitments
Side Wall:National Treatment
Commitments
Back Wall:Exceptions
Floor:Dispute Settlement
GATS Council
Health Sovereignty
GATS TimetableGATS 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
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’
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’
Threshold Question: Does GATS Apply?
Is the health-related service supplied by the government?
Is the health-related service supplied on a commercial basis?
Is the health-related service supplied in competition with
one or more service providers?
Is the health-related servicesupplied by a private actor
pursuant to delegated governmental authority?
GATS applies to measures of WTO members that affect trade in health-related services
No
YesYes
No
No
Yes
GATS does not apply
No
Yes
START
Structure of GATS:Structure of GATS:Four ‘Modes of Supply’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)
Mode 1:Mode 1:Cross border delivery of servicesCross border delivery of services
• Shipment of laboratory samples, diagnosis and clinical consultations by mail
• E-health– Telediagnostic
– Telesurveillance
– Teleconsultation
– Teletreatment
– Teleproducts (especially phamaceuticals)
Mode 1 OpportunitiesMode 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
Mode 1 RisksMode 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
Mode 2:Mode 2:Consumption abroadConsumption 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
Mode 2 OpportunitiesMode 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
Mode 2 RisksMode 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
Mode 3:Mode 3:Commercial presenceCommercial 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
Mode 3 OpportunitiesMode 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)
Mode 3 RisksMode 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
Mode 4:Mode 4:Movement of Health ProfessionalsMovement 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
Mode 4 OpportunitiesMode 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
Mode 4 RisksMode 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
Scope of analysisScope of analysis sp
ecif
ic c
omm
itm
ents
Cross-industrial commitment
Bu
sin
ess
Tel
ecom
mun
icat
ion
Con
stru
ctio
n
Dis
trib
uti
on
En
viro
nm
ent
Fin
ance
Ed
uca
tion
Hea
lth
& S
ocia
l ser
vice
s
Cu
ltu
re &
sp
ort
Tou
rism
/Cou
rier
Tra
nsp
orta
tion
Oth
ers
National treatment
Market access
1-4 = modes
1122
3344
1122
3344
Status of GATS CommitmentsStatus of GATS Commitments(No. WTO Members by Sector)(No. WTO Members by Sector)
0
50
100
Commitments of WTO Commitments of WTO Members in Health ServicesMembers in Health Services
Number of WTO Members number (~2004) with commitments in health (developed/developing):
Medical/dental services 62 (18/44) (excl. USA)
Nurses/midwives 34 (17/17) (excl.USA)
Hospital services 52 (15/37) (incl. USA)
Other human health 22 (2/20) (excl. USA & EC)
No commitments at all 39 (e.g. Canada, Brazil)
Commitments – Market AccessCommitments – Market Access Medical and
Dental Services
Midwives,
Nurses, etc.
Hospital
Services
Other Human
Health Services
Full 21 (4/17) 8 (2/6) 18 (0/18) 11 (0/11)
Partial 12 (1/11) 6 (1/5) 1 (0/1) 1 (0/1)
Mode 1
Unbound 29 (13/16) 20 (14/6) 35 (15/20) 10 (2/8)
Full 35 (5/30) 12 (2/10) 44 (14/30) 15 (0/15)
Partial 24 (13/11) 21 (15/6) 5 (1/4) 5 (2/3)
Mode 2
Unbound 3 (0/3) 1 (0/1) 3 (0/3) 2 (0/2)
Full 29 (13/16) 7 (2/5) 18 (0/18) 12 (0/12)
Partial 26 (4/22) 25 (15/10) 31 (15/16) 9 (2/7)
Mode 3
Unbound 7 (2/5) 2 (0/2) 3 (0/3) 1 (0/1)
Full 0 (0/0) 0 (0/0) 0 (0/0) 0 (0/0)
Partial 56 (16/40) 32 (17/15) 48 (14/34) 21 (2/19)
Mode 4
Unbound 6 (2/4) 2 (0/2) 4 (1/3) 1 (0/1)
Commitments – National TreatmentCommitments – National Treatment Medical and
Dental Services
Midwives,
Nurses, etc.
Hospital
Services
Other Human
Health Services
Full 24 (4/20) 9 (2/7) 21 (0/21) 12 (0/12)
Partial 10 (1/9) 6 (1/5) 1 (0/1) 1 (0/1)
Mode 1
Unbound 28 (13/15) 19 (14/5) 30 (15/15) 9 (2/7)
Full 34 (5/29) 12 (2/10) 44 (14/30) 15 (0/15)
Partial 23 (13/10) 21 (15/6) 5 (1/4) 5 (2/3)
Mode 2
Unbound 5 (0/5) 1 (0/1) 3 (0/3) 2 (0/2)
Full 19 (1/18) 10 (2/8) 33 (13/20) 11 (0/11)
Partial 37 (16/21) 22 (15/7) 15 (2/13) 9 (2/7)
Mode 3
Unbound 6 (1/5) 2 (0/2) 4 (2/2) 2 (0/2)
Full 3 (0/3) 1 (0/1) 3 (0/3) 1 (0/2)
Partial 54 (17/37) 31 (17/14) 44 (14/30) 19 (2/17)
Mode 4
Unbound 5 (1/4) 2 (0/2) 5 (1/4) 2 (0/2)
Summary of GATS CommitmentsSummary 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)
GATS – 3 Key QuestionsGATS – 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 country’s 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
Further ReferencesFurther 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).