Globalization, global public goods, and health

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3Woodward, et al. Globalization

Globalization, global public goods,

and health

David Woodward,1 Nick Drager,1

Robert Beaglehole,1 and Debra Lipson1

INTRODUCTION

Globalization is one of the characteristics

that define the beginning of the 21st

century. Yet, there is no single agreeddefinition of what it is, and there arewidely divergent views of what it meansin terms of its economic and socialrepercussions, including its impact onhealth. What is clear is that it is amultidimensional process encompassing

economic, social, cultural, political, andtechnological components, and that itdefines much of the environment

within which health is determined.

This paper focuses on economicglobalization, which is a key elementof the globalization process as a whole,a major driving force behind it, and acritical determinant of its impact onhealth. It provides a description of thekey linkages between globalization andhealth, as presented in Woodward etal. (1), and introduces the concept andpossible applications of global public

goods for health as a pro-healthcounterpart to the globalizationprocess.

THE GLOBALIZATION PROCESS

Economic globalization encompassesthree components connected by anessentially circular relationship. Theincreasing cross-border flows of goods,services, capital, people, information,and ideas have created pressure for thedevelopment of international institutions

and rules regulating national policiestowards such flows. These, in turn,have contributed to the opening of national borders, thus promoting afurther increase in the level of cross-

border flows (Figure1).

This is a dynamic, evolving process.World trade in goods and services grewby 8.6% per year between 1991 and1999, 3.3% per year faster than outputgrowth (2 ). Both figures represent amarked acceleration from the 1980s.

The value of trade in commercialservices grew by around 6% per yearin the 1980s and 1990s and increasedits share in total world trade from15.6% in 1980 to 18.9%, in 1999 (3, 4 ).

The nature of financial flows todeveloping countries was transformed

1 Department of Health in Sustainable Development, World Health Organization, Geneva,Switzerland.



4 TRADE IN HEALTH SERVICES

Health care system

Health

Individual health risks Household economy

Worldmarkets

National economy,politics, and societyPopulation-level health

influencesHealth-relatedsectors

Cross-border flows

International rules andinstitutions

Opening of economies

Globalization

Health

Figure 1. Impact of globalization on health




during the 1990s (5 ). Net loans andgrants from official sources includingthe IMF fell by more than half between1990 and 2000 and net commerciallending excluding bonds fell almost tozero. Over the same period, foreigndirect investment made to acquire oradd to a lasting interest in anenterprise, equity investment (inshares), and bond issues increased byfactors of 7, 13, and 25, respectively(6 ). As a result, the proportion of netfinancial flows going from the publicsector in developed countries to thepublic sector in developing countriesfell from 56% in 1990 to 9% in 2000,while those going from the private

sector to the private sector, which wereonly 18% in 1980, rose from 38% in1990 to 82% in 2000. The share of direct and equity investment increasedfrom less than 6% to nearly 80%. Thisshift has led to a skewing of thedistribution of international financialflows away from Sub-Saharan Africaand towards larger and better-off developing countries in Latin Americaand East and South-East Asia.

Temporary movements of people

via travel and tourism have alsoincreased recently, but legalinternational migration has beenselective and is unlikely to have keptpace with the growth of internationaltrade and financial transactions. Thisrelatively slow growth contrastsmarkedly with the last major period of globalization, which took place from1870 to 1914. At that time migration,particularly from Europe to theAmericas, was a major feature.

However, some developed countries arenow increasingly open to theimmigration of people with skills thatare in short supply locally, such ashealth and information technologyprofessionals.

The creation of new institutions has

assisted and supported the increase of

global economic integration. The World Trade Organization (WTO), responsiblefor the new set of rules governing worldtrade, was established to promote freertrade. The 1994 General Agreement on

Tariffs and Trade, updated during theUruguay Round of trade talks, canaffect the international flow of healthgoods or products. Its provisions allowcountries to ban the import of products, if necessary to protect publichealth, as long as such bans are notapplied in ways that discriminatebetween countries of origin or betweendomestic and foreign-made products,

and do not restrict international tradeany more than is necessary to achievetheir public health objectives.

Th ere are four other WTO

multilateral trade agreements that have

particularly important implications forpublic health. One is the agreementon the Trade-Related Aspects of Intellectual Property Rights (TRIPS),which sets the minimum standardsof protection for intellectual propertyrights including patents, copyrights,

trademarks, and industrial designs. Though intended to st rengthenincentives to create new knowledge, itmay make patented drugs lessaffordable and accessible to developingcountries. It also raises issuesconcerning the desirability of treatingknowledge as a global public good andof decreasing the knowledge gapbetween countries, while skewingresearch, e.g. for pharmaceuticaldevelopment, towards the health needs

of the rich rather than the poor.Questions are also being asked aboutthe “patentability” of traditionalmedicines that have been in the publicdomain for centuries as well as of newdrugs, diagnostic agents, and therapies




resulting from the application of biotechnology.

Another agreement, on the application

of Sanitary and Phytosanitary Measures

(SPS), affects national policies for foodsafety. To apply measures morerestrictive than the internationalstandards set by the CodexAlimentarius Commission, a countrymust show scientific evidence of risksto health, although the Agreement doesallow countries to implementprovisional measures in the absenceof conclusive scientific evidence.Current discussions center on whetherprecautionary measures should betaken to protect health even whenscientific evidence suggests, but doesnot prove, that traded foods constitutea risk for health. One particularconcern is the effect of unnecessarilystrict food safety conditions on theexport prospects of developingcountries: a recent World Bank study(7 ) estimates that new European Union(EU) standards on aflatoxins will saveone life per two years in Europe, butreduce African exports by US$ 700millions per year. The latter is likely to

have a considerable effect on healththrough its impact on poverty andnutrition.

On the other hand, the Agreementon Technical Barriers to Trade (TBT)has implications for the production,labeling, packaging, and qualitystandards of pharmaceuticals,biological agents, foodstuffs, and otherconsumer products. The TBT Agreement stipulates that productsmust be compared to “like” productswithout considering productionmethods or practices, and this createsa potential bias against the adoptionof health and safety regulations if theyadd to production costs.

The health sector is also affectedby the General Agreement on Trade inServices (GATS), as it covers themovement of consumers and providersacross borders to receive and supplyhealth care, foreign direct investmentin health, and the emerging areas of e-commerce and telehealth. GATSprovides WTO Members withsubstantial flexibility to decide whichservice sectors to liberalize. If a countrypermits market access to any foreignservice provider, it must treat providersfrom all trading partners equally. GATSexempts “service supplied in theexercise of government authority,”which covers services supplied neither

on a commercial basis nor incompetition with other suppliers. Thisis assumed to exempt governmenthealth providers and governmentsocial health insurance schemes fromGATS rules.

GLOBALIZATION AND HEALTH RISKS

The spread of communicable disease,whether foodborne or not, illustratesthe direct effects of globalization on

health. The growth in internationaltravel, with more than two millionpeople crossing international bordersevery day, has helped carry diseasesinto new areas. The increased trade inlive animals and animal products hasincreased the spread of foodbornedisease and led to new humandiseases, for example, bovinespongiform encephalopathy andvariant Creutzfeldt-Jacob disease, andthe introduction of Rift Valley fever into

Saudi Arabia and Yemen. The increasingl y globa lized

production and marketing of cigaretteshas a major adverse health impact.

Transnational tobacco companies,




while exploiting the potential forgrowth in tobacco sales in thedeveloping world, have been among thestrongest proponents of tariff reductionand open markets. Trade openness islinked to tobacco consumption; thebilateral agreements negotiatedbetween the United States of Americaand several Asian countries underthreat of sanctions in the 1980sresulted in an overall increase in thedemand for tobacco, with a greatereffect in poorer countries (8 ). WTOMember governments retain the abilityto implement the legal and regulatorytools that constitute a comprehensivetobacco control policy, provided they

apply equally to all tobacco productsregardless of country of origin.However, countries vary greatly in theirpolitical willingness and capacity toimplement these policy measures, andthis willingness may be increased orreduced by market opening. (9 , 10 ).

TRADE IN HEALTH SERVICES AND

HEALTH SECTOR INPUTS

Trade in health services is minimal,particularly when compared to othertraded services. However, this trademay grow rapidly as information andcommunication technology make iteasier—for example, through e-health—and as health systems areliberalized and entry barriers arelowered. This may facilitate access tohigh-level services by the better off; butit may also divert human resourcesfrom public services to more profitable,private services for the elite or foreign

markets, thus reducing staffing levels,lowering staff quality, and/or raisingsalary costs for the public sector.Cross-border electronic communications

offer potential benefits, particularly interms of professional training,continuing medical education,

information sharing, and diseasesurveillance and response, although itsimpact is restricted by limited internet-connectivity in most developingcountries.

Trade in health sector inputsaffects health services by influencingtheir availability and prices. Thelowering of barriers to imports of goodssuch as drugs, medical equipment, andother consumables may reduce theirprices. Conversely, the price of drugs,vaccines, and other patented inputsmay be increased by the monopolygranting effects of the TRIPSAgreement. Although the TRIPSAgreement is intended, in part, toincrease the incentives for research,the emphasis of medical researchremains directed much more towardsthe more profitable developed-country

markets (11).

The international mobility of healthprofessionals also has importantimplications for health services, as the“brain drain” from many developingcountries has created or exacerbatedshortages. There are reportedly more

Bangladeshi nurses in the Middle Eastthan in Bangladesh and there aremajor outflows of physicians fromIndia, South Africa, and Cuba, and of nurses from the Philippines and

Jamaica . The economic costs of training professionals thatsubsequently emigrate is substantial,estimated to be tens of millions of dollars for South Africa alone (12 ).

GLOBALIZATION, THE NATIONAL

ECONOMY, AND HEALTH

National economic performance affectshealth mainly through changes inhousehold incomes, governmentexpenditure, the exchange rate, andprices. All of these are interrelated, as




well as being influenced byglobalization. Income is importantbecause of its effects on public sectorresources available for health and itseffects on the nutrition and healthrelated behaviours of households(especially low-income households).Economists generally assume thatopening the economy stimulateseconomic growth at the national level,and that this growth contributes topoverty reduction. Several cross-country studies have supported thelink of international trade or opennesswith growth (13-16 ); but the reliabilityof these results is limited bymethodological weaknesses (17 ).

The contribution of growth topoverty reduction depends critically onthe distribution of the associatedincrease in incomes. One World Bankstudy (18 ) has suggested that the poorparticipate equally in growth duringeconomic opening; but itsmethodology, too, has been questioned(19 ). A recent WTO study (20 ), whileassuming the openness-growth-poverty linkage, nonetheless suggested

eleven circumstances—most of themcommonplace in low-income countries—

in which poverty reduction would not

occur.

Economic globalization hasresulted in divergence betweeneconomies—faster growth in therichest and slower growth in thepoorest—and has been blamed forincreasing inequality within countriesand slower poverty reduction in low-income countries (21-23 ). Even in

those countries that have attainedrapid growth during the recent phaseof globalization, the adverse effects of financial crisis have partly reversed theassociated poverty reduction (6).Besides its effects on economic growth,globalization has a potentiallyimportant influence on exchange rates

and government finances, which inturn affect prices, incomes, andresources available for public services.

While the effects of globalization on

health are strongly influenced by itsimpact on the national economy,health is also an important constrainton the successful integration of developing countries into the globaleconomy. Human capital andproductivity are keys to competing ininternational markets and attractinginvestment, but ill health reduces both,through the absence of adults fromwork and of children from school, andtheir impaired performance whenpresent. Ill health also increasespoverty as earnings diminish due towork-related absence and reducedproductivity, and to the costs of medical treatment. This, in turn,reduces the productivity andperformance of all household membersin both work and school through theeffects on nutrition, particularlyreduced calorie intake and irondeficiency. These problems are mostacute in low-income and leastdeveloped countries, contributing to

the skewing of benefits of globalizationaway from them. Ensuring theeffectiveness of basic health sectorsand the provision of key healthinterventions—essential drugs,vaccination programs and other low-cost preventive measures—is thereforean important element in broadeningthe potential benefits of globalization.

CROSS-SECTORAL EFFECTS

Other sectors are important to healthbecause of their roles as

• producers of health-sector inputs (for

example, pharmaceuticals, medical

equipment, and consumables,

construction of health facilities,education of health professionals,and others);




• producers and promoters of goodswith favorable or unfavorableeffects on health, such as foods,infant formula, tobacco, alcohol,and cleaning products;

• influences on environmental riskfactors (for example, pollution,vectors, workplace health andsafety, etc); and

• contributors to the keydeterminants of health, such asemployment and education.

The patte rn of the results of globalization on different sectors is verycomplex, differing markedly not onlybetween sectors, but also between the

same sectors in different countries.Service sectors such as education andenvironmental protection are affectedprimarily through impacts on resourceconstraints affecting publicexpenditure and input costs. Likehealth, education is also affectedthrough the effects of changes inincome and poverty on the demand foreducation. In productive sectors, theeffects are much more variable,depending critically on economic

circumstances and the competitivenessof production.

GLOBAL PUBLIC GOODS FOR HEALTH

An important response to theincreasing global consciousnessassociated with globalization is theconcept of global public goods. It offersthe potential both to improve thehealth effects of globalization itself andto provide broader benefits to health

worldwide. A public good is a good— or, more accurately, a service—that isnonexcludable and nonrivalrous inconsumption: once provided it isavailable to all, and consumption byone person does not prevent othersfrom consuming it. The classic

historical example is the serviceprovided by a lighthouse, but theconcept subsequently extended to suchpublic health services as water andsanitation systems, health education,and information.

The objective of the global publicgoods agenda promoted by the UNDP(24 ) is to extend the concept of publicgoods from its historical locus at thelocal and national level to the globallevel. That is, it seeks to identifyservices which, when provided globally,confer greater benefits than whenprovided at the national level, throughtheir cross-border effects.

While there are a number of conceptual and practical problems inidentifying global public goods, thereare many possible examples in the fieldof health. Some of these areintrinsically linked to the globalizationprocess, in that they act through theinstitutional framework andinternational rules that govern it.Examples include the proposedFramework Convention on TobaccoControl, initiated by WHO, which

would control the promotion,marketing, and trade activities of tobacco companies (25 ); changes to theinternational rules governingintellectual property rights to securean optimal combination of incentivesfor research and development of products to deal with the mostimportant global health problems, withthe affordability of these products tothose who would benefit from them;and international rules to limit adverseenvironmental health effects of economic activity.

However, global product goods inthe area of health extend far beyondthe field of globalization, asconventionally defined. An example ispolio eradication; it is nonexcludable




in the sense that only universaleradication confers the full benefits of savings on preventive programs andthe prevention of reinfection; and it isnonrivalrous in consumption in thesense that, once polio is eradicated, allwill benefit. Other examples of this type

include development and disseminationof knowledge based on the bestpractices for disease prevention andcontrol, and international coordinationof efforts to reduce antimicrobialresistance.

CONCLUSIONS

Globalization, a key feature of the worldat the beginning of the 21st century,will continue to be a critical influenceon health for decades to come. Tosecure the health improvements thatare possible, we must therefore ensurethat the globalization process, in all itsdimensions, contributes to healthpromotion rather than to itsdeterioration. This means managingglobalization to minimize its potentialadverse effects on health—both directand indirect—and to maximize its

health benefits. Ultimately, it meansdesigning international rules andinstitutions explicitly to promote andsupport those national policies andactivities which will optimize healthoutcomes, particularly in thosecountries in greatest need.

However, this objective requires amuch greater understanding of theglobalization process, of the channelsthrough which it influences health,and of how these effects are mediated

by the particular characteristics of different countries and households. Italso requires both a systematicconsolidation of what we already know,and a considerable and well-targetedresearch agenda to fill the gaps in ourknowledge.

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Globalization, global public goods, and health