Lecture18 Globalization

8/3/2019 Lecture18 Globalization

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Lecture 18:

Globalization and Health

Richard Smith

Reader in Health Economics

School of Medicine, Health Policy & Practice

Health EconomicsSOCE3B11Autumn 04/05


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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


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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)


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HEALTH

health

services

risk

factorshousehold

economy

national economy and

health-related sectors

Globalization

economic opening cross-border flows

international

rules and

institutions

goods, services,capital, people,

ideas, information


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Aspects of Globalization that

may effect Health General effect on health from changes in national

economic growthlink 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


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Cryptosporidiosis

Lyme Borreliosis

Reston virus

VenezuelanEquine Encephalitis

Denguehaemhorrhagicfever

Cholera

E.coli O157

West Nile

Fever

Typhoid

Diphtheria

E.coli O157

EchinococcosisLassa fever

Yellow fever

Ebolahaemorrhagic

fever

Onyong-nyong fever

HumanMonkeypox

Cholera 0139

Denguehaemhorrhagicfever

Influenza (H5N1)

Cholera

RVF/VHF

nvCJD

Ross Rivervirus

Equinemorbillivirus

Hendra virus

BSE

Multidrug resistantSalmonella

E.coli non-O157

West Nile Virus

Malaria

Nipah Virus

Reston Virus

Legionnaires Disease

Buruli ulcer

SARS

W135

SARS

merg ng re-emerg ng n ec ousdiseases 1996 to 2003


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World Health Organization

Economic impact, selected infectious diseaseEconomic impact, selected infectious disease

outbreaks, 1990outbreaks, 199019991999

UKUKBSEBSE

US$ > 9 billionUS$ > 9 billion

19901990--19981998

UR TANZANIA

CholeraUS$ 36 millionUS$ 36 million

19981998

INDIAINDIAPlaguePlague

US$ 1.7 billion,US$ 1.7 billion,

19951995

PERUPERUCholeraCholera

SeafoodSeafoodExport BarriersExport Barriers

19911991

MALAYSIAMALAYSIANipahNipah

Pig destruction, 1999Pig destruction, 1999

HONG KONG SARHONG KONG SAR

Influenza A (H5N1)Influenza A (H5N1)

Poultry destruction, 1997Poultry destruction, 1997

USAUSAE. coli 0157E. coli 0157Food recall/Food recall/destructiondestruction

PeriodicPeriodic


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Specific Public Health Issues

Infectious disease control

Food safety

Tobacco Environment

Access to drugs

Food security Emerging issues (biotechnology.)

Health services


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WTO Agreements

Goods: GATT

Technical barriers to trade: SPS, TBT

Intellectual property and trade : TRIPS

Services: GATS


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Specific Health Issues and

most 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 *


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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


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General Agreement on Trade

in Services (GATS)

GATS emerged from 1994 Uruguay Round ofnegotiations that created the WTO (Members agree toprogressive liberalization)

Subject services trade to same treatment as goods (GATT)Basis = liberalization increases global efficiency (comparative

advantagelower cost, higher quality, innovation)

Provides multilateral legal framework for liberalizinginternational services trade (based on existing int. trade law)

Debate is polarized - Tale of Two Treaties

GATS is worst of treatiesundermines national sovereignty

GATS is best of treatiesincrease health (sovereignty)


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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 AccessCommitments

Side Wall:

National Treatment

Commitments

Back Wall:

Exceptions

Floor:Dispute Settlement

GATS Council


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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


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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 multilateralno favourites


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Key Aspects of GATS

Creates binary system either solely public

provided (hence not covered by GATS) or not

Commitments potentially irreversiblechanges

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 exerciseof governmental authority debate on coverage

MFN principle

Structurefour modes of supply


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Threshold Question:

Does GATS Apply?

Is the health-related service

supplied by the government?


supplied on a commercial basis?


supplied in competition with

one or more service providers?


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

YesYes

No

No

Yes

GATS does not apply

No

Yes

S

T

A

RT


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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)


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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)


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Mode 1 Opportunities

Enable health care delivery to remote and

underserviced areaspromoting 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


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Mode 1 Risks

Relies on telecommunications and power

sector infrastructure

Capital intensive, possible diversion ofresources from basic preventive and

curative services

Equity issue if it caters to a small segmentof the population - urban affluent


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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


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For exporting countries

Generate foreign exchange earnings to increase resources

for health

Upgrade health infrastructure, knowledge, standards andquality

For importing countries

Overcome shortages of physical and human resources in

speciality areas

Receive more affordable treatment


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Mode 2 Risks

Create dual market structure

May crowd out local populationunless these

services are made available to local population

Diversion of resources from thepublic health

system

Outflow of foreign exchange for importingcountries


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Mode 3:

Commercial presence

Establishment of hospitals, clinics, diagnostic and

treatment centres and nursing homes and training

facilities through foreign direct investmentcrossborder mergers/acquisitions, joint venture/alliance

Opportunities for foreign commercial presence also

in management of health facilities and alliedservices, medical and paramedical education, IT

and health care


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Generate additional resources forinvestment in upgrading of infrastructureand technologies

Reduce the burden on public resources

Create employment opportunities

Raise standards, improve management,quality , improve availability, improveeducation (foreign commercial presence inmedical education sector)


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Mode 3 Risks

Large initial public investments to attract FDI

If public funds/subsidies used - potential diversion

of resources from thepublic 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


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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


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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


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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 andquality of services


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Scope of analysis

specificcommitments

Cross-industrial commitment

Bu

siness

Telecommunication

Construction

Distribution

Environment

Fin

ance

Edu

cation

Health&Socialservices

Culture&sport

Tourism/Courier

Transportation

Oth

ers

National treatment

Market access

1-4 =

modes

12

34

12

34


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Status of GATS Commitments

(No. WTO Members by Sector)

0

50

100

Tourism

Financ

ial

Busines

s

Commu

nication

s

Transp

ort

Constru

ction

Recrea

tion

Environ

mentHea

lth

Distrib

ution

Educati

on


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Commitments of WTO

Members 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)


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CommitmentsMarket 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)


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CommitmentsNational TreatmentMedical 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)


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Summary of GATS Commitments

Generally, number of sectors committed positivelyrelated 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 subsectorsmedical/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 morethan developing countries

No Member undertaken full commitments for mode 4 (highlyrestricted area)


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GATS3 Key Questions

Why are current levels of trade in health services low? presence of government monopolieslikely 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 obligationsMFN, 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 environmenteven extent of openness/liberalization!

research required on impact of liberalization on: population health status,distribution of health services/status, economic factors (GDP, BoP etc) andhow GATS compares with other agreements


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Further References

See references for Seminar 6

Smith RD. Foreign direct investment and trade in

health services: a review of the literature. SocialScience 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 (inpress).

Documents

Lecture18 Globalization