The Relationship between Trade and Health

The following article is based upon findings contained in the report 'The EU's Bilateral FTA Negotiations are a Threat to the Right to Health' presented in April 2010 by the Platform for Action on Health and Solidarity.

 

Trade policies impact on peoples' right to health in several ways. However, it is only recently that the relation between trade liberalization and the right to health has been examined more systematically. In 2004 Paul Hunt, the first UN Special Rapporteur on the right to health, wrote in his report on a mission to the WTO that “trade impacts on the right to health in numerous ways”, and “States have to ensure that the trade rules and policies they select are consistent with their legal obligations in relation to the right to health. If reliable evidence confirms that a particular trade policy has a negative impact on the enjoyment of the right to health of those living in poverty or other disadvantaged groups, then the State has an obligation under international human rights law to revise the relevant policy.”[1]

 

In particular, when we look at the relationship between Free Trade Agreements (FTAs) such as the Economic Partnership Agreements (EPAs) being currently negotiated by the European Union and the right to health, we have to look into four broad areas:

 

• Impact on government revenue
• Liberalization of the health sector
• Trade in health and health related services
• Stronger intellectual property rights

 

Loss of government revenue

 

A typical aspect of FTAs such as EPAs is the removal of import and export duties. However, most developing countries are highly dependent on these trade taxes to raise government revenue, as they have limited sources of domestic revenue and limited tax bases. According to World Bank estimates, tariff revenues in sub-Saharan Africa average between 7 and 10 percent of government revenue. With EU products representing 40 per cent of total imports in sub-Saharan Africa, eliminating tariffs on EU imports would lower tariff revenues considerably.

 

Such a revenue loss leaves a government with few options. One is clearly cutting public spending, putting at risk very much needed funds for health or also for the education sector. Revenue loss also pressurises a government to transfer the ownership and running of state utilities to private companies. So, indirectly, privatization is encouraged.

 

Liberalisation of services

 

If the European Commission gets its way, final EPAs will also contain a chapter dedicated to the liberalisation of services including health services. Opening up the services sector means that a country can no longer limit the investments of foreign companies, nor the kind of services. It will not be possible to put limitations on the number of providers, the numbers of services provided, the value of the imported services, the legal form of the service providers and the participation of foreign capital. It also means that if a country liberalizes trade in services, it has to allow foreign companies in the country and treat them as local companies. All measures affecting services must be at least equally favourable to foreign service suppliers and services as they are to local suppliers and services. This considerably limits the policy space for developing countries and a liberalisation of the health sector would make it impossible for the governments to control the sector any longer. The liberalization of health means that the public sector will have to compete with the private sector. As the private sector can pay higher wages it will drain the most qualified medical personnel from the already weak public sector, thus weakening the national health system further. Governments may want to experiment with commercialization in some components of their health systems, but making these policy experiments part of binding trade agreements will strongly limit their ability to undo these reforms if they wish to do so in the future.

In the Cariforum EPA, which is the only final EPA concluded thus far, the Caribbean countries committed to considerable liberalisation in the health sector.

 

Trade in health and health related services

 

There are clear commercial interests behind the wish to see the health sector in Africa liberalised. Health is one of the faster growing sectors in the world economy. In developing countries, it is also increasingly becoming an attractive investment opportunity for private actors due to the growing middle class being able to pay for health services. The consultancy office McKinsey projected the market for private health care in Africa at USD 21 billion a year by 2016. The recently issued BusinessEurope[2] proposal for trade policy strategy 2014/2020 states that the EU needs to address barriers to participation in international public procurement markets in key sectors such as healthcare and water treatment. In other words BusinessEurope is asking the EU to help them to obtain free access to the health and water market of developing countries.

 

The privatisation of the health sector is dangerous as private provision increases inequity of access because it naturally favours those who can afford treatment. Data from 44 middle-and-low-income countries suggest that higher levels of private-sector participation in primary health care are associated with higher overall levels of exclusion of poor people from treatment and care. With respect to foreign service providers, they are likely to target only the profitable sectors or the higher income earners.

 

Access to medicines

 

In developing countries, where health insurance is scant and most health services are paid out-of-pocket, prices of medicines are a critical factor in determining the level of health care. The high cost of medicines in developing countries reduces access, both by limiting the ability of poor people to pay for medicines themselves and by limiting the ability of governments to expand. The extra expenses for medicines will weaken the health systems as financial resources are already scarce. The current patent system (and other forms of intellectual property protection) delays competition by low-cost competitors, resulting in higher prices of medicines. Generic competition makes prices of medicines drop by an average of 40-80%. The protection of intellectual property (IP) rights is a barrier to access to medicines. Further strengthening of IP protection increases the costs of accessing medicines for citizens of developing countries. Furthermore, increased IP protection also impedes developing countries from establishing their own pharmaceutical industry.

 

In recent years, the EU has been promoting very tough provisions regarding the protection of intellectual property rights. A common feature of the FTAs that the EU is concluding with third countries is that they include so-called TRIPS-plus standards. This means that they require the protection of intellectual property rights that goes beyond what was internationally agreed upon in the TRIPS Agreement[3]. Studies indicate that TRIPS-plus standards increase medicine prices as they delay or restrict the introduction of generic competition. The FTAs tend to benefit the pharmaceutical monopolies and impede access to medicines in the countries that sign up to the agreements. This is why MSF, Oxfam International and Health Action International recently released a joint statement declaring that “European Union trade policies consistently threaten access to affordable essential medicines by seeking to entrench overreaching intellectual property rules”.[4] Meanwhile, the EU is also involved in the negotiations for an Anti-Counterfeiting Trade Agreement (ACTA). ACTA aims to develop and implement a multilateral IP enforcement scheme which is likely to hinder the free circulation of generic medicines.[5]

 

The current UN Special Rapporteur on the Right to Health, Mr Anand Grover recently highlighted the need to revisit trade related agreements in the light of their impact on the right to health and in particular on access to medicines. He concluded that “developing countries and LDCs should not introduce TRIPS-plus standards in their national laws. Developed countries should not encourage developing countries and LDCs to enter into TRIPS-plus FTAs and should be mindful of actions which may infringe upon the right to health”.[6]

 

In May, the Council of the EU approved conclusions on the EU's role in Global Health. Paragraph  15 states that “the Council calls on the Commission and the Member States to address the major aspects that influence global health in the five priority areas of trade and financing, migration, security, food security and climate change.” and paragraph 16 a. adds “the EU should support third countries, in particular LDCs, in the effective implementation of flexibilities for the protection of public health provided for in TRIPs agreements, in order to promote access to medicines for all, and ensure that EU bilateral trade agreements are fully supportive of this objective".

 

Conclusions

 

Trade policies have a direct impact on peoples’ right to health. This impact ought to receive greater consideration when the EU's trade policies are formulated. The EU must stop giving priority to commercial interests. The necessity of African governments to preserve tariff revenue to finance its health sector must come before the desire to open up markets for European companies. The desire of European companies to maximise their profits does not justify a push for liberalisation of the health sector in Africa, which would lead to a decline in the quality of the service for the poorest. Tighter rules on intellectual property benefit pharmaceutical giants, but undermine the access to quality medicines of the poorest and should therefore not be included in trade agreements.

 

 

Thomas Lazzeri & Begona Inarra