Free Trade Agreements and possible impacts on Health

By Marc Maes Trade specialist at 11.11.11, Flemish North-South movement

 

1.1 Brief overview of the EU Trade negotiations.

At the moment the EU is engaged in many different negotiations. Some countries belong to more than one negotiation table.

The 153 member countries of the World Trade Organization (WTO) are negotiating the Doha Development Round since 2001. The name 'development' was added by the rich countries to bring on board the developing countries which were more interested in assessing the existing WTO agreements than to engage into new negotiations. By adding the word ‘development’, the rich countries promised to take into account their concerns. However, they never asked so much market access as in this round, with tariff cuts up to 55%. In 2003 in Cancun the tension North-South grew and the developing countries refused to negotiate investment, government procurement and competition (called Singapore issues). Since then the negotiations concentrate on NAMA (Non Agricultural Market Access: industrial products), agriculture and services. The negotiations are stuck since 2004. The last WTO Ministerial in Geneva in November 2009 ended in a deadlock as positions did not move. Will the Doha Round come to a conclusion one day?

Already in 2003 after the refusal to negotiate Singapore issues at the Doha Round, the USA moved forward bilaterally with countries ready to negotiate (Latin America). Initially the EU insisted on the importance of multilateral negotiations at the WTO, but in 2007 faced with the failure of the Doha Round it also moved towards bilateral negotiations with individual countries or groups of countries (Latin America, Andean region, India, Korea, ASEAN region). The EU felt that if it did not undertake bilateral negotiations it would fall behind, so it started negotiations in all directions.

The EU is negotiating in all directions: Middle East, Africa, Latin America, Europe and now Asia. With developing countries where it says the aim is to foster development, and with middle and developed countries (Asia) where it aims to bring forth EU interests.

There are three groups of EU negotiations that we follow less:

- with EU neighbouring countries (Ukraine, Balkan countries, Kazakhstan, etc), involving all issues;
- Negotiations for an EU-Mediterranean economic zone (North Africa & Middle East countries);
-  with Gulf States.

There are two groups of EU negotiations with developing countries:

 

• The Economic Partnership Agreements (EPAs) with African, Caribbean and Pacific (ACP) countries (EU ex-colonies), involving Most Least Developed Countries (LDCs) and middle income developing countries. All are among the poorest countries in the world. The EU had trade relations with its ex-colonies since 1960, but now it is negotiating Free Trade Agreements (FTAs) with them. The gap EU-ACP is so big that it is not possible to establish Free trade. However, the EU aims to integrate goods, Singapore issues, investments and services into these agreements.
• The EU negotiations with MercoSur (Brazil, Argentina, Paraguay, Uruguay) since the beginning of 2000. This agreement should complement the Trade agreements signed by the EU with Mexico and Chile in the 1990s.

1.2 Global Europe: What Europe wants

 

In 2006 the EU adopted the “Global Europe competing in the world” strategy for all its Trade negotiations. It is a very aggressive strategy aiming at  market access for EU goods and services. The aim of the EU is to go beyond the border into these countries to allow EU investors to play a part in the growth taking place in these countries. For that the EU tries to challenge all domestic policies and regulations that hinder the access to EU business, under the pretext that they are trade distorting. The aim is that EU industries can establish themselves freely wherever they want. The EU is increasingly less willing to take development issues into account, because it feels that with the growth of China and India, the EU is loosing market share in Asia.

The two main strategies taken by the EU to get market access are:

- Bilateral trade negotiations, leading to Trade Agreements
- “Market access teams”. These teams are established world-wide in the EU delegations. Working groups, composed by EU diplomatic staff and business, analyze all possible barriers to the entrance of EU business in the country.

 

When they identify barriers, they put pressure on the government to get the regulation changed. A Non Tariff Barrier can be anything, even measures to protect public health.

The next step is to push the elimination of the barriers to EU business in all trade negotiations. This means that Domestic regulation (Standards, licences, qualification,…) must be “not more burdensome than necessary” or “least trade distorting”. 

This eliminates the possibility for the country to defend its often nascent industry and business and prevents it to put forward the development and the interest of its own population. For the EU the important thing is that Trade is not disturbed. This puts Trade above any other concern even above public and social interest, what implies that any domestic regulation and policy can be examined under its Trade distorting aspect. Whatever you do, it should not harm trade.

Most bilateral negotiations are urged by industry and business.

 

1.3 Impact of the liberalization of services on Health in developing countries

If we talk about health and trade, we can look at all aspects of trade. For example, trade liberalization on goods causes loss of government revenue, because in poor countries import tariffs are an important source of government income. Or trade liberalization of waste management might have an impact on health. But most EU Free Trade Agreements contain also clauses on the liberalization of services.

What are services? Services are typically produced and consumed on the same place. One can say it is “everything which cannot fall on your foot”. Today services represent 25% of world trade and about 60% of global production and employment. There are different kind of services related to health:

- professional services (health professionals: doctors, nurses, dentists, midwives, para-medical personnel);
- distribution services : pharmaceutical retailing;
- education services: the training and education of health workers;
- financial services: health insurance;
- health and social services sectors: hospital services, rehabilitation services, welfare services to elderly, children, disabled, nursing services, ambulance services,…

The concept of “Trade” in services did not exist before. Trade in services had to be invented. Since the birth of the WTO this trade is classified in 4 modes of supply:

Mode 1: cross border trade (e.g. through internet).

Mode 2. Consumption abroad. When a consumer goes to another country to consume services there. e. g. when a Belgian patient goes to the UK to be treated there, the UK exports the business. For that Belgium has to allow its citizens to use their health insurance in the UK. This means this service is liberalized between those two countries.

The insurance in a country pays your damage in another country. In that way Belgium has less control on the consumption.

Mode3. Commercial presence. A hospital or a university built in another country. This is the most important way of selling services: open a bank, build a hospital. E.g. if USA hospitals would be allowed to come to Belgium that will change the way Belgium deals with health services.

Mode 4. Temporary movement of natural persons. E. g. doctors go abroad to give their services there. This involves the recognition of diplomas. Many foreign doctors cannot work as doctors in the EU because their diplomas are not recognized there. Liberalization of this trade implies recognition of diplomas, visas, migration policy and tendering. If this trade is liberalized doctors and nurses from developing countries will go to developed countries. 

To open the service sector means that a country can no longer limit the investments of foreign companies, nor of the kind of services, unless it explicitly say so during the negotiations and it is put in the body of the Trade agreement. E.g. write that only the privately funded hospitals are liberalized and that these will not receive subsidies. If a country liberalizes services and opens its hospital sector, it will not be able to decide on the number of hospitals, the value and legal form that these hospitals will take (social, public, etc).

Market access means no limitations on: the number of providers, the number of services provided, the value of the imported services, the legal form of the service providers, the participation of foreign capital, unless explicit reservations are made on the Trade agreement.

National Treatment means that if a country liberalizes trade and 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 services suppliers and services as they are to local suppliers and services, unless explicit reservations are made. This limits regulatory space for the receiving country.

Lack of transparency in Trade negotiations. All bilateral Trade Negotiations are done behind closed doors, which mean lack of transparency. This is currently the case for EPAs where secrecy and confidentiality is asked from negotiators until decisions are taken. The outcome is that decisions are very exclusive. There is too little consultation of consumers, trade unions, mutual health insurance funds and other interested bodies. When consultation exists it is done too late, and with too little time to react. But one group of society receive preferential treatment: corporations. In the EU, governments do not have to inform Parliaments on Trade negotiations. Only when the Agreement is concluded it is sent to Parliaments for ratification. Not even the European Parliament has a say about the kind of negotiations the EC will launch. In contrast, in the USA the government needs to get permission from the Senate before starting negotiations.