Open Democracy | 18 July 2019
Trade negotiations and the triple trouble for health and the NHS
by Meri Koivusalo
Boris Johnson promises if he becomes Prime Minister next week he’ll fly out at the earliest opportunity to seal a “trade deal” with the United States. President Trump and other representatives of the United States have openly stated that NHS would be on the negotiation table in a UK/US deal, with Trump’s apparent hasty backtracking doing little to reassure. After over 160.000 signatures to the parliamentary petition to safeguard NHS in trade negotiations, the UK Parliament will debate the issue on 22nd of July (a parallel petition on Change.org has over half a million signatures). The government has provided a written answer to the parliamentary petition, which seeks to calm concerns, but in fact their answer brings up perhaps more worrying insights on how the government approaches the NHS as part of trade negotiations.
“Calm down dear”
The government claims it will not sell NHS to outsiders, and that trade agreements cannot change the fundamental fact that NHS will be based on universal services free at the point of need. This sounds reassuring, but it does not in fact answer the request to keep the NHS out of negotiations. Trade agreements can affect how NHS services can be provided even when they would not directly affect the fundamental guiding principles. Decisions on how to run public services will always be taken by UK Government and not by its trade partners, but these decisions may need to be compliant in future with what the UK government has agreed to in trade agreements.
Public services are on the negotiation table
In most new trade agreements public services are on the negotiation table on one way or another. This can be through public procurement obligations or in relation to negotiations on services, investment and investment protection. Governments define the limits of how and what is put on the table. There are two approaches in trade deals on services – “positive listing”, where governments can explicitly decide which services to include under the trade agreement, and “negative listing”, where they have to rely on specific exceptions and protections from more generally binding obligations extending to all services. United States negotiation objectives clearly set out their desire for negative listing: “Where any exceptions from core disciplines are needed, the negotiation, on a negative list basis, of the narrowest possible exceptions with the least possible impact on U.S. firms”.
Lack of specific concern for health and social services
The reply by the UK government emphasises the right to regulate in the public interest and protect public services generally under broader framework of public services. However, in practice European Union Member States and the European Commission have had, in addition to general public services clauses, specific sectoral exceptions for health services which receive any public funding. This provides a broader exclusion of health services from negotiations, compared to just a generic focus on public services. But in talks of a US/UK deal, this distinction for health services is now lacking. If the NHS is considered just as any other public service, it will have less protection under such trade arrangements, compared to current EU trade agreements.
Public services “protections” usually refer to the World Trade Organisation (WTO) General Agreement on Trade in Services (GATS) governmental services exception clause. This clause requires that to be exempt, a service must be supplied neither on a commercial basis, nor in competition with one or more service suppliers. However, this is not sufficient for NHS as these days, most health services provision is, or could be, in competition with private services providers. As Amedeo Arena has pointed out in the Journal of World Trade: “if governmental services under Article I:3(b) GATS are identified exclusively by reference to the two negative criteria in Article I:3(c) GATS, virtually all public services could be subject to the GATS, thus making the exemption meaningless”.
Relying too much on these kind of general public services “protections” in trade agreements can result in a false sense of security. It can result in the loss of policy space and governments’ freedom to regulate and intervene in the interests of the public, citizen health, health services and the broader public interest, without the danger of claims or pressure from other governments or corporations challenging their actions on the grounds that they breach obligations arising from trade agreements. The scope to regulate can be further affected by negotiations on regulatory principles, investment and technical barriers to trade.
From goods to services – and why the right to regulate is not enough
The question of the ‘right to regulate’ has become more important in trade agreements, as negotiations have moved from tariffs and goods to services and regulatory cooperation, as we saw with the earlier negotiations towards a EU/US Transatlantic Trade and Investment Partnership (TTIP). The US negotiating objectives for US/UK negotiations in many areas reflect those of that now stalled deal. Trade agreements do often contain big declarations on the ‘right to regulate’ – but crucially, the big problem is that these reside in aspirational, introductory parts of the text, not in the binding clauses of the actual agreement. Right to regulate clauses can also be limited by requirements of compliance with other provisions of the negotiated agreement (empty promise), include requirements of additional hoops (e.g. that they are “necessary” or “scientific evidence-based”) or emphasize merely the aim of the regulation, when the real issue is how governments can regulate.
The UK government’s reply to the petition emphasises that"Trade agreements do not prevent governments from regulating as they see fit”. However, as trade agreements are usually based on existing legislation and as governments sign them, it can be assumed that it is what they consider “fit”. Trade agreements can restrict how and on what grounds future governments can regulate, intervene to or restrict markets. This is the purpose of the modern trade agreements.
Trade agreements affect prices of medicines and access to knowledge
Modern trade agreements with intellectual property rights (IPR) chapters increase the prices of new medicines as result of market exclusivity (monopoly). The increasing concentration of global pharmaceutical markets has also resulted in new problems of availability and pricing of more ordinary medicines in many countries. While IPR is defended as incentive for innovation, this has come with increasingly high prices and limited response to health policy priorities, such as need for new antimicrobials. Trade agreements are key to the protection of intellectual property rights and data exclusivity, leading to higher prices of new medicines and in restricting, rather than enhancing competition. The importance of knowing what is written in trade agreements has been emphasized by Dani Rodrik (2018) in his paper “What do trade agreements really do?” where he elaborates why we should not assess impacts of trade agreements on the basis of misplaced general assumptions about what ‘free trade’ actually means. Traditional discussion of ‘free trade’ focuses on competition, lower prices and bigger choice for consumer products. But we should not take this at face value, because such talk does not fully correspond to the actual contents of trade talks on investment, intellectual property rights, regulatory cooperation, government procurement and trade in services.
Triple trouble for health
The challenge of trade talks for NHS and health policy is that there are significant conflicts of interests between the priorities of large multinational industries and those of national publicly funded health systems. There are also conflicts of interests between large multinational industries and public health protection and health promotion. Achieving great economic benefits for industries in trade negotiations can result in large costs for publicly funded national health systems. For example, if trade negotiations enhance competition in health services and restrict competition in pharmaceuticals, this can increase costs as well as ultimately undermine access to services and medicines. Free trade agreements can also enhance unhealthy consumption (e.g. tobacco, alcohol, soda and junk food), while making regulatory measures more difficult, cumbersome or conditional on increasingly onerous demands for evidence. While big industries from tobacco to pharmaceuticals would benefit, the NHS could bear the triple burden of increasing ill-health as result of lack of effective regulatory action, more market driven service provision, and growing cost pressures from higher prices of new treatments and technologies.
Finally, the question is not whether or not to negotiate trade agreements, but for whose interests trade agreements are negotiated and how other public policy priorities – and public value - are recognized, assessed, prioritized and duly addressed as part of trade negotiations. In the light of the current response to the petition from the UK government, it seems that none of the key issues of concern with respect to NHS are really addressed.