GATS, Privatisation and Health

Summary

The World Trade Organisation’s General Agreement on Trade in Services (GATS) is one of several mechanisms that can be used to liberalise public services. But it is the liberalisation of services other than health care services that may in fact have a grave impact on health care services.

While the GATS agreement would not at present seem to be significantly affecting health care services, it it has a serious potential to affect people’s health and the determinants of health. Women are particularly affected as society’s major carers of the sick and providers of health care services.

This presentation was given at a conference "Service without Borders? Privatisation -- GATS and the Consequences for Women" held in Cologne, Germany.

Contents

• Introduction
• The UK and the National Health Service
• UK Privatisation and the "Privatisation" of the NHS
• GATS and Privatisation
• Notes and References

Introduction

I've been asked to talk about GATS, privatisation and the health sector emphasising the countries of the North, as Naila has already described some of the processes taking place in Bangladesh in recent years.

Most of what I have learnt in the past few years is based on the work of many colleagues around the world in the areas of health, international trade policy, and privatisation.¹ What I have done is just to try to understand it -- the GATS agreement is simple but complex and without legal precedent -- and bring the various knowledges together. Out of all this, I put together a briefing paper, Trading Health Care Away? GATS, Public Services and Privatisation.² From this and from subsequent developments, I will today make just four points:

1. A public service -- that is, one provided and/or paid for out of the public purse -- need not be privatised or sold off for it to come under GATS rules.
2. GATS is just one of several mechanisms to liberalise public services and services in general; it's not the only one. We need to consider GATS in the context of all these mechanisms, not in isolation from them.
3. The liberalisation of other services -- not health care or medical services -- may have a grave impact on health care services.
4. GATS is not at present significantly affecting health care services -- but it has a serious potential to affect people's health, the determinants of health: what keeps us away from using health care services.

The UK and the National Health Service

The UK is a good example of these points and processes, so I will first describe some of what has been happening there in recent years.

Its National Health Service, known widely by its initials, the NHS, was established in 1948. It came out of a working class movement. The "powers that be" introduced various health and welfare reforms after the Second World War in response to working class agitation and mobilisation -- a health system seemed a better option than a Russian Revolution.³

The UK's health service is paid for out of general taxation -- there isn't a particular tax for health or social insurance as in Germany or The Netherlands. Even the Financial Times newspaper, a supporter of free-market economics, considers general taxation to be the most economical, the most efficient, the least bureaucratic and even the fairest way to fund the bulk of health care.

The services the NHS provides have been free at the point of delivery and provided on the basis of need -- are you sick? -- not on the basis of ability to pay -- have you got the money?

The NHS employs 1.2 million people, making it the UK's largest single employer, the world's third largest employer.⁴ "People", however, is, depending on your perspective, a gender-neutral word, a masculine assuming word (people are in fact men) or a women-hiding word (most of the "people" are women). ("Refugees" is another: by far the majority of the world's refugees are women and children.)

The NHS is the biggest single employer of women in Europe.⁵ Six out of 10 health workers are women; 8 in 10 non-medical staff are women -- and non-medical staff account for more than 1 million 'people' working in the NHS. 87% of nurses (and AHPs) are women. 86% of administrative and clerical staff.⁶ One quarter of NHS workers have dependent children.⁷

And what proportion of the top jobs in the NHS are held by women? Less than 20% of those in charge of hospital trusts are women. What about medical staff? Less than one-third of doctors are women. Women are perceived as good at running the community, mental health and disability units, while men handle the acute medicine and teaching jobs better.⁸ Women do the cleaning and the laundry -- the lowest paying jobs.⁹

One quarter of doctors and nurses working in the NHS qualified outside of Britain: Spain, Scandinavia, the Philippines, Australia, New Zealand, China, and South Africa. Nelson Mandela has appealed to Britain to stop "leaching" his country's health workers. (People moving from one country to another to provide a service is a key issue in GATS and a pertinent one for health services.¹⁰)

Women come into contact with the health service far more than men do, as they often seek care not only for themselves but also for their children, relatives and the elderly.

UK Privatisation and the "Privatisation" of the NHS

The NHS has been held up for decades as a model to be emulated around the world. Despite being underfunded and overworked, particularly over the last two decades, it still provides high-quality health care to most of the people in Britain more cheaply and more efficiently than almost any other medical system in the world (according to the Organisation for Economic Cooperation and Development, OECD).

But now it is the mechanisms for dismantling it as a public service that are being exported around the world.

The UK in general is a model of privatisation.¹¹ Over the past two decades or more, various public entities and services have been outrightly sold off: telephones, water, gas, electricity, and railways.

But selling off the NHS? That would be politically unacceptable, especially given the general popularity of the NHS and its entrenched public nature.

Instead, successive governments have taken the back-door approach. Just like structural adjustment programmes in the countries of the South, the process has been called "reform" and "modernisation" (many of those working within the NHS believe that reform is needed, but have a different interpretation of what is needed) rather than commercialisation or privatisation. The process seems ad hoc, fragmented, gradual and covert.

A first step has simply been to undermine confidence in public services by ensuring that there is unrelenting criticism in the media of the NHS. Other steps have been to:

• require the NHS to contract out its services, particularly support services such as cleaning, catering, laundry, administration and laboratory analysis, to private firms rather than provide them themselves. The NHS pays for these services, but no longer provides them.

• separate the buildings from the service provided in them, and bring in the private sector to build and/or run the buildings. The UK government's Private Finance Initiative (PFI) has been the main mechanism for this.¹² If the process can be called a "public-private partnership" or PPP, that's even better and politically more acceptable, because the term suggests a public dimension to the arrangement rather than one that is controlled by private interests.

• introduce internal markets: separating the purchaser of the health service (a general practitioner sending a patient to a hospital for a scan or specialist check up) from the provider of the health service (the hospital).

• introduce commercial accounting systems and private financing. As David Hall of the Public Services International Research Unit points out, "The introduction of business accounting ... may be a change as significant as that of private ownership itself".¹³

• allocate resources on the basis of an individual patient's health risks rather than a population's health needs.

• introduce user charges and private insurance.¹⁴

The UK is now embarking on a system in which taxpayers, via public money, pay for the provision of health care, but it is the private, for-profit¹⁵ sector that owns and manages the infrastructure and operates the services. Nearly half of all UK tax revenue now goes to profit-making companies.¹⁶

What have been the impacts of this "reform"? Dirty wards, dirty sheets, unmet performance standards, lower pay and poorer working conditions -- for women.

In the first 15 hospitals built by the for-profit sector in the UK under the Private Finance Initiative, the number of hospital beds have been reduced by one-third. Private money is now funding the largest hospital building programme in Britain or 30 years -- and is being paid for by the largest service closure programme in the history of the NHS. These hospitals are smart and modern, but tend to be on the edge of town centres, meaning that patients need invariably need their own transport to get to them and thus adding to the expenses that poorer people face.

In general, for-profit health care tends to be more expensive and less efficient than public health care, and not necessarily of higher quality. Private health care is never cheaper or more comprehensive than state or public care. The rhetoric about the private sector serves to obscure the fact that, in many respects, this process is not really about providing better or quicker health care services: it is about the for-profit sector capturing public money and wealthier individuals' money.

Privatisation of a health care system means that the public system has less money and fewer staff as they attracted by better pay and working conditions elsewhere. The private sector caters for wealthier people, who also tend to be healthier people -- the public sector has to help the rest: the poor, elderly and children who often most need health care and have the least money.

A market-based approach to health not only drives up the cost of health care but also changes the services that do get provided. Neither public or private sector end up providing preventative health care services for instance: the private hospital sector is not interested in the factors that make people ill (the insurance sector might be but only so as to avoid patients) while the public sector hasn't got the money. A market-based approach promises that good health can be bought and sold in the marketplace. It can't.

Who takes care of those who can't afford the health care services, or for whom health care is no longer provided?

GATS and Privatisation

What have these processes to do with GATS? When I was first learning about GATS and health, I discovered that those who had been contending with the issues for several years disagreed as to whether the GATS agreement itself was the main problem,? Or privatisation in general? Or economic liberalisation? Or deregulation? Or that the for-profit entities aiming to gain access to the service markets in other countries by means of GATS would be "foreign"? (A key challenge when tackling "globalisation" is to find ways of discussing the relevant issues without adding to or unwittingly supporting the growing racism and prejudice that surrounds us all and that all these processes have both fuelled and have exploited.)

Health researcher Meri Koivusalo, who has done much to draw public attention in Europe to the health effects of trade agreements, contends that GATS, indeed all the World Trade Organisation agreements, is not really about trade barriers between nations, nor about conflicting interests between North and South, but about "the various incentives and mechanisms which deal with the respective rights, responsibilities and capacities of the private and public sector."¹⁷ Under GATS, governments can still regulate -- but GATS itself is about regulating governments.

What has been happening to the NHS in the UK over the past two decades illustrates the points I mentioned at the beginning that I would like to make today about GATS and privatisation.

1. A public service -- that is, one provided and/or paid for out of the public purse -- need not be privatised or sold off for it to come under GATS rules.

   The NHS, a public service, has not been privatised as such or sold off, yet much of it is subject to competition and provided by for-profit interests -- privatised in effect. Ask the majority of people in the UK, however, and they would say that the NHS is still a public service that has not been privatised.

   Public services are theoretically exempt from GATS. But if a public service competes with another, presumably non-public, service, then it probably comes under GATS rules. Even WTO officials concede this.¹⁸ Thus if a government contracts out any part of its public services, such as cleaning or catering, or if private (either for-profit or voluntary) companies supply services that are also provided by the government (for instance, if private hospitals exist alongside state ones, or if there is a mixture of public and private funding), then those services could be judged by a WTO dispute panel as not being a government service and thus subject to GATS rather than exempt from it, that is, subject to competition from operators from abroad.¹⁹

   Under the North American Free Trade Agreement (NAFTA), US for-profit hospitals argued that the user fees charged by the Canadian public health system to patients were commercial charges and that denying US companies entry to the Canadian health market was a denial of the right of US companies to profit from that market. European trade officials, moreover, have emphatically reassured WTO members that an exemption for governmental services in the European Union Treaty has offered them no protection at all in practice.²⁰

   Many trade unions and others are therefore calling for public services to be clearly and categorically exempt from GATS -- and for such services to be defined as those "in the public interest".

2. GATS is just one of several mechanisms that companies, via their national governments, could use to liberalise services.

   GATS was not instrumental in any of the UK's health privatisation. It had nothing to do with it. The government managed quite nicely on its own, thank you.

   In other countries, World Bank and IMF programmes have done the job of cutting back and redirecting public spending and of introducing user fees so as to create health markets.²¹

   Elsewhere, bilateral agreements between two countries or regional agreements between several countries (such as the North American Free Trade Agreement between the US, Canada and Mexico) have required countries to liberalise their services -- and the liberalisation of services required under some bilateral agreements goes far deeper than that contained in the GATS rules.²² Just last month, for instance, the United States urged Japan to take steps to accept greater foreign entry into high-quality medical services under a bilateral initiative to promote Japan's inward foreign direct investment.

   We need to look at all of these mechanisms and interests to see how they intersect with GATS. We need to explore how government actions, such as those in the UK, can, albeit unwittingly, bring health care services under the GATS umbrella. We need to be aware of other processes that are privatising health care.

   What GATS does do, however, is to entrench privatisation and make it irreversible, possibly permanent.²³ As the WTO Secretariat has said, GATS has the effect of "protecting liberalisation policies, regardless of their underlying rationale, from slippages and reversals".²⁴

   I would like to inject, however, a word of warning and a note about context. The corporations and countries that support and use the rules of the World Trade Organisation as they are currently written, interpreted and implemented are powerful. But ordinary people affected by their policies and actions are powerful, too. We should take care not to give "the powers that be" any more power, for instance, by stating baldly that the GATS commitments are irreversible or that they automatically mean a rush of foreign investment. We need also to look at context.

   For instance, Sierra Leone is the only country to have listed all its health service categories as covered by GATS -- and yet US hospital chains or insurance companies do not seem to be dashing in there. Companies are interested in high-cost commercial care, in patients who can pay for services, and in countries that have public money that could be directed their way. If they don't see how they can make a profit out of a service, they will not be rushing in to provide it, even if it has been listed under GATS.

   Another example. The British government sold off the national railways some years ago. One of the many new companies thus created maintains the track -- the railway or railroad itself -- throughout the country: other companies run the trains. But in 2002, RailTrack went bankrupt (despite millions of public money being poured into it), and the British government effectively renationalised it. It is now run as a not-for-profit company. Britain has actually broken GATS rules -- because the EU listed maintenance of rail track under GATS as open to competition.²⁵ But as far as I'm aware, no country has lodged a complaint with the WTO about this, either because no company based outside of Britain was involved in maintaining the tracks -- or because there's no money to be made in Britain's railways so why bother.

3. The liberalisation of other services -- not health care or medical services -- may have a grave impact on health care services.

   So far, GATS has not -- as yet -- been used by countries or companies to privatised health care services and open them up to foreign competition. What's listed under GATS as subject to liberalisation is more or less what was already liberalised when the Agreement was signed in 1994. Moreover, health care services are "trailing behind other sectors" in the rate that they are being listed under GATS as open to competition.²⁶

   In the current stage of the GATS renegotiations,²⁷ health care services would not seem to be an issue, although it is difficult to tell given that the negotiations between government representatives are taking place behind closed doors (but in close consultation with corporate lobbyists) and are not disclosed to the public.

   But the liberalisation of other services under GATS may in fact have a grave impact on health care services.

   Consider all the services (according to a GATS schedule) used in a hospital, especially one that contracts out some of its operations:²⁸

   • Business services:

     • medical, dental, midwives, nurses, paramedics
     • data processing
     • research and development in natural and social sciences
     • technical testing and analysis
     • placement and supply of personnel
     • maintenance, cleaning

   • Construction related services

   • Education services (teaching hospitals)

   • Environmental services: sanitation, refuse, and waste disposal

   • Financial services: health insurance, lending, and asset management

   • Health related & social services:

     • hospital
     • other human health
     • social services
     • ambulance
     • residential facilities, convalescent, rest homes, disabled care

   • Tourism related: catering

   If a government has committed data processing under the GATS "Business services" classification, does that include data processing in a hospital? What about all the invoicing and payments, a growing and probably lucrative area given that so many different services are being provided by different companies?

   What about the financial services a hospital needs or that patients rely on? It has not been health care companies lobbying for GATS since its inception but financial service companies -- banks, insurance companies, credit card companies, investment companies, pension funds -- and telecommunication companies. They are the most organised sector in the GATS arena and they know what they want from the Agreement and from the renegotiations. Where can a hospital go to borrow money to maintain its buildings but to the private financial markets if a government does not have, or will not provide, the money?

   A significant part of financial services is insurance services, and in the context of health and social services, it is health insurance service that is at issue. In sum, the liberalisation of other services, particularly financial services, might well affect health care services.

4. GATS is not at present significantly affecting health care services -- but it has a serious potential to affect people's health, the determinants of health: what keeps us away from using health care services.

   A whole range of services and the regulations governing them directly and indirectly affect people's ability to stay healthy and to remain uninjured. Many are subject to liberalisation under GATS. I'll mention just three;

   • i) environmental and water services.

     If people -- not "people"; who does the cooking and cleaning? -- are excluded from access to clean water and to sanitation because they can't afford it, theirs and everyone's health suffers. The privatisation of water and sewage supply typically leads to an increase in prices, which forces people to collect their water from untreated sources. Children in particular are more prone to water-borne infections and diseases. Over two million people, mostly children, die each year from diarrheal diseases related to lack of access to clean water. Yet in the current round of GATS negotiations, the EU is trying to get water services classified under GATS and to persuade countries to open up their water supply to competition (see Maude Barlow's presentation??)

     Water is also essential for agriculture. Who grows the food in small subsistence plots that feeds most of the world's people and that never enters national, let alone international, statistics because it is consumed directly or traded locally?

   • ii) pollution restrictions.

     Emission limits or bans on what power generators or manufacturers can put into the air could be considered as barriers to trade, as could restrictions on the distribution of alcohol, tobacco and firearms.

   • iii) a whole host of occupational and workplace health and safety regulations, aimed at preventing accidents at work could possibly be challenged if, in practice, they created a barrier to a company outside the country providing a service.

Conclusion

To conclude: Health is a fundamental human right; trade policies, however, are negotiable.

Notes and References

1 To mention a few: Meri Koivusalo (www.stakes.fo/gaspp); Allyson Pollock, School of Public Policy, University of London; David Price, University of Northumbria, UK; Clare Joy, World Development Movement (www.wdm.org.uk); Ellen Gould; Erik Wesselius, Corporate Observatory Europe (www.xs4all.nl/ceo/); David Hall and Jane Lethbridge, Public Services International Research Unit, UK (www.psiru.org.); Alexander Nunn and Centre for Public Services (www.centre.public.org.uk); Kasturi Sen, University of Cambridge; John Hilary, Save The Children (www.savethechildren.org.uk); Jane Kelsey, New Zealand; Ellen Shaffer, Center for Policy Analysis on Trade and Health (www.cpath.org)

2 Trading Health Care Away? GATS, Public Services and Privatisation, Corner House Briefing 23, July 2001, www.thecornerhouse.org.uk/briefing/23gats.html or www.thecornerhouse.org.uk/pdf/briefing/23gats.pdf

3 Jean Shaoul, "Global Capital and Healthcare Reform: the Experience of the UK" in Kasturi Sen (ed.), Restructuring Health Services: Changing Contexts and Comparative Perspectives, Zed Books, London and New York, 2003, pp.146-159.

4 See UK Department of Health: www.doh.gov.uk

5 IWW Health Worker, magazine of the Health Workers Industrial Union, a member of the Industrial Workers of the World (IWW), www.iww.org.uk.

6 "Women Bear The Brunt of PFI [Private Finance Initiative] in the NHS", Centre for Public Services, Sheffield, UK. www.centre.public.org.uk

7 "Beyond Workplace Nurseries", Second Annual NHS Childcare Conference, London 12 February 2003, www.doh.gov.uk

8 "Top of the NHS is no place for women", The Guardian, 16 April 2001.

9 op. cit. 5.

10 For an exploration of these issues, particularly concerning developing countries, see David Woodward, "Trading Health for Profit: The Implications of the GATS and Trade in Health Services for Health in Developing Countries", March 2003, www.ukglobalhealth.org (Health and Trade) and www.twnside.org.sg in. See also Corner House Briefing 23, op. cit. 2, Box 6

11 For analysis and description of the processes, see Dexter Whitfield, Public Services or Corporate Welfare? Rethinking the Nation State in the Global Economy, Pluto Books, London 2001. See also Centre for Public Services, www.centre.public.org.uk.

12 For extensive research, analysis and critique of how the Private Finance Initiative operates within the health service, see the articles of Allyson Pollock and colleagues in the British Medical Journal, www.bmj.com

13 David Hall, Globalisation, Privatisation and Health care -- A Preliminary Report, Public Services International Research Unit, Greenwich, January 2001, p.17, website: www.psiru.org.

14 For more details of all these mechanisms, see Corner House Briefing 23, op. cit. 2, Box 10, and Dexter Whitfield, op. cit. 11.

15 Note that the "private" sector can also include the non-profit or voluntary sector. In many "developing" countries, it is this sector that provides many health care services, particularly in places where structural adjustment programmes have required public or state sector cut-backs.

16 Calculated by Allyson Pollock from 1999 data.

17 Meri Koivusalo, World Trade Organisation and Trade-Creep in Health and Social Policies, GASPP Occasional Paper 4, 1999, Helsinki, 1999, website: www.stakes.fo/gaspp

18 Although GATS encompasses all services, many civil servants and government ministers state that it makes an exception for public services -- those "supplied in the exercise of governmental authority" (Article I.3b) -- such as health care, education or utilities. But GATS defines government services so narrowly -- "any service which is supplied neither on a commercial basis, nor in competition with one or more service suppliers" (Article I.3c) -- that the exception would probably be meaningless if one country were to challenge another country's public services at the WTO dispute panel as contravening GATS. The meaning or interpretation of this exemption is unlikely to be clarified other than by a dispute panel. Moreover, the WTO's Council for Trade in Services commented in November 1999 that exceptions provided in Article I.3 needed to be "interpreted narrowly" when applied to health services. Council minutes are used by dispute panels to interpret WTO agreements. See "GATS and Public Service Systems: The GATS 'Governmental Authority' Exclusion", discussion paper from international branch of the Ministry of Employment and Investment, Government of British Columbia, Canada, 2 April 2001. website: www.ei.gov.bc.ca or members.iinet.net.au/~jenks/GATS_BC2001.html; and Krajewski, M., "Public Services and the Scope of GATS", Center for International Environmental Law, Geneva, May 2001, website: www.ciel.org

19 Many government and WTO officials frequently state that the GATS rules do not apply to a country's services unless a government has specifically decided to list or "schedule" them under GATS as being open to competition from entities based in another country; they claim that GATS is a "bottom-up" agreement rather than a "top-down" one. This is only partially true. Some GATS obligations do not apply to a service unless a country has scheduled the service, market access and national treatment being the main ones. Other obligations, however, apply directly and automatically to all WTO members for all services: most-favoured-nation and transparency. One rule on domestic regulation (Article VI.4) may also apply to all services (the Agreement's wording is unclear). Moreover, the assertion that a country can "choose" what services to include under GATS assumes that it has sufficient knowledge and understanding of the complex Agreement and domestic legislation (something that dispute panels have indicated that neither the EU or Canada had concerning, respectively, the distribution of bananas and the manufacture of automobiles), and that it is not pressured or enticed by other countries to list services in return for concessions in other WTO agreements.

20 See Ellen Gould, "The WTO General Agreement on Trade in Services: Separating WTO Fact from Fiction", Council of Canadians, website: www.canadians.org.

In theory, the US could take Britain to the WTO disputes panel if the British government or any other body refused a US multinational permission to buy a British NHS hospital that had been financed through the Private Finance Initiative.

The Canadian province of Alberta plans to allow private, for-profit hospitals to provide services previously provided only by public hospitals. If any of these private entities are based outside Canada (and a US-based company could use NAFTA to gain access), Alberta would be obliged to extend the same rights to every other "like" foreign provider under the GATS most-favoured nation rule. This is despite the fact that Canada had not made any commitments under GATS to liberalise professional, health or social services. See Sanger, M., Reckless Abandon: Canada, the GATS and the Future of Health Care, Canadian Centre for Policy Alternatives, February 2001, website: www.policyalternatives.ca

21 See Corner House Briefing 23, op. cit. 2, Box 7.

22 See Corner House Briefing 23, op. cit. 2, Box 12

23 A country can alter a commitment it has listed in its GATS schedule, but has to wait three years after it has listed the commitment or service before it can do so. The country also has to negotiate a substitute commitment to open up another service area to competition as compensation in a way that satisfies all other WTO members.

24 WTO Secretariat, "Recent Developments in Services Trade", 9 February 1999, S/C/W/94, website: docsonline.wto.org, quoted in Ellen Gould, "The 2001 GATS Negotiations: The Political Challenge Ahead", The Alliance for Democracy, March 2001, website: www.thealliancefordemocracy.org

25 This point made by Canadian GATS researcher Ellen Gould, 1 July 2002, as follows: "The renationalisation of RailTrack [the privatised company that maintained the railway track but did not run the trains] by Britain was a violation of the EC's GATS commitments. While the EC did not make commitments in rail transport per se, it did commit under maintenance and construction of rail lines under its construction commitments, and these are services carried out by RailTrack."

26 WTO Secretariat, "Health and Social Services: Background Note by the Secretariat S/C/W50", 18 September 1998.

27 The GATS agreement came into effect in 1995. Since then, various Annexes have been negotiated and added to it. One GATS clause (Article XIX), however, mandates that the Agreement should be renegotiated several times so as to achieve more liberalisation, and that the first round of such renegotiations should begin within five years of GATS coming into effect, that is, the year 2000. WTO members thus began renegotiations in February 2000 to change or clarify some of the rules and to persuade each other to list more of their services under GATS.

28 This point is drawn from the analysis of Professor Jane Kelsey, University of Auckland in New Zealand, from her presentation, "Deregulation of public services & the GATS" at the University of London School of Public Policy, 5 February 2003.