Trading Health Care Away?
GATS, Public Services and Privatisation

 

Summary

The World Trade Organisation is revising its General Agreement on Trade in Services (GATS) so as to increase international trade in services. If current proposals are implemented, GATS could be used to overturn almost any legislation governing services. Particularly under threat are public services -- health care, education, energy, water and sanitation, for instance. This briefing outlines the main provisions of GATS, its proposed revisions, and key corporate aims. It explores the potential for private companies to capture the most profitable components of publicly-provided and -funded health care services, leaving a reduced public sector to cope with the elderly, chronically sick and the poor who most need health care and who can least afford it. The result will be a decline in accessibility to health care worldwide.

Contents

• Box 1: The World Trade Organisation
• Everything Under the Sun
• Box 2: US and EU Service Exports
• General Agreement on Trade in Services (GATS)
• Box 3: GATS Main Obligations
  • All Services
  • Specified Services
  • Modes of Supply
• GATS 2000
• Box 4: Regulating Governments, Not Corporations
• Box 5: GATS 2000 Negotiations--New Rules and Restrictions
• Business Objectives in GATS 2000
• Box 6: GATS Privatisation of Immigration?
• Turning Public Into Private
• Box 7: Box 7Creating Health Markets: Privatising Health Care ... The IMF, World Bank and World Health Organisation
  • IMF and World Bank
  • World Health Organisation
• Turning Health Care Into Health Markets
• Box 8: Marketing Health in Chile
• Box 9: Health Care for the Few
• Using GATS to Privatise Public Health Care
• Box 10: Britain's National Health Service Privatisation by the Back Door
  • Purchaser-Provider Split
  • Commercial Accounting
  • The Privatisation of Public Funding
  • Per-Patient Funding
  • Private Insurance
  • Private Hospitals to the Rescue?
  • Privatisation of Long-term Nursing and Residential Care
  • Conclusion
• Public versus Private
• Box 11: Trade Encroaching on Health
  • Other WTO Agreements
  • Poverty and Hunger
• Conclusion
• Box 12: If Not Multilateral, Then Bilateral
  • The Proliferation of Other Avenues
  • Deeper than GATS
• Notes and references

 

 

Main text

Amid the shouts of demonstrators, the protests of South-ern delegations and the disagreements between the US and European Union, the World Trade Organisation (WTO) failed to launch a comprehensive revision of international trade rules in November 1999 in Seattle, USA. But talks have since begun to change one of the 28 agreements overseen by the WTO -- the General Agreement on Trade in Services or GATS.¹

The US, EU, Japan and Canada are trying to revise GATS so that it could be used to overturn almost any legislation governing services from national to local level. Domestic policy making, even on matters such as shop opening hours or the height and location of new buildings, could, in effect, be turned over to the WTO. All legislation would primarily be aimed at increasing trade.

Particularly under threat from GATS are public services -- health care, education, energy, water and sanitation, for instance. All of these are already coming under the control of the commercial sector as a result of privatisation, structural adjustment and reductions in public spending. A revised GATS could give the commercial sector further access and could make existing privatisations effectively irreversible. Experience in the United States and several Latin American countries, where health services have been run for profit over the past decade or so, suggests that the result will be a decline in accessibility to health care worldwide.

Most elected officials and civil servants, let along the general public, are not aware of GATS, nor of its implications. But several countries are demanding that a wide-ranging assessment of the impact of a free market in services be carried out before any more so-called trade barriers are removed. And non-government organisations (NGOs) and trade unions are demanding that services in the public interest be clearly exempt from GATS.

Rules governing international trade are certainly necessary. But such rules should place people before the entrenchment of corporate power.

This briefing outlines the growth in services in recent years, the main provisions of GATS, the proposed revisions to the Agreement, and some key corporate aims in extending it. It details how public services may not in fact be excluded from GATS and explores the implications for public health care. It also considers what may happen to publicly-provided and -funded health care services if private companies capture their most profitable components and the public money subsidising them.

Everything Under the Sun

Heart surgery and electricity transmission, education and childcare, water purification and pesticide application, sewerage and sports centres, road construction and film making, toxic waste disposal and mobile 'phone communication -- all are services, not tangible commodities. Some services are luxuries, such as tourism and entertainment. Others are essential: health care, education, transport, water and energy.

Services have become an important part of many countries' economies, overtaking manufactured goods in significance in some places. Providing services (excluding public services) now represents over 60 per cent of the GDP of industrialised countries and 50 per cent of that of others.² Most services are provided and consumed domestically. In Europe:

"The service sector accounts for two-thirds of the [European] Union's economy and jobs, almost a quarter of the EU's total exports and a half of all foreign investment flowing from the Union to other parts of the world".³

The US Coalition of Service Industries estimates that services account for four-fifths of US GDP.⁴

International trade in commercial services was worth US $1.35 trillion in 1999 -- about one-quarter of the global trade in goods -- up from some $400 billion in 1985 and from $1.2 trillion in 1995.⁵ This trade is firmly in the grip of the industrialised countries, which exported nearly 71 per cent of services traded internationally in 1997 and imported 67 per cent.

The EU regards itself as the biggest services exporter in the world,⁶ while more than one-third of US economic growth over the past five years has been due to exports of services.⁷ The largest single US export industry is entertainment, in particular, films and television programmes.⁸

Services account for 60 per cent, or US$210 billion, of annual foreign direct investment, much of which is connected with privatisation of state entities.⁹

Developing countries import and export less than one-third of the services traded internationally.¹⁰ Because of the vast differences between the capacities of developed and developing countries to supply services, it is major traders in the industrialised world which have most to gain from increased access to services markets. The US Coalition of Service Industries is confident that any increase in the consumption of services anywhere in the world effectively means an increase in consumption of US services.¹¹ The European Union acknowledges the disparity in financial services:

"In many instances we will be interested in exporting our competitive banking activities to developing countries but they will not be as interested in establishing a bank in the European Community since the market is already highly competitive".¹²

The EU attributes "the fact that services represent a smaller proportion of the economy in developing countries ... to their lesser developed financial and business service sectors".¹³

The world's largest employer is tourism, accounting for one in ten workers worldwide and for one-third per cent of global services exports.¹⁴ Many of the workers in service industries are low-paid women. Some 80 per cent of women workers in the European Union are employed in services.¹⁵

General Agreement on Trade in Services (GATS)

Services first came under the rules of the world trading system in 1995 when the WTO came into effect.¹⁶ The ambitious and ambiguous General Agreement on Trade in Services (GATS) sets out rules governing international trade in practically all services.¹⁷ It does not define what it means by a service, instead offering a classification list of 160 of them based on a United Nations system which, according to Canadian researcher and activist Scott Sinclair, "reads like a catalogue of occupations and human needs".¹⁸ The classification makes no distinction between public (or voluntary) services and those provided on a for-profit basis. Because distribution is a service, moreover, GATS also encompasses goods. As the EU says, "Goods cannot walk, they need to be distributed and transported".¹⁹

Because the main way of governing services has traditionally been via complex national rules and regulations, GATS is also "fiendishly complex".²⁰ Like the GATT agreement before it covering trade in goods, GATS encourages trade across national borders in services by requiring a WTO member country to treat all countries the same (most-favoured nation) and to treat foreign companies as if they were domestic (national treatment).

But GATS differs from the agreement governing international trade in goods in several critical ways. At present, some of its rules and requirements do not apply to all services, but only to those sectors which each country has indicated it is prepared to open up to foreign competition.

Moreover, whereas trade in goods involves simply transporting products from one country to another (cross-border trade), trade in services is more varied because services are not so tangible or physical. Airlines, telephone companies, banks and accountants all provide their services in different ways. Thus GATS lists another three ways (or "modes") in which services can be supplied besides cross-border supply -- movement of consumers, foreign commercial presence and movement of persons -- because "the supply of many services is possible only through the simultaneous physical presence of both producer and consumer".²¹ Some services can be supplied in several ways, others not. A business adviser, for instance, can supply her services to a client in another country by mail, by the client visiting her, through an office in the client's country or by visiting the client. To be a tourist, someone has to go to another country to consume tourism-related services, as does an "exported" street cleaner to carry out "environmental services". A government thus provides the WTO with a "schedule of specific commitments" listing which services and the ways of supplying that service it is prepared to open up to competition under GATS (see Box 3).²²

The majority of the WTO's 141 member countries have so far committed themselves to liberalising just a small part of their services. Most commitments have been made in tourism, hotels and restaurants, computer-related services and value-added telecommunications. The least number of concessions have been made in river transportation, basic telecommunications, recreational and cultural services, education and postal services.

A country can alter a commitment but has to wait three years after it has listed it before it can do so. The country also has to negotiate a substitute commitment as compensation in a way which satisfies all other WTO members. The WTO Secretariat admits that country commitments undertaken in GATS "have the effect of protecting liberalization policies, regardless of their underlying rationale, from slippages and reversals".²³ The former WTO Services Division Director, David Hartridge, said that GATS "can and will speed up the process of liberalisation and reform, and make it irreversible".²⁴ India's former ambassador to GATT, Bhagirath Lal Das, stresses that liberalisation under GATS is different from a country undertaking liberalisation on its own without making a binding commitment to the WTO:

"The developing countries have lost the flexibility of modifying their policy in the light of future experience ... even if it is assumed that they benefit by importing services."²⁵

The power of GATS, as with all WTO agreements, is that its rules can be enforced by trade sanctions (see Box 1). GATS does allow countries to protect human, animal and plant life or health (Article XIV) through measures which might otherwise contravene the Agreement, but its preamble, according to the US Alliance for Democracy, "has a caveat large enough to drive a truck through".²⁶ WTO dispute panels have interpreted exemptions and exclusions narrowly and forcefully in favour of trade in GATT disputes and have usually ruled against environmental protection measures.²⁷ These rulings "show that GATS can be used to challenge an almost unlimited range of government regulatory measures that, even indirectly or unintentionally, affect the conditions of competition of international service suppliers".²⁸

The GATS standard for "national treatment", for instance, extends well beyond conventional notions of non-discrimination between domestic and foreign companies. It applies to any measure from any level of government -- national, provincial, state, regional, municipal or local -- that alters the conditions of competition in any way that might disadvantage a foreign service or supplier. The WTO's Council for Trade in Services (the permanent body responsible for GATS) has discussed restrictions on large-scale retail outlets, shop opening hours, zoning and planning laws, controls on land use, building regulations, building permits, registration of contractors and professionals, regulation of professional fees, environmental regulations, worker health and safety regulations, local content and employment policies, urban planning rules and environmental protection policies. Even legislation to ensure that a country benefits from foreign investment -- minimum number of local jobs or content, for instance -- could be considered trade restrictive.²⁹ No government measure or practice, whatever its aim, is beyond GATS scrutiny if it might affect trade in services. Countries could thus use GATS to "frustrate government policies, practices and programs that allegedly adversely affect foreign commercial interests in services".³⁰

David Hartridge, WTO's former director of services, described GATS as "the first multilateral agreement to provide legally enforceable rights to trade in all services" and "the world's first multilateral agreement on investment, since it covers ... every possible means of supplying a service, including the right to set up a commercial presence in the export market."³¹ According to the EU, GATS "aims to end arbitrary regulatory intervention, and assure predictability of laws, to generate growth in trade and investment".³²

Unsurprisingly, critics call GATS "the MAI in disguise". According to them, rules and disciplines with effects similar to those of the abandonded Multilateral Agreement on Investment are being incorporated in the WTO through the back door.³³ The former WTO Director-General, Renato Ruggiero, acknowledged in 1998 that GATS extended into "areas never before recognised as trade policy" and warned that "neither governments nor industries have yet appreciated the full scope of these guarantees or the full value of existing commitments".³⁴

Researcher Scott Sinclair says that GATS "is designed to facilitate international business by constraining democratic governance".³⁵ Indeed, the WTO expressly states that the Agreement will help its members overcome "domestic resistance to change" and that it will facilitate "more ambitious reforms ... than would be attainable on a national basis alone".³⁶

GATS 2000

GATS is innovative, complex and without legal precedent. Few of its provisions have been tested or clarified by challenges brought to the WTO dispute panel. Little information exists on the impact of GATS so far in facilitating trade in services, or on the economic benefits countries have accrued from services liberalisation, let alone their social and environmental effects. There is little baseline data upon which to make comparisons. The WTO Secretariat recognises this lack of data upon which to base an assessment of trade in services, while the UK government says it has yet to work out how such statistics can even be collected.³⁷ Nonetheless, WTO representatives have begun to negotiate to extend the scope of GATS.

When the Agreement was signed in 1995, some countries considered it to be incomplete.³⁸ A clause (Article XIX) was therefore included mandating "successive rounds of negotiations ... aimed at achieving a progressively higher level of liberalization" -- in practice, privatisation and deregulation. It specifies that the first "successive round" of negotiation should begin within five years of GATS coming into effect, that is, by the year 2000. As Canadian trade and investment researcher Ellen Gould points out, "under the GATS, liberalization could just keep on going and going, presumably until negotiators run out of sectors to open up to foreign competition and ownership".³⁹ The WTO Secretariat describes Article XIX as "a guarantee that the present GATS package is only the first fruit of a continuing enterprise."⁴⁰ Other clauses provide for further rules to be developed for domestic regulation, government procurement of services, subsidies and emergency safeguards (see Boxes 4 and 5).

When he was European Commission Vice President, Leon Brittan made clear that "the aim [of GATS 2000 negotiations] must be ... to conclude an ambitious package of additional liberalisation by developing as well as developed countries, in politically difficult as well as in other sectors".⁴¹ The EU Commissioner for Trade, Pascal Lamy, has argued that "if we want to improve our own access to foreign markets, then we can't keep our protected areas out of the sunlight. We have to be open about negotiating them all if we are going to have the material for a big deal."⁴²

The US, European Union, Japan and Canada (known as the Quadrilateral or "Quad" governments) are pushing hard to:

• increase the services and ways of supplying services that WTO member countries agree to open up to foreign competition (market access);
• re-classify services to get around some countries' reluctance to open them up to foreign competition;⁴³
• insert new rules and restrictions that apply to all members, services, sectors of services and ways in which services are supplied, irrespective of whether countries have agreed to open such services to competition;⁴⁴
• place new constraints on domestic regulation (see Box 4).

They are seeking more access to Southern markets, to each other's public services, and further deregulation of services already in private hands but publicly-regulated, such as media, publishing, telecommunications, energy, transport, financial and postal services. Northern countries are interested in service liberalisation in Southern countries in construction and engineering; distribution; education; environmental, health and social services; and recreational and cultural services.

These revisions, if they are agreed upon, could mean that the voluntary nature of GATS -- under which a country decides which services to list as open to foreign competition -- would in effect be meaningless. It could be irrelevant whether a country offers up its services or not if other rules apply to all services. Guarantees, such as those from the UK's Department of Trade and Industry that "the UK government has no intention whatsoever of offering to privatise public health care or education under the GATS 2000 negotiations", would have little force.⁴⁵

Following the GATS "built-in agenda" mandating successive rounds of negotiations, talks opened on 25 February 2000 in Geneva, home to WTO headquarters. The United States would like these negotiations to be completed as soon as possible, and suggested the end of the year 2002 as a deadline. Other countries, however, want the negotiations to be open-ended, or integrated within a broader and comprehensive revision of all the WTO agreements.⁴⁶

Despite the requirement for "transparency" in GATS (see Box 3), the renegotiations are taking place between government representatives behind closed doors (but in close consultation with international corporate lobbyists). Few of the results of discussions are made publicly available by the WTO or individual countries. It is next to impossible for citizens' organisations to find out the current state of negotiations while access to many background documents is restricted.⁴⁷ Thus even negotiations on apparently technical issues such as reclassification of services are evading public accountability and public and parliamentary debate.

Business Objectives in GATS 2000

This secrecy, combined with GATS's obscure, bureaucratic, arcane and technical terminology, make it difficult for policymakers, let alone the general public, to grasp the significance of the Agreement. But statements from US and EU industry associations indicating what they want out of the current negotiations give a much clearer picture.

The president of the US Coalition of Service Industries (CSI), Robert Vastine, has said that his "most salient criticism" of GATS is that countries have specified so few services to be opened up to liberalisation.⁴⁸ He argues that:

"the new negotiations must secure commitments to national treatment, market access, and cross border services in as many sectors as possible. Current scheduled exceptions are too broad, and must be honed".⁴⁹

US negotiators must:

"propose broad commitments to liberalization in areas such as the right to establish a business presence in foreign markets (commercial presence), the right to own all or a majority share of that business, and the right to be treated as a local business (national treatment)."⁵⁰

Vastine is adamant that the WTO:

"must ... provide that the entire new 'round' be completed by 31 December 2002, in order to force closure on the existing agenda, reap what gains can be garnered, and begin again with a fresh agenda that could include items like investment".⁵¹

The European Union has been actively reaching out to companies. It declares that:

"GATS is not just something that exists between Governments. It is first and foremost an instrument for the benefit of business, and not only for business in general, but for individual services companies wishing to export services or to invest and operate abroad."⁵²

"In short", it concludes, "the GATS should be one of the key reference texts used by any corporate planner seeking to do business on a world level".⁵³

The EU encouraged the establishment in 1998 of the European Services Network (now Forum -- ESF) of multinational industry representatives, led by Barclays plc chair Andrew Buxton, to "advise European Union negotiators on the key barriers and countries on which they should focus" and to ensure "that the EU's policy corresponds to the real export and economic growth interests of our service industries".⁵⁴ The ESF still represents a limited group of companies, primarily financial services, telecommunications, postal, tourism and engineering/construction, but is determined "to support and encourage the movement to liberalise service sector markets throughout the world and to remove trade and investment barriers for the European services sector".⁵⁵ The ESF says that "foreign investors should have the same access to domestic markets as domestic companies" and that barriers such as nationality or residency requirements should not apply to the posting of key personnel.⁵⁶

Several joint industry-government conferences provide examples of the close collaboration between corporate employees and government officials in testing and refining their ideas for expanding GATS. In the US, one of the goals of the World Services Congress, a large three-day international conference in November 1999 attended by corporate executives and WTO, World Bank and government officials, was to "shape government policies". The 100 or so comprehensive research papers presented at the Congress serve "as a guide not just to the topics under consideration but also to the intended direction of the GATS re-negotiation itself".⁵⁷ In November 2000, the US Department of Commerce and the US Coalition of Service Industries jointly held a conference on "Services 2000: A Business-Government Dialogue on US Trade Expansion Objectives", the purpose of which was "to focus industry's priorities in the current WTO negotiations" and to "allow participants to make detailed recommendations to negotiators".⁵⁸ The Trade Directorate of the European Commission, meanwhile, co-funded the November 2000 European Services Forum international conference on "The GATS 2000 Negotiations: New Opportunities of Trade Liberalisation for All Services Sectors".⁵⁹

Turning Public Into Private

Although GATS encompasses all services, many civil servants and government ministers believe 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 could be almost meaningless if one country were to challenge another country's public services at the WTO dispute panel as contravening GATS.⁶⁰

Governments the world over have been deregulating and privatising both the funding and the provision of public services, sometimes on their own initiative, sometimes as a condition of IMF structural adjustment programmes (SAPs) and sometimes on World Bank advice.⁶¹ In some cases, governments have simply sold public entities off. For instance, in Britain, the railways, telephones, and electricity, gas and water utilities have been transferred to the for-profit sector. Governments are transforming other public services, particularly those which it might be politically unacceptable to privatise outright, by requiring the public body to contract services out to for-profit companies or to institute a process of compulsory competitive tendering (private provision). They have separated infrastructure such as buildings from service provision, and privatised the infrastructure by means of an array of public-private "partnerships" that retain an ostensible public dimension and thus appear more politically acceptable. Examples include the UK's Private Finance Initiative (PFI), build-own-transfer (BOT) schemes, and build-own-operate-and-transfer (BOOT) projects. Governments have also introduced internal markets, that is, divided purchasers from providers within a public service sector (see Box 10).⁶² Management from the private sector has been introduced to infuse the public service sector with market-oriented methods and principles. As David Hall of the Public Services International Research Unit points out:

"The corporatisation of public service organizations ... usually involves the introduction of business accounting ... and may be a change as significant as that to private ownership itself."⁶³

As far as GATS is concerned, 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 also provided by the government (for instance, if private schools 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.⁶⁴

As a result of existing deregulation and privatisation, national -- and increasingly transnational -- companies have sprung up and made inroads into a wide range of public services in many countries, particularly utilities (water, energy, telecommunications, transport), refuse collection, prisons, housing, social services, and support services (cleaning, catering, information technology).⁶⁵ Via GATS, they could gain access to many more.

The European Union, for example, wants all WTO member countries to open up their water delivery systems to competition because this "would offer new business opportunities to European companies, as the expansion and acquisitions abroad by a number of European water companies show".⁶⁶ French-based companies such as Vivendi, Suez-Lyonnaise and Bouygues (SAUR) have taken the lead in water supply.⁶⁷ Education has been described by investment group Lehman Brothers as "the final frontier of a number of sectors once dominated by public control".⁶⁸ Other targets include museums, libraries, energy and transport.

Via GATS, private companies could prise open for themselves public funding for services. The EU and US spend a substantial amount of public money on public services. In the countries of the OECD (Organisation for Economic Cooperation and Development), public expenditure on health services and education accounts for more than 13 per cent of gross domestic product.⁶⁹ Much of this spending now goes to public or voluntary bodies but could end up being channelled to for-profit groups. Nearly 50 per cent of UK tax revenue now goes to profit-making companies.⁷⁰

It is often argued that the privatisation of public services brings more competition, more private finance so as to lessen public expenditure, less bureaucracy, more flexibility, greater opportunities for the workforce, and more modern management practices. In practice, however, cartels develop and corruption is rife. Public money provides guarantees for private companies which simply avoid competition from the public sector. There is little or no accountability or regulation within the private sector, and job cuts or reduced conditions of work are common.

The bulwarks of public health -- air quality, safe drinking water, food safety, road safety, drainage and sanitation -- have been under threat because of privatisation for some time now; under GATS, they could be permanently dismantled. The consequences are apparent in many poorer countries today and in nineteenth century Europe: high mortality rates, especially high maternal death rates, a proliferation of contagious diseases, and high levels of poverty and homelessness.⁷¹

The WTO Secretariat has acknowledged that restricting domestic regulation creates a tension between trade expansion and national sovereignty. But another critical tension is that between the goals of trade more generally, as facilitated by privatisation, and the public interest. As David Hall points out:

"Whether the private companies involved are national or foreign is arguably a less important issue for public services than the impact of privatisation on financing or service provision ... There may still be negative development consequences of globalisation of these services, from the entry of foreign capital, but the distinctive damage to public services happens through privatisation".⁷²

Health care researchers Allyson Pollock and David Price stress that "the crucial factor is not so much domestic sovereignty as the way in which public interest and public-health objectives can be over-ridden by objectives that further trade".⁷³ Health care researcher Meri Koivusalo argues that what the WTO really deals with "is not trade barriers between nations or interests between the North and the South, but ... incentives and mechanisms which deal with the respective rights, responsibilities and capacities of the private and public sector."⁷⁴

Turning Health Care Into Health Markets

Health care is just one example of a public service threatened by GATS. Commercial interests now provide some of the health services in many countries, sometimes in competition (albeit limited and regulated) with public providers.⁷⁵ In the UK, for instance, for-profit nursing homes and privately-financed hospital buildings provide health services in competition with public ones.⁷⁶

This dual system gives the WTO a useful rationale for encouraging further competition and privatisation through GATS:

"The hospital sector in many countries ... is made up of government-owned and privately-owned entities which both operate on a commercial basis, charging the patient or his [sic] insurance for the treatment provided ... It seems unrealistic in such cases to argue for continued application of Article 1.3 [that the service is a government service] and/or to maintain that no competitive relationship exists between the two groups of suppliers of services".⁷⁷

The stakes are huge: expenditure on health in OECD countries is estimated at more than US$3 trillion annually.⁷⁸

To date, however, GATS has not been instrumental in privatising health care services and opening them up to foreign competition.⁷⁹ Health and social services are "trailing behind other sectors" in the rate they are being listed under GATS as open to competition. The WTO acknowledges that some governments do not want to commercialise their hospitals because they are part of their "national heritage".⁸⁰

As of 1998, 59 countries had put one or more aspects of their professional (medical, dental, veterinary, nursing, midwifery, physiotherapy) services or health-related and social services (including hospitals) under GATS. Medical and dental services had the highest tally with 49 countries while 39 countries had agreed to open up hospital services to foreign suppliers. In the financial services sector, including health insurance, however, 76 countries have made commitments.⁸¹ Poorer countries have made more commitments in the hope of attracting services they lack. Sierra Leone is the only country to have included all eight health service categories under GATS, while the US has included just hospital and health insurance services.

Even if they have made such commitments, however, such countries can still limit foreign suppliers' market access and specify which ways of supplying the service are open to competition (see Box 3). The highest number of restrictions in ways of supplying health services is in "commercial presence".

During GATS 2000 talks, US negotiators have made health care a special target:

"The United States is of the view that commercial opportunities exist along the entire spectrum of health and social care facilities, including hospitals, outpatient facilities, clinics, nursing homes, assisted living arrangements, and services provided in the home".⁸²

The US Coalition of Service Industries is calling for majority foreign ownership of all public health facilities to be allowed:

"We believe we can make much progress in the [GATS] negotiations to allow the opportunity for US businesses to expand into foreign health care markets ... Historically, health care services in many foreign countries have largely been the responsibility of the public sector. This public ownership of health care has made it difficult for US private-sector health care providers to market in foreign countries."⁸³

The US private health care sector also wants to gain access to "rapidly expanding health care expenditures in many developed countries" experiencing "an increase in their aged population".⁸⁴

Using GATS to Privatise Public Health Care

GATS could facilitate further privatisation and competition in health care services if more countries are pressured during GATS 2000 negotiations to list health care services on their schedules of commitments in all ways of supplying the service.

In the longer term, challenges under GATS to public services could be another way. The US could take Britain to the WTO disputes panel, for instance, if the British government or any other body refused a US multinational permission to buy a British public National Health Service hospital which had been financed through the Private Finance Initiative. Similarly, 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.⁸⁵

A third way GATS could facilitate privatisation and competition is if mechanisms and principles underpinning the design, funding and delivery of public services are in effect proscribed -- for example, if the vague requirement for "domestic regulation" to be "least burdensome" to trade is defined as "pro-competitive" (see Box 4).⁸⁶ "Universal risk pooling", for instance, is a key principle of public health care services and would be at risk because it is not "pro-competitive". It means that the different risks that people will need health care services are pooled together across society. Some people are healthy most of the time and need little health care, while others are chronically ill for years on end and need more. Access and entitlement to health care services are based on an individual's need for them, not on their ability to pay.

Also threatened is another widely-used principle: "cross-subsidisation". Under this principle, areas or services which cost less subsidise areas and services which cost more. In many countries, profitable services such as international telephone calls have subsidised less profitable but socially beneficial telephone services in rural areas. In transport, bus services or railway branch lines serving outlying areas are easily paid for by routes in busy, more congested areas.⁸⁷ Risk pooling and cross subsidies between rich and poor, healthy and sick ensure that all get tolerably equal access to similar levels of care because the basis of public services aims to be redistribution.

Getting rid of cross-subsidisation is an essential step in service privatisation. It allows corporations to divide up integrated health care services, extract the more profitable ones and the more profitable patients (usually those who least need health care) and leave behind a reduced public sector. Such break-ups threaten the principles of universal coverage and shared risk that tax-funded (as in Britain and Canada) or social-insurance-funded (as in France or Germany) health care systems generally uphold.⁸⁸

The trend is toward something like the United States' health care system, which has become dominated by for-profit organisations over the past decade. There, researcher Robert Kuttner observes, tacit cross-subsidies are being eliminated and hospitals treated more and more as businesses:

"Temporary losses are defensible only as investments in future profits, so cross-subsidy must be avoided ... There is no place for uncompensated care, unprofitable admissions, research, education, or public health activities -- all chronic money losers from a strictly business viewpoint".⁸⁹

A revised GATS could not only reduce equitable access to health care services. It could also undermine mechanisms for containing the costs of public sector health care. It could override national regulations governing health care and affect the kind of services provided, restricting rather than enlarging people's choice of services and of the places in which they are provided.⁹⁰ With reduced public expenditure on health and social services, women will increasingly have to take up the slack and nurse the sick who cannot find or afford health care.⁹¹

Public versus Private

The main argument put forward for private health care is that it improves the quality of care. If patients have to pay for services and can choose where they spend their money (or the public money they are doled out), then health and social services will be compelled to become more economically responsible and efficient because they have to respond to competition.

But it is difficult for patients to assess the quality of the health and social services provided by private companies in any meaningful way. Despite "performance" data such as league tables ranking hospitals according to death rates or operations performed, most people will not be equipped to decide where they should be treated, by whom and with what, without the advice of their doctor. Moreover, rules and regulations governing the public sector, for instance, setting minimum care standards, often do not apply to or are not enforced in the private sector.

In the UK, cost has become the only relevant factor. But "the relentless drive towards ever greater cost savings through contracting out has, in many cases, had a disastrous effect on service quality".⁹² Hospital trusts which have contracted out "hundreds of millions of pounds of support services over the past 17 years admitted that cost-cutting had directly led to the filthy NHS wards, dirty bed linen and inedible hospital food of public infamy".⁹³ In the past three years, private companies contracted to provide support services to the NHS have incurred more than £2 million in penalties because they did not meet performance standards. Low pay and poor working conditions are two of the main causes of poor quality care, yet the benchmark of tendering and awarding contracts is cost rather than quality. Many NHS managers now recognise that "privatisation is not an infallible cure for service inefficiencies".⁹⁴

Pressure from the families of hundreds of those who have died or been left disabled, brain-damaged or in severe pain as a result of inadequate care in private facilities led to a Care Standards Act in 2000 to enforce standards in private hospitals, and residential and nursing homes in the UK.⁹⁵ "Almost without exception, all of the tragedies ... have been due to private hospitals being inadequately staffed".⁹⁶

Analysis of the quality of care provided by for-profit entities in the United States casts further doubts on the assertion that the private sector provides better quality.⁹⁷ Says Peter Julian of the Council of Canadians, "Virtually every credible study ever done has shown that private, for-profit health care is more expensive, less efficient and of lower quality than public health care".⁹⁸

But if quality of private (and public) care could be assured, evaluated by public health concerns rather than economic benchmarks such as the number of patients being treated or the length of waiting times,⁹⁹ it may be argued that using state money to pay a commercial company to provide health care services is no different from using it to fund public services. Moreover, private services, it is said, can fill the gaps in the public system.

In practice, the move to for-profit providers undermines the public sector in several ways (even though this private sector depends upon the public sector). When public and voluntary hospitals and health services have to compete with commercial providers for funding, whether provided by the state in the form of per-person public funds or private insurance or co-payments (additional payments by patients), less money ends up flowing into the public system. Competition also leads to competition for patients -- the private sector tends to take the healthier and wealthier. Typically, the public sector is left to care for more vulnerable people whilst at the same time contending with cutbacks in funding.

The inevitable result is a loss of preventative services: the public sector has less money for these services, while the private sector is not interested in them. Private health providers do not aim to provide health care to society, but health products or surgical procedures to individuals. They will not supply inherently unprofitable care to anyone, least of all to those who are in no position to pay for it.¹⁰⁰ And as public service activist Dexter Whitfield points out, "the penultimate privatisation system is one in which taxpayers fund service provision, but the private sector own and mange the infrastructure and operate services", the system that Britain is embarking upon.¹⁰¹ Health care, moreover, cannot be planned on the basis of individuals or highly-segmented medical practice: it is about populations and matching resources to known priorities.

Changes in health care provision in the United States and Latin America over the past two decades illustrate these trends clearly. In the early 1990s in the US, a growing number of hospitals, health maintenance organisations (HMOs, or insurer-type intermediaries between employers and hospitals), nursing homes, home care services and hospices became for-profit companies publicly traded on stock exchanges. HMOs, transformed from a social form of medicine into multibillion-dollar businesses depending on a mixture of public funding, private health insurance and user charges, acquired non-profit hospitals cheaply and gained effective control over US hospitals. The pursuit of market share, the search for profitable admissions and relentless cost-cutting came to dominate all aspects of health care, even that provided by socially-oriented entities. By the late 1990s, pressure to protect profit margins had led to insurers and hospitals avoiding sick patients, the micro-management of physicians, a worsening of staff-to-patient ratios, and the outright denial of care to many. Instead of exercising greater efficiency in the use of available resources and greater integration of preventive and treatment services, the industry merely tries to avoid costs.¹⁰² "More than any other country", concludes The Economist, "America has turned health care into a business". Health care is the largest sector of the US economy; over $1 trillion is spent on it every year, 46 per cent coming from government insurance programmes.¹⁰³ Nonetheless, some 44 million US Americans -- one in six people -- do not have health insurance, while millions of others are underinsured.¹⁰⁴

Latin America, meanwhile, (particularly Chile, Colombia, Peru, Argentina, Brazil, Mexico and Venezuela) has become a testing ground for the privatisation of health care in the name of "reform", pushed by the World Bank, Inter-American Development Bank and US-trained national economists, and by the export targets of US health care providers and insurers. Private insurers tend to select the "best risks", mainly young and healthy people. They reject those with chronic illnesses and leave behind those who cannot afford the insurance. Private companies tend not to operate in the countryside where health services have always been sparse.¹⁰⁵ As The Economist points out, "The poor in rural communities are unattractive clients for managed-care organisations, and may languish outside the new systems."¹⁰⁶ Many "informal" or casual workers are also outside the public health system.

Yet private operators rely on the very state health and social services that they are undermining. They take trained and experienced staff from the state system, select patients whose needs the public services have already identified, offer only the (profitable) services they want to, and set up private facilities, ranging from laboratory analysis to residential care, which can be rented or contracted out to the public service. The WTO itself acknowledges that:

"private health insurers competing for members may engage in some form of 'cream skimming', leaving the basic public system, often funded through the general budget, with low-income and high-risk members. New private clinics may well be able to attract qualified staff from public hospitals without ... offering the same range of services to the same population groups".¹⁰⁷

In Brazil, the private sector can now offer 120,000 doctors for one-quarter of the population, whilst the public sector has fewer than 70,000 doctors for everyone else. As Public Services International concludes, such private health care "is never cheaper or more comprehensive than state care".¹⁰⁸ The US is the most extreme example of this provision: it has the most administratively expensive health system in the world covering the lowest percentage of the population.¹⁰⁹

In India, under the influence of World Bank reforms, medical care has been handed over to the private sector without mechanisms to ensure the quality and standards of treatment. Infectious disease control programmes run by the state have been disrupted by being deprived of funds. Similar results have occurred in Sub-Saharan Africa.¹¹⁰

Private provision, in other words, is not an effective means to promote public health. Yet without good public health, the health of every individual is endangered.¹¹¹ As food policy analyst Tim Lang points out, many public health gains such as clean air, clean water and food safety were won once the affluent and the middle classes recognised that they could not escape the consequences of unhealthy conditions and that it was in their interests to tackle the causes of ill-health together.¹¹² Many of the pioneers striving for more and better housing in Britain, for instance, argued that housing improvements were not just a social right but also a health gain for all. As Geof Rayner of the UK Public Health Association points out, "a market-based approach to health not only drives up the costs of health care, but it can also lead to disinterest in the factors that make people ill. A consumer society promises -- falsely -- that medical technology can fix diseased individuals, and that good health can be bought and sold in the marketplace rather than being something to promote or work for."¹¹³

Conclusion

By means of GATS, the WTO is stage-managing a new privatisation bonanza. Multinational and transnational corporations, including pharmaceutical, insurance and health care companies, are lobbying hard to capture the chunks of gross domestic product that governments currently spend on public services such as health and education. Revisions to GATS are by and large being proposed by trade negotiators from countries bent on obtaining better market access to export markets for domestic industries. Officials in other government departments responsible for health, agriculture or the environment may not be aware of what is being negotiated, nor the implications. Publicly-accountable services could be dismantled and the door effectively closed to ever reviving them.

A wide range of Southern governments, unions and NGOs contend that a thorough assessment, independent of the WTO and associated bodies such as the World Bank or IMF, of the health, social, environmental and cultural impacts of existing service liberalisation (and indeed of all the WTO agreements) must be conducted, with special reference to the poorest and to women, before negotiations continue on GATS. Some commentators believe that:

"it would be reckless for governments to expand the GATS before the full implications of existing provisions and current coverage have even been assessed or become widely known. Rather, the GATS policy implications should ... be reviewed, assessed, fully debated and, where necessary, the agreement should be formed or rolled back. To expand such an agreement would be irresponsible."¹¹⁴

Many British Members of Parliament, too, have called on the government to ensure that there is an independent and thorough assessment of the likely impact of the extension of GATS on the provision of key services, both in the UK and internationally.¹¹⁵ GATS itself mandates an assessment of trade in services, particularly of the impacts on developing countries (Article XIX), but the WTO Secretariat has done little so far towards this.

The African Group of countries believes that developing countries have already made "extensive concessions" without receiving sufficient benefits in return. The WTO Secretariat acknowledges that many developing countries signed on to GATS in 1995 without appreciating the Agreement's full implications. Many of them have poorly-developed public services and made some wide-ranging commitments in the belief that foreign direct investment would step in to provide them. Several developing countries are arguing that they should not liberalise their service sectors further, but that the developed countries should reduce their subsidies and open up areas such as textiles and agriculture in which developing countries often have a comparative advantage.¹¹⁶ Developing countries have also pointed out that GATS outlines several clear specific and detailed rules to ensure the movement across borders of capital related to the supply of services, but nothing comparable concerning the movement of people (see Box 6)¹¹⁷

Public sector unions are calling for public services to be modernised and improved, but based on principles of democratic accountability, effective delivery, adequate funding, equality of access and fairness and partnership at work.¹¹⁸ The current ostensible "exclusion" of public services from GATS should be made actual for services provided in the public interest.

Opposition to GATS, however, should go hand-in-hand with support for campaigns against privatisation more broadly and generally. It would be a hollow victory for GATS to be curtailed only for bilateral and plurilateral arrangements with the same effects to increase (see Box 12) or for the IMF's hold in the South to tighten. After all, many governments are already themselves restructuring public services; in several respects GATS is merely a mechanism for "locking-in" existing commercial practices. In Ecuador and Brazil, various groupings and coalitions of physicians, public health activists, trade unions and community groups resisting the privatisation of health care services and supporting alternatives to strengthen public services are working along similar lines to GATS critics. So are activists in other countries who stress that the public sector can be cheaper, as efficient, more flexible, more transparent and accountable than privatisation or public-private partnerships.¹¹⁹

International rules governing investment are certainly needed. The current set, however, and the way in which they are implemented, are invariably a charter for corporations to do as they please. Just because the World Trade Organisation, and indeed the World Bank and IMF, are doing the wrong job does not mean that international institutions are not needed to iron out the vast inequalities of the global economy or to prevent further meltdowns in financial markets. At issue is not whether to have rules governing international trade but what kind of rules to have and how they should be implemented so that they do not have adverse health, social and environmental impacts nor exacerbate inequities. As Kevin Watkins of Oxfam stresses, "We desperately need a rules-based system of global governance that places people before corporate profit, and shares the benefits of globalisation more equitably."¹²⁰

Health is a fundamental human right, recently defined under the Covenant on Economic, Social and Cultural Rights: "all people have the right to the highest attainable standard of health ... as a prerequisite for the full enjoyment of all other human rights". Human rights and public health policies are indispensable. Trade policies, however, are negotiable.

Notes and references

1 Negotiations have also begun to change the Agreement on Agriculture (AoA). Since the 1947 General Agreement on Tariffs and Trade (GATT) governing trade in goods between those countries who signed the Agreement, there have been seven major GATT negotiation sessions: the Conference of Annecy, France, 1949; the Conference of Torquay, UK, 1950; the Conference of Geneva, 1956; the Dillon Round, 1962; the Kennedy Round, 1964-67; the Tokyo Round, 1973-77; and the Uruguay Round, 1986-94.

2 Public Services International, The WTO and the General Agreement on Trade in Services: What is at Stake for Public Health?, PSI, Ferney-Voltaire, France, 1999, p.5, website: www.world-psi.org, email: psi@world-psi.org.

3 "The European Union and World Trade", Frontier-Free Europe, 1-4, August-September 1999, quoted in Price, D., Pollock, A.M. and Shaoul, J., "How the World Trade Organisation is Shaping Domestic Policies in Health Care", The Lancet, Vol 354, 27 November 1999, pp.1889-1891, website: www.thelancet.com.

4 Vastine, R., statement before the Senate Finance Committee Subcommittee on International Trade, 21 October 1999, website: www.uscsi.org, accessed on 25 October 2000.

5 Public Services International, op. cit. 2, p.5. The estimate is calculated from WTO figures of national balance of payments records and thus represents cross-border trade. The value of services provided in one country by companies based in another (commercial presence) could be at least as large as cross-border trade. See "Opening World Markets for Services: A Guide to the GATS: The General Agreement on Trade in Services", website: gats-into.eu.int/gats-info/guide.pl?MENU=bbb, accessed 1 November 2000.

6 European Services Forum, "Set of Principles", 26 January 1999, website: www.esf.be/f_e_abou.htm

7 Office of the United States Trade Representative, "USTR 1998 Trade Policy Agenda and 1997 Annual Report", USTR, Washington, DC, 2 March 1998, quoted in Price, D. et al, op. cit. 3.

8 Human Development Report 1999, UNDP, New York, p.3. If proposed GATS revisions go ahead, any government measure to encourage national or regional culture, including funding for national film boards, could be challenged.

9 European Services Forum, op. cit. 6.

10 Estimated from WTO Annual General Report, Geneva, 1998, cited in Balasubramaniam, K., "Globalisation & Liberalisation of Health care Services: WTO & the General Agreement on Trade in Services", paper prepared for People's Health Assembly, Dhaka, December 2000, website: www.pha2000.org.

The World Bank has calculated that in less developed countries, infrastructure development involving at least some private backing rose from US$15.6 billion in 1990 to $120 billion in 1997. Around 15 per cent of this was direct foreign investment in public schemes. See Roger, N., "Recent Trends in Private Participation in Infrastructure: Public Policy for the Private Sector", World Bank Group, 1999, pp.1-4, note 196, quoted in Price, D. et al., op. cit. 3.

11 Vastine, R., op. cit. 4.

12 "Opening World Markets for Services: Towards GATS 2000", website: gats-info.eu.int/gats-info/g2000.pl?NEWS=aaa, accessed 1 November 2000.

13 "Opening World Markets", op. cit. 5.

14 After oil, tourism earns the most foreign currency for some 30 developing countries. But some 60 to 90 per cent of the money that tourists spend goes to transnational companies which own networks of airlines, hotel, tour operators and travel agents. See Seifert-Granzin, J. and Jesupatham, S., Tourism at the Crossroads: Challenges to Developing Countries by the New World Trade Order, Equations/Tourism Watch, Frankfurt, 1999; "Liberalising Tourism under the GATS: Pitfalls for Developing Countries", "Notes on GATS", (msss), Equations, Bangalore, May 2001, email equations1@vsnl.com; WWF, "Preliminary Assessment of the Environmental & Social Effects of Liberalisation in Tourism Services", WWF International Discussion Paper, Gland, February 2001, website: www.panda.org, email: mperrin@wwfint.org

15 "Trade in Services Liberalisation and Gender Impacts in the European Union", European Women's Lobby, Brussels, September 2000, website: www.womenlobby.org

16 The GATS text is available at www.wto.org/english/tratop_e/serv_e/gatsintr_e.htm. See also WTO Secretariat, Trade in Services Division, An Introduction to the GATS, October 1999, website: www.wto.org/english/tratop_e/serv_e/gsintr_e.doc. For a range of articles and documents on GATS, see: www.xs4all.nl~ceo/gatswatch/gatswatch/html.

A WTO Council for Trade in Services is responsible for the workings of the GATS Agreement. It currently has three sub-groups: a Committee on Specific Commitments, a Working Party on Domestic Regulation and a Working Party on GATS Rules (emergency safeguards, subsidies, government procurement).

17 Air transport services are largely excluded from GATS, but a mandated renegotiation of the air transport Annex at least once every five years is expected to define these services more concisely so as to restrict exclusions. "The WTO approach ... will means a death sentence for airlines in developing countries" says one international air transport official. See Williams, F., "WTO Seeks to Spread its Wing Over Air Services", Financial Times, 29 September 2000, p.13.

18 Sinclair, S., GATS: How the World Trade Organization's New "Services" Negotiations Threaten Democracy, Canadian Centre for Policy Alternatives, Ottawa, September 2000, pp.24, 68, website: www.policyalternatives.ca; email: ccpa@policyalternatives.ca.

One effect of not defining services is that more (as yet unthought of) services can be incorporated in future. GATS does define, however, "sector", "measures", "supply" and "person". A WTO guide to GATS identifies 11 broad service sectors, each divided into several sub-sectors:

• Business (professional including legal, accounting, auditing, bookkeeping, architectural, real estate, engineering, medical and dental, veterinary, computer, management consultancy, advertising);
• Communication (telecommunications, postal, courier, audio-visual, radio, television, film, video, satellite);
• Construction and related engineering services;
• Distribution (retail, wholesale, franchising);
• Educational;
• Environmental (water delivery, refuse disposal, sewage, sanitation);
• Financial (insurance, reinsurance, underwriting, banking, provision of financial information, asset management);
• Health-related and social;
• Tourism and travel-related (travel agencies, tour operators, hotels, restaurants, catering, tourist guides);
• Recreational, cultural and sporting (entertainment, news agency);
• Transport (sea, water, air, space, rail, road, pipeline); and
• Other (including energy).

Most WTO members used the WTO/UN classification system as the basis for scheduling commitments, but not the US. For the EU's interpretation of these services, see "Opening World Markets for Services: A Guide to the GATS: Which Sectors Are Covered by GATS?", website: gats-into.eu.int/gats-info/guide.pl?MENU=ccc, accessed 1 November 2000.

19 "Opening World Markets", op. cit. 12.

The International Chamber of Commerce stresses that manufacturing industries are infused with services from beginning to end: research and development, inventory management and control, transport, marketing, advertising, insurance, and "backroom" functions, such as accounting and legal services. Likewise, agriculture requires research and development, finance, insurance, storage, transport, distribution, marketing, and a host of technical services. See website: www.iccwbo.org/

20 The WTO Secretariat states that "the fact that the GATS rules are still necessarily untested, and that the services schedules are much more complex than those for goods, adds to the difficulty of assessing exactly what rights and obligations WTO members have assumed under the services package". See WTO Secretariat, op. cit. 16.

21 WTO, "The GATS: Objectives, Coverage and Disciplines", website: www.wto.org/english/tratop_e/serv_e/gatsqa_e.htm

The "supply" of a service includes its delivery, production, distribution, marketing and sale.

22 The WTO website lists each country's Schedules of Specific Commitments: www.wto.org/english//tratop_e/serv_e/22-specm_e.htm. The GATS text itself (see ref. 16) explains how to read a schedule. More accessible is the EU's information point on world trade in services which enables commitments to be viewed by country or by service sector, website: gats-info.eu.int.

The WTO Secretariat has identified over 1,400 errors and inconsistencies made by governments in scheduling their commitments. Such errors would become more significant if the agreement was expanded. See Gould, E. and Joy, C., In Whose Service? The Threat Posed by the General Agreement on Trade in Services to Economic Development in the South, World Development Movement, London, December 2000, p.16, website: www.wdm.org.uk.

Canada believed it had protected from GATS its 1965 national trade agreement (Auto Pact) to encourage domestic car manufacturing, but the WTO ruled otherwise in May 2000. See Sinclair, S., op. cit. 18, pp.42-43.

More than 70 WTO members, mainly Northern countries familiar with the system, have listed many exemptions to the Most-Favoured Nation clause. But in a US challenge arguing that the EU's preferential banana import arrangement with Caribbean countries discriminated against US "service providers" involved in banana distribution, a WTO dispute panel ruled that the EU's arrangement contravened GATS -- the EU had forgotten to list it as an exception to the MFN clause. See Sinclair, S., op. cit. 18, pp.48-49.

23 WTO Secretariat, "Recent Developments in Services Trade", 9 February 1999, S/C/W/94, website: docsonline.wto.org, quoted in Gould, E., "The 2001 GATS Negotiations: The Political Challenge Ahead", The Alliance for Democracy, March 2001, website: www.thealliancefordemocracy.org/campaigns/2000.

24 Hartridge, D., "Opening Markets for Banking Worldwide: The WTO General Agreement on Trade in Services", speech to international banking seminar, 8 January 1997, London, UK, quoted in Gould, E., "The WTO General Agreement on Trade in Services: Separating WTO Fact from Fiction", Council of Canadians, website: www.canadians.org, received May 2001.

25 Lal Das, B., "Negotiations in Agriculture and Services in the WTO: Suggestions for Modalities/Guidelines", paper presented at "Current Developments in the WTO: Perspective of Developing Countries", Third World Network seminar, Geneva, 14-15 September 2000.

Many of the deregulatory and privatisation aspects of GATS are similar to the structural adjustment measures imposed on developing countries by the IMF and World Bank.

26 Caplan, R., GATS Handbook, Alliance for Democracy, Waltham, Massachusetts, website: www.thealliancefordemocracy.org, accessed 24 February 2001.

27 For example, a WTO dispute panel decided in 1996 that a US ban of gasoline imports from Brazil and Venezuela because they did not meet its Clean Air Act standards contravened GATT rules. In September 2000, however, a WTO dispute panel upheld a French ban on imports of "white" asbestos, challenged by Canada -- the first time that a trade-restrictive measure has been exempted from WTO rules on health grounds. In March 2001, moreover, the WTO's appeals body ruled that a product's health risk was a legitimate factor in determining whether it was "like" another product.

See Waskow, D. and Yu, V.B., A Disservice to the Earth: The Environmental Impact of the WTO General Agreement on Trade in Services (GATS), Friends of the Earth US, Washington, June 2001, website: www.foeeurope.org/trade/wto/wto.htm

28 Sinclair, S., op. cit. 18, p.1.

GATS Articles XIV and XIV bis provide for general exceptions and more specific national security exceptions. The Article XIV exemption for measures "necessary to protect human, animal or plant life or health", is borrowed from GATT (Article XX), but leaves out an additional GATT exemption for measures "relating to the conservation of exhaustible natural resources", an omission from GATS which could be interpreted as intentional. Article XIII provides exceptions for government procurement from most-favoured nation, market access and national treatment principles, but not transparency.

29 For details of laws in countries of the South which could be threatened by GATS rules of national treatment and market access, see Gould, E. and Joy, C., op. cit. 22, pp.10-12.

30 Sinclair, S., op. cit. 18, pp.1, 6, 40.

The term "measure" is a broad one. It covers any law, regulation, rule, procedure, decision or administrative action taken by central, regional or local governments and authorities and non-governmental bodies exercising powers delegated to them by these governments and authorities. GATS could therefore restrict the ability of governments to use subsidies and grants; nationality requirements; labour standards; residency requirements; licensing standards and qualifications; registration agreements; performance measurements; technology transfer provisions; local content or employment provisions; economic quotas or needs tests; licensing or training requirements; restrictions on ownership of property or land; limitations on access to markets; environmental and consumer protection measures; and some tax measures. See also Box 4 on domestic regulation.

31 Hartridge, D., op. cit. 24.

32 "Opening World Markets", op. cit. 5.

33 The Multilateral Agreement on Investment (MAI) was negotiated among the 29 industrial country members of the Organization for Economic Cooperation and Development (OECD) from 1995 until 1998, when negotiations were abandoned because of widespread citizen opposition. As many features of the GATS renegotiations resemble aspects of the MAI, the issues raised by GATS are similar to those underlying the MAI: loss of sovereignty on the part of nation-states; loss of governments' ability to protect the social security system and national culture; and doubts about the future of public services in a context of trade and investment liberalisation. Rules on investment may also be negotiated elsewhere, for instance, the TRIMS agreement. See Khor, M., "The WTO and the Proposed Multilateral Investment Agreement: Implications for Developing Countries and Proposed Positions", Third World Network, Penang, (undated); MAIgalomania, Corporate Europe Observatory, Amsterdam, February 1998; License to Loot: The MAI and How to Stop It, Friends of the Earth, Washington, 1998; Clarke, T. and Barlow, M., MAI: The Multilateral Agreement on Investment and the Threat to Canadian Sovereignty, Stoddart Publishing, Toronto, 1997.

34 Ruggiero, R., "Towards GATS 2000--A European Strategy", address to the Conference on Trade in services, organised by the European Commission, 2 June 1998, Brussels, cited in Gould, E. and Joy, C., op. cit. 22, p.4.

35 Sinclair, S., op. cit. 18.

36 WTO, op. cit. 21.

37 "There is not a single empirical study analysing on a comprehensive basis -- across countries, sectors and modes -- the effects on services trade attributable to scheduled commitments". See WTO Secretariat, op. cit. 23.

Such statistics were also missing from the Uruguay Round. See Raghavan, C., Recolonisation: GATT, the Uruguay Round and the Third World, Zed Books, London, 1990.

38 At the conclusion of the Uruguay Round, it was agreed that negotiations had to continue immediately on a number of service sectors: financial, maritime transport and basic telecommunications services and on the movement of natural persons supplying services. These led to various Annexes. The Annex on Financial Services, which came into force in January 1999, removed many obstacles for financial services corporations wanting to enter "emerging markets". It is predicted to liberalise over 90 per cent of the world market in insurance, banking and brokerage services. See Corporate Europe Observer, no 4, July 1999, "Special WTO Edition", website: www.xs4all.nl/~ceo/observer4/index.html, accessed 24 February 2001.

The Annex on telecommunications established the right for any service supplier to have access to and make use of public telecommunication networks and services (telephone, telegraph, telex and data transmission, but not radio or television) on reasonable and non-discriminatory terms.

39 Gould, E., "The Next MAI", Fall 1999, Council of Canadians, website: www.canadians.org, accessed 25 October 2000.

The WTO Secretariat stated in 1999: "The GATS rules are not quite complete, and are largely untested. The process of filling the gaps will require several more years of negotiations ... Among the most important elements in the GATS package is the promise that successive rounds of negotiations will be undertaken to continue opening up world trade in services". See WTO Secretariat, op. cit. 16.

40 WTO Secretariat, op. cit. 16.

Former WTO Services Director David Hartridge said, "It [GATS] has a built-in commitment to continuous liberalization through periodic negotiations, a far more solid commitment than the old GATT ever had." See Hartridge, D., op. cit. 24.

41 Brittan, L., "European Objectives For Services Worldwide: How the WTO Can Help", speech, 2 June 1998, Brussels, website: gats-info.eu.int/gats-info/gnews.pl?NEWS=ccc, accessed 1 November 2000.

42 Speech to the US Council for International Business, New York, 8 June 2000, website: europa.eu.int/comm/trade/speeches_articles/spla23_en.htm

43 Negotiators aim to reclassify services by:

- narrowing the description of service sub-sectors in which governments have made the least number of commitments (such as health, education and social services) and broadening that of those in which members have made the greatest number;

- disaggregating services to make it easier for countries to demand or to offer access to a particular sub-sector;

- clustering related services together so that a country's specific commitment applies to the whole group rather than just one sector;

- reclassifying new services so that they are encompassed by existing commitments.

Hospital management, for instance, could be reclassified under business services and thereby hived off from health-related service sectors in which WTO members have not made many commitments. Or health information systems could be classified under "computer and related services" instead of "health-related and social services". Or ancillary services such as catering, laundry and cleaning could be classified not under health services but elsewhere. The EC has proposed that water supply should be considered part of an environmental services "cluster", while the US has argued that all energy-related services should be treated as a cluster. These reclassifications would affect the interpretation of existing commitments as well as future commitments. Canadian researcher Scott Sinclair regards service reclassification, a seemingly simple technical procedure, as a means "to expand GATS coverage by stealth". See Sinclair, S., op. cit. 18, pp.67-71; Gould, E., op. cit. 24.

44 Some commitments could be negotiated which would apply to all members, sectors and/or modes of supply, for instance, each government could make a minimum level of commitments in each sector; countries could include under GATS a specified percentage of their services by GDP; governments could reduce limitations in their schedules by a fixed percentage; or members could eliminate certain measures such as residency requirements in certain sectors or modes.

45 UK Department of Trade and Industry, "GATS 2000, Health and Education Services", briefing note, 2 December 1999, cited in Pollock, A.M. and Price, D., "Rewriting the Regulations: How the World Trade Organisation Could Accelerate Privatisation in Health-Care Systems", The Lancet, Vol. 356, 9 December 2000, p.1996. See also website: www.dti.gov.uk/worldtrade/service.htm

46 Many governments might prefer to be able to make concessions in one agreement, for instance, the Agreement on Agriculture, in return for concessions in another agreement, such as the TRIPs agreement, instead of renegotiating an agreement such as GATS on its own. The world's three leading service industry organisations (the US Coalition of Service Industries, the European Services Forum and the Japan Services Network) called on their governments in May 2001 to launch a new round of WTO renegotiations on the grounds that substantial agreement on services would most likely be achieved in the context of a wider and broad-based WTO round.

The Council of Trade in Services finally agreed guidelines and procedures in March 2001 for the rest of the GATS 2000 negotiations, having agreed to various requests from developing countries. But no completion dates were set. Countries now enter the more detailed "request-offer" phase: countries request each other to liberalise a particular service under GATS and respond with offers of their own. Southern countries will more often be the "requestee" rather than the "requester". Bilateral trade-offs are then extended on a most-favoured nation basis to all WTO members. The US and European Communities have already submitted their initial negotiating proposals for specific service sectors; see website: www.wto.org/ddf/ep/. See also Raghavan, C., "Revised GATS Guidelines Attempt to Mollify Developing World", Third World Economics, no 254, 1-15 April 2001, pp.2-4.

47 The WTO has made some original WTO documents public on its website: docsonoline.wto.org, and, because of criticism, has started to post many of its new documents. For a range of articles and documents on GATS, including WTO documents not made public, see: www.xs4all.nl~ceo/gatswatch/gatswatch/html; and Gould, E., op. cit. 24.

48 CSI members are drawn from the insurance, financial, telecommunications, travel, transportation and air cargo, information technology and internet, energy, management consultants, entertainment and retail distribution sectors. Vastine says that the group "played an aggressive advocacy role in writing the General Agreement on Trade in Services". The objectives of all government regulation, according to CSI, should simply be to promote fair competition. In 1998, CSI set up a working group to prepare for the GATS negotiations which "has continued to work with the WTO, the USTR [US Trade Representative], Congress, the diplomatic community in Washington, and international organizations to influence the current services negotiations."

49 Vastine, J. R., statement before the Interagency Trade Policy Staff Committee, 19 May 1999, website: www.uscsi.org, accessed on 25 October 2000.

50 Vastine, R., op. cit. 4, emphasis added.

51 Ibid.

52 "Opening World Markets", op. cit. 12.

53 "Opening World Markets for Services: A Guide to the GATS: What GATS Means to Business", website: gats-into.eu.int/gats-info/guide.pl?MENU=aaa, accessed 1 November 2000.

While the US and EU may agree on wanting other countries to open up more of their service sectors to competition, they disagree when it comes to their own sectors. For instance, the US is now "seeking to gain greater access to European markets, particularly for satellite transmissions, pay-TV networks, and the newest media". But the EU claims that the European film industry has undergone a dramatic decline because of competition with US producers. France insists on restricting imports of US films, television programmes, music and videos. To date, the EU has not made any market access commitments in the audio-visual sector and has listed comprehensive most-favoured nation exemptions. See "Opening World Markets", op. cit. 18.

The US is frustrated that the EU will not allow, on precautionary health grounds, the import of meat from cattle which have been given hormones, despite a WTO ruling. The US has therefore increased import tariffs on EU goods unconnected with the disputed practice. See also ref. 22. The US, meanwhile, has not changed its tax legislation governing a Foreign Sales Corporation (FSC), despite a WTO ruling that its provisions are in effect export subsidies, which are prohibited by WTO rules, and should be withdrawn by 1 October 2000.

The US and EU have also disagreed over a plan for US and EU regulators to recognise each other's certification procedures for the safety of six types of industrial product including computers, telecommunications equipment and other electronic devices. See "It's Not Mutual", Financial Times, editorial, 13 November 2000, p.24; Alden, E., "Mismatch on Product Safety Puts Accord on Danger List", Financial Times, 9 November 2000, p.23; website: www.europa.eu.int/com/trade

54 "Opening World Markets", op. cit. 12.

55 European Services Forum, website: www.esf.be/

56 European Services Forum, op. cit. 6.

57 See World Services Congress 1999, website: www.worldservicescongress.com. quoted in Sinclair, S., op. cit. 18.

58 Website: www.uscsi.org/events/services2000conf.html, accessed 24 March 2001.

59 Cohen, N., "Brussels Puts Everything Up For Sale", New Statesman, 2 April 2001; European Services Forum website: www.esf.be/.

The Trade Directorate of the EU has created a special electronic mail list serve ("Services Information System") through which it distributes draft EU GATS negotiating proposals to solicit business comments and suggestions. See Wesselius, E., "GATS: Undermining Public Services World-wide", mss, CEO/TNI, Amsterdam, May 2001, website: www.xs4all.nl/~ceo/gatswatch/

60 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

61 See Martin, B., In the Public Interest? Privatisation and Public Sector Reform, Zed Books, London, 1993; Hildyard, N., The World Bank and the State: A Recipe for Change?, Bretton Woods Project, London, 1998.

62 Public Services International, Health and Social Services, PSI, Ferney-Volataire Cedex, 1999, p.9. For details of the mechanisms by which public services in Britain have been marketised over the past two decades, see Whitfield, D., Public Services or Corporate Welfare; Rethinking the Nation State in the Global Economy, Pluto Books, London, 2001; Centre for Public Services, "What Future For Public Services?" Private Finance Initiative and Public Private Partnerships", June 2001, website: www.centre.public.org.uk/briefings, email ctr.public.serv@mcr1.poptel.org.uk

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

64 Under the North American Free Trade Agreement (NAFTA), for instance, 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 Treaty had offered no protection at all in practice. See Gould, E., op. cit. 24.

Article XIII of GATS currently exempts government procurement -- the services a government buys directly for its own use -- from the obligations of most-favoured nation, market access and national treatment. The European Services Forum proposed in 1999 that this article be deleted or that the WTO Agreement on Government Procurement covering goods be extended to services. The EU estimates that government procurement may cover as much as 15 per cent of European GDPs. See European Commission, Directorate General I, Seattle Conference Preparations, website: www.europa.eu.int/comm/dg01.newround/seaproc.htm, accessed 5 June 1999, cited in Koivusalo, M., World Trade Organisation and Trade-Creep in Health and Social Policies, GASPP Occasional Paper4, 1999, Helsinki, 1999, website: www.stakes.fo/gaspp

65 Public Services International, Transnationals in Public Services, PSI, Ferney-Volataire Cedex, 1998, p.3. website: www.world-psi.org

66 "Opening World Markets", op. cit. 18.

The "market" for "environmental services" is significant. One-fifth of the world's population has no access to clean water and two-fifths have no acceptable means of sanitation, according to WHO and Unicef. But many are unlikely to be a target for utility companies because they are unlikely to be able to pay for these services. See Williams, F., "Many in Developing World 'Still Lack Clean Water and Sewerage Services'", Financial Times, 23 November 2000, p.12.

67 Hall, D., The Water Multinationals, PSIRU, Sept, 1999, website: www.psiru.org/reports/9909-W-U-MNC.doc.

68 quoted in "Don't Gamble With Canada: Don't Gamble With Public Education!", The Council of Canadians, website: www.canadians.org.

The UK has already laid the groundwork for commercialisation of higher education. See Nunn, A., "GATS and Resistance: The Case of UK Higher Education and Knowledge-Based Restructuring in an International Context", (mss), email alexandernunn@hotmail.com; People and Planet, The Threat to Higher Education, Oxford, 2000, website: www.peopleandplanet.org/tradejustice/GATS; Education International/Public Services International, The WTO and the Millennium Round; What is at Stake for Public Education?, EI-PSI, Brussels/Ferney-Voltaire Cedex, website: www.ei-ie.org/pub/english/epbeipsiwto.html, accessed 1 November 2000; Oxfam, Break the Cycle of Poverty, Education Now, Oxfam, 1999, www.oxfam.org/educationnow.

Corporations have also moved into school classrooms by providing computers and text books. Banks send CDs and games that teach personal finance; other companies send free exercise books displaying advertising from soft drink companies and sportswear groups. As the head of telecoms company said, "We get the reputation for being a good corporate citizen. But it's not an esoteric holier-than-thou thing. We're in business." Commercial companies are also involved in education under the Private Finance Initiative (PFI). Nearly 20 per cent of the £9 billion committed by the British government since 1997 to rebuild schools is earmarked for schemes under PFI. Companies are also providing teachers, and proposals have been made for the for-profit sector to run schools directly. See Baby Milk Action, Seeing Through the Spin (Schools Pack), website: www.babymilkaction.org; Mathiason, N., "Can Schools Survive Commercial Drive?", The Observer, 11 February 2001, p.5; Regan, B., Our Schools Are Not For Sale: The Case Against Privatisation of Education, Socialist Teachers Alliance, 2001.

69 Pollock, A.M. and Price, D., op. cit. 45, p.1996.

70 Calculated by Allyson Pollock from 1999 data.

71 Public Services International, op. cit. 62, p.4.

72 Hall, D., op. cit. 63, p.5.

73 Pollock, A. and Price, D., op. cit. 45, p.1999.

74 Koivusalo, M., op. cit. 64.

75 The multinational expansion of private health care companies has not been as coherent or extensive as that of other public service sectors such as water, waste management and energy. But companies active in insurance, hospitals, laboratories (clinical diagnosis and therapy such as dialysis and MRI scans) and support (cleaning and catering) services all have an impact on health care services. Support service multinationals with many contracts in hospitals in many countries include ISS (Denmark), Sodexho (France), Rentokil/Initial (UK), Granada/Compass (UK) and EDS (US). Some of the main multinational companies involved in health insurance include Aetna (Netherlands), Allianz (Germany), Aon (US), CIGNA (US), UnitedHealth care International (US) and AIG (US). In the UK, Bupa and PPP have 70 per cent of the health insurance market. Among the largest for-profit chains of hospitals are Hospital Corporation of America (HCA), Sun Health care (US), Tenet (US), Humana (US) and National Medical Enterprises (NME) (US).

Private health care companies, particularly US ones, are targeting countries which have a sufficiently affluent elite willing to pay for health care or which have an existing private health service base. Countries and regions of special interest are Latin America, South-East Asia, China and the Pacific Rim, the Middle-East and, to some extent, in South Asia. See Koivusalo, M., op. cit. 64; Price, D., Pollock, A.M. and Shaoul, J., op. cit. 3; Hall, D.,op. cit. 63.

76 Pollock, A.M. and Price, D., op. cit. 45, p.1996.

Health-related services include not only professional and clinical services (hospitals and doctors) but also insurance, occupational, laboratory, infrastructure, support, nursing, community care and pensions services.

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

State involvement in health care is usually based on compulsory social insurance or general taxation.

78 WTO Secretariat, op. cit. 77.

Hospital services represent between 40-50 per cent of this expenditure, pharmaceuticals between 30-40 per cent and out-patients the remainder. OECD countries account for about 90 per cent of worldwide health care expenditure. The public share of total health spending in the US is 45 per cent, lower than any other industrial country. The OECD average is about 75 per cent.

79 Ibid.

GATS schedules list several categories of health services divided into three areas:

- professional services, encompassing medical, dental, veterinary, nursing and midwives, laboratory, services;

- health-related and social services, encompassing hospital, other human health, social, community care (including of the elderly) and other services;

- health and pensions insurance.

80 Ibid.

81 Ibid; EU, op. cit. 22.

The WTO Secretariat points out that 19 of the 59 countries that have made commitments on medical or hospital services have not made commitments on health insurance services, while 35 of the 76 members with commitments on health insurance have not make commitments on medical or hospital services.

82 Kuttner, R., "The American Health Care System: Wall Street and Health Care", New England Journal of Medicine, 340, 1999, pp.664-68.

83 Website: www.uscsi.org.

84 Gould, E., op. cit. 39.

85 This is despite the fact that Canada has 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

86 See Pollock, A.M. and Price, D., op. cit. 45.

87 A cross-subsidy equivalent in the commercial world is "loss leaders": selling something at less than cost price to draw in customers, but with the costs paid for by other higher-priced goods.

88 Pollock, A.M. and Price, D., op. cit. 45, p.1996. See also Evans, R., "Health Reform: What Business is it of Business?" in Drache, D. and Sullivan, T., (eds), Health Reform: Public Success: Private Failure, Routledge, London 1999, pp.25-47.

A general principle to ensure equity in health care has been to provide services according to need and to finance them according to ability to pay. A comparison of different finance mechanisms suggests that general taxation and public provision is the least regressive approach, while financing health care services through private insurance and patients' out-of-pocket payments is the most regressive. Universal social insurance, such as is common in continental Europe, falls somewhere in the middle. The privatisations in Britain of utilities (electricity, gas, water), transport and long-term care have adversely and disproportionately affected the poor, elderly, disabled and unemployed. See Koivusalo, M., op. cit. 64; Pollock, A. and Price, D., "Globalisation? Privatisation!" Health Matters, 41, Summer 2000. website: www.healthmatters.org.uk/stories/

89 Kuttner, R., "Columbia/HCA and the Resurgence of the For-Profit Hospital Business", New England Journal of Medicine, 335 (5), 1 August 1996, pp.362-367.

90 GATS could also enable pharmaceutical companies to run hospitals. In the US, the pharmaceutical industry, one of the most profitable and fastest-growing sectors of the world economy, is integrating vertically into managed care companies (those that act as an intermediary between doctor and patient) and other services. Merck, for example, has acquired Medco, the largest US prescription drugs provider. Zeneca, the world's second largest manufacturer of cancer drugs, has taken over the management of 11 cancer treatment centres in the US.

Meanwhile, the confidentiality of medical records could be undermined. For instance, a country may not have opened up its health services to competition under GATS, but may have opened up data processing or database services. Would national measures relating to the confidentiality of health records be classified under health services or under database services? See Sinclair, S., op. cit. 18, pp.36-37. See also Sanger, M., op. cit. 85.

91 Allaert, B. and Forman, N., "Gender, Trade and Rights: Moving Forward", WIDE Bulletin, Brussels, May 1999; Macdonald, M., "From Seattle to Beijing+5: How Can Women's Economic Human Rights be Safeguarded in Times of Globalisation? The Impact of Macroeconomy on Women," WIDE Bulletin, Brussels, December 2000, website: www.eurosur.org/wide/porteng/htm. See also Zarilli, S. and Kinnon, C. (eds.) International Trade in Health Services: A Development Perspective, UNCTAD/WHO, June 1997.

92 Butler, P., "Dirty Work", Guardian Society, 2 August 2000, pp.10-11.

93 Ibid.

94 Ibid.

95 The Care Standards Act provides for regulation of children's homes, independent (not NHS) hospitals, independent clinics, care homes, residential family centres, independent medical agencies, domiciliary care agencies, fostering agencies, nurses agencies and voluntary adoption agencies.

96 Ennals, R., "A Very Messy Business", Health Matters, issue 42, Autumn 2000.

The detailed rules and regulations have still to be worked out; the largest group of those being consulted are those hospital groups and medical bodies whose employees and members were responsible for the tragedies in the first place. Separate quality controls for public and private medicine could reinforce a two-tier health care system.

97 Saltman, R., "The Sad Saga of Managed Care in the United States", Eurohealth 4, 1998, pp.35-36, quoted in Koivusalo, M., op. cit. 64.

98 Quoted in "Failure to Stop Health Care Privatization in New Deal Increases Likelihood of Trade Attacks", press release, 11 September 2000, The Council of Canadians, Ontario. website: www.canadians.org.

A 1997 study in the New England Journal of Medicine analysing 1994 data of over 5,000 acute care hospitals in the US found that for-profit hospitals were 25 per cent more expensive than non-profit facilities. A 1999 report, Private Profit or Public Good: The Economic and Politics of the Privatization of Health Care, from the Parkland Institute at the University of Alberta, Canada, concluded that private, for-profit health care consistently fell short of non-profit and publicly-provided health care in various countries over several decades. A July 1999 study, "Quality of Care in Investor-Owned vs Not-for-profit HMOs" in the Journal of the American Medical Association by Dr. Sidney Wolfe and Dr. David Himmelstein examined 1996 quality of care data from 248 investor-owned and 81 not-for-profit HMOs providing coverage in total to 56 per cent of all Americans in HMOs. For all 14 quality indicators, for-profit HMOs scored lower than non-profit ones. Although the patient treatment costs in both type of HMO were almost identical, spending on administration and profits was 48 per cent higher in for-profit HMOs. Concluded Dr. Himmelstein, "If all American women were enrolled in for-profit HMOs instead of non-profits, 5,925 more would die [each year] from breast cancer ... Your chances under a for-profit HMO are much worse if you are seriously ill."

As important as quality of care, however, is the range of health care services provided: for-profit facilities tend to develop care only in

those areas which make money, avoiding long-term care in areas such as burns or asthma. As the driving forces in health care become profit and avoidance of responsibility, the non-profit sector is starting to avoid long-term patients as well.

99 "A radical critique of medicine has to deal with the things that make people sick and the kind and quality of health care people get". See Levins, R., op. cit. 97.

100 Public Services International, op. cit. 62, p.9.

101 Whitfield, D., op. cit. 62, p.29.

102 Kuttner, R., op. cit. 82; Kuttner, R., op. cit. 89; Kuttner, R., "The American Health Care System: Health Insurance Coverage", New England Journal of Medicine, 340 (2), 1999, pp.163-168; Kuttner, R., "The Commercialization of Prepaid Group Health Care", New England Journal of Medicine, Vol. 338, No. 21, pp.1558-1563; "Health Care: Thirty-Six Places to Go", The Economist, 24 June 2000, pp.72-73.

Before the 1990s, a "fee for service" system dominated: doctors and hospitals recouped expenditure from insurers, which recovered their costs from their clients' employers, who passed this cost onto the public in their products. Since the 1990s, however, the concept of managed care was introduced to contain costs and is replacing the fee system. Managed care is health services provided under the administrative control of large, private (mostly for-profit but many originally mutual) organisations charging flat fees per patient enrolled per month. Employers have begun to purchase pre-paid arrangements based on inclusive "managed" arrangements, while public health efforts have been dismantled to make way for them. Prepaid group health care plans began in the US in the 1940s as a social form of health care, some originating in occupational health schemes. In the early 1970s, national legislation enabled such plans to become for-profit health maintenance organisations (HMOs). Today, nearly three out of four HMOs (now generally called managed care organisations) are for-profit, shareholder-owned plans run by non-clinicians preoccupied with holding down costs. The conflict of interest between a plan's desire to save money and a patient's need for good care has been described as "managing costs" versus "managing care". This industrialisation of US health care has turned the system from one run by the professions into one run by insurance companies managing the professions and telling them what kind of health care they can offer.

103 The US spends more than any other country on health care in absolute terms and as a proportion of GDP. It accounts for 3-4 per cent of the world's population, yet spends 35-40 per cent of the world's spending on health care. Despite its high expenditure of health care, however, the US has some of the worst health indices of OECD countries. Increased spending does not mean increased health or health care: one-fifth of the spending is on administration; those who need health care do not receive or have access to it; the spending is driven by a technological model of health and medical consumerism; and the underlying causes of sickness are increasing. "The irrationality of the system extends even to the rich," points out Richard Levins, "who are overtreated". Nearly 200,000 people in the US die each year through improper medical interventions, while many more die from misuse of heavily-advertised prescription drugs, over-the-counter remedies and other preparations. See Levins, R., "Is Capitalism a Disease? A Report on the Crisis in US Public Health, Monthly Review, Vol. 52, No. 4, September 2000, pp.8-33.

104 The US health care system is financed by insurance, although programmes and companies vary from state to state. For nearly two out of three Americans, this health insurance is paid for by their employers. Publicly-funded national insurance schemes, paid for out of national and state budgets, were introduced in 1965, modelled on private health insurance schemes and based on the needs of doctors and hospitals rather than patients. Medicare pays for hospital and doctor treatment (but not drugs outside hospitals) for some 39 million people over the age of 65, while Medicaid pays for some 34 million people on low-incomes or with disabilities. But today, the vast majority of the 44 million uninsured are employed. More than one-third of Hispanics and one fifth of blacks do not have regular insurance, compared with 12 per cent of white Americans. Despite state-sponsored insurance programmes, America's poor have little access to medical care of any sort. Moreover, the number of people who are underinsured is growing as employers cut back on their costs. Like the uninsured, they pay for care themselves out of pocket or forego it. Medicare and Medicaid have insufficient resources to check that treatment is necessary or that bills are accurate. The US Department of Health estimates that it overpays private hospitals $23 billion a year. Medicare and Medicaid together underwrite about three-quarters of the costs of the $86 billion long-term care industry. See The Economist, op. cit. 102.

105 Hsiao, W., Director of Harvard School of Public Health, reported in New York Times, 17 June 1999, cited in Public Services International, Great Expectations: The Future of Trade in Services, PSI, Ferney-Voltaire-Cedex, February 2000, website: www.world-psi.org

106 "The Americas Shift Toward Private Health Care", The Economist, 8 May 1999, pp.69-70.

107 WTO Secretariat, op. cit. 77.

108 Public Services International, op. cit. 62, p.10.

109 Ibid., p.10.

110 Price, D., Pollock, A.M. and Shaoul, J., op. cit. 3.

111 Public Services International, op. cit. 62, p.16

112 Lang, T., "The New GATT Round: Whose Development? Whose Health?", Journal of Epidemiology and Community Health, November 1999; Lang, T., "Trade, Public Health and Food" in McKee, M., Garner, P. and Stott, R., (eds), International Co-operation and Health, Oxford University Press, Oxford, 2001 (forthcoming).

113 Rayner, G., personal communication, 11 June 2001.

No amount of expenditure of health care will solve health problems caused by rising rates of diabetes explained by a higher consumption of high-fat, high calorie, fast food and sugary drinks, declining rates of exercise or extended hours of sedentary entertainment. The explosion of obesity in the US, Britain and Germany, however, will result in a massive increase in health costs over the next 20 years.

If broader measures of health are the goal, spending more on housing or education often does more to reach it. The WTO Secretariat itself points out that "Given the amounts spent on health care in some countries, the question may arise whether alternative approaches aimed at improving the health situation (investments in environmental measures, traffic safety, non-smoking and anti-drug campaigns, etc.) carry higher returns." See WTO Secretariat, op. cit. 77, footnote 4.

114 Sinclair, S., op. cit. 18, p.60.

115 Early Day Motion 260, website: edm.ais.co.uk/

116 Article IV requires WTO members to facilitate the increasing participation of developing countries by "the liberalization of market access in sectors and modes of supply of export interest to them [developing countries]."

EU Trade Commissioner Pascal Lamy admitted in November 2000 that the EU has "offensive export interests in the field of those services which are regulated as public services. That is an important distinction between GATS and GATT. With GATS, reciprocity is not the same -- there is none. If we have a strong interest in the field of health, we're not obliged to make commitments but can take advantage of opening up other markets". Quoted in Caroline Lucas MEP, "GATS-The EU Perspective", speech at WDM GATS seminar, 29 March 2001.

117 Articles XI and XVI state that:

• restrictions must not be applied on transfers and payments for current transactions relating so specific sectoral commitments;
• there must not be any restrictions on capital transactions inconsistent with specific sectoral commitments;
• a country is obliged to allow a cross border movement of capital if it is an essential part of the movement of service covered by specific sectoral commitments.

118 UNISON, Public Services Manifesto, London, website: www.unison.org.uk. See also "Stop the GATS Attack, International Statement", website: www.citizen.org/pctrade/GATS/GATSsignon.htm

119 Hall, D., "The Public Sector Water Undertaking", PSIRU, Greenwich, February 2001. website: www.psiru.org

120 Watkins, K., "Behind Closed Doors: Why the Poor will Suffer if Globalisation is not Controlled", The Guardian (Society), 13 December 2000, p.9.

 

Acknowledgements

This briefing was compiled by Sarah Sexton, The Corner House, drawing on the work and comments of the following to whom immense thanks are due: Meri Koivusalo, GASPP/STAKES; Allyson Pollock, University College London; David Price, University of Northumbria; Clare Joy and Petra Kjell, World Development Movement; Ellen Gould; Mike Rowson, MEDACT; Erik Wessilius, Adam Ma'anit and Olivier Hoedeman, Corporate Observatory Europe; Geof Rayner; David Hall, Public Services International Research Unit; Caroline Lucas MEP; Kasturi Sen, University of Cambridge; Alexander Nunn, University of Manchester; and James Munro, Health Matters.