# Session Overview ## Session summary The session discusses the consequences of international trade for health. ## Learning outcomes - Critically assess the role of the main actors, agreements and governance structures in global trade and their relevance to global health - Describe the governance structures of the [[World Trade Organization (WTO)]] and the importance of the main WTO agreements such as the [[General Agreement on Tariffs and Trade (GATT)]], the [[TRIPS Agreement]] and the [[General Agreement on Trade in Services (GATS)]] as they relate to global health. - Compare and contrast the effect of multi-lateral agreements within the WTO with bilateral and regional trade agreements as they affect global health # 1. Introduction ![[Globalization concept diagram.png]] Trade is a good thing, with caveats about how trade policy should be managed and the degree of openness and protection which is appropriate for economies at different stages of development. [[Insights]] It is also important to highlight that while trade may increase the size of the national economy we need to ask also who benefits from these increases in wealth? How precisely are these gains in GDP distributed across the population to particular groups or individuals? To what extent do the increases in GDP lead to increases in tax revenue which can be used to support national health systems and public health efforts? Do they lead to increased philanthropy by those individuals and industrialists who benefit most from the new economic opportunities? ## 1.1 Trade Liberalisation and distributive impacts [[Understanding the effect of trade liberalisation on the income of poor househoulds is especially important]] Liberalisation by its nature is based on the removal of economic controls and thus implies adjusment to the economy which will have distributional impacts (i.e. on inequality). Although evidence supports the proposition that trade liberalisation will be poverty-alleviating in the long run and on average, trade reform is not always the most important mechanism for poverty reduction. The distributional impacts of trade liberalisation reduce the welfare of some (at least in the short term), and often these are the poor. This distributive impact is potentially considerable and is of great concern, especially with respect to health. In this sense, it is important to remember that macroeconomics concerns aggregate populations and incomes, not individuals. In many cases, changes in macroeconomic policy will result in distributional impacts, especially during a temporal adjustment period, which will benefit some and be detrimental to others. [[Differentiation should be made between general trade liberalisation and liberalisation specifically under the auspices of the GATS framework]] The use of barriers varies depending on the commodity traded. It is helpful to spend a bit of time considering the nature of tariffs and other sorts of non-tariff barriers to trade. A tariff can be defined as a list or system of duties (taxes) imposed by a government on imported or exported goods. Tariffs make the imported goods more expensive and give the domestic industry an advantage in the market, so promoting home grown trade. [[Question]] What are examples of non-tariff barriers for trade? - **Quotas**: physical restrictions on the overall volume of imports allowed into a country, these have the effect of giving the domestic industry some protection from competition. For example, the Organization of Petroleum Exporting Countries sets a production quota for crude oil in order to "maintain" the price of crude oil in world markets - **Local content requirements**: require all imported goods to have a certain proportion of domestic content. For example, foreign cars are often assembled in the domestic country and thus use local labour inputs - **Technical requirements** (technical barriers to trade): refer to the application of technical regulations or standards such as testing requirements, labelling, packaging, marketing standards, certification requirements, health and safety regulations and so forth, for example vehicle emissions standards in the European Union (EU) (EC 2020) - **Administrative barriers** in obtaining customs clearance, or domestic subsidies to make imported goods less competitive compared to domestically produced goods, for example by imposing minimum environmental standards Originally, the [[Bretton Woods]] Conference, held in 1944, was intended to create an International Trade Organisation (ITO) premised on the belief that protectionism during the 1930s had contributed significantly to international conflict. An agreement to create this was achieved in Havana in 1948, but the organisation was not created in the end because USA congress refused to ratify it. As a result, the non-permanent General Agreement on Tariffs and Trade (GATT) was used to negotiate reductions in trade tariffs in a series of rounds held between 1947 and 1994. | Rounds | Participating countries | Items | | ---- | ---- | ---- | | Geneva Round (1947) | 23 countries | Concessions on 43 tariff lines | | Annecy Round (1949) | 29 countries | Further modest tariff reductions | | ... | | | | Uruguay Round (1986-1994) | 125 countries | Foundation of [[World Trade Organization (WTO)]], New agreements on agriculture, clothing, technical barriers to trade (TBT), investment (TRIMS), services ([[General Agreement on Trade in Services (GATS)]]), and intellectual property [[TRIPS Agreement]] | What is of note is the growing number of countries involved in negotiations, the broadening scope of the subjects under negotiation, and, not unrelated, the length of time that the rounds took to conclude. Perhaps the most significant was the Uruguay round (lasting 8 years), because its conclusion led to the creation of a new international trading system administered by the [[World Trade Organization (WTO)]]. In recent decades, [[as international trade has increased, domestic health sectors are now affected by events and agreements made beyond their borders and beyond the capacity of national governments to regulate their effects]], at least acting alone. Trade occurs not just in goods which are bought and sold across national boundaries, but also in services. Consequently, international trade now occurs in a huge array of areas which affect population health and the provision of health services, which are the focus of later sessions in the module. This includes the manufacture and distribution of pharmaceuticals and medical devices (Session 11) and, increasingly in recent years, services such as worker migration (Session 9), health tourism (Session 10) and e-health (Session 12). In addition, trade affects the availability, pricing and marketing of unhealthy commodities, such as tobacco, alcohol and processed food, which are key drivers of non-communicable diseases. Since these products are produced and marketed often by trans-national corporations, they are discussed in the following Module [[GHM102 Session 07 Corporations and global health policy]]. [[Power asymmetry]] [[Health policymakers must see, that liberalisation that may resulted in aggregated increase in GDP, but it doesn't guarantee the distribution outcomes of trade]] High-income countries tend to produce, consume and export high value patented pharmaceuticals, with low- and middle-income countries (LMICs) importing these products, although some LMICs, particularly India, produce and export mainly generic products. This leads to many low-income countries experiencing a trade deficit in medicines (pharmaceuticals), which often fuels an overall health sector deficit, whereby a country exports the majority of health commodities and services it produces (often to the detriment of the local population). For example, extensive exports of Covid-19 vaccines manufactured in India’s Serum Institute in early 2020 to countries such as the UK coincided with a rapid increase of cases and deaths and the emergence of a new, more infectious strain of the virus. This concentration of medical production in high-income countries raises issues about equity and global distributive justice and it is thus unsurprising that trade in pharmaceuticals has been the subject of intensive international dialogue. Debates in global health policy in this area have focused especially on the WTO Trade Related Aspects of Intellectual Property (TRIPS) Agreement, discussed below, which effectively extends the intellectual property (IP) and patent systems of high-income countries to the rest of the world (see also Session 11 on the pharmaceutical industry). # 2. The multilateral trade regime ## 2.1 [[General Agreement on Tariffs and Trade (GATT)]] The underlying logic of the GATT was the promotion of free trade, which is reflected in the key principles that it established for the governance of international trade. These are: - [[Most Favoured Nation (MFN)]] Principle - Non-discrimination - Multi-lateralism - Consensus ### The MFN Principle and Non-discrimination MFN principle dictates that states must apply tariffs for all states at the rate offered to its most favoured trading partner, i.e. the one which enjoys the lowest level of tariff. In other words, countries cannot discriminate between trading partners in terms of a particular good. The same logic is reflected in the norms of non-discrimination on the grounds of nationality and the principle that trade should be multi-lateral creating a level playing field and common tariff regime for all member-states. The principal of multi-lateralism is also reflected in the nature of the agreements undertaken within the GATT and the WTO and the form of decision-making by consensus employed. Despite the importance given to the most favoured nation principle, however, a number of exceptions to this are allowed and explicitly recognised in WTO law, including preferential trade arrangements granted to former colonies and the ability for WTO members to enter into bilateral and regional free-trade agreements (in which tariffs are effectively removed altogether). Examples of the latter include the EU’s Single Internal Market and the USA, Mexico, Canada agreement. ## 2.2 The formation of the [[World Trade Organization (WTO)]] >[[Insights]] So, from GATT to WTO. WTO enacted GATS, TRIPS, and other agreements. The Uruguay round also saw a shift in focus from manufactured goods to services and, as we saw above, the inclusion of IP rights – which were becoming increasingly important within the context of globalisation and a research-intensive, knowledge-based economy – within the global trade regime. Alongside the GATT, the newly enacted General Agreement on Trade in Services (GATS), the newly established TRIPs, the Agreement on the Technical Barriers to Trade (TBT) and the Agreement on the Application of Sanitary and Phytosanitary Measures (SPS) became the key pillars of the WTO system, with multiple implications for health policy. ### 2.2.1 The [[TRIPS Agreement]] ==The IP agenda was driven forward in the Uruguay negotiations by the United States Trade Representative under pressure from its domestic pharmaceutical companies (see Sell 2003)==. The USA trade delegation, which included representatives of Pfizer, insisted on the extension of the TRIPS agreement to cover the IP rights associated with patents on medicines. The TRIPS agreement had important implications for research-intensive industries, including pharmaceutical manufacturers, seeking to guarantee return on their investment by preventing the possibility of their products being copied and sold by others. However, it had significant implications also for the availability and affordability of pharmaceuticals globally. In response, there has been some softening of TRIPS requirements, termed as [[TRIPS flexibilities]]. However, this has had the effect of industry actors putting pressure on their governments in their home (high-income and politically powerful) states to include what are termed TRIPS-plus measures, in bilateral trade agreements that they conclude with third countries. These extend IP protection beyond the TRIPS requirements and have become a common feature of these agreements, usually in exchange for market access concessions in other areas of trade (such as agricultural products on which many LMIC economies depend and which are often highly protected from outside producers). Trade in pharmaceuticals and TRIPS in particular is the subject of Session 11 later in the module, so we will not explore these issues any further here. ### 2.2.2 [[General Agreement on Trade in Services (GATS)]] Trade in health services has expanded significantly since 2010, in large part due to the push by the WTO to facilitate trade in services under GATS. Under GATS services trade is classified as four different modes of supply representing different forms of service delivery: 1. **Mode 1: Cross-Border Supply of Services**. This mode regulates the online provision of health services, such as diagnostics and radiology, from one country to another (e.g., x-rays are interpreted for diagnostics in another country but the x-ray was performed in the original country). 2. **Mode 2: Consumption of Services Abroad**. This mode covers health tourism and concerns the physical movement of people across borders to receive medical services. 3. **Mode 3: Commercial Presence**. This involves foreign direct investment from one country to another. In the health sector this usually involves setting up private hospitals and the presence of foreign insurance companies. 4. **Mode 4: Presence of Natural Persons**. This mode covers the movement of people from one country to another to provide skills or labour. In the case of health services, this would involve healthcare workers. ## 2.3 Health exemptions in the [[World Trade Organization (WTO)]] > Health exceptions in [[General Agreement on Tariffs and Trade (GATT)]] and [[General Agreement on Trade in Services (GATS)]] WTO jurisprudence established that WTO members have the right to determine the level of health protection they deem appropriate. Article XX of GATT guarantees the Members' right to take measures to restrict imports and exports of products when those measures are necessary to protect the health of humans, animals and plants (Article XX(b)) or otherwise relate to the conservation of natural resources (Article XX(g)). In a similar vein, Article XIV of the GATS authorises Members to take measures to restrict services and service suppliers for the protection of human, animal or plant life or health. The health exceptions allowed for in GATT and GATS indicate the importance that WTO Members assign to national autonomy in the protection of health. The Ministerial Declaration on the TRIPS Agreement and Public Health (WTO document WT/MIN(01)/DEC/2 also allows states to override any other obligations, including tariff concessions on goods or specific commitments on services that WTO Members have undertaken under WTO Agreements, in certain circumstances. Taken together, these provisions recognise that there are cases where WTO members may wish, and be entitled to, pursue other legitimate policy objectives, such as health. However, the underlying goal is always trade maximisation. To make use of the health exceptions, WTO Agreements generally require the health measures to be no more trade-restrictive than necessary. Determining whether a measure is "necessary" involves a process of weighing and balancing a series of factors which include the importance of the interests protected by the measure, its efficacy in pursuing the policies, and its impact on imports or exports. > In other words, GATTS ensure States have rights and can implement measures to restrict imports/exports to protect health. ## 2.4 Decision making in the [[World Trade Organization (WTO)]] ![[CleanShot 2024-02-11 at [email protected]]] Officially decisions within the WTO are made on the basis of one member one vote. In practice, however, decisions are made by consensus. ==On the surface this may appear to be more democratic than the quota system used in the International Monetary Fund but it presents problems nonetheless==. [[Consensus-based decision-making means that the most powerful members are still able to exert pressure on the least powerful members]] without the need to resort to a vote to force their policies on them. This model of decision making can often be very labour intensive and involves many officials in the process of lobbying and negotiation required to put forward their arguments and ensure their concerns are listened to. Larger, more powerful member-states are thus better placed to play this game than smaller LMICs, which may have an extremely small delegation in Geneva responsible for representing their country at other international fora based in the city. On the other hand, [[Open Question]] What would happen in LMICs if the WTO did not exist or had never intervened? Would they have been better off? Or worse? ## 2.5 Dispute resolution and criticism of the WTO > Key message: WTO settle disputes through [[Dispute Settlement Body (DSB)]], not WTO Secretariat. Companies and other entities, including private individuals, cannot complain directly to WTO but must be through their governments. The power asymmetry is apparent due to smaller countries experiencing difficulties through [[Reciprocal measures]], and such, is dependent on power politics. The needs to have resources and expertise to bring cases to DSB, many smaller economies were unable or unwilling to bring measures before the DSB. Hence, the majority of disputes brought before the DSB have been between two largest trading blocs, the EU and the USA. The birth of WTO saw the introduction of a formalised dispute resolution mechanism, which had been absent from the GATT, and this led to the forming a [[Dispute Settlement Body (DSB)]] comprised of the entire WTO membership and an Appellate Body created to hear appeals. ==The WTO Secretariat cannot challenge the trade policies of any member-state. It is not a prosecutor or enforcer.== Instead, the ==WTO dispute settlement process (like the organisation more generally) is member-led==. It is up to governments to decide whether or not the trade policies implemented by other members infringe their obligations under the various WTO agreements and to bring a dispute against another government to the WTO where these infractions are believed to adversely affect their interests. Thus, all disputes at the WTO are between governments, and only about alleged failures to comply with WTO agreements or commitments. ==Companies, organisations or private individuals cannot complain directly to the WTO, but can do so through their governments==. Settling disputes is the responsibility of the DSB, which has sole authority to establish "panels" of experts to consider the case, and to adopt the panels' findings or the results of an appeal. In addition, the DSB, monitors the implementation of the rulings and recommendations of panels and the Appellate Body and has the power to authorise retaliation when a country does not comply with a ruling. [[Power asymmetry]] [[World Trade Organization (WTO)]]The key issue for small members and LMICs is that enforcement of the ruling of the dispute resolution body can often be difficult for a small economy. The principal means of enforcement is usually through reciprocal measures and, as such, is dependent on power politics. [[Reciprocal measures]] mean that country, X whose exports have been treated in an unfair and discriminatory way by another state, country Y, may take similar measures against country Y’s goods when it tries to import these into country X. The potential loss of imports into the USA or the EU may create a strong incentive for a country dependent on these markets or simply keen to access large, rich markets such as these. However, enforcement through retaliation may not prove to be a disincentive for the USA, which may be unaffected by retaliation from smaller countries which are of little strategic importance to its overall trade portfolio. In addition, the ability to bring cases depends on resources and so many LMICs due to the size and expertise present in their delegation may be unable or unwilling to bring measures before the DSB. It is for these reasons, it has been argued, that the majority of disputes brought before the DSB have been between the two largest trading blocs, the EU and the USA. Commentators have sought to identify alternatives to reciprocity as a means to enforcement, with a system of fines or other penalties mooted as a potential alternative. It should be noted that ==despite the weaknesses of the dispute resolution mechanism and the justifiable criticisms levelled against it, it represented a significant advance from the situation under GATT== and must be evaluated in the context of international relations in which fully binding and equitable agreements are incredibly difficult to enforce. The problems of government beyond the level of the state will be dealt with in Module GHM102 and can be related back to the issues presented here. What kind of disputes are resolved by the WTO? Consider the scenario: Costa Rica finds that the EU is imposing a 20% tariff on bananas imported from Central and South America, but no tariffs on bananas imported from Africa and the Caribbean. The Costa Rican government may then decide to register a case with the WTO which looks at the issue. The WTO makes a ruling, and if the EU were found to be acting unfairly, the WTO would require this policy to be changed or compensation made, or sanctions would be applied. # 3. Bilateral and regional trade arrangements Due to impasses of Doha Development Round at the WTO since 2011, many states have increasingly sought to conclude other forms of trade facilitation agreement to fill the void. This has taken the form of bilateral, regional and mega-regional trade and investment agreements. Examples: bilateral between UK and Japan after Brexit, Comprehensive and Progressive Trans-Pacific Partnership Agreement (CPTPP), between countries in the Asian and the American pacific rim, or the USA-Mexico-Canada agreements (which replaced a previous agreement, the North American Free Trade Area). The proliferation of such agreements has meant that countries may be party to a number of different agreements which may overlap in places, creating a highly complex [[spaghetti bowl|'spaghetti' bowl of agreements]] governing trade flows in different goods and services between different states. ==The EU single market is also an example of a highly integrated regional economy in which trade facilitation measures between member-states, and those in the European Economic Area, extend far beyond those typically found in normal trade agreements, including in the area of services==. Since it has formed a single internal market and a customs union, with a common external tariff, ==the EU acts collectively as a trading block in international forums and negotiations, and has a joint representation at the WTO==. In recent years, the EU has concluded important bilateral trade agreements with third countries including Singapore, Vietnam, Japan and Canada. Before 2016 there were unsuccessful attempts also to finalise an agreement – the so-called Trans-Atlantic Trade and Investment Partnership (TTIP) – with the USA, although these negotiations were put on ice during the presidency of Donald Trump. The scale of agreement such as TTIP and the CPTPP, involving some of the world’s largest economies and blocs, has led them to be dubbed ‘==mega-regional==’ trade agreements, which were seen as heralding a new phase in the development of the global trade regime. Details of these different agreements can be found in the core and further reading at the end of the session. ## 3.1 The 'next generation' of trade agreements Agreements such as CPTPP, and proposed agreements such as TTIP, have been identified as representing a ==new generation of trade agreements not just because of their (geographical and/or economic) scale but because of the approach they take to trade facilitation.== The virtual elimination of tariffs on manufactured good traded between advanced industrial economies means that the principal barriers to trade are now in fact non-tariff barriers. These often take the form of regulatory requirements which have the (deliberate or accidental) effect of favouring domestically produced goods over imports and thus creating unfair competitive conditions (or even outright exclusions) for overseas producers. [[Insights]] [[Indonesia obsession with local manufacturing]] That's why countries remove tariff and taxes on investment to increase access and trade. This is why it's a new era: if you want to be advanced industrial economies, the principal barriers to trade are now non-tariff barriers. This barrier take the form of regulatory requirements which have the effect of favouring domestically produced goods over imports and thus creating unfair competitive conditions for overseas producers. Consequently, the focus of recent trade agreements has increasingly been on the ==elimination of these technical barriers to trade==. This mirrors the inclusion of the TBT agreement within the WTO. Since these barriers often relate to domestic regulatory standards, one of the key ways to address these has been through regulatory co-ordination chapters within trade agreements. These so-called ‘behind the borders’ measures require countries to undertake regulation and implement policies and domestic laws in ways which do not adversely affect overseas producers in third countries with whom they have a particular trade agreement. These regulatory co-operation measures may create institutional structures or notification mechanisms through which overseas actors (including private companies who may be subject to these measures) are given early warning of any potential policy changes or laws, and have the ability to raise concerns about these and feed into the deliberations. Regulatory co-operation measures have the effect of potentially restricting the ‘legislative space’ available to national governments who may be considering health protective measures which may in some way contravene commitments made under a trade and investment agreement. Moreover, it affords significant opportunities for powerful vested interests, such as trans-national corporations in the health harming industries, to oppose measures (e.g. tobacco labelling restrictions) which are designed to protect public health but which undermine their business models and profits. As well as the regulatory co-operation measures, these agreements include extremely powerful dispute resolution mechanisms, through which existing laws and policies may be challenged. ==Unlike the WTO system in which only WTO member-states can institute disputes (against other member-states), under many agreements such as CPTPP and the abortive TTIP, so-called [[Investor-State Dispute Settlement (ISDS)]] mechanisms give legal standing to private companies (in their guise as cross-border investors whose interests are protected by the agreements) to take direct legal action against governments which are party to the agreements==. This creates important new mechanisms through which health policies, which may adversely affect certain industries, may be challenged, delayed and even prevented from being enacted. The most obvious example of this is the use of such agreements to attempt to prevent the introduction of ==enhanced health warning labels and ‘plain packaging’ for cigarettes in countries== such as Uruguay and Australia. These cases are discussed in the core and supplementary readings for this session set out below (see also [[GHM102 Session 07 Corporations and global health policy]]). It is important to note that, even where national governments are able to successfully defend such cases, the costs involved are significant and prohibitive for many LMICs. For example, in the Philip Morris-Australia cigarette packaging dispute, brought under the Australia-Hong Kong Bilateral Investment treaty, the costs incurred by the Australian government were estimated at around $50m in addition to the diversionary effect that defending the case had on other government activities, as civil servants and other resources dedicated to this case could have been used in other areas of healthcare provision. This means that the effects of [[Investor-State Dispute Settlement (ISDS)]] mechanisms cannot be fully captured just by examining cases brought. The effects of ISDS mechanisms extend beyond just the cases which are initiated and have been studied. The potential consequences of defending an ISDS case may mean many potential disputes are never formally initiated. The mere threat of legal challenges – and the significant costs which governments face just to defend a case even before any compensation has been awarded – means that policy-makers may self-police and decide not to bring forward controversial measures that industry actors will object to. This so-called ‘[[chilling effect]]’ has been documented in the area of tobacco control and may be a particular concern for LMICs, which have limited financial and human resources with which to fight such cases and where this would divert resources away from already over-stretched health systems and ministries (see Hawkins and Holden 2016). # 4. Integrating activity Imagine you are the health representative on the trade negotiating team representing a country of your choice at either the WTO or in a bilateral trade negotiation with another country or group of countries. Write a one-page briefing paper for the other delegates (e.g. from the Ministry of Trade or Finance in your chosen country setting out: - What issues are the priority for you to discuss - How these affect public health and why this matters - What will be your bargaining position and why - How will you go about pursuing your objectives - What level of participation/ influence you should have over proceedings Post your paper on the Integrating Activity discussion forum on Moodle to receive feedback from your fellow students. Comment also on two other discussion documents from other students. Reflect on how the briefings from different countries compare to yours. # 5. Summary This session discussed the ways in which trade in goods and services impacts on health and examined the evolution of the global trade regime via the GATT and the formation of the WTO and the proliferation of bilateral and regional trade and investment agreements since the stymying of WTO negotiations in the early 2000s. It examined the TRIPs agreements, and their relevance for various issues in global health such as pharmaceutical access, which has come to the fore in debates about global supply and access to Covid-19 vaccines. In addition, the development of increasing capacity for cross-border trade in services via the GATS agreement has implications for cross-border movements of health care professionals, medical tourism and e-health. All of these issues are discussed in more depth in the subsequent sessions of the module. # 6. References ## 6.1 [[Essential readings]] [[@gleesonLabonteTradeandHealth2020]] [[@hawkinsCorporateVetoHealth2016]] ## 6.2 [[Recommended reading]] UNITAID (2014). The Trans-Pacific Partnership Agreement: implications for access to medicines and Public Health. Geneva: World Health Organization. (Read the executive summary. You may read the detail in chapters if time allows.) Friel S, Gleeson D, Thow AM, Labonte R et al (2013). A new generation of trade policy: potential risks to diet-related health from the trans pacific partnership agreement. Global Health 9:46 Gleeson D, Labonté R (2020). Trade agreements and public health. Springer Singapore. Rest of the book. Labonté R, Crosbie E, Gleeson D, McNamara C (2019). USMCA (NAFTA 2.0): tightening the constraints on the right to regulate for public health. Globalization and health, 15(1), 1-15. McGrady B (2011). Trade and public health: the WTO, tobacco, alcohol, and diet. Cambridge University Press. #to-read Smith R et al (eds) (2015). Trade and health: building a national strategy. World Health Organisation (Chapters 3 and 5). [[@smithTradeHealthTrade2009a]]