Free trade jh

Free trade for
better health
Free trade for better health
By Philip Stevens, Director, Health Programme International Policy Network (IPN) is a charity based in the UK, and a non-profit (501c3) organisation in the US.
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Executive summary
Free trade is a powerful mechanism for improving steadily rising in most parts of the world for the last 50 human health, for two broad reasons. First and most important, freeing up trade between individuals and Nevertheless, some have claimed that trade countries is a proven way of increasing prosperity and liberalisation and especially agreements such as those administered by the World Trade Organisation (WTO) Wealth is important to health because it allows people to are harmful to the poor. Such claims are not borne out buy improvements in living conditions. Prosperity brings with it decent sanitation, clean water and clean, One of the WTO agreements, the General Agreement on efficient domestic fuels. A lack of these necessities is Trade in Services (GATS) has been accused of directly responsible for a large proportion of mortality undermining sovereignty and requiring the privatisation and morbidity in the world’s poorest countries. People in of health services, but the reality is that the GATS allows wealthier countries, meanwhile, have the resources to signatories a great deal of flexibility. In addition, like all ensure that they are well-nourished and live in hygienic trade agreements, the GATS is voluntary and relies on conditions. This is why life expectancies have been on mutual recognition, not coercion. Moreover, the GATS the rise in these regions since modern economic growth may act as a significant spur to technology and began at the time of the Industrial Revolution.
knowledge transfer, because it encourages the adoption The second reason why trade improves health relates to of beneficial things such as telemedicine, medical so-called ‘technology transfer’. Before the late 19th tourism and proper standards for health insurance. It Century, cross-border trade was restricted to a handful may also help overcome the so-called ‘brain drain’ of of nations. Today, all countries trade internationally, medical personnel from South to North, by encouraging with lower-income countries recently seeing their share of global trade increasing significantly.
Another WTO agreement, the Trade Related aspects of As a result of this growing international exchange of Intellectual Property Rights (TRIPS) agreement, has goods and services, the health-related knowledge and been accused of – among other things – holding up technologies which originated in rich countries have knowledge transfer from “North” to “South”. In fact, been disseminated to the rest of the world. In the years the opposite is true. India has recently made its following the Second World War, the global spread of domestic legislation compliant with TRIPS, and the drugs such as penicillin – a medicine discovered and result has been a massive influx of foreign Research and developed in Britain – had a massive impact on Development expertise and capital. The early indications mortality in many poor countries. Similarly, the spread are that this TRIPS-compliant law will provide an of other technologies developed in rich countries, such environment in which India will develop a range of new as DDT, have significantly reduced the incidence of drugs for the diseases which affect its population.
malaria worldwide. Some economists believe that the Meanwhile, the various Free Trade Agreements (FTAs) spread of technology, facilitated by free trade, is the signed between the United States and bilateral partners most important reason why life expectancies have been likewise stand accused of delaying technology transfer by strengthening intellectual property protection. Thetruth is that most of these FTAs retain the flexibilities ofTRIPS, and binding ‘side letters’ exist for the others. Butby protecting intellectual property, these FTAs allowlocal manufacturers to develop their own products witha far lower threat of profit-eroding piracy. Likewise,multinational companies will be reassured that theirproperty will be safe in a signatory country, resulting ingreater foreign investment and technology transfer.
Free trade has a positive impact on health, so it isreprehensible that governments continue to imposerestrictions on trade. It is particularly horrific that drugsand medical devices continue to be subject to a range ofimport levies in the majority of lower-income countries,with the result that many sick people are priced out oftreatment. Removing these unconscionable restrictionson trade must be a priority for trade negotiatorsconcerned about the health of the poorest.
In addition, there is a strong moral case for prioritisingthe removal of tariffs on technologies that enable thesupply of clean water and clean energy. Dirty water andfuels are two of the biggest causes of disease in lower-income countries – resulting in over 4 million deaths peryear, mostly of women and children. The removal ofthese levies can and should be done as soon as possible.
If unilateral removal is not politically acceptable thenthey should be removed within the context ofnegotiations on access to environmental goods andservices in the current multilateral Doha round.
Finally, there is an absolute moral imperative to removerestrictions on trade in food, because malnutritionremains a major problem in many parts of the world.
This applies especially to the many nations in Africawhich maintain harmful tariffs on the agriculturalproducts of neighbouring states.
Free trade for better health
countries, led to what has been described as the third ofthree great waves of mortality decline (Gwatkin, 1980).
The history of humanity shows that the most certain This period saw an increased access to safe water and and sustainable way of improving human health is to sanitation services in lower-income countries. Such increase individual prosperity and wealth. A seminal access, coupled with increases in per capita food 1996 study by economists Lant Pritchett and Lawrence supplies, basic public health services, greater knowledge Summers showed the dramatic effect which increases in of basic hygiene, and newer weapons (such as incomes can have on health. They found a strong antibiotics and tests for early diagnosis) were causative effect of income on infant mortality, and instrumental in reducing mortality rates.
demonstrated that if the developing world’s growth rate As a result of these advances, life expectancies had been 1.5 percentage points higher in the 1980s, half lengthened worldwide, not just in the richest nations.
a million infant deaths would have been averted.
Average global life expectancy increased from 46.6 in In fact, the health of the world’s population has been 1950–1955 to 66.8 years between 1950–1955 and 2003, improving since modern economic growth began with as technology, including knowledge, was diffused the Industrial Revolution. Infant mortality and life around the world (World Bank, 2005). Figure 1 expectancy rates have improved dramatically around the illustrates the correlation between wealth and health, world, and food is more abundant and cheap than ever showing that life expectancy increases as GDP per capita before. These indicators of human well-being improved noticeably in rich countries from the mid to late 19thcentury, as nations cleaned up their water supplies andinstituted basic public health measures, such as Figure 1 Life expectancy vs. income
sanitation, pasteurization, and vaccination. Then, in the first half of the twentieth century, antibiotics, pesticidessuch as DDT, and an array of vaccines were added to the arsenal of weapons against disease. Once the traditional infectious and parasitic diseases were essentially conquered, richer countries turned their ingenuity andwealth to dealing with so-called diseases of affluence: cancer, heart diseases and strokes (plus HIV/AIDS, a non-traditional infectious disease). While these have not yet been entirely defeated, a vast array of new treatments, drugs and technologies now exist to GDP per capita (2000 International $, PPP) During the second half of the twentieth century, the diffusion of technology from the rich to lower-incomecountries, as well as greater wealth in the lower-income Trade and health
income countries now command 31 per cent of globalmerchandise trade, their highest level since the 1950s It is clear that humanity owes its current, unprecedented good health to growing prosperity andthe diffusion of advances in knowledge. This knowledgewould be of limited value without the economic Barriers to open markets
resources required to implement it; sewage systems are Lower-income countries have been able to begin expensive, for example, as are mass vaccination participate successfully in global markets partly through programmes or the construction of hygienic dwellings. abandoning the old protectionist policies of the post-war But much of this economic growth and diffusion of period. Chief among these was Import-substitution health knowledge could never have been achieved industrialisation (ISI), which was promoted very widely without the dramatic increases in international trade after World War II and was implemented aggressively that characterised the late nineteenth century and and enthusiastically in many lower-income countries, second half of the twentieth century. Before the late especially in post-independence Africa.
nineteenth century, cross-border trade was confined to The justifications for ISI policies were twofold. First, it handful of nations. Today, all countries trade was taken as a given that development required internationally and, with the occasional exception such industrialisation. Second, it was supposed that as North Korea, they trade significant – and increasing – governments could speed this process up by preventing proportions of their national incomes. While higher imports of industrial goods – thereby encouraging the income countries still accounted for three quarters of global trade in 2000, lower income countries haverecently seen their share climb by one third as they cut Following the advice of proponents of ISI, Brazil and tariffs and dismantled other barriers to free trade. The other Latin American economies put massive restrictions average tariff in lower-income countries has fallen from – quotas, tariffs, and outright bans – on imports of 25 per cent in the late 1980s to 11 per cent today (World industrial goods. As a result, there was a temporary rise Bank and IMF 2005). According to the WTO, lower- in industrial output. This is not surprising: if you restrict Figure 2 World exports of merchandise
Figure 3 International trade
Developing and developed countries, 1970–2000 the import of goods that people have traditionally Can any link be drawn between the increasing global imported, then local production will compensate to importance of trade and improving health in the developing world? It could be that increasing nationalwealth that comes from engaging in international trade However, the initial cost was a reduction in agricultural allows individuals and governments to afford output, as productive factors moved into industry and technologies and infrastructure that are propitious to away from agriculture, and a migration of people from health. A wide and increasing body of literature the countryside into the cities. After a period of time, demonstrates that increasing volumes of trade are industrial output began to level off. This was mainly causatively associated with robust economic growth (for because the output was no longer competitive. Because example, Dollar, 1995; Dollar & Kraay, 2001; Frankel & it was no longer possible to purchase essential Romer, 1999; Sachs & Warner, 1995). And, as we have productive inputs from abroad, efficiency of outputs was seen, rising incomes are result in better health, mainly constrained. The costs of inputs rose and so competitors because they allow people to buy improved sanitation, cleaner fuels and more advanced health technologies. To save the industries that had been sponsored by In this way, opening up a country to trade is a powerful import-substitution policies, governments started to way of improving the health of its population. This subsidise them. To pay for these subsidies, they raised thesis is confirmed by the as yet small literature on the taxes on agriculture and monetized government debt relationship between trade liberalisation and health. In through inflation. The net result was hyperinflation, their panel study of 219 countries, Owen and Wu (2004) combined with unemployment and negative growth.
found that increased openness to trade is associated In addition, it created social chaos. This is because many with lower rates of infant mortality and higher life people had migrated to towns and were now expectancies, especially in lower-income countries. Wei unemployed. If they had been unemployed in the and Wu (2002) also illustrate that higher trade openness countryside, they would have had their social support (especially when measured with a lower tariff rate) is networks that had been developed over decades. But the associated with a longer life expectancy and lower infant new migrants to towns hadn’t developed such networks.
mortality. The recent experiences of countries such asChina, India and Vietnam, whose health indicators haveimproved as they have pursued more liberal trade Open trade improves health
policies, provides a powerful and tangible confirmation Fortunately, by the close of the Uruguay Round of negotiations in 1994, most countries had agreed to move Future generations in lower-income countries stand to away from this counterproductive strategy and lower accrue even greater financial and welfare gains if trade is significantly their protectionist tariffs. In many further liberalised. According to a recent study by the countries, this set the stage for rapid economic growth World Bank, the abolition of tariffs, subsidies and and deepening integration in the global economy.
domestic support programs would boost global welfare As well as being a period of increasing global trade and by nearly $300 billion per year by 2015. Close to two- economic activity, the second half of the twentieth thirds of these gains would come from agricultural trade century also saw remarkable improvements in health in reform, because agriculture is so much more distorted most lower-income countries. Between 1950–55 and than other sectors. Furthermore, lower-income countries 2003, for example, India’s infant mortality fell from 190 would receive 45 percent of global gains from completely to 63 per 1,000. In fact, life expectancy in low and freeing all merchandise trade. As poor countries have a middle income countries has risen steadily since the much smaller share of global wealth, their potential middle of the 20th century, with the exception of sub- gains from trade liberalization are disproportionately Saharan Africa in the 1990s. This progress took place large, amounting to more than twice their share of global against a backdrop of increasing international trade. gross domestic product (Martin & Anderson, 2005).
In the 1940s, Asia ended several decades of relative economic and cultural isolation, and started to integrateinto the global economy. This brought with it a massive Although the economic benefits of international trade transfer and diffusion of public health programmes, are of fundamental importance to understanding the technologies and techniques that originated in richer relationship between free trade and health, trade may countries. The 1920s to 1940s had seen huge advances in also be beneficial for health in other ways. In fact, some medical discovery, including penicillin, sulfa drugs, economists believe that the spread of health-related bacitracin, streptomycin and chloroquine. With the knowledge that accompanies trade liberalisation is one arrival in Asia of these and other drugs, effective of the primary determinants of health in lower income treatments for the diseases which had once killed countries (Deaton, 2004; Owen & Wu, 2004; Jamison, millions were now available at low cost. Furthermore, Sandbu & Wang, 2001). This is because much of the the invention of DDT in 1943 gave authorities a hugely knowledge about how to improve human health – from powerful weapon in the fight against malaria which vaccines to the germ theory of disease – has been widely allowed the disease to be eradicated from the US and distributed to all parts of the world from the richer Europe, and to lower caseloads by over 99 per cent in countries where it was first developed.
parts of Sri Lanka and India (Gramiccia & Beales, 1988).
When the costs of trade are lowered, it becomes easier to As a result of the widening availability and decreasing disseminate to other countries knowledge, techniques cost of such interventions – made possible by freer trade and medical products from the countries that developed – crude death rates dropped steeply, particularly in them. For example, the discovery by John Snow in eastern Asia in the late 1940s. By the 1950s and 1960s London in 1854 that cholera is spread by contaminated fewer and fewer children and young people were water was to have significant implications for the succumbing to the easily preventable diseases which prevention of infectious diseases throughout the world.
had historically depressed the region’s health indicators, This knowledge gradually filtered from London and life expectancy was on the rise throughout the throughout Europe, leading city authorities to upgrade their water and sewage systems in order to prevent This process continues today as new drugs and medicines that are invented in one place are made (Williamson, 1990). Today, germ theory is widely available on international markets. Even though nearly understood and recognised by public health authorities all drugs start their life protected by patents, these all over the world as an important tool for fighting eventually expire, opening the market for generic disease (even if the resources do not always exist to competition. As a result, many off-patent medicines are construct and maintain effective water management available throughout the world at extremely low prices – allowing people in poorer countries to benefit from the Similarly, lowering the costs of trade can speed up the knowledge and innovation of more affluent parts of the rate at which proven medical technologies can be world. More recent examples of this would include adopted by other countries. Some of the most effective antiretroviral drugs and statins, as well as items such as and simple medicines such as antibiotics and vaccines neonatal intensive care units, kidney dialysis equipment, were first developed in richer countries, but the screening equipment and myriad other modern medical international manufacture and trade of such devices. Of course, many drugs that are on-patent are technologies has allowed them to become readily also subject to competition from other medicines in the available in most parts of the world. It is likely that the same class. Moreover, with price differentiation on- adoption of such technologies by the poor countries in patent drugs may be made available to poorer people at Asia in the post-war years is largely responsible for the prices close to the cost of production.
remarkable declines in their crude death rates in thisperiod. Taxes and tariffs delay technology transfer
technologies and drugs as soon as is practicable, in orderto maintain competitive advantage. This is obviously The benefits from this technology transfer would be even greater if lower-income countries were to abolishthe many tariffs and taxes they impose on medicines.
Similarly, lowering the cost of trade has resulted in a Tariffs often significantly inflate the end-user price of massive take-up in both wealthy and poor countries of pharmaceutical in lower-income countries and act as a communication technologies such as television, radio barrier to the effective distribution of drugs and medical and the internet. This has helped to improve global technology. A 57 country study conducted on behalf of health by facilitating the spread of ideas such as the the European Commission in 2003 found that lower- health consequences of smoking or exercise. Finally, income countries impose significant taxes and tariffs on there is some evidence that increased trade has a imported drugs, with India imposing a combined rate of positive effect on the quality of governance institutions, 55 per cent, Nigeria 34 per cent and Pakistan 33 per cent thereby leading to a policy environment which is more (European Commission, 2003). Often governments conducive to better health (Owen & Wu, 2004). This claim such taxes are necessary to protect the domestic study also demonstrated that the improved health pharmaceutical industry, but in reality they simply serve outcomes resulting from increased volumes of trade to deny patients the best quality medicines at the lowest were most powerfully experienced in poorer countries.
Anecdotal evidence suggests that foreign companies wishing to export medical devices such as pacemakers to The resurgence of free trade following the economic India face tariffs of around 50 per cent – even though destruction of the Great Depression and Second World cardiovascular disease accounts for one fifth of all War owes much to the development of a world trading deaths in India and the World Health Organization regime, and more specifically, the creation of the General estimates that 60 per cent of the world’s cardiac patients Agreement on Tariffs and Trade (GATT) in 1947. This will be Indian by 2010. In spite of this, the country has institution hoped to promote the simple idea that if a no domestic pacemaker manufacturers and imported person in one country produces goods or services people ones are taxed heavily. As a result, Indian patients in other countries want to buy, then they should have frequently have to make do with inferior, older or the right to sell it to them without interference from the refurbished pacemakers, if they are lucky enough to get state. From this beginning, the world trade regime has one at all (Anilkumar & Balachander, 2004). today evolved into the most prominent example ofinternational cooperation. Successive rounds of trade Other technologies
liberalisations have seen tariffs tumble, trading practicesstandardised and many more countries brought into the Despite the stultifying effect of tariffs on the dissemination of medicines and other healthtechnologies, the ‘knowledge spillover’ argument gains The GATT has now been subsumed within the World further support from a study conducted by economists Trade Organisation (WTO), which operates on the Angus Deaton and Christina Paxon in 2004. They widely accepted premise that human welfare will showed that mortality trends for infants and the increase through economic growth based on trade middle-aged tend to appear about four to five years liberalisation in the context of non-discriminatory rules, earlier in the US than the UK. This may be because the reciprocity, fairness and transparency. Whereas the more market-orientated US healthcare system allows for dispute settlement body of the original GATT had a speedier adoption of new technologies than the state- limited powers of enforcement, the decisions of the run UK system, even if those technologies were not WTO’s dispute settlement body are automatically originally invented in the US. Free trade allows binding and enforceable, primarily through sanctions. providers in the US health market to adopt those new Trade in services
services” (Pollock & Price, 2000). Finally, critics contendthat the GATS is democratically illegitimate, because it However, the rise of the more binding trading regime sacrifices some of the sovereign nation’s ownership of its faces heavy opposition and criticism, particularly from overall health policy to a trade regime that is subject to activist NGOs who claim to represent public health external forces and actors (Sinclair, 2000).
interests. Much of this stems from the details ofparticular Multilateral Trade Agreements (MTAs). While An assessment of the GATS by Leah Belsky et al in 2004 MTAs are intended to facilitate free trade and shows most of these fears to be groundless. Although knowledge transfer, they are denounced by activists as there are concerns that the rules of the GATS are so being injurious to public health – particularly in lower- vague that they do not specifically exclude publicly income countries. The most high profile of these among provided health services (Krajewski, 2001), this is health campaigners has been the WTO’s Trade Related irrelevant because countries still retain the right to Aspects of Intellectual Property Rights (TRIPS), which regulate all providers – public as well as private.
will be discussed below, but it might be that the WTO’s Furthermore, although countries are limited in the General Agreement on Trade in Services (GATS) is of policies they pursue towards sectors that they have equal or more relevance to public health. committed to the GATS, countries can choose whetheror not to participate, and are free to pick and mix which The GATS, negotiated by some 120 countries, came into sectors to commit. It is therefore inaccurate to claim the force in 1995 and aims to create a favourable climate for GATS undermines national sovereignty, because it is trade in services under conditions of transparency and something a country voluntarily imposes on itself.
progressive liberalisation.2 It does this by allowing Moreover, it is difficult to argue that the GATS countries to make binding commitments to lower trade represents a particularly outrageous example of barriers. With specific respect to healthcare, the democratic illegitimacy – to argue that would be to agreement covers the areas in the table below.
argue that all decisions made on trade policies are Critics of the GATS, however, interpret it as requiring the democratically suspect. And seeing as trade agreements privatisation of health services, a challenge to within the WTO are only finalised with the consent of governments’ ability to regulate their own health the legislators of member states, they are in many ways providers and to determine the shape of their health more democratic than other supranational bodies such systems (Sinclair, 2000; Pollock & Price, 2003). For instance, critics claim that the wording of the agreement These concerns aside, it is worth stating the positive does not specifically exempt all government provided effects on public health that a trade liberalising healthcare from the auspices of the GATS (Krajewski, commitment such as the GATS could have. Committing 2001). Another area of controversy is the extent to to the GATS could have significant overall benefits, which the GATS allows governments to regulate mainly because it helps speed up the “knowledge spill- healthcare providers, with some arguing that it would over” and technology transfer that we have already seen “outlaw the use of non-market mechanisms such as is crucial to improving health. It could also act as a way subsidisation, universal risk pooling, solidarity, and for countries to earn significant amounts of export public accountability in the funding and delivery of earnings, thereby contributing to their economic growth.
Patients seeking treatment abroad (‘medical tourism’) Foreign commercial presence in the hospital or insurance sectors Temporary movement of health professionals to provide services abroad Countries enjoying a comparative advantage in the Telemedically training doctors for resource poor
provision of health services would obviously benefit settings
from liberalisation; while this mainly applies towealthier nations, certain lower-income countries such The Johns Hopkins School of Medicine has established a as India are rapidly developing world class new centre designed to provide clinical training to health specialisations and capabilities across a range of medical care providers in parts of the world where resources and infrastructure are limited or lacking. The Center forClinical Global Health Education (CCGHE) aims to useadvanced telemedicine technology and Johns Hopkins Telemedicine
experts to provide clinical training to health care workers Telemedicine is the most obvious area of medical around the world in an efficient and cost-effective services that could be supplied across borders. Although manner. “Recently, many donors have made it possible to telemedicine provision is still relatively embryonic, its obtain HIV/AIDS medications for some of those infected adults and children in resource-limited settings,” said communications costs are broadening the scope for Robert Bollinger, director of the new centre.
doctors to examine x-rays or even to perform telesurgery “Unfortunately, these medications help only a fraction of on a patient in an entirely different country. Clinical, these infected populations. These countries lack surveillance and epidemiological information could also experienced, trained health care providers to dispense the be disseminated through telecommunication technologies, such as the internet. These moderninnovations make it far easier for doctors to keep upwith the latest medical literature and knowledge than in suitable infrastructure has long been recognised by the past, even in the most world’s most remote regions. public health experts as one of the main barriers to goodhealth in poor countries. A major related problem is Communications technologies have the power to drive attracting specialists to rural and suburban areas. It down costs, as hospitals will commission the services of would be far easier, therefore, to build and maintain the the most competitively priced provider, and will no communications infrastructure required to use longer have their choice limited by location.
telemedicine than to place expensive medical specialists Telemedicine can help professionals in remote areas consult with specialists in urban centres, therebyreducing much of the need for costly referrals.
Telemedicine could help extend the scope of clinical Consumption abroad
trials, adding the potential to include rural participants, There is an increasing trend for patients to travel for instance, or a wider range of races and ethnicities.
internationally in order to seek out the best quality care, For the patient, telemedicine can remove the need for at the lowest cost and with the minimum of waiting.
costly, difficult travel and lessen delays between referral Currently, medical tourists are travelling in large and treatment (Hailey, Roine & Ohinmaa, 2002). numbers to India, South East Asia, Latin America and There is also evidence that telemedicine can be of direct South Africa, where there are many high quality medical benefit to lower income countries. One study found that facilities. Many medical tourists come from regions of the a teleophthalmology project between the United world where state-of-the-art medical facilities rarely Kingdom and South Africa helped practitioners to exist; others come from countries like the UK and Canada improve their limited ophthalmic knowledge, and also where public health-care systems are so overburdened to reduce the burden of eye disease (Johnston et al, that it can take years to get needed care. Another driver of 2004). Indeed, lower-income countries possibly stand to medical tourism is cost: surgery in India, Thailand or accrue greater benefits from telemedicine than rich South Africa can cost one-tenth less than the United countries. A lack of access to qualified medical care and States or Western Europe, and sometimes even less. The GATS helps to provide the framework through which Second, the development of high quality medical services will provide additional employment for medicalprofessionals, and thereby help to retain them in the Ten years ago, levels of medical tourism were country. It is often the case that consulting surgeons insignificant. Today, more than 200,000 patients every divide their time between the private and public sectors.
year visit Singapore — nearly half of them from the If their choice of employment is limited to the public Middle East.4 It is estimated that in 2005 approximately sector, they will have few incentives to keep them in the half a million foreign patients will travel to India for country. The presence of foreign commercial providers medical care, whereas in 2002, the number was only can thereby help to overcome the so-called ‘brain drain’ 150,000. This goes some way to relieving the burden on that has been affecting medical services in certain lower- increasingly cashed-strapped health systems in the rich world, while creating greater incentives for highly-trained medical staff to remain in their country of Third, foreign providers and private capital within a origin, instead of taking their expertise overseas.
foreign country can also go some way to easing the Furthermore, the GATS provides a mechanism by which burden on cash-strapped public services, by reducing the countries can exchange medical students, thereby further increasing the rate of knowledge transfer.
Finally, it might also be that the GATS speeds up the Attracting foreign patients can also be a considerable introduction of private health insurance in lower-income source of foreign exchange for lower-income countries.
countries, which would be a positive development for Medical tourism could bring India as much as $2.2 those who are denied access to care by inefficient and billion per year by 2012, according to a study by iniquitous public monopolies. This can only improve management consultants McKinsey and Company and the Confederation of Indian Industry. Argentina, CostaRica, Cuba, Jamaica, South Africa, Jordan, Malaysia, Presence of natural persons
Hungary, Latvia and Estonia have all entered into thismarket, or are trying to do so, with more countries The GATS provides a legal framework through which individual medical professionals can move betweencountries in order to practice. This is a contentious issue,because the greatest movement of health professionals Commercial presence
is from lower-income countries to rich countries, where The GATS provides a rules-based mechanism through salaries are higher and working conditions better. In which commercial providers of health services – such as many lower-income countries, medical professionals hospitals or insurance providers – may operate in a find it hard to find employment in their own foreign country. While countries such as the US and UK professions, and often resort to working in low-skilled are becoming increasingly open to foreign private health investment, poorer countries such India, Indonesia, In the popular media, this is phenomena is depicted as Nepal, Sri Lanka and Thailand are also beginning to an entirely negative ‘brain drain’ that saps the health tread a similarly liberal path in this area (WHO, 2002).
systems of lower-income countries of capacity and There are several reasons why this kind of trade is resource. However, the so-called ‘brain drain’ of medical important for speeding up the ‘knowledge spill-over’ personnel may in fact make some positive contributions that we have seen improves public health. to knowledge spill-over and contribute to a country’s First, the presence of additional foreign capital will foreign exchange via remittances. Many medical accelerate the speed at which new medical technology professionals acquire skills that they would be unable to can be adopted. Foreign providers will also bring with at home, and in many cases they bring those skills with them advanced management techniques, which will them when they return. In health research, scientists migrating from lower-income countries can promote research activity in priority areas relevant to their population. In this way, India stands to benefit not only countries, thereby helping to improve the allocation of from the pharmaceutical expertise that the health research funding to these areas. Furthermore, multinationals bring with them, but also from increased allowing the free movement of peoples ensures that levels of foreign direct investment which helps to boost human potential does not go untapped. It is worth the economy. There is also some evidence that the new bearing in mind, for example, that Albert Einstein laws are creating a climate that is tempting skilled would have been unable to develop his theories if he had Indian scientists and researchers back home from the remained in Nazi Germany in the 1930s.
From a broader philosophical perspective, the idea that However, this move by the Indian government has been particular classes of individuals should have their met with much opposition from various health freedom of movement constrained by governments is campaigners and so-called ‘public interest’ groups, who distastefully authoritarian. Those who call for legislation believed that India’s compliance with TRIPS would to stop the international movement of health switch off the world’s greatest source of cheap professionals seem to be implying that these people are medicines because Indian generics companies will no the financial property of governments. It seems deeply longer be able to copy vital medicines that are on-patent illiberal to want to constrain people from fulfilling their aspirations and potential in such a way.
But this claim is bogus. Of the medicines that Indiangenerics firms produce, 97 per cent are off-patent, so the TRIPS and technology transfer – the case of India
law will affect, at most, 3 per cent of all drugs producedin the country. Moreover, fewer than 2 per cent of the Bringing intellectual property issues into international medicines on the World Health Organisation list of trade law has been controversial since the WTO’s Trade essential medicines are currently on patent (Attaran, Related aspects of Intellectual Property Rights (TRIPS) 2004), so it is simply not possible that the new Indian agreement was first signed in 1994. Much of the patent law will have a significant impact on access to subsequent debate has focused on whether or not medicines in other parts of Asia and Africa.
enforcing patents on pharmaceutical products hindersaccess to medicines in lower income countries. The Prior to the implementation of TRIPS there were agreement tries to balance the need to ensure access to approximately 20,000 companies in India producing medicines with the need to protect the investment of pharmaceuticals, some of them still on-patent in other innovators. Without such protection, it is unlikely that countries. Nevertheless, it was estimated in 1999 that the private sector would invest the considerable sums less than 40 per cent of the population had access to any required in order to develop new drugs.
kind of medicine (Lanjouw, 1999). The implementationof TRIPS-compliant patent law has no doubt reduced This paper, however, does not intend to dwell too long the number of companies producing copies of drugs – these aspects of the TRIPS debate, which are by now estimates put the number at around 9,000 – but it has familiar to all those with an interest in public health.
had no discernable impact on rates of access to Rather, it would more interesting to examine how the medicines, which remain deplorably low. The fact is that TRIPS agreement can affect technological and there are far more serious problems at play that affect access to medicines besides intellectual property rights, India is one example which is worth close examination.
such as an entirely inadequate medical infrastructure.
In order to become compliant with TRIPS, India enacted Nevertheless, the recent changes in India’s intellectual a patent law in early 2005. The early signs are that this property law are already stimulating Indian firms to has led to increased investment into drug research and research and develop drugs for diseases that development (R&D) in India by local and multinational predominantly affect the local population. For instance, companies, which should in time result in cheaper drugs the company Nicholas Piramel has recently opened a more specifically tailored for the needs of the Indian $20 million research and development centre in Bombay speeding up collaboration between the information to carry out basic research in a wide range of disorders, technology sector and the pharmaceutical and ranging from cancer to malaria. This latter disease is biotechnology industries. Until recently, the fledgling contracted by at least 600 million people annually, research-based biotech and pharmaceutical sectors predominantly in poor countries, including India.
relied on patenting in the U.S and Europe. They have Ranbaxy, India’s largest pharmaceuticals company, and also faced difficulties in establishing joint ventures with Dr. Reddy’s are also pursuing similar R&D projects. India IT companies because of weak local patent laws and the currently has the largest number of approved reluctance of foreign businesses to make large, risky pharmaceutical manufacturing companies outside the commitments. Now, instead of exporting raw materials US, and has increased spending on R&D from 4 per cent, and basic active ingredients that go into cheap generics, firms in India now have the ability to compete globally,producing high value-added, life-saving medicines. This The change in patent law is also attracting significant will also contribute to the country’s continuing foreign investment. Multi-national pharmaceutical economic growth which has seen its life expectancy rise companies such as Merck and Bristol-Meyers Squibb from 36 years in 1951 to its current level of 61 years.
now see India as a prime location for establishingresearch facilities. India is attractive not only because ofits lower basic costs, but also because of the many well- Free Trade Agreements
educated researchers that can reliably conduct capital- The growing tendency of the United States to sign intensive clinical trials and more complicated forms of bilateral and regional Free Trade Agreements (FTAs) later stage drug development. The management has, like TRIPS, given rise to the fear that trade consultants McKinsey estimate that by 2010, US and agreements might damage health by prioritising European pharmaceutical companies will spend $1.5 intellectual property considerations over access to billion annually in India on clinical trials alone (Padma, medicines. The US currently has FTAs with Jordan, Chile, Singapore, Morocco, Australia, Bahrain and a Many Western firms are also seeking to partner with group of six Central American countries (the Free Trade local expertise. A collaboration between Danish-based Area of the Americas). The US is in advanced Novo Nordisk and Dr. Reddy’s to create a new treatment negotiations with Thailand, Andean countries, five for diabetes is a recent example. Japanese firms have Southern African Customs Union, or SACU, countries also expressed interest in investing substantial sums and 34 Latin American and Caribbean countries. But, into Indian R&D projects. Instead of imposing similarly to TRIPS, these FTAs can improve health by prohibitive barriers, as it once did, the Indian promoting technology transfer and enriching signatory government has been actively courting these foreign investments by providing incentives, such as a ten year There is some scepticism about FTAs. For instance, some tax break to pharmaceutical companies that are involved activist groups assert that certain intellectual property provisions in FTAs will prevent countries from making Such developments mean that an Indian firm may well use of safeguards provided in the Doha Declaration on develop a vaccine for malaria or improve current the TRIPS Agreement and Public Health. Signed by all tuberculosis therapies, resistance to which contributes to WTO member countries, the declaration restated the deaths of over 1,000 people each day in India alone.
flexibilities in TRIPS that allow countries to take Investments are even going into R&D for a vaccine for necessary measures, including the compulsory licensing HIV/AIDS. Human trials are underway for the second of medicines, to protect public health. A further preventative HIV vaccine candidate that India has clarification in August 2003 ensured that third countries could also compulsory-license drugs for export to poorcountries lacking manufacturing capability.
In a relatively short time, India’s new patent law is also But the activists’ claim that FTAs “kill” by tipping the also help to grow their own innovative industries. This “public health versus private intellectual property” will allow for greater technology and knowledge balance in favour of the commercial interests of transfer, as multinational companies will feel that they American pharmaceutical companies is simply untrue.
can operate in a country free from having their property All the FTAs have language that expressly states that the misappropriated. By protecting intellectual property, FTA will not restrict any flexibility permitted under FTAs encourage innovative product launches by local TRIPS, or the Doha Declaration, to protect public health.
pharmaceutical industries. Since the U.S.-Jordan FTA Where this language does not appear in the main was signed in 2000, for example, there have been more agreement, the U.S. and its partner country (or than 32 new product launches in Jordan (USTR, 2004).
countries) have signed binding “side letters” to the sameeffect. To be sure, FTAs are a second-best solution to free trade.
When campaigning against FTAs, many activists raise Nevertheless, they are an improvement on the then- the spectre of patent terms that go beyond the TRIPS’ prevailing situation, freeing up trade and improving minimum of 20 years, thus suggesting a situation where economic wellbeing. This will allow countries to spend poor people would have to wait 20 years or more before more on healthcare, as well as enabling individuals to they can get access to generic drugs. But, as we have improve their living conditions and thus improve health.
seen, 95 per cent of drugs on the World Health They also encourage knowledge and technology transfer Organization’s essential-drugs list are off-patent and by improving the operating environment for innovative will remain so (Attaran, 2004). Similarly, drugs patented in the US, but not in other countries, including manyanti-retrovirals, cannot gain patent protection now.
In any case, no drugs have a de facto 20-year patent term.
Although it is clear that free trade stimulates two of the It typically takes between 10 and 12 years to take a most significant determinants of health – economic molecule through testing and regulatory approval – all growth and technology transfer – it is still faced with of which occur after a patent has been granted, since no much scepticism from a diverse range of people. These company would invest in an unpatented molecule.
include industry lobbies who fear international Meanwhile, it can take between one and three years to competition, activists who seek to curtail the freedom of obtain a patent after filing. Therefore, most drugs have the private sector, and governments who dictate policy an effective patent term of six to ten years, often less.
according to the wishes of special interest groups.
According to the U.S. Food and Drug Administration Opponents contend that free trade is a bad thing (FDA), the average patent life remaining after marketing because of the perception that it can create winners and approval in 2001 was 7.8 years out of the original 20 losers. Despite considerable empirical evidence to the years of patent protection (FDA, 2002). By contrast, contrary, there is also intense suspicion that economic other industrial sectors enjoy an average patent life of growth can actually improve human well-being.
more than 18.5 years. Some FTAs do provide for patent Frequently, these dissenting views are articulated as the term restoration, but only in the case of unnecessary official voices of bodies such as the UN and its agencies, delays in marketing approvals. In the US, where such which seem to believe that addressing inequality is a legislation exists, this extra term typically does not higher priority than promoting economic growth.
exceed two years. In other words, most drugs would stillhave far less than 20 years of exclusivity.
One document which embraces this stance is the UNDevelopment Programme’s 2005 Human Development While TRIPS allows governments to protect public Report, which argues that more foreign aid is required to health, it is also designed to encourage countries to address the widening inequalities that it considers to be respect intellectual property by refraining from copying the main barrier to meeting the Millennium existing drugs, such as Viagra and other “lifestyle Development Goals. The document is also sceptical of drugs.” In doing so, they will attract investment and the power of free trade to ameliorate the humancondition. It suggests that free trade can worsen Figure 4 Growth rate of per capita GDP
inequalities in health, education and income in lower- income countries. This view also forms the basis of theWorld Health Organization’s Commission on the Social Determinants of Health, and it is also discussed in the World Bank’s 2006 World Development Report.
A global obsession with eliminating ‘inequality’ somewhat misses the point where health issues areconcerned. Rising health inequality does often accompany economic growth, but it is important torecognise that economic growth rarely – if ever –damages overall population health. In fact, the empirical evidence shows the exact opposite occurs. In his analysisof data from 42 countries, Adam Wagstaff (2002) finds that in both rich and poor countries, health inequalitiesdo indeed rise with rising per capita incomes. This is due in part to improving availability of new healthtechnology that accompanies economic growth, whichcan be taken up more speedily by the rich than the poor.
globalisation have enabled a far more rapid transfer of However, it is important to note that the poorest people technology and knowledge from rich to poor countries do not get less healthy as the society’s wealthier than was possible in previous centuries. A study by elements get healthier. Rather, they become healthier as World Bank economist David Dollar has shown that the well, but at a slightly slower rate than those who are acceleration of economic globalisation and trade flows in relatively wealthier. But if lower-income countries hope the later stages of the 20th Century has also allowed the to overcome these inequalities by managing trade via rate of economic growth in lower-income countries to import substitution policies and the like, it is probable outstrip that of rich countries for the first time in history that economic growth will be retarded and poverty (see Figure 4). Furthermore, the number of poor people perpetuated, leaving people unable to afford clean fuels, in the world is declining – by 375 million people since proper sanitation and healthy living conditions. 1981, even while the world population increased by 1.6 For those concerned with inequality from a normative stance, it is also worth remembering that the startling Opponents of free trade, by contrast, fail to recognise its rises in individual prosperity witnessed in recent years in hugely beneficial impact on humanity. They see it as a India and China have contributed enormously to zero-sum game in which higher income countries and reductions in global health and educational inequalities.
multinational companies exploit the poor and Although global incomes are diverging (largely as a marginalised. Anti-poverty activists consistently push result of Africa’s failure to promote economic growth), the message that trade liberalisation is bad for the poor, human development indicators have been converging because they are unable to compete against the financial rapidly throughout the world during the last half and technological superiority of producers from richer century. Economist Charles Kenny recently noted that although the gaps in incomes between the richest andpoorest countries are widening, most countries are Often opponents of free trade wilfully mistake ‘free speedily converging in development indicators such as trade’ for what is actually managed trade. One current health and education (Kenny, 2005). This is partly anti-free trade campaign spearheaded by the NGO because the processes of free trade and economic Christian Aid disingenuously promulgates the notion that African farmers are suffering because of free trade with rich countries,8 whereas the most cursory Anilkumar, R., & Balachander, J., (2004), “Refurbishing acquaintance with the facts reveals that they are Pacemakers: A Viable Approach”, Indian Pacing and suffering from the lavish subsidies and protectionist electrophysiology Journal, 4(1):1–2 tariff barriers represented by the Common AgriculturalPolicy (CAP). This is clearly not free trade, and is Attaran, A., (2004), “How Do Patents and economic obviously bad for both farmers in poor countries and policies affect access to essential medicines in consumers in rich countries. But when the impact of developing countries?” Health Affairs, 23(3), 155–166 genuine free trade on population health is measured by Belsky, L., et al (2004), “The General Agreement on Trade economists, the evidence suggests that it is a force for in Services: Implications for Health Policymakers” Health good, helping to improve life expectancy and infant Bloom, D., & Williamson, J., (1997), “Demographic Countries that embrace free trade and reject import change and human resource development”, In Asian substitution policies will not only improve health Development Bank, Emerging Asia, Manila through better economic performance, but will make itpossible for consumers to acquire higher quality, less Chanda, R., (2002), “Trade in Health Services”, Bulletin expensive goods that contribute to human health.
of the World Health Organization 80(2): 158–163 Mortality and morbidity in lower-income countries, for Deaton, A., (2004), “Health in an age of globalization”, example, are greatly increased by the indoor air paper presented to the Brookings Trade Forum, pollution that arises from burning primitive biomass Brookings Institution, Washington DC May 13th 2004 fuels such as cow dung. Free trade would makeimported, cleaner fuels such as gas and kerosene Deaton, A., & Paxson, C., (2004), “Mortality, income, cheaper and more readily available, and would indirectly and income inequality over time in Britain and the pressure governments to reform their energy sectors.
United States”, in Perspectives on the economics of ageing, ed Similarly, a large part of the disease burden in the Wise, D., Chicago: University of Chicago Press poorest countries is directly attributable to dirty water, Dollar, D., (1995), “Outward-oriented developing so free trade in water purification and related countries really do grow more rapidly: evidence from technologies would be also extremely beneficial. Finally, 95 LDCs, 1976–85”, Economic Development and Cultural free trade in foodstuffs would allow a far better match between supply and demand than is currently the casein many parts of the world, and would help combat Dollar, D., (2004), “Globalization, Poverty, and Inequality malnutrition – a significant determinant of health. This since 1980”, World Bank Policy Research Working Paper is particularly true of many African countries, who needlessly erect swingeing tariff barriers between Dollar, D., & Kraay, A., (2001), Trade, growth, and poverty, themselves in order to protect their local agricultural Policy Research Working Paper No 2199, Washington sectors. The result is more expensive food, shortages European Commission, (2003), Working document ondeveloping countries’ duties and taxes on essential medicinesused in the treatment of the major communicable diseases,Directorate-General for Trade: Federal Drug Administration, (2002), “The DrugDevelopment Process: How the Agency Ensures that Drugs are Safe and Effective,” Publication FS 02–5, U.S.
Martin, K., & Anderson, W., (2005), Agricultural trade reform and the Doha development agenda, World Bank Tradeand Development Series, World Bank Frankel, J., & Romer, D., (1999), “Does trade causegrowth?” American Economic Review June:379–99 Owen, A., & Wu, S., (2004), “Is trade good for yourhealth?” Hamilton College, Clinton NY Golkany, I (forthcoming), “Health, wealth and the cycleof progress”, in Fighting the Diseases of Poverty: ed. Stevens, Padma, T., (2005), India’s drug tests, Nature 436, 485 (28 Gramiccia, G., & Beales, P., (1988), “The recent history of Pollock A., & Price D., (2000), “Rewriting the malaria control and eradication,” in Wersdorfer, W., & regulations: How the World Trade Organisation could McGregor, I., eds. Malaria: principles and practice of accelerate privatisation in health care systems by malariology. New York: Churchill Livingstone undermining the voluntary basis of the GATS”. TheLancet, 356: 1995–2000 Gwatkin, F., (1980), “Indications of change indeveloping country mortality trends: the end of an era?” Pollock, A., & Price, D., (2003), “The public health Population and development review, 6(4), 615–44 implications of world trade negotiations on the GATS”,The Lancet, 362: 1072–1075 Hailey D., Roine, R., Ohinmaa, A., (2002) Systematicreview of evidence for the benefits of telemedicine, Pritchett, L., & Summer, L., (1996), “Wealthier is Journal of Telemedicine and Telecare, 8 (1) 1–7 Healthier”, Journal of Human Resources, 31(4): 841–868 Irvine, B., (2004), Death and taxes, Campaign for Fighting Sachs, J. & Warner A., (1995), “Economic reform and the process of global integration”, Brookings Papers on Sinclair, S., (2000), “GATS: How the WTO’s new Jamison, D., Sandbu, M., Wang, J., (2001), “Cross- ‘services’ negotiations threaten democracy”, Canadian country variation in mortality decline, 1962–1987: the Center for Health Policy Alternatives, Ottowa role of country specific technical progress”, Commission USTR, (2004), U.S.-Morocco Free Trade Agreement: on Macroeconomics and Health Working Paper Series, Access to Medicines, available at Document_Library/Fact_Sheets/2004/US-Morocco_ Johnston, K., Kennedy, C., Murdoch, I., Taylor, P., Cook, Free_Trade_Agreement_Access_to_Medicines.html C., (2004), “The cost-effectiveness of technology transfer Wagstaff, A., (2002), “Inequalities in health in using telemedicine”, Health Policy and Planning, 19: developing countries: swimming against the tide?”, World Bank Policy Research Working Paper 2795 Kenny, C., (2005), “Why are we worried about income? Wei., S-J., & Wu, Y., (2002), The Life and Death Nearly everything that matters is converging”, World implications of globalization, IMF Working Paper (Washington: International Monetary Fund) Krajewski, M., (2001), “Public services and the scope of Williamson, J., (1990), Coping with city growth during the the GATS”, Center for International Environmental Law, industrial revolution, Cambridge, UK: Cambridge Lanjouw, J., (1999), “The Introduction of World Bank, 2005. World Development Indicators available Pharmaceutical Product Patents in India: Heartless at Exploitation of the Poor and Suffering?” NBER WorkingPaper no. 6366, Washington DC: World Bank and IMF, (2005), Global Monitoring Report2005: Millennium Development Goals: From Consensus to Momentum. Washington, DC, available at]. May 2005 WTO, (1998), “Health and social services”, Backgroundnote by the secretariat, S/C/W/50, 18 September 1998,Council for Trade in Services, WTO, Geneva WTO, (2005), “Developing countries’ goods trade sharesurges to 50-year peak”, WTO press release, 14 April2005, 1. The smoothed curves in this figure are based on log-linear regression analysis. N = 268 for 1977 and 2003cumulatively; adjusted R2 = 0.56. The increase in lifeexpectancy due to increase in income and the passage oftime are both significant at the 99.9 percent level.
2. From the preamble to the GATS, available at 3. 4. 5. 6. 7. 8. Free trade for
better health
Free trade is a powerful mechanism for improving
the health of the world’s poor. It leads to enhanced
competition, which drives improvements in products
and processes – leading to economic growth. It also
enables ‘technology transfer’, ensuring that advances
made in one market rapidly become available elsewhere.

As a result, free trade leads to greater prosperity, andimproves access to clean water, clean energy, food, sanitation and other goods necessary for health. This hascontributed to the dramatic increases in worldwide lifeexpectancy of the last fifty years.
The rise of the multilateral trading regime under theauspices of the GATT and later the WTO has contributedto a massive liberalisation in global trade that has seennew health knowledge and technologies, and wealth,spread to nearly all corners of the globe.
Nevertheless, multilateral trade agreements from TRIPS to GATS have been met with scepticism from self-styledhealth activists and campaigners, who accuse them ofholding up technology transfer and evendisenfranchising the poor.
But are such allegations grounded in reality? A review ofthe evidence suggests not. These agreements and tradeliberalisation generally have contributed to a significanttransfer of technology and expertise, which has hadgreat benefit for the poor.


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