The New International Trade Regime: Problems for Publicly Funded Healthcare in Canada?

By Ostry, Aleck | Canadian Journal of Public Health, January/February 2001 | Go to article overview
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The New International Trade Regime: Problems for Publicly Funded Healthcare in Canada?


Ostry, Aleck, Canadian Journal of Public Health


Since the early 1970s and the demise of the Bretton-Woods agreement, economies have increasingly moved towards globalization as markets internationalize and deregulate a process that has been facilitated by the World Trade Organization (WTO), with new and historically unprecedented powers to enforce trade rules.1

Why should the process of globalization, in general, and the rise to prominence of the WTO in particular, interest health researchers and policy makers? First, because, "owing to the health consequences, good and bad, of the sanctioning of monopoly pricing of new drugs and medical products - and because of its influence over international trade in medical supplies, insurance, and health services - the World Trade Organization is likely to emerge as one of the most important international players in health."2' Pg.193

Second, as well as the direct impact of the WTO on the trade in medical products, globalization may also impact health by creating a "regulatory deficit", wherein national institutions are rendered less effective by the internationalization of markets.3 A key to understanding the regulatory deficit attendant on the internationalization of markets lies both in an appreciation of the indirect pressures brought to bear on the nation state by deregulated international markets as well as the direct powers of coercion the WTO can now apply to nations to open markets.

This paper discusses the potential for the WTO, through its influence on the trade in health and ancillary services, to directly impact publicly funded healthcare delivery systems.

Recent changes in the international trading regime

Most nations are bound by the rules of the General Agreement on Tariff and Trade (GATT), established in 1946 and superseded by the World Trade Organization (VETO) in 1995. The scope of the WTO is much larger than it was under GATT. In the past, trade agreements have largely involved trade in goods such as raw/natural products, manufactured products, and commodities. Today, international agreements have been extended to include trade in intellectual property and services (the fastest growing trade sector among developed nations).

The major impacts on healthcare services in developed nations will likely arise through WTO regulations governing the trade in services.

Potential for trade-in-services regime to impact healthcare delivery

The Trade-Related Intellectual Property Rights (TRIPs) agreement requires all WTO members to adopt US-style patent laws. Over the past several years, the Canadian government, under threat of patent law changes initially introduced via the Free Trade Agreement (FTA) between Canada and the United States, moved to expand patent protection for brand name drug companies at the expense of Canadian generic drug companies that had been supplying the Canadian market with low-cost generic drugs.4 Although Canada had cracked down on its own generic drug companies, the TRIPs agreement was used to force the Canadian government to extend drug patent protection to multinationals to the full 20 years required under US patent law.5

The implications for healthcare systems are potentially serious because enhanced patent protection, by allowing drug companies to protect themselves from competition for a longer time, will reduce the availability of cheap drugs. This is a major problem because drugs are the single fastest-growing component of healthcare budgets.

Another important agreement, the General Agreement on Trade in Services (GATS), covers not just cross-border trade, but every possible means of supplying a service. At present, nations have the right to keep sectors of their service economy outside the scope of GATS. However, while Canada has taken the position that its health and education services will not be included in GATS, both the European Union and the United States are in the process of volunteering these sectors for full inclusion under GATS.

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