2003ASAPGlobal Trade And Health Key Linkages And Future Challenges1


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2003ASAPGlobal Trade And Health Key Linkages And Future Challenges1

  1. 1. Critical Reflection Global trade and health: key linkages and future challenges Douglas W. Bettcher,1 Derek Yach,2 & G. Emmanuel Guindon3 Globalization of trade, marketing and investment has important implications for public health, both negative and positive. This article considers the implications of the single package of World Trade Organization (WTO) agreements for public health research and policy, focusing on three themes: commodities, intellectual property rights, and health services. The main aims of the analysis are as follows: to identify how trade issues are associated with the transnationalization of health risks and possible benefits; to identify key areas of research; and to suggest policy- relevant advice and interventions on trade and health issues. The next wave of international trade law will need to take more account of global public health issues. However, to become more engaged in global trade debates, the public health community must gain an understanding of the health effects of global trade agreements. It must also ensure that its own facts are correct, so that public health is not blindly used for political ends, such as justifying unwarranted economic protectionism. ‘‘Healthy trade’’ policies, based on firm empirical evidence and designed to improve health status, are an important step towards reaching a more sustainable form of trade liberalization. Keywords: commerce; treaties; hazardous substances; public policy; health status; health services accessibility; pharmaceutical preparations, patents; tobacco industry, legislation; international agencies; risk assessment. Voir page 531 le resume en francais. En la pagina 532 figura un resumen en espanol. ´ ´ ¸ ´ ˜ Introduction normative framework, WTO is the principal inter- national institution for the management of interna- Globalization of trade, involving cross-border move- tional trade. The normative framework of GATT and ment of capital, technology, traded goods and WTO originally evolved because of the ‘‘devastating information, is leading to economic integration protectionist policies’’ of the 1930s, which led to the transcending the state. The universalization of the collapse of the world economy; the contagion of norms of multilateralism, reciprocity and most- blind protectionism led to a ‘‘contracting spiral of favoured nation status, coupled with an unprece- world trade between 1929 and 1933’’ (2). dented rate of scientific advance, is resulting in the In the global economy of the 21st century, rapid expansion of cross-border trade. Technologies economic development will increasingly be linked to and knowledge are rapidly diffusing between coun- transnational access to knowledge and information tries and vast communications webs are being networks and the exchange of information. Multi- created. A major impetus for the liberalization of national conglomerates will be able to promote their global trade has been the eight rounds of multilateral ‘‘global commodities’’ in most countries of the world trade negotiations held over the past 50 years, the via sophisticated satellite links. The rapid evolution of most recent being the Uruguay and Tokyo Rounds. new scientific knowledge, for example in biotechnol- The conclusion of the Uruguay Round, marked by ogy and genetic engineering, will be the subject of the Final Act (1), transformed the General Agree- ongoing ethical debate. Concerns will continue to be ment on Tariffs and Trade (GATT) into a permanent raised that economic globalization should not be seen organization, the World Trade Organization (WTO). as an end in itself, but as an economic tool which With about 90% of world trade carried out under its should be adapted so that marginalized populations and broader social policies are not neglected. More- 1 Coordinator, Framework Convention on Tobacco Control, Tobacco over, a strong case can be made that the globalization Free Initiative, World Health Organization, 1211 Geneva 27, of world markets carries with it a transnationalization Switzerland (e-mail: bettcherd@who.int). Correspondence should of health risks, but also of benefits (3–5). be addressed to this author. 2 Executive Director, Noncommunicable Diseases and Mental Health, World Health Organization, Geneva, Switzerland. Why is trade and health 3 Economist, Tobacco Free Initiative, World Health Organization, an international policy issue? Geneva, Switzerland. The links between international trade and disease Ref. No. 99-0215 have been recognized for centuries: the path of the Bulletin of the World Health Organization, 2000, 78 (4) # World Health Organization 2000 521
  2. 2. Critical Reflection Black Death followed international trading routes in benefits of trade liberalization have been studied the 14th century, and the direct links between empirically and are well documented.a Greater trade communicable diseases and trade/international tra- openness has been linked to faster growth in both vel were the catalyst for 12 countries to join in productivity (12) and the economy in general (13, 14). organizing the First International Sanitary Confer- However, a recent analysis by Rodriguez & Rodrik ence in Europe in 1851. Though many transnational challenged these studies, arguing that methodological challenges are not new, it has been argued that the problems left the results open to diverse interpreta- global public health challenges of today exceed those tions (15). of earlier periods by an order of magnitude (3, 4). This article considers the implications of the Trade/financial liberalization could offer bene- single package of WTO agreements for public health fits that improve health status. For example, the research and policy by focusing on three specific diffusion of technology such as telemedicine and themes: health services, commodities and intellectual distance learning for poor or remote communities property rights. The main aims of the analysis are to and nations could have positive health implications. identify how trade issues are associated with the Information technologies are often seen as a motive transnationalization of health risks, and possible force for economic and social development, and the benefits; to identify key areas of research; and to importance of improving the capacity of developing suggest policy-relevant advice and interventions on countries to utilize information technology is widely trade and health issues. Although we concentrate recognized (4). Moreover, the globalization of trade primarily on the global context of trade, the liberal- and finance will increase the importance of inter- ization of markets is also being facilitated by the recent national standards and legal instruments, both to proliferation of regional and bilateral trade agreements. achieve sustainable globalization and to ensure the safety of traded goods such as agricultural and food commodities. These standards have come into play, Global trade: determinants for example, in mediating disputes over such issues as the safety of genetically modified foods and of health status hormone-treated beef products. Determinants of health are the direct or indirect causes On the other hand, the negative health of a disease, condition or injury, and may be classified repercussions of trade and financial liberalization, as either direct (proximal) or indirect (distal) (16). For such as the extended promotion and marketing of example, smoking is a proximal determinant of health harmful commodities, especially tobacco, cannot be status, while the economic, demographic and social overlooked. The increase in international trade and factors that promote tobacco use are distal determi- travel also magnifies the risk of cross-border dis- nants. The health effects of distal determinants are semination of infectious diseases (7). A multinational often mediated through proximal determinants, and approach to food production and distribution, in typically these distal determinants cannot be acted conjunction with the progressive opening up of world upon through direct health sector interventions, even markets, has allowed the international food trade to though they have longer-term impacts on health. flourish. The value of global food trade — Table 1 shows various components of trade US$ 266 000 million in 1994 — was more than which have direct or indirect effects on health and are 300% greater in constant dollars than it was 20 years amenable to interventions, either by acting on the previously, and is continuing to grow rapidly (7). proximal determinants or by instituting policies Moreover, the liberalization of health services, and the addressing the distal factors. Table 1 also summarizes cross-border ‘‘brain drain’’ which often accompanies which of the multilateral agreements establishing the opening of health markets, have the potential to WTO are relevant to a policy analysis of health blur the boundaries between national and ‘‘globalized’’ determinants in the trade sector. sectors; the efficiency, quality and equity implications The new legal framework constituting WTO of these trends need to be examined closely (8). has been compared to a tricycle: ‘‘a driver (WTO), It can be contended that a purely market-driven two large wheels (Multilateral Trade (in Goods) approach to development fails to consider intrinsic Agreements (MTAs) and General Agreement on contradictions. While it may be true that ‘‘piling on Trade in Services (GATS) and a smaller one (Trade- social clauses’’ in multilateral trade and investment related Aspects of Intellectual Property Rights agreements would inhibit progress in achieving (TRIPS))’’ (17). These three multilateral agreementsb enhanced trade integration and result in dissent (trade in goods, trade in services, and intellectual between countries (9), the social implications of trade property rights) are binding on all members of WTO: and investment liberalization should not be over- looked. Social improvements, for example in public a health, should be seen as a means of forging a For a multidisciplinary study of the benefits of liberalization see: sustainable globalization. Health improvements have Open markets matter. The benefits of trade and investment liberalisation. Paris, Organisation for Economic Co-operation been increasingly linked to positive economic effects and Development, 1998. (10), and the crucial link between health and human b The multilateral agreements constituting WTO contrast with the capital formation has become an important area of plurilateral trade agreements, which are binding only on members recent health policy research (11). The economic of WTO that accept them. 522 Bulletin of the World Health Organization, 2000, 78 (4)
  3. 3. Global trade and health Table 1. Components of trade as determinants of health Distal determinant Proximal determinant Health status Relevant WTO agreement(s) indicator Hazardous Promotion, marketing and Tobacco consumption. Burden of disease MTAsa: especially Agreement on Technical commodities trade in hazardous products, Vital statistics Barriers to Trade (TBT) and GATT 1994, but such as tobacco also Agreement on Agriculture and Agreement on Import Licensing Procedures Licit and illicit trade in Violence (individual, civil Burden of disease Weapons and firearms are not covered by WTO firearms, landmines, and conflict, and inter-state Vital statistics agreements other ‘‘conventional warfare) weapons’’ technology Illicit trade in psychoactive Psychoactive drug addiction Burden of disease No WTO agreement. Mandate of United Nations substances and consumption Vital statistics Drug International Control Programme (UNDCP) Dumping of unsafe or Use of ineffective or unsafe Surveillance data MTA: TBT outdated pharmaceuticals pharmaceutical products Burden of disease Trade in contaminated food Re-emerging and emerging Surveillance data MTA: Agreement on the Application of Sanitary products infectious diseases Burden of disease and Phytosanitary Measures (SPS) Transboundary movement Health risks due to waste Surveillance data WTO: GATT 1994 (Articles 1–3). of hazardous wastes, e.g. disposal and environmental Burden of disease Outside WTO: Basel, Convention to developing countries contamination (WHO 1997a) Protection Patent protection Effects on availability, unit Surveillance data Agreement on Trade-Related Aspects of of intellectual and innovation, and costs, and discovery of new Burden of disease Intellectual Property Rights (TRIPS) property diffusion of new pharmaceuticals and cost- Health systems technologies to effective technologies data developing countries Health services Possible negative Decrease access to quality Surveillance data General Agreement on Trade in Services (GATS) consequences of care Health systems liberalization of health data services: for example, ‘‘brain Human capital drain’’ of highly qualified health professionals Foreign commercial Erosion of equity and Surveillance data GATS presence resulting in emergence of an inequitable Health systems promotion and provision two-tier health care system. data of expensive medical Internal brain drain and services decreased quality of services for vulnerable groups in society (8) Increased foreign Increased access to Surveillance data GATS direct investment new technologies Health systems data a Multilateral Trade (in Goods) Agreements (MTAs): this set of agreements on trade in goods consists of 13 separate multilateral binding agreements. they are framed as a single binding treaty and must be the strength of the system will depend on the accepted as a single package (18). This situation willingness of sovereign states to adhere to its differs from previous arrangements under GATT, disciplines. Many analysts feel that more will have whereby members could pick and choose which to be done to improve the WTO trading system, to agreements they decided to adhere to. Moreover, a accommodate the interests of developing economies series of legal clauses appear in the MTAs which deal and to reduce protectionist tendencies in many with national enforcement of rules and procedures, developing and developed countries (20). and the translation of these agreements into national With respect to public health, Article XX(b) law (19). For the first time in history a global trade under the General Exceptions section of the General agreement has been forged that is binding and Agreement on Tariffs and Trade (1947) allows ‘‘each enforceable at the national level. The implementation contracting party to set its human, animal or plant life and surveillance of these norms are underpinned by a or health standards’’ if these restrictions do not strengthened dispute settlement system. However, represent an ‘‘unjustifiable discrimination or a Bulletin of the World Health Organization, 2000, 78 (4) 523
  4. 4. Critical Reflection disguised restriction on international trade’’ (21). alone, 800 000 individuals will die in 2000 because of Under the single package of MTAs, Article XX(b) is tobacco use; and at current smoking uptake rates, part of GATT 1994, which contains the provisions of tobacco will kill about 100 million of the 300 million GATT (1947) ‘‘as rectified, amended or modified’’ Chinese males now under 29 years of age (28). with entry into force of the WTO Agreement (22). Penetration of new markets by aggressive multi- Similarly, other multilateral agreements, for example national companies, facilitated by the liberalization of the Agreement on Technical Barriers to Trade (TBT) trade and investment, is one of the factors that has (Article 2(2)) and the TRIPS Agreement (Article 8), prevented the public health community from contain similar provisions for the protection of effectively implementing tobacco control policies. human health and safety. Notwithstanding these The expansion of the global tobacco trade into provisions, it should not be assumed that the markets of developing countries and transitional governing bodies of WTO will ensure that these economies is a significant, but inadequately quanti- provisions are upheld for legitimate public health fied, contributor to the increased risk of tobacco reasons. Nor should it be assumed that WTO has the disability and disease. As a response to dwindling technical means or resources to monitor effectively sales in Western industrialized countries, major the full gamut of public health implications related to transnational companies targeted growing markets the various WTO agreements. in Latin America in the 1960s and the newly industrialized economies of Asia (China (Province of Taiwan), Republic of Korea, and Thailand) and Trade in commodities: a potential Japan in the 1980s. In the 1990s they have moved into eastern Europe, China and Africa (29) and have health hazard increasingly targeted young persons and women. The The health risks and benefits associated with the ‘‘cynical promotion of smoking’’ continues unabated liberalization of trade in goods are highly dependent on as the industry aggressively pursues ‘‘its own best the nature of the commodities concerned. They can be interests, not those of consumers or governments, in classified into four groups (23): legal and beneficial a policy characterized by casuistry and bad faith’’ — a (e.g. nutritive food and cost-effective technology); policy which has included denials of the public health legal and of doubtful benefit (e.g. technologies of low effects of smoking (30). cost-effectiveness); legal and harmful (e.g. tobacco, Penetration of the world’s tobacco markets by alcohol and weaponsc ); illegal and harmful (e.g. illicit the transnational tobacco companies has been drugs). We focus here on the implications of trade facilitated by the Uruguay Round of trade negotia- liberalization for the consumption and regulation of tions (31), which included for the first time the legal and harmful commodities. The following liberalization of unmanufactured tobacco. The single empirical analysis, which demonstrates links between package of WTO trade agreements will facilitate the cigarette consumption and trade liberalization, sup- expansion of global trade in tobacco products ports the hypothesis that public health concerns need through significant reductions in tariff and non-tariff to be factored into a more rational approach to barriers to trade. Other regional trade agreements sustainable globalization. As Taylor et al. suggest, the and/or regional trade associations, such as the North increased consumption of harmful commodities such American Free Trade Agreement (NAFTA), the as tobacco could offset some of the health benefits of European Union (EU), the Association of Southeast trade liberalization (24). Asian Nations (ASEAN), the Common Market of East and Southern Africa (COMESA), the Economic Tobacco trade and global public health Community of West African States (ECOWAS) and Tobacco control is one of the most rational, the Organization of American States (OAS), have evidence-based policies in medicine. But even acted in synergy with the global agreements by though evidence that smoking kills began to mandating further trade liberalization in goods and accumulate over 50 years ago, global control of this services, including tobacco, at the regional level (31). addictive drug is still elusive. Estimates indicate that Other bilateral agreements have also facilitated the tobacco use was responsible for 3 million deaths in penetration of potential growth markets (32). 1990 (25). In 1998, the annual death toll from Examples are those negotiated in the 1980s by the tobacco use reached 4 million (WHO, 1999). This is United States Trade Representative under Sec- expected to reach 8.4 million deaths by 2020, of tion 301 of the revised 1974 US Trade Act with which 70% will occur in developing countries (26). Japan, China (Province of Taiwan), Republic of Of the 100 million projected tobacco-related deaths Korea and Thailand. over the next 20 years, about half will occur during Although the global reach of the transnational the productive ages of 35–69 years (27). In China tobacco companies has been enhanced by a recent wave of liberalization, they have also taken advantage of more direct forms of market penetration via direct c foreign investment, either by licensing arrangements Certain goods such as tobacco and weapons are intrinsically with a domestic monopoly, joint ventures, or direct hazardous. Other goods such as alcohol depend on their use or abuse, while commodities such as food are only hazardous when acquisition of a domestic company (29). Market contaminated. penetration by the tobacco multinationals is therefore 524 Bulletin of the World Health Organization, 2000, 78 (4)
  5. 5. Global trade and health being enhanced by a complex mix of rapidly changing openness (total imports divided by gross domestic factors in the world political economy, from trade product (GDP)) was used to make it applicable to all liberalization and global marketing to direct foreign countries. The estimates showed that reduced trade investment. barriers had a large and significant impact on cigarette consumption in low-income countries, a small but Research implications significant impact in middle-income countries, and Numerous studies have attempted to estimate the no significant impact on smoking in high-income social cost of smoking.d However, very few have countries. These results indicate that less wealthy explored the economic impact of trade in tobacco. countries may be more vulnerable than wealthier One exception is a study of the net benefits (added countries to the impact of trade liberalization on value for consumers and producers) versus the costs cigarette consumption. (premature death, time off sick and medical costs) These findings are in keeping with economic carried out by Barnum from the World Bank. The theory. Domestic consumption can be expected to study estimated that every 1000 additional tonnes of rise as a result of increased trade for three reasons. tobacco traded in the global market results in a net First, increased competition due to trade opening loss of US$ 27.2 million (33). The extensive would be expected to reduce prices and stimulate economic and econometric literature dealing with demand, especially in younger age groups. Second, the ‘‘traditional’’ determinants of tobacco consump- significant increases in advertising by transnational tion, such as price, taxation, advertising/promotion, tobacco companies in new markets would also be restrictions on access to tobacco products, and expected to increase cigarette demand and consump- agricultural policies, has been reviewed and summar- tion (34, 35). Finally, the superior efficiencies of ized in recent publications (34). transnational tobacco firms, in markets often Recent empirical evidence has linked economic dominated by inefficient government monopolies, changes, such as trade openness, to tobacco would also be expected to lower prices and increase consumption. In a groundbreaking study, Chaloupka demand. These findings agree with earlier observa- & Laixuthai constructed a fixed-effect model to tions that transnational tobacco companies in Latin measure the relationship between cigarette con- America were much more efficient in creating sumption and a country’s degree of openness to the demand, promoting their products, and increasing cigarette trade, specifically to that involving large total output than state-controlled monopolies (36). multinational corporations (35). This study focused on the effects of the opening up of trade in China National and global policy implications (Province of Taiwan), Japan, Republic of Korea, and The empirical analyses outlined above point to one of Thailand between 1986 and 1990. These countries the potentially harmful effects of the recent dramatic were the targets of US Government action under increase in the global tobacco trade. Given recent Section 301 of the 1974 US Trade Act, which trends in the globalization of trade, these results have empowers the US Trade Representative to enquire important policy implications. If low- and middle- into unfair trade practices by foreign countries. As a income countries aspire to diminish the impact of the result of the trade pressures applied by the USA, expansion of transnational tobacco corporations, bilateral agreements were signed by China (Province national governments will need to implement of Taiwan), Japan, Republic of Korea, and the USA comprehensive tobacco control policies, such as that included the removal of excise taxes and increasing the prices of tobacco products and distribution practices that discriminated against US restricting tobacco advertising and sponsorships.e tobacco products. Thailand also removed its ban on International trade is only one element of cigarette imports from the USA in response to the globalization. Tobacco-related direct foreign invest- 1990 GATT ruling that such a ban contravened ment may have severe and damaging effects on the GATT’s norms. The study demonstrated that there health of a population and should be regarded as a was a significant rise in the market share of public health concern. There is anecdotal evidence US cigarettes in those countries affected by the that transnational tobacco corporations have aggres- Section 301 bilateral trade agreements, and that ‘‘the sively invested in low-and middle-income countries agreements resulted in an overall increase in cigarette through mergers and acquisitions, leveraged buy- demand’’ (35). outs, alliances and other strategic partnering activities A joint World Bank/WHO study also exam- (37). The consequences of tobacco-related invest- ined empirically the relationship between cigarette ments and increased global tobacco marketing need consumption and global trade (24). To estimate the to be examined, but there is a lack of basic data and impact of increases in trade flows on cigarette this first needs to be addressed. consumption, a model similar to that employed by Furthermore, the dichotomy between domes- Chaloupka & Laixuthai was constructed. However, a tic and foreign policies, such as occurred in the USA fixed-effect model with a broader measure of trade e See Guidelines for controlling and monitoring the tobacco epidemic d See the forthcoming review of the literature on the social cost (Geneva, World Health Organization, 1998) for elements of of smoking by Chaloupka & Warner in ref. 34. a comprehensive national tobacco control policy. Bulletin of the World Health Organization, 2000, 78 (4) 525
  6. 6. Critical Reflection in the late 1980s, is problematic from a public health age design/labelling; information sharing; and agri- perspective. Promoting domestic policies to reduce cultural diversification (39).f smoking, while at the same time encouraging In a major step towards making global tobacco increased trade abroad as a matter purely of national control a reality, Dr Gro Harlem Brundtland, the self-interest, is self-defeating and difficult to defend, Director-General of WHO, has committed the given the strength of evidence linking tobacco use organization to controlling the activities of tobacco with death and disability. To address this problem the companies, which ‘‘concentrate immense resources Doggett Amendment prohibited the promotion of on increasing the numbers of smokers in developing USA tobacco products abroad and it is an important countries, with a frightening rate of success’’ (40). sign of progress being made by the US Departments Dr Brundtland’s strong position on tobacco under- of Commerce, State and Justice. This approach scores the need to include on trade agendas public provides a policy template that other major tobacco health issues that are founded on legitimate, evidence- exporting countries may wish to follow. based reasoning. Moreover, the expansion of transna- In its report on ‘‘Thailand — restrictions on tional trade in harmful commodities points to a need to importation of and internal taxes on cigarettes,’’ the examine the ethics of international business (41). 1990 GATT Panel decided that ‘‘GATT-consistent measures could be taken to control both the supply of and demand for cigarettes, as long as they were Protection of intellectual property applied to both domestic and imported cigarettes on a national-treatment basis’’ (21) It was therefore Intellectual property was one of the ‘‘new issues’’ concluded that the restriction of foreign imports of negotiated in the Uruguay Round. Because of the cigarettes was not necessary if other measures could increasing globalization of economic activities in the be taken (32). The future harmonization of tobacco latter part of the 20th century there was a growing control policies, including price increases, ad valorem demand from industrialized economies and multi- taxes and advertising bans, could be introduced as national corporations for the protection of intellec- long as the policies did not discriminate between tual property. The proposals for such an agreement foreign and domestic products. Thus, the Panel were initially opposed by most developing countries, provided a general mechanism for tightening tobacco on the grounds that the agreement would constitute control without breaking WTO rules. Following the the transfer of rents from South to North. As a result, GATT Panel decision, Thailand maintained its the TRIPS Agreement became a symbol of the advertising ban and has upheld other strict measures North–South split during the Uruguay Round (42). to control tobacco use (32). Thailand’s strong The scope of the TRIPS Agreement is much legislation is a model of what countries can do when broader than any previous international agreement in confronted with multinational tobacco companies this field. Before TRIPS the main international and their advertising (38). intellectual property covenants were the Paris Con- In addition to national policies, it is necessary vention for the Protection of Industrial Property and to formulate an effective global strategy for control- the Berne Convention for the Protection of Literary ling the trade and promotion of hazardous products, and Artistic Works, both of which were adopted at the based on shared principles. More specifically, trade end of the 19th century. These two agreements were issues need to be incorporated in international later amended at the 1968 Stockholm Conference to instruments to control the trade and marketing of create the World Intellectual Property Organization hazardous commodities, and to harmonize actions (WIPO). A perceived weakness of these agreements across borders. Multilateral environmental agree- was the absence of a binding enforcement or ments, such the Basel Convention, that provide for settlement mechanism. Since large industries such as trade measures to ban the export or import of computer software and pharmaceutical companies, as hazardous or other wastes, are examples of this type well as agricultural/food enterprises depend on of inter-state collaboration. protection of intellectual property to ensure innova- Such initiatives have already begun for global tion, it was argued that the TRIPS Agreement was a tobacco control. At present, WHO is developing a crucial foundation for global trading order (43). The Framework Convention on Tobacco Control, which TRIPS Agreement established minimum standards has the potential to control numerous aspects of governing the scope, availability and use of intellectual marketing, trade and distribution practices for tobacco property rights in the following areas: copyright and products. The Framework Convention could include related rights; trademarks; industrial designs; patents; provisions: to encourage countries to move towards layout designs of integrated circuits; protection of comprehensive tobacco control policies; to cooperate undisclosed information; and control of anti-compe- in research, programme and policy development; to share information, technology and knowledge; and to f A protocol is a form of legally binding treaty, which typically meet regularly to strengthen global tobacco control. supplements, clarifies, amends, or qualifies an existing international Possible related protocols could include more specific agreement, for example, a framework convention. See: What commitments to address such elements as: prices; makes international agreements effective? Some pointers for smuggling; tax-free tobacco products; advertising/ the WHO Framework Convention on Tobacco Control, Geneva, World Health Organization, 1999 (FCTC Technical Briefing Series, sponsorships; Internet trade; testing methods; pack- document WHO/NCD/TFI/99.4). 526 Bulletin of the World Health Organization, 2000, 78 (4)
  7. 7. Global trade and health titive practices. The Agreement extended patent pharmaceutical patents originated in only 16 coun- protection, including both product and process tries, and that no patents were filed in 64 countries patenting, to a minimum term of 20 years from the (49). The research/innovation argument of the large filing date. The harmonization of patent protection pharmaceutical companies has also been questioned, policies means that countries that did not previously because a large share of the resources for research is provide protection for pharmaceutical products, for provided by governments, such as occurs in the USA example, now have to do so. All members of WTO (45). Moreover, it has been argued that innovation were given one year to fulfil their obligations under the itself matters less than the ‘‘type’’ of innovation. Agreement, while developing countries were given an Proponents of this argument point to the modest additional four-year grace period plus an additional achievements in the search for new drugs that curb five years for countries that had not previously diseases found predominantly in developing coun- provided patent protection. Least developed countries tries, such as tuberculosis and malaria (50). There is were accorded a transitional period of 10 years (43). also some question as to whether the pharmaceutical Specific concerns have been expressed that the industry would have the incentive to develop the new TRIPS Agreement could cause escalation of prices drugs required in developing countries, when only for medical technologies and pharmaceuticals in the cheapest drugs have a chance of being used on a developing countries. At the same time it has been large scale (51). argued that intellectual property protection is necessary to encourage innovation: many new drugs Price escalation might not have been developed without the granting No consensus has emerged on the effect of the of patent protection (44). Some observers contend TRIPS Agreement on pharmaceutical prices. As with that the TRIPS Agreement may lead to perverse the original debate over the Agreement, the transfer of technology and a significant decrease in accumulated economic evidence is highly polarized. local production (45). Since pharmaceuticals are an On the one hand, studies from developing countries important component in addressing the major causes argue that as the TRIPS Agreement comes into effect of disease burden, including infectious diseases, (i.e. as transitional periods start to expire in the early depression, and ischaemic and cerebrovascular 21st century) massive drug price escalation will ensue. disease, and for confronting major determinants of In India, a country which has only provided for health such as tobacco, the balance between pharmaceutical process patents, it was argued that a innovation and accessibility of new technology is a strong patent system would establish a ‘‘monopoly of crucial policy issue. the worst kind’’ and that massive price escalation Within the health sector, the protection of would result (45). This argument is supported by pharmaceutical patents has been the subject of evidence that price increases for selected pharma- controversy. To some degree the debate has mirrored ceuticals are directly related to the ‘‘patent system the original debate during the Uruguay Round practised in these countries’’. At present, 70% of the concerning the TRIPS Agreement: the interests of Indian population cannot afford modern medicines a vocal group of developing countries have been set and it was argued that this proportion would increase against the interests of transnational pharmaceutical if product patent protection were introduced (45). companies and several industrialized countries. Other evidence also supports the cost escala- There is disagreement as to the need for innovation tion hypothesis. For example, a study in Argentina in pharmaceutical research and development, as estimated that the introduction of product patents opposed to the need to avoid cost escalation. The would result in price increases of about 270%, a evidence supporting each of these positions is reduction in consumption of medicines by 45.5%, summarized below. and an increased annual expenditure of US$ 194 mil- lion (49). According to an analysis of the situation in Innovation Argentina, Brazil, China (Province of Taiwan), India, Proponents of a more comprehensive global patent Mexico, and the Republic of Korea product patents system have pointed out that patents are more would result in a minimum welfare lossg of important to the drug industry than any other US$ 3500 million to US$ 10 800 million (48). A corporate sector: patent protection is crucial for study in Malaysia, where product patent protection development of new products (46). Since the devel- already exists, found that prices of pharmaceuticals opment of new chemical entities now takes longer and were 20–76% higher than in India, reflecting the carries a high risk for investors, patent protection is ‘‘profit maximizing’’ nature of the market (52). The deemed to be crucial for continuing innovation. When Indian Ministry of Trade estimates that product combined with the challenges of new medical needs, patents will increase drug prices 5–10 fold (53). the need to stimulate innovation becomes the more Another body of research does not support the important factor (47). It has been argued that evidence view that the TRIPS Agreement will result in massive so far indicates that intellectual property rights do contribute to increased innovation (48). On the other hand, a study of 95 countries over g The welfare loss represents the loss in consumer and producer the period 1950–89 found that 91.7% of the surplus. The consumer surplus, for example, is the difference between the willingness to pay for a good x and the actual amount paid. Bulletin of the World Health Organization, 2000, 78 (4) 527
  8. 8. Critical Reflection price escalation. It has been argued that patent record low share of their national income to overseas protection does not affect approved products already aid, and only four countries gave more than 0.7% of on the market, and thus stricter patent protection will their GDP, the United Nations target (59). Partner- not produce higher drug prices (54). In particular, ships between the private sector and international only 10 of the 270 pharmaceutical items in the WHO organizations can also be used to improve public Model List of Essential Drugs were protected by health through increased drug access. In 1997, the European patents in 1994. Hence, introduction of Joint United Nations Programme on HIV/AIDS product patents would have only the ‘‘most marginal’’ (UNAIDS) launched the UNAIDS HIV Drug effect on drug prices in developing countries (55). A Access Initiative, a collaborative effort between the recent study conducted by National Economic public and private sectors to identify strategies for Research Associates found that prices of branded increasing access to drugs for human immunodefi- pharmaceuticals were generally not affected by ciency virus/acquired immunodeficiency syndrome alterations in patent laws because of four factors: (HIV/AIDS) therapy in developing countries. In patent protection does not apply retroactively to 1998, major pharmaceutical companies, the World pharmaceuticals already being marketed in a given Bank and the Arab Fund for Economic and Social country; therapeutic competition within countries Development joined WHO in its efforts to eliminate tends to drive prices down; the regulatory environ- lymphatic filariasis (elephantiasis). More recently, in ment in a country will determine drug prices; and January 1999, WHO announced the launch of a market situations in which there is only a single buyer partnership with the pharmaceutical industry to help (monopsonistic) for drugs act as a price constraint smokers stop smoking. (56). A study of the Indian pharmaceutical sector concluded that previous estimates of cost escalation Research and policy implications due to patent protection are overstated because the Despite emerging evidence that new patent protec- patentable drug market represented only 10% of the tion may lead to higher prices, it has not been clearly total pharmaceutical market. Therefore, welfare demonstrated that TRIPS will lead to significant losses from introducing product patents would welfare losses and cost escalation for developing amount to only US$ 33 million, a much smaller countries. Also, it is not clear whether most amount than that estimated in previous studies (57). patentable drugs will be of relevance to most developing countries. Notable exceptions include Local production the recently developed antiretroviral agents for Opponents have argued that effective patent protec- treatment of HIV/AIDS. Moreover, the welfare tion is only a public good for industrialized nations benefits of future innovation have not been and huge multinationals. Because of the new patent adequately studied so far and are often disregarded regime, the existing industry in India ‘‘will face in economic modelling. For example, the develop- serious degrowth’’ as it will no longer have the ment of more new drugs may lead to enhanced ‘‘possibility of taking up new products’’ (45) — a line welfare, even in developing countries, through an of argument that has, however, also been contested. increase in consumer surplus (60). At present it is For example, since China instituted a more effective difficult to determine the potential effects of patent protection regime, the country expects to have extending global intellectual property rights on the 10 new patented drugs on the market by the future burden of disease. These issues should be year 2000. Some of these are likely to be placed on addressed in future research, to provide policy- the export market and numerous joint ventures with relevant evidence for decision-making. foreign firms have already been established (54). It The polarization of evidence is mirrored in has also been argued that the pharmaceutical current international policy on intellectual property industries of Italy, Japan and the Republic of Korea and pharmaceuticals. For example, a recent WTO have benefited from the introduction of patent Dispute Settlement Panel considered a complaint by protection in the 1970s and 1980s (47). Scherer & the USA against India. In September 1997 it Weinburst studied the impact of patents in Italy and concluded that India was in breach of its obligations found a statistically significant increase in the number under the TRIPS Agreement because it had failed to of Italian patents, although they found no significant provide adequate mechanisms for ensuring product change in real research and development expendi- patents for pharmaceutical and agricultural chemical tures (58). inventions (61). Further controversy arose between International aid can be a useful instrument in the South African Government and the pharmaceu- helping to reduce the disadvantages outlined above. tical industry over South Africa’s plans to eliminate Humanitarian aid from wealthier national and local barriers to parallel imports of pharmaceuticals (62, governments can be invested in public health 63). In 1998, manufacturers filed a suit against the programmes and improve drug access in poorer government. However, in September 1999, the countries. However, more financial resources are Governments of South Africa and the USA needed from rich governments. In 1998, member announced that a solution had been found. Both countries of the Organisation for Economic Co- governments agreed to abide by the TRIPS Agree- operation and Development (OECD) contributed a ment. TRIPS permits parallel imports and the South 528 Bulletin of the World Health Organization, 2000, 78 (4)
  9. 9. Global trade and health African Government intends to proceed in this in need. It was stressed some years ago that many direction (64). useful technologies had already spread to developing At the World Health Assembly in May 1998, countries, that the health of millions had benefited, there was no consensus that Member States need to and that many more would continue to benefit (72). review their options under the TRIPS Agreement to Finally, at the Global Knowledge ’97 conference safeguard access to essential drugs (65). More sponsored by the Canadian Government and the recently, several agencies (including the 1999 Nobel World Bank, the International Development Re- Peace Prize winner, Medecins sans Frontieres) called ´ ` search Centre (IDRC), in partnership with the on WTO to help developing countries by ending International Federation of Institutes of Advanced restrictions on essential medicines (66). Studies (IFIAS), launched experiments to demon- Collaboration with the research and pharma- strate the value of a knowledge broker. The idea is to ceutical sectors is important for developing new and bring together individuals and countries that are affordable drugs for new and re-emerging infectious confronted with similar problems and link the diseases, as well as noncommunicable diseases. creators and users of knowledge (73). Future policies at national and international levels should focus on bringing together the various parties in the TRIPS and pharmaceutical debate, with both Liberalization of services their evidence and grievances. For example, 90% of the world’s cases of HIV/AIDS are in developing The General Agreement on Trade in Services countries, where new treatments are inaccessible, and (GATS) established, for the first time, a global research expenditures to develop new therapies rules-based multilateral system to govern the more against tropical diseases such as malaria are dwind- than US$ 1 200 000 million involved in world ling. The stakes are thus too high to risk an escalating services trade (74). In many respects these rules are war of words. similar to the GATT rules for trade in goods and Collaboration between private and public commodities. However, in contrast to GATT, the sectors should focus on the need for global social national treatment and most-favoured nation provi- responsibility in the private sector, which would be sions are generally less comprehensive: many of the implemented ‘‘by minimizing negative impacts and rules only apply to areas where sector-specific maximizing positive opportunities in core business commitments are made. Therefore, the ‘‘liberal- activities, via social investment activities and by ization dynamics’’ of GATS may be weaker than engagement in public policy’’ (67). Recent moves by those of GATT. Moreover, under Article XIX, major multinational producers to make HIV treat- developing countries are permitted to make fewer ments more readily available at lower cost in sector-specific commitments than industrialized developing countries suggest that this type of states (75). Although industrialized countries gen- engagement with industry is both a practical and erally made a greater number of commitments than necessary health development strategy for the future. developing countries, certain sectors such as health To facilitate common action on issues such as proved to be ‘‘sensitive’’ and fewer commitments patent protection and access to essential drugs, the were made. In contrast, many developing countries Director-General of WHO recently convened a first have a particular export interest in some of these round-table meeting with nongovernmental organ- ‘‘sensitive sectors’’, such as health (75). In the health izations active in pharmaceuticals and essential drugs. sector the range of services covered by GATS is The Director-General also held a round-table meet- summarized in Table 2. ing with senior executives from the research-based The growth of health services trade brings up pharmaceutical industry ‘‘to map out the challenges, complex issues of malpractice, regulation, patient and to see what WHO and the industry can achieve confidentiality and data protection (77), as well as together’’ (68). concerns about balancing efficiency and equity in Although much of the health debate surround- service provision (8). Moreover, it is possible that ing TRIPS has focused on the pharmaceutical sector, liberalization of services in sectors not listed in Table the links between patent protection and public health 2 may be of concern to health development. For are not restricted to pharmaceuticals. It is becoming instance, liberalization of advertising and distribution increasingly clear that the globalization of scientific services may promote cross-border trade in hazar- knowledge can play an instrumental role in improving dous products such as tobacco. health (69). Economic development is dependent on On the other hand, trade liberalization in health the diffusion of technical and managerial knowledge services has the potential to generate positive effects. and the capacity of a country to command new At the macroeconomic level, increased foreign technologies (70). The special needs of least devel- investment in recipient countries creates employ- oped countries include a need to create a sound and ment opportunities; increases access to new tech- viable technological base. A UNESCO publication nologies; and improves competitive capacity, quality, argues that science can make an important contribu- accessibility and productivity of services. More tion to addressing problems that go beyond national specifically, freer trade may enhance the movement borders (71). With this in mind, UNESCO is devising of providers and improve exchanges of clinical new ways to convey knowledge to communities most knowledge among health professionals. Trade liber- Bulletin of the World Health Organization, 2000, 78 (4) 529
  10. 10. Critical Reflection economic modelling of the impact of services trade Table 2. Trade in health sector services covered by GATSa on health is not at an advanced stage. In effect, the potential impact on health status of liberalizing health Mode of supply Specific health services services cannot be accurately determined. In new Movement of consumers Movement of patients seeking treatment abroad areas such as telehealth and telemedicine an ‘‘inter- Movement of students studying abroad national consensus is needed on a minimum data set for reporting’’ concrete data and trends (76). In the Movement of persons Movement of skilled health personnel: future it will be important to rectify these major gaps supplying services South to North and South to South so that decision-makers can obtain more reliable information. Foreign commercial presence Direct foreign investment in hospital operation, management, or health insurance Cross-border trade Telemedicine: care delivery, diagnosis Conclusions and treatment, medical education and training, The advent of WTO has brought with it a new and technical expertise in telemedicine concept of international trade law, framed according a Adapted from ref. 8 and ref. 76. to universally binding principles. We have tried to demonstrate that the next wave of trade law will need alization may also improve the standards of care in to take more account of certain global public health recipient countries, by promoting the adoption of issues. Some observers already consider that the full international certification procedures for providers integration of environmental and social matters and facilities. Finally, increasing international travel represents the next generation of trade agreements, will apply pressure upon governments and private and that this inevitable shift in trade thinking is insurers to improve the portability of health ‘‘already knocking at the door’’ (17). insurance, thereby enhancing the cross-border We conclude that there is an urgent need for mobility of health service consumers (78–80). well-documented evidence to inform future trade Several empirical problems are encountered in and health policies. The public health community trying to determine the extent of service trade and needs to understand the health ramifications of possible impacts on health status. In general, data on global trade agreements, and must concentrate on trade in services are weak compared to those on getting its own facts correct so that public health is merchandise trade, and only a limited number of not used ‘‘naively’’ for other political ends, such as industrialized countries report disaggregated data on justifying unwarranted economic protectionism. 10 or more categories of services (75). Similarly, it is Although strengthening provisions to protect public difficult to determine the volume of trade in health health in global (and also regional) trade agreements is services because of a lack of disaggregated data, even an important component for realizing sustainable though there is an increasing awareness that such globalization, such provisions should not be used trade is potentially important to both developing and indiscriminately; for example, as a cover for industrialized countries (8). Moreover, quantitative unadulterated trade protectionism. However, before measures are limited in the case of services trade. advocating a shift in policies the health community Such data would provide accurate information on the needs to put its own house in order. Towards this total output of service activities across countries and end, this article has provided an overview of some of determine the levels of barriers faced by foreign the research and information needs in the area of suppliers (an equivalent measure to tariffs). Thus, trade and health. cross-country comparisons of services trade are not In areas such as tobacco and other hazardous easily made (75). commodities, food safety, liberalization of trade Econometric modelling in this field is proble- services and patent protection of pharmaceuticals, matic and the degree of market access is difficult to the health sector has a clear role to play. It is the estimate: ‘‘current simulations are therefore at best responsibility of the health sector to ensure that its weak on services, if not arbitrary guesswork’’ (81). In arguments are technically sound when advocating the health sector, for example, the ‘‘brain drain’’ of protection of public health; that excessive measures health professionals from low-income countries to which impede trade unnecessarily are not taken; that more developed economies is considered to be a health and trade policies are aligned at global and serious problem (82). However, since there is no national levels; and that the health sector is adequately database on net flows of health professionals informed about the implications of global trade between countries, it is difficult to determine the agreements. extent of the problem. Moreover, the negative effects Finally, the trade and health debate outlined of the ‘‘brain drain’’ are offset by broader, macro- here suggests that health threats and opportunities economic benefits such as foreign remittances from for society will become increasingly globalized, and nationals working abroad (8). thus health development strategies ‘‘must include a Because of problems quantifying the extent of central place for intersectoral/international inter- health services trade, and the complexities of agency collaboration’’ (69). At the global level, the estimating the degree of openness of markets, WHO has forged closer ties with the WTO to ensure 530 Bulletin of the World Health Organization, 2000, 78 (4)
  11. 11. Global trade and health that public health interests are present on the trade trade negotiations in the early 21st century is agenda. It was in this context that WHO representa- inevitable and desirable. When this next round of tives attended the WTO Ministerial Conference held trade negotiations is eventually launched, it is crucial in Seattle, WA, USA (83). Although it was expected that public health issues be given a higher profile in that a new round of multilateral trade negotiations the deliberations. n would be launched in Seattle, the talks became enmeshed in such issues as labour standards and Acknowledgements agricultural subsidies. However, despite a momen- We thank Mr Orvill Adams, Dr Jonathan Quick, and tary ‘‘storm over globalization’’, trade economists Professor Allyn Taylor for their comments and generally believe that a new round of multilateral suggestions. Resume ´ ´ Commerce mondial et sante : liens essentiels et defis pour l’avenir ´ ´ La mondialisation du commerce, des marches et des ´ des pays en developpement compte tenu de leurs ´ investissements a des repercussions importantes, tant ´ problemes et de leurs priorites : parmi les exceptions ` ´ negatives que positives, sur la sante publique. Le present ´ ´ ´ notables figurent les medicaments tels que les agents ´ ` ´ article considere les repercussions de l’ensemble integre ´ ´ antire troviraux re cemment mis au point pour le ´ ´ d’accords de l’Organisation mondiale du Commerce traitement de l’infection par le virus de l’immunodefi- ´ (OMC) concernant la recherche et la politique de sante ´ cience humaine/syndrome d’immunodeficience acquise ´ publique, en se concentrant sur trois themes : les produits ` (VIH/SIDA). de base, les droits de propriete intellectuelle et les services ´ ´ L’Accord general sur le commerce des services ´ ´ de sante. Il s’attache principalement a determiner le lien ´ ` ´ (GATS) etablit pour la premiere fois un systeme ´ ` ` entre le commerce et la transnationalisation des risques multilateral mondial destine a reglementer le commerce ´ ´ ` ´ sanitaires mais aussi des avantages e ventuels, a ´ ` mondial des services, en pleine expansion. La croissance repertorier les principaux domaines de recherche et a ´ ` du commerce des services de sante , comme la ´ ´ suggerer des orientations et des interventions pertinentes ´ ´ ´ telemedecine, souleve des problemes complexes lies ` ` ´ concernant le commerce et la sante. ´ ` aux abus, a la reglementation, a la confidentialite et a la ´ ` ´ ` Les risques et les avantages pour la sante lies la ´ ´ protection des donnees relatives aux patients, et appelle ´ ´ liberalisation du commerce des marchandises dependent ´ ´ un souci d’equilibre entre efficacite et equite dans la ´ ´ ´ en grande partie de la nature des produits concernes. Le ´ prestation des services. Par exemple, la liberalisation de ´ present article est axe sur les repercussions de la ´ ´ ´ la publicite et des services de distribution risque de ´ liberalisation des echanges pour la consommation et la ´ ´ faciliter la promotion et le commerce transfrontiere de ` reglementation des produits nocifs et neanmoins licites. ´ ´ produits dangereux comme le tabac. Mais la liberalisa- ´ L’accent est mis sur les liens entre la consommation de tion des echanges s’agissant des services de sante peut ´ ´ cigarettes et la liberalisation du commerce. Notre analyse ´ egalement produire des effets positifs en accroissant les ´ ´ ´ ´ defend l’idee que les preoccupations de sante publique ´ investissements etrangers et le transfert de technologies ´ doivent s’inscrire dans une approche plus rationnelle et en facilitant un acces plus large aux dispensateurs de ` d’une mondialisation durable. services de sante. Parce qu’il est difficile de mesurer le ´ La propriete intellectuelle a ete l’un des « nou- ´ ´ ´ ´ ´ ´ volume des echanges representes par les services de ´ veaux themes » abordes lors des negociations commer- ` ´ ´ ´ ´ ´ sante et d’estimer precisement le degre d’ouverture des ´ ciales multilaterales du Cycle d’Uruguay. En raison de la ´ marches, il est impossible de determiner avec precision ´ ´ ´ mondialisation croissante des activites economiques ´ ´ l’impact que pourrait avoir la liberalisation de ces services ´ dans la derniere partie du XXe siecle, les economies ` ` ´ ´ ´ sur l’etat de sante. Il convient de combler rapidement ces industrialisees et les entreprises multinationales recla- ´ ´ lacunes pour pouvoir donner aux de cideurs des ´ ment une protection accrue des droits de propriete ´ ´ informations plus precises sur lesquelles fonder les ´ intellectuelle. Pendant le Cycle d’Uruguay, l’Accord sur politiques. les aspects des droits de propriete intellectuelle qui ´ ´ Le present article en conclut que la prochaine serie ´ ´ touchent au commerce (ADPIC) est devenu le symbole du d’accords commerciaux internationaux devra tenir fosse Nord-Sud. Dans ce contexte, l’article examine ´ davantage compte des grands problemes de sante ` ´ l’impact possible de la mondialisation sur l’innovation, la publique mondiaux. Toutefois, pour s’engager davan- hausse des prix et la production locale. Malgre les ´ tage dans les debats relatifs au commerce mondial, la ´ donnees de plus en plus nombreuses montrant que la ´ communaute de la sante publique doit parvenir a mieux ´ ´ ` nouvelle protection des brevets peut provoquer une comprendre les effets sur la sante des accords ´ hausse des prix, il n’a pas encore ete clairement ´ ´ commerciaux mondiaux. Elle doit egalement veiller a ´ ` demontre dans la pratique que la mondialisation ´ ´ ne se fonder que sur des faits averes, de sorte que la ´ ´ entraıˆnera des pertes significatives de bien-etre social ˆ ´ sante publique ne soit pas utilisee aveuglement a des fins ´ ´ ` ou une escalade des prix pour les pays en developpe- ´ politiques, telles que la defense d’un protectionnisme ´ ment, ni d’ailleurs le contraire. De meme, on ne sait pas ˆ economique injustifie. Des politiques commerciales ´ ´ encore si la plupart des medicaments brevetables ´ « saines », fondees sur des donnees empiriques solides ´ ´ presenteront un interet quelconque pour la majorite ´ ´ ˆ ´ et visant a ameliorer l’etat de sante, sont un pas ` ´ ´ ´ Bulletin of the World Health Organization, 2000, 78 (4) 531