Introduction
GATS is the international multilateral trade agreement proposed in 1994 that sets the rules for global trade in services (WFPHA, 2003). Aiming to privatize and deregulate vital services, this agreement gives the legal framework through which WTO members will approach the progressive liberalization of trade in services, including health-related services. GATS is expected to have a significant influence on international trade particularly in the health care sector and is also believed to create opportunities, especially for developing countries. This chapter discusses the influence of the GATS on international trade in health services.
Trade Liberalization & the GATS
In the Uruguay Round Negotiations, many countries initially were not interested to include trade in services, as it is different from the trade in goods or commodities. Services trade may call for the exercise of the right of establishment, which would have implications for development strategy, resource mobilization, social objective, etc. (VanderWerf, 2004).
The main objective of GATS was to ensure that priority is given to developmental issues and that national regulations remain supreme. In effect, the Agreement allows Member Countries to select their service sectors for opening to international competition in the light of their national development strategy (Fidler et al., 2005). GATS identifies four main modes of international trade in services as shown in Figure-4.1.
Fig-4.1: Four Main Modes of International Services Trade:
- Mode 1: Cross-border supply (CB): This includes telemedicine, teleconferencing, teleconsultation, Tele-education, and subscription to journals and databases on the Internet. This CB has been greatly facilitated through the rapid expansion of e-commerce (Wibulpolprasert & et al., 2000).
- Mode 2: Consumption abroad (CA): This includes traveling abroad, including via health tours, to seek high-technology treatments or cheaper health services.
- Mode 3: Commercial presence (CP): This includes foreign investment in hospital operation, medical and dental services, and management of health care.
- Mode 4: Temporary movement of natural persons (NP): This includes temporary emigration of doctors from developing to developed countries, and import of specialists from developed countries into facilities invested in by foreign capital in the developing countries.
Implications of GATS
GATS being an international framework for services trade has significant implications for services trade including health-related services. Some of its implications are:
- GATS provides cross-border business opportunities even for smaller countries. Following this framework, a non-resident or non-native supplier can also supply services across a border into the country.
- Consumers and firms can make use of a service in another country.
- GATS provides the platform for a foreign company to set up a business base (subsidiaries and branches) for providing services in another country.
- Any individual can also travel to foreign destinations for supplying services.
- Under GATS negotiations, countries make or request specific commitments relating to market access in various services sectors, including health services. For the health sector, GATS applies only to health-related services provided for profit; it excludes public-provided services not available on a commercial basis or in competition with others.
- GATS can contribute to the overall economic growth of a country.
Conclusions & Future Perspectives
From the standpoint of health services, GATS signifies a liberalized health services market, which a country needs to take advantage of. However, making a fortune in this highly competitive market is not as simple as it sounds. To derive maximum benefits under this situation, a country should strategically position itself in the market and it should:
- Form or strengthen regional cooperation frameworks or agreements that take advantage of the opportunities offered by liberalization;
- Establish or strengthen existing national coordinating mechanisms for appropriate harmonization of work between ministries responsible for health, trade, commerce, and legislation to ensure that public health concerns are duly taken into account;
- Provide training and orientation for senior and middle-level administrators working in the health, commerce, and legislative sectors in matters concerning international development or the implications of multilateral trade agreements on health, trade, and other social areas;
- Identify and promote the work of regional and national centers of excellence on globalization, trade, and health that would specifically deal with research and training in multilateral trade agreements; these institutions should establish networks at national and regional levels;
- Explore how they can reinforce and complement mutual trade in health services within the existing regional and sub-regional blocs.
Countries need to fully appreciate the potential effects of multilateral trade agreements, particularly those relating to health and take appropriate measures to deal with them. Trade-in health services present potential opportunities that countries can exploit. However, the opportunities have attendant risks. Countries should take advantage of the emerging global opportunities offered by trade in health services while striving to mitigate the adverse effects of the trade.
Given the centrality of health to human well-being, policy reform discussions in the health sector tend to be sensitive. Many countries have inscribed a basic right to healthcare in their constitutions, sometimes mandating the provision of services free of charge. Health services are not viewed as a tradable commodity that can be subject to global market forces. Notwithstanding these sensitivities, healthcare policy does involve serious economic choices. Few countries can afford state-of-the-art healthcare for every citizen. Choices about what kind of health services are provided to which segments of the population have to be made—explicitly or implicitly. At their core, these choices involve complex trade-offs between promoting equitable and affordable access to a basic set of health services at minimum quality, creating incentives for efficiencies in the healthcare system, and managing constraints in central and state-level government budgets. International trade in health services influences these trade-offs. It can present opportunities for cost savings and access to better quality care, but it can also raise challenges in promoting equitable and affordable access.
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