Trading People’s Health for Corporate Wealth*

Throughout the past decades, health activists and public health experts have consistently argued that globalization has detrimental effects on both health and health care. A lot of attention has gone to the role of multilateral institutions, especially the International Monetary Fund (IMF) and the World Bank (WB). Both institutions became notorious in the 1980s for their impositions on national economies through so-called Structural Adjustment Programs (SAPs) which had to ensure that poor countries were able to continue paying the interest on their ballooning foreign debt.

By Wim De Ceukelaire
International Action for Liberation (intal)
Posted By Bulatlat.com

Health workers protest against World Trade Organization control over health services. 

Photo courtesy of the Council for Health and Development

The key pillars of SAPs were the economic policies of deregulation, liberalization and privatization. They forced Third World countries to open up their economies to foreign Transnational Corporations (TNCs) for them to take advantage of cheap labor and new captive markets. At the same time, poor countries had to cut government spending on “non productive” sectors like social services, health care and education.

The WB also directly intervened in poor countries’ health policies and overtook the World Health Organization (WHO) as the most influential international agency in the health sector. Its involvement in health policy making culminated in its 1993 World Development Report “Investing in Health,” which echoed the same structural adjustment paradigm. Recommendations included the privatization and commercialization of health care while urging poor countries to focus on economic growth, which was supposed to foster better health.

Fueled by the intensifying crisis of overproduction in the industrialized countries, globalization made further strides throughout the 1990s. To take full advantage of the adjustment of Third World economies by the IMF and the World Bank, the focus shifted to transnational trade. Through the increase in trade, at a pace of 8.6% per year,[1] TNCs were able to amass huge profits while securing and expanding their monopolies. A new institution was therefore created to consolidate the “achievements” of the IMF and the WB: the World Trade Organization (WTO). In all these three organizations, the United States and Europe exercise overall hegemony.

Public health experts are now arguing that the WTO has become one of the most influential international agencies with respect to health.[2] Its influence extends to almost all aspects of human life, from the food we eat to the health services we need when we are sick. The impact of the WTO and snowballing trade liberalization on people’s health and health policy is tremendous and yet health activists have largely focused on only one of its implications: the effects on the availability of medicines. This aspect of the WTO has been denounced firmly by NGOs and activists the world over, and rightly so. However, from a public health point of view, there are more than enough arguments to reject the WTO and its so-called “free trade” regime in its entirety.

1         WTO: Working for Tyranny and Oppression

The WTO was established in 1995 as a result of the completion of the “Uruguay Round” of the General Agreement on Tariffs and Trade (GATT). This was the widest-ranging round of trade negotiations ever, as it covered for the first time services, agriculture, investments, intellectual property rights, trademarks and copyrights. The agreement that was forged after 8 years of painstaking negotiations also urged in a qualitative development in the global trade regime as it established an institution that is tasked to oversee the global trade regime. As a result, the agreement compromises individual countries’ sovereignty and had some far-reaching consequences:

• Commitments under the WTO are not limited in time, unlike the SAPs or other international agreements. Moreover, commitments are generally irreversible: once a country has committed itself to liberalization of a certain sector, there is no way back even if the measures prove to be harmful or when a new government would opt to undo past policies.

• Commitments under the WTO are enforceable. There is a dispute settlement mechanism in place and countries that are found to be violating a rule have to adjust their laws to the WTO requirements, pay compensation to the country that has filed the complaint or face sanctions. The WTO’s legislative and judicial power to challenge the laws, policies or programs of countries that do not conform to the agreements sets it apart from other international agreements.

• WTO member countries are obliged to treat all countries equally. This means that favors to one country should also apply to all others, unlike bilateral trade agreements.

• The WTO has an intrinsic drive to more liberalization. Members are committed to successive “rounds” of trade negotiations. The institution has therefore been compared to a bicycle: it has to keep in motion on the path to more trade liberalization to prevent it from collapsing.

1.1      Utterly undemocratic

Most of these agreements are extremely complex and there were probably few people who realized the tremendous impact they would have on the global economy at the time they were signed. Even today, most countries have to rely on a few experts to interpret the intricate rules and regulations. The complexity of the agreements is already a major source of bias against the poor countries. While the industrialized countries can employ the brightest legal experts and rely on well-paid industry lobby groups, 24 poor countries cannot even afford a permanent delegation in Geneva, where the headquarters of the WTO are based. The delegations of rich countries are more than twice as big as those of poor countries on the average, but Geneva-based staff of poor countries’ delegations often also have to cover other international institutions. For the WTO alone, there are easily 40-50 meetings to be covered in a week.[3] It goes without saying that only the rich countries are able to cover them all.

The decision-making process has proven to be problematic, to say the least. In principle the organization functions by consensus on the basis of one-country-one-vote. The practice, however, has repeatedly been denounced as utterly undemocratic and heavily dominated by the industrialized countries. Decision-making essentially takes place in “concentric circles.” First, the United States and the EU come together to decide on a common position. The circle is then expanded to Japan and Canada in the so-called “Quad.” After this, other rich countries and selected allies from the South are brought on board in so-called “green room” discussions. This group is sometimes known as “Friends of the Chair.” Finally, the agreement is presented to some influential poor countries, like India, Malaysia, Brazil and China because they carry weight and cannot easily be ignored. Blackmail and intimidation are standard practice to make the poor countries subscribe to the agreement one by one.

One delegate from a poor country to the WTO’s Doha Ministerial Meeting expressed his frustration as follows:

“By the time you are consulted, they have already done consultations with the big countries. The truth is that you are fighting against the proposal already agreed by the big guys and the person who is doing consultations is defending that proposal. I have seen people say I want this 15 times— the same thing—but Chairs do not pay attention. If this is not something already agreed before that meeting, you can be sure that you cannot get it.”[4]

1.2      Prioritizing business over health concerns

One feature that makes the WTO stand out against any other trade pact is its dispute settlement mechanism, which compromises member countries’ sovereignty as local regulations can be overruled. As usual for WTO, the settlement process operates behind closed doors and members of the dispute settlement are trade and legal experts, even if many of their decisions also affect public health. In the dispute settlement mechanism, the following principles are observed:

• Comparing “like” with “like”: The WTO agreement stipulates that in a trade disputes products must be compared to “like” products regardless of the methods or practices that have produced them. For example, a country cannot ban beef from cows that have been fed with antibiotics or hormones, even if local regulations ban this practice. The United States has also argued that genetically modified (GM) products are technically “like” non-GM products and therefore their import cannot be restricted. Because of this principle, products can also not be discriminated against because child labor or other unfair labor practices have been used in their production.

• Least trade disruptive measures: The dispute settlement mechanism also prescribes that the “least trade restrictive” measures should be used to address public health and safety concerns. As a result, there is a tendency toward “soft” measures against potentially hazardous products like labeling instead of more radical measures like banning or taxation.

• Overriding national laws: If the dispute settlement body rules that a national law or regulation is in conflict with one of the WTO’s trade agreements, the local law should be changed. This implies that trade rules that were forged in secrecy are given priority over laws that often went through public debate and scrutiny in individual member countries. Besides, these decisions are taken by trade experts, economists and other technocrats, without any expertise in environmental, health and safety concerns.

2         Goods, services and patents

Since the completion of the Uruguay Round of GATT, the global trade regime is built on a set of 28 agreements all of which are overseen by the WTO. The major agreements among them fall into 3 categories:

• The Multilateral Agreement on Trade in Goods builds on previous GATT agreements and further eliminates barriers to trade in capital and goods between countries. It also includes the Agreement on Agriculture, liberalizing trade in farm products, and agreements on sanitary and phyto-sanitary measures, on technical barriers to trade and trade-related investment measures, among others.

• The General Agreement on Trade in Services (GATS) brings services under the rules of the world trading system. It sets out rules governing international trade in practically all services, including health and social services.

• The Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) sets minimum standards for all forms of intellectual property including patents.

As the WTO agreements are so all-encompassing and insidious, all of them have significant consequences for people’s health. Their complexity is truly challenging as even trade experts get lost in the many stipulations and exceptions. Besides, experts seemed to have developed their own jargon consisting of a curious alphabet soup—GATT, GATS, TRIPS, SPS, TBT, LDCs, NTBs, MFN, NAMA, HODs, SDT, AMS, SP are just some of the acronyms commonly used—and references to intriguingly tinted boxes and rooms (green, amber, blue). Still, for anyone concerned about people’s health some basic understanding of the agreements’ mechanics is necessary.

2.1      Trade in Goods

During a recent lecture organized by the International Health and Medical Education Centre and the Lancet, Indian activist researcher Vandana Shiva argued that the globalization of agriculture is “the most important health hazard of our time.”[5] Still, it is a recent phenomenon as the United States and the European Union have objected to the inclusion of agriculture in the successive rounds of GATT until the late 1980s because of their own protectionist agricultural policies. The inclusion of agriculture in the Uruguay Round of GATT was therefore a major breakthrough in the liberalization of trade.

Attack on Agriculture

The Agreement on Agriculture (AoA) is in essence a pact between the United States and the European Union who were facing increasing problems of overproduction by their heavily subsidized agricultural sectors during the 1980s. The key elements of the Agreement on Agriculture are: (1) the reduction of subsidies to the domestic farming sector; (2) the reduction of export subsidies; and (3) improved market access through the introduction of minimum access requirements and tariffication of import restrictions with subsequent reduction of tariffs.

In fact, the AoA is an agreement for unilateral liberalization by the poor nations. Through the many exemptions of the agreement, contained in the ‘green box’ and other boxes that came to be identified with different colors, the rich countries were able to maintain and even increase the support to their domestic farm sector while the poor countries, most of which had never used subsidies, were forbidden to do so and had to open their markets for agricultural products. The industrialized world spends more than US$ 300 billion to support its agriculture, or almost US$ 1 billion per day. Subsidies to US cotton growers equal more than triple the amount of US Government aid to sub-Saharan Africa. In the European Union, at more than US$ 2 per head the cash subsidy to every dairy cow exceeds total per capita EU aid to sub-Saharan Africa.[6]

In this situation, the skewed trade relations affect the agrarian economies of the Third World in various ways. At the macro level, their competitiveness is largely eroded while they are forced to submit to increasing TNC control on their whole food chain. At the grassroots level, however, the very lives of millions of farmers are put on the line.

Dumping of surpluses from the North continued under the AoA and cheap imports were flooding the markets of the poor countries as soon as they liberalized trade rules, putting their own farmers out of business. For example, all of a sudden, poor corn farmers had to ‘compete’ with mechanized farms in the United States that are receiving yearly subsidies amounting to hundred times their income and selling corn at only two-thirds its cost of production. Moreover, prices of several major export crops of poor countries have collapsed since the mid-1990s.

As poor countries were faced with a deluge of imported products, they often gave priority to the production of export crops in a bid to offset the increasing trade deficit. Many studies show that trade liberalization has led to more land and resources being devoted to export crops and less to domestic food production. In the Philippines for example the area planted to mango almost doubled between 1994 and 1999.[7] Consequently, the arable land allotted to staple food production is decreasing.

In poor countries, landlords and agribusiness TNCs are in the best position to profit from increased imports and export crop production. They are importing cheap agricultural products and are able to expand their market share by aggressive trading practices. They also have the capital to venture into the production of cash crops for export. Consequently, there is not only a tendency toward consolidation of the markets but to the re-concentration of land into the hands of the landed elite as well. Landlessness is rising and farmers have to sell their labor power as farm workers, pursue odd-jobs in the cities or simply remain unemployed.

Worldwide it would not be unreasonable to estimate a figure of at least 30 million jobs lost in Third World countries because of trade liberalization and related factors since the establishment of the WTO.[8] An assessment of the impact of the Agreement on Agriculture by the Food and Agriculture Organization (FAO) confirms the general trend toward the concentration of land, marginalizing small farmers and increasing landlessness, unem­ployment and poverty.[9]

The dependence on imported food, emphasis on export production and increasing monopoly control by TNCs and landlords is putting the food security and sovereignty of the people in peril. For example, from 1995 to 1999, the Philippines exported 8.25 million metric tons of banana, pineapple and mango while it had to import 4.74 million metric tons of rice, the staple crop providing a source of income to 3.2 million rice farmers and 35% of the average Filipino diet.[10]

In short, the AoA has severely affected poor farmers, who constitute 70% of the world’s poor, and their sources of livelihood. Moreover, trade liberalization has also affected food security and made the poor increasingly dependent on imported food supplies, which are monopolized by a few huge food monopolies. Examining the case of the Philippines in a recent editorial the New York Times concluded that the Philippines, especially its farmers, ‘got taken’ when it joined the WTO:

“Instead of making gains, the Philippines has lost hundreds of thousands of farming jobs since joining the WTO. Its modest agricultural trade surpluses of the early 1990s have turned into deficits. Filipinos increasingly view the much-promoted globalization as a new imperialism. Despair in the countryside feeds a number of potent anti-government insurgencies.”[11]

The Agreement on the Application of Sanitary and Phytosanitary Measures (SPS)

The Agreement on the Application of Sanitary and Phytosanitary Measures deals with issues related to food safety and animal and plant health regulations. It stipulates that measures should be based on international standards although it doesn’t always define which body should create the standards, thus creating scope for industry-led self-regulation by organizations like ISO. The general trend is against the precautionary principle (“when in doubt, don’t allow it”) even where legitimate concerns exist.

The Codex Alimentarius, which was originally established by the Food and Agriculture Organization (FAO) and the WHO, is designated as the body to set the standard with regards to food products. However the codex is dominated by commercial interest as most non-governmental delegations represented industry. For example, food giant Nestle sends more representatives to committee meetings than most countries.[12] Other well-established international bodies are sometimes ignored, like the International Agency for Research on Cancer (IARC) whose studies on carcinogenicity received little consideration in the beef-hormone conflict between the United States and the European Union. The objectivity and impartiality of the Codex has therefore been questioned.

Most worrisome about the SPS is that standards which could have tremendous effects on public health, on food additives for example, are not made by public health experts but by people who have the interest of world trade on their minds, many of them even belonging to the industry which has a stake in the issue. It is but another example of the WTO’s mechanisms to make trade concerns take precedence over matters of public health.

The Agreement on Technical Barriers to Trade (TBT)

The Agreement on Technical barriers to Trade (TBT) also has a bearing on the production, labeling, packaging and quality standards of pharmaceuticals, biological products, foodstuffs etc. The TBT Agreement encourages member states to apply internationally agreed standards as a basis for their technical regulations, but unlike the SPS Agreement it does not identify them. Similar concerns have therefore been raised as those about the SPS agreement.

2.2      GATS: a service to whom?

In a nutshell, the European Commission’s definition captures quite well what GATS is all about:

“The GATS is not just something that exists between governments. It is first and foremost an instrument for the benefit of business, and not only for business in general, but for individual service companies wishing to export services or to invest and operate abroad.”[13]

Trade in services is firmly in the grip of the industrialized countries, which account for more than two-third of their import and export.[14] Because of their dominance of the markets, it is major traders in the rich countries which have most to gain from increased access to markets. Due to resistance from poor countries, GATS’s provisions are not as comprehensive as these of GATT. The rich countries had to settle for an agreement that left WTO member countries some room to choose which services they wanted to be covered.

Because it was not able to get full liberalization of services from the very start, the United States and Europe took care to include clauses mandating further liberalization in the future. GATS is therefore a “work in progress” mandating “successive rounds of negotiations (…) aimed at achieving a progressively higher level of liberalization.”[15] 

Four modes and obligations

Member countries of the WTO commit to four obligations under GATS, two of which apply to all services: most-favored-nation treatment and transparency.

• Most-favored-nation treatment means actually the opposite. If a WTO member country grants favorable treatment to another country, it must grant it to all other WTO member countries. If a country allows any foreign competition in a service sector, it must allow service providers of all WTO member countries to supply that service. The Philippines, for example, cannot open up its hospital sector to Malaysian companies while banning US-based commercial health care providers.

• Transparency requires governments to publish all relevant laws and regulations governing all service sectors. By 1997, they had to designate ‘contact points’ where foreign companies and governments could obtain this information.

Two other obligations only apply to those sectors, from a list of 160 categories, which each country has indicated it is prepared to open up for foreign competition. If a service is listed in the so-called ‘Schedule of Specific Commitments’ it has to provide market access to foreign companies so they can provide the service in the local market. Moreover, these foreign companies have to be accorded national treatment, or they must be treated like local companies.

To make it even more complicated, the ‘Schedule of Specific Commitments’ also identifies which of four different modes of supplying the services are covered:

1. Cross-border delivery: This applies for example to the delivery of lab samples, diagnosis and treatment to consumers in other countries. Currently “telehealth” or the delivery of health services through electronic media like the Internet is a booming industry, with a worldwide market estimated at US$ 1.25 trillion.[16]

2. Consumption abroad: This refers to the movement of consumers to the country providing the service for diagnosis and treatment. The Third World elite has been practicing this for decades, but with increasing opportunities to travel and the deterioration of domestic health systems in many countries more people are seeking medical treatment abroad.

3. Commercial presence: Covered are the establishment of health care facilities and investment in health services abroad. This provision shows how far-reaching GATS is as it extends into areas never before recognized as trade policy, including rules on foreign investment.

4. Movement of health personnel: Individuals from one country can be admitted temporarily to another country to provide services there. The inclusion of the fourth mode of service delivery in GATS was perceived as a concession to the poor countries who rely on a labor export policy to beef up their domestic economy. Many nurses and doctors from Third World countries are working in the industrialized world and sending remittances to their country of origin.

Health services

There have been some misconceptions about whether public services, like health care, are covered by GATS. The agreement makes an exception for services “supplied in the exercise of governmental authority” (Article I.3b) yet this is defined so narrowly that it becomes almost meaningless. The exceptions are only made for services that are supplied neither on a commercial basis, nor in competition with one or more service suppliers. This means that if a government contracts out  the cleaning or catering of hospitals to private companies, or if private companies or NGOs also provide hospital services, they are not considered public services anymore and should be subject to GATS.

Under the first round of negotiations, there have been relatively few commitments in health services. As of 1998, 59 countries had put one or more aspects of their professional, health-related and social services under GATS. Medical and dental services were opened up by 49 countries while 39 had agreed to liberalize the hospital sector.[17]   The WTO therefore concluded that the health sector was trailing behind other sectors as governments do not want to commercialize their hospitals because they are considered part of their “national heritage.”

Interestingly, commitments under mode 4, the movement of service providers, were very few and limited to ‘intra-corporate transferees’ in areas such as management consulting, research and development, health education, and some specialized services.[18] Apparently, the massive migration of doctors, nurses and caregivers from poor to rich countries is not subject to liberalization, as the receiving countries want to make use of other mechanisms to regulate the influx of skilled workers.

GATS’ other threats to public health

Some health-related services are classified by GATS in other categories. Health insurance, for example, is classified under financial services, a category that has been liberalized to a much greater extent than health services. The liberalization of water and sewage systems, an industry dominated by European TNCs, also has tremendous effects on public health.

In Manila, for example, water distribution was privatized in 1997 and sold to two consortia, Maynilad Water Services and Manila Water Company. Both companies are joint ventures between European water giants, Lyonnaise des Eaux and International Water Ltd., and local business oligarchies, the Ayalas and the Lopezes. Five years after liberalization, water rates have tripled and the promised improvement in service did not materialize. In fact, the water distribution system is deteriorating further, making it vulnerable to contamination. Only last week, more than 500 people were hospitalized, at least 4 of which died, after an outbreak of gastroenteritis due to contaminated tap water in Tondo, a neighborhood in Manila that makes part of the service area of Maynilad.

GATS relies on a ‘necessity test’ in dispute settlement: domestic regulations of member countries must not pose ‘unnecessary barriers to trade.’ This provision can be used by foreign governments to challenge any domestic law, including public health regulations, before the WTO’s dispute settlement body. If the domestic regulation is deemed ‘unnecessary’ from the point of view of trade it will have to be revoked, even if it is sound public health practice. This provision is one of the many mechanisms through which the WTO erodes national autonomy over health policy and gives precedence to the presumed benefits of increasing trade liberalization over people’s health.[19]

According to some interpretations, this ‘necessity test’ applies to all services, not only to those services that have been offered voluntarily for liberalization. It therefore applies to health services, whether or not the country has commitments in the sector. Moreover, there are moves to strengthen this provision to outlaw principles of ‘redistributive’ health care systems including cross-subsidization, universal risk pooling as anti-competitive and unnecessary restrictions. This could accelerate privatization all over the world.[20]

The new round

Following the GATS built-in agenda, a new round of negotiations opened in February 2000. During the 2001 Doha Ministerial Meeting it was decided that member countries had to submit their requests for specific commitments by June 30, 2002 and initial offers by March 31, 2003. The United States Coalition of Services Industries was gung-ho about the prospects for health care:

“We believe we can make much progress in the GATS negotiations to allow the opportunity for US business to expand into foreign health care markets.”[21]

Some 60 countries have already made formal requests while only 30 have made offers for liberalization of services. All requests are kept secret with the notable exception of the European Union’s detailed requests to 109 countries, which became public only when they were leaked to a Canada-based NGO.[22] Health and social services are not included in the European Union’s requests but the liberalization of professional services and environmental services, including water and sanitation, is one of the major requests to most Third World countries. Whether other countries have made requests for the privatization of health and social services is not known. According to standard practice in WTO, negotiations are taking place behind closed doors (except of course for the corporate lobbies) and the status of the negotiations is kept secret from the outside world.

2.3      TRIPS: Treason and Robbery by Impostors and Patent Swindlers

The agreement on Trade-Related aspects of Intellectual Property Rights (TRIPS) regulates the international protection of intellectual property through patents and lays down rules for the patent laws of member countries. For example, it prescribes a minimum of 20 years for patent protection. Besides, it also has provisions on trademarks and copyrights.

Patented monopolies

TRIPS’s implications for the pharmaceutical sector are among the most controversial aspects of the agreement. The sector is under the monopoly control of a few pharmaceutical TNCs from the industrialized countries who protect their interests through patents, without any consideration for affordability and accessibility. They control not less than 97% of patents worldwide.[23]

Like GATS, the TRIPS agreement is flexible in principle, allowing member countries to take measures to safeguard the public interest, for example when public health is at risk. One of the most important safeguards is the right of member countries to issue compulsory licenses. Governments can override a patent and force patent holders to authorize licenses enabling drugs to be produced locally, subject to the compliance with certain procedures and a modest compensation. Production under compulsory licenses has to be “predominantly to supply the local market.”

Theoretically, this provision of the TRIPS agreement offers a convenient solution for poor countries and allows them to produce their own, cheap generic medicines. However, the number of countries that has the capacity to develop or even produce their own generic medicines is very limited. TRIPS therefore also provides the option to issue a compulsory license for importation of the drug from another country. In practice, this system did not work because of irrationalities in the provisions. Moreover, the multinationals and the rich countries, especially the United States, continued to exert political pressure and intimidation on poor countries not to make use of compulsory licenses at all. Most countries therefore wanted to improve the TRIPS provision on compulsory licenses during the WTO’s Ministerial Meeting in Doha in 2001.

The short-lived euphoria of Doha

The Third World was able to make some progress in Doha because the industrialized countries’ negotiating position was hampered by external circumstances. First, there was the lawsuit of 39 pharmaceutical multinationals against the government of South Africa because it had passed a new law to improve the availability of AIDS medication. This case brought the pharma-mafia’s callousness and the effects of patent protection on public health to the attention and the public sentiment was hostile to more intimidation about life-saving drugs in Doha. Secondly, the United States was experiencing a wave of attacks with anthrax-contaminated letters. When panic broke out about the availability of ciprofloxacin, a drug used to treat the disease, the United States government threatened to issue a compulsory license in order to secure immediately a cheap supply of Cipro from pharma-giant Bayer. Even though this action was justifiable under TRIPS, it was hard to reconcile with strong-arm tactics at the negotiating table.[24]

The Doha ‘Declaration on the TRIPS Agreement and Public Health’ explicitly states that “the TRIPS agreement does not and should not prevent Members from taking measures to protect public health” and reaffirmed the right to use compulsory licenses. That this declaration, which merely states the obvious, was seen as a breakthrough for the Third World, speaks volumes about the actual balance of forces in the world. Apparently, the mere fact that the poor aren’t being duped during an international summit is already a reason to crow victory. Nevertheless, the Doha declaration is definitely a step forward. It exempted the least developed countries from the full application of TRIPS until 2016. And in its famous paragraph 6, the agreement promised an ‘expeditious solution’ for the export problem of compulsory licenses before the end of 2002.

The problem that had to be solved was the following: Poor countries can issue compulsory licenses for the importation of a certain drug from another country that produces a cheap, generic version but TRIPS restricts export of this medicine. If the other country produces the drug under compulsory license, it should be “predominantly to supply the domestic market.” Currently, some poor countries can still purchase these drugs from a country like India that only has to start implementing TRIPS in January 2005. After that date, this kind of trade will become practically impossible. So while TRIPS provides the right to import a drug from another country under a compulsory license, this is useless if other countries are not allowed to export it.

The paragraph 6 saga

During the negotiations about paragraph 6 it became clear what the rich countries’ rhetoric about public health at Doha was really worth. In defense of their pharmaceutical industry, the United States, European Union, Japan and Switzerland, fought tooth and nail in order to turn the Doha declaration on its head and put greed ahead of public health. They effectively prevented any solution by introducing unnecessary procedural complications and limitations.[25] The pressure of the pharmaceutical industry was so overwhelming that, at one time, the WTO secretariat even announced that they were negotiating directly with pharma-giant Pfizer to find a text acceptable to the US government!

An agreement was finally reached in August 2003, two weeks before the Ministerial Meeting in Cancun. This agreement has already been denounced by organizations that have monitored the negotiations as it introduces a whole new and cumbersome bureaucratic procedure and offers more comfort to the pharma-giants than to the poor patients.[26] But for the poor countries, it was this temporary and partial solution or none at all.

Not only medicines

Patents under TRIPS do not only apply to medicines of course. Biopiracy is threatening traditional knowledge of poor countries as TRIPS allows TNCs to patent their application and ban others from using them. Patenting of seeds, for example, is denounced by poor farmers as it outlaws their traditional practice of saving seeds for the next planting season and erodes their meager incomes. Patenting also encourages the commercialization of products that are not proven to be healthy, like genetically modified organisms. Whatever commodity they are applied to, the ultimate impact of patents is similar: consumer prices rise and TNC monopolies benefit.

After the collapse of the WTO Ministerial in Cancun, it can be anticipated that the United States and the European Union will also maximize other channels to secure their TNCs’ profit margins through patents. Even while the negotiations about the implementation of TRIPS’s paragraph 6 were still ongoing, the United States continued to bully other countries and forced them to tighten patent protection even more than required by the TRIPS agreement, often through bilateral or multilateral trade agreements.[27] In the Free Trade Area of the Americas (FTAA), for example, the United States wants to ban the export of drugs under compulsory licenses completely and extend patents beyond 20 years in all 34 FTAA member countries.[28]

3         Winners and losers?

Even apologists of globalization readily admit that trade liberalization has winners and losers. They conveniently fail to specify, however, who these winners and losers are: the vast majority of the world’s population are at the losing end while a small number of TNCs and the small elite that rules them are reaping the benefits. The apparent ‘backlash’ of trade liberalization has made WTO officials label the current round of trade negotiations, which began in Doha in 2001, the ‘development round.’ Seemingly, they are anxious to project the illusion that the WTO will finally compensate the detrimental effects of trade liberalization on the world’s poor with ‘development.’

In reality, ‘development’ has never thrived without protection of national economies. That is how Europe, the United States and later Japan were able to industrialize. Even the ‘Asian tigers,’ Taiwan, Hong Kong, Singapore and the Republic of Korea relied on protectionist economic policies for several decades before they liberalized their trade with other countries.

Unmistakably, liberalization of trade has increased poverty and reduced access to health care through the commercialization of health systems. Also accessibility of medicines has suffered while health workers and health professionals find it hard to make a living. On the other hand, the TNCs that have been dominating health care in the industrialized world have been able to consolidate their monopolies and maximize their profits tremendously.

3.1      Increasing poverty and underdevelopment

The further advancement of globalization in the 1990s has arrested any improvements in living conditions or reversed them altogether. The 2003 Human Development Report of the United Nations Development Organization (UNDP), for example, analyzes the evolution of social indicators of most countries during the 1990s. The researchers’ balance of the ‘decade of globalization’ is disconcerting: 54 countries were poorer than at the start of the decade; in 37 countries income poverty had worsened; in 34 life expectancy went down; in 21 hunger worsened; in 14 child mortality increased; and in 12 countries less children were enrolled in primary school.

The Human Development Index (HDI), an aggregate of development indicators including health, deteriorated in 21 countries during the 1990s. UNDP Administrator Mark Malloch Brown was particularly alarmed by this trend. “Reversals in HDI are highly unusual as these indicators generally tend to edge up slowly over time,” he said, “and signify an urgent call for action to address health and education as well as income levels in these countries.” In comparison, only 4 countries saw their HDI drop during the 1980s.

According to the report, the number of people suffering from extreme income poverty, surviving on less than US$ 1 a day, fell by 123 million since 1990. Interestingly, China alone was able to reduce the number of extremely poor by 150 million during the decade. That is significant because China was much less exposed to globalization and trade liberalization than most other countries and because of its large population it influences overall statistics greatly. Excluding China, only considering that part of the world under liberal trade regimes, the number of extremely poor people actually increased by at least 28 million.

The same is true for the 20 million reduction in the number of hungry people during the 1990s and other modest improvements in global social indicators. Excluding China, the progress turns into a setback as the number of hungry increased with 60 million. Considering that China was not a member of the WTO during the 1990s, there is reason to conclude that the decade was a social catastrophe for member countries of the WTO.

The global trends in child mortality show the same picture. While the number of child deaths fell by 2.5% per year during 1960-90, the yearly improvement shrank to 1.1% in the 1990-2001 period. Although this deceleration might be expected in areas that had already achieved low rates of child mortality, such slowing also occurred in regions with high mortality rates. Disparities between countries also widened during the 1990s. In 1990, there were 180 deaths per 1000 live births in sub-Saharan Africa and only 9 per 1,000 in industrialized countries—a 20-fold difference. In 2000, this gap had increased to 29-fold with mortality rates of 175 and 6 per 1,000 children in sub-Saharan Africa and industrialized countries, respectively.[29] Apparently, even among the children there are winners and losers.

The former Soviet Union provides an extreme example of the devastating effects of economic liberalization. When the country collapsed in 1991, its population was suddenly exposed to the capitalist ‘free market’ economy. The effects on people’s lives were, and still are, devastating. The number of people living on less than US$ 1 a day rose more than twenty-fold.[30] In Russia, life expectancy fell to 58.9 among men and 71.8 among women in 2001. A recent study confirmed that an extra 2.5-3 million Russians died prematurely in the ten years after 1991 than would have been expected based on 1991 mortality.[31] Apparently, rapid opening up of the economy makes 700-800 victims per day in Russia!

3.2      Commercialization of care

The liberalization of trade in goods and services has given new impetus to the further commercialization and privatization of health care. Health has become a commodity that is sold and bought in the market and the primary objective of health care is to make profit. The trend is toward the American model of health care for profit even if the United States has the most expensive health system in the world covering the lowest percentage of the population.[32]

It is definitely not the patients who are the winners from health care for profit. American researchers argued in the New England Journal of Medicine: “For decades, studies have shown that for-profit hospitals are 3 to 11 percent more expensive than not-for-profit hospitals; (…) For-profit hospitals spend less on personnel, avoid providing charity care, and shorten stays.” They go on to conclude their article with a warning that is unusually passionate for a medical journal: “Like blood, health care is too precious, intimate, and corruptible to entrust to the market.”[33]

Health services

Until recently, most developing countries did not permit foreign private participation in their health sector because of its perception as a public good to citizens. It is only during the 1990s that developing countries have liberalized their foreign investment laws in health services.[34]

Since the mid-1990s, for example, US health maintenance organizations (HMOs) and investment funds have rapidly explored foreign markets. The exportation of HMOs has been linked to privatization and cutbacks in public-sector services and according to one study in Latin America, HMOs have attracted healthier patients, whereas sicker patients gravitate to the public sector.[35] Many large US health insurers have invested in joint ventures in Latin American markets, and by mid-1999 enrolled over 5 million members. One of them indicated their revenue was growing 20% annually on average.[36] Under GATS, big insurance corporations offering health coverage, HMOs and private hospital groups are expected to pry on the middle class markets in many poor or middle-income countries in Asia, Eastern Europe and Latin America.

The expansion of the private sector through foreign competition, as seems to be the ultimate objective of GATS, undermines the health system as a whole, even the public health sector. While the private sector is focusing on the rich and middle class, who have the capacity to pay for health services, the public sector has to fend for the poor. The gap between the rich and the poor therefore tends to increase. While expensive health services are available for those who can pay them, the poor have to rely on the poorly funded government services, or have to make do with none at all.

Medicines

The availability of medicines is severely restricted because of patents and unnecessarily high prices. The TRIPS agreement introduces protection of patent rights where they did not exist, raising prices of drugs with 12 to 200%[37] and makes drug prices rise out of reach for the poor, who need them most.[38] TRIPS introduces a minimum period of 20 year for the duration of patents, delaying the availability of cheaper, generic medicines.[39]

Recently, the WHO was forced to declare the failure to deliver AIDS medicines to those who need them a global health emergency. The international health agency explained that they decided to take this rare measure after evaluating the global situation and finding that only 5% of those in the Third World who require antiretrovirals (ARVs) are getting them. Of 5-6 million people in need, just 300,000 are on ARVs. In sub-Saharan Africa, for example, only 50,000 people, of 4.1 million who require ARVs, actually have access.[40]

In the Philippines, pharmaceutical giant MSD jubilantly announced 37% to 57% discounts on its blockbuster cholesterol-lowering drug Zocor. It forgot to inform the public that it was forced to lower its prices because the patent on simvastatin, the active ingredient, had expired. In other words, thanks to the patent, MSD was able to charge the patients twice the ‘competitive’ price for many years.

Even off-patent medicines, however, are often blatantly overpriced. The monopoly position of the big TNCs allows them to maintain unreasonably high prices. Over half of the people in Africa and Asia do not have access to essential drugs because of prohibitive prices.[41] Drug prices in the Philippines are the highest in Asia, next only to Japan. The Council for Health and Development’s pharmacy is able to sell medicines on the average at only one third of the price in commercial pharmacies. The Philippine Department of Trade and Industry recently announced it was able to buy branded medicines through ‘parallel importation’ from India at prices that are as much as 81% cheaper. “I cannot understand why in some cases medicines are sold at prices ten times higher here than in other countries of the region. They were developed and manufactured by the same companies,” Philippine Trade and Industry Secretary Mar Roxas commented.[42] Maybe someone should explain him how monopolies work.

The logic of liberalized markets dictates the priorities to the pharmaceutical TNCs. Less than 5% of the money spent worldwide on pharmaceutical research and development is for diseases that predominantly affect the poor. Although expenditure on total pharmaceutical research and development in the private sector doubled to US$ 44 billion in 1990-2000, of the 1395 drugs approved between 1975 and 1999, only 13 were specifically indicated for tropical diseases, including tuberculosis and malaria.[43]

Health workers

Health workers are likewise affected by commercialization and privatization. Staff of government health facilities are retrenched when government budgets for vital health services are cut. For example, a recent report released by the Stop-TB Partnership showed that 17 of the 22 high-burden countries found their efforts to stop TB hampered by staffing problems. But during a recent visit to one country, a WHO team discovered that 4000 nurses were currently unemployed due to privatization and budget cuts in the public sector.[44]

Rural communities in particular risk seeing their access to health care undermined by the expansion of the private sector, as their remaining doctors, nurses and midwives leave to serve the urban elite. In Cambodia, for instance, where 85 percent of the people live in the countryside, only 13 percent of government health workers work in rural areas.[45]  In the Philippines and many other Third World countries similar disparities are observable and expected to widen.

With or without GATS, the gap between the rich and the poor also induces a brain drain, not only from the countryside to the cities but also to the industrialized world. Of all migrating physicians, 56% goes from South to North while only 11% takes the opposite route.[46] In the Philippines, doctors are even training as nurses to take advantage of the demand for nurses in the United States and Europe where they can earn US$ 3,000 to US$ 4,000 or five to ten times more than in their home country.[47]  Not less than 700 out of 8,000 who took the June 2003 licensure exam for nurses were doctors.[48]

3.3      Serving big business

The ‘winners’ have to be found in the boardrooms of the TNCs that were able to take advantage of new opportunities in international trade. The pharmaceutical industry is a case in point. Throughout the 1990s a series of mergers and acquisitions has consolidated the pharmaceutical industry into a few giant monopolies and their number is expected to fall further from over 30 to around 12 in the next decade.[49]

The pharmaceutical industry is actually the most profitable in the world. The average profit margin of the top 10 pharmaceutical companies in 1996 was 30%, which explains why drug making continues to survive as one of the largest manufacturing industries. Monopoly of patents and monopoly position in the market is the key to the drug industry’s extraordinary profitability and its annual revenue growth of 10%.[50]

According to a survey by Families USA in 2000, the average compensation of the highest paid executive in the top nine pharmaceutical companies in the United States—exclusive of unexercised stock options—was almost US$19 million. The highest-paid among them was William C. Steere, Jr., Chairman of Pfizer who earned US$ 40,191,845 in compensation. On top of that, he held stock options worth US$ 130.9 million.[51]

Expect these staggering figures to rise when the WTO is able to turn global health needs into a global health care market!

4         Challenges from farmers and from Cuba

The WTO’s offensive on the health care markets and the public sector is not over yet. While the GATS negotiations are still ongoing, the rich countries tried to start negotiations on government procurement of goods and services at the recent 5^th Ministerial Meeting in Cancun. Government procurement, which used to be an issue under GATS, was surreptitiously packaged as one of the four so-called Singapore issues.

In fact the health sector could learn from the peasants who have united and fought against the WTO from the very start. Especially since the ‘battle of Seattle’ they are in the forefront of the people’s struggle against trade liberalization. In its Seattle Declaration, Via Campesina, a global alliance of peasant groups, asserts:

“The WTO is a totally inappropriate institution for democratic decision-making and policy formulation on important issues such as food sovereignty, health and environmental legislation, management of genetic resources, water, forestry and land, and the organization of agricultural markets. A profound reform of the WTO in order to make it respond to the rights and needs of people would mean the abolition of the WTO itself! We do not believe that the WTO will allow such a profound reform. Therefore, the Via Campesina, as an international movement responsible for the agricultural sector, demands that agriculture should be taken out of the WTO. Perhaps more appropriately, let's take the WTO out of agriculture. We invite other sectors to demand the same. (…) Via Campesina calls upon international and national movements, and non-governmental organizations to build strong alliances to continue to fight these neo-liberal policies and to build alternatives. If we continue to work together we will succeed!”[52]

Now the detrimental effects of the WTO on health and health care become clearer, the health sector cannot but heed the call of the peasants to strengthen an international health movement in solidarity with the basic sectors.

Our world and our health are not for sale!

WTO out of health!

To those who criticize us for being ‘anti-globalization’ and ‘anti-development’ we can tell the stories of international solidarity in the health sector. One remarkable example was recently featured in The Lancet.[53] According to this London-based medical journal, Cuba will provide free treatment to poor Argentineans under an agreement that reduces Havana's US$ 1.9 billion debt to Buenos Aires, in return for drugs, vaccines, and access to Cuban health-care services. Argentinean people denied medical services as a result of the near-collapse of the country’s health and social security system—a consequence of a generalized economic crisis—will get free treatment in Cuba. Care up to a value of US$ 50 million over 5 years will be provided to low-income Argentineans. Argentina's chronic shortage of drugs will be eased by consignments from Cuba's highly developed pharmaceutical sector, worth US$ 475 million. Argentinean scientists and medical tutors will be trained in pioneering Cuban treatment for the degenerative eye disease retinitis pigmentosa and in other specialties highly developed in Cuba, such as drug rehabilitation and cosmetic surgery. Apparently, Cuba doesn’t need GATS to provide health services to the poor of other countries in a spirit of international solidarity!

Cuba might be an exception because its current society was born in exceptional circumstances. Cuba’s president, Fidel Castro, reminisced last August how he described his country exactly 50 years ago, during his trial after the failed attack on the Moncada garrison:

“The little rural schoolhouses are attended by a mere half of the school age children who go barefoot, half-naked and undernourished. Ninety per cent of the children in the countryside are sick with parasites. Society is indifferent to the mass murder of so many thousands of children who die every year from lack of resources. From May to December over a million people are jobless in Cuba, with a population of five and a half million. When the head of a family works only four months a year, how can he purchase clothing and medicine for his children? They will grow up with rickets, with not a single good tooth in their mouths by the time they reach thirty; they will have heard ten million speeches and will finally die of poverty and disillusion. Public hospitals, which are always full, accept only patients recommended by some powerful politician who, in return, demands the votes of the unfortunate patient and his family so that Cuba may continue forever in the same or worse condition.”[54]

“Statesmen,” Castro continued, “whose statesmanship consists of preserving the status quo and mouthing phrases like ‘absolute freedom of enterprise,’ ‘guarantees to investment capital’ and ‘law of supply and demand,’ will not solve these problems.”

Time has proven him right. Moreover, we know now that if the statesmen don’t solve the problems, the people will. Be sure the health sector will be on their side!

*Paper presented at the International Conference on Challenges in Health Work Amidst Globalization and War

Manila, Philippines, 8-10 November 2003

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