WTO Agreements and Public Health: A nexus rather than an agreement
Sabyasachi Mitra

Summary: The recently brought out joint study by the WHO and the WTO Secretariat titled WTO Agreements and Public Health has argued more for private medical service providers instead of addressing the concerns of the distressed.

Keywords: Sabyasachi Mitra, WHO, WTO, WTO Agreements and Public Health, public health, TRIPS, WTO Members, compulsory licensing, parallel imports, developing countries, US, European Commission, Thailand, Jordan, liberalisation, health services, Cuba, Philippines, India, GATS, Sanitary and Phytosanitary (SPS) Agreement, national food security, household food security, malnutrition, terms of trade, food aid, consumer goods, human right

WTO Agreements and Public Health: A nexus rather than an agreement
By Sabyasachi Mitra

The study by the WHO and the WTO Secretariat titled WTO Agreements and Public Health has belied expectations of those who had expected a critical analysis of the WTO policies and the likely impact they would have on public health, especially in developing countries. The report identifies the Agreements on Technical Barriers to Trade (TBT), Sanitary & Phytosanitary Measures (SPS), Trade Related Intellectual Property Rights (TRIPS) and Trade in Services (GATS) as the main WTO Agreements related to health and health policies. While the report seeks “to examine the linkages between trade and health policies, so as to enable both trade and health officials to better understand and monitor the effects of these linkages”, in places it looked as if the principal focus is to espouse the neoliberal agenda which proclaims that TRIPS, after all, is not such a bad thing. Overall the report lay emphasis on the interlinkages between trade and health and talked about the need for greater coherence between trade and health policies and said that the intention of bringing out the WTO-WHO joint report is to illustrate that such coherence is attainable.

The report claimed that the TRIPS Agreement does not undermine the right of WTO Members to formulate their own public health policies and implement them by adopting measures that protect public health. While the WTO principle of non-discrimination bars Members from discriminating between their trading partners or between imported and locally-produced goods that are otherwise similar, the report states that this principle can be violated if restrictions on export and import of products are necessitated in order to protect the health of humans, animals and plants. WTO Agreements and Public Health also allows governments to use ‘a host of WTO consistent, non-discriminatory measures, such as internal taxes’ to reduce tobacco consumption which has negative health impacts.

The report expects the WTO negotiations to eliminate (or reduce) import duties on drugs, vaccines, etc., thereby lowering prices of the same. While the study states that patent protection for pharmaceutical products is a critical issue that needs to be addressed, and outlines the need to find a proper balance between providing incentives for future inventions of new drugs and ensuring affordable access to existing drugs, it remains mum on how the right balance might be achieved. As regards concerns that TRIPS might lead to an increase in drug prices, the report outlines the provisions of compulsory licensing and parallel imports that can be resorted to in case of such price spirals. It is true that TRIPS do speak of tools like compulsory licensing and parallel imports that Members may use to deal with public health. Besides the TRIPS Agreement does not disallow differential pricing which allows medicines to be priced cheaper in developing countries while higher prices in rich countries continue to provide incentives for spending on R&D. It is true that the Doha Declaration, though still vague, leaves open the chance of deciding positively about the use of compulsory licensing by the TRIPS council eventually. However, developing countries have correctly expressed concerns about the restrictive conditions advanced by many developed countries under which these tools might be brought into force.

Even as the report mentions that TRIPS, under certain conditions, allows countries to limit the exclusive rights of patent owners by granting compulsory licenses or allowing parallel importation of patented products, the TBT and SPS Agreements however require that while trade might be restrained for legitimate reasons including health, it should not be done unnecessarily.

The WHO-WTO study at least has recognized the need for allowing compulsory licenses to countries under certain conditions. The US, which has trashed all democratic norms of decision-making whenever such norms have not suited US interests, and has coerced countries to toe its line, has categorically and repeatedly stated that strong patent regimes would be beneficial to all countries, rich or poor, and has refused to acknowledge concerns of developing countries that TRIPS would have negative effects for access to affordable medicines. It has strongly objected to issuing compulsory licenses, saying that it would have negative implications for patent systems. NGOs have found evidence that developing countries come under tremendous pressure and attacks by drug multinationals and the US government when they try to invoke measures like invoking compulsory licensing in their laws. And there has rarely been a report whose recommendations have been successfully implemented without the support of the United States. A recent proposal by the US, presented to the African Trade Ministers by the Assistant US Trade Representative for Africa quoted below will help the readers to realize how rigid the US is on the issue of compulsory licensing.

‘The US supports a solution that focuses on the serious epidemics faced by Africans- HIV/AIDS, malaria, and tuberculosis. Broadening the solution to cover any public health problem, as some are advocating, would divert attention and resources away from these epidemics, at Africa's expense, and risks trivializing the gravity of these serious epidemics.’

The US had even issued a challenge to countries that have asked for extensions of transition periods to justify such proposals. The US claimed that such proposals are based on the belief that TRIPS would adversely affect public health. But, according to the US, none of these countries could have seen the impact the Agreement would have on their health care regimes, as they are yet to implement it, and hence such demands are uncalled for. Such a point of view holds little water. Paying scant respect to voices of all organisations except the WTO, the US has ‘advised’ Members to refer only to the WTO website and “avoid documents circulated by other individuals and organisations that lack WTO’s expertise”.

The European Commission has also stated that it would not even entertain any discussion about downgrading the level of Intellectual Property protection that is currently accorded. One is left wondering how much scope for ensuring public health would be left in the TRIPS when the developed world is not even willing to discuss the worries of the developing countries.

Even as the focus remains on patents and strict implementation of the same, 14 million people are dying of infectious diseases every year.1 The predominant distribution of these deaths in poor countries (more than 90 per cent of these deaths occur in developing countries) is perceived as a major disincentive to invest in the discovery and development of new treatments for these illnesses. According to WHO estimates, one-third of the world’s population lacks access to essential drugs. More than 50 per cent of the people in poor Africa and Asia do not have access to even the most basic essential drugs. Less than 1 per cent of the 1223 new medicines launched on the international market between 1975 and 1997were destined specifically for tropical communicable diseases. High R&D costs allow only large drugs multinationals to invest in R&D. However, people suffering from infectious diseases cannot mostly pay lucrative prices to justify such investment. Smaller potential returns are considered as simply not worth the investment.

As reported by Medecins Sans Frontieres (MSF), it is often argued that investment in tropical disease research will go up once all WTO Member states grant patents on new drugs and processes for a minimum of twenty years as would be required under the TRIPS guidelines.2 Lack of adequate protection of innovations in developing countries is said to be the prime cause for making such investment uneconomical so far and a strong patent regime has been argued for availability of these drugs in the countries where they are needed. But as MSF points out, ‘experience has shown that drug development for neglected diseases - conditions that mainly or only affect people in poor nations - will not increase no matter how stringently patents are protected. This is because the people suffering from neglected diseases do not represent a lucrative enough market to drive research’. Only 15 per cent of the world’s population accounts for 86 per cent of the drug spending, and the world market for drugs mostly cater to their needs. While drugs for treating diseases like bacterial meningitis and sleeping sickness have often been suspended for a lack of lucrative market even as thousands get affected by them every year, non-life-saving drugs like Viagra and anti-depressants are evolving into the fastest growing segments of world drug production.3

Pharmaceutical expenditure accounts for a substantial part of the health budgets of most developing countries. Process patents have so far allowed these countries to manufacture a patented drug by a process different from the one originally used. This has kept prices of essential drugs under control. All that would change with the introduction of product patents as required by TRIPS, that too for a period of twenty years. Majority of the people in developing countries would not be able to afford many of these drugs and would keep dying of diseases long eradicated from the developed countries. Once product patents are made mandatory, the absence of generic competition will allow a particular drug to be priced much higher than may be warranted by the actual expenditure incurred in R&D for the drug. The cost of regulation to ensure that product patents are not violated would contribute to raising the prices of drugs further. The lack of generic innovation would thus adversely affect prevention and cure of diseases in developing countries.

The joint study cites the evolving of the health industry in countries like Thailand and Jordan to cater to foreign patients as a benefit of the liberalisation of health services. To quote from the study, “…growing numbers of countries are seeking to attract health consumers from other countries”. As if all citizens in these countries have been ensured adequate health facilities and any expansion of services can now cater to foreign patients. The other benefit the study mentions is the export of doctors and nurses to the developed world from countries like Cuba, the Philippines and India. So while the developing countries witness a further drop in the already abysmally low doctor-patient ratio, developed countries get skilled medical personnel at lower prices. One can clearly see whose health the study has in mind when speaking of public health. What the study cites as benefits actually wean resources away from serving the needy to the service of the affluent. The study hopes that new five-star hospitals in developing countries, set up with foreign capital essentially to cater to the rich, would prevent trained medical personnel from leaving their native shores, thus preventing outflow of human resources. However these personnel serve the rich many of whom could have got treated abroad as well and to the poor majority it hardly matters whether they remain in their native countries or migrate abroad. Though as an appendage the study does warn of such consequences, saying that

the report mentions that such unwanted developments can be reduced through regulatory strategies, though it would require strict enforcement capacity which some countries may not have. One cannot treat the setting up of luxury hospitals as a positive impact of liberalisation when the same process is leaving public health support systems in the doldrums.

Even though there is no empirical evidence in any service sector (including health services) to link any significant increase in FDI flows to developing countries with the conclusion of GATS, the joint study says the time span that has elapsed since WTO is too short to arrive at such a conclusion and also attributes it to developing countries’ “commitments that bind existing levels of market access, rather than involving any substantial liberalization”. This is a story that has been repeated once too often. Whenever the liberalization package has failed to deliver, (which has been the case more often than not), the proponents of the package has blamed the developing world for not opening up enough to get the benefits of the programme.

In several places the study has spoken of the possibility of national governments imposing some social obligations on foreign and other private providers of health services who would otherwise make their services available exclusively to the rich. However, FDI in developing countries is abysmally low even without such conditionalities. One can well imagine what the case would be if such restrictions were imposed on private health providers.

Another positive impact of TRIPS on public health that the study talks about is the protection it allows to countries that enables them to bar entry of different products under several food safety measures like the Sanitary and Phytosanitary (SPS) Agreement, environmental concerns, etc., and under the plea that the products under consideration would adversely affect human or animal health. This clause, the study argues, puts to rest criticisms that the TRIPS Agreement will open the floodgates for imports of all kinds and qualities and that sovereign nations will have no control over any situation that might arise as a result.

However, as is obvious, this measure will again turn out to be in the interest of developed countries who will now use this clause to prevent products of developing countries from entering the developed markets, thus protecting the domestic producers from competition from abroad. Developing countries hardly have advanced testing facilities and hence can rarely prevent imports from developed countries from entering the markets. Many of the disputes the study cites to exhibit how the WTO Agreement allows justifiable protection are between countries or groups within the developed world.

The study identifies national food security and household food security as two crucial necessities to ensure adequate health standards for all. Thereby it recognises that food reserves in godowns are not enough to ensure that food reaches the hungry households in time. The study further recognizes that “the great majority of the burden of disease associated with undernutrition arises from chronic malnutrition as a result of household food insecurity. This is affected by economic and social policies at home. It is also affected by trade liberalization through a number of different impacts on household incomes and employment opportunities and on prices of foods and other essentials. However, suddenly the study says that household food security is a complex issue and “because of its complexity, household food security is not discussed in this report, despite its central importance to the burden of disease”.

In other words the report, keen to prove that accession to the WTO would enable Members to have improved standard of living for its people, does not even have the expertise to deal with the issues whenever they are a bit ‘complex’ (read ‘does not support the view that trade would be beneficial’), and deals with issues which are at best of peripheral interest to mankind.

So far as the issue of national food security is concerned, the study suggests that while trade liberalization may reduce self-sufficiency in basic food production, it may not necessarily imply national food insecurity provided the country is able to earn enough foreign exchange to import the food it needs. The report hopes that elimination or reduction of export subsidies and increased market access in developed countries will raise export earnings of lower income developing countries for which export agriculture remains the principal source of foreign exchange. Again the report takes for granted the standard argument that agricultural liberalisation will boost exports from developing countries and help them get better prices than the ones they were getting within national boundaries. Evidence however shows that the terms of trade has been continuously deteriorating against agricultural goods. Also the stringent import norms which the developed countries impose on exports of developing countries under SPS, environmental and other criteria (ones that the report has trumpeted as measures in the WTO that preserve public health standards) reduce the already minimal scope for agri-exports from the developing world to markets in developed countries. And with WTO-compatible subsidies given to farmers in developed countries being many times the annual incomes of farmers in developing economies there is no hope of the latter getting a level playing field.

On the issue of food aid the report cites the ‘flexibility’ that WTO allows to national governments to hold public food stocks for food security purposes. But there is a catch. The stocks have to be procured through a publicly funded government programme, should not provide price support to producers, and have to be purchased entirely at market prices. The study states that therefore “this leaves governments free to pursue such policies, subject only to their own resource constraints, and the policy conditions of the international financial institutions and donors”.

So what happens to countries where governments are not that rich? They cannot set up public food reserves to ensure adequate nutritional standards to the entire population, particularly in years of crop failure. And ironically these are the countries where the majority of the people vulnerable to nutritional deficiency reside. Policy conditions of the international financial institutions and donors get predominance over lives of the people. What has recently happened in Malawi is a lesson for everyone who thought that a country can dismantle its food reserves, and food aid would take care of any deficit in the required supply, if and when such a necessity arises. The country sold its food reserves, purportedly under pressure from the IMF, to service outstanding loans. The World Bank also encouraged Malawi to hold foreign exchange instead of foods stocks and buy grain with the same in years of shortage. Unfortunately it is precisely in the years of crisis that grain prices soar to levels at which countries cannot, with the foreign exchange reserves they have, buy the amount required to avert the famine.4

Also banking on food imports in times of shortage is fraught with risks. If a large country is facing a crisis, providing food to it might lead to a rise in international food prices. More often than not food aid also arrives with political strings attached to it. Finally the time that passes before food aid arrives at the ports of the crisis-ridden country might lead to preventable loss of life owing to starvation. And in less developed countries where such crises are more frequent, the distribution system is often not efficient enough to ensure a swift disbursal and delivery of the food aid from the port to the people who are affected.

On the question of coherence between health and trade policies the report states that the WHO’s objective is “the attainment of all peoples of the highest possible level of health”. And what has that to do with trade? In this regard the report says, “an underlying assumption is that a liberal international trade regime, subject to reasonably stable and predictable conditions, improves the climate for investment, production and employment creation, and therefore contributes to economic growth and development. Generally, the health status of a country is affected positively by such growth”.

The report considers the link between the environment, health and trade as a complex one. It proposes withdrawal of subsidies to polluting industries and trade liberalization for exports from developing countries, along with financial and technology transfers, to help fight environmental degradation and encourage sustainable development. But without any concrete commitment from the developed world chances of financial and technology transfers to developing countries do not look bright.

The report identifies three areas as the emerging ones – ones that have the potential to revolutionize health care – and discusses the relationship between health and trade in these cases. The three emerging issues are biotechnology, information technology and the use of herbal medicines. The TRIPS Council has debated the issues of patentability of some biotechnological innovations, while the SPS Committee has discussed concerns raised about safety of GM food. A lot of the patents in the area of biotechnology are based on knowledge that has been in the public domain for long, and some are products from nature. The possibility of product patents for all matters relating to natural products, whether in the pharmaceutical or food industries, should be denied and only process patents for the products of nature or any extensions of them should be allowed. While the role and potential of information technology in transforming societies and economies, in raising job productivity, in creating new jobs, and in speeding up communication and information flows has been outlined, the report cautions that growth of information technology, particularly in resource-starved countries, can be constrained by high costs and lack of infrastructure and trained personnel.

In the last chapter the report outlines the need for greater interaction between trade and health policy makers and practitioners, and also for greater mutual awareness of trade and health policies. The report states that as long as the principle of non-discrimination is adhered to, any country can manage trade in goods and services in a way to achieve its national health objectives. Even these conditions are sometimes waived in case there is a public health emergency. The report views possible tensions between national health policies and trade policies as opportunities for finding common ground. As experience suggests, more such opportunities are bound to emerge in the days ahead when WTO wreaks havoc in developing countries as people in these countries find prices of health services skyrocketing even as private medical services reap huge profits.

WTO Agreements and Public Health argues that there exists no basic conflict between ‘open’ trade rules and health in even poor countries. However medical knowledge-and associated medical research, technological application and dissemination- belong to the category of ‘club goods’, goods that have large externalities and hence tend to be underprovided by private suppliers. Club goods are defined by limited access and are (at least up to a certain number of consumers) non-rival. The need for public action arises to ensure adequate provision of such knowledge and universal access of the same. While attempts to increase the development of medical knowledge by increasing private appropriability (such as through patents) might encourage more innovation, and thus result in dynamic gains, knowledge thus obtained might be underutilized because of underproduction, monopolistic pricing, or similar behaviour on the part of the patent holder.5

The reality is far from the make-believe world of such lopsided reports. Essential medicines that control infectious diseases need to be made available at affordable prices throughout the globe. Public health is not as trivial as consumer goods in a global free market economy. It has a special status as it plays a crucial role in global welfare, and has to be hence provided to the entire population in the world irrespective of their purchasing powers. The WHO-WTO joint study in no way addresses any such concern. In fact it acts against such basic principles. The acceptance of this study as a benchmark would run contrary to the notion that public health is a human right and not an ordinary consumer good. It would boost the power of multinationals in rich countries while bringing growing hunger, malnutrition, and deaths from preventable diseases in the developing world.

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