Trade liberalization in

services, the GATS way

Implication for the health
industry
Ankur Gupta- B14067
Mahboob Reza-B14086
Raja Reddy- FB14004

General Agreement on Trade

in Services (GATS)
GATS emerged from 1994 Uruguay Round of negotiations
that created the WTO (Members agree to progressive
liberalization)
Subject services trade to same treatment as goods (GATT)
Basis = liberalization increases global efficiency (comparative
advantage lower cost, higher quality, innovation)
Provides multilateral legal framework for liberalizing
international services trade (based on existing int. trade law)

WTO Agreements
Goods: GATT
Technical barriers to trade: SPS, TBT
Intellectual property and trade : TRIPS
Services: GATS

GATS Timetable
1994 Uruguay Round of WTO negotiations saw initial
commitments in health services made by a handful of
countries
Current negotiations began following WTO meeting in
February 2000:
o initial requests for specific commitments made by end
June 2002
o initial offers due by end of March 2003
o finalised agreement by end of January 2005

Main Elements of the GATS Agreement

General Agreement on Trade in services provides basic
disciplines and a framework for negotiations on liberalisation
of services sectors.
The agreement does not define the services but provides
that the term service covers any service in any service
sectors including their production, distribution, marketing,
sales and delivery according to the four modes (Article 1.3).
GATS also covers government measures affecting services
which are provided on a commercial basis.

How does GATS work?

Successive rounds of negotiations with a view to achieving
a progressively higher level of liberalization in their service
sector (art. XIX)
WTO members make liberalization requests / offers of other
member countries in bilateral secret meetings in Geneva
Debate is polarized - Tale of Two Treaties
o GATS is worst of treaties undermines national
sovereignty
o GATS is best of treaties increase health (sovereignty)

S
T
A
R
T

Threshold Question: Does GATS Apply?

Is the health-related service

supplied by the government?

No

Yes
Is the health-related service
supplied on a commercial basis?

No
Is the health-related service
supplied in competition with
one or more service providers?

No
GATS does not apply

Is the health-related service

supplied by a private actor
pursuant to delegated
governmental authority?

Yes
Yes
Yes

No
GATS applies to measures
of WTO members that affect
trade in health-related services

GATS in health care systems: Four modes

of supply

Cross border delivery

Consumption abroad
Commercial presence
Movement of personnel

Cross border delivery

Example: E-health, Consultation by mails
Opportunities
Enable health care delivery to remote and underserviced areas
Improve quality of diagnosis and treatment
Upgrade skills, disseminate knowledge through interactive
electronic means
Risks
Possible diversion of resources from basic preventive and curative
services
Relies on telecommunications and power sector infrastructure

Consumption abroad
Example: Movement of patients from home country to the country
Opportunities
Generate foreign exchange earnings (for exporting country)
Overcome shortages of physical and human resources in speciality
areas (for importing country)
Risks
Outflow of foreign exchange (for importing country)
Diversion of resources to service foreign nationals
Create a dual market structure higher quality for the wealthy
foreign nationals and lower, resource constrained segment for the
poor

Commercial presence
Example: Establishment of hospitals through FDI
Opportunities
Upgrading of infrastructure and technologies
Reduce the burden on public resources
Create employment opportunities
Risks
Two tier structure of healthcare establishments corporate
segment and public sector segment
Internal brain drain from public to private sector
Cream skimming (Thailand)

Movement of personnel
Example: Doctors and nurses settling permanently in foreign country
Opportunities
For sending country
Promote exchange of knowledge among professionals
Upgrade skills and standards (provided service providers return to the
home country)
For host country
Meet shortage of health care providers
Risks
Permanent outflows of skilled personnel
Loss of subsidised training and financial capital invested

GATS provision adversely affecting poorer

nations
Most Favored Nations
Favor one favor all: Treat trading partners equally
A country cannot be selective in permitting a foreign country in
offering services based on national interest
National Treatment
Treating domestic and foreign service providers equally
Foreign service provider entitled to all the subsidies that is given to
a national institution
Increased pressure on public health system; government may
withdraw subsidy altogether

Why are current levels of trade in health services low?

Administrators are skeptic about the potential benefits as health
outcomes
Presence of government monopoly offering free or below cost service
Lack of any pace setters in the health sector (unlike US/OECD
countries for telecomm/financial services)

Statistics
Only 88 countries have made specific commitment
In case of Europe, only 12 countries have made commitments

Implication of GATS for healthcare sector in India

Cross border delivery such as e-health not possible due to lack
of power and telecomm infrastructure in India
Diversion of public resources which can be used to provide
facilities for disease prevention and cure
Private sector might threaten to take over the most profitable
segments
Rural communities might risk access to healthcare as private
sector draw personnel from public sector

Most important issue for adopting GATS

Unlike a countrys own unilateral decisions, which can be reversed if they are found
to be damaging, the GATS commitment is binding and effectively irreversible
Question for Policy makers
Will increased trade in these services lead to better health outcomes?
Will increased liberalization of trade (more competition from foreign private
health care companies) lead to better health outcomes?
Will making a GATS commitment in these sectors offer any additional advantage
that will lead to better health outcomes?
If No for any of these -> Country Should not make GATS Commitments

Recommendations
Call for full and independent impact assessment of GATS and other WTO
agreements
Recognition of national sovereignty over liberalisation commitments
Stronger exemption for public services and exemption of subsidies from
national treatment standards
Developing countries should not come under pressure to liberalise their
basic service
Call for a change to GATS rules which restrict countries from retracting
commitments already made under GATS

References
Pollock, Allyson M., and David Price. "The public health implications of world trade negotiations on the
general agreement on trade in services and public services."The Lancet362.9389 (2003): 1072-1075.
Smith, Richard D., Rupa Chanda, and Viroj Tangcharoensathien. "Trade in health-related services."The
Lancet373.9663 (2009): 593-601.
Timmermans, Karin. "Developing countries and trade in health services: which way is
forward?."International Journal of Health Services34.3 (2004): 453-466.
Woodward, David. "The GATS and trade in health services: implications for health care in developing
countries."Review of International Political Economy12.3 (2005): 511-534.
Nick Drager 1 and David P. Fidler2, MANAGING LIBERALIZATION OF TRADE IN SERVICES FROM A
HEALTH POLICY PERSPECTIVE, WHO
Chantal Blouin ,Nick Drager and Richard Smith book on International Trade in Health services and the
GATS current issues and debates
Karin Timmermans, Developing Countries and Trade in Health Services: Which Way is
Forward?, International Journal of Health Services
Biswajit Chatterjee, book on Globalisation and Health Sector in India

Thank You!