Ronald Labonté Canada Research Chair, Globalization/Health Equity University of Ottawa Trade and Health
To trade or not to trade? • That is not the question! • Trade endemic to human societies, global trade as old as human settlements • What changes is our notion of ‘global’ • The questions: • What are the terms of trade, the rules? • How are they set? • Who benefits/loses and why? • What are the ecological limits?
Key questions: • How does the current era of increasingly ‘free’ global trade affect health equity (leveling up within and between countries)? • How do the rules (governance) of global trade affect such trade’s health equity impact? • What trade reforms would permit global trade to be more health equitable?
From GATT to WTO • Post-war reconstruction • World Bank: Fund reconstruction • IMF: Ensure macroeconomic stability (instability being one of the causes of both world wars) • GATT: Voluntary agreements to lower tariffs • Enter oil crisis, global debt crisis, the neo-con backlash, the rise of neoliberalism and the increasing scope of GATT negotiations • 1995: WTO arise from GATT as set of complex agreements with enforcements • 2001 onwards: rise in bilateral and regional trade treaties (‘spaghetti bowl’) as WTO stalls
The way forward is: ‘tough, sustained bilateral negotiations’ US Trade Representative Ron Kirk 7th WTO Ministerial
Key WTO Principles • Progressive liberalization • Domestic barriers to free flow of goods should be ‘least trade restrictive’ • Most Favoured Nation: all members given same market access (limited exception: General System of Preferences for LDCs) • National Treatment: like goods, services from foreign country treated the same as domestic goods, services (non-discrimination) • Special and differential treatment: developing countries should have lesser obligations until they catch up • Single undertaking: all or nothing • Regional and bilateral treaties can make exceptions for provisions that are WTO+
The Parties to this Agreement …their relations in the field of trade and economic endeavour should be conducted with a view to raising standards of living, ensuring full employment and a large and steadily growing volume of real income and effective demand…while allowing for the optimal use of the world’s resources in accordance with the objective of sustainable development http://www.wto.org/english/docs_e/legal_e/04-wto_e.htm
Pro Free Trade ArgumentLiberalization Increases GrowthIncreased Growth Increases WealthIncreased Wealth Decreases PovertyDecreased Poverty Increases HealthIncreased Health Increases Growth
The big picture - 1 • Little empirical support for conventional trade/health ‘story’
The rising tide? • Poverty at $1.25 day down by 505 million since 1981; but up by 123 million excluding China • decreases in some parts of the world offset by increases elsewhere • Poverty at $2.50 day up by 402 million; and by 745 million excluding China Chen, S. & Ravallion, M. (2004). "How Have the World's Poorest Fared since the Early 1980s?" The World Bank Research Observer, vol. 19, no. 2, pp. 141-169. Chen, S. & Ravallion, M. (2008). The Developing World Is Poorer Than We Thought, But No Less Successful in the Fight against Poverty, Policy Research Working Paper 4703. Washington, DC: World Bank.
For every $100 in global economic growth, only $1.30 trickles down to the poorest 20%, less than half that trickled down in the 1970s. Export led growth (business as usual) requires consumption levels primarily by higher-income groups that are already environmentally unsustainable Growth is Not Working Percent changes in GHG emissions 1990-2004 by sector Woodward, D. & Simms, A. 2006, Growth is Failing the Poor: The Unbalanced Distribution of the Benefits and Costs of Global Economic Growth, ST/ESA/2006/DWP/20, United Nations Department of Economic and Social Affairs, New York, 20.
The big picture - 1 • ‘Globalizers’ that grew 1980s – 1990s ended period still more closed than equally trading ‘non-globalizers’ that failed to grow and that had been ‘forced’ open earlier and more rapidly by SAPs
GDP per capita in developing regions relative to that in the developed world, 1950-2001 World Economic and Social Survey 2006, UN DESA;
Trading our way to better health through poverty reduction? “it is hard to maintain the view that expanding external trade is…a powerful force for poverty reduction in developing countries” Ravallion, M. (2006). "Looking beyond averages in the trade and poverty debate,” World Development, vol. 34, no. 8, pp. 1374-1392.
Comparative Advantage? When theory was developed: • Finished goods traded across borders • Capital immobile • Wealth difference (trading nations): 3:1 Situation today: • Most trade intra-firm between subsidiaries • Capital hypermobile • Wealth difference (trading nations): 300:1
The big picture - 2 • Economic benefits have been asymmetrical; globalization’s enlarged and deepened markets reward countries that already have productive assets (financial, land, physical, institutional and human capital).
Who wins, who loses? • Estimated benefits of completed Doha Development Round projected to 2015: • HICs: +$79.9 billion • Developing countries: +$16.1 billion • Estimated tariff lossesHIC NAMA proposals: • HICs: -$38 billion • Developing countries: -$63.4 billion Sundaram, J. and Arnim, R. 2009. “Trade Liberalization and Economic Development,” Science 323. Gallagher, K. P. 2007, Measuring the cost of lost policy space at the WTO, IRC Americas
Low-income countries High-income countries
Whatever the right assumptions are, all the different models come to essentially the same conclusion: Global gains of a Doha trade agreement are miniscule relative to world GDP and mostly accrue to large and more developed countries. Sundaram, J. and Arnim, R. Trade Liberalization and Economic Development, Science 323, 9 January 2009.
More than simply trade • Structural adjustment conditionalities (now embodied in PRSPs, some of which require deeper tariffs cuts than WTO) • Ghanaian tariffs for chicken imports 99% under WTO; IMF SAP required a cut to 20%; 400,000 domestic producers went out of business when market flooded by cheap, subsidized European frozen chicken imports which some concerns over health and safety of eventual retailing of frozen chicken in a country with few freezers • Implicit conditionalities (international financial institutions and investors ‘punish’ countries with the ‘wrong’ policies through high borrowing costs and currency crises)
Cast-off UK clothes make Zambia poorHigh street charity exports help to destroy textile jobs Sunday May 23, 2004The Observer
☓ In the 8 years after structural adjustment forced open Zambia’s borders to tariff-free textiles in 1992, 132 of 140 mills closed and 30,000 workers lost their jobs.
AIDS and structural adjustment • Previously employed workers moved to the informal, ill-paid and untaxed underground economy. • Privatization of state enterprises eliminated revenues that might have been used to support education and health care. • As part of structural adjustment, Zambia imposed user fees, cut health staff and reduced the salaries of those who remained. • Just as the AIDS epidemic was beginning to surge.
Trade and health inequities - 1 • Reducing policy space/flexibilities • Pre-WTO: non-reciprocation by developing countries • WTO: some Special and Differential Treatment (though lacks forceful language) and time-limited exemptions • HIC pressures on developing country to reduce across the board tariffs on industrial goods, though LDCs exempt for undisclosed period
Trade and health inequities - 1 • Reducing policy space/flexibilities • European Union negotiating ‘Economic Partnership Agreements’ with former African, Caribbean and Pacific (small country) colonies • For first time must be reciprocal • EU pushing for liberalization in services and for tariffs reduction • ODI (UK) study estimates annual developing country gains at €12.7 million (market access) and losses at €500 million (tariffs reduction)
Trade and health inequities - 2 • Reducing policy capacities (fiscal resources) • Growth often did not follow liberalization • Most LMICs (particularly LICs) failed to replace most or all of lost tariffs revenue
Trade and health inequities - 2 • Reducing policy capacities (fiscal resources) • Capacities to improve tariffs capture (even when reduced) and to develop alternative taxation systems (income, sales, payroll, capital gains, property) need to be in place before further tariffs reductions made
Trade and health inequities - 3 • Increasing economic insecurities • Often increases informal economy, compounding revenue loss from tariffs • Foreign competition often unfairly subsidized or benefits from scale and technological efficiencies unavailable to LICs • Workers/producers in less efficient sectors lose; long-term adjustment costs • Increased social protection programs can mitigate but may be unaffordable for many LICs
Globalization increases inequalities between skilled/unskilled workers • Women occupy lower paid, less desirable jobs while bearing disproportionate share of responsibility for unpaid work in the household. • Increased women’s employment in export-processing zones has contributed to gender empowerment, but exploitative conditions, unsafe conditions and lack of labour rights compromise potential health gains.
Trade liberalization may be health beneficial through effects on economic growth, but requires flanking policies • Careful sequencing of liberalization commitments together with expanded, universal and progressively financed social protection policies (particular emphasis on universal childcare to increase women’s economic participation) can prevent some of liberalization’s health-negative consequences associated with increased insecurity. • Governments should have experience regulating trade in health and other SDH sectors in equity-promoting ways before making binding commitments in trade treaties. • How often is either the case? • How likely is increased social protection spending in light of global economic recession?
Health specific treaties - 1 • GATS • Locks in commercialization, no cost-free way to expand public services in committed sectors • Mostly HICs and some MICs have service industries that could benefit • Exceptions for wholly publicly provided services, and to protect ‘public morals’; not yet tested for interpretation • No new commitments and/or remove health and other essential health services (e.g. water) from trade treaties (most prior commitments from LICs from Uruguay round, South Africa from apartheid era)
Health specific treaties - 2 • TRIPS • LDCs exempt from TRIPS obligations until 2016 • Some flexibilities (exceptions) for other countries for medicines (Doha Declaration 2001) • Compulsory licensing, parallel importing • Rules for parallel importing cumbersome, as if designed not to work • Remove from trade treaties; return to WIPO
TRIPS+ Limits on compulsory licensing and prohibition of parallel imports Patentability of plant varieties ‘Linkage’ of IP and drug approval Data exclusivity Extended patent terms (for approval delays) Precedence of trade mark over geographical indications Presently part of EU/Canada bilateral treaty negotiations, estimated to add $2.5 billion to Canadian public health care costs with no health benefit to any Canadians And now a new emphasis on ‘counterfeit’ drugs, but with little clarity on definition of ‘counterfeit’
Health specific treaties - 3 • SPS • Beyond non-discrimination: scientific risk assessment • Beef hormone, GMOs • Trumps other treaties (e.g. Convention on Biological Diversity) unless all parties to dispute also parties to other treaties • WTO dispute settlement decisions may even be superordinate to other Conventions • Based on Codex Alimentarius • Industry dominated • Assessments based on country votes
Indirect health treaties - 1 • TRIMS • Prevents attaching performance requirements to foreign investment (economic/employment and geographic equity) • Present flexibilities could be eroded through increase in Bilateral Investment Treaties (BITs) • Most with investor-state provisions similar to NAFTA Chapter 11 • Investor state provisions increasingly incorporated into general bilateral trade treaties, not just BITs • Some banks using BITs to try to force Argentina to pay back more of its bond interest after it defaulted several years ago (most other banks accepted the ‘shave’ or devaluation) • Present Australian government against such provisions and fighting against their incorporation in future trade treaties it negotiates
Indirect health treaties - 2 • TBT • Domestic regulations not be “unnecessary obstacles” and alternative measures “less trade restrictive” • Exceptions for environmental, animal, human health but narrowly interpreted with only two health ‘successes’ • asbestos/glass fibres; re-tread tires Brazil
Indirect health treaties - 3 • AGP • Government contracts open to firms from countries party to agreement (currently plurilateral with intent to extend to all WTO members) • Can avoid kleptocracy and cronyism but… • Contracts based only on economic competitiveness, not equity or development needs/priorities • A key element in DR-CAFTA and in most US/EU bilateral trade treaties with developing countries (and now with EU/Canada treaty still in negotiation)
Indirect health treaties - 4 • AoA • Introduced by US agribusiness during Uruguay Round • Continuing producer and export subsidies cost LICs $20 - $60 billion in lost annual revenues, hardest on single-crop dependent poorer nations (West African cotton producers) • Although more recent estimates place these losses at <$9 billion • Food security vs. economic growth (impact on unsubsidized food exports on importing LICs; agriculture-led food export vs. domestic markets and needs; mixed empirical findings)
Caveat Agricultural Exporter • Equity: Export growth benefits largely male large-scale producers, pushes domestic producers, often female, onto marginal land • Economy: Cash crop exports do not produce enough $ to pay for substitute food imports; food security can decline, particularly for net food-importing LDCs (a result of ‘white man’s burden’ colonial partitioning in early 20th century); primary commodity export growth ultimately a ‘dead end’ • Ecology: Most food-exporting developing countries already water-scarce; intensification leads to increased water use/pollution (fertilizer run-offs)
The Real Reason Dinosaurs Became Extinct
I was poor growing nuts until I switched to tobacco. Now I am no longer poor. Zimbabwe black woman farmer, March 2011 Child tobacco workers: Nicotine exposure = smoking 50 cigarettes a day
…inspiring national health care lawsuits against the tobacco industry in Brazil, Nigeria, Turkey and Poland
FCTC but… • Eleven disputes have recently been or are presently being brought against tobacco control policies, many FCTC compliant, by tobacco multinationals or by countries at the prompting of their tobacco firms • Three involved taxation policies that discriminate against foreign products (all disputes were successful); and while discriminatory two of the policies were intended to prevent tax evasion (undeclared value) by foreign tobacco importers
FCTC but… • Four involve promotion policies • Canada: ban on terms like ‘light’ (successful); plain packaging; threat by Philip Morris International under NAFTA Chapter 11 (Canada retreated) • Australia: plain packaging; again, threat by Philip Morris International under a BIT Australia has already signed (early stages); as well, several Latin American and African tobacco exporting countries threatening disputes under TRIPS and TBT of WTO (early stages) • Norway ban on tobacco displays at retail stores (already in place in Canada); challenged by Philip Morris Norway under European Free Trade Agreement (decision pending) • Uruguay requirement of 80% package warning and only one variant of a brand; challenged by Philip Morris International (Swiss division) under BIT (decision pending)
FCTC but… • Three involve product policies • Canada: ban on certain additives (flavours) that make cigarettes more attractive to youth with ‘concerns’ (not yet disputes) raised by 29 countries under WTO TBT (Latin American countries: Argentina, Brazil, Chile, Colombia, Cuba, Dominican Republic, Ecuador, Honduras, Mexico) • Brazil: limit tar and nicotine contents and ban on certain additives (flavours) (!) (health and trade not talking to each other?) with ‘concerns’ (not yet disputes) raised by 19 countries (many the same as the ones complaining about Canada’s additive ban policy) • US ban on flavoured cigarettes but exempts menthol cigarettes (under dispute, resolution decision expected soon, could set precedent for two other cases above) • And the US, like Brazil, is one of the complainants in the Canada case!
There are no bad foods, only bad eating habits Canadian health promotion campaign, early 1990s