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Strengthening public health engagement in trade policy: PHAA's policy on Trade Agreements and Health

Authors


Correspondence to: Dr Deborah Gleeson, School of Public Health and Human Biosciences, La Trobe University, Victoria 3058; e-mail: D.Gleeson@latrobe.edu.au

Trade relations affect the way we live and the determinants of health such as employment patterns, nutrition, economic development and living standards.1,2 Trade agreements to regulate trade relations can contribute to better health where they lead to increased employment and economic development (assuming benefits are well distributed, decent working conditions are maintained and growth is not achieved at the cost of the environment), but they can also reduce the ability of governments to protect health.3 Trade agreements can enable transnational corporations to discourage governments from regulating for health (e.g threatening to use indirect expropriation clauses to discourage governments from regulating tobacco packaging) or from regulating for health care (e.g. deploying United States trade power to undermine pharmaceutical pricing and reimbursement schemes).3

It is important for public health professionals and organisations to engage with trade policy issues. The Public Health Association of Australia (PHAA) policy on Trade Agreements and Health is a significant step towards facilitating such engagement.

PHAA Trade Agreements and Health policy

The Trade Agreements and Health policy was first developed in the context of negotiations for the Australia US Free Trade Agreement (AUSFTA) in 2004. The US negotiators sought to introduce intellectual property (IP) and pharmaceuticals provisions which would have weakened the Pharmaceutical Benefits Scheme (PBS), and investor-state dispute settlement provisions (ISDS) which would have enabled US corporations to challenge Australian public health policies in international arbitration.4

PHAA played a strong role in a successful public campaign to preserve the PBS and keep ISDS provisions out of the AUSFTA.5 The campaign sensitised the public health community to the potential public health consequences of trade agreements. The Trade Agreements and Health policy was developed to strengthen PHAA advocacy in this area.

Key points of intersection between public health and trade agreements

Many different aspects of trade agreements can affect population health and the provision of healthcare. Intellectual property provisions affect access to medicines; ISDS affects the scope for public health regulation; subsidised agriculture and trade liberalisation affect food security and farmers’ livelihoods; and liberalisation of trade in manufactured goods constrains industrialisation in developing countries and associated possibilities for population health.

Intellectual property rights and access to medicines

Intellectual property (IP) regulation has been a feature of trade agreements since the TRIPS Agreement (Trade Related Aspects of Intellectual Property Rights) was negotiated in 1994.

The South African treatment access campaign from 1997 to 2001 is a famous case illustrating the effect IP regulation can have on access to medicines. In 1997, 39 international pharmaceutical companies brought a case against the South African government saying that its ‘parallel importing’ legislation (designed to improve access to cheaper versions of brand name drugs) ran counter to its TRIPS commitments. At this stage the cost of brand name anti-retrovirals was around US $10,000 per treatment year while generic versions were available for US $350 per year.6 Over the next four years a powerful civil society campaign arose against the drug companies. In May 2001 the companies accepted defeat, withdrew their action and paid the costs of the South African government.7 In December 2001 the Ministerial Council of the World Trade Organization (WTO) adopted the Doha Statement on Public Health8 and agreed to amendments of the TRIPS Agreement for wider access to compulsory licensing.

Meanwhile, the stalemate between rich and poor countries over the further development of the WTO treaties led the US and Europe to progress their trade ‘liberalisation’ goals through bilateral and regional trade agreements, many of which have had ‘TRIPS Plus’ provisions included (meaning easier patenting but greater protection of patents). Evidence suggests that TRIPS Plus provisions in the US-Jordan FTA increased medicine prices by twenty percent between 2001 and 2007.9 IP rules introduced in Guatemala with the Central America FTA reportedly reduced access to generic drugs and increased drug prices by up to 846%.10

Investment protection, investor state dispute settlement (ISDS) and policy space

One of the most controversial features of the current round of bilateral and regional trade agreements has been the ISDS provisions which commit governments to compensate firms (from co-signatory countries) if government policy has the effect of reducing the value of the company's investments. ISDS enables the aggrieved company to call the offending government to arbitration and, if successful, to require policy reversal or compensation to be paid.

The investor protection and ISDS provisions in the Australia – Hong Kong bilateral investment treaty are being used by Philip Morris Asia (PMA) to challenge Australia's tobacco plain packaging policy.11 Legal experts have concluded that PMA's case is weak and it appears unlikely to succeed.12 However investor-state arbitration can cost millions regardless of outcome,13 and can tie up government resources for long periods of time. The threat of such costs can be enough to prevent governments from enacting important public policies (‘regulatory chill’).13 Three-hundred and fifty million dollars has already been paid out in compensation for ISDS claims under the North America FTA (NAFTA), Central America FTA and US-Peru FTA and there is almost $12 billion in pending claims over environmental, public health and transport policies.14

Food sovereignty and small farmers’ livelihoods

Tariff reduction is the central plank of trade liberalisation but where reduced tariffs allow the import of cheap food products which undercut local production they can have devastating effects on food sovereignty and small farmers’ livelihoods. The harm is exacerbated where food imports are sold at prices below the cost of production, because the farmers and food exporters are subsidised.

Since 1994, when NAFTA was signed, agricultural employment in Mexico has fallen from 8.1 million to 5.8 million (in 2008), a loss of more than 2.3 million jobs. Increased imports of subsidised grains and oilseeds have contributed to falling corn prices for Mexican farmers and a massive flow of farm workers to the cities.15 Trade liberalisation associated with subsidised imports has also contributed to loss of small farmers’ livelihoods and rural unemployment in India.16

Trade liberalisation and economic development

Trade liberalisation in manufactured goods is in the interests of the industrialised countries and their transnational corporations but heightens the barriers facing developing countries seeking to deploy some level of industry protection and import substitution as strategies for economic development. These are complex debates but they have huge significance for population health. For this reason, they are too important to be left to the economists.

The implications of trade agreements go well beyond these four critical points of intersection, but they do illustrate the need for the public health community to be aware of trade negotiations, to be literate in trade policy language and to participate in public debate about the health issues at stake.

Current negotiations

The Trans Pacific Partnership Agreement (TPPA)

The TPPA is a regional trade agreement being negotiated between Australia, Brunei, Chile, Malaysia, New Zealand, Peru, Singapore, the United States and Vietnam. Japan, Mexico and Canada have also expressed interest in joining.

US proposals for IP and investment protection for the TPPA go far beyond what Australia was prepared to agree to in the Australia-US FTA. For example, leaked US proposals for the TPPA17 include provisions which would remove safeguards allowing patent applications to be challenged before they are granted; would require governments to allow patents to be granted for minor variations to existing drugs (‘evergreening’); and would require patenting of diagnostic, therapeutic and surgical methods. Pharmaceutical companies are also lobbying for further restrictions on the use of clinical trial data by generic manufacturers.18

The US is reportedly seeking ISDS provisions that would expose governments to legal action by foreign companies over government policies that affect these companies’ profits. The inclusion of these provisions in the TPPA would be likely to deter other countries from introducing plain packaging policies similar to Australia's.

The Australian Government's trade policy released in April 2011 affirmed that Australia will not accept provisions in trade agreements that weaken the PBS or prevent the introduction of tobacco plain packaging.19 However, as Woodward and Woodward highlighted in their recent editorial,3 commitments such as these can be bargained away in the negotiating room in exchange for concessions in other areas. The secrecy of the negotiations means that the public cannot be sure what will be in the agreement until after it is signed.

PHAA is working with the Australian Fair Trade and Investment Network (AFTINET) and other networks around the TPPA proposals. This has included press releases, letters to trade ministers, roundtable discussions with Department of Foreign Affairs and Trade (DFAT) and Department of Health and Aging (DoHA) representatives, briefing politicians, writing opinion pieces, and a number of forums. PHAA's Political Economy of Health Special Interest Group also held a workshop prior to PHAA's annual conference in 2011 on the topic of trade, health and development.

PACER Plus

The proposed PACER Plus agreement between the Pacific Island Forum Countries (including Australia and New Zealand) will replace the older Pacific Agreement on Closer Economic Relations. It is not clear whether this will emerge as a trade liberalisation agreement or a framework for economic and social development in the Pacific. However, there are concerns in the Pacific island countries that tariff reductions could weaken the revenue base of Pacific island governments and reduce the funding available for health systems.20 Lower tariffs could also mean lower prices for unhealthy imported foods such as mutton flaps and soft drinks, and other health-damaging products including alcohol and tobacco.

Most of the Pacific island countries are keen to have labour mobility provisions included in PACER Plus in order to enable workers from the Pacific to work in Australia or NZ. This would have benefits in terms of employment access and remittances but if it includes health workers it could exacerbate existing shortages in the Pacific.

PHAA sponsored two forums in 2010 in Melbourne and Sydney to raise awareness about the health issues at stake in the PACER Plus negotiations. PHAA representatives also met with officials from DFAT, AusAID and DoHA to discuss the issues, and the Victorian Branch of PHAA funded the development of plain English fact sheets about the health issues.

Strengthening public health engagement

The Trade Agreements and Health policy has provided a sound basis for co-ordinating PHAA's advocacy around trade and health. The policy has informed media statements, campaign letters and discussions with officials.

However, there is more to be done to strengthen public health engagement around trade and health issues. There is a need for further research and for more effective communication of such research to public health advocates, trade policy officials and stakeholders from other sectors. There is a need for stronger intersectoral collaboration between public health advocates, trade experts and advocates from other sectors. A pre-condition for such collaboration is that public health professionals are familiar with trade issues and can speak the languages of the other sectors. The need for such literacy has implications for public health training.

Public health advocacy around trade needs to involve closer links with public health advocates in other countries. The World Federation of Public Health Associations is one important platform for such co-operation but there are many other professional bodies with international links who are able to support such cooperation.

PHAA's Trade Agreements and Health policy provides a useful framework, but effective advocacy around trade relations for better health outcomes will require action in areas other than policy formation, including research, teaching, continuing professional education and intersectoral and international collaboration.

The authors are Convenor and Deputy Convenor of the Political Economy of Health Special Interest Group of PHAA, which has responsibility for the development and revision of PHAA's policy on Trade Agreements and Health.

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The PHAA notes:

  • 1Trade agreements regulate international trade in goods, services and intellectual property. They include the agreements administered through the World Trade Organisation (WTO) such as the GATT (General Agreement on Tariffs and Trade), GATS (General Agreement on Trade and Services) and TRIPS (Trade Related Aspects of Intellectual Property Rights). They also include bilateral and regional trade agreements concluded outside the WTO such as the Australia – US Free Trade Agreement (AUSFTA) and two regional trade agreements involving Australia which are currently being negotiated: the Pacific Agreement on Closer Economic Relations (PACER) and the Trans-Pacific Partnership Agreement (TPPA).
  • 2The establishment of the WTO, and the various trade agreements which it administers, was based on the need for a rules-based trading regime to contain the tendency to unilateral trade restrictions adopted for short term national advantage but carrying the risk of wider instability. However, the goal of establishing a rules-based trading regime has become increasingly linked to the goal of ‘free trade’; aiming for the progressive reduction in barriers to trade in manufactured goods. As currently promoted, ‘free trade’ refers mainly to liberalising trade in manufactured goods. It does not include the free movement of labour nor liberalisation of agricultural trade but paradoxically does include the protection of technological monopolies (easy patents but tight policing).
  • 3While a rules-based trading regime makes sense generally, the drive towards ‘free trade’ has different implications for different countries; it is generally beneficial for developed economies but has very mixed implications for economies which do not have a strong manufacturing base. The pressure on developing countries to reduce barriers to the import of manufactured goods while the developed countries maintain high levels of protection with respect to agriculture has serious implications for the health and development of developing countries including small farmers’ livelihoods (jeopardised by agricultural protection and dumping) and industrial development (jeopardised by inflow of cheap manufactured products). The experience of the ‘Asian tigers’ (Japan, South Korea, Taiwan, Singapore) and Europe and the USA before them suggests that industrialisation can be facilitated by protection and that blanket liberalisation is not necessarily beneficial for all.
  • 4Since 1999 the drive to promote ‘free trade’ through the WTO has met with increasing resistance from developing countries. In response to this resistance the USA and the European Union have embarked on a campaign to develop bilateral and regional trade agreements with explicit commitment to progressive liberalisation of trade.
  • 5The current focus of trade negotiation within the WTO has been on the ‘Doha Round’ which is currently deadlocked. The main focus of the Doha negotiations has been on the demands of the developed countries for developing countries to reduce the barriers to the import of manufactured goods and the demands of developing countries for access to rich world markets for their agricultural products. In addition the GATS agreement is being renegotiated, with pressure to move from the present opt-in approach regarding services to be subject to the Agreement to an opt-out approach which would require countries to explicitly identify those services to which the Agreement would not apply. This opens the prospect of many additional service industries being exposed to foreign competition.
  • 6Beyond the WTO there are several bilateral and regional ‘free trade’ agreements under consideration, two of which are particularly relevant to Australia: the TPPA and the proposed PACER Plus Agreement.
  • 7Major concerns from a public health point of view regarding the TPPA concern the Pharmaceutical Benefits Scheme and the prospect of Australia agreeing to investor state dispute resolution provisions. Over many years US pharmaceutical manufacturers have sought to force Australia to discontinue the use of cost effectiveness criteria in the listing and pricing of new drugs on the PBS.
  • 8The inclusion of investor state dispute resolution procedures would allow companies to sue the Australian Government in relation to any policy initiative which affected the profits of a foreign corporation, including tobacco companies suing for loss of revenue arising from plain packaging.
  • 9The Australian Government's Trade Policy Statement released in April 2011 included significant commitments to protect public health in trade agreements, including ensuring the sustainability of the Pharmaceutical Benefits Scheme (PBS) and excluding investor-state dispute resolution processes. However, US trade negotiators are known to be applying a great deal of pressure to persuade the Australian Government to renege on these commitments in relation to the TPPA.
  • 10PACER Plus is a new trade agreement being negotiated between Australia, New Zealand and the Pacific island countries. This agreement has the potential to damage the health of Pacific Islanders in a number of ways, including: loss of government revenues with reduced tariffs; increasing exposure to cheap junk food, alcohol and tobacco; increasing foreign investment in health care; increasing the cost of medicines; and exacerbating the ‘brain drain’ of health workers (Morgan, 2010).

The PHAA believes:

  • 1In evaluating proposed new trade agreements public health advocates need to have regard to the following criteria:
  • • The quality and distribution of any increased economic activity associated with new trading arrangements;
  • • Unrestricted scope for policy makers to implement policies for health and well being and other policy goals in the national interest.
  • 2New trading rules could increase aggregate economic activity but still lead to widening income inequalities with predictable consequences for health outcomes. New trading rules could increase economic activity but include the expansion of unhealthy industries such as gambling and junk foods. Privatisation and deregulation promoted as part of neoliberal economic policies and locked in by ‘free trade’ agreements can contribute to increasing social and economic inequity and dysfunctional health systems, which adversely influences population health and well-being.
  • 3Trade agreements should not limit or override a nation's ability to foster and maintain systems and infrastructure that contribute to the health and well-being of its citizens by detracting from a nation's ability to legislate and regulate on such matters as:
  • • Water and sanitation;
  • • Control of tobacco, alcohol and firearms;
  • • Pricing of medications (e.g. price regulation in the PBS);
  • • Practitioner registration standards;
  • • Privacy rules;
  • • Distribution of services based on need;
  • • Health worker mobility; and
  • • Occupational Health and Safety standards.
  • 4Policy space needs to be preserved in trade agreements for national governments to regulate to protect public health (for example, by banning or restricting the availability of health damaging products) (Koivusalo et al, 2009).
  • 5Free Trade Agreements with any country (especially developing ones) must not be used to the detriment of public health. The application of this principle should include:
  • • Limiting the ability of private corporations to sue governments under indirect expropriation or investor state dispute settlement provisions;
  • • Ensuring the ability of the PBS (or similar programs in other countries), to use cost-effectiveness criteria in pharmaceuticals pricing;
  • • Preventing the patenting of medical procedures;
  • • Ensuring the bio-security of all local blood or organ products;
  • • Ensuring food safety and food security;
  • • Limiting the cost of medicines used for independent academic research; and
  • • Enabling governments to licence patents in public health emergencies, without prior consultation with the patent owners, if this is necessary to produce adequate supplies for urgently required treatments.
  • 6Moving towards a fairer regime of trade regulation which addresses sustainability issues as well as economic development and which prioritises equity within and between countries as a necessary condition for global population health improvement.

The PHAA resolves that the Board, Executive and Political Economy of Health Special Interest Group will:

  • 7Advocate to appropriate Commonwealth officials and departments with a view to:
  • • Preserving the ‘opt-in’ character of the GATS agreement;
  • • Excluding from any renegotiated GATS agreement any services that relate to or are likely to have an influence on population health and the provision of health care and welfare services;
  • • Supporting the continuing implementation of WHO Resolution 59.26 which mandates WHO to provide advice to national governments regarding the implications of trade agreements for health;
  • • Supporting moves within the WHO to reform global and national intellectual property protection rules to facilitate the development of pharmaceuticals for diseases of the developing world and to facilitate access to essential medicines;
  • • Ensuring that the PBS is not weakened and that investor-state dispute processes are not included in the TPPA negotiations.
  • 8Through the World Federation of Public Health Associations (WFPHA), the People's Health Movement and other international public health organisations, encourage the wider public health community to advocate at the national and international levels to promote and protect public health within international trade agreements.
  • 9Work with the Australian Fair Trade and Investment Network and with the People's Health Movement and other similar organisations nationally towards limiting adverse impacts of trade agreements on health and well-being, both within Australia and in other countries with which Australia has, or is negotiating, trade agreements.

Adopted 2004, Revised and Re-Endorsed in 2008 and 2011
First adopted at the PHAA Annual General Meeting held on 9 October 2004 following the IUHPE PHAA Policy forum in April 2004. Revised and re-endorsed as part of the 2008 and 2011 policy review processes.

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