Health and other WTO Agreements

9.2 The General Agreement on Trade in Services (GATS)

The GATS is the counterpart to the GATT in the area of services trade, although it is wider in scope and coverage. As trade in services often involves the cross-border movement of factors of production, the Agreement extends to investment and the movement of natural and juridical persons as well. Trade in services under the GATS thus includes supplies through any of four modes: (1) cross border flows between jurisdictions, (2) consumption abroad through movement of the consumer; (3) commercial presence, via investment and/or legal incorporation of a supplier; and (4) direct physical presence of foreign natural persons (nurses, doctors, architects, accountants, etc.) in the relevant market. By the same token, GATS rules tend to affect broader areas of policy-making disciplines under the GATT, such as the use of non-discriminatory entry barriers and internal standards.

 

Liberalization versus deregulation  back to top

While creating a framework for trade liberalization, the GATS does not, however, undermine Government’s basic ability to regulate. Rather, the Agreement recognizes the importance of domestic regulation in ensuring an orderly functioning of markets, protecting consumers, maintaining adequate quality levels and preventing monopolistic abuse. Governments may thus operate licensing and qualification requirements for service professionals, enforce compliance with codes of good practice, or impose public service obligations on health, social or regional policy grounds. Yet any such measure must be administered in a reasonable, objective and impartial manner, and affected suppliers must have access to judicial review.

The basic tools for services liberalization are similar to those provided for goods under the GATT. First, all WTO Members have the legal obligation to grant most-favoured-nation treatment to other Members across all services sectors. Second, in country-specific schedules, all Members have undertaken, with varying breadth and depth, commitments on market access and national treatment in individual sectors. Full market access means that foreign service suppliers may operate free of numerical or value quotas, equity restrictions, or limitations on their legal incorporation.

During the Uruguay Round, Member governments not only negotiated the text of the Agreement, but also these schedules of specific commitments. They entered into force in January 1995. Moreover, Article XIX of GATS embraces the concept of progressive liberalization to be achieved in successive rounds of negotiations. The first such round began on 1 January 2000.

 

Coverage  back to top

The Agreement applies in principle to all service sectors. It only excludes services supplied in the exercise of governmental authority or, in other words, services which are provided neither on a commercial basis nor in competition. Such services elude the disciplines of the Agreement and will not draw liberalization requests in future rounds. Cases in point are public health systems which provide for free treatment.

The number and quality of the commitments hitherto negotiated in health services trail significantly behind the commitments undertaken in sectors such as tourism, finance or telecommunications. Sensitivities related to the presence of foreign suppliers, institutional access barriers or technical considerations, including the perceived impossibility of trading health services cross border, may have played a role. However, recent regulatory and technical developments (tele-medicine, tele-analysis, etc.) point to an increased potential for trade which, depending on negotiating interests, may be made subject to market access and national treatment obligations in future rounds.