Health systems and the released documents on services and investment
By Meri Koivusalo
It is always good to give recognition to reasonable actions and so European Commission willingness to put EU offers and texts of chapters online and out needs to be commended. It does make a difference as it is the only way to check whether Commission just talks the talk or if it also walks the walk. Of course we do not know if what has been released represents the actual final version as negotiating text is still available only for the chosen few.
The risk for the Commission is of course that what has been offered does not quite match what has been promised. Unfortunately this is the case with the services and investment offer and text, which have, to put it mildly a number of concerns, on a first read. Furthermore, there are a number of further issues of concern, which relate to regulatory cooperation, state-owned enterprises, IPR and pharmaceuticals.
European Union services and investment offer seems to follow and build on CETA text as well as TISA negotiations. What governments have included in their offer tends also to follow their previous GATS schedules and bilateral negotiations seeking to expand inclusion of areas.
The general provisions make clear that the scope covers all services using the narrow GATS exclusion of services and activities performed in the exercise of governmental authority’ , which means services or activities which are performed neither on a commercial basis nor in competition with one or more economic operators”. It is already known that this exception is narrow and does not protect modern health systems and if anyone is in doubt, there is a new book which provides ample insights on the matter edited by Markus Krajewski with a more general focus on services of general interest (1).
If European Commission and Member States would have liked to explicitly exclude health and social services and social security from investment liberalisation requirements, this could have been made alongside audiovisual services, which have been excluded from the investment and services liberalisation in the beginning of the chapters. This was not done. Furthermore, the Commission actually expands obligations on national treatment of investments. This is done through division of national treatment obligations into establishment and operation of investment.
The general provisions make an important separation of establishment from operation: “operation’ of an investment means the conduct, management, maintenance, use, enjoyment, sale or other disposal of the investment by an investor of one Party in the territory of the other Party.” This creates trouble as reference to exclusions in Annexes apply only to paragraph 1 (establishment) and not with respect to the “operation” of an investment.
A further scrutiny of what this will mean is clearly needed as what is of concern is that return to public provision, non-profit providers or preference of local providers (e.g. NHS as preferred provider) could then imply different treatment of foreign and domestic investors. It could also reach quite deep into national policy arena in practice if obligations are understood broadly, for example in what is implied by enjoyment of an investment in practice. Furthermore, clarification for operational obligations and where these do not apply, is made on the basis of three criteria, where the third criterion for approved measures is of concern as it states that: “a measure covered under its Annex II that is adopted after the entry into force of this agreement and does not fall within sub-paragraph (a) or (b), provided it is not applied in respect of, or in a way that causes loss or damage to, investments made in the territory of the Party before the entry into force of such measure. “ While performance requirements seem to remain excluded, this would need to be clarified with respect to operational aspects and Annex II exclusions. Annex II exclusions were made so that governments could apply any measure on the basis of legitimate public policy objectives, not only such, which do not affect negatively investments made in the territory.
In services part governments should clarify also the role of establishment and NT as European common exclusion for social services only covers establishment. In health services this seems to cover “provision”, but again the word “establishment” has been added to national exclusions for privately funded services. A broader policy discussion needs to be had with respect to the use of the word establishment in services offer and what this would actually mean to national policy space as now there is a risk that governments believe that health services are fully excluded, when this is not the case.
Health tourism and patient mobility
Another area where clarification is needed is for health tourism, the so called mode 2, as it is unclear if it is covered under general exclusion of publicly funded health services for national treatment and European Union has not excluded medical and dental services for health tourism as this is indicated as none for mode 2 in the schedule. As governments have had difficulties to fulfil requirements for patient mobility in the context of internal markets, the potential expansion of patient mobility to USA is unlikely to be welcomed by Member States already struggling with financing of health systems during times of austerity.
We do not know how exclusions are finally interpreted and what these are actually considered to cover. Further potential complications could arise from the lack of exclusion of publicly funded medical and dental services in the market access category of Annex III implying that denying reimbursement for consultations made in the United States could become challenged on the basis of denying of market access to consumption of medical and dental services abroad. Medical and dental services are services provided by “natural persons” so consumption abroad could be understood in terms of patient mobility to “professional consultations” in the USA.
It is unclear why European Union has not taken care to exclude all publicly funded health services as this is clearly not the case on the basis of the actual negotiation documents. This could have been simple and very possible. Instead of clarity Member States have been served with statements and letters, which are not worth the paper they are printed on after negotiations have been finalised.
As USA itself has made reservations for mode 2 in terms of national treatment for health insurance in General Agreement on Trade in Services (GATS), it might be an area where careful consideration needs to be made. Interpretation of market access commitments can be tricky as declining from reimbursement of services use abroad or from a particular service category more available in USA could be seen as restriction of market access. Portability of health and social security is a big issue with potential to affect in particular social insurance-based health care systems.
Domestic regulation and mutual recognition of qualifications (MRA)
A crucial aspect for health systems is to ensure that medical doctors and staff are adequately qualified for the work they do. Requirements with respect to the role and relevance of domestic regulation provisions can also become a challenge as exclusions become very narrow. In contrast to WTO agreements, the TTIP negotiations do not follow market access only, but as well national treatment obligations to the extent these apply.
Provisions on mutual recognition of qualifications create the ground for further negotiations. It is unlikely that health professions would be at the forefront of negotiations, but the risk remains with respect to the establishment of a general framework which may or may not be suitable for health care professions in practice.
Statutory social security and pension funds
Key provisions with respect to statutory social security and pension funds have traditionally been part of financial services. However, social security is listed also as exception to market access for all modes as well as national treatment under social services. The recognition of necessity to exclude social security systems as part of services is good, but can be of limited utility, if this applies only to social services categories, when real issues are more likely to remain with pension funds, insurance and different types of financial services. It is thus of utmost importance to ensure that social security exclusions will apply also to financial services, where the offer has not been published yet. There is also nothing that states that health services or health insurance is part of social security.
The social security exclusion in financial services is not clear: “Nothing in this Title shall be construed to prevent a Party, including its public entities, from exclusively conducting or providing in its territory activities or services forming part of a public retirement plan or statutory system of social security, except when those activities may be carried out, as provided by the Party’s domestic regulation, by financial service suppliers in competition with public entities or private institutions.”
It is likely that some thinking has been going on, but it is unclear on whose benefit. While the first part of the clause seems to emphasise that nothing will affect measures concerning social security, the use of except later seems to indicate this is fine only, if these are not in competition with finance service suppliers. The danger is that Member States may assume that there are no problems due to “social services” exclusions.
The positive take on the issue is to consider the current exclusions as a step –although a little step – forward so as to seek to ensure that all aspects of social security are excluded. A negative take would consider exclusions for social services in the context of social security as nothing better than a trick intended to be used for consolation of NGOs and social security institutions, while leaving the “financial” services of social security vulnerable to challenge, when these compete with financial services products.
The financial services section has an article on new services, which should be scrutinised closely as presence of a service in one Party should not be pushed to be accepted by the other Party, in particular, in financial services.
The other chapters,…
The exclusion of health services even from the key service and investment chapters is not clear and miles away from that of audiovisual services. Furthermore, there is also a danger that the focus on services and investment is not sufficient to keep health services out, if chapters on regulatory cooperation with pro-competitive emphasis and state-owned enterprises apply to all sectors.
Preserving publicly funded services is also of less relevance, if these are driven into corner of residual function and role, where operation is possible if it does not affect functioning of markets or investor interests. The European Union proposal on state owned enterprises, available from the Commission website, gives some insight on the matter. State owned enterprises have become raised also in the context of TPP. This relates to the broader concern to preserve public option and policy space in service provision, which may become challenged if requirements for regulatory “objectivity” and “impartiality” are interpreted so as to imply that public regulatory oversight excludes public providers.
The provisions on pharmaceuticals and intellectual property rights are likely to follow those in TPP, which have now been leaked to public domain (2). While some cooperation with respect to pharmaceuticals can be useful or reduce costs, the real issues remain unfortunately with IPR and pricing issues, where costs fall to Member States, rather than European Commission. What the TPP seems to suggest will be a move towards higher prices and safeguarding interest of major companies against policy measures to change the situation.
TTIP iceberg of issues of concern
There is unfortunately an emerging trend of Commission presentation of matters on the basis of articulation, which is technically correct, but hides real political and policy issues of concern. Thus, when emphasis is on “not lowering standards”, the real issue is that it will make it harder to change or tighten regulatory measures against commercial interests. Many requirements are procedural in a way, which does not make impossible to have higher standards, but makes achieving them very difficult in future. The result is politics of PR seeking to keep noise and complaints sufficiently low to allow taking negotiations as far as possible.
It could also be claimed that through changes in national treatment and exclusions, the European Commission actually nudges incrementally and silently towards further inclusion of health services under trade-related obligations. In the EU offer, the national and European Union exclusions for health and social services were based on “any measures” with respect to provision of services, but Commission has been tampering ,modifying and adding establishment to Annex II reservations, while claiming that the scope of these exclusions is not affected. The chapter on investment raises some doubts on the matter. In the CETA Agreement with Canada it was possible to exclude all investment and services from national treatment. So this is a new development and something that takes place, while Commission seeks to gain trust as guardian of health services exclusions through letters and statements.
It would thus be important to invite a few legal scholars to fully analyse whither the Commission has actually delivered what governments have wanted, when they have wished to exclude health and social services. It seems that there is a lack of understanding within the Commission and in particular, with respect to those negotiating investment chapter, that a NO does mean NO.
Services chapter and offers are available here: http://trade.ec.europa.eu/doclib/press/index.cfm?id=1230
(1) Krajewski M (ed) (2015) Services of General Interest Beyond the Single Market. External and International Law Dimensions. Springer. http://www.springer.com/us/book/9789462650626
(2) Available from: http://www.keionline.org/tpp/11may2015-ip-text
Meri Koivusalo is a founding member of the Health and Trade Network and a senior researcher in National Institute for Health and Welfare. She has written on and followed health and trade-related issues for a longer time she would like to admit. She has a academic background in medicine and health policy. She has published on commercialisation of health care as well as on common interests in trade and pharmaceutical policies, health in all policies, environmental health and European policies and health.
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