Free trade agreements (FTAs) might seem a million miles from the NHS. However, FTAs are not just about the trading of goods. They also cover services and corporate rights. The Coalition Government is keen to negotiate a FTA between the EU and the USA in which health services will be treated as things to be bought, sold and profited from. This will have disastrous consequences for the NHS. Here we attempt to explain why.
What are Free Trade Agreements (FTAs)?
FTAs are treaties set up between the governments of two or more countries on behalf of large commercial companies with global operations (‘transnationals’). FTAs aim to encourage the trading of goods across national borders by reducing tariffs (e.g. import duty) and non-tarrif barriers (such as regulations), and establishing rights to protection for transnational companies that wish to invest in services (including public ones). The usual argument made for FTAs is that, by removing restrictions on trade, it is easier for private companies to trade and so economic growth and jobs will increase. But some analysts say that these benefits are considerably overestimated and outweighed by the threats that FTAs pose. For example, for the UK:
- FTAs give transnational corporations the right to enter the UK market and operate without limits on their activities.
- FTAs give transnationals the right to the same treatment (including access to government subsidies) as domestic companies.
- If an FTA includes what a mechanism known as investor-state dispute settlement (ISDS), a transnational corporation can directly sue the UK government if it introduces any new regulation that might, even unintentionally, limit that transnationals’ expected future profits. ISDS also limits the ability of governments to move public services out of markets in which investors have substantial interests. (For more information on ISDS see https://www.youtube.com/watch?v=spBdTcaY3_Q#t=235).
- Overall, FTAs involve irreversible commitments made at a level of international trade law that trumps national law: once signed, it is almost impossible for a national government to cancel an FTA. In other words, FTAs give far-reaching rights to transnational corporations while severely undermining the power of democratically elected governments.
The Transatlantic Trade and Investment Partnership (TTIP)
The European Commission (EC) is currently involved in negotiating an FTA of unprecedented scale between the US and European Union (EU). This is the Transatlantic Trade and Investment Partnership (or TTIP). It is concerned not just with trade in goods, but also trade in services. Initially it was hoped that negotiations would be concluded at great speed (or ‘on one tank of gas’) but it now seems, if TTIP is agreed, that it is unlikely to be signed before the end of 2015 at the earliest.
In addition to reducing tariffs and increasing protection for transnational investors, TTIP also aims to remove (or ‘harmonise’) regulatory barriers that restrict profitable trade between the US and EU. These ‘barriers’ are often our most prized and hard-won regulations and standards that protect, for example, our labour rights, environment, food safety, digital privacy, and banking standards.
The way this treaty is being negotiated is, in itself, cause for concern. Transnational corporations have had frequent opportunities to lobby the EU Trade Department about the treaty but the same opportunities have not been extended to trades unions or civil society groups. For example, of the 560 meetings that the Trade Department held in preparation for negotiations, 520 were with business lobbyists and only 26 (4%) were with public interest groups. (for more details, see http://www.corporateeurope.org/international-trade/2014/07/who-lobbies-most-ttip).
The process is also undemocratic as the substance of on-going negotiations is largely kept from our MPs and MEPs, as well as the public. Once the treaty is signed by negotiators, the UK parliament (like other EU member states) will only be able to vote to accept or reject the treaty as a whole: they will not be able to amend it in any way.
The main political parties argue that TTIP will bring increased growth and jobs. There is little credible evidence for these claims, which rest largely on an assessment made by the Centre for Economic Policy Research (CEPR). Not only should the CEPR research be viewed with caution because of its poor quality, and because the summary of the research report misrepresents its own findings, but because the research cannot be seen as unbiased: the CEPR is funded by the same international banks that are keen to see the TTIP signed. The key findings section of the CEPR research report states that growth from TTIP will bring a family of four an extra 545 euros each year. However, the main body of the research shows that this gain is not per annum but cumulative over 10 years: the more accurate figure is about 60 euros per year (equal to about one cup of coffee per person, per month).**And this very small gain is only predicted if the most optimistic, ambitious scenario is achieved in which there is the maximum removal of regulatory barriers.
In addition, while TTIP will bring little in the way of economic growth, it may result in actual job losses in the UK. EC-funded research suggests that at least 1.3 million European workers would lose their jobs as a result of TTIP, without necessarily being able to find new employment (http://trade.ec.europa.eu/doclib/docs/2013/march/tradoc_150737.pdf) Certainly, job losses have been typical of other free trade deals, such as the North American Free Trade Agreement. The social costs of TTIP, such as unemployment or the effects of less rigorous safeguards for food, chemicals and so on following the ‘harmonisation’ of US and EU regulations have generally been downplayed. (http://www.oefse.at/fileadmin/content/Downloads/Publikationen/Policynote/PN10_ASSESS_TTIP.pdf).
How could TTIP affect the NHS?
Many believe that one of the biggest prizes of the agreement for transnationals looking to expand will be the NHS. When it was first established, the NHS was set up on the basis of social solidarity – everyone contributed to the cost of providing the NHS through taxes, and in return healthcare was provided by the state and available for those who needed it, when they needed it. But the Health and Social Care Act (2012) and the regulations for implementing it (especially Section 75) have changed the fundamental nature of the NHS. By fragmenting the NHS, opening it up to competition law and turning the NHS into a market in which private companies can compete to get NHS funding for patient services, the HSC Act has turned the NHS from a social into a commercial activity.
Public services are normally protected from FTAs, However, because the NHS is now, in part, provided by commercial companies, it will only be protected from TTIP if it is explicitly excluded from the treaty (which currently it is not).
If agreed, TTIP will change the whole emphasis of NHS health care: the priority will become the rights of transnational organisations rather than the care of patients. TTIP will give transnationals the right to bid for government spending, including on health. It will put severe restrictions on the ability of the UK government to control costs (e.g. of medicines) and to regulate any transnational companies that provide health services.
ISDS and the NHS
TTIP will give transnational corporations the right, under ISDS, to claim massive compensation if the government introduces initiatives (including, for example, public health regulations, health protection measures, and health promotion policy) that could potentially reduce transnationals’ future profits.
Some countries, such as Finland, have found that using private companies for providing state-funded health services has led to increased costs and poorer service, and so have returned the provision of services to the state. However, in the case of the UK, the inclusion of ISDS within TTIP would make it virtually impossible in future for our government to reverse the privatisation of the NHS resulting from the Health and Social Care Act (2012) – even if this proves to be a disaster.
Similarly, if ISDS is included in the treaty, the fear of being sued for huge compensation will inhibit any future government from ending the contracts that many NHS Trusts have entered into with private investors under the Private Finance Initiative. These contracts can be for as long as 60 to 100 years and often mean that NHS Trusts are repaying debt for new buildings or infrastructure at usurious rates of interest.
TTIP will not only affect the NHS but also our standards of health. ISDS will give any US company operating in the UK health market the right to sue the government if it introduces new public health regulation, or health protection and health promotion policy measures that might affect these companies’ future investment or profit opportunities. So evidence for safer or more effective treatments, or advances in clinical knowledge, could not be put into practice (at least without the risk of being sued) if this affected the anticipated profits of existing providers. At the same time, harmonisation of health and safety regulations is likely to mean the downgrading of UK public health measures governing the use of food labeling, pesticides, chemicals, the presence of hormones in meat production and so on.
The EU generally has higher standards of health and safety regulation than the US because of different methods of deciding safety standards: the EU uses the ‘precautionary principle’ (where tests must prove substances are not harmful) while the US approach is to assume that something is safe unless proved otherwise. ‘Harmonisation’ is likely to mean that the standards currently set by the EU will have to be lowered to those of the US.
The effects of TTIP on NHS staff
The USA has not implemented some of the most fundamental labour rights set out by the International Labour Organisation (ILO) and recognised by the EU, such as the rights to freedom of association and collective bargaining. This means that standardisation across the EU and US brought into effect by the TTIP would probably bring about a ‘leveling down’ to the labour standards found in the USA, rather than leveling up to those required in the EU.
TTIP could also affect standards of health care professionals’ practice. A government’s ability to regulate professional standards and qualifications for health care workers could be restricted, with worrying implications for patient care. In addition, investment liberalisation will prevent the use of ‘performance measures’ that require the use of the local (i.e. a UK) workforce. This could mean, for example, that when part of a health service is delivered by personnel in a different country, it is more difficult to control the quality and qualifications of the personnel involved.
TTIP and the cost of medicines
It is thought that the TTIP chapter on intellectual property includes provisions that could undermine public health safeguards enshrined in international trade law by giving pharmaceutical companies increased patent protection for pharmaceuticals. Possible changes to do with patenting the medicines include:
- reducing the standards for what counts as a new invention through allowing the ‘evergreening’ of patents (i.e. extending a company’s monopoly on an existing drug by making minor modifications to its substance or dosage and obtaining a new patent, so deferring the appearance of a cheaper, generic version of the drug on the market);
- extending the term of a patent by including the time it takes to obtain a patent in the period of time the patent covers ;
- introducing ‘data exclusivity’ that locks up the clinical data used to develop a drug for a specific period and prevents competition from other companies during this time;
- Creating new rules that limit the freedom to challenge patent applications where these seem frivolous or suspect.
The main implication of these changes would be to reduce access to affordable generic (i.e. identical but not brand name) drugs.
TTIP and the assessment of new health technologies and drugs
At the moment there is a difference in the way that the EU and US assess new technologies and drugs. In the UK, for example, the regulatory harmonisation that TTIP aims for has implications for the role of the National Centre for Health Clinical Excellence (NICE). NICE makes evidence-based decisions concerning the drugs and technologies that can be bought by the NHS, as well as providing both an assessment of the efficacy of these and the means of controlling cost. It’s feared that the work of NICE will be undermined by the harmonisation that TTIP will impose, given the treaty’s ambition to reduce barriers to trade rather than protect public health.
The effects of TTIP on procurement
There are concerns that governments will lose the power to define the terms and criteria for the assessment of contracts and whether, for example, they are assessed narrowly for price or value for money, rather than quality of experience. This could have serious consequences for the quality of health services.
The need to exempt the NHS from TTIP
The prospect of being unable to intervene and regulate healthcare in the interests of public health, or to ensure quality services, has led some governments (e.g. Canada) to seek the exemption of health services from FTAs. Not so our current government. Some of those who are promoting TTIP say that health will be exempt because of prior commitments made in the World Trade Organisation’s General Agreement on Trade (GATS) which protects publicly provided services. But in this context, the term ‘public service’ refers only to those services that are supplied without any involvement of commercial companies, or that are not in competition with other service providers. Since the passing of the Health and Social Care Act (2012), the NHS does not conform to this description. With no explicit exemption for the NHS, we have to assume that it is included in TTIP. (For a more detailed discussion of this, and how the NHS could be exempted, see the briefing paper “Can the NHS be made exempt from the NHS?” in the TTIP section of Keep Our NHS Public’s homepage: http://www.keepournhspublic.com/index.php.)
It is worth noting that, while working in the USA, the Chief Executive for NHS England (the non-accountable organisation that oversees the budget, planning, delivery and day-to-day operation of the commissioning side of the NHS in England) was a founder member of The Alliance for Healthcare Competitiveness. This is a US lobby group pushing for the inclusion of health in TTIP (see https://www.opendemocracy.net/ournhs/caroline-molloy/nhs-boss-stevens-and-ttip-lobbyists).
What can we do?
Many argue that it is not enough to try to exclude the NHS from TTIP but that the whole treaty is unacceptable. However, it’s possible to see a widespread call for the broad exemption of the NHS as way of raising awareness about TTIP overall. Ways you can take action include:
- Look out for forthcoming campaigns against the whole TTIP agreement because of the way it will undermine democratic decision-making and accountability.
- Write to your MEP and let them know your concerns about the inclusion of ISDS and health in the TTIP, and about the treaty as a whole. See https://www.writetothem.com/ for how to contact them.
- Write to your MP and ask them to demand that healthcare is exempted from the TTIP, including from the ‘investor protection’ mechanism that gives corporations the right to sue governments for loss of future profits.
- Write to your MP and ask them to raise a question in the House of Commons – e.g. on the implications of the TTIP for public health or for safety standards in the NHS.
- Write to local and national newspapers, contact local radio etc to raise public awareness about what the TTIP will mean.
- Put pressure on Labour (who currently are in favour TTIP on the grounds of its supposed economic benefits, although not about the inclusion of health) and other political parties a) to review the evidence for TTIP and economic growth and/or labour rights, and b) take a clear stance in opposing the TTIP. At the very least they should be demanding that health services are made fully exempt.
- Write to David Cameron, who is the person who has to insist on the exemption of the NHS from TTIP.
For more information see:
StopTTIP booklet explaining TTIP (£1.50 including postage) – see www.stopttip.net . Cheques made out to Democrat Press (or postal orders or stamps) to Democrat Press, PO Box 46295, London, W5 2UG
With thanks to Linda Kaucher, researcher on international trade issues.
** For the EC-commissioned research with confusing figures on the economic impact of TTIP (mentioned above) see http://trade.ec.europa.eu/doclib/docs/2013/march/tradoc_150737.pdf, (note p.vii. where the claim is that TTIP will bring economic gains of 119 billion euros each year, and p.3 where it states that “estimates [are] to be interpreted as changes relative to a projected 2027 economy”.)
updated January 2015