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 if not better treatment (including access to government subsidies) as domestic companies.
- If an FTA includes what a mechanism known as investor-state dispute settlement (ISDS), transnational corporations have the unique right to use a secretly-run, international tribunal of three corporate lawyers to directly sue the UK government if it introduces any new regulation that might, even unintentionally, damage the corporation’s investment, including its expected future profits. The awards that these tribunals can make are colossal. For example, the American company Renco sued Peru for $800 million because its contract was not extended after the company’s lead smelting operations caused massive environmental and health damage. 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.
For further general information on TFAs see http://www.econlib.org/library/Enc/InternationalTradeAgreements.html
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 not just – or even primarily – concerned with trade in goods, but also with trade in services. Initially negotiators hoped that the deal would be concluded at great speed (or ‘on one tank of gas’) by the end of 2014, but unforeseen delays mean that negotiators now aim to sign the treaty before US Presidential election campaigning starts in 2016.
One difficulty has been the concerns expressed the public, trades unions and civil society groups about the implications of TTIP. These include a growing awareness of the risks posted by the inclusion of ISDS. For example, under existing FTAs, only 8% of US-owned firms operating in the EU (mainly in Central and Eastern European countries) are covered by ISDS, but these firms have already claimed more than 30 billion euros against EU member states under ISDS. If ISDS is included in TTIP, a further 92% of US-owned firms would have the right to use ISDS and – given the litigious nature of US companies – the sums claimed are likely to rise dramatically. A public consultation on the inclusion of ISDS in TTIP resulted in 97% of respondents (including some business organisations and elements of government) rejecting ISDS. Despite this, it is becoming clear that the EU has dismissed public opinion, has not ruled out ISDS and is not suggesting any meaningful changes to how it will operate (http://corporateeurope.org/sites/default/files/s2b-on-ec-isds-reforms.pdf).
One of the stated aims for TTIP is the reduction of tariffs although, at 3%, these are already very low between the US and EU. The real priorities are
- to increase protection for transnational investors (for example through ISDS, although many argue that this is an unnecessary measure in a treaty between countries which already have established and respected legal systems), and
- to remove (or ‘harmonise’) ‘not-tariff’ or regulatory barriers – the different ways of doing things that make it difficult to sell the exact same product on both sides of the Atlantic – that restrict profitable trade between the US and EU. In many cases, different national regulations demand different types of tests and standards that mean additional costs for exporters. But the move to create a common transatlantic standard could mean a race to the bottom, with the least demanding standard being adopted. The tests for safety in the US and EU are based on very different principle: in the US, producers can assume that products are safe until shown to be harmful, while in the EU the Precautionary Principle is used, whereby companies must prove their products are not harmful before they can be sold. Many fear that the removal of ‘non-tariff barriers’ between the US and EU will often mean the removal of 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 – despite a recent move towards greater transparency – 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 (not least, 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 would be 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.
Independent research suggests TTIP will lead to losses in terms of net exports; growth and government revenue (http://ase.tufts.edu/gdae/Pubs/wp/14-03CapaldoTTIP.pdf).
In addition, while TTIP will bring little in the way of economic growth, it may result in actual job losses in the UK. Even 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). Alternative research has estimated that TTIP would lead to 600,000 job losses in the EU alone (http://ase.tufts.edu/gdae/Pubs/wp/14-03CapaldoTTIP.pdf) and certainly, job losses have been typical of other free trade deals, such as the North American Free Trade Agreement (NAFTA).
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).
To see how the different political parties stand on TTIP, see http://www.waronwant.org/news/latest-news/18306-ttip-where-the-parties-stand
A useful 2 minute video outlining the issues can be found at https://www.youtube.com/watch?v=AmKzYg84nNA
See also http://arstechnica.co.uk/tech-policy/2015/05/ttip-explained-the-secretive-us-eu-treaty-that-undermines-democracy/
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 making the NHS 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 can probably 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 be closer 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. 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
Under TTIP, transnational corporations would be able to tender for local authority procurement. The treaty would effectively take away the power of local authorities to define the terms and criteria for assessing contracts, including ‘performance requirements’ such as minimum wages or gender balance. There only deciding factor would be cost: issues, such as quality of experience, could not be considered. This suggests that the ability of local governments to carry out social policies would be severely restricted by TTIP, there could be serious consequences for the quality of health services, and democratic accountability could be significantly undermined.
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.
Members of the EC and of our own government have repeatedly issued reassurances that
- TTIP would not compel a UK government to privatise NHS services (it just happens that the NHS is already being privatised), and
- there is nothing in TTIP that prevents member states of the EU managing their own health services (or public services) as they see fit. This is true – a future government would, in theory, be free to re-nationalise the NHS. However, TTIP involves an irreversible commitment to give transnational corporations ‘market access’ (i.e. the right to enter the UK market and operate without limit on their activities) and ‘national treatment’ (i.e. the right to equal treatment with domestic companies with, for example, the same right to government subsidies). This means that bringing NHS services back into the public sector would be likely to lead to a massive claim for compensation under ISDS (as indicated above). It is also thought that if future governments introduce charges for NHS treatments, these charges will be locked in by TTIP and we may never be able to return to an NHS that is free at point of use.
Some of those promoting TTIP say that health will be exempt because of prior commitments made in the World Trade Organisation’s General Agreement on Trade in Services (GATS) which protects publicly provided services. But in this context, the term ‘public service’ is ambiguous and may refer only to those services supplied without the 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 whether or 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;
- the report commissioned by Unite on the legal implications of TTIP for the NHS: http://www.unitetheunion.org/uploaded/documents/FINAL%20Legal%20implications%20of%20TTIP%20for%20the%20NHS%2012%20Feb%20201511-21864.pdf.
- videos of talks by MEPs with insight into whether the NHS can be exempted from TTIP, plus ‘stakeholders’ (the British Medical Association’s EU Policy Manager and the Secretary General of the European Public Health Alliance) on the impact of TTIP on the delivery of health services and on public health in general: http://www.rcn.org.uk/newsevents/news/article/uk/transatlantic-trade-and-investment-partnership-ttip.
Finally, it is worth noting that, while working in the USA, the current 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, such as those run by 38 Degrees, against the whole TTIP agreement because of the way it will undermine democratic decision-making and accountability.
- Visit http://stopttip.net and www.nottip.org.uk for information and campaign news.
- Sign the European Citizens’ Initiative to force a hearing on TTIP in the European Parliament. For more details, see https://stop-ttip.org/about-the-eci-campaign/ and to add your name to the ECI, visit http://action.sumofus.org/a/stop-ttip-eci/
- Write to your MEP and let them know your concerns about the inclusion of ISDS and about the treaty as a whole. See https://www.writetothem.com/ for how to contact them.
- Write to your MP, making sure that they are aware that the NHS is not safe from TTIP and asking them to demand that public services like healthcare are made exempt, as well as the ‘investor protection’ mechanism (ISDS) that gives corporations the right to sue governments for loss of future profits. You might want to download the briefing paper from Keep Our NHS Public to send them (see http://www.keepournhspublic.com/pdf/Excludinghealthnov5-2-2.pdf ).
- 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 for 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.
- Sign the petition by the People’s NHS http://www.peoplesnhs.org
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
The Democratic Congressman Alan Grayson for describes the Trans Pacific Partnership (a FTA that includes things relevant to TTIP such as ‘fast track’ and the role of corporate lobbyists ) as ‘pure evil” – see https://www.youtube.com/watch?v=xKx9_2wCYzU
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 April 2015