Guest Blogger Eleanor D. Kinney: Greetings from Indianapolis (alas not Puerto Vallarta)!!

El 6 de Agosto

Greetings from Indianapolis (alas not Puerto Vallarta)!!

 

 This is my last blog on health care in Mexico and North America. In this blog, I want to talk about the implications of free trade agreements for the health care sectors of the three countries of North America – The United States, Canada and Mexico. 

In 1947, twenty-three countries agreed to the General Agreement on Tariffs and Trade (GATT) to promote free trade in the world. Initially, GATT only addressed trade in goods.  However, since the Uruguay Round in 1994, the General Agreement on Trade and Services (GATS) also addresses trade in services, capital, and intellectual property. The trade agreements in the Uruguay round also established the World Trade Organization.  (World Trade Organization, Legal Texts).

The basic theory of free trade agreements is that free trade among private persons and enterprises is to be promoted and, as a corollary, public monopolies providing goods and services are to be discouraged.  This theory is at odds with the state of affairs in almost every national health care sector in the world.  In these health care sectors, private actors have demonstrated that they are not able to provide affordable and high quality health care services for all in need. In almost every country of the world, states have had had to subsidize health coverage for certain segments of the population – namely, the elderly, disabled and poor. Often this subsidy is accomplished through a public health insurance program. 

The impact of free trade agreements on the accessibility and affordability of health care services is a concern in the three countries of North America with their varied health care systems.  As discussed in prior blogs, the three health care sectors of North America are quite different and independent. Canada has an established public universal health insurance program. The US health care sector is undergoing reform to address major gaps in health coverage. Mexico too is expanding coverage in its less modern but advancing health care sector. 

 In 1993, the United States, Canada, and Mexico adopted and ratified the North American Free Trade Agreement (NAFTA).  NAFTA is open to any country in the world, including members of the European Union, upon meeting certain criteria.  NAFTA applies to all economic sectors including social services. The national governments of the three state parties must “ensure that all necessary measures” are taken in order to give effect to the NAFTA’s provisions, including their observance by state, provincial, and local governments.

The preamble of NAFTA expressly recognizes — as a cardinal principle — the right of parties “to preserve their flexibility to safeguard the public welfare.”  However, NAFTA does not contemplate the growth of public programs or the inauguration of new public programs. Both Chapter 11 (Investments) and Chapter 12 (Cross Border Trade in Services) provide that the operative provisions of each chapter do not apply if there are existing nonconforming measures, or the party establishes non-conforming measures within two years of NAFTA’s adoption — so long as these nonconforming measures are reserved in the appropriate annexes of NAFTA.  

In Chapter 11, NAFTA requires that parties and their political subdivisions provide investors of other North American countries with national treatment and also most favored nation treatment.   NAFTA Chapter 11 also contains a provision that parties may not “directly or indirectly nationalize or expropriate an investment of an investor of another Party in its territory or take a measure tantamount to nationalization or expropriation of such an investment…except under circumstances such as for a public purpose.”   

Chapter Eleven of NAFTA facilitates the settlement of investment disputes.  Specifically, Chapter Eleven permits an investor of one NAFTA Party to seek money damages for measures of one of the other NAFTA Parties that allegedly violates Chapter Eleven. Investors may initiate arbitration against the NAFTA Party under the Arbitration Rules of the United Nations Commission on International Trade Law or the Arbitration (Rules of the International Centre for Settlement of Investment Disputes ("ICSID Additional Facility Rules").  Department of State, NAFTA Investor-State Arbitrations.

The invocation of these investment provisions on the part of American health care providers is not a hypothetical possibility. It is noteworthy that an American entrepreneur, Melvin Howard, has brought an action against Canada under NAFTA for trade restrictions barring his investment in for-profit health care facilities in British Columbia.   In Centurion Health Corporation v. Government of Canada, the plaintiff claims that the Canadian public health insurance program violates the national treatment rule under NAFTA Article 1102 and the most favored nation rule under NAFTA Article 1103. Centurion Health Corporation v. Government of Canada, Revised Amended Statement of Claim (Feb. 2, 2009). The case is now before a NAFTA Investor-State arbitration proceeding. 

Trade policymakers must take care that free trade agreements do not undercut existing public health insurance programs or thwart the establishment of new public health insurance programs.  Regarding the first concern, private providers and insurers should not be able to gain extraordinary profits from public programs. Private health care providers and insurers have been able to make money in an imperfect health care services market. Yet neither providers nor insurers have been able to meet the needs of all citizens.   They thus should not be allowed to cherry pick privately funded patients at the expense of public programs.  

Regarding the second concern, investment protection rules such as those in NAFTA of Chapter Eleven should not be invoked if a country establishes a public health insurance program to meet coverage needs of any portion of the population now and in the future.

- Eleanor D. Kinney