International Free Trade in Medical Care “TRADE CREEP” AND IMPLICATIONS OF THE TRANSATLANTIC TRADE AND INVESTMENT PARTNERSHIP AGREEMENT FOR THE UNITED KINGDOM NATIONAL HEALTH SERVICE Meri Koivusalo and Jonathan Tritter

The ambitious and comprehensive Transatlantic Trade and Investment Partnership Agreement (TTIP/TAFTA) agreement between the European Union and United States is now being negotiated and may have far-reaching consequences for health services. The agreement extends to government procurement, investment, and further regulatory cooperation. In this article, we focus on the United Kingdom National Health Service and how these negotiations can limit policy space to change policies and to regulate in relation to health services, pharmaceuticals, medical devices, and health industries. The negotiation of TTIP/TAFTA has the potential to “harmonize” more corporate-friendly regulation, resulting in higher costs and loss of policy space, an example of “trade creep” that potentially compromises health equity, public health, and safety concerns across the Atlantic.

Negotiation of the Transatlantic Trade and Investment Partnership Agreement (TTIP/TAFTA) between the European Union and the United States began in June 2013. The motivation for the negotiations is the expected economic benefit from increased trade on the basis of not simply removing tariffs, but essentially creating a transatlantic marketplace based on trade and regulatory cooperation. The contents of the negotiation mandate imply that the agreement would not only seek to deepen existing multilateral commitments in trade, but also to expand these in relation to government procurement, investment liberalization of trade and investment protection, and the enhancement of regulatory cooperation with a specific focus on pharmaceuticals and medical devices (1). International Journal of Health Services, Volume 44, Number 1, Pages 93–111, 2014 © 2014, Baywood Publishing Co., Inc. doi: http://dx.doi.org/10.2190/HS.44.1.f http://baywood.com

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Health services have traditionally not been at the core of trade policy interests. However, in the case of TTIP/TAFTA, the decision not to mention or explicitly exclude health services in the EU negotiation mandate (1) means that health services are considered part of the overall negotiation package. The actual wording of the mandate is broad and ambitious. Paragraph 15 of the mandate seeks to bind the existing level of liberalization of both parties at the highest level captured in existing free trade agreements, “covering substantially all sectors and all modes of supply, while achieving new market access by tackling remaining long-standing market access barriers, recognising the sensitive nature of certain sectors” (1). What this implies is an overarching approach that takes account of some limitations for “sensitive” sectors, rather than keeping these outside trade negotiations. A variety of regulatory issues concern health, labor, and social policies, in the context of TTIP/TAFTA, for EU regulatory practices, accommodating health and safety consideration of products and production practices (e.g., hormones in meat production), precautionary principle, and accommodation of consumer preferences in product labeling (e.g., genetically modified organisms). However, in this article, we focus on potential implications of TTIP/TAFTA for the National Health Service (NHS) in the United Kingdom. As negotiations are only beginning, the main “empirical” reference for this analysis is based on the leaked EU mandate for the negotiations (1). The impact of the TTIP/TAFTA on the NHS in the United Kingdom is directly related to the way the NHS operates and how it is governed. The crucial element in TTIP/TAFTA is the extent to which it is an example of “trade creep” in terms of how the rules it sets in the context of a commercial policy affect the policy space for health and how governments can implement health policies within countries (2, 3). We draw on this concept and on the broader impacts of globalization (4, 5), new constitutionalism and constitutionalization of politics (6), political globalization and competitive state (7), market-driven politics (8), and aspects of neofunctionalism that have been used in the context of analyzing the European Union’s influence on national health systems (9). Our analysis considers and assesses the implications of a variety of aspects of trade negotiations. We also explore the negotiation process itself, as this can lead to inadvertent commitments through the inclusion of services and sectors as larger blocks without additional consultation. The traditional understanding of the purpose and aims of the NHS has been built on commitment to universal access on the basis of need rather than ability to pay. However, while the broad aims have been formally reiterated, the emphasis has changed toward a focus on publicly funding services, with the potential to contract with private and third-sector organizations to provide care. This process of growing commercialization was initiated during the New Labour governments (10-12), but has accelerated under the current center-right coalition government

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(13-15). In this respect, the current commercialization of the NHS is a result of domestic policy. However, the domestic shift from a non-market-based public service toward a more market-based structure of publicly financed health services makes the NHS more vulnerable to the impacts of trade policies. The UK NHS is also vulnerable to EU rules and regulations for government procurement and services in internal markets. However, it is important to recognize that what is negotiated by the European Union on behalf of the United Kingdom will apply not only to England, but also to the devolved administrations of Scotland, Wales, and Northern Ireland. TRADE NEGOTIATIONS BY THE EUROPEAN UNION In the European Union, trade negotiations are undertaken by the European Commission based on multilevel governance. This adds complexity to the negotiations, but makes the European Union more comparable to the United States as, in both cases, the governance of trade policies is at a different level than the financing of health services. The European Union has competence for the negotiation of trade agreements on goods and services, but competence in relation to investment protection is less clear (16). The role of the European Union is particularly challenging in the negotiation of partnership agreements that reach far beyond the borders of the 28 member states and influence how individual governments regulate at local and regional levels. The TTIP/TAFTA has also expanded to include the controversial areas of trade-related negotiations, such as government procurement, investment protection, and regulatory cooperation on products such as medical devices and pharmaceuticals. The mandate of the agreement also makes reference to the vague term of “health industries” under sectoral provisions in Section 25 (1). The benefits and beneficiaries of TTIP/TAFTA remain contested and unclear. The European Commission’s economic impact assessment suggests modest economic gains to the European Union (€119 billion a year) and slightly less to the United States (€95 billion a year) (17). By contrast, a study of the potential macroeconomic effects sponsored by the Bertelsmann Foundation suggests that the United States will be the primary beneficiary and that one consequence would be a convergence of labor markets in the Organisation for Economic Co-operation and Development member countries (18). What is less apparent is whether the potential administrative costs of changes in non-tariff barriers to regulators and consumers or the shifting of risks for consumers and the public sector have been taken into account. Furthermore, benefits and costs across sectors may differ widely¾for example, with different implications from automotive and pharmaceutical industries to the public and public financing.

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Trade negotiations are predominantly informed by business and commercial interests. In terms of the TTIP/TAFTA, a letter by Trans Atlantic Consumer Dialogue (TACD), a forum for EU and U.S. consumer organizations that promotes consumer interests in policymaking, explains: “In recent years, TACD has sought to engage in the preparation of agendas for the Transatlantic Economic Council meetings and participate in stakeholder meetings surrounding the High Level Regulatory Cooperation Forum. These efforts have largely failed to be meaningful, because of a lack of mutual engagement by governmental parties, in notable contrast to their engagement with business organisations” (19). As business interest groups have a stake in the kind of regulatory action that governments take, trade agreements risk becoming mechanisms to regulate government action for the benefit of multinational industries rather than to protect citizens and consumers. Regulation in this context becomes transformed into regulation against government intervention, with the commercial sector as the primary beneficiary. Another concern is that a general focus on benefits from competition or with reference to particular services can be extended to cover all services. In the context of public services, this could result in health services not being excluded, because liberalization has been seen to positively impact garbage collection. Many health systems have changed from strictly government-funded and government-provided services to government-funded services that have been contracted out to private providers. Traditional public service exemption clauses, such as the public services exception in the General Agreement on Trade in Services (GATS), do not exclude services for which markets or competition exist (20, 21). The public services exception applies only to services for which there is no private-sector competition or interest. This suggests that the reference in the EU mandate that “services supplied in the exercise of governmental authority as defined by Article 1.3 of GATS shall be excluded from these negotiations” (1, Paragraph 20) no longer refers to the publicly funded health systems in many European member states. The NHS in the United Kingdom used to be excluded from EU government procurement obligations; however, the situation has changed as a result of recent legislation (Section 75 of the Health and Social Care Act 2012) (22, 23). This section requires the application of specific regulations and in Article 5(1) requires that “A relevant body may award a new contract for the provision of health care services for the purposes of the NHS to a single provider without advertising an intention to seek offers from providers in relation to that contract where the relevant body is satisfied that the services to which the contract relates are capable of being provided only by that provider” (23). This implies that if there is relevant competition in health services, a bidding process should take place. What the TTIP/TAFTA suggests is that the proposed

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public services exception is not going to safeguard the NHS from liberalization of market competition. REGULATORY POLICY SPACE The concept of policy space has been applied to trade and national economic policies (24). The national policy space for health can be defined as the freedom, scope, and mechanisms that governments have to design, choose, and implement public policies in order to fulfill health-related priorities and aims (3). This concept applies, in particular, to the impacts of trade agreements on health system regulation, organization, and financing. It also relates to the mobility and qualifications of the health workforce, pricing policies for pharmaceuticals and vaccines, and public health-related regulation and standard setting. The negotiation of ever “deeper” and more comprehensive “partnership agreements” under trade and investment agreements is an example of “trade creep,” challenging the forums and priorities that should be a part of national and global regulatory rule setting. While criticism of nongovernment and consumer organizations with respect to regulatory measures is likely to focus on health and safety regulations (19), the policy space for regulation and cost containment within the health sector, as well as the regulation of prices and quality of pharmaceuticals and medical devices, remains a particular concern in EU member states. Such partnership agreements also challenge the role of the European Union in trade negotiations, as individual European member states pay for medicines and health system costs, while the European Commission negotiates trade agreements informed, in particular, by corporate interests and regulatory priorities. These priorities are often at odds with the priorities of member states in technology assessment and cost containment. Furthermore, the pharmaceutical industry is a significant lobbyist at the European level, and EU pharmaceutical policies have already been criticized for being subject to regulatory capture (25). Trade agreements have implications for policies within the health sector, as well as health promotion and health protection policies that affect investment, goods, or services in other sectors. An example is the tobacco industry, which used aspects of trade and investment agreements to oppose Australian plain packaging legislation as a tobacco control mechanism (26, 27). It is now widely recognized that maximizing the health and well-being of a population cannot be achieved through the health sector alone; increasingly, governments are recognizing the importance of considering Health in All Policies (28). This has been acknowledged as part of EU policies since 2006 and in the context of Article 168 of the Lisbon Treaty, which requires a high level of health protection in all policies (29). However, at the same time, the health sector is increasingly under scrutiny by trade policies, not only in terms of trade barriers that health-related regulations can create, but also as a commercial sector. Thus, while many health-related

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concerns relate to the consideration of health in other policies, it is increasingly important to ensure “health in health” policies (30). TRADE IN SERVICES The new negotiation mechanisms, in addition to lacking transparency, create additional challenges as they increasingly use negative listing horizontal measures that cover all sectors and services, as well as standstill, ratchet, and no roll-back provisions (31). Negotiations based on negative listing assume that unless specifically excluded, all services and areas are included as part of the agreement (the opposite of the positive listing approach taken in GATS). Horizontal measures are a narrow form of negative listing as they extend commitments with specific provisions, such as national treatment, initially to all sectors. Standstill and no roll-back mechanisms ensure that, while existing legislation that is incompatible with the trade agreement can be allowed to prevail, it is not possible to enact more trade-restrictive legislation or legislation that would be incompatible with provisions of the agreement. These mechanisms are complemented with a push toward inclusion of services as part of the agreement on the basis of existing legislation within a sector. This means that if there is no legislation discriminating against foreign providers, there would be pressures to include the sector as part of the agreement. Finally, the use of ratchet mechanisms automatically includes the sector as part of the agreement when legislation in the sector becomes compatible to the agreement. An earlier document for the Organisation for Economic Co-operation and Development on the Multilateral Agreement on Investment (MAI) describes, perhaps most clearly, the purposes and aims of these types of provisions (32): “The fundamental aim of the ‘standstill principle’ is to ensure an irreversible minimum standard for liberalisation through the exclusion of new or additional restrictions. Standstill is also the starting point for the removal, via rollback, of existing restrictions” (32, p. 2). “Rollback is the liberalisation process by which the reduction and eventual elimination of non-conforming measures to the MAI would take place. It is a dynamic element linked with standstill, which provides its starting point. Combined with standstill, it would produce a ‘ratchet effect’, where any new liberalisation measures would be ‘locked in’ so they could not be rescinded or nullified over time” (32, p. 3). These mechanisms are not only an effective means to “lock in” commitments, but also increase the potential that governments include services and sectors in agreements that they would not otherwise have included or did not intend to include. Many governments have relatively liberalized health sectors, allowing foreign investments and access to markets for services. It is particularly problematic for recently liberalized service sectors as these may not have a sufficient regulatory framework. Regulations are often enacted as corrective measures to respond to problems in a given market, rather than as pre-emptive measures.

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Governments may not be aware of the implications of the provisions, restrictions, exclusions, or what is accommodated under each category of services included in an agreement. In the recent World Trade Organization (WTO) case on online gambling, the United States’ arguments on not scheduling online gambling were overturned as the WTO’s appellate body concluded that the United States scheduled online gambling as part of other recreational services and that online gambling was considered a recreational service and could therefore not be the subject of further restrictive regulation (33, 34). An emerging problem with respect to the new trend in trade negotiations is that there seems to be an assumption that if a sector has no explicit discriminatory legislation, it can be included as part of a trade agreement, but from the perspective of maintaining policy space for health regulation, this is not the case. The negotiation mandate of the European Union includes “sensitive sectors,” a status that in practice is often applied to health, education, social, and cultural services, while the balance between the requirements for all services and the potential for exceptions with respect to “sensitive” sectors remains unclear. As the United Kingdom included hospital services as part of the GATS agreement, hospital services are likely to be included in the TTIP/TAFTA agreement. The broader consequence may be a fragmentation and separation of commitments on publicly funded services so that only some restrictions remain national, while the European Commission retains the potential to expand or limit commitments with respect to such provisions based on EU restrictions. Trade in services also applies to health tourism and the mobility of health professionals. In comparison to other health systems, the NHS has allowed access for foreign health professionals to the extent that this is discussed in terms of poaching health professionals (35). The NHS is also already subject to mutual recognition of professional qualifications within the European Union (36). However, fake doctors and, in particular, counterfeit qualifications remain an issue in the United States and the European Union (37, 38). The central issue is the ability of regulators to verify qualifications and the extent to which governments can ensure that those establishing a private health care practice are aware of and follow relevant national guidance and legislation. One fundamental problem for the European Union is the assumption that it is possible to separate regulatory measures for publicly funded services from those of privately funded services. The consequence of increasingly mixed financing and involvement of predominantly “privately funded” companies in provision of services under public financing and contracts makes it hard to differentiate publicly and privately funded services in a meaningful way. The European Union has traditionally made an exception for publicly financed services; however, the scope of this exception remains unclear. The purpose of this exception has been to complement the more narrow public services exception in WTO agreements. However, the safeguarding of regulatory policy space on the basis of exceptions within a sector can also be problematic, as WTO provisions

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under domestic regulation are defined on the basis of whether services are initially included (39). This implies that exceptions are not necessarily the correct measure to retain policy space, as the primary aim is not necessarily to exclude market access from any foreign provider, but rather to ensure the functioning of the broader health system and the freedom to regulate, irrespective of the interests of foreign investors or whether regulations affect their access to these markets. GOVERNMENT PROCUREMENT In England, the Health and Social Care Act 2012 has accelerated the liberalization of health service provision within the NHS, in particular through the Section 75-77 regulations that apply to procurement. While, previously, the NHS and the health sector were excluded from government procurement provisions, the new legislation essentially subjects all contracts with potential commercial interest to a competitive tendering process (23). While the government claims that the 212 Clinical Commissioning Groups across England who will make the majority of the decisions relating to contracting health services still have the scope to choose, if they wish, to outsource services, this remains strongly conditional, requiring advertising intentions and, in all such cases, a service can only be provided by a single provider. Unless specifically excluded from government procurement provisions, it is likely that the general provisions of the negotiations would also apply to the NHS in England. This would put U.S. providers on an equal footing with those from the United Kingdom. Furthermore, unless explicitly excluded, it is likely that these provisions would also cover NHS services in Scotland, Wales, and Northern Ireland, where outsourcing is used. If the government chooses to exclude the health sector and the NHS from government procurement commitments, the flexibility and potential to change legislation and NHS practices on the basis of evidence and experience would remain; such changes might include returning a service to public provision. On the other hand, if health care is not excluded, foreign providers could challenge contracts or any legislation that would discriminate against their interest. There would also be the potential of “dragging in” NHS services in Wales, Scotland, and Northern Ireland to government procurement regulations within the European Union. While this would not necessarily prohibit the NHS from continuing its own provision or from retreating from outsourced contracts to its own provision in England, Wales, Scotland, and Northern Ireland, it would have implications for how and on what basis contracts can be written and assessed. The extent to which the TTIP/TAFTA would limit a return to public provision depends on the explicit provisions in the agreement and on developments in EU procurement law. The implications for government procurement requirements for the NHS are likely to be an increased administrative burden and requirements for publicly financed health care, increased litigation costs, challenges for continuity of care and use of shared resources, and less freedom to support domestic third-sector and

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local providers, depending further on how government procurement is defined in the treaty and whether these will exceed EU requirements in Category B. The possibility to return to public provision is important for reasons of continuity, cooperation, oversight, and costs. In some European member states, such as Finland, approximately one-third of municipalities (local government) have returned outsourced health service to their own provision because of problems of flexibility, costs, and continuity in outsourced contracts (40). Furthermore, it is important to note that all provisions would also apply to contracts given to nongovernment organizations, which are¾unless specified¾considered the same as commercial market operators. While EU government procurement legislation retains some scope for assessing contracts, the details of negotiations are important in terms of how these treat different providers. In particular, governments need to retain the flexibility to define the terms and the basis for assessment of contracts, such as whether they use qualitative and broader requirements rather than simply value for money or price. According to the EU mandate, Paragraph 24: “The agreement shall aim for the maximum ambition, complementing the outcome of the negotiations of the revised Government Procurement Agreement in terms of coverage (procurement entities, sectors, thresholds and services contracts, including in particular public construction). The agreement will aim at enhanced mutual access to public procurement markets at all administrative levels (national, regional and local), and in the fields of public utilities, covering relevant operations of undertakings operating in this field and ensuring treatment no less favourable than that accorded to locally established suppliers” (1). INVESTMENT LIBERALIZATION The TTIP/TAFTA provisions on investment liberalization and protection are likely to be important both to “lock in” outsourcing of services and to specify the use of local providers. These provisions require that if a public service is put out to tender or outsourced, it will no longer be possible to return it to public provision unless there is no commercial interest in those particular contracts. The liberalization provisions also prohibit the imposition of so-called performance measures that require the use of the local workforce or the transfer of knowledge and learning to local providers. This could raise particular issues, when part of a service is provided from a different country (e.g., interpretation of X rays) with less scope for oversight of quality and adequate qualifications of the workforce within the country where the service is being delivered. It is possible to exclude health services from investment liberalization commitments. However, if health and hospital services are not excluded from investment liberalization, this will require that for the NHS, services will need to be outsourced to markets, even if it could be more cost-effective to provide them in-house. More problematically, should a future government like to

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reconsider legislation, such as Health and Social Care Act Section 75-77 regulations on procurement for the NHS, it would become more difficult. While the implications of the TTIP/TAFTA in terms of “maintaining” markets are relatively clear, investment liberalization commitments also seek to limit scope for expanding public ownership in privatized or partly privatized services. They also cover establishment, although investments and establishment are at times dealt with under so-called Mode 3 in trade-in services. In the case of the NHS, investment liberalization could raise issues with respect to ownership of hospitals and the role of private finance in health systems. However, even if publicly financed services are not included, it is likely that regulation and oversight of privately funded services and providers will become more challenging if these are included as part of investment agreements, as it would no longer be possible to restrict market access or establishment from foreign providers. This would result in far greater difficulty for governments to ban certain kind of private provision or practices or to strongly regulate against certain types of provision. Governments are likely to be careful with respect to the inclusion of health services as part of investment agreements. The real challenge is to have such an exclusion also relate to investment protection, which, in the context of the TTIP/TAFTA, will be negotiated separately from investment liberalization. INVESTMENT PROTECTION The negotiation mandate also applies to investment protection, although this remains one of the more contested aspects of the agreement. If this is negotiated as a horizontal measure and therefore applies to all services, it could compromise any exclusions made with respect to health and hospital services. The most controversial part of investment protection concerns expropriation and arbitration; investors would have the right to challenge decisions by governments and national courts through an arbitration mechanism, with compensation for direct and indirect expropriation (41-43). Expropriation is traditionally understood to cover situations where a government, for example, takes over privately owned premises, requiring it to make compensation to owners of these premises. However, the definition of investment is broad and also covers intellectual property rights. Furthermore, indirect expropriation extends also to general regulatory measures, which have a negative consequence on the value of an investment. A potential implication is that if a government seeks to withdraw health care services from market mechanisms, corporations could challenge such measures as nullifying their investments in UK health care markets. This is the argument a Swedish Vattenfall company made (44) when Germany decided not to proceed with nuclear power. The governments in Poland and Slovakia have already been challenged for backing away from privatization programs in health care (45, 46).

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Investment protection clauses are therefore not simply about the retention of contracts, but limit the capacity of governments to move public services out of markets in which investors have substantial financial interests. Such clauses benefit multinational firms and foreign investors over and above local providers as they have access to commercial arbitration through an exclusive channel of influence. Investment protection has further relevance for health-related regulation and impacts on other sectors, for instance through environmental health provisions banning hazardous products or practices (47, 48), which are likely to compromise investments or limit commercial prospects. Indirect expropriation provisions can and have been applied to legitimate regulatory measures by governments. The broad definition of investment includes intellectual property rights, and investment protection provisions have been raised with respect to medicines (49). The implications for the NHS might be that foreign investors in the NHS health care market could challenge the government, requiring arbitration if it moves out of the market or imposes measures that compromise investment returns in this market. This is a real possibility as several North American investors already operate in the NHS market. The EU mandate for investment protection is, in this respect, particularly worrying and suggests that it will be horizontal, but will not cover market access issues in Section 23 on investment protection (1): “Relationship with other parts of the Agreement: investment protection provisions should not be linked to the market access commitments on investment taken elsewhere in the Agreement. Investment Dispute Settlement System shall not apply to market access provisions. These market access commitments may include, where necessary, rules prohibiting performance requirements. All sub-central authorities and entities (such as States or municipalities) should effectively comply with the investment protection chapter of this Agreement.” DOMESTIC REGULATION AND REGULATORY COHERENCE Trade negotiations apply to domestic regulation. Under the WTO GATS agreement, the main provisions in Article VI apply only to those sectors that have been included as part of the agreement (39); however, there are different interpretations of the issue (50). Licensing and technical requirements remain important for regulation, and further requirements from government measures can raise hurdles that governments need to overcome for regulation. These can include efforts to engage with necessity tests and limiting the scope of “trade restrictiveness” to domestic regulation measures in comparison with “like” (i.e., similar) countries (50-52). It is acknowledged that domestic regulation provisions can affect policies for cost containment and regulation in health systems (21, 50, 52). These have already been analyzed in relation to the NHS (50). It

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is therefore important to focus on how and on what basis domestic regulation provisions are negotiated and whether these are required for all sectors and services as a horizontal measure just for those services, where commitments have been made. The provisions on regulatory coherence are likely to have implications for health and safety regulations and for practices concerning labeling. However, these provisions can also have broader implications through measures on regulatory coherence where there is an attempt to gain (1; Section 75 on regulatory coherence) “more compatible regulations for goods and services, including early consultations on significant regulations, use of impact assessments, evaluations, periodic review of existing regulatory measures, and application of good regulatory practices.” The main challenge is to clarify from which perspective good regulatory practices are to be addressed¾that of consumers, governments, or industry¾and why such practices should be part of negotiations concerning a trade agreement. These provisions relate to chemicals, pharmaceuticals, and other health industries and seek to remove existing non-trade barriers and prevent the adoption of new non-trade barriers. They are likely to affect the basis and aims for regulation as the mandate seeks an agreement that is (1, paragraph 27) “binding on all regulators and other competent authorities of both Parties.” The danger is that pressure for regulatory coherence and cooperation produces a binding framework of more “business-friendly” regulatory practices that is conducive to the interests of and input from multinational industries and, at the same time, limits the scope and actions of regulatory agencies. PHARMACEUTICALS, MEDICAL DEVICES, AND STANDARD SETTING Pharmaceuticals and medical devices are included in the TTIP/TAFTA negotiations. The economic impact assessment that is applied draws attention to existing U.S. concerns with respect to EU member state pricing policies. More directly relevant to the United Kingdom is the variation in the EU and the U.S. interests on the basis of the initial impact assessment (53) around information for patients and technology assessment. In particular, there are potential implications for the role of the UK National Centre for Health Clinical Excellence (NICE), which makes decisions concerning drugs and technologies that can be purchased by the NHS. The impact assessment study conducted by Ecorys for the European Commission concluded that: “The most important issues for U.S. companies exporting to the EU¾constituting the estimated trade costs of 15.3 percent¾relate in particular to EU pricing policies, the EU Health Technology Assessment methods, divergent national authorization systems (although decreasing in importance), data exclusivity, parallel trading, international and therapeutic reference pricing and customs administration differences and delays” (53, p. 106).

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Trade negotiations in the field of chemicals and pharmaceuticals are likely to be strongly influenced by industry priorities and concerns, potentially compromising legitimate regulatory aims. More importantly, NICE is an important NHS mechanism for cost containment in the field of pharmaceutical policies. In terms of pharmaceuticals, the most important aspect of the TTIP/TAFTA agreement is likely to be the extent that it applies to NICE or interferes with mechanisms to assess quality, contain costs, or effectively procure medicines. The danger is that rather than tightening regulation on medical devices, bad practices in the European Union spread to the United States (54). The European system has been blamed for being “fragmented, privatised, and largely opaque; safety is dealt with in an unsatisfactory way and efficacy not at all” (55, p. 1). Furthermore, even more worrying in relation to the TTIP/TAFTA negotiations is that the evolution of the current system in the European Union is one where the “primary goal of the system was to harmonise national regulations to reduce barriers to trade, rather than to protect public health” (55, p. 1). In terms of the NHS, the impact of standard-setting measures may have implications for Public Health England and those parts of the NHS in Wales, Scotland, and Northern Ireland, where public health measures remain under the broader NHS umbrella. Negotiations are likely to enhance requirements and relevance of scientific risk assessment for standard setting, with implications for how governments address the use of antibiotics and hormones in meat production, production practices, and labeling. Of particular note is the issue of labeling and the inclusion of information on genetically modified organisms and dietary advice or initiatives for indicators, such as “traffic light” labels promoted by consumer groups on both sides of the Atlantic (56), but opposed by industry (57). In the context of trade negotiations, both the European Union and the United States have been critical of efforts by individual countries to introduce junk food labeling (3, 58). Indeed, one test with respect to the agreement is whether it hampers such measures or improves labeling and consumer information. CHALLENGES FOR NEGOTIATIONS While the TTIP/TAFTA is unlikely to force or impose direct privatization on publicly funded health systems, it is likely to catalyze and enable further privatization of the NHS. This can be avoided by ensuring exemptions that remove health and health-related services from commitments in the areas of services, investment liberalization and protection, and government procurement. Such exemptions would leave them “unbound” to the negotiated agreement. Such a course of action would not prohibit or limit privatization of provision of services or free trade and investment policies, but would enable governments to retain policy space for regulation and, if desired, a return of contracted-out services to public provision.

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While privatization remains a choice for governments, trade and investment agreements, in particular, enhance the rights of private-sector providers and multinationals in a given market to “lock in” existing liberalization and to make future government interventions more difficult. Such actions represent a kind of meta-regulation of governments for the benefit of foreign investors and corporations, building a free market in services while securing tighter intellectual property rights. The negative implications of the TTIP/TAFTA for health equity arise from the way it creates barriers to cross-subsidization and regulation for equal access, instead promoting a system based on choice and a more commercialized context for service provision (59). Other potential impacts include fragmentation of services and greater geographical inequities in the quality and provision of services. The result of increased choice in the NHS will be more opportunity for the wealthy to navigate the new system both as patients and contractors. Issues of cost escalation, the increased administrative burden of regulation for the public sector, and issues related to shifting of financial risk and quality control are usually not considered in discussions of international trade agreements. It is assumed that trade and investment agreements will lead to lower costs and increased efficiency in all services. The broad scope, multilevel governance, and time pressure of negotiations of such agreements makes it difficult to thoroughly address the implications for health systems. Indeed, there is a great likelihood that health systems in many countries, including the NHS in the United Kingdom, will be included as part of trade and investment agreements by accident or through a lack of attention to detail. This is reflected in the Prime Minister’s reply to a question in Parliament on whether he would confirm that the NHS is exempted from the E.U.-U.S. trade negotiations: “I am not aware of a specific exemption for any particular area, but I think that the health service would be treated in the same way in relation to EU-US negotiations as it is in relation to EU rules. If that is in any way inaccurate, I will write to the Hon. Lady and put it right” (60). What the Prime Minister did not say was that his government would ensure, work toward, or seek to have the NHS excluded from these negotiations. CONCLUSIONS The implications of trade negotiations for governments are likely to be particularly challenging for the control costs of health services, but this is often difficult to tackle due to politics and ideological assumptions of the benefits from competition in health services. It is important to note that while the European Union is responsible for trade and negotiations concerning the regulation of health services and pharmaceuticals, it is not the European Commission, but the member states, that remain responsible for financing these services.

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Health services are not openly at the forefront of trade negotiations, but can become subject to trade agreements as a result of new and more expansive negotiation mechanisms and the increasing complexity of provisions. In the context of multilevel governance, securing an exemption for the NHS can suffer from fast-paced negotiations driven at the EU level and by the fact that health and social security systems function on a different basis in the 28 member states. At the same time, multinational industries are likely to benefit from investing in influence at the EU level, with potential benefits from all member states. On the other hand, it is also possible that the NHS will benefit from the politics and policy priorities of other EU member states that are more willing to consider health as a high policy priority. For NHS-type health systems, it is not enough to ensure it is exempted from the government procurement aspects of the negotiated agreement. Exemption needs to be done for services, investment liberalization, and investment protection and for negotiations concerning domestic regulation, mutual recognition of qualifications, and regulatory cooperation. Investment liberalization and protection provisions are particularly difficult and, if care is not taken, there is already evidence that this can lead to compensatory claims by corporations, if a government decides to return to public provision. Both of these consequences are examples of trade creep. The policy space in which member states can operate to manage and regulate health services will be constrained by the TTIP/TAFTA. But, more centrally, the impetus for the agreement is trade and commercialization; the interests that are shaping the provisions are those of multinational organizations rather than member states in the European Union or their citizens. Trade and investment agreements are not natural laws, but are negotiated on the basis of priorities within governments. It is important that governments are reminded of health as a priority for citizens in the context of trade negotiations. Furthermore, trade negotiations should not take place solely on the basis of the needs and priorities of health-related industries, but must be balanced with other legitimate policy interests, public interests, and the wise use of public funds. Indeed, the transparency that is prescribed should also apply to trade negotiations. International cooperation on regulatory issues is important, but should be based on health and safety priorities and needs at a national level, rather than on the international interests of multinational corporations. REFERENCES 1. Council of the European Union. Directives for the Negotiation on the Transatlantic Trade and Investment Partnership Between the European Union and the United States of America, 2013. General Secretariat of the Council, Brussels, June 17, 2013.

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