Merchants in the temple? The implications of the NAFTA and GATS for Canada's health care system.

• Author: Epps, Tracey

"My temple should be a house of prayer, But you have made it a den of thieves. Get out! Get out!" (Lyrics from Jesus Christ Superstar)

Introduction

Canada's publicly funded health care system, "Medicare," is the country's most cherished social program. It is a near-sacred institution, comparable to the temple in the New Testament story from which Jesus drove the merchants who had set up shop. Many believe that international trade agreements threaten to flood Canada's sacred institution with unwanted merchants of its own in the form of foreign for-profit investors. (1) They fear that these agreements will force Canada to open its health care system to entry by foreign service providers and insurers, causing a slide into a US-style system of health care driven by for-profit providers and insurers. (2) A contrasting view has been presented by the federal government, which has assured the public that international trade agreements pose no threat to the integrity and sustainability of Medicare. (3)

The two trade agreements that have received the most critical attention are the North American Free Trade Agreement (NAFTA) and the General Agreement on Trade in Services (GATS). The NAFTA is an agreement implemented in 1994 between the federal governments of Canada, the US and Mexico that aims to create a free trade area between the territories of the three countries. The GATS is an agreement for liberalization of trade in services implemented in 1994 that imposes rules on all member countries of the World Trade Organization (WTO).

In this article, I provide a brief overview of the implications of the NAFTA and GATS for Medicare with the objective of determining the reality behind the contrasting views discussed above. (4) I will do so by examining:

* The values underpinning international trade agreements;

* Key characteristics of Canada's health care system; and

* The key provisions and potential implications of the NAFTA and GATS for Canada's health care system.

International Trade Agreements and Health Care--Conflicting Values?

The key objective of most international trade agreements, including the NAFTA and GATS, is trade liberalization through the reduction of barriers to trade. The rationale is that trade unhindered by government interference will result in the best allocation of scarce resources, and improved economic growth and welfare. The success of trade liberalization is largely dependent on the presence of an open market within each of the trading partners. In an open market, goods and services are allocated on the basis of purchasing power and there is no concern with equity of distribution. On its face therefore, trade liberalization is incompatible with the goals of the Canadian health care system where the free market gives way to high levels of government intervention in order to achieve goals of distributive justice.

Canada's Health Care System

Before looking at the provisions of the NAFTA and GATS, it is essential to understand the fundamental nature of Canada's health care system. Medicare is sacred to Canadians because it seeks to achieve goals of distributive justice, that is, the provision of health care services to all based on need regardless of the ability to pay. Yet, while popularly described as a "single-payer public system," Canada's health care system is in fact characterized by a wide range of public/private relationships. At the core of the system, "medically necessary" hospital and "medically required" physician services are fully publicly funded. Outside of this core, a number of increasingly important services are not fully publicly funded, including prescription drugs used outside of hospitals, home care, alternative care (e.g., services provided by chiropractors, homeopaths, naturopaths), dental care and some vision care. While provincial governments provide some of these service (e.g., through publicly funded home care programs), people often have to buy private insurance or pay out of their own pocket for these services.

In terms of delivery of health care services, very few publicly funded services are actually delivered by public entities. Rather, publicly funded services are predominantly delivered by private non-profit organizations (e.g., hospitals) or private for-profit professionals (e.g., physicians). This mix of public and private interests on both the financing and delivery sides of the system makes it difficult to draw a sharp distinction between what is public and private. As I discuss below, this causes problems in applying Canada's reservation to the NAFTA and exemptions to the GATS which assume a clear demarcation between public and private.

Potential for Export of Health Care Services

The level of international trade in health services is increasing as business interests recognize the possible opportunities and profits to be made exporting health care goods and services. (5) New technologies are providing greater opportunities for the export of health care goods and services, for example, e-health initiatives such as remote diagnostics, remote consultations and robotic surgery. Yet benefits from trade do not flow only one way and the quid pro quo for gaining increased opportunities for Canada's exports abroad is that Canada may be required to grant reciprocal treatment to foreign interests under international trade agreements. Thus, the benefits of trade liberalization (that...