Healthcare and World Trade

[long post alert: this posts includes info on WTO, NAFTA post will be later today]

A few have asked whether the government of Canada can realistically allow private participation in healthcare while barring American firms, including HMO’s, from entering Canada.

This is a very interesting question and one that socialists like Maude Barlow have raised in the past. Throughout this post I will talk about the general, international trade issues that come up and not about the merits or flaws of foreign competition.

The important thing to note is that this is really not exclusively a NAFTA issue. Although it may be fought in a NAFTA court, if NAFTA did not exist Canada would still have to deal with the WTO if it wanted to exclude American firms from competing in Canada. So I will deal with WTO first.

The basic principles of the World Trade Organization are two ideas called “most favoured nation” and “national treatment.” MFN basically says that you cannot treat different countries differently. In other words, countries cannot normally discriminate between their trading partners. Grant someone a special favour (such as a lower customs duty rate for one of their products) and you have to do the same for all other WTO members. So if a province in Canada were to allow a company from UK bid on a hospital or allow a Chinese investor to invest in a private insurance company, it could not stop a US firm. So what, you might say, we can easily just ban all foreign firms from competing in anything that has anything to do with healthcare. True, I suppose. You’d have to stop a few P3 contracts. That is possible – difficult, but possible.

However, there is no easy way around National treatment- which by the way is one of the only ideas included in all three of WTO’s main agreements, (GATT:3, GATS: 17, TRIPS:3). It says, in different ways, once a good or a service has entered your country there is nothing, absolutely nothing, you can do that would treat it differently from a domestic good. National treatment applies after a product or a service has entered the market, so theoretically Canada could build a tariff wall so huge that would make it highly unprofitable for an American firm to do business in Canada. The question is, are Canadian politicians willing to put a blatant tariff on a service when they know very well that the future of our country’s economic well being depends on there being free trade in services? Even if they are willing to put up a tariff wall on this, are they willing to shut out the entire world, per MFN, from this segment? I’d submit that no government would be willing to do so.

This doesn’t mean there aren’t completely legal ways for the government of Canada to slow down American firms to protect an “infant industry.” (I really don’t want to get into debates about infant industries and strategic trade, if you are really interested read Marc Busch’s book on this.) Canada could put up NTB’s under the SPS agreement. (Not Trade Barriers, Sanitary and Phytosanitary agreement.) Canada could say that no medical provider is allowed to practice in Canada until all the company’s senior management has taken so and so course. (This is basically what the BAR association does to American lawyers.) Of course if the requirement is too unreasonable, then the US could challenge it and win a case. But since a WTO case of such magnitude would take at least 12-18 months to work its way through the system, the government of Canada could buy an infant industry at least 3-4 years by putting up various restrictions.

The question you have to ask yourself is: are you willing to play games with the world trade system, on which 50% of Canada’s GDP is directly dependent, in order to protect healthcare?

If the answer to that question is yes, then here is a simple solution to all of the problems: stop complying. The easiest way to stop American firms from coming into Canada is straight non-compliance. Have the Prime Minister stand up in Brussels or DC and say: “Folks, it is my government’s intention to legislate in a way that is in direct contravention of our WTO obligations. You will find us at fault at a WTO tribunal and give us a few months to comply. We will take those few months and do nothing. Then you will take us back and fine us by nullifying some of our rights. We will ignore you since we know no-country actually likes to take actions even when they are allowed to through nullification.”

This is what I would call a European Union on Hormone Beef defense. (Canada was the country complaining in that case, we won and Europe refuses to comply.)

So Maude, don’t worry, despite all the protests, in the very end, WTO has no teeth and depends on country leader’s being honourable people. Paul Martin and crew, by defying century old traditions in house, have shown that they are not honourable in any way, shape, or form. They could just as easily defy the decades old WTO code.

[this post is really, really incomplete, but I have lots of work to do this morning so I am going to get back to work. There will be updates on the following issues: 1) NAFTA and Chapter 11 – a little preview: unlike the WTO NAFTA has some teeth, not a lot but some 2) realities of world trade and diplomacy – preview: it’s likely that hell will freeze over before anyone brings a healthcare case in front of either the WTO or NAFTA - unless we really piss of the Americans by, oh I don’t know, mocking them internationally and calling them liars and a danger to the world]