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The WTO, health, and education

The Observer (London)
Sunday November 28, 1999

World Trade Organisation: special report


A new World Trade Organisation policy threatens the very heart of the National Health Service

By Will Hutton

Capitalism has never been so fashionable. The Governments fascination with businessmen is well known, but it is a follower of the new fashion as much as its cause. Microsofts software, Internet millionaires, the collapse of the Soviet bloc - all are part of a world in which capitalism has proved its creativity and dynamism while other systems have failed. Twenty five years ago, few boasted of being a capitalist; now its a badge worn with pride.

One of capitalisms great advantages is its capacity to embrace technological change and to drive growth in productivity. But there is a dark side to capitalism; it may be creative, but it is also, as the Austrian economist Joseph Schumpeter argued, destructive. He paired the two trends, characterising capitalism as a permanent process of creative destruction. We havent been hearing much about the darker side of capitalism for a long time, but this weekends massive protests in Seattle as the millennial trade talks start, under the aegis of the World Trade Organisation, may mark the beginnings of a change of mood.

For we are living through a period of classic creative destruction: a period of structural technological change that, because of the new global markets in trade and finance, has global reach but which also implies extraordinary economic, environmental and social dislocation. The arrival of e-commerce on the Internet is just one component of this change; by some estimates, the world wide revenue from e-commerce will be $2 trillion by 2002. This may be brilliant for Internet entrepreneurs, but it means an equivalent loss of revenue for every other organisation that deals directly with the buying public - from newspapers to high-street stores.

Not since the 25 years before 1914 has there been such an interaction of technological change and global capitalism, with such tumultuous social implications. Edwardian prosperity lived side by side with unparalleled mass migration from Europe to North America, driven by incredible poverty; 10 per cent of the Austrian and Italian populations, for example, emigrated. It was in this maelstrom that communism, socialism and fascism seeded and states, buffeted by ungovernable domestic forces, could not sustain the international order. The result was war and depression.

It is a lesson that the advocates of another round of trade liberalisation should heed. The Western political establishment is right when it argues that the world needs clear, transparent and universal rules to govern the business of international trade, and it needs commonly agreed means for settling the inevitable rows peaceably - the WTOs disputes panels. And voices as disparate as our own Clare Shorts and the World Bank are also right when they argue that without trade there is no growth. Infant mortality is falling and life expectancy rising worldwide, a trend disfigured by massive poverty in parts of the developing world, but which would be impossible without the general rise in living standards that accompanies trade. The open global economy offers opportunity, creativity and wealth.

But the problem is whether Western society and the less developed world alike can take a further opening of trade in areas hitherto closed, on top of the already astonishing change that is in train. This change is being exacerbated by global financial markets which are also operating on the same principle of market freedom but are massively destabilising, as witnessed in the Asia crisis. The expectation is that the resulting frictions can be handled by the fragile WTO, which is obliged by its constitution always to rule that free trade is good.

Few realise how ambitious the millennial round is. Take the vexed issue of trade in services. Under Article 19 of the WTOs general agreement on services, all members of the WTO are pledged to sign up to progressively higher levels of liberalisation. But what is radical about Seattle is that the WTO wants to extend this commitment into areas that have hitherto been the preserve of government, such as health care and housing.

An article published in the Lancet this weekend shows how the WTO is already committed to opening up the worlds public sector to international trade and foreign ownership if there is any degree of commercialisation, user-charging or partnership with the private sector. Transport and housing thus qualify in most countries, but so can health and education. What concerns the Lancet is that in Britain, where the use of the Private Finance Initiative and user-charging are far-advanced, we have created a degree of commercialisation of the public sector which means the rules of international free trade will have to govern our hospital service rather than the principles of free universal health care. A US multinational could take the NHS to the WTO disputes panel if it refused it permission to buy a PFI-financed British hospital.

Nor is this an empty threat. The American Coalition of Service Industries is on record as saying: We can make much progress in the [Seattle] negotiations to allow the opportunity for US business to expand into foreign health care markets, a position supported by the US trade delegation. It adds: The US is of the view that commercial opportunities exist along the entire spectrum of health and social care facilities, including hospitals, outpatient facilities, clinics, nursing homes and services provided in the home.

It is this prospect that alarms the Lancet. The instant the public sector in any WTO signatory state moves from being wholly owned by the state and financed by taxation to some partnership with the private sector, it moves into a domain in which the WTO is obliged to ensure it conforms to international trade rules.

Pascal Lamy, EU Trade Commissioner recognises US pressure but insists he will say no.

The US and WTO position might be more acceptable if the whole apparatus was less biased towards the interests of large Western countries. But less developed countries complain bitterly that they are beset by restraints on their cheap exports while having to open up to Western multinationals. The WTO even has to defend the intellectual property rights of Western drug companies against the proper aspirations of countries like South Africa trying to copy cheaper versions for use against Aids.

The world needs to govern its trade relationships, but what the protesters at Seattle are signalling is that the process is reaching the limits of its legitimacy. We need multinational trade rules, but they need to be part of an overall global economic architecture that is fairer and more balanced than this.

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