The GATS and South Africa's National Health Act: A Cautionary Tale

South Africa's new health legislation, the National Health Act 61 of 2003, designed to tackle the public health crisis and the HIV/Aids pandemic, conflicts with binding commitments made by the former apartheid regime under the World Trade Organization's General Agreement on Trade in Services (GATS). This illegitimate trade treaty makes meeting the health needs of most South Africans far more difficult, says a new report released by the South African Municipal Workers Union and the Municipal Services Project.

South Africa’s new flagship health legislation, designed to combat a daunting and urgent public health crisis, conflicts with legally binding commitments the former apartheid regime negotiated under the World Trade Organization’s (WTO’s) General Agreement on Trade in Services (GATS).

This trade treaty conflict threatens to undermine the much-needed legislation and, if left unresolved, would make meeting the health needs of the majority of the population far more difficult.South Africa’s dilemma should serve as a world-wide warning that health policy-makers, governments and citizens need to be far more attentive to negotiations that are now underway in Geneva to expand the reach of the GATS.

South Africa’s National Health Act (NHA) aims to remedy past injustices by creating a more uniform and egalitarian national health care system. It is the current government’s chief legislative response to continuing health care challenges in a country where the social and economic costs of the worsening HIV/AIDS pandemic have greatly exacerbated the structural problems inherited from the apartheid era. Scarce health resources are still disproportionately directed to rich and urban citizens. South Africa’s National Health Act (NHA) aims to remedy past injustices by creating a more uniform and egalitarian national health care system.

The General Agreement on Trade in Services (GATS) is no ordinary trade treaty. It is exceptionally complex and broad in scope. It aims to expand international commerce by restricting government measures that impede the ability of foreign companies and investors to maximise profit by supplying services, including health services. Once a national government agrees to cover a particular service sector under the GATS, this “specific commitment” binds all future governments, under threat of punitive trade sanctions.

This is the difficult situation in which the current South African government finds itself. In 1994, South Africa made GATS commitments covering a huge swath of the country’s health services. Almost all human health services delivered outside of hospitals by doctors, dentists, nurses, midwives and other health professions are directly and explicitly covered. However, these commitments are not classified under health but under the Professional Services sub-sector of Business Services. This bizarre classification system, together with the commitments having been made by the apartheid regime some 10 years before the drafting of the National Health Act probably explains why both South African trade and health officials denied for so long that the country’s health services are covered under the GATS.

The conflicts between South Africa’s health legislation and the international services treaty are substantial. In general, public planning policies that allocate health resources more equitably between urban and rural areas, between rich and poor people, and between public and private sectors conflict with the GATS prohibitions against limiting the numbers or activities of private sector service providers.

In particular, the NHA’s “certificate of need” system conflicts with the GATS Market Access rule (Article XVI). This system is the legislation’s primary policy instrument, requiring all health establishments to acquire a “certificate of need” in order to operate. The legislation gives the health minister the authority to grant or refuse certificates based on community needs, and to set conditions on certificates, such as requiring health establishments to service poorly-served regions or populations, or to train community health care professionals.

These basic measures, which are moderate and typical by world health policy standards, conflict with GATS Article XVI:2. This GATS provision explicitly prohibits the application of such “economic needs tests” to the approval of new facilities or the expansion of existing health establishments. The GATS also threatens the health legislation and related policies in other ways. The application of the GATS National Treatment rules (Article XVII) to all health sectors and sub-sectors listed in the South African schedule of commitments creates a host of regulatory issues and problems. Community-based control and decision-making, local training and technology transfer options, directed health care subsidies and incentives, and black economic empowerment policies are all at risk.

GATS negotiations are currently underway on Domestic Regulation (GATS Article VI:4). If these negotiations result, as planned, in new restrictions on non-discriminatory government regulation, the apartheid-era commitments covering health services would create further problematic conflicts with the National Health Act.

The approaches embodied in South Africa’s current health policies and its GATS commitments are incompatible. The government can choose either to conform to legally binding, but illegitimate, treaty commitments made by apartheid-era negotiators, or it can implement the NHA and related policies to try to achieve a more equitable health care system. The existing inequities within the health care system are in need of urgent reform. There is also an overarching responsibility, enshrined in South Africa’s now democratic constitution, for the state to protect health and other basic human rights. Accordingly, the morally and constitutionally valid way for the government to resolve these conflicts is to bring the country’s GATS commitments into conformity with South Africa’s health policy imperatives.

Failure to resolve this trade treaty issue promptly could, over time, divert effort and scarce resources from the central task of health care reform. It would enable foreign for-profit health service corporations, through their home governments, to launch GATS challenges that could thwart the implementation of the National Health Act and related policies.

There are several possible options for dealing with the GATS problem. One option is for South Africa to implement the National Health Act as planned, and deal with any potential GATS issues as they arise. This “wait-and-see” approach is, however, unlikely to be effective over time. Due to the stark inconsistency between the NHA and the GATS, disputes are to be expected. Losing such a case would expose South Africa to the threat of trade sanctions targeted against the country’s key exports.

Another option is for South Africa to withdraw its GATS commitments covering health services. This approach would resolve the immediate GATS threat to the NHA. A drawback, however, is that South Africa would be required to negotiate increased GATS coverage in other sectors to compensate affected WTO member governments for their service suppliers’ lost “market access” in health services.

A third, more ambitious approach would begin with the withdrawal of the GATS commitments. This would be accompanied by the South African government leading or participating in collective action by like-minded governments and citizen movements to tackle the threats that the GATS poses to progressive health policies. This would be consistent with the GATS and similar treaties being fundamentally changed to address the basic incompatibility between their commercializing imperatives and policies to realise health as a human right for all. The GATS is corrosive to a variety of public service systems and to regulation in the public interest.

Instead of the current negotiations to broaden and deepen GATS coverage, there needs to be a thorough assessment of the treaty’s defects from a health policy and public interest perspective, and joint international action for concrete changes to remedy its structural flaws. Bringing South Africa’s GATS obligations into line with its new national health legislation should be viewed as a necessary first step towards the vital goal of creating more democratic international governance frameworks for human and social development. Instead of the current negotiations to broaden and deepen GATS coverage, there needs to be an assessment of the treaty’s defects and joint international action to create more democratic international governance frameworks.

South Africa’s predicament is a cautionary tale. All the evidence suggests that the drafters of the Health Act either did not know about the country’s health commitments under GATS or had forgotten about them. The officials who knew about GATS resided in South Africa’s Department of Trade & Industry. But they knew nothing about the Health Act until it had already passed through parliament and were alerted to the problem by the South African Municipal Workers' Union (Samwu). These same trade officials now publicly accuse Samwu of being “unpatriotic” in bringing public attention to the conflict between GATS and the National Health Act.

* This is a summary of a report "The GATS and South Africa's National Health Act: A Cautionary Tale" based on a research project commissioned by the South African Municipal Workers Union and the Municipal Services Project, published in June 2006. Contact Jeff Rudin of Samwu ([email protected]) for more information or a copy of the report.

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