Why Single Payer has Been 'Forbidden' Since 1994, but they just forgot to tell us about it. Shhh!
The WTO is an international institution created by multilateral treaty in 1995, ostensibly for the purpose of liberalizing trade. WTO agreements create rules governing trade sectors such as tariffs, patent rights, and the dumping of goods on foreign markets. The agreement establishing the WTO also created a Dispute Resolution Body—a kind of “court” for the WTO—and a set of procedures for resolving conflicts between states over their rights and obligations under the treaty.
Member countries agree to implement WTO rules and to submit to the jurisdiction of its dispute resolution system by ratifying and signing on to the treaty. The 21 international agreements the WTO administers were the product of more than a decade of negotiation and comprise thousands of pages. When the U.S. Congress voted in 1994 to pass the legislation (the Uruguay Agreements Act) agreeing to submit to WTO rules, few legislators had read the contents of the agreements. Hence, many sectors of the economy were bound to WTO agreement requirements with little discussion, debate, or understanding (1). One of the most controversial WTO agreements was the docile-sounding General Agreement on Trade in Services. U.S. negotiators were insistent on including services in the WTO treaty, but other nations perceived how farreaching such an agreement could be.
Allowing service sectors to be bound in the same way as goods would dramatically extend the reach of commercial trade rules favoring markets and privatization into areas traditionally seen as essential to the public welfare: education, social security, libraries, mail service, police and fire protection, prison systems, water, energy, telecommunications, transportation, and health care. Illustrating the WTO leadership’s recognition of the expansive nature of the GATS, former WTO Director General Renato Ruggiero said in 1998 that “GATS provides guarantees over a much wider field of regulation and law than [other WTO treaties]; the right of establishment and the obligation to treat foreign services suppliers fairly and objectively in all relevant areas of domestic regulation extend the reach of the Agreement into areas never before recognized as trade policy” (2). The GATS was so controversial that it had to be structured as a “bottom-up” treaty. In other words, its most controversial provisions (called “Market Access” and “National Treatment”; see below) apply only to service sectors that each nation volunteers to bind to them.
Each WTO member country has a document (its “schedule”) that lists the service sectors it is binding to GATS rules (its “commitments”). Once a sector is committed in a nation’s GATS schedule, that nation is obligated to conform nearly all its domestic policies governing that sector (and sometimes even those merely affecting it) to GATS rules. If it does not, the WTO agreements require it to negotiate compensation with international investors adversely affected by its domestic policies or face international trade sanctions (3).366
What the GATS Rules Require
Broadly speaking, there are three “tiers” of GATS rules affecting health care. The first tier of rules, General Obligations and Disciplines, apply equally to all service sectors of all WTO member countries, regardless of whether those sectors are committed in a country’s schedule or not. The second tier, Specific Commitments, apply only to those sectors that a country commits to its schedule. These rules are more far-reaching, and members were given the opportunity to write any exceptions or limitations to them into their schedules. Finally, under GATS Part III, Article XVII, WTO member countries are allowed to negotiate a third “tier” of rules to govern their commitments above and beyond the underlying Specific Commitments rules that normally apply. Citing this provision, the United States has inscribed its Financial Commitments schedule with the “supplemental” rules of the Understanding on Commitments in Financial Services. These rules apply in addition to the underlying GATS Specific Commitments rules on Market Access and National Treatment (described below).
Table 1
Selected rules included in the General Agreement on Trade in Services Rule tier Binding upon Rule content General Obligations (Tier 1) All member states of the World Trade Organization 1. Most-favored nation treatment. 2. Prohibition on “new monopolies” 3. Disciplines on domestic regulation Specific Commitments (Tier 2) Only those service sectors that members choose to bind in their schedules of commitments 1. Open market access obligations 2. National treatment of all foreign service provider Supplementary Voluntary Commitments (Tier 3) Service sectors already scheduled that members choose to make additional liberalization commitments in (financial services in the U.S.) 1. Subjection of public entities to GATS rules 2. “Standstill” of existing exceptions to liberalization 3. Requirement to allow any new financial service 4. Requirement to “endeavor to remove or limit any significant adverse effects” of domestic regulation
General Obligations and Disciplines.
These rules apply to all service sectors of all WTO member countries, regardless of whether or not the sectors have been committed to a nation’s schedule. While these are generally the least controversial provisions, several may have serious implications for reform or regulation of the health sector (4).
Most-Favored-Nation Treatment: This provision requires a member to give service suppliers of any other WTO member no less favorable treatment than it gives service suppliers of “any other country” (4, Art. II).
Prohibition on New “Monopolies”: This provision requires that if a country grants new “monopoly rights” regarding the supply of a service covered in its schedule, the country granting the “monopoly” must enter into negotiations to provide compensation to any other member adversely affected by it. If an agreement is not reached, the affected member may refer the matter to arbitration, and the “monopoly” may not go into force until the compensation required by the arbitration has been made. The term “monopoly rights” is not defined anywhere in the agreement (4, Art. VIII).
“Disciplines” on Domestic Regulation: In sectors where no commitments have been undertaken, the GATS states that a special Council for Trade in Services shall develop “disciplines” that assure that qualification requirements and procedures, technical standards, and licensing requirements for the provision of services are “not more burdensome than necessary to ensure the quality of the service.” Regarding sectors in which commitments have been undertaken, however, it is unclear whether such a “necessity test” is already in force (4, Art. VI).
Specific Commitments. These rules apply only to service sectors that members have volunteered to submit to the rules by inscribing them in their schedules. Members were also given an opportunity to reserve specific exceptions to the rules during the negotiations of their schedules. Rules in this section fall into two broad categories, Market Access and National Treatment.
Market Access: The rules in this section are aimed at preventing governments from limiting the number, type, form, or size of foreign service suppliers in their markets or intervening to affect or regulate the way the firms provide the service. Examples of prohibited measures include (4, Art. XVI):
• Limitations on the number of service suppliers
• Limitations on the total quantity of service output
• Requiring a specific type of legal entity (e.g., nonprofit)
• Limitations on the “total value of service transactions or assets”
National Treatment: This set of rules requires that foreign service suppliers receive, “in respect of all measures affecting the supply of services,” the same treatment that a nation gives to its own service suppliers. It is easy to think of situations in which a country may want to shape policy to favor domestic industry over foreign operations, but the GATS rules go even farther than these requirements. Under the National Treatment rules, any measure that modifies the conditions of competition in favor of a domestic supplier is a GATS violation. In other words, even if a policy has no intent to discriminate against foreign service suppliers—indeed, it can be totally unrelated to service provision at all—if it has the effect of disadvantaging them, it is potentially a violation of the GATS (4, Art. XVII).
Special Rules for Health Insurance. The United States committed health insurance to its schedule under the Financial Services section. Two special sets of rules apply to commitments made under this section. The first is the Annex on Financial Services, a unique set of constraints that apply to all commitments in financial services, no matter what nation makes them. The second is an even more expansive Understanding on Commitments in Financial Services, a set of extreme liberalization rules that are an optional “attachment” to commitments in financial services that the United States has chosen to take. These rules go so far in constraining governments that only developed countries have signed on to them.
The Annex on Financial Services: Most financial services are related to banking and investment, hence the Annex provisions pertain mostly to them. One provision in particular is significant in assessing the impact of the GATS on health care:
• Subjection of “Public Entities” to GATS Rules:
Normal GATS rules make an exception for government services and procurement (with significant limitations). The Annex specifically states that if a nation allows domestic service suppliers to compete with “public entities,” those entities are subject to GATS rules. This will have significant implications for Medicare, as we will see (4, Annex on Financial Services, §1(b)(iii)). The Understanding on Commitments in Financial Services: The most farreaching document in the GATS, the Understanding binds signatory nations to an extreme level of financial services liberalization.
The commitments undertaken by signatories to the Understanding include (interpretation of the Understanding [5] aided by Kevin C. Kennedy, Professor of Law, Michigan State University College of Law):
• The “Standstill” Provision: The signatories pledge that any exceptions to the commitments they have made are limited to existing measures. The implications of this vaguely worded provision are not entirely clear. Some commentators believe that the signatories bind themselves to never enact a limitation on their commitments in the future that was not in effect when the Understanding was inscribed in their schedule. In effect, the level of privatization at the time of the implementation of the Understanding is “locked in” (5).
• New Financial Service: Signatories pledge to allow foreign firms to offer any new financial product in their territory, as long as another WTO member offers it (5, Art. B(7)).
• Domestic Regulation: Signatories pledge to “endeavor to remove or limit any significant adverse effects” on foreign investors of any laws that “affect adversely” the ability of foreign firms “to operate, compete, or enter” the domestic market (5, Art. B(10)).
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.....I doubt that many legislators in the affected countries have had time to read them. Those that have had time to read them, probably don't understand them! 
