Trade Secrets
The truth about the US trade deal and how we can stop it

3. The NHS, public services and procurement

Medicines in the US are on average 4 times more expensive than in the UK

“Look, I think everything with a trade deal is on the table. When you’re dealing in trade everything is on the table. So NHS or anything else, a lot more than that, but everything will be on the table, absolutely.”
Donald Trump, June 201930


‘Does Britain’s National Health Service face an existential threat from a US trade deal?’ That became a key question in the general election of December 2019. For Brits, the NHS is the epitome of civilisation, the proof of what a society can achieve when geared towards the needs of the many. In the ruins of a world war, a Labour government took healthcare out of the market and, in essence, brought the right to health a giant leap closer to reality for all citizens.

The US system, on the other hand, is the most inefficient health system in the developed world.31 Despite being the most expensive, it delivers the worst health outcomes of any industrialised country. It is preyed upon by gigantic corporations who charge whatever the market will tolerate. But these same corporations are international operators, desperate to push market mechanisms onto the British NHS. And unfortunately, the NHS has been gradually pushed in that direction over the years, lumbered with internal markets, public‑private partnerships and the contracting out of services to big business. Even its CEO spent 10 years as a senior executive at the world’s largest healthcare corporation.32

The NHS is most certainly ‘on the table’ in a US trade deal. That deal could accelerate and cement in place a direction already well trodden by successive governments. But the way the NHS is threatened is not straightforward, and the government can hide behind this complexity. As then shadow secretary of state for trade Barry Gardiner MP pointed out during the 2019 election, “the NHS is not a building you can simply sell”. The way a US deal will threaten the NHS revolves around how trade deals discipline the regulation and provision of services, privilege pharmaceutical corporations and increasingly extend new powers to Big Tech.

Services

In trade rules, a ‘service’ is anything you can’t drop on your foot, from finance to telecommunications, from transportation to hairdressing. Trade in services accounts for $5.8 trillion a year, or one quarter of all global trade.33 It also covers many sectors that we would regard as public services. Rules around services are governed by the General Agreement on Trade in Services (GATS). After hard‑fought campaigns, GATS does make exemptions for public services. The problem is that those exemptions are narrowly defined, being limited to “any service which is supplied neither on a commercial basis, nor in competition with one or more service suppliers” – a definition that is unlikely to apply to large parts of the NHS, never mind more fully privatised services such as railways and energy. What’s more, many trade deals today go well beyond the commitments governments made under GATS.

Services are included in trade deals in order to open them up as much as possible to the market – and lock that liberalisation into place. For public services that basically means privatisation; for others it is about deregulation. Trade deals require governments to commit to a high level of ‘openness’, or liberalisation. Modern trade deals often contain clauses which require that any policy change in relation to these services must not reverse the level of liberalisation (a ‘standstill’ clause) or must be in the direction of more liberalisation (a ‘ratchet’ clause).

In practice, this locks market mechanisms into the delivery of services in perpetuity, making it much harder for a government to bring services back into public ownership or to better regulate those services. In addition, they insist that foreign businesses or investors need to be treated as favourably as domestic investors or businesses.

It is still possible to exempt services from trade deals, but it’s getting harder. In older trade deals, governments could choose specifically which services to opt into these disciplines under a so- called ‘positive list’. But today this is being replaced with ‘negative lists’ – unless you list something as excluded, it’s automatically subject to liberalisation. This is a problem, because disentangling various services is complex. And of course, when a service doesn’t yet exist – think how few households had internet connections a couple of decades ago – it’s impossible to remove them for these trade rules.

In the campaign against TTIP, the now‑defeated US‑EU trade deal, Unite the Union commissioned legal advice by leading QC Michael Bowsher which concluded that the NHS would not have been adequately protected from liberalisation under TTIP.34 The US wants to put the same provisions into its deal with the UK that were previously in TTIP.

All in all, protecting services that have already experienced some degree of privatisation, such as the NHS, wouldn’t be at all easy. Where contracting‑out and market mechanisms already exist, a trade deal would lock those mechanisms into place and make it very hard for a future government to reverse or remove them. For our health service, a US trade deal would make the Health and Social Care Act – which introduced so many pro-market changes – a permanent fixture, with any new law only able to move in the direction of further privatisation.

Intellectual property

A second major threat to the NHS is intellectual property rules. Intellectual property – copyright, trademarks, patents and so on – became a part of trade rules in 1995 with the passing at the World Trade Organisation of the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). This agreement attempted to extend western‑style intellectual property standards right across the world. In effect, this gave big business massive new protections for what is increasingly seen as their key asset. As actual manufacturing or customer service work was increasingly outsourced, corporations held the ‘intellectual property’ that enabled them to keep hold of the profits.

To understand the nature of the problem, bear in mind that much of the positive impact that comes from trade in developing countries is exposure to new technologies from more advanced countries. By better understanding and copying these technologies, countries can avoid ‘reinventing the wheel’ and can leapfrog their economies to a more advanced state. It’s one of the key ways that China has been able to use trade to develop its economy – in some cases literally taking stuff apart, seeing how it’s put together, and copying or producing something better based on the same technology. India developed its generic medicine sector, producing affordable versions of life‑saving drugs at scale, because medicines were not patentable there before TRIPS – leading to it becoming known as the ‘pharmacy of the developing world’.

TRIPS makes this much harder. It’s not about enforcing competition, but the opposite – protecting rights to a monopoly for an extended period of time, often 20 years. This is a particular problem for research and manufacture of medicines.

During the 1990s, at the height of the HIV epidemic, countries were prevented from rolling out HIV medication because it was covered by intellectual property rules, which kept prices of key medicines very high – far out of reach of most health systems. So even though medicines existed which could have massively extended the lives of millions of people, and mitigated their suffering, intellectual property prevented their treatment.

Fortunately, campaigners fought for and won some exemptions to TRIPS, which allowed countries to override intellectual property provisions in certain circumstances. For example, governments are allowed to issue so‑called compulsory licenses, authorising manufacturers to produce generic versions of patented drugs, for public use or in situations like a health emergency. What’s more, compulsory licensing gives governments negotiating power with the pharmaceutical corporations, persuading them that it’s better to lower the price of a drug rather than lose their patent in a certain country altogether. Even developed countries use this leverage to ensure patients can access new drugs without breaking their health system budgets. And this seems only fair, given that public money is often a vital part of research costs, especially in the earliest and most risky stages of research.

However, Big Pharma has fought back, persuading western governments, especially the US, to close these important exemptions in new trade deals. Their agenda, known as ‘TRIPS‑plus’, tries to make compulsory licensing impossible. They also want to give Big Pharma more power to block transparency in their medicine testing, to make it harder for governments to negotiate better drug prices, and to make it easier for big business to gain new monopolies by making small changes to medicines that are reaching the end of their current patents.

Despite government claims that higher medicine prices won’t be part of a US trade deal, we know that it is already being discussed. A particular bone of contention for the US is a UK public body known as the National Institute for Health and Care Excellence, or NICE. NICE sets guidelines for cost efficiency in the NHS, so in effect decides which new medicines can be provided by the NHS. These guidelines give real leverage to the NHS in negotiating with drug companies, because the threat that the NHS will not prescribe a certain medicine will often persuade a drug manufacturer to lower the price.

Big Pharma hates NICE. Donald Trump has called countries like Britain “freeloaders” and vowed to make pharmaceutical pricing a “top priority” in trade.35 This agenda is a serious threat. The cost of drugs to the NHS is already growing much faster than inflation, and is driving deficits across the service.36 US drug prices are eye‑watering, averaging more than four times the price paid in the UK.37 For newer drugs like Humira, used in the treatment of Crohn’s disease and rheumatoid arthritis, the NHS is already paying £1,400 per packet – and it costs seven times as much in the US.38 Other ‘biologic’ drugs are also important in cancer treatment and are a particular focus for US negotiators. Such large increases in prices under a US trade deal would pose an existential threat to the NHS – driving costs for new drugs well beyond the health system’s ability to afford them.

The US position is driven by the the pharmaceutical industry, whose lobby groups continue to demand far‑reaching intellectual property rules in any trade deal, including an all‑out war on compulsory licensing and NICE’s ability to negotiate lower prices. So seriously does Big Pharma take these concerns over pricing that they have demanded that the UK should be placed on a US trade ‘Watch List’,39 opening the door to potential trade sanctions unless Britain falls into line.

Beyond the NHS

Much public concern has been focused on the NHS, but other public services – and services we might one day want to be returned to public ownership – are also threatened by a US trade deal. Polls suggest significant public support for restoring public ownership of services such as railways (60% yes to 25% no), energy companies (53% to 31%) and the post office (65% to 21%).40 But through the provisions explored in this chapter, a US trade deal would make this significantly harder. Standstill and ratchet clauses, discussed above, would make any such move contrary to the terms of the trade deal. If combined with an ISDS corporate court system (see chapter 4), it could also mean a future government being sued for attempting such action. In fact, during the 2019 general election, it was reported that private energy providers were moving their headquarters overseas precisely in order to sue a prospective Labour government if it carried out its manifesto pledges to move parts of the energy sector into public hands.41

Meanwhile, industries still in the public sector, such as Scottish Water, would face the same kinds of pressures that would be placed on the NHS under a trade deal. This is particularly egregious given that the Scottish government, which makes decisions about the public nature of water provision, doesn’t currently have any power over the content or approval of a US trade deal. As such, a deal could undermine the constitutional powers given through Scottish and Welsh devolution.

Also included in services liberalisation could be Royal Mail, telecoms and potentially rules that affect the BBC. Although the US objectives are relatively silent on offensive interests in these areas, the powerful US Chamber of Commerce and the US Coalition of Services Industries released their own priorities for the talks in November 2019.42 They are calling for a trade deal to “provide the broadest possible coverage of binding market access and national treatment for delivery and logistics services” and “ensure that some of the unique challenges associated with market dominant players in the sector (i.e. national postal operators) are addressed with appropriate safeguards against abuse of that position”. This could limit the ability of governments to step in to help the Post Office, while shifting the rules to favour Amazon and private courier firms. They also call for the government to prohibit the nationalisation of some pension funds, which could make it more difficult for governments to bail out people left short when firms go bust.

Finally, the lobby groups call for liberalisation of: “media and entertainment services, including all of its sub‑sectors and related services (such as advertising) and across all means of distribution. The agreement should also eliminate quotas and other forms of discriminatory treatment of films and television in all means of distribution, including online. There should be no culture carve out and any agreement should ensure non‑discrimination online.”

This goes much further than TTIP, where the French government insisted on a cultural carve out to protect its entertainment industry from a takeover by the US industry. It would make it hard to protect the British film industry and harder to regulate the big streaming services including Amazon and Netflix. Neither would the BBC be exempt – a particularly chilling possibility given the current government’s known antipathy towards the state broadcaster.

All in all, modern trade deals help accelerate privatisation and make it nearly irreversible. A deal with a country as keen on corporate involvement in the provision of services as the US would represent a plan for privatisation on steroids.

What the trade papers say

The name ‘NHS’ doesn’t appear in the leaked papers from the preliminary US‑UK talks – deliberately. The UK is recorded as saying it “wouldn’t want to discuss particular health care entities at this time”, because negotiators know it is so sensitive. But the issues that would affect the NHS are present.

The papers show that the US wants very sweeping liberalisation of services, including a ‘negative list’, going beyond what was proposed even in TTIP. In fact the US jokes about the EU’s reticence to apply this approach to TTIP and explains: “The US wanted total market access to be the baseline, and the EU simply didn’t understand that.”

The US negotiating mandate has a long section on intellectual property calling for “a standard of protection similar to that found in US law”, while the leaked papers from the talks with the US show that medicine pricing has been extensively discussed, to the point where “beyond specific policy details in niche areas, we are awaiting the clearance to negotiate and exchange text to really take significant further steps”.

On top of this, the leaked documents show that pharma lobby groups have already had privileged access to negotiators, and preliminary negotiations have been “followed by a series of positive bilateral stakeholder meetings [including] with… the Pharmaceutical Research and Manufacturers of America (PhRMA)”.