Today, increases in the demand for healthcare are driving European governments to look for ways to control growth in healthcare expenditures and at the same time improve health outcomes. Consideration of ways to enhance trade in healthcare goods and services is important for governments as they struggle to find resources to finance this increasing demand for healthcare.
Healthcare is a global growth sector. It is global because the curiosity of mankind to understand diseases – and its ingenuity in finding cures for them – does not stop at the border. Even before the birth of modern medicine, and more so since, awareness of new discoveries has travelled quickly around the globe, making healthcare professionals mindful of the enhanced capacity and innovation to alleviate human suffering in remarkably similar ways. Such awareness, however, does not automatically confer access.
Healthcare is a growth sector because it is expanding at a faster rate than GDP (gross domestic product). Global healthcare spending per capita is expected to grow by 4.4% annually between 2014 and 2017, boosted especially by double-digit growth rates in Asian countries. The growth rate will also stay high in the medium and long term because of broad changes in global income and the demographic structure of larger markets.
Equally important, the healthcare sector spurs growth through innovation. About a fifth of global spending on research and development (R&D) by companies is accounted for by the healthcare sector. Pharmaceuticals and biotechnology represent the biggest private R&D sector in the world. The health sector ranks second in Europe, after automobiles, in corporate R&D spending. In addition, governments spend substantial resources on medical research. In other words, the healthcare sector is an important source of value-added growth in the economy – and the general capacity to grow economies on the back of innovation.
That the health sector is a global sector is also shown in trade statistics. Health products – especially health goods like medical equipment, advanced medical technology and pharmaceuticals – have for decades been traded around the globe, with Europe and the United States as the two main trading hubs. Trade in healthcare-related services has also grown, especially in areas like logistics and R&D services. Trade and investment have been key channels to quickly diffuse new and innovative health products, bringing substantial contributions to the vast improvements in human health and welfare seen over time. This development is not slowing down – and as the world of healthcare technology is yet again on the threshold of another giant innovation leap, trade will continue to be key in delivering better and affordable healthcare.
While healthcare trade has been strong in past decades, healthcare trade policy has been struggling. Positive reforms to open up for healthcare trade were made in the past, such as reducing or eliminating tariffs on healthcare equipment and pharmaceuticals. Yet these achievements are neither recent nor complete. There are substantial barriers to trade that remain unaddressed – and some of them have grown more distorting in recent years. Like in other sectors, there are still some tariffs that depress trade; even a tariff of just one or two percent has depressing effects as it deters small- and medium-sized companies from engaging in trade because of the bureaucracy it entails. However, the barriers that really slow down trade among key trading entities in the world are rather based on regulations, regulatory practices and the general environment for protection of innovation.
What makes the healthcare sector different from other sectors is that, despite its capacity to generate growth, it increasingly has to fight for its voice to be heard in trade policy. This is especially true in the debate over TTIP, where some have incorrectly claimed TTIP to be a threat to European healthcare systems. For some, improvements in trade policy for healthcare goods and services are seen as politically controversial. For others it is the technical difficulties of reducing existing barriers that have acted as a deterrent. Notwithstanding such opposition, trade in healthcare goods and services is a twenty-first century issue – for the health of trade as well as the affordability of healthcare and the ingenuity of healthcare innovation.
The European Union has a strong interest in leading that development. Healthcare is already one of the biggest sectors in the world economy, estimated at USD 7 trillion by the World Bank, and its expansion will be far bigger outside than inside Europe. Europe also has import interests. It represents a significant share of the global healthcare market. Taking away unnecessary costs of trade would positively affect healthcare expenditures in a very direct way. Furthermore, Europe has competitive firms that could expand globally. It has strong import needs, especially as it struggles with the costs of healthcare and needs better ways to pool resources and access technology. Importantly, Europe now has a good platform to use for such leadership – for fashioning a trade agreement that addresses key obstacles to trade in healthcare. That initiative is TTIP.
This paper is concerned with the role of healthcare in TTIP. It makes the argument that trade in healthcare goods and services deserve central attention in TTIP negotiations, especially if political leaders are true to their promise of using TTIP as a foundational agreement for modern, next-generation, or twenty-first century trade policy. The paper has three core parts.
First, it sets out the unfinished business for trade in healthcare goods.
Second, it analyses the role that trade should play for better and affordable healthcare services.
Third, it sets out an agenda for negotiating a TTIP agreement with a distinct role for healthcare goods and services – an agreement that can serve ambitions on both sides of the Atlantic to improve healthcare efficiency and equity.
The paper is primarily concerned with trade and healthcare policies in Europe. It does not discuss the structure and financing of healthcare policy in Europe. Nor does it suggest reforms of that system. TTIP is a trade agreement, not a healthcare reform act. Therefore, this paper is primarily focused on generating a better understanding of how trade can play a bigger role for European countries that desire to maintain the current organisation and financing of healthcare. Healthcare systems that rely to a greater extent on private supply and financing of healthcare typically have a greater pool of resources to draw from to support healthcare expenditure. European healthcare systems are far more based on public organisation and financing of healthcare. Given the pressure European governments are under to cut healthcare expenditure or their growth, this paper makes the argument that Europe has an even stronger interest in making better use of the gains for trade in healthcare goods and services.
 Economist Intelligence Unit (2013), World Healthcare Outlook.
 Booz&Co. (2013), The 2012 Global Innovation 1000.
 European Commission (2012), EU R&D Scoreboard: The 2013 Industrial R&D Scoreboard. Luxembourg: the European Union.