HSCI 305 week 12 Trade agreements do affect health policy both in Canada & internationally International trade agreements have a significant impact on health policy in Canada
Most obvious area is Canada’s drug policy
They provide extensive patent protection to the pharmaceutical industry
They protect foreign investments in health service sectors
They encourage expansion of the
TRADE agreements determine the price of pharmaceuticals by guaranteeing patent protection for drug companies, promote the privatization of public health system, Expand the role of insurance
What are some of the economic arguments we often hear in support of trade agreement?
Free trade if benefit to the economies of all counties by encouraging competition and promoting more efficient use of resources
Trade agreements are necessary to promote and expand international trade, are needed to stop govs adopting or maintaining ‘protectionist policies’
The economic Theory Underlying Trade Agreement
Based on neoclassical economic theory
Belief in the benefits of free markets and competition
Assumes society will prosper if markets allowed to function with minimal gov interference
Key challenge: encourage gov to reduce ‘trade barriers’ and stop gov from acting in ways that impede the operation of the free market
The economic Theory Underlying Trade Agreement: Adam smith
He praised the ‘invisible hand’ of the market
The division of labor, specialization and the expansion of domestic and international markets would promote economic development
Allowing each individual to pursue his/her own economic self-interest would result in the greatest good for society
Also the expansions of markets facilitated the further decision of labor and thus max. production and prosperity
This was true both within countries and internationally
The economic Theory Underlying Trade Agreement: Ricardop
Developed of ‘comparative advantage’
All counties benefit from trade ---do not need to have absolute advantage
He used the example of trade between England and Portugal
England was more efficient in producing wool , but Portugal was more efficient in producing wine
So trade would encourage the international division of labor English would prod more wool and less wine, Portugal would prod more wine and less wool
Thus using the same # of workers, each country would actual prod more b/c each would specialize in what they were best at producing
Assumption underlying current trade treaties:
Markets should be free of regulation
But unfortunately, government tend to protect their own industries by interfering with market
Example of protectionism: great depression
Cause of great depression:
Protectionism was a response to, not a causes of the great depression
Countries raised trade barriers because their economies were in trouble
They were responding to a crash created by a major downturn in the business cycle
While protectionism made things worse, it did not cause the great depression
Protectionism and Trade in goods:
Concerns about 1930s protectionism focused on the impact of restricting trade in goods as result of high tariffs
Thus the issue was how to bring down tariffs – that is how to limit what gov did to protect their foods producing industries
There was almost no concern about most domestic policies of govs – these were not seen as being barriers to trade
Self-regulating markets
Advocates of free trade assume that markets do not need gov regulation either domestically or internationally
They define the problem in terms of interference in the market
Without interference, the market will regulate itself
Thus the goals is to minimize gov regulation of market activities
The assumption that markets are self- regulating is itself questionable
Neoliberal economic theory is only one stream of economic though
Other theorist had different approaches
John Maynard and Keynes believed that markets were unstable and resulted in ‘booms and busts’