Craig Kramer is a vice president with Johnson & Johnson, and on December 5, 2013, he was one of three panelists at the GBD Bali colloquium that focused on "Development and National Interests:  Lessons from the Doha Round."  This was one of two GBD programs at the WTO's 9th Ministerial Conference in Bali, Indonesia. His topic was healthcare.  His starting point was the fact that healthcare has become the largest and fastest growing part of the global economy: 17 percent, going up to 20 percent in the U.S.  His message was that healthcare needs to be part of the global trade agenda.  His advice to policy makers was to begin with these four goals:

1.    Lower tariffs,
2.    Regulatory Convergence,
3.    Better Investment Rules, and what he called
4.    Organizing for Success.

But he began with China.  Here is some of what he said:

As usual, the added emphasis is ours.  We bolded the above statement on the link between longevity and GNP for two reasons: on the one hand it is interesting, and on the other it is far from the whole story.  The latter point was brought out forcefully in Mr. Kramer's comments on Japan.  Japan had been a country where the government paid the full healthcare costs for all of its citizens, and it is also the country "with the oldest society on the planet."  And so, Mr. Kramer said, "Whatever is going on in Japan is going to happen everywhere else eventually."

And the main thing that is happening in Japan is that, like other countries with government run health care systems, Japan is opening up to the private sector.  For starters, Japanese citizens now face 30 percent copays for all of their medical expenses, even the most costly procedures, and they are turning to private companies like AIG to ensure them against the risks of high copays.

In listening to Mr. Kramer, this American was struck by two things.  First, there was the contrast between the current expansion of government's healthcare role in the United States and the efforts of others to cut back on what are, to be sure, larger government roles in healthcare.  We could see some irony in that.  Second and far more important, however, was his illustration of the fact that countries around the world face common problems and that better trade rules may be one way of dealing with them.

What follows are our notes from Mr. Kramer's remarks at GBD's December 5 colloquium.  We have not contributed any ideas to this summary.  They are Mr. Kramer's thoughts.  We have, however, modified the language somewhat: cutting a bit here, adding a clarifying word or two there.   If we have unwitting injected errors, they are of course our responsibility and no else's.

The title here is "Development and Lessons from the Doha Round."  We just had a briefing with Ambassador Froman.  One thing he highlighted that is relavent here was this.  He said that the debate that is going on now in Bali is not between the North and the South.  In fact you've got North and South on both sides of the issue, mostly on one side, obviously. 

If you think back to the beginning of the Doha Round, how many of us would have thought that, at the end of this process, you would have North and South on both sides of the debate and really having a constructive dialogue about where we should go? In my own mind, that is a change of pivotal importance, and Azevêdo, as much as anyone, has brought that about in these final hours. 

It is an important change because, if you do it right, if you succeed in breaking down that barrier between North and South over some of the issues at hand, then we can tackle some of the big issues that have emerged since the Doha Round was started.
We know that, at the beginning of the Doha Round, there were many large countries that were thought of as developing countries which are now huge players in the global system.  How do we deal with those folks?

We know about the internet.  It grown dramatically since the launch of the Doha Round and has changed so many different parts of the global economy. 

Healthcare.  There is another issue, a very large issue.  That is healthcare, and that is what I want to talk about.  In my mind, this is a development issue.  Let me kind of back into this. 

China Creates a System.  I spent the better part of the last fifteen years working all around the world to create sustainable health-care systems.  And I have spent no more time in any country than in China.   China essentially had no health-care system after the economic opening.  The iron rice bowl was abandoned, and you had to pay out of your own pocket for health care.  The government at some point was crunching the numbers, and they realized that seventy percent of the bankruptcies in China were related to health incidents.  People were being taken out of the economic system, not only because of illness but also because that had to pay for the family member who got ill.  They went into debt, and they were no longer performing in productive roles in society. 

And it was that fact - the fact that people were going bankrupt on a mass scale because of the lack of healthcare - that prodded the government into a process of building a healthcare system.  So, five years ago, 10 percent of Chinese had health insurance from the government.  Today it is 100 percent, 1.3 billion people.  It might be 99.99 percent, but just about everybody has health insurance.  It is only about $50 bucks a year.  So, it doesn't cover brain surgery, but it does get you vaccines and other things.  But they built a system, and they are now going in with more resources.  They built 13,000 village clinics and the like.  And all of that development has helped unleash the economic power of China. 

So health is really a development issue.  The Chinese have realized that. I think the Indians are starting to realize it.  This is one way to unlock the power.  You give people a certain amount of financial security, [a sense] that there is some safety net around the healthcare issue.  You also enable people to live longer.  And all of the studies show that for every year of increased longevity, GDP grows by 4 percent.  That is not necessarily cause and effect, but there is this kind of correlation between the two.

Where The Jobs Are.  What is interesting from a trade perspective - to sort of bring development and trade together now - is that, while we have all been watching the Doha Round, healthcare has become the largest part of the global economy: 17 percent, going up to 20 percent in the U.S.  It is the fastest growing sector.  If you look at where the jobs are coming from now, it is from healthcare almost everywhere you go. 

I was just up in rural Michigan, where I am from, visiting my relatives.  These are truck drivers and loggers and craftsmen.  And half of them are now working in the healthcare system.  Which they absolutely hate because they are sitting in offices instead of being outdoors.  But that is where the jobs are.  That is where the money is.  So it is having a far reaching impact.

It is a tremendous job creator.  It develops income.  And the great thing with the healthcare eco-systems is that you've got jobs for the grade school dropout, who can do janitorial work.  And you've also got jobs for the PhDs: genome projects, modern pharmaceuticals, medical technology, hospital management, the architecture of these complex healthcare systems.  Pharmacies too create employment, and for a lot of people they are the interface between the healthcare system and day-to-day life.  It is a very complex system but it has something for everybody. Healthcare information technology is now a huge part of the IT industry.

Healthcare and Trade.  When we talk about trade, no one ever talks about healthcare.  And that is because most people think of healthcare as a social program.  They don't think about it as an economic program. They don't think about it as a jobs program.  They think about it as a government cost that has to be strangled and put in a corner so that it is small enough to be fiscally manageable.

In fact it has become a driver of the economy.  The Chinese realize that when you focus on healthcare, not only do you have a healthier, more productive workforce, you also free them from the worries of having to stash money away for that time when you know that mom is going to get sick. 

The big emerging markets are literally creating healthcare systems from scratch.  They are pouring hundreds of billions, trillions, of dollars into this space.  And the wealthy countries too are restructuring their healthcare systems in a ways that open the door for trade discussions.

The Systems.  If you don't know anything about healthcare, you probably think there are two ways of doing it.  One is the American way: private sector, very messy.  And the other way is government run healthcare.  That's the way the Canadians, the British, the Japanese, the Taiwanese, the Germans and the French do it.  They have government paid healthcare programs.  People don't pay anything out of pocket. They are social programs. 

But what all of those countries are now realizing is that they cannot afford the promises the made.  Their societies are getting too old.  There are not enough workers paying into the system.  Technology is doing wonderful things that cost money.  Every one of these systems is under tremendous strain.  They are looking for ways, private sector ways, to bridge the gap, like private sector health insurance to cover high-end situations.  They are looking for private management of hospitals to provide levels of care that the governments cannot generate. 

The Case of Japan. You have the big emerging markets pouring tons of money into healthcare for lots of different reasons.  And you have got the biggest markets already opening up to the private sector. One example is Japan.  The Japanese system was 100 percent government paid.  You didn't have to pay a yen or anything.  They also have the oldest society on the planet.  So whatever is going on in Japan is going to happen everywhere else eventually.  And what has happened in Japan is that the government can no longer afford the promises it made.  So they now have 30 percent copays for every time you go see a doctor for any service or product you can get. 

And the Japanese are doing exactly what all of us would do.  They are ensuring themselves against the risks of the copays.  AIG is active in Japan, and half of its premiums come from health insurance.  And you are seeing this in Canada, in the UK as well.   All of these traditional systems are opening up to the private sector. 

Healthcare and the WTO.  When you come to the WTO, there are no clear ground rules for dealing with this whole sector because we've always considered it off limits.  When you look ahead and start to talk about how do you break down these barriers in healthcare, it is going to be vital that the developing countries sit down with the developed countries and address the healthcare issues together.  It will be vital because healthcare will, I think, be the next big issue for the trade world. 

Four Action Points.  To close, there are a lot of things you can do, but there are four things we would like to have people focus on.

Tariffs. One is the elimination of tariffs.  You've got the Information Technology Agreement and the green goods agreement.  We really think the next thing is healthcare products.  In many countries, up to 50 percent of the cost of healthcare is from tariffs.  India is a good example, by the way.  It has 50 percent tariffs on imported medical products.  It doesn't make much sense from a humanitarian point of view.  And it makes even less sense from a trade point of view.   We are going to try to get that issue teed up next.

Regulatory Convergence.  The second thing is regulatory convergence.  Because this has been a backwater, there are 180 different regulatory regimes out there.  We would like to see those converge, so that people can get the latest healthcare technology just as easily as they get the latest cellphone technology. 

Investment Rules. The third thing has to do with investment rules.  A lot of countries, including Indonesia, have equity ownership restrictions on hospitals, health insurances companies, pharmacies, and other parts of the healthcare eco-system.  Those need to come down, so that the best ideas can flow.  This is not something that is going to benefit [just] my home country, the United States.  It is going to benefit everybody.  Because, I can tell you, every country has some unique innovations in healthcare that the world needs.  And if you have been watching any of the headlines in the U.S. about healthcare, you know that we don't do it right.  We're still working on it. 

Organize for Success.  The fourth thing is to organize for success.  Because this is a very complex part of the economy, it's one that has not been looked at.  Governments have got to appoint people to really dig into this.

We just met with USTR two weeks ago, and I asked them: Who is your point person on healthcare?  Basically, they said, "We've got Johnny who spends a lot of his time on the financial services aspect of health insurances.  Jane over here spends about one-tenth of her time on intellectual property issues affecting pharmaceuticals."  But there is nobody who is really looking at this and trying to figure out how to make this big thing happen.

There should be, and we would like governments to appoint lead negotiators on healthcare the same way they do on agriculture and other important issues.