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Foreign direct investment and trade in health services: A review of the literature

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  • Smith, Richard D

Abstract

Globalization is a key challenge facing health policy-makers. A significant aspect of this is direct trade in health services, a result of the rise of transnational corporations, challenges in health care financing, porous borders and improved technology creating the scope for increased 'foreign direct investment' (FDI) in health care. This has gathered momentum with the General Agreement on Trade in Services (GATS), which aims to further liberalize trade in services, and within which FDI has been noted as perhaps the most critical area for trade negotiation. Given the rapid development of this area, there are little empirical data. This paper therefore seeks to provide the first comprehensive and systematic review of evidence concerning FDI and health services. This process included electronic bibliographic database searches, website searches and correspondence with experts in the area of trade in health services, from which 76 papers, books and reports were reviewed. Perhaps due to the rapid developments in this area, most of the literature is speculative, polarized between those arguing for the benefits of liberalization and those arguing against. However, there seem to be three issues which emerge as of most importance: (i) the extent to which a national health system is commercialized per se is of more significance than whether investment in it is foreign or domestic; (ii) the national regulatory environment and its 'strength' will significantly determine the economic and health impact of FDI, the effectiveness of safeguard measures, and the stability of GATS commitments; and (iii) any negotiations will depend upon parties having a common understanding of what is being negotiated, and the interpretation of key definitions is thus critical. Each of these issues is explored in some depth, with the overall conclusion that countries should take a step back and first think through the risks and benefits of commercialization of their health sector, rather than being sidetracked in to considering the level of foreign investment.

Suggested Citation

  • Smith, Richard D, 2004. "Foreign direct investment and trade in health services: A review of the literature," Social Science & Medicine, Elsevier, vol. 59(11), pages 2313-2323, December.
    • Handle: RePEc:eee:socmed:v:59:y:2004:i:11:p:2313-2323
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    Citations

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    Cited by:

    1. Chaudhuri, Sarbajit & Mukhopadhyay, Ujjaini, 2012. "Is Direct FDI in Healthcare Desirable in a Developing Economy?," MPRA Paper 41007, University Library of Munich, Germany.
    2. Changyao Song & Shanshan Shi & Jamie M Chen & Xinjian Li, 2020. "Does inward FDI affect outward FDI in tourism in China?," Tourism Economics, , vol. 26(2), pages 344-349, March.
    3. Burns, Darren K. & Jones, Andrew P. & Suhrcke, Marc, 2016. "The relationship between international trade and non-nutritional health outcomes: A systematic review of quantitative studies," Social Science & Medicine, Elsevier, vol. 152(C), pages 9-17.
    4. Weifan Zhang & Rebecca Liu & Chris Chatwin, 2016. "Chinese Medical Device Market and The Investment Vector," Papers 1609.05200, arXiv.org.
    5. Smith, Richard & Martínez Álvarez, Melisa & Chanda, Rupa, 2011. "Medical tourism: A review of the literature and analysis of a role for bi-lateral trade," Health Policy, Elsevier, vol. 103(2), pages 276-282.
    6. Lautier, Marc, 2008. "Export of health services from developing countries: The case of Tunisia," Social Science & Medicine, Elsevier, vol. 67(1), pages 101-110, July.
    7. Biswajit Mandal & Soumyadip Chattopadhyay & Alaka Shree Prasad, 2019. "Effects of Trade Reform on Health and Tourism Sectors of the Reforming Country," Review of Market Integration, India Development Foundation, vol. 11(3), pages 176-189, December.
    8. Camilla Jensen & Jie Zhang, 2013. "Trade in tourism services: Explaining tourism trade and the impact of the general agreement on trade in services on the gains from trade," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 22(3), pages 398-429, April.
    9. Jacek Klich, 2008. "Globalizacja usług zdrowotnych," Gospodarka Narodowa. The Polish Journal of Economics, Warsaw School of Economics, issue 4, pages 21-40.
    10. Shailender Kumar Hooda, 2015. "Foreign Investment in Hospital Sector in India: Trends, Pattern and Issues," Working Papers 181, Institute for Studies in Industrial Development (ISID).
    11. Shailender Kumar Hooda, 2017. "Foreign Investment in Hospital Sector in India," Foreign Trade Review, , vol. 52(4), pages 247-264, November.
    12. Оksana Strelchenko & Svitlana Okhrimenko & Dmytro Pavlov, 2020. "The Role of the Institute of Medical Law in the Postmodern Society," Postmodern Openings, Editura Lumen, Department of Economics, vol. 11(3), pages 145-159, October.
    13. Salter, Brian & Zhou, Yinhua & Datta, Saheli, 2015. "Hegemony in the marketplace of biomedical innovation: Consumer demand and stem cell science," Social Science & Medicine, Elsevier, vol. 131(C), pages 156-163.
    14. Zhizhong Liu & Guangyue Liu & Xu Han & Yingna Chen, 2022. "Green Technology of Foreign Direct Investment on Public Health: Evidence from China," Sustainability, MDPI, vol. 14(20), pages 1-16, October.
    15. Richard Smith, 2012. "Trade in Health Services: Current Challenges and Future Prospects of Globalization," Chapters, in: Andrew M. Jones (ed.), The Elgar Companion to Health Economics, Second Edition, chapter 16, Edward Elgar Publishing.
    16. Kausik Lahiri & Sarmila Banerjee, 2013. "India’s Health-care Sector under GATS: Inquiry into Backward and Forward Linkages," Foreign Trade Review, , vol. 48(3), pages 285-357, August.
    17. Peiman Ghasemi & Amir Mehdiabadi & Cristi Spulbar & Ramona Birau, 2021. "Ranking of Sustainable Medical Tourism Destinations in Iran: An Integrated Approach Using Fuzzy SWARA-PROMETHEE," Sustainability, MDPI, vol. 13(2), pages 1-32, January.
    18. Coast, Joanna, 2018. "A history that goes hand in hand: Reflections on the development of health economics and the role played by Social Science & Medicine, 1967–2017," Social Science & Medicine, Elsevier, vol. 196(C), pages 227-232.
    19. Jarman, Holly & Greer, Scott, 2010. "Crossborder trade in health services: Lessons from the European laboratory," Health Policy, Elsevier, vol. 94(2), pages 158-163, February.

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