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


  • Smith, Richard D


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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    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. Weifan Zhang & Rebecca Liu & Chris Chatwin, 2016. "Chinese Medical Device Market and The Investment Vector," Papers 1609.05200,
    3. Richard Smith, 2012. "Trade in Health Services: Current Challenges and Future Prospects of Globalization," Chapters,in: The Elgar Companion to Health Economics, Second Edition, chapter 16 Edward Elgar Publishing.
    4. 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.
    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. 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.
    8. 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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