Few and Far Between: Some Explanations of Health Provisions in Trade Agreements

Appendix

In this section, the model is analyzed in a more general form. Specifically, no explicit functional form is assumed for q(h). However, q(h) is assumed to be an increasing function, which implies that the probability of better public health status increases in the extent of health carve-outs in trade agreements taken by Home. Optimizing (4) with this generalization gives:

2δh=q(h)(xL∗−xH∗)−xL∗−h2+x¯+q′(h)[(xL∗+h2−x¯)2−(xH∗+h2−x¯)2].

Let Δx=(xL∗−xH∗). Total differentiation then yields:

For the analysis that follows, we assume that the term labeled A on the left-hand side in (10) above, i.e. the term in square brackets, is positive. Roughly, this amounts to considering the case where costs of engaging in trade negotiations are higher than the benefits that can be derived from succeeding to incorporate health carve-outs in trade agreements, an assumption that is valid for most developing countries, at least in the short term. Under this assumption, comparative statics imply:

when xL∗+xH∗+h>2x¯,

The result in (11) suggests that more health carve-outs are likely when public health status in the high and low states is similar, i.e. when health status does not depend on the state of the world. This highlights the role of health carve-outs as a type of insurance against adverse states of the world since a country would vigorously negotiate to retain its sovereignty over health policy if the “low” state significantly worsens public health status relative to the “high” state. If, on the other hand, health status is unaffected by the state of the world, unconstrained health policy would not be as effective at mitigating health challenges. Results (12) and (13) match (7) and (8) from the main text and are interpreted as those earlier results. Hence, weak negotiating capacity would lead to fewer carve-outs; and higher export demand would enable more carve-outs since that would imbue the country with enhanced negotiating leverage.