WTO Issues New Report on Treatment of Medical Products in Regional Trade Agreements

The WTO Secretariat has published a new report on 27 April 2020 on the treatment of medical products in regional trade agreements (RTAs) amid current supply shortages caused by the COVID-19 pandemic. The report examines the extent medical products are traded among preferential partners and the difference in liberalization rates within and outside these trade agreements.

The world's top 10 exporters of medical products ship 27-75 per cent of these goods to their RTA partners according to the report. It also finds that WTO members have eliminated tariffs on over 84 per cent of medical products for 2020 under their various RTAs. Moreover, medical products face an average tariff of 1.6 per cent within RTAs as compared to the 3.8 per cent average tariff for medical products traded outside RTAs, suggesting room for further trade liberalization at the WTO.

The report also examines other provisions in RTAs that may restrict or facilitate trade and also highlights the need for forging mutual recognition agreements that recognize standard conformity assessments by authorities in other countries.

Key points

· The share of exports by the world's top 10 exporters of medical products to their regional trade agreement (RTA) partners ranges from between 27 per cent for China to almost 75 per cent for Italy. The majority of the top 10 traders in such products are EU member states.

· In their RTAs, WTO members had liberalized over 84 per cent of these products by 2020. The share is higher for developed members (99.5 per cent) than for developing (84.3 per cent) and least developed members (68.4 per cent).

· Developed members surveyed had eliminated tariffs (both most-favoured-nation (MFN) tariffs – i.e. without discrimination between trading partners – and preferential tariffs) in medicines and in their RTAs for medical equipment and personal protective (PP) products (compared to an average MFN rate of 0.2 per cent and 2.4 per cent respectively). Their average preferential rate for medical supplies is 0.5 per cent compared to an average MFN rate of 1.8 per cent.

· In developing and least-developed members, average MFN and preferential rates are higher, especially for medical supplies, medicines and PP products.

· The preferential rates of G20 members are less than half of their average MFN rates in 2020, with greater liberalization in PP products and medical supplies, again suggesting there might be room for further tariff liberalization on an MFN basis.

· In addition to tariffs, there are other provisions in RTAs that may prove either trade-restrictive (such as rules of origin) or trade-facilitating (such as increased transparency and cooperation in the formulation of standards regarding medical products and/or procedures to obtain product registration certificates). Some RTAs also explicitly prohibit the use of export restrictions and taxes and import restrictions, except those permitted under WTO rules.

· The COVID-19 pandemic has also highlighted the need for greater cooperation and efforts to reduce barriers to trade, including through increased mutual recognition agreements (MRAs).