Trade Related Issues

The development, implementation and harmonisation of medical devices regulations and technical standards to ensure public health and safety have linkages with international trade obligations and domestic trade measures. The work of the Global Harmonisation Task Force is a good example:

"The objective of the Global Harmonization Task Force (GHTF) is to encourage convergence at the global level in the evolution of regulatory systems for medical devices in order to facilitate trade whilst preserving the right of participating members to address the protection of public health by regulatory means considered to be most suitable". (Source: GHTF website)

In developing regulations and standards for the control of medical devices, there are issues relating to tariffs, technical barriers to trade and intellectual property rights.

Many of these issues are broader than the traditional notion of "trade" and they are addressed by agreements enforced by the World Trade Organisation.

Tariffs: Customs duties or tariffs are imposed on importWTO on non-agricultural market access (NAMA) that will affect industrial products, and these s at the border. Tariffs have a role in generating government revenue. Reduction of tariffs on medical devices provides cheaper devices for patients. In addition, tariffs can be a form of domestic support to protect a country’s local industries in order for them to become more competitive before opening up the local market to foreign imports. In this way, a country can develop its domestic production capacity in the medical devices sector.

The General Agreement on Tariffs and Trade (GATT): The original GATT was signed in 1947. The basic approach of the GATT has been that goods, when exported from a country, should generally have free entry into the importing country. Customs duty (tariff) can, however, be imposed at the border. The GATT provides a framework for negotiations on the levels of tariff. It also permits countries to apply, under certain situations, some non-tariff measures to directly restrain imports. Besides, it provides for protection against unfair trade and disguised obstructions to trade. The objective is that such trade-distorting measures should not be permitted to erode the benefit which a country gets by the reduction of tariff levels in other countries.

Seven rounds of multilateral trade negotiations have taken place in the GATT: Geneva (1947), Annecy (1948), Torquay (1950), Geneva (1956), Dillon (1960-1961), Kennedy (1964-1967), Tokyo (1973-1979) and Uruguay (1986-1994).

"GATT 1994" means GATT 1947, plus the decisions taken under it until 31 December 1994, plus the Uruguay Round Understandings on various Articles of GATT 1947, plus the new Protocol relating to tariff concessions adopted in Marrakesh, Morocco in April 1994.

Marrakesh was where the Uruguay Round was concluded and a number of agreements, including the Agreement Establishing the World Trade Organisation were signed.

There are ongoing negotiations at the WTO on non-agricultural market access (NAMA) that will affect industrial producs. and these are at a crucial and difficult stage because of wide defferences among WTO Members. The outcome of the NAMA negotiations will have implications for the production, quality control and trade of medical devices. These in turn have implications for timely and easy access to medical devices, and costs in the healthcare sector.

It is thus useful for health authorities to analyse and understand the impact of tariffs and NAMA negotiations on medical devices for healthcare purposes.

The World Trade Organisation (WTO): This multilateral organisation established by the Uruguay Round (1986-1994) of multilateral trade negotiations provides the framework for the conduct of international trade in goods and services and for the protection of intellectual property rights (IPRs). It administers the implementation of a set of agreements, including the General Agreement on Tariffs and Trade (GATT), some agreements in the goods sector and, in addition, agreements in services and IPRs. The WTO also contains a framework for the enforcement of rights and obligations in these areas. The agreements generally contain disciplines on governments and, in some cases, even on enterprises. There are 149 Members as of June 2006.

WTO Agreement on Technical Barriers to Trade (TBT): The Agreement covers 3 areas - (a) Formulation of mandatory technical regulations by governments, on products for reasons of security, health or the environment; (b) Formulate of non-mandatory (i.e. voluntary) standards by the standardizing bodies of governments, for products in order to facilitate their use; and (c) Determination of conformity with these regulations and standards (Conformity Assessment Procedure).

Technical regulations are a mandatory set of rules which lay down (a) the characteristics of a product; (ii) related processes and production methods; and (c) applicable administrative provisions which are obligatory. These may also cover (a) terminology; (b) symbols; and (c) requirements for packaging, marking or labeling, applicable to the product and the process or production method.

The TBT Agreement gives primacy to international standards for domestic technical regulations in a specific field. WTO Members are obligated to use these standards. Exceptions: when the international standards will be ineffective or inappropriate (e.g. fundamental technological problems).

Members are expected to participate fully in the preparation of international standards by appropriate international bodies (e.g. the ISO/TC 210 committee). Participation in the Asian Harmonisation Work Party and cooperation with the GHTF is one example.

If WTO Members wish to adopt their own regulations, they may do so according to the objectives, requirements and procedures set out in the TBT Agreement. The objectives include: (a) national security requirements; (b) prevention of deceptive practices; (c) protection of human health or safety; (d) protection of animal life or health; (e) protection of plant life or health; and (f) protection of the environment. This list is not exhaustive and members can add on other objectives.

Standards are formulations approved by a recognized body, providing for voluntary rules and guidelines on characteristics of products and related processes and production methods. These may also cover (a) terminology; (b) symbols; and (c) requirements for packaging, marking or labeling, applicable to a product or process or production method. The formulation of voluntary standards by a government’s standardizing bodies will have to follow guidelines in the Code of Good Practice for the Preparation, Adoption and Application of Standards contained in Annex 3 of the TBT Agreement. Although the standards are voluntary, their importance lies in the fact that products conforming to them are often accepted as being of assured quality.

WTO TBT obligations regarding the procedure for the assessment of conformity with technical regulations or standards are similar to those for regulations and standards themselves. This procedure is used, directly or indirectly, to determine that relevant requirements in technical regulations or standards are fulfilled. These may include procedures for (a) sampling, testing and inspection; (b) evaluation, verification and assurance of conformity; and (c) registration, accreditation and approval.

The main TBT obligations relate to: Most Favoured Nation (MFN) treatment; national treatment; full participation in the work of international standardizing bodies; prior publication of the regulations, standards, conformity assessment procedures; prompt publication on adoption; allowing reasonable time between adoption and entry into force of the regulations, standards, conformity assessment procedures; and enforcement of the various obligations.

Developed countries make use of the TBT Agreement more than developing countries, and these may result in unnecessary trade restrictions on the trade of the products concerned. AHWP Member Economies also need to monitor and assess the technical regulations, standards and conformity assessment procedures of various countries to ensure that they are appropriate as these are often the basis for the development of international standards.

Developing countries can have some flexibilities and exceptions relating to their TBT Agreement obligations, such as the use of international standards as a basis for their own technical regulations, standards and conformity assessment procedures. Technical assistance is to be provided to developing countries with special problems so that they can discharge their TBT obligations.

Agreement on Trade-related Aspects of Intellectual Property (TRIPS) under the WTO: The TRIPS Agreement, one of the WTO Agreements, obliges Members to patent all products and processes, subject to conditions, criteria, limitations and exclusions provided in the Agreement. There are flexibilities and safeguards that Members can exercise for purposes of public health and nutrition.

For example: "diagnostic, therapeutic and surgical methods for the treatment of humans or animals" can be excluded from patentability.

The implementation of the Agreement is a matter for national legislation. Thus it would be important for health authorities to understand the scope and application of the TRIPS Agreement in order to provide inputs for national laws and measures that contribute to public health and safety. At the same time, the TRIPS Agreement provisions also allow for Members to consider options for research and development, and transfer of technology so as to develop domestic capacity in manufacturing.

The patent status of a product (in this case, a medical device) is important for purposes of pricing, and thus access to affordable medical devices, for patients and the public healthcare system.

Therefore it would be of benefit to AHWP Member Economies to be better informed of the interface with trade aspects in developing measures to harmonise the controls of medical devices in the region. This would also be consistent with future related work of the AHWP.