Editor’s Note: This article first appeared in the Wall Street Journal Asia.
China and South Korea insist on protecting their medical-device industries, preventing access to life-saving technologies
The World Trade Organization is struggling to prove it can still deliver meaningful trade liberalization that improves people’s lives. One negotiation that could prove it still has value is the Information Technology Agreement, a deal between 54 countries to eliminate tariffs on high-tech products. Negotiators are meeting in Geneva this week to bring lifesaving medical devices into this agreement. This would drive down costs for health systems and improve care for patients globally.
But the deal is being held up by China and South Korea, which want to continue protecting their medical-device industries behind tariff walls. A recent WTO study found that while tariffs on medical devices in developed countries average approximately 0.5%, they are particularly high in large, middle-income countries such as China (7%), India (7.5%) and Brazil (up to 16%). Beijing and Seoul insist on phasing in tariff elimination over seven years.
That’s an eon given the lightning speed at which medical-technology innovation is occurring. U.S. regulators recently approved a handheld scanner that employs technology originally used for missile guidance systems to determine if a skin lesion is likely to be cancerous—without the need for a costly surgical biopsy.
The potential for new medical technologies and devices to transform patients’ lives and save health systems money is immense.
It won’t be long before robots are patrolling the wards of hospitals, checking on patients in different rooms and monitoring their vital signs. And U.S. regulators have already approved “smart pills,” which send highly accurate diagnostic information from inside the patient’s body to doctors via Bluetooth.
The potential for new medical technologies and devices to transform patients’ lives and save health systems money is immense: in Europe, a 50% reduction in costly hospital stays over 20 years has been attributed to the wider uptake of these technologies.
New technologies will also transform health care in developing countries, particularly in rural areas with limited health-care infrastructure. The benefits of connecting physicians with patients via videoconferencing and other Internet-enabled technologies are already clear. But telemedicine’s potential for developing countries is much greater.
British researchers have developed a portable ultrasound scanner that can be manufactured for around $65 and could bring affordable imaging to women and babies in developing countries. These new technologies could significantly decrease the 250,000 deaths that occur each year due to pregnancy complications—of which 99% occur in developing countries. But if technologies’ cost is inflated by import tariffs, more mothers and children will needlessly die.
China and Korea’s attempt to protect their domestic industries is rooted in faulty economic logic of the past. Domestic high-tech sectors are unlikely to develop if they are shielded from international trade and competition.
Take the domestic pharmaceutical industries of China and India for example. For decades, they simply manufactured low-cost copycat drugs. Over the past 10 years, Chinese and Indian manufacturers have begun to embrace international competitors as partners, forming alliances and joint ventures to develop innovative medicines.
Asia’s medical-technology companies could follow the same path to greater innovation. High-tech devices such as CT scanners are rarely manufactured in one country. Just like smartphones and other consumer goods, they are produced by global supply chains, with different countries manufacturing different components before they are brought together for assembly.
The majority of the Asian members of the WTO’s Information Technology Agreement—Japan, Malaysia, the Philippines and Singapore—recognize the limits of technological autarky and the harm cost-inflating tariffs cause patients.
No Chinese company will be able to develop and manufacture in-house all the various technologies and components required to develop a world-class medical device. International alliances are essential, but they are hindered by barriers to trade such as tariffs, which prevent “protected” companies from integrating into global supply chains.
The majority of the Asian members of the WTO’s Information Technology Agreement—Japan, Malaysia, the Philippines and Singapore—recognize the limits of technological autarky and the harm cost-inflating tariffs cause patients. That China and South Korea are misguidedly pushing for protection is bad for patients, the multilateral trading system and even their own companies.
By Nilanjan Banik and Philip Stevens