The WTO's Pharma Agreement
The 1994 Agreement on Trade in Pharmaceutical Products (also known as the Pharmaceutical Agreement or the Pharma Agreement) eliminates tariffs and other duties and charges on a large number of pharmaceutical products and the substances used to produce them, permanently binding them at duty-free levels. Concluded during the Uruguay Round of trade negotiations, the Agreement was signed by and applies to only a group of participants, who also committed to implement the outcomes on a most-favoured nation basis. Canada, the European Union, Japan, Macao (China), Norway, Switzerland, the United Kingdom and the United States currently participate in this Agreement (L/7430 and Add).
The Pharma Agreement is one of many sectoral initiatives agreed during the Uruguay Round. A number of contracting parties to the General Agreement on Tariffs and Trade (GATT) agreed to eliminate and/or reduce tariffs on specific sectors (TN/MA/S/13). Unlike multilateral agreements, these sectoral agreements, as they are known, were signed by and apply to groups of participants rather than all WTO members. Participants committed to implement the outcomes on a most-favoured nation basis.
Participating members in the Pharma Agreement agreed to periodically review the Agreement, with a view to updating and expanding the list of items covered. Four reviews have taken place since the establishment of the WTO: in 1996 (G/MA/W/10), 1998 (G/MA/W/18), 2007 (G/MA/W/85) and 2010 (G/MA/W/102).
Products covered by the Agreement
The concessions agreed to in the negotiations are incorporated in the WTO's schedules of concessions of the participating members via the 1980 procedures for the rectification of schedules. The items covered include:
- Finished pharmaceutical products, designated by their Harmonized System codes:
- products classified (or classifiable) in HS chapter 30
- products classified (or classifiable) in HS headings 2936, 2937, 2939, and 2941, except for dihydrostreptomycin and salts, esters and hydrates thereof
- Pharmaceutical active ingredients and chemical compounds used by the pharmaceutical industry, enumerated in four annexes and designated by a combination of:
- HS codes (HS subheadings)
- Product description (name, chemical name, chemical formulae)
- Chemical Abstract Service codes (unique, specific “registration numbers” created by the Chemical Abstract Service and used for the identification of chemical substances — https://www.cas.org/support/documentation/chemical-substances/faqs)
- International Non-proprietary Name codes (managed by the World Health Organization to facilitate the identification of pharmaceutical substances or active pharmaceutical ingredients — https://www.who.int/medicines/services/inn/en).
As a result of the 1994 Agreement and the subsequent reviews, participating members committed to eliminate customs duties and all other duties and charges not only on all finished pharmaceutical products, whether sold in bulk or in dosified packages for retail sale (paracetamol, antibiotics, vaccines, etc.), but also on over 7,000 pharmaceutical active ingredients and chemical components used in pharmaceutical supply chains. An indicative list of covered items is contained in JOB/MA/142.
Trade in pharmaceutical products
International trade in pharmaceutical products has experienced dynamic growth since the adoption of the Pharma Agreement. Imports of finished pharmaceutical products (i.e. medicines packaged for retail sale and medicines in bulk) have grown by almost 14 per cent over the last 20 years, with imports valued at more than US$ 350 billion in 2018. Trade in pharmaceutical active ingredients and chemical components has also grown steadily.
Obtaining tariff and import statistics for these products can be a complex exercise. Pharmaceutical active ingredients and chemical components used in the production of finished pharmaceutical products do not have common HS codes (over 270 HS subheadings appear at least once in the four annexes of the Pharma Agreement). Moreover, chemical substances such as carbon or chlorine may be traded and used for a variety of purposes, not only for pharmaceutical production. Nonetheless, global imports of these substances have risen continuously over the last 25 years.
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