A GLOBAL ANALYSIS OF TRADE POLICIES IN ANTIMICROBIAL MEDICINES

Antimicrobial medicines are difficult to access for the poor people in many parts of the world, mainly because of their costs and lack of local availability. While it is not necessary that these medicines may be produced across the world, it is possible to import them from countries that have enormous production capacities. For this to happen, the countries that lack these medicines should have trade policies in place that facilitate their cheap imports. However, trade policies typically do not take this aspect into account when they are formulated. The policy determinants of high import tariffs are industrial policy and protectionism-related concerns on one hand and revenue considerations on the other hand. In this paper, we take a close look at the global trade and tariffs in various countries in several antimicrobial medicines and medicaments, to come up with inferences on how countries that import a lot of them may do better by reducing tariffs. Especially, the article deals with anibiotics trade. The export and import drug potentials are investigated. The largest export countries proved to be China, the United Kingdom, India, Canada, Germany, Switzerland and Italy. The import leaders are India, Chile, Austria, the USA, Switzerland. A major policy implication emerging from this study is that countries ought to take a deeper look at the trends in trade and tariffs on antimicrobial drugs on a priority basis, since this has to do with lives of real people. Unnecessary blanket tariffs meant for tariff revenue should be avoided, as we find this in many countries that have hardly any production capacity for these drugs (such as the Bahamas, Djibouti, Bermuda, the Comoros, etc.). The bigger players in the sector, both in terms of imports and exports, have relatively lower tariffs, but there is still a lot of scope of reducing these tariffs to ensure that these drugs are available at affordable prices to people at large. Industrial policy motivations to levy tariffs in order to protect the domestic industry against import competition may also need to be done in a measured manner, because this is about health and safety of people and not just another industry. Having said that, for health security purposes, it makes sense to develop domestic production capacity and supply chains. That can be done based on international partnerships, R&D, domestic tax and other policy incentives like the Production Linked Incentives (PLI) scheme in India (rather than tariffs).


Introduction
Antimicrobial medicines play a pivotal role in treatment of infectious diseases.They are life-saving drugs whose availability significantly impacts public health.Access to antimicrobials, however, continues to be a complex issue in many countries.More deaths are caused by the limited access and delays in access to antibiotics than by antibiotic resistance (Requejo et al., 2013).
Access to antimicrobial medicines is determined by a number of factors: public health policies, industrial policies, pharmaceutical sector development, R&D, etc. Trade policy has not been given enough emphasis in this regard, though there is a potential for this to be a low hanging fruit in terms of being able to address the access issue effectively.
In particular, import tariffs on these drugs are imposed by many countries with at least two objectives.Firstly, they are meant to protect the domestic industry that produces AMs, which is assumed to exist, thrive or flourish in the future.Secondly, they are not mindful of anything specific to this industry, but rather an instrument to generate revenue for the government.They are kept in place as there is no one to lobby against the tariff.
While the first objective may be deemed reasonable for the countries that have some capacity or potential to produce AMs, even in that case AMs end up becoming more expensive than they should be by the time they reach the consumers.The final price of a pharmaceutical is determined by many factors that differ by country.Costs and markups occur along the distribution chain from port charges to warehousing, local government taxes, distribution charges and hospital or retailer markups.Tariffs may seem a relatively small component of the final price, but the effect is compounded as all of these "internal" costs accumulate.Imported pharmaceuticals are hence at a clear disadvantage and patients bear the burden in cost and diminished availability.
In the second case, tariffs merely act as a cost escalator of AMs without creating any capacity.A public health stance needs to be taken, by advocating for tariff reduction.
In this study, we focus on this aspect, by analysing the current set of tariffs globally in the sector, and further modeling the potential impact of reducing those tariffs on the AM prices.Today, no such study exists in the literature, apart from a very brief exploratory document on sustainable development goals (Hanefeld et al., 2017) and a broader study on COVID-19 medical supplies (Vickers & Ali, 2020).

Literature review
While there is literature focusing on trade and tariff policies for medicines and medical equipment, discussions on the impact of trade policies (particularly concerning AMs) remain largely amiss.
Access to antimicrobial medicines is a critical determinant of the global health scenario.Tariffs on AMs are an important factor limiting this access.In this section, we aim to divide our discussion into two segments.Firstly, to highlight the pivotal role of antibiotics in preserving public health.Secondly, to reflect how tariffs can be a distortionary practice in the pharmaceutical sector particularly.
Stevens & Banik (2020) analysed the trends in pharmaceutical tariffs for specified HS codes.They underlined that pharmaceutical tariffs are essentially twice as regressive as normal tariffs since the hardest hit is poorer people suffering from disease.
In the case of medicines, import tariffs are the prime trade barrier responsible for inflating end prices because such border surcharges are compounded as the product moves down the distribution chain.Bauer & Lamprecht (2021) studied the economic effects of tariffs on supply in different nations.They concluded a full global elimination of import tariffs on APIs would encourage producers in low-and middle-income countries to expand and diversify medicinal product portfolios, thereby benefiting patients by providing wider access to diversified medicinal ranges.
On similar lines, Helble et al. (2017) examined the ways in which openness to trade can help improve development outcomes in the case of health specifically.Their research further strengthened the proposition that tariffs simply transfer income from consumers to local producers and the government, with an additional cost in economic efficiency.They averaged the applied MFN rates for a vast range of health product groups for 160 countries.It was concluded South Asia was the most protected region but could not justify the rates on the basis of the development and protection argument.They stated that no public policy objective (such as consumer protection) was achieved by tariffs.
A general view on COVID-19 medical supplies was provided by Vickers & Ali (2020).It was stated that lower import barriers can boost public health responses in LDCs by reducing costs for hospitals and healthcare professionals and enabling access to a range of foreign suppliers.
The World Medicines Situation Report (World Health Organization, 2004) noted that high prices of medicines in resource-poor settings can significantly restrict access to medicines.That constitutes 20-60% of health expenditure in poorer countries against 10%-20% in the richest countries.
A study by Bauer (2017) examined the impact of tariffs on final prices for consumers.Here, it was estimated that the compounded financial burden of import tariffs on pharmaceuticals is as high as 6.2bn USD for China, 2.8bn USD for Russia, 2.6bn USD for Brazil and 737m USD for India.He further found out that for Brazil and India, tariffs on medicines inflate their final price by up to 80 per cent of the original sales price ex-factory.
Another instance of tariff removal impact on final prices is reflected by China's judgment to eliminate tariffs on 28 categories of imported drugs in May 2018 (Zhang, 2018).The judgment discussed the implications for foreign and domestic pharma companies.It mentioned that due to high tariffs, multiple layers of distribution, and monopoly supply, imported drugs had been extremely expensive in China.It further pointed out that reducing the price of imported drugs would eliminate the economic burden on its vast patient population.Removing the tariff would lead to the reduction of imported drug prices, giving foreign pharmaceutical companies a better chance in the competitive Chinese market (Zhang, 2018).
Access also forms a significant aspect of the UN Sustainable Development Goals (SDGs).Mendelson et al. (2016) suggested that unrestricted access to antimicrobials can potentially lead to substantial population health gains in the short term which might extend beyond reductions in morbidity and mortality for individual infections.
Talking on the health perspective, the WHO paper "Meeting Report: Antibiotic Shortages: Magnitude, Causes and Possible Solutions" (2018) assessed the cost of one antibiotic shortage to be between € 20-30 million.Access to antimicrobials and prevention measures has been a crucial factor in the 50% reduction in maternal and child deaths since 1990 (Requejo et al., 2013).Penicillin lowered mortality associated with pneumococcal pneumonia from 20-40% to 5%, and mortality from pneumococcal bacteraemia from 50-80% to 18-20% (Laxminarayan et al., 2016).The research estimates that mortality for penicillin-sensitive causes of death fell by 0.3 per thousand following the introduction of penicillin, a 58 percent decline relative to the mean prior to 1947 (The National Bureau of Economic Research, 2019).In the US for example, the leading causes of death changed from communicable diseases to noncommunicable diseases (cardiovascular disease, cancer, and stroke).The average life expectancy at birth rose to 78.8 years, post the onset of the antibiotic era (Adedeji, 2016).
A major emerging threat to health is Antimicrobial Resistance, which calls for balancing access to overconsumption.However, any efforts to tackle this phenomenon must acknowledge the fact that many of the world's poorest people still lack access to essentials.Resistance could be conveniently dealt with by restricting access, but it is not a feasible option.The repercussions could be tragic for those without access to affordable drugs (Laxminarayan et al., 2016).
The requirement of tariff free trade in essential drugs is reiterated by the WTO Pharma Agreement (1994).That eliminated tariffs and other duties and charges on specified pharma products.It is applicable only to a group of participants (HS chapter 30, products classified (or classifiable) in HS headings 2936, 2937, 2939, and 2941).
Between 2006 and 2018, pharmaceutical imports by jurisdictions and customs territories outside the WTO Pharma Agreement (1994) have increased from 39.7bn USD in 2006 to 65.73bn USD in 2018.Hence, we see a Compound Annual Growth Rate of 4.28% over those twelve years (Stevens & Banik, 2020).
As a result, the Zero for Zero initiative, while still important, represents a declining share of global pharmaceutical trade.Governments should therefore commit to permanent tariff reductions on medicines and vaccines via legally binding WTO commitments.Most obviously, this means more WTO members should accede to the WTO Pharma Agreement (1994) as swiftly as possible (Stevens & Banik, 2020).
The above arguments support the stance for elimination of tariffs on essential pharmaceutical products.Our study aims to ameliorate this literature by focussing on the potential of maximising access to AMs through elimination of tariffs.

Data sources and methodology
The trade and tariff data have been sourced from the World Integrated Trade Solution (WITS, 2023) database by the World Bank.The trade data pertains to the year 2021.
The latest year for which tariff data is available for most nations is 2018, hence the same has been chosen for the purpose of tariff analysis.
This paper analyses the trade and tariff data across the following categories of HS codes.They comprise digit subcategories of HS-2941 and HS-3003.The former is Antibiotics.The latter is Medicaments consisting of two or more constituents mixed together for therapeutic or prophylactic uses, not in measured doses or put up for retail sale.
The HS 2941 subcategories: HS-294110 -Antibiotics; penicillins and their derivatives with a penicillanic acid structure; salts thereof.

The HS 3003 subcategories:
HS-300310 -Medicaments containing penicillins, streptomycins or their derivatives, for therapeutic or prophylactic uses (not in measured doses, not packaged for retail sale).HS-300320 -Medicaments containing antibiotics other than penicillins, streptomycins and their derivatives, for therapeutic or prophylactic uses (not in measured doses, not packaged for retail sale).HS-300420 -Medicaments containing antibiotics other than penicillins, streptomycins or their derivatives, for therapeutic or prophylactic uses (packaged for retail sale).HS-300410 -Medicaments containing penicillins, streptomycins or their derivatives, for therapeutic or prophylactic uses (packaged for retail sale).
We analyse the top 25 exporting and importing nations for each of the product subcategories mentioned above on the basis of their trade value in USD millions.Further, we look into the nations imposing the highest import tariffs to obtain a panoramic understanding of the tariff structure for AMs of all major countries of the world.

Results
Below we represent and discuss the results of our research analysis.Trade and tariffs are considered in two separate sections.The above graph shows the export data in 2021 for HS-294110 -Antibiotics; penicillins and their derivatives with a penicillanic acid structure; salts thereof.A large part of the export is dominated by China, accounting for nearly 56% of the total exports in the top 25 category.It is followed by India, Spain, Italy, Singapore, the Netherlands and the UK with the remaining 40%.The above data reveals that India emerges as the largest product importer, followed by the US, Spain, Portugal, Italy, the Netherlands, Thailand, the UK.The share of imports among the top 25 nations is dominated by India constituting nearly 34%.The latter share of nations collectively contribute to about 32%.Top importers of HS-294120 are the European Union ($12.519 mn, 401,724 kg), India ($12.42 mn, 276,523 kg), Saudi Arabia ($9.29 mn, 27,698 kg), the Netherlands ($7.570 mn, 253,058 kg), the United Kingdom ($6.27 mn, 108,166 kg).The product import statistics reveals a more fragmented trend.Though imports are dominated mainly by India ($69 mn) accounting for nearly 11.67% and the Netherlands ($60.58 mn) forming 10.2% of the import share within the category, the shares of the remaining nations are distributed.Within the imports segment, Chile has the maximum HS-294140 imports ($27.93 mn), followed by Brazil ($19.89mn), the Netherlands ($16.52 mn), Korea ($16.12 mn), Germany ($11.97 mn).These countries account respectively for 14.45%, 11%, 9.13 %, 8.9% and 6.62% to the total share of imports represented by the top 25 importing nations.In 2021, the Indian import stood at $152.39 mn, nearly 42.37 %.Japan, Croatia, Pakistan, the USA and France followed and collectively form over a quarter of the imports in terms of value.Switzerland, the USA and Saudi Arabia were the largest HS-300320 importers.Collectively, their imports totalled $417 mn (56.7 %) of the top 25 importing nations.The USA recorded the highest HS-300410 imports in 2021.The trade value stood at approximately $420 mn, totalling to 5.6 mn kg.It was followed by Saudi Arabia, Germany and Egypt.Canada, Germany, Switzerland and Italy were the highest exporting nations for HS-300420.Their trade values were $1527.9mn, $1346.8mn, $1291.17mn and $1288.69mn respectively.Collectively, they attributed for 41.17% of exports among top 25 nations.The MFN tariff rate for HS-294110 is highest for the Bahamas at 45%.Iran (31%), Djibouti (26%) and Bermuda (25%) follow.The Bahamas tops the list for highest MFN rates (45%) for HS 294120.

2) HS-294120 -Antibiotics; streptomycins and their derivatives; salts thereof
3) HS-294130 -Antibiotics; tetracyclines and their derivatives; salts thereof  The table shows the MFN rates for HS-294140.It follows a similar pattern as HS-294130.The MFN import tariffs are the highest for imports to Iran at 34.5%.Morocco stands second with 17.5%.French Polynesia, Mexico and Nepal charge 15% on imports.

Figure 1 :
Figure 1: The top 25 exporting nations of HS-294110 (value in USD mn)

Figure 2 :
Figure 2: The top 25 importing nations of HS-294110 (value in USD mn)

Figure 3 :
Figure 3:The top 25 exporting nations of HS-294120 (value in USD mn)

Figure 4 :
Figure 4:The top 25 importing nations of HS-294120 (value in USD mn)

Figure 5 :
Figure 5:The top 25 exporting nations of HS-294130 (value in USD mn)

Figure 6 :
Figure 6:The top 25 importing nations of HS-294130 (value in USD mn)

Figure 7 :
Figure 7:The top 25 exporting nations of HS-294140 (value in USD mn)

Figure 8 :
Figure 8:The top 25 importing nations of HS-294140 (value in USD mn)

Figure 9 :
Figure 9:The top 25 exporting nations of HS-294150 (value in USD mn)

Figure 10 :
Figure 10:The top 25 importing nations of HS-294150 (value in USD mn)

Figure 11 :
Figure 11:The top 25 exporting nations of HS-294190 (value in USD mn)

Figure 12 :
Figure 12:The top 25 importing nations of HS-294190 (value in USD mn)

Figure 13 :
Figure 13: The top 25 exporting nations of HS-300310 (value in USD mn)

Figure 16 :
Figure 16: The top 25 importing nations of HS-300320 (value in USD mn)

Figure 17 :
Figure 17: The top 25 exporting nations of HS-300410 (value in USD mn)

Figure 18 :
Figure 18:The top 25 importing nations of HS-300410 (value in USD mn)

Figure 19 :
Figure 19: The top 25 exporting nations of HS-300420 (value in USD mn)

Figure 20 :
Figure 20: The top 25 importing nations of HS-300420 (value in USD mn)

Table 1 : Nations with the highest MFN rates for HS-294110 Source
: Generated via the World Integrated Trade Solution software(WITS, 2023)

Table 2 : Nations with the highest MFN rates for HS-294120
Source: Generated via the World Integrated Trade Solution software(WITS, 2023)

Table 3 : Nations with the highest MFN rates for HS-294130
Source: Generated via the World Integrated Trade Solution software (WITS, 2023)The Bahamas has the highest MFN tariff for HS-294130.Djibouti comes second with an MFN tariff of 26%.Bermuda and the Comoros follow with 25% and 20% respectively.

Table 4 : Nations with еру highest MFN rates for HS-294140
Source: Generated via the World Integrated Trade Solution software(WITS, 2023)

Table 5 : Nations with the highest MFN rates for HS-294150
Source: Generated via the World Integrated Trade Solution software (WITS, 2023)The Bahamas impose the highest rate of the MFN tariff for HS-294150 with 45%.Iran stands second with 32.25%, Djibouti third, followed by Bermuda.Other nations such as Pakistan, India, Korea, Uruguay and Venezuela impose tariffs at 11%, 7.5%, 6.5%, 6% and 6% respectively.

Table 6 : Nations with the highest MFN rates for HS-294190
Source: Generated via the World Integrated Trade Solution software (WITS, 2023)The Bahamas, yet again, leads the list of highest tariffs.The highest MFN for the HS-294190 rate stands at 45%.Next in line are Iran (27.17%),Bermuda (25%) and the Comoros (20%).Pakistan imposes 10.85% and India 7.5%.

Table 8 : Nations with the highest MFN rates for HS-300320
Source: Generated via the World Integrated Trade Solution software(WITS, 2023)

Table 9 : Nations with the highest MFN rates for HS-300410
Source: Generated via the World Integrated Trade Solution software (WITS, 2023)The MFN rates for HS-300410 highlights that Iran imposes a tariff rate of 35%, Pakistan 15.5% and Congo Democratic Republic, Anguila, French Polynesia and Nepal 15%.10)HS-300420 -Medicaments containing antibiotics other than penicillins, streptomycins or their derivatives, for therapeutic or prophylactic uses (packaged for retail sale)

Table 10 : Nations with the highest MFN rates for HS-300420
Source: Generated via the World Integrated Trade Solution software(WITS, 2023)