Free trade agreement with MRA in the best interest of European pharma, says new research

New research published today outlines the importance of a free trade agreement with a mutual recognition agreement for the European pharmaceutical industry.

As attention turns to defining the future trading relationship between the EU and the UK, today, the Institute for International and Development Economics (IIDE) published its study on the economic implications for Europe of three different types of trading arrangements.

The report looks at no deal (trading under WTO rules), a simple free-trade agreement (FTA) limited to covering tariffs for all sectors and an FTA that includes a mutual recognition agreement (MRA) on GMP inspections and batch testing in addition to tariff liberalisation.

Data from the report shows that EU nominal GDP will be €1.3 billion higher annually in an FTA with MRA, compared to a Simple FTA. Also, EU pharmaceutical total exports are expected to drop by 1.2% in the event of a no deal, and by 0.9% in case of an FTA with MRA. This is a difference of €1.2 billion annually in favour of an FTA with MRA.

Speaking about the publication of the report, EFPIA Director General, Nathalie Moll said “There is a clear choice available to the EU which mitigates the impact of changes to the EU-UK relationship and supports the region’s resilience and economic recovery. The evidence in today’s report leads to the conclusion that from a medicines perspective, an EU-UK free-trade agreement which includes a mutual recognition agreement is the most beneficial type of relationship for Europe.”

Ms. Moll went on to say “If we fail to get the relationship right then Europe will continue to lose ground to other regions like Switzerland, US, China, Turkey, Russia and Japan. The bigger the disruption to EU-UK pharmaceutical trade, the more other regions benefit. A free-trade agreement with the inclusion of an MRA is the best way to protect our global competitiveness, our resilience and our economic recovery”.

For example, in the event of a No Deal or simple FTA scenario, US pharmaceutical exports are predicted to rise by 3.5% (€2.4 billion), however in the case of a EU-UK FTA with MRA, US exports are predicted to rise by only 1.5% (€1.0 billion). Similarly, pharmaceutical production in other regions is likely to expand to fill the void left by the fall in EU and UK production, as both become less competitive globally. For example, for Switzerland, production is predicted to rise by €1.5 billion (+2.6%) under a no deal and US production would rise by €3.1 billion (+1.9%). Under an FTA with MRA, Swiss and US production would only increase by half that amount.

As the sixth round of UK-EU Future Relationship negotiations continues this week there is a significant long-term economic rationale for the EU and UK to agree to an FTA with MRA compared to the No Deal and Simple FTA scenarios when looking at exports, production and global competitiveness. Without an FTA and MRA, both the EU and UK become less competitive compared to other regions.