UPDATED: Trade agreement with China paves the way for reduction in medical device tariffs

President Obama's trip to China was a productive one. Not to be overshadowed by the countries' new climate change accord is an agreement to expand the World Trade Organization's tariff-cutting Information Technology Agreement to cover a host of new products, including medical devices.

That's good news for U.S. medical devices companies, which face tariffs and duties as high as 8% on imaging equipment like MRI and CT scanners. With device exports of $38.1 billion and imports of $37.8 billion, the U.S. had a small trade surplus in medical devices as of 2012, AdvaMed says, citing government statistics.

"AdvaMed strongly supports expansion of the ITA and we are pleased to see the agreement reached by the leadership of China and the U.S. We hope that this will lead to continuation of a robust negotiation and swift passage of an expanded agreement. The ITA has the potential to reduce tariffs for several innovative medical technologies, benefitting manufacturers in the U.S., China and other countries. Even more importantly, the agreement will lower health care costs and increase patient access to life-saving and life-enhancing technologies," said the trade association's CEO Stephen Ubl, in an email to FierceMedicalDevices.

In 2012, the U.S. had a $900 million trade deficit with China in devices, with imports from China of $3.5 billion and exports to China worth $2.6 billion, according to information provided by AdvaMed.

Obama announced the breakthrough at the Asia-Pacific Economic Cooperation summit earlier this week in Beijing. "It was APEC's work that led to the Information Technology Agreement, which we are now negotiating to expand," he said in remarks at the meeting, according to Politico. "So it is fitting that we are here with our APEC colleagues to share the news that the United States and China have reached an understanding that we hope will contribute to a rapid conclusion of the broader negotiations in Geneva."

Indeed, the agreement between the U.S. and China does not immediately change the status quo regarding the global, 54-economy Information Technology Agreement. But ratification of the expansion is now likely at December's World Trade Organization meeting in Geneva, Switzerland, now that the two economic powerhouses are on the same page.

There are still some details to be worked out however, such as the speed at which China will eliminate those tariffs. "In trade negotiations there are always issues of how the obligations are phased in over time, and that will be part of what is discussed in Geneva," U.S. Trade Representative Michael Froman said, according to Politico.

The Information Technology Agreement was signed in 1996 and included 29 economies at the time. The expansion to include more products under the deal would support 60,000 additional U.S. jobs, eliminate tariffs on $1 trillion in annual global sales of technology products, and increase annual global GDP by about $190 billion, according to a White House fact sheet.

Past efforts to expand the agreement were stymied by China. In March, talks were suspended because China "came to the table with a limited mandate that did not provide sufficient space for a meaningful negotiation," according to Deputy U.S. Trade Representative Michael Punke. But the country seems to have had a change of heart since then.

Progress on another trade deal involving several Asian and Latin American countries, though not China, is stalled. The Trans-Pacific Partnership (TPP) focuses on nontariff barriers to trade such as intellectual property and regulatory harmonization in industries such as healthcare. It is supposed to include an annex on the medical device industry.

- here's the Politico article
- read the White House fact sheet
- more on the Information Technology Agreement

Editor's Note: This article has been updated with information and reaction from AdvaMed.

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