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Free-market medicine

July 17, 2006

IF PRESIDENT BUSH AND THE REST of the Group of 8 leaders resuscitate the stalled Doha trade agreement at their meeting in St. Petersburg -- it's unlikely, but there's still time, because the meeting doesn't adjourn until today -- it will be a major victory for the global economy, especially the Third World. It could also be a victory for the millions of people for whom affordable, sometimes lifesaving medicines remain out of reach.

Today, many developing countries impose tariffs on medicines and medical devices. Zimbabwe and the Democratic Republic of Congo, for instance, impose tariffs of about 8%. Others, such as India and Morocco, impose levies double that. Ironically, these nations gain relatively little revenue from such taxes; according to one survey, money from tariffs on medicines usually accounts for less than 0.5% of total government revenue. This is one reason that a third of the world's population lacks adequate medical care and has low life expectancy and high rates of disease.

The United States, Switzerland and Singapore have proposed removing import tariffs on medicines in the current round of trade talks that began in 2001 in Doha, Qatar. But the talks have repeatedly stalled, mostly because wealthy countries, such as the U.S. and several in Europe, refuse to end their indefensible agriculture subsidies. Reducing farm subsidies would help rich and poor nations alike. But there are other benefits the trade deal could bring. There's plenty of evidence, for example, to show that reducing tariffs on medicine and other health-related products produces abundant rewards.

In 2000, several African countries promised to reduce taxes on bed nets, which block mosquitoes and help lower malarial infections. As a result, in several countries that have dropped the duties, the cost of bed nets has fallen by 50%, sales have soared and malarial rates appear to be falling. Imagine what could happen if more of the world could afford antibiotics, vaccines and HIV drugs.

Opening more of the world's markets would no doubt benefit countries with large pharmaceutical industries, which include the U.S., Switzerland and Singapore. That's been a sore point for many trade ministers. But if companies in those countries benefit from an increase in sales, people who now can't afford the drugs would benefit even more.

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