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TWN Info Service on WTO and Trade Issues (Oct19/03)
3 October 2019
Third World Network


Turkey’s measures on pharmaceutical products for dispute panel

Published in SUNS #8988 dated 2 October 2019

Geneva, 1 Oct (Kanaga Raja) – The WTO Dispute Settlement Body (DSB) on Monday agreed to establish a panel, at the request of the European Union, to examine certain measures imposed by Turkey concerning the production, importation and marketing of pharmaceutical products.

This was a second-time request and panel establishment was automatic.

Japan, the United States, Canada, Switzerland, the Russian Federation, Ukraine, China, Brazil and India reserved their third party rights to the dispute.

In other actions, a request for panel establishment by the United States to examine additional duties imposed by India on certain products from the US in response to measures imposed by the US in 2018 on imports of steel and aluminium was blocked by India at the DSB meeting (see separate story).

Meanwhile, under a separate agenda item, the US once again blocked the start of a selection process to fill four current vacancies on the Appellate Body (AB), as well as two vacancies that will come about when the second terms of AB members Ujal Singh Bhatia and Thomas Graham expire on 10 December 2019 (see separate story).

Canada and the European Union also formally presented at the DSB meeting their interim appeal arbitration arrangement pursuant to Article 25 of the Dispute Settlement Understanding (DSU).

EU-TURKEY PHARMA DISPUTE

In its complaint against Turkey, the EU said that the measures at issue include the localisation requirement, the import ban on localised products and the prioritization measure.

Regarding the localisation requirement, the EU said that the Turkish authorities have adopted plans to achieve progressively the localisation in Turkey of the production of a substantial part of the pharmaceutical products consumed in Turkey.

In order to achieve that objective, Turkey requires foreign producers to commit to localise in Turkey their production of certain pharmaceutical products.

According to the EU, if such commitments are not given, are not accepted by Turkish authorities, or are not fulfilled, the pharmaceutical products concerned are excluded from the scheme for the reimbursement of the pharmaceutical products sold by pharmacies to patients operated by Turkey’s social security system (the “reimbursement scheme”).

That scheme covers the vast majority of sales of pharmaceutical products by pharmacies to patients.

Consequently, said the EU, if an imported pharmaceutical product is excluded from the reimbursement scheme, its competitive opportunities in the Turkish market are significantly impaired, as compared with domestically produced like products.

In order to comply with the above described localisation requirement (the “localisation requirement”), certain producers of pharmaceutical products commit to localise their production of certain pharmaceutical products in Turkey.

In those cases where foreign producers do not give the required commitments to localise (or where their offered commitments are rejected, or are considered not to be fulfilled, by the Turkish authorities), the pharmaceutical products concerned are no longer reimbursed.

The localisation requirement is designed to apply on an ongoing basis, or at least until the localisation objectives established by the Turkish government are achieved.

The localisation requirement is periodically adapted, modified, updated or extended with respect to, inter alia, the products it applies to and/or the extent of localisation sought.

The specific commitments to be implemented in order to comply with the localisation requirement are established for each foreign producer in a non-transparent manner and may differ from producer to producer.

The EU considers that the localisation requirement is inconsistent with Turkey’s obligations under the following provisions of the covered agreements:

* Article III:4 of GATT 1994, because, by excluding imported pharmaceutical products for which localisation commitments have not been given, have not been accepted or have not been fulfilled from the reimbursement scheme, through the localisation requirement Turkey accords to imported pharmaceutical products treatment less favourable than that accorded to like products of national origin covered by that scheme in respect of laws, regulations and requirements affecting their internal sale, offering for sale, purchase, transportation, distribution or use;

* Article X:1 of GATT 1994, because Turkey has failed to publish certain elements, terms and conditions of general application of this measure promptly in such a manner as to enable governments and traders to become acquainted with them;

* Article 2.1 of the TRIMs Agreement, because the localisation requirement is an investment measure related to trade in goods inconsistent with Article III:4 of GATT 1994; and

* Article 3.1(b) of the SCM Agreement, because the reimbursement scheme operated by the Turkish social security system involves the granting of a subsidy within the meaning of Article 1.1 of the SCM Agreement.

The localisation requirement makes the granting of that subsidy contingent upon the use of domestic over imported goods, thereby violating Article 3.1(b) of the SCM Agreement.

On the import ban on localised products, the EU said that where the production of a pharmaceutical product has been localised in Turkey in accordance with the localisation requirement, applied in conjunction with the Turkish rules for approving the importation and marketing of pharmaceutical products, the importation of that pharmaceutical product is no longer permitted (“the import ban on localised products”).

The EU considers that the import ban on localised products is inconsistent with Turkey’s obligations under Article XI:1 of GATT 1994, because, once a foreign producer has localised production of a certain pharmaceutical product pursuant to the localisation requirement, applied in conjunction with the Turkish rules for approving the importation and marketing of pharmaceutical products, that product can no longer be imported, and therefore Turkey institutes and maintains a prohibition or restriction, other than duties, taxes or other charges, on the importation of pharmaceutical products of the territory of other WTO Members.

On the prioritization measure, the EU said even in certain cases where imported products are not excluded from the reimbursement scheme by virtue of the localisation requirement, Turkey gives priority to the review of applications for inclusion of domestic pharmaceutical products in the list of products covered by the reimbursement scheme, as well as with respect to any pricing and licensing policies and processes, over the review of the applications of like imported products (the “prioritization measure”).

The EU considers that the prioritization measure is inconsistent with Turkey’s obligations under Article III:4 of GATT 1994, because, by according priority to the review of applications for inclusion in the reimbursement scheme, as well as with respect to any other pricing and licensing policies and processes, of pharmaceutical products of national origin, through the prioritization measure Turkey accords to imported pharmaceutical products treatment less favourable than that accorded to like products of national origin.

According to trade officials, the EU referred to its previous statement made at the DSB on 15 August when it presented its first request for panel establishment.

Turkey expressed deep regret over the EU’s second request for a dispute panel. It said the EU’s request was misplaced, as the dispute involves Turkey’s social security system and Turkey’s policies aimed at ensuring fair, affordable and uninterrupted access to medicines for its people.

Turkey said that its measures are fully consistent with its WTO obligations, adding that matters concerning a member’s healthcare and social security policies should not be subject to WTO panel review.

OTHER ACTIONS

A request for panel establishment by Tunisia to examine definitive anti-dumping measures imposed by Morocco on school exercise books from Tunisia was blocked by Morocco at the DSB meeting.

This was a first-time request and panel establishment will be automatic when the request comes up again before the DSB.

Meanwhile, the DSB adopted the panel report, as amended by the Appellate Body, in a complaint brought by Russia over anti-dumping measures imposed by Ukraine on ammonium nitrate.

The DSB also adopted the panel report, as amended by the Appellate Body, in the complaint brought by Japan over anti-dumping duties imposed by Korea on pneumatic valves from Japan.

 


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