WTO finds in favor of EU in dispute over pharmaceutical imports

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A WTO arbitration panel has agreed with an EU claim that new rules in Turkey favoring locally-produced pharmaceutical products are discriminatory against foreign manufacturers.

The World Trade Organization (WTO) has upheld a complaint from the EU brought against Turkey regarding rules on the import of pharmaceutical products to the country.

Brussels had objected to a new policy that sought to favor the use of domestically-produced products in Turkey. Specifically, this required foreign producers of pharmaceuticals to move their production to Turkey for those goods to be eligible for reimbursement under Turkish social security schemes.

An arbitration panel agreed that this constitutes discrimination against foreign producers and is therefore incompatible with Turkey's obligations as a WTO member.

As such, the country is required to remove its localization and prioritization measures, either immediately or within a period of time negotiated with the EU or determined by a WTO arbitrator.

European Commission (EC) executive vice-president and commissioner for trade Valdis Dombrovskis welcomed the decision, which he described as a "clear win" for the bloc.

He added: "This is not only of economic importance for EU companies, but it also sends a strong signal discouraging other countries from continuing or pursuing similar discriminatory forced localization policies, which are incompatible with WTO rules."

The decision is also significant as it marks the first arbitration ruling under article 25 of the WTO Dispute Settlement Understanding in more than two years. This follows a prolonged period of paralysis at the WTO's Appellate Body, which has been caused by the refusal of the US to allow the appointment of new members.

It was noted by the EC that the decision on pharmaceuticals was made possible by appeal arbitration procedures agreed between the EU and Turkey that were circulated to WTO members earlier this year. This ensured that the case could continue despite the crisis at the Appellate Body and could set out a way forward for other disputes.