Commerce Secretary: Device Industry Key to Increase in Exports

His was not the most anticipated speech at the Advanced Medical Technology Association’s 2010 annual meeting and conference, but the message he delivered to attendees was equally as important as those sent by the heads of the U.S. Food and Drug Administration and the Centers for Medicare and Medicaid.

“America will remain the most open major economy in the world. That’s been good for our nation’s quality of life, and it’s been good for our economy,” U.S. Commerce Secretary Gary Locke told medical device manufacturers gathered in Washington, D.C., last week for AdvaMed’s annual conference.

“But we will continue to insist that if we give foreign countries the privilege of access to our market, U.S. companies must receive the same access and protection in theirs,” he continued. “This expectation has taken on greater significance since President Obama announced his National Export Initiative with a goal of doubling U.S. exports by 2015. There’s no question that AdvaMed members will have a leading role to play in reaching this target.”

No question, indeed. With aging populations worldwide and emerging markets clamoring for more sophisticated medical devices and equipment, the U.S. medical technology industry most likely will remain a dominant player in the global market in the foreseeable future. Over the last three years, device exports have steadily increased, rising from a value of $28.3 billion in 2007 to $36 billion in 2009, according to various industry data.

And though Locke claims medical technology has maintained a favorable trade balance in recent years, the numbers tell a different story. Data from the International Trade Administration (ITA) in Washington, D.C., indicate the United States imported more medical devices than it exported in 2007 and 2008. According to a 17-page industry assessment conducted by the ITA, the U.S. imported $31 billion worth of medical devices in 2007 and exported $28.3 billion; in 2008, device exports increased to $31.4 billion but imports also rose, to $33.6 billion.

“Over the past decade the value of imported medical devices has steadily increased, gradually eroding the previous trade surplus,” the ITA wrote in its assessment. “The majority of imports are lower tech products, e.g. surgical gloves and instruments. Continuing shifts in trade patterns have resulted in China emerging as a significant export of lower tech equipment and supplies to the United States.”

At the same time, however, China increasingly has become a target market for American companies exporting high-tech medical devices. China (including Hong Kong) is the second largest market for U.S. medical device exports in Asia, having taken in about $1.5 billion worth of goods in 2008, according to ITA data. The organization expects device exports to China to increase 5-10 percent annually for “the foreseeable future.”

Markets outside of China also are expected to grow in the future, particularly India, where shipments of healthcare products shot up tenfold in the 1990s and rose about 12 percent annually from 2000 through 2008. U.S. exports to India totaled nearly $400 million in 2008, according to ITA figures.

Latin America is expected to become fertile exporting ground as well, with destinations such as Mexico, Brazil and Venezuela contributing to growth. U.S. exports of medical devices to Latin America and the Caribbean in 2008 totaled about $7.7 billion, a figure that is prompting an increasing number of device firms to pursue this market despite challenging access issues and economic difficulties in the region.

The U.S. government can help the medical device industry overcome some of those challenges and difficulties by:

• Negotiating to reduce or eliminate tariffs on medical devices;
• Addressing foreign governments’ regulatory policies that are inconsistent with international harmonization efforts and that may cause unfair discrimination against U.S. industry;
• Educating the industry on ways to comply with foreign regulatory requirements and providing similar export help that foreign governments provide for their industries; and
• Encouraging developing countries to consider the advantages of the appropriate use of advanced medical technologies.

Earlier this year, President Obama unveiled a National Export Initiative (NEI) designed to double exports over the next five years and support 2 million jobs. The initiative, according to Locke, provides “more funding, more focus and more cabinet-level coordination” to increase exports. Specifically, the president’s plan includes fighting tariffs and non-tariff barriers as well as practices that blatantly harm American companies and hiring as many as 328 trade “experts” who will serve as advocates for U.S. firms.

The NEI also calls upon the Export-Import Bank to increase its financing available for small- and medium-sized businesses from $4 billion to $6 billion over the next year.

“The opportunity to sell more of what [companies] make to the 95 percent of consumers who live outside our borders is real and immediate,” Locke said. “Under the NEI, and with traditional drivers of American economic growth facing headwinds, we are committed to doing more than ever to help U.S. companies reach new markets.”