U.S.-Korea Free Trade Agreement: Potential Economy-wide ... - USITC

Box 3.5 Potential price and quantity effects of NTMs on ultrasound scanning apparatus (HS 901812)
Firms seeking to export to Korea have identified a variety of NTMs that may have impeded their access to the
market for medical equipment, including opaque pricing and reimbursement policies, overly complex and costly
regulatory requirements, and unethical business practices (see text). These measures may restrict the quantity
of imports into the Korean market, raise the price of imports, or both.
Korean imports of this product, in quantity terms, are substantially lower than imports of the same product into
most other economies, relative to the size of the Korean economy. Korea's import unit value for imported
ultrasonic scanning apparatus is substantially higher than the import unit value for most other countries. Existing
tariffs of 8 percent ad valorem appear to be too low to account by themselves for either the relatively low quantity
of imports or the relatively high price of imports. This relatively low quantity and relatively high price of imports
may be reflective of the effects of NTMs, but could also be influenced by such factors as market structure, product
differentiation, and consumer preferences.
Korean imports of ultrasonic scanning apparatus in 2003–05 were 0.0028 units per million $ GDP, as compared
to a median of 0.012 units among 23 comparable countries. Korea ranks twenty-second out of the 23 comparable
countries in imports relative to the size of its economy, with only Thailand ranking lower. The number of
comparison countries is limited because some countries measure imports in kilograms or other units.
The Korean average import price from the United States during 2004–06, was $31,733 per ultrasonic scanner,
which is 48 percent higher than the U.S. export price to the world of $21,450. The Pharmaceuticals and Medical
Devices and TBT chapters of the FTA are intended to address some of these NTMs (see chapter 5 of this report
for additional information on TBT provisions and appendix D for a summary of the FTA chapter on
Pharmaceuticals and Medical Devices).
For further information on the calculation and interpretation of the quantity and unit-value information reported
above, see appendix J.
Source: See app. J for data sources; USITC staff analysis.
and reimbursement systems concerning access to innovation, imposition of an independent
appeals process, increased transparency and accountability, and maintenance of ethical
business practices to ensure a level playing field. 543 The report, however, says that the
committee believes that substantial work remains to ensure full implementation of the FTA’s
provisions to address the challenges that innovative medical device and pharmaceutical firms
face in gaining fair access to the Korean market.
In its report, the ITAC on Small and Minority Business (ITAC 11) states that it believes the
chapter on pharmaceuticals and medical devices will expand opportunities for small
businesses in the medical device industry. 544 Finally, the Intergovernmental Policy Advisory
Committee noted that it is pleased that state-level Medicaid programs are excluded from
coverage of the chapter on pharmaceuticals and medical devices, which applies only to
central-level government health-care programs. 545
543 Ibid., 16.
544 ITAC (11) on Small and Minority Business, Advisory Committee Report, April 26, 2007, 4.
545 IGPAC, Advisory Committee Report, April 24, 2007, 23.
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