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Drug Snares: Tariffs Take Their Toll in Poor Nations
Roger Bate, Kathryn Boateng, AEI Online, 8-9-06

Authors Bate and Boateng report on the effects of drug tariffs on medicinal access in developing nations. They argue that these tariffs keep valuable medicines out of the hands of desperate patients while funding corrupt bureaucracies. They call for the international community to push for the elimination of drug tariffs to help the world's poorest citizens gain access to critical medical treatments.

The burden caused by high and frequently altered tariff rates creates an opportunity for public officials to extract bribes; since local officials often have asymmetric knowledge about what is a correct fee, as well as the authority to charge it locally, this allows them all sorts of leverage, such as allowing them opportunities to waive official fees if paid a bribe. Also, random or capricious intervention by customs officials makes criminals of importers by often leaving them little choice but to pay bribes to avoid delays, especially where goods with short shelf lives (for example, antibiotics that need refrigeration) are concerned. Such corruption contributes to the instability of access to medicines in a country. Clearly, the corrupting influence of tariffs is detrimental to any ongoing efforts to improve health in a nation.

Among the specifics we found our survey are the following: Vietnamese officials routinely demand bribes; delays and unofficial administrative payments are routinely demanded in Nigeria, and it is almost as bad in Uganda, Kenya, and Ethiopia. Also, in about a third of the cases we studied (36 out of 105), bribes were demanded; and in 85 percent of the cases, delays occurred and non–official payments were demanded.

Tariffs and taxes on essential medicines account for a negligible contribution to national income, and thus are of little benefit to the governments of developing countries; the effect of the conditions they create, however, is disproportionate and damaging. Today, rallying behind the G8 are other multilateral initiatives—such as the United States Trade Representative (USTR) and the Swiss and Singaporean collective initiative to remove tariffs on essential medicines—striving to bring the era of tariff imposition on essential medicines to an end.

Leaders of developing countries should not wait for U.S. and EU action, but should restart the Doha Development round by taking the simple, initial step required to help their own people—implementing national tariff policies that eliminate tariffs and taxes on essential medicines. This action will come at little cost to their revenue base, and will bring about an immeasurable gain for their people.

Project FDA.
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