Matthew Lynn

A no-deal Brexit won’t mean a shortage of medicines

A no-deal Brexit won't mean a shortage of medicines
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Covid-19 has hit us harder than just about any country in the world. Lockdown has been eased chaotically, and no one has any idea what the rules are any more. And now, on top of everything else, it looks as if we are about to run out of medicines if the government doesn’t mange to reach a trade deal with the European Union by the end of the year.

According to the Financial Times today, the UK is running dangerously low on stockpiles of essential pharmaceuticals, and might well run out just as a second wave of the coronavirus hits, probably next winter. We need to import lots of medicine from the rest of Europe, and the ‘crash out’ ideologues at Number 10 are putting us all at risk. There is a problem, however. It’s nonsense. There might or might not be a shortage of certain drugs. But that will be because there is, in case anyone hadn’t noticed, a pandemic. Leaving the EU won’t have anything to do with it one way or another.

Project Fear doesn’t have the same potency it once did. It can no longer trot out the governor of the Bank of England, the president of the CBI, and half a dozen FTSE chief executives, the way it once did. A bit like an ageing rock band, however, it occasionally gets itself back on the road for a re-tread of some of the old hits, even if you are not quite sure anyone’s heart is really in it anymore. This week’s tune? If we don’t reach a deal with the EU, presumably agreeing to what ludicrous demand Michel Barnier comes up, we will quickly run out of medicines.

Like many scares stories around leaving the EU, it does have a grain of truth. We import a lot of medicines from the rest of Europe. And medicines are also regulated right now at a European level. So if we don’t come to an agreement we won’t be able to import the drugs we need right?

Well, not really. There are three problems with that idea. First, pharmaceuticals manufacturing is a complex process and it makes sense to concentrate production in plants that can produce a pill or vaccine to the required standards in the right kind of volume. So production is very specialised. The result? The EU exports a lot of medical supplies to the UK, but it also imports a lot. As a report from the European Parliament points out, the UK is one of the main providers of drugs to Europe, as well as one of the main markets. We run a trade deficit with the EU in pharmaceuticals, as we do in most things. But if there are any restrictions from 2021, the EU’s supplies will be as much under threat as ours.

Next, while there may be some tariffs on goods if we don’t do a deal, drugs won’t be on the list. The World Trade Organisation already has a thing called the Pharmaceutical Tariff Elimination Agreement. As the title implies, that very sensibly gets rid of virtually all tariffs on medicines. 

Finally, regulatory approvals won’t be an issue either. As the Institute of Economic Affairs pointed out in an analysis from 2018 we can simply recognise EU standards unilaterally. In truth, there are plenty of reasons still to worry about Covid-19. But whether we reach a trade deal with the EU isn’t among them – and it won’t make any difference to the supply of medicines either way.

Written byMatthew Lynn

Matthew Lynn is a financial columnist and author of ‘Bust: Greece, The Euro and The Sovereign Debt Crisis’ and ‘The Long Depression: The Slump of 2008 to 2031’

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