NAFTA's Benefits To Industry "Gradual"

The North American Free Trade Agreement between the USA, Mexico and Canada represents 380 million people and a pharmaceutical market of $81 billion, second only in size to the European economic area. It presents an unprecedented opportunity to unleash the rapidly-expanding potential of Mexico, which is forecast to grow over 15% in the next five years but, says a new study from IMS' Pharma Strategy Group, progress will be slow.

Unlike the European Union, NAFTA is only a means to create a free trade area; it does not imply a commitment to creating full economic union or integration, says the study. Major benefits will not be realized for eight to 10 years, but the immediate positive influences will include: - the gradual elimination of tariffs on imports into Mexico, which will help manufacturing rationalization through the free markets; - the locking-in of important intellectual property developments in Canada and Mexico; and - continued economic progress in Mexico, leading to increased purchasing power, development of health care infrastructure and market growth.

The major barrier to free trade is drug regulation, and this will remain insurmountable in the short to medium term. Convergence will however occur, gradually, and Mexican standards will have to be upgraded to allow the domestic industry to compete in the regional market. The market for generic drug products in the region will grow from a value of $4.7 billion in 1993 to $7 billion by 1998, the study forecasts, adding that cross-border generic activity will be led by Canadian companies. R&D-based manufacturers should continue to seek alliances with these companies, given their high levels of expertise, it advises.