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IP/97/514

Brussels, 13 June 1997.

EU reaches agreements to cut red tape with United States and Canada

The European Commission and the US Administration have concluded a Mutual Recognition Agreement (MRA) which will cut red tape, reduce costs and shorten delays in the marketing of European products in America and vice-versa. A separate MRA has been reached with Canada. The MRA with the US covers well over $ 40 bn worth of transatlantic trade a year in some of the most important sectors for the future - telecommunications equipment, medical devices and pharmaceuticals, as well as electromagnetic compatibility and electrical safety. Now that the EU and US have agreed on a common text, the MRA is expected to be formally initialled next week. Through the MRA, a product tested and approved in Europe to US quality and safety standards will automatically be ready for sale in the United States without having to undergo a second round of US certification procedures. It will substantially cut the time it takes to launch new products, ranging from mobile phones and computers to drugs and tomographic X-ray systems. These agreements will open up significant new opportunities in the North American market as a whole.

The agreement was welcomed by Sir Leon Brittan, with the following statement:

"The MRA has been one of the crowning achievements of the new Transatlantic relationship so far. It has assured that in real, concrete ways the EU and US can work together to bring benefits to business and consumers. It will cut rad tape, reduce costs and bring products for healthcare patients, information technology users and other consumers onto the market faster without compromising on quality. As such it will make existing business cheaper and encourage companies to expand into new markets and new products".

"The achievement of a broadly based MRA was identified by the business community on both sides of the Atlantic as the biggest single step that could be taken to stimulate trade, now that tariff barriers have been so substantially lowered. The identification of the MRA as a top priority by the business community was crucial in persuading the EU and the US to overcome bureaucratic objections and reach this hard-won agreement. It is good news for business, good news for the consumer and above all a real sign that our efforts to breathe new life into the EU-US relationship can be successful in the most practical way."

Through this agreement, the US allows European companies to sell products straight into the US market after they have been tested and certified to US health, safety and quality standards in Europe, foregoing the right to carry out a second set of tests in America. The same applies vice-versa. The sectors covered are mainly in the health and electrical areas. They are:

Medicinal products

Medical devices

Telecommunications terminal equipment

Electromagnetic compatibility. This is to ensure that networked equipment does not harm other parts of the same network

Electrical safety, to ensure equipment is safe to for the user

Recreational craft, such as speed boats and sailing boats

Other sectors, notably fasteners and veterinary vaccines, will be added to the framework agreement in the not-too-distant future.

A similar MRA has also been initialled with Canada, covering the same sectors as the US and representing around US $ 5 bn of two-way trade. The MRA with Canada provides for every sector the right to test and approve products to the other party's requirements.

MRAs have already been initialled with Australia and New Zealand. Negotiations with the US and Canada have lasted about three years, and have enjoyed a steady input of ideas from major European and US companies through the Transatlantic Business Dialogue (TABD). Final signature is expected to take place in the next few months. Mutual recognition will also pave the way for greater harmonisation of standards themselves between Europe and North America.

What the business world is saying about the MRA

Ericsson, which invoiced $ 1.5 bn of systems and equipment in the US in 1996, has said: "the life-cycle of a mobile phone is 18 months or less, and yet it currently takes around three months to get the product approved for the US market. An MRA will therefore bring an appreciable reduction in 'time-to-market' and thus improved commercial conditions".

The Information Technology Industry Council (ITI) has estimated that an MRA on telecoms terminal equipment and IT products will save US and European consumers and industry some $1.37 bn a year. US sales of IT products to the EU totalled $13 bn in 1993 and European exports to the US totalled $3.4 bn.

Philips claims that "hundreds of inspections and approvals are processed every year. A meaningful MRA on medical devices could bring potential savings of millions of dollars to the taxpayer and the control of healthcare costs". Philips places great value on potential savings from mutual recognition firstly of the assessment results of the manufacturer's quality system, and secondly of product approval procedures.

SmithKline Beecham says: "time and resources are wasted by both industry and regulators with the administrative burden of duplicating inspections. An MRA will improve our efficiency in delivering European products to American patients and giving European patients rapid access to US-produced medicines". Jan Leschly, CEO, SmithKline Beecham

The European Federation of Pharmaceutical Industries Associations (EFPIA) says "the current need to perform duplicate inspections is a direct and unnecessary cost for Governments, regulatory authorities and manufacturers. It consumes scarce company resources and delays the arrival of drugs on the market, at the expense of patients themselves." Prof Rolf Krebs, CEO, Boehringer Ingelheim - Pres, EFPIA

Glaxo Wellcome says: "an MRA between the USA and the EU is an event of great significance. It will of course contribute to improving efficiencies at our manufacturing establishments, reducing procedurals delays while enhancing high quality standards. But perhaps of more importance is the signal which this agreement will send about the attainability of mutual recognition between the US and the EU. That holds out good prospects for further progress in future". Sean P Lance, CEO, Glaxo Wellcome Plc.

The Agreement

It takes the form of an international Treaty between the US Government and the European Community. A framework text lays down the general rights and obligations of both parties and sets up a permanent Joint Committee. This framework will permit future extensions of the agreement to include additional industrial sectors. The agreement with Canada follows an identical format. The following sectoral annexes are attached to both agreements.

Medicinal products

Teams of inspectors currently cross the Atlantic incessantly in order to inspect manufacturing conditions in two or three hundred production sites every year. This laborious work will be dramatically reduced under the MRA. The EU and US will accept each other's inspections and recognise 'Good Manufacturing Practice (GMP)' clearance given to production sites that pass those inspections. This will eliminate most overseas pharmaceutical re-inspections by the importing country. After a three-year transition period aimed at determining the equivalence of EU and US inspection systems, the EU and US will exchange their inspection reports which will generally be endorsed without re-inspection nor additional queries.

The MRA covers inspections carried out when assessing a request for authorisation to market a product, such as a new drug, and inspections during the routine production of items already authorised. Most medicinal products are covered, including human and veterinary drugs, starting materials used for the maunfacture of medicinal products, and intermediate products when all steps of the manufacturer do not take place in the same plant. Human plasma derivatives, investigational products used in clinical trials, radiopharmaceuticals and medicial gases are not included during the transition phase but will be reconsidered later. Veterinary vaccines are likely to be dealt with in a separate and further annex to this agreement.

A committee will be set up to resolve all technical questions. A system for exchanging information and a rapid alert system are being designed during the transition period. In the EU, the new European Medicines Evaluation Agency will co-ordinate the Member States' inspection activities.

The MRA with Canada has a shorter 2-year transition period. It is similar to the US one regarding verification of the capabilities of all inspection services involved, but after two years recognition will be based on GMP certificates instead of comprehensive inspection reports. In both cases, analytical controls of batches imported into the EU will be waived.

Medical devices

Medical devices include various instruments ranging from catheters to scanners. The MRA will permit each side to recognise the quality system-related evaluations and inspections and the pre-market evaluations carried out by the other. In this sector, the agreement is also based on the principle of a three-year determination of equivalence between the European Conformity Assessment Bodies (CABs) and the Food and Drug Administration (FDA) or US CAB. Under this agreement, the parties will normally endorse the various sorts of reports exchanged between them: quality system evaluations and inspections for all medical devices and product evaluations for a number of low and medium risk devices. The number of products covered will be expanded with time and experience, in line with the parties' ability to prepare evaluation guidelines and to comply with international standards.

There will be a joint committee for medical devices which will provide a forum for technical discussions between the two sides. A system for exchanging information and a rapid alert system will be devised during the transition period.

The MRA with Canada goes further than the US agreement since it covers all types of regulated devices in both the EU and Canada, after a two-year transition period, for recognition of certification of final approvals.

Telecoms

Both agreements cover virtually all categories of terminal equipment connecting to public telecoms networks. This includes both analogue and digital equipment devices using wired connection (like telephones or modems) or radio connection (like mobile phones). Satellite terminal equipment and radio transmitters are also included. For all these products, approvals by a recognised conformity assessment body (CAB) in the territory of one party will be accepted by the authorities of the other. A 24-month transition period is foreseen during which time each Party will accept and evaluate test reports and related documents issued by the CABs of the other Party. During this period, the Parties will also consider regulatory changes needed to support the objectives of the agreement, i.e. mutual recognition of approvals.

ElectroMagnetic Compatibility and Electrical Safety

In these sectors, similar provisions apply: all tests carried out and reports and certificates issued by agreed Conformity Assessment Bodies in the territory of one Party will be recognised by the other. Products will be marketed without any duplication of testing and certification in the importing country. ElectroMagnetic Compatibility tests ensure that any equipment does not harm networks or other equipment in the same environment. Electrical safety tests verify the level of risk for workers and consumers of electrical appliances such as domestic appliances, hand-held tools and electrical installation equipment. These two sectors are especially relevant for telecommunication terminal equipment which has to be safe for users and networks. A similar 24-month transition period is therefore foreseen.

Recreational craft

This annex covers speedboats, sailing boats and other recreational craft subject to conformity assessments or approval procedures before being put on the market in the US, Canada or the EU. Compliance to the importing Party requirements may be determined in the territory of the exporting Party and these products will have unrestricted access to the market for sale as recreational craft. An 18-month transition period is foreseen.


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