The COVID pandemic has brought considerable attention to international trade in health products and technologies. According to the World Trade Organization (WTO), the principal categories of traded health-related goods and technologies are as follows:
- Medicines (pharmaceuticals, and certain chemical inputs used to produce them)
- Medical supplies (consumable items used in hospitals, labs and other clinical settings, such as syringes, gauze, re-agents, etc.)
- Medical equipment and other technology products (e.g., medical devices, MRI machines, CAT scanners, ultrasound machines, and other diagnostic/therapeutic equipment and technologies)
- Other health products (e.g., PPE, specialized soaps and sanitizers, etc.)
The WTO estimates that cross-border trade in health products and technologies – as defined above – amounted to about US$2 trillion in 2019. This was equal to approximately 5% of total international merchandise trade in that year. In the half-decade leading up to the pandemic, international trade in health products and technologies was growing by 5-8 per cent per year, modestly faster than the growth of overall merchandise trade. Note that these figures do not capture “medical tourism” – the purchase of medical/health services in foreign countries. This is a separate type of cross-border commerce and is not included in the WTO’s trade data.
Of the four categories of health products/technologies identified above, 56 per cent of the value of cross-border trade in 2019 was accounted for by “medicines” (basically, pharmaceuticals), followed by “medical supplies” (17 per cent), “medical equipment and technologies” (14 per cent), and “other” health products (13 per cent).
The top 5 importing nations for health products and technologies, in descending order, are the United States, Germany, China, Belgium and the Netherlands (as of 2019).
Which countries are the leading exporters of health products and technologies? In 2019, Germany, the United States, and Switzerland – in that order – were the top three, together making up 35 per cent of the value of such exports. Of interest, Germany, with 84 million people and an economy only about ¼ as large as the United States, is the number one exporter. Other countries in the top 10 global exporters, in descending order, are the Netherlands, Belgium, Ireland, China, France, Italy, and the U.K.
Canada does not rank among the ten leading exporters of health products and technologies (nor are we among the ten biggest importers).
Looking at our exports and imports of the products and technologies listed above, it turns out that Canada runs a large and rising structural deficit – now in excess of $20 billion per year. In other words, we import much more than we export, in dollars terms, across the four categories of health products and technologies identified above.
The table below shows Canada’s trade deficit in the two main categories of health products and technologies used by Statistics Canada to measure industrial activity and trade in this part of the economy.
Canada’s large and growing trade deficits in health products and technologies are a fact, even though our country scores highly in international rankings of medical and health research owing to the excellence of our universities, scientists, medical experts, and teaching hospitals. This situation is puzzling and should be unacceptable to both Canadians and our policymakers.
Canada devotes 11-12 per cent of GDP to providing health services, with roughly 70 per cent of this reflecting public sector expenditures and the rest occurring in the broadly defined private sector. As a country, we also spend heavily on post-secondary education and research, including in the areas of health sciences, medical research, and other segments of life sciences. According to the OECD, we are a global leader in the share of the working-age population with post-secondary credentials, including many people with STEM qualifications. Canada has a generous regime of tax credits to support scientific research and development in the business sector, including the life sciences industry. The pools of venture and other risk capital to fuel the growth of innovative technology-based Canadian firms have expanded dramatically in the last decade. Finally, Canada’s skills-based immigration system puts us in a strong position to attract global talent to help grow the broad health innovation sector.
In short, Canada, including B.C, would seem to have the ingredients to enable the country to benefit from the future growth of world-wide demand for and cross-border trade in health-related products and technologies.
British Columbia, in particular, boasts strengths in the burgeoning life sciences sector. As B.C. policymakers look to diversify the economy and promote the growth of innovation-based industries, life sciences should be at the top of the list. The province should focus on creating a welcoming environment for existing biotechnology and other life sciences companies – and on attracting new investment and talent to accelerate the growth of the health innovation cluster. More can be done to establish pathways for B.C. firms that develop innovative health products and technologies to sell these locally; currenty, some B.C. based firms that export commercially successful innovations report that they are frozen out of the domestic market. The province should also be looking to make B.C. a preferred location for clinical trials for pharmaceutical and bio-pharmaceutical products, leveraging the advantages that flow from our integrated public health system and the large amounts of data that can be made available to support the work of reserachers, clinicians, and innovators.
World trade in health products, equipment, and technologies is on track to double by the end of the decade (to somewhere near US$4 trillion). At the same time, Canada will be spending more of its GDP to provide health care services to a growing and steadily aging population. Let’s make sure Canada and B.C. are in a position to reap some of the economic rewards associated with the expansion of world-wide demand for health care and the anticipated rapid growth in global trade in health goods and technologies.
World Trade Organization, “Trade in Medical Goods,” April 3, 2020.
BC Life Sciences Update 2021: Building on a foundation of innovation, March 2021.
Statistics Canada, Canada’s merchandise trade balances by NAICS category, 2022.