Trade Therapy: Deepening Cooperation to Strengthen Pandemic Defenses
easily replaced. Feedback from doctors and patients in turn enables manufacturers to improve the p erformance of their devices. These characteristics make the entry barrier extremely high in the medical device segment, so latecomers have trouble competing with established firms. MNCs play a dominant role in health GVCs, though it varies significantly by segment. Globally, MNCs and their affiliates contributed 36 percent of output in 2016 (Qiang, Liu, and Steenbergen 2021), including about two-thirds of exports and more than half of imports. However, their share of medical goods and services varies hugely. In chemicals and pharmaceuticals, MNCs accounted for 87 percent of global value added and 83 percent of exports in 2016 (figure 1.6). MNCs account for such a large share in global value added because of highly localized regulations, prompting them to set up affiliates to produce for the domestic market. MNCs play a similarly outsize role in medical devices; the 10 biggest medical device MNCs accounted for approximately 40 percent of global sales in 2018 (Vara 2019). In contrast, MNCs represented just 4 percent of global value added in health and social services—among the lowest MNC contribution in all industries. Heavy regulations on entry and the dominance of the public sector explain the limited role of MNCs in medical services.
Figure 1.6
MNCs’ contribution to global value added and exports varies by industry
100
MNCs’ contribution (%)
90 80 70 60 50 40 30 20 10
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Gross exports
Value added
Source: Calculations based on the Organisation for Economic Co-operation and Development (OECD) Activity of Multinational Enterprises (AMNE) database (https://www.oecd.org/sti/ind/amne.htm). Note: Data are from 2016. IT = information technology; MNCs = multinational corporations.
