* Seamless medical equipment trade may end from 26 May

* Switzerland’s small market triggers concern over thousands of products

* Scramble for the treaty threatens Switzerland’s access to EU research funding

ZURICH, February 18 (Reuters) – Switzerland’s years of stalemate with the European Union over a stalled bilateral agreement could have an immediate real-world impact by fueling a shortage of medical devices that are now being trafficked seamlessly across borders.

Switzerland’s refusal to support the agreement – which would ensure non-member Switzerland adopts EU single market rules – could cripple the medical device trade when the industry standard collective recognition agreement (MRA) for them expires in May.

The clashes signaled erosion creeping from the uncomfortable relationship between Switzerland and the EU, its biggest trading partner which has lost Britain a member, as the network of bilateral economic agreements that froze over time becomes increasingly obsolete.

Swiss scientists fear the dispute could hinder their access to the 96 billion euro ($ 116 billion) European Union’s Horizon research program now being drafted.

The standoff could also disrupt medical supplies to the EU which is struggling to contain the coronavirus pandemic. Nearly half of Switzerland’s exports of medical devices used in things such as surgical procedures are sent to the EU, while Switzerland imports more than $ 3 billion worth of these items annually from the EU.

The two sides have clashed before over the draft agreement, which Bern has rejected since 2018 until open points are clarified about state aid, EU citizens’ access to Swiss social benefits, and unilateral Swiss rules protecting high wages.

Playing a political ball, Brussels in 2019 refused to recognize Swiss exchange trading rules that are on par with EU standards, sparking revenge.

But disrupting the trade in devices like respirators to treat COVID-19 patients would be an entirely different matter.

“We are very concerned about the supply chain,” said Beat Egli, vice president of the Swiss association Medtech which represents a sector that employs 63,000 people.

SMALL NOT BEAUTIFUL

Barring a swift deal to stop the clock, the current open market medical device trade ends when the EU switches to a new authorization regime on May 26.

Swiss manufacturers face an additional fee of around 100 million Swiss francs ($ 112 million) and a recurring fee of 75 million a year if they have to switch to an official EU representative, Swiss Medtech said.

But the bigger problem is that importing the EU’s essential products into a country of only 8.6 million people may not be worth the bureaucratic complexity of serving the Swiss market.

A Swiss Medtech survey in November found up to a quarter of all imported medical equipment – about 75,000 – could fall by the wayside, but it’s unclear for months which will disappear as suppliers and importers sort out the systems.

Even something as simple as replacement respirator parts can wreck a supply chain.

“The Swiss manufacturers are very aware that sooner or later they have to do something … but I am very concerned about the EU manufacturers. They may not know the new requirements, “said Egli of Swiss Medtech.

The lobby wants a transition period of at least 18 months to cushion the blow, but is not sure it will get that in a decision the Swiss government is preparing.

“If the MRA reforms are not adopted by May 2021, measures are being developed to mitigate the potential negative impacts,” the Federal Public Health Office said without providing any details.

BOOTED FROM THE CHAMPIONS LEAGUE

The German medical sector association BVM and its allied groups have appealed for a renewal of the MRA or at least an appropriate transition period, warning that emergency, trauma and diabetes care products as well as for dialysis and chronic respiratory disease are particularly at risk.

“Especially against the backdrop of the current COVID-19 pandemic, it must be ensured that no supply bottlenecks arise with medical products and that care for high-risk patients is adequately guaranteed,” he said.

Bern has closed talks to revive the agreement, which has continued under new chief negotiators on both sides.

But Brussels, which has made it clear that Switzerland will not gain access to a new single market until the agreement is made, is clearly irritated by moves in Bern amid domestic opposition spanning the political spectrum.

The dispute has research institutes concerned ahead of talks about Swiss access to the Horizon scheme which will start in April or May. “Everyone wants to compete and take part at the highest levels of research, and if Switzerland is no longer part of Horizon’s funding program, it will be like being knocked out of the football Champions League,” said Detlef Guenther, vice president of the Federal Institute of Technology in Zurich.

“No longer participating in schemes like this would seriously damage Switzerland, our institutions and the economy.”

($ 1 = 0.8286 euros) ($ 1 = 0.8975 Swiss francs)