* Seamless trade in medical devices could end from May 26

* Small Swiss market sparks concerns over thousands of products

* Fight over treaty threatens Swiss access to EU research fund

ZURICH, Feb 18 (Reuters) – Switzerland’s years-long standoff with the European Union over a stalled bilateral treaty could soon have real-world impact by triggering shortages of medical devices that now trade seamlessly across borders.

Swiss refusal to endorse the treaty — which would ensure non-member Switzerland adopts EU single market rules — may cripple trade in medical devices when a mutual recognition agreement (MRA) on industrial standards for them lapses in May.

The clash signals a creeping erosion of uneasy ties between Switzerland and the EU, its biggest trading partner which has already lost Britain as a member, as a web of bilateral economic accords that are frozen in time become increasingly obsolete.

Swiss scientists worry the row could crimp their access to the EU’s 96 billion euro ($116 billion) Horizon research programme now being drawn up.

The standoff could also disrupt medical supplies to an EU struggling to get on top of the coronavirus pandemic. Nearly half of Swiss exports of medical devices used in things like surgical procedures go the EU, while Switzerland imports more than $3 billion worth of such items every year from the EU.

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

Playing political hardball, Brussels in 2019 refused to recognise Swiss stock exchange trading rules as equivalent to EU standards, sparking tit-for-tat retaliation.

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

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

SMALL IS NOT BEAUTIFUL

Barring quick agreement to stop the clock, the current open-market trade in medical devices ends when the EU switches to a new authorisation regime on May 26.

Swiss manufacturers face one-off extra costs of around 100 million Swiss francs ($112 million) and recurring costs of 75 million a year if they have to switch to having EU authorised representatives, Swiss Medtech says.

But the bigger issue is importing crucial EU products to a country whose population of just 8.6 million may not make it worth the bureaucratic hassle of serving the Swiss market.

A Swiss Medtech survey in November found up to a quarter of all imported medical devices — around 75,000 — could fall by the wayside, but it would be unclear for months exactly which would vanish as suppliers and importers sort out the system.

Even a simple thing like a replacement part for a respirator could make supply chains go haywire.

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

The lobby wants an at least 18-month transition period to cushion the blow, but is not confident it will get that in a decree the Swiss government is readying.

“In the event that the MRA update is not adopted in time for May 2021, measures are being developed to mitigate the potential negative impacts,” the Federal Office of Public Health said without providing any details.

BOOTED FROM CHAMPIONS LEAGUE

German medtech sector association BVMed and allied groups have appealed for an updating of the MRA or at least the adoption of a proper transition period, warning that emergency, trauma and diabetes care products as well as those for dialysis and chronic respiratory diseases were especially at risk.

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

Bern has kept a tight lid on talks to revive the treaty, which have resumed under new chief negotiators on both sides.

But Brussels, which has made clear the Swiss will get no new single market access until the treaty progresses, is clearly exasperated by foot-dragging in Bern amid domestic opposition that spans the political spectrum.

The row has research institutes concerned ahead of talks on Swiss access to the Horizon scheme due to start in April or May. “Everyone wants to compete and take part at the highest levels of research, and if Switzerland was no longer a part of the Horizon funding programme it would be like being knocked out of the Champions League of football,” said Detlef Guenther, vice president of the Federal Institute of Technology in Zurich.

“To no longer participate in a scheme like this would be extremely damaging for Switzerland, our institutions, and the economy.”

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