From the East Asia Forum (excerpt):
Trade held hostage to IP — it’s anti-development
Philippa Dee, ANU
Now that the intellectual property chapter of the Trans-Pacific Partnership has been leaked, our worst fears are confirmed — IP in TPP is OTT.
This would be bad enough on its own. What is less well recognised is that the trade liberalisation agenda is being held hostage to the IP agenda, and the result is inimical to development.
Intellectual property rights protection, as introduced into the last two Rounds of WTO negotiations, no longer guarantees that under a cooperative settlement everyone will be made better off….
…Arguably it is better for the world as a whole to have some IP protection, rather than none. But in my view it is highly unlikely that the TRIPS-plus provisions being pushed since will lead to global gains.
These TRIPS-plus measures are only a little bit concerned with providing additional incentives for new IP to be created that might not be otherwise. They are greatly concerned with expanding the ongoing transfers of economic rents from the consumers to the producers of IP that already exists (and hence needs no further incentives)….
As a general rule, I support free trade proposals. Unfortunately, some aspects of regional trade agreements are harder to justify, and this is one of them.
IP protection (e.g. copyrights, trademarks, patents) is essentially a time-limited guarantee of monopoly rights over ideas, works or creations. As with any such rights, consumers will suffer from legally proscribed choices and higher prices during the period the protection is active. The economic rationale for what appears to be a welfare reducing measure is fairly straight forward – without such rights, those ideas, works or creations would never exist in the first place.
IP rights therefore have a straightforward cost-benefit analysis – does the present value of the total future benefit to society from having such works, exceed the loss in consumer surplus during period IP rights are enforced? For the most part the answer is yes, even if for many creative works the monetary value is hard to gauge. What’s the value of a Rembrandt or a Warhol, for example. For others its a little easier to quantify – what would be the value for cure for AIDS?
But when we’re looking at the inclusion of IP rights into free trade agreements, the cost-benefit analysis has an extra layer of complexity, because most countries participating in free trade agreements already have IP rights protection.
We are therefore no longer looking at a yes/no question of whether works, creations, or R&D are pursued. We’re having to evaluate such rights at the margin – does the inclusion of additional IP rights protection induce greater production of intellectual property?
For individual IP rights holders, the answer is probably no. I don’t think there is a good argument for extending IP rights protection beyond the natural life-span of a human being. For corporate holders, the answer is a qualified yes – since extending IP rights increases the present value of the yield from collecting monopoly rents, there is an incentive to produce more.
However, such extensions also increase the welfare cost to society as a whole. What it boils down to is this: extending IP rights only make sense if the additional cost to society is less than the benefits accruing from greater innovation, creativity, and new products. Considering existing IP rights protection, that’s unlikely unless you’re starting from ground zero.
Emphasising enforcement of existing laws would probably be more beneficial, as extension or not, that’s what really matters. That would also be fairer to those countries which already enforce adequate IP rights protection, versus countries that don’t. Extending IP rights protection effectively penalises countries who play by the rules, because they will be the ones who will bear most of the welfare cost in any such agreement, while at the same time providing an incentive to those countries who won’t.