IP and Trade

James Surowiecki has a really solid piece in The New Yorker about exporting American patent and copyright law as a key element of trade policy:

Our recent free-trade agreement with South Korea is a good example. Most of the deal is concerned with lowering tariffs, opening markets to competition, and the like, but an important chunk has nothing to do with free trade at all. Instead, it requires South Korea to rewrite its rules on intellectual property, or I.P.—the rules that deal with patents, copyright, and so on.

He goes on to explain in a calm and restrained tone I couldn't personally manage to muster that this is a bad idea, before noting that "The great irony is that the U.S. economy in its early years was built in large part on a lax attitude toward intellectual-property rights and enforcement." Yes. Though one should say that this isn't merely ironic, the U.S. had weak IP when it was a less-developed country because that's the correct set of policies for such a country to have. American IP rules are too strong for America's own good, and way too strong for the developing world.

Incidentally, this is why even though I still think including labor and environmental standards in trade deals isn't a very good idea, I don't get indignant about these kind of demands from labor groups the way I used to. The IP-related conditionality we're currently engaged in is much worse than that; if we could somehow swap it out in favor of labor standards, that would be a change for the better. Realistically, though, we're more likely to wind up with the worst of both worlds.

Comments

Well, IP protection does enhance trade along the lines of comparative advantage, while labour and environmental standards restrict the ability of poor countries to export based on comparative advantage. And there's a quid-pro-quo element here: if South Korea did not give up stronger IP rights for this sort of deal, they would have had to give up something else -- something else the Koreans did not in fact prefer to give.

Posted by otto | May 14, 2007 10:44 AM

yes, otto, but the difference is that with IP restrictions that rich and established in both countries benefit. With labor restrictions, at least the labor market here benefits (and possibly Korea's as well).

Posted by mpowell | May 14, 2007 11:35 AM

Well, living in a developing country (Egypt) that has signed on for above mentioned "stricter IPR laws", it doesn't mean that much. Said developing country is free to selectively enforce the laws on the books and continue to let people buy their illegally copied DVDs until they develop to a point where enforcing them becomes practical.

In fact, because of said IPR laws, the pharmaceutical sector is doing quite well as international companies move in and/or buy up local operations to produce drugs for export.

Also, it seems to me that if any country was in line for stricter IPR laws, South Korea would be it with a PPP per capita GDP higher than Kuwait and Saudi Arabia, and better broadband internet accesss than the US.

Posted by Rashad | May 14, 2007 11:38 AM

Again, the problem isn't "weak" or "strong" IP protections per se, the problem is thoughtless application of IP protections regardless of circumstance. For example, part of the problem with China's mass piracy is that it, in fact, undermines real businesses in other parts of the world because the Chinese are willing and able to export those infringements in vast quantities. That should be dealt with differently, however, from the desire of U.S. corporations to use copyright law as a permanent monopoly on things it was never intended to protect.

Posted by IP Guy | May 14, 2007 11:41 AM

If not for IP protections, large and growing sections of the American economy would have no ability to export profitably to other countries. The domestic constituency for free trade would be that much weaker, and the chances of developing countries losing access to American markets that much greater.

Posted by rd | May 14, 2007 11:57 AM

Re comment 1: Even if Ccountry A could make an entire market basket of goods more efficiently than country B, it would still benefit both countries to trade with each other. See, e.g., http://internationalecon.com/Trade/Tch40/T40-4.php

Posted by Paul | May 14, 2007 1:22 PM

As I never tire of explaining, the sewing-machine fortune Martin Peretz's schlong gained him was NOT the Singer family's, but came (via Anne Labouisse Farnsworth Peretz, daughter of H.R. Labouisse and Elizabeth Scriven Clark), from the family of Edward Clark -- the intellectual-property lawyer who protected Singer's patent against Elias Howe. Clark's IP services were crucial enough to make him a full partner in the business.

Posted by John Emerson | May 14, 2007 2:18 PM

Great. Not content with imposing upon our own country a Mickey Mouse system that stifles creativity lets muscle everyone else into it. To bad we don't have a trade treaty with Hamas.

Posted by Footloose | May 14, 2007 4:25 PM