The Merits and Demerits of TRIPS

Breaking the Pattern Nations with less advanced economies typically select lower levels of IP protection –Deliberately foster local imitative industries, relying on technology imported (“pirated”) from more advanced economies –E.g., US in 19 th century –E.g., most tropical countries in 20 th century Only when nations approach the developmental frontier do local industries agitate successfully for higher levels of IP protection TRIPs is forcing less developed countries to increase IP protections “prematurely” Good or bad?

Major Positions 1)High levels of patent protection mandated by TRIPS are bad for all countries a)As compared to no patent protection b)As compared to more moderate levels of patent protection c)As compared to alternative means of stimulating innovation 2)Developing countries have been hurt by TRIPS, and their injuries are greater than the gains reaped by developed countries 3)Developing countries have been hurt by TRIPS, but their injuries are more than offset by advantages to developed countries a)Other concessions to developing countries in Uruguay Round still left them, on balance, worse off b)Other concessions to developing countries in Uruguay Round = transfer payments sufficient to achieve Pareto superiority 4)Developing Countries have been helped (already) by TRIPS

Major Positions 1)High levels of patent protection mandated by TRIPS are bad for all countries a)As compared to no patent protection b)As compared to more moderate levels of patent protection c)As compared to alternative means of stimulating innovation 2)Developing countries have been hurt by TRIPS, and their injuries are greater than the gains reaped by developed countries 3)Developing countries have been hurt by TRIPS, but their injuries are more than offset by advantages to developed countries a)Other concessions to developing countries in Uruguay Round still left them, on balance, worse off b)Other concessions to developing countries in Uruguay Round = transfer payments sufficient to achieve Pareto superiority 4)Developing Countries have been helped (already) by TRIPS TRIPS Reduced Global Social Welfare TRIPS Enhanced Global Social Welfare

Asserted Injuries to Developing Countries Lack of patent protection for pharmaceutical products and processes led to cheap drugs; lost Lack of patent protection for fertilizers and pesticides led to more and cheaper food; lost Lack of copyright protection for informational products fostered education and technology transfers; lost Foregone jobs in local imitative industries (assuming “working requirements” are forbidden) In general, large deadweight losses from higher prices; minimal stimulation of local innovation Abbot (1989); Gana (1996); Oddi (1996); Hamilton (1996); Primo Braga & Fink (1998); Correa (1998); Heald (2003)

Asserted Benefits to Developing Countries Secondary effects of stimulating local inventors and innovation; Increased trade in technologically sophisticated goods; Increased foreign direct investment (FDI) Increased technology transfers through licensing 1987 OECD Study; 1989 UN Commission on Transnational Corporations; Mansfield (1994); Adelman (1996); Maskus (2000); Long 2000

Preparing the Ground Maskus argues that the magnitude of the benefits to developing countries will depend heavily on the adoption of collateral reforms, e.g.: –Education –Public assistance for university-based scientific research –Sensible anti-trust laws –Open market access Reichman (1996 & 1998) argues that the best balance will be achieved if developing countries aggressively use the “wiggle room” left by various TRIPS provisions