The Merits and Demerits of TRIPS

1. The Merits and Demerits of TRIPS

2. 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 19th century • E.g., most tropical countries in 20th 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?

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

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

5. 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)

6. 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

7. 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