Comments for TRIPS Plus Ten: Economic Implications

1. Comments for TRIPS Plus Ten: Economic Implications Keith Maskus Prepared for SIDA/ICTSD Conference, Stockholm, 24 September 2004

2. Perspectives • A trade economist’s view of IPRs and development • Based both on researh and practical experience • Complex questions without simple answers: focus on a few themes

3. Expectations of TRIPS • Original idea: agreement on counterfeiting and piracy • There were many differences among developing countries. • Positive expectations: • Central concession in return for market access; • Additional flows of ITT and research; • Shift of global innovation toward needs of poor countries; • Relief from IPR-related trade threats and access to dispute resolution.

4. Have Expectations Been Met? • Considerable dissatisfaction among developing-country governments: • Weak link to market access; • Limited success in ITT; • Recognition of need for broader reforms; • Not much evidence of targeted innovation; • Concerns in agriculture, medicines, science and education.

5. Was TRIPS a Good Idea? • Yes, because of policy externalities. • Yes, because IPRs are a pillar of market support. • But the details of TRIPS leave considerable room for argument about how well or how equitably IPRs are globalized. • Importance of flexibility.

6. Is TRIPS a Boost for Development? • Positive case for TRIPS: • IPRs support market deepening and product quality, even at low development levels. • IPRs support greater flows of ITT. • IPRs offer scope for improving commercialization of publicly supported research. • IPRs can improve scope for implementing critical new technologies.

7. Is TRIPS an Obstacle to Development? • Negative case for TRIPS: • Heavy demands on development budgets and expertise. • Limits policy space for learning and imitation. • Raises potential for anti-competitive activity. • Stronger protection could reduce technology flows to poorest countries. • Neutral case: impacts may be slight in poor countries. • One opinion: it is still too early to be confident of much.

8. Focus on ITT • Importance of inward technology for development • Both access and adoption/learning are necessary for productivity. • Major market-mediated forms of ITT • Trade in goods and services (capital goods) • Foreign direct investment • Technology licensing (patents, trademarks, know-how) • Non-market forms are also important

9. Potential Market and Policy Failures • Asymmetric information and transactions costs • Market power and markups on technology prices • Externalities and spillovers • Policy coordination difficulties • Subsidies and tax holidays • Trade and investment policies • Intellectual property rights

10. TRIPS and ITT • TRIPS-like protection can resolve some of these difficulties. • But evidence suggests other problems could be worsened in poor countries. • ITT is likely to be enhanced by differentiated innovation regimes and IPR standards, safeguarding policy space.

11. TRIPS Provisions on ITT • Article 7: IPRs should contribute to the promotion of innovation and transfer of technology. • Article 8.2: freedom to prevent IPRs abuses that interfere with ITT. • Article 66.2: positive obligation of developed countries to provide incentives for enterprises to promote ITT to LDCs. • Inherent difficulty of this task.

12. Increasing ITT: Host Country Policies • General support for technology adoption and ITT • Need for policy flexibility regarding nature of market failures, imitation prospects, competition • Low-income countries should have wide exemptions from rigorous IP protection, especially where public goods are involved.

13. Increasing ITT: Source Country Policies • Improve market access. • Technical assistance for capacity building and technology adoption. Consider undertaking competition policy actions on behalf of developing countries. • Fiscal incentives for ITT in parallel with those for disadvantaged regions in OECD. • Encourage differential pricing strategies, especially for data and research results. • Greater opportunities for temporary movement of technical workers and students. • Public research programs into LDC technology needs.

14. Multilateral (WTO) Cooperation • Extend Article 66.2 on a graduated basis. • Re-visit WTO rules on subsidies to expand policy space for ITT. • Clarify that TRIPS permits research exemption in patents and PVRs. • Expand information flows on effective interventions. • Expand Mode 4 GATS negotiations (temporary movement) to include acquiring education and skills (a “knowledge export”).

15. Other Multilateral Options • Dedicated small fee on international patent and trademark applications. • Move toward consideration of a multilateral agreement on access to basic science. • Consider additional measures for price differentiation in information products. • Clarify international norms on the scope of fair use in digital works.

16. Concluding Remarks • TRIPS a qualified success. • TRIPS needs to be implemented in good faith. • Reiterate the need for careful consideration of appropriate standards and flexibilities. • There is scope for improving ITT processes. • Developing countries need complementary policies.