Free Trade Agreements Will Encourage Stronger Intellectual Property Rights

Alexander Hendrie Americans for Tax Reform
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The U.S. House of Representatives will soon vote on Trade Promotion Authority (TPA), legislation that outlines congressional objectives and prerogatives the president must follow when negotiating trade agreements. While TPA encompasses a diverse and comprehensive range of guidelines and objectives, perhaps most importantly it is an opportunity to strengthen global protections of intellectual property (IP).

TPA includes almost 150 objectives related to agriculture, investment, labor, state-owned enterprises, currency manipulation, and more. In addition, TPA contains strong oversight provisions that give Congress the final say so that any agreement is in the best interest of the American people.

In regards to intellectual property, TPA will ensure that American companies receive fair and equitable market opportunities when operating overseas. The legislation requires any trade agreement to “promote adequate and effective protection of intellectual property rights” and encourages trade partners to adopt many of the strong IP protections that are found in U.S. law.

Stronger IP protections will be beneficial to all economies. IP-intensive industries are defined as any business that relies on trademarks, copyrights, or patents. This includes pharmaceuticals, automobile manufactures, film and music industries, and tech firms. But as the U.S. Trade Representative points out, almost the entire economy relies on IP in some form or another and IP-intensive industries indirectly support another 12.9 million jobs. IP-intensive jobs are also high paying jobs – wages from these jobs are 42 percent higher than the average non-IP job.

When intellectual property is not protected, the costs to business are enormous. According to a report by the Joint Economic Committee, the average U.S. business that had its IP rights infringed overseas lost $101.9 million in revenues. In addition, resolving an infringement suit is a long and complex process, with over 30 percent of foreign infringement cases taking over a year to resolve.

As a result, IP-intensive industries face an uphill battle in operating in countries with weak IP protections. For instance, the pharmaceutical industry has been the victim of IP theft throughout the world including in India, Canada, and Peru.

According to a recent study, only one medical compound out of 10,000 considered will ever gain approval for commercial use. Therefore, for every medicine approved for sale, pharmaceutical firms spend an average of $1.2 billion and between 10 and 15 years of research. As a result of this high cost, innovators rely on IP protection to recoup the extensive costs behind their creations.

When the property rights of pharmaceutical manufacturers are not protected, generic medicines run rampant. While having access to cheaper medicines may sound desirable, they are almost always lower quality and in some cases are lethal.

Protecting IP through free trade agreements is not just about punishing countries that do not respect property rights. Strong IP protections benefit all nations, rich and poor, and encourage countries to shift their economy towards innovative creations.

The Global Intellectual Property Center’s International IP Index has found that economies with robust IP environments yield 50 percent more innovative output compared with economies with IP regimes in need of improvement. Further, the Property Rights Alliance’s International Property Rights Index found that countries with strong IP protection have GDP up to 13 times higher than countries with weak IP protection.

The first opportunity to promote strong IP will come with the soon to be concluded Trans-Pacific Partnership (TPP), a trade deal involving economies in the Asia-Pacific. The 12 nations negotiating TPP account for 40 percent of global Gross Domestic Product, and so the economic potential of this agreement is enormous.

By providing stronger protections for intellectual property, innovative high-tech economies will be unlocked across the world. For this to happen Congress must pass TPA to promote strong and comprehensive free trade agreements.

Alexander Hendrie is a Federal Affairs Associate at Americans for Tax Reform and its affiliate, Property Rights Alliance (PRA). He focuses on tax, fiscal and, trade policy issues. At PRA he works to advocate for the protection of physical and intellectual property rights, both domestically and internationally.