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March 6, 2014

Cato Event Panelists Discuss Whether Or Not Intellectual Property Provisions in the TPP Are a "Corporate Handout"

IPI expert referenced: Tom Giovanetti | In The News | Media Hit

By Mike Palmedo

Yesterday the Cato Institute held an event titled “Intellectual Property in the Trans-Pacific Partnership: National Interest or Corporate Handout?”  The panel, moderated by Cato’s Simon Lester, featured Tom Giovanetti (Institute for Policy Innovation), William Watson (Cato), and Margot Kaminski (Yale Information Society Project).  The video of the event is here.

Lester opened the panel, noting that in the 1990s, trade experts discussed intellectual property in vague terms, not really understanding the particulars.  At the time, bringing IP into the trade realm increased support for free trade.  Today, however, people have realized the implications of stronger intellectual property protections, and it is causing trouble.  The inclusion of intellectual property in the trade regime is generating opposition to trade agreements as much as it increasing support for them.  Lester raised the possibility that debates over global intellectual property norms are better left to WIPO.  He asked the panelist to address the issue of whether trade should remain part of the trade realm, and if so, what the rules ought to be.

Tom Giovanetti argued against the position that inclusion of IP in the Trans Pacific Partnership (TPP) is holding the overall agreement hostage to the interests of a small set of industries.  He said that the majority of U.S. exports come from industries that are highly dependent on IPR.  These include pharmaceuticals and Hollywood, but also other industries such as industrial chemicals, aerospace, and agriculture. Why would trade negotiators not include IP in trade agreements if the main exporters depend on it?

Giovanetti said that zero-sum thinking about intellectual property in trade agreements is bad, because IP is good for rightholders and good for normal citizens.  Evidence shows that rich and poor countries alike benefit when they raise IP protection.  Higher IP is associated with more domestic R&D spending, more foreign direct investment, and greater technology transfer.  A study by Gresser in 2013 also showed that TRIPS had a positive effect on public health in developing countries, because after TRIPS there was more spending on medicines.

William Watson argued that the presence of intellectual property in the trade agenda is getting in the way of USTR’s role in advancing free trade.  20 years ago, there was a belief that adding IP into the trading system would increase support for free trade.  Now, however, IP is controversial, and there would be a large lobby for free trade without IP being part of the deals.  The IP provisions in the TPP are purely focused on increasing rents to export industries, not increasing consumer welfare abroad. The U.S. is isolated in the TPP intellectual property negotiations, so it needs to spend negotiating capital to win concessions from the other countries.  This means it needs to give up other things in order to get stronger IP provisions in the agreement.

Nonetheless, Watson said there are three intellectual property measures that would be good to fit into a trade agenda:

  1. Nondiscrimination, which is already in Art. 3 of the TRIPS Agreement.
  2. International exhaustion (to allow global first sale doctrine)
  3. Stopping the abuse of geographical indications

Margot Kaminski said that the well-known transparency concerns over the TPP negotiations are part of a larger problem – information capture. Not only is there a lack of information flowing from USTR to the public, there there are also controls on the information inputs received by USTR.  Since it is exempt from the Administrative Procedure Act and the Federal Advisory Committee Act (which have provisions in place meant to prevent regulatory capture), USTR gets its information from a small subset of industries. The consequence is that USTR is not really promoting the level on IP that is found in U.S. law, as it is tasked to do. Instead, it promotes the interpretation of U.S. law that is favorable to rightholders that have access to USTR.  For instance, USTR pushes against parallel trade, despite the fact that theKirtsaeng ruling allows it.  USTR also fails to promote the parts of U.S. intellectual property law that are not beneficial to IP owners, such as fair use.  The result is that we see laws abroad that are less balanced than U.S. law.  This harms internet companies and small business.

Kaminski suggested ways to address the problem.  We could change the fasttrack legislation which is currently stalled on the Hill. An improved fasttrack bill could require more Congressional involvement, and could change the negotiating objectives to instruct USTR to seek more balanced IP abroad.  We could create a new advisory committee mandate for USTR that would require it to receive more input from other stakeholders. Finally, we could take intellectual property out of trade agreements like the TPP entirely.

Giovanetti was given a chance to respond to the others.  He said that nothing in current U.S. trade agreements forbids countries from establishing fair use.  He also downplayed fair use, calling it a defense in infringement cases, and something that is mainly a carve-out for “noneconomic applications.” He also said that there is not a consensus that ISP liability should be included in trade agreements.  His organization believes it should be left out of trade agreements.  Kaminski told him that she was happy to hear he is opposed to ISP liability, and noted that search engines rely on fair use to operate.

In Q&A, the first question dealt with the capture of IP policymaking. Isn’t Congress just as captured as the executive?

Kaminski said that Congress had been captured for a long time, but after the SOPA debacle, Congress has been wary of increasing intellectual property.  Giovanetti disagreed that there is a problem with capture of the trade agenda, and said that people who disagree with the current U.S. trade objectives are simply wrong about the best objectives for trade negotiations.

Giovanetti argued that transparency in trade negotiations is not possible, because countries need confidentiality in order to negotiate deals.  IP critics want to block the progress of any group that is creating new intellectual property norms.  WIPO is a good example of this. Kaminski noted that WIPO – operating in a much more transparent manner than the TPP – recently concluded the Marrakesh Treaty.

The panel was asked if the true free trade position would be to drop tariffs unilaterally, regardless of what other countries do.  Watson said that lowering barriers unilaterally would be good, but it is not politically feasible.  Giovanetti added that unilateral lowering of trade barriers would not incentivize other countries to lower their barriers to trade.

A questioner asked the panelists to comment on the idea that more IP is not always better.  As countries continue to increase intellectual property protection, there comes a point where further strengthening IPR can stifle innovation.  Watson said that you need balance in IP systems. Giovanetti said that when you look at the data, developing countries that have strengthened IPR protection have reaped economic benefits, and he doesn’t believe the arguments that IPR is bad for consumers.  Kaminiski said that more IPR protection is not necessarily better for innovation, and that permissionless innovation has driven new technologies.

The final question was whether the intellectual property policymaking capture was really one part of a larger problem.  Has the whole trade system been captured by rent-seeking industries, and it is time to rethink the costs and benefits of the current model.  Watson answered that we often think of trade agreements as existing to benefit exporters, which leads to trouble.  Trade agreements should focus on advancing trade to benefit everyone, not just special interests.  Giovanetti warned that capture is inevitable if we have a huge government and many regulations, so the solution is to downsize.  Everyone agreed this was a good ending for a Cato Institute event, and went to lunch.


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