Intellectual Property Rights and Global Capitalism: The Political Economy of the TRIPS Agreement

The Political Economy of the TRIPS Agreement

Donald G. Richards

• Publisher: Routledge
• Year: 2020
• ISBN:
  9781000161267
• Edition: 1
• Topic: Volkswirtschaftslehre
• Subtopic: Wirtschaftstheorie

This is an examination of the origins and impact of the agreement on Trade-Related Intellectual Property Rights (TRIPS) negotiated during the Uruguay Round of GATT talks. The principal theme is that the TRIPS agreement is not in the best interests of the poorer countries, and that its imposition on them by the richer countries has more to do with the exercise of political and economic power than with the positive economic benefits the agreement's supporters claim it can deliver. To support this assertion the book critically examines the economic evidence regarding the impact of intellectual property rights on such important variables as export performance, foreign investment, and economic growth. The author provides a political economic analysis of why the poorer countries acceded to the TRIPS agreement, illustrated with case studies of two important industries where the struggle over intellectual property is especially strong: pharmaceutical and agricultural biotechnology sectors. Designed for use in advanced undergraduate and graduate courses in international political economy and international relations theory, the book offer a radical view of the process of globalization.

1
Introduction and Background

My purpose in writing this book is to examine of the origins and impact of the agreement on trade-related aspects of intellectual property rights (TRIPS) negotiated during the Uruguay Round of talks of the General Agreement on Tariffs and Trade (GATT). The principle theme of the book is that the TRIPS agreement is not in the best social welfare interest of the poor countries and that its effective imposition on them by the rich countries has far more to do with the exercise of real political and economic power than it does with the positive economic benefits the agreement’s supporters claim it can deliver. To support this assertion, I provide a critical examination of the theoretical literature and empirical evidence as they pertain to the impact of intellectual property rights (IPRs) on such important economic variables as export performance, foreign investment, and economic growth. This examination demonstrates the overall weakness of the positivist economic case in favor of a strong international IPR regime, at least as it applies to the poor countries.¹

The book then proceeds to provide a political and economic analysis that explains why the poor countries acceded to the TRIPS agreement notwithstanding the lack of positivist economic evidence in favor of its benefits. The analysis here is driven by a theory of the state in the global system which is itself the product of a method I choose to describe as “critical eclecticism.” By this term I mean that the approach to state theory I adopt is inspired by several well-established traditions in radical political economy and international relations theory that speak to, or carry implications for, the relations between the state and civil society. The constituent approaches are (1) world systems theory, (2) Gramscian hegemony, and (3) internationalization of capital. My method is critical in two senses of the word. First, it is critical in the same sense that these constituent traditions are critical. That is, it calls into question the dominant institutional infrastructure by which the global system is administered, and it advocates fundamental reforms to benefit the world’s marginalized majority. Second, it is critical in the sense that it does not attempt to include or reconcile all aspects of each of the three component radical research traditions. It recognizes that each tradition has differences of emphasis and strength and draws on these as they advance the analysis at hand. I do argue that the three approaches are in fact mutually consistent at a fundamental level. I do not pretend to settle old debates among and between the schools that have often taken on a polemical character in the past.

Having advanced the general political and economic analysis of the TRIPS agreement, the book then proceeds to illustrate with a pair of case studies of two important industries where the struggle over IP is especially strongly waged. These are the pharmaceutical and agricultural biotechnology sectors. In each of these cases, an attempt is made to specify the IPR issues and demonstrate how the TRIPS agreement operates to define and extend capitalist social relations of production on a global scale. It does this in part, I argue, by operating as a mechanism of (Gramscian) consensual hegemony. At the same time, it is recognized that ideological struggle is not strictly determined and that the door is open for counterhegemonic efforts. These cases reveal the conditions under which counterhegemony is more likely to succeed.

TRIPS is a relatively recent phenomenon and the literature devoted to its analysis is still relatively undeveloped. Most of the work that has been done in this area by scholars from the developed countries tends to promote the benefits of a strong international IPR regime. I know of no work in this area that approaches the general case of the TRIPS agreement from a radical perspective of political and economic international relations of the type I develop here. Later in this chapter I review some of the recent related literature and show how my own contribution extends, improves on, and/or corrects this work.

The TRIPS Agreement in Basic Outline

The TRIPS agreement is not a sui generis system for the international protection of intellectual property rights. It traces its historical and juridical roots to several earlier international agreements, two of which date back to the nineteenth century. The Paris Convention for the Protection of Industrial Property of 1883 and the Berne Convention for the Protection of Literary and Artistic Works of 1886 were precursors of the TRIPS agreement. The Paris agreement required signatory nations to provide national treatment for foreign innovations in the areas of patents, trademarks, industrial designs, appellations of origin, and utility models, while the Berne Convention did the same for copyrights. National treatment, however, does not require nations to provide any particular standard of protection. It merely requires that whatever level is provided to domestic works also be provided to foreign works. Essentially, then, the Paris and Berne conventions amount to nondiscrimination agreements in the area of IPRs rather than agreements that establish minimum standards. Nonetheless, the two conventions were not universally embraced: some countries chose not to become signatories in the belief that the agreements represented constraints on the countries’ abilities to reap the benefits of technological transfer and development.²

In 1893 the Paris and Berne conventions were merged into a single secretariat to be administered by the World Intellectual Property Organization (WIPO) (Ryan 1998, p. 126). WIPO subsequently became a part of the United Nations system in 1974. Its mission is to help nations develop multilateral norms governing IP, help nations develop national legislation, and facilitate the negotiation of international treaties. As Ryan notes, however, WIPO operated under the same constraints as its predecessor agreements. That is, while some members of WIPO attempted to press for effective minimum standards for IP protection, there was within the organization considerable resistance to these attempts as well. Neither was WIPO endowed with an effective mechanism to enable it to enforce what minimum provisions its membership was able to agree to. The inadequacies of WIPO can fairly be identified as the inspiration motivating the movement to establish the TRIPS agreement as part of the multilateral trade negotiating system and institutional framework. The demonstrated effectiveness of the latter in liberalizing trade, its effectiveness in enforcing its various provisions, and its ability to settle disputes, or at least limit their negative fallout, made the GATT/World Trade Organization (WTO) an obvious choice for those who advocated a strengthening of the international IPR regime.

The basic function of the TRIPS agreement is to establish and enforce minimum international standards for the protection of intellectual property. As such, it does not literally seek to bring about the international harmonization of IPRs inasmuch as nations are free to adopt national IPR regimes that provide more extensive protection than that called for by the agreement. It does require that nations adhere to the main provisions of the Paris and Berne conventions while calling for nothing that derogates nations’ obligations to one another under those agreements. Thus, for example, the basic principles of national treatment and most favored nation are strongly enshrined in the TRIPS agreement.³

Beyond this, as noted, the TRIPS agreement stipulates that certain minimum requirements for IP protection be met by the WTO nations. In the area of copyright, works are afforded a period of exclusionary protection equal to fifty years after the life of the author, and copyright protection is extended beyond printed matter to include sound and video recordings (Articles 12 and 14). Copyright protection is also provided to computer software programs as well as to compilations of data that represent a necessary degree of intellectual creativity.⁴ Minimum patent protection is established at twenty years and is extended by the prohibition of patent discrimination based on the place of invention, field of technology, or whether products are imported or locally produced (Article 27.1). Industrial designs are given similar protection for periods of at least ten years (Article 26.1). Article 18 allows for the registration of trademarks for periods of seven years that are indefinitely renewable, while Article 16 grants exclusive right of use of a registered trademark. Geographical indications are protected by Articles 22 and 23.

There are also some especially notable exceptions to the protections offered by the TRIPS agreement. Where patents are concerned, exceptions apply to living organisms developed by traditional methods. Compulsory licensing of patented products or processes is not allowed except in cases of national emergency. Transitional arrangements are allowed to enable poorer countries to update their legislation and establish the necessary administrative machinery to apply and enforce the law. Five years’ grace is granted to less developed and transition countries with an additional five years for the poorest of these. All countries are expected to be compliant by 2005.

Recent Literature

There have been a number of recent book-length publications (monographs and collected editions) devoted to the internationalization of intellectual property rights. In this brief review, I shall call attention to the strengths and weaknesses of a representative sample of these works in a manner that I hope makes clear the need for a political economic analysis of the type that I propose of the prevailing IPR regime. Some of the recent works are supportive of the prevailing IPR system, albeit with qualifications, while others are highly critical. Some of the recent scholarship may be considered, at least as I understand the concept, political economic in character while other works focus on the sociological, philosophical, or juridical aspects of IPRs. In drawing attention to these distinctions, I do not wish to denigrate the valuable contributions made by authors who write from a disciplinary emphasis that differs from my own. I wish only to convince the reader that a space exists that my own contribution seeks to fill. It will also be clear that I disagree with several of the general perspectives as well as the particular interpretations of the salient issues offered by the authors I review. This should come as no surprise to those even distantly familiar with the nature of intellectual property discussions.

The negotiations leading up to the establishment of the TRIPS agreement were extremely contentious. Leading the effort to establish the TRIPS were the United States, several European countries, and Japan. In these efforts, the U.S.-based pharmaceutical, telecommunications, and computer companies were especially prominent. Opposing the agreement were many middle and less developed countries, particularly India and Brazil, which seek to nurture incipient knowledge-intensive industries of their own. Predictably, the scholarly literature is also represented by voices that stand in support of the agreement, however qualified in some instances, and those that are opposed to it. I shall state at the outset my own view that the TRIPS agreement is not in the best interests of the poor countries of the world. More accurately, I do not believe it to be in the best material interests of the poor majorities who live and work in these countries. Neither is it clear that the agreement operates in the best interests of workers and consumers in general. A major task of this book is to explicate the reasons for such skepticism. A second major task is to provide an ex post facto explanation for the accession to the agreement by those very same poor countries. This explanation, I argue, must properly be conducted in political economic terms—a type of analysis I shall define in due course. Before delving into these and other related questions, however, a consideration of the relevant academic context is in order.

Mainstream Economics Justifications of the TRIPS Agreement

Standard economics justifications for intellectual property rights typically commence by recognizing that IPRs entail an inherent contradiction. On the one hand, welfare is maximized in a competitive economy by the free and complete availability of information. On the other hand, the production of knowledge and knowledge-intensive goods requires, as does any production in a market-based economy, incentives. Such incentives will be lacking in a regime that does not provide some restrictions on the access to information. This contradiction has led many economists to pose the problem in terms of “optimal” IPRs. Primo Braga (1990), in an early survey of the literature cites seminal contributions by Arrow (1962), Nordhaus (1969), and Scherer (1972) in his discussion of the optimal patent length, for example. Primo Braga recognizes that more recent theoretical developments, involving such dynamic considerations as the cost of patent races and the pace and reach of knowledge diffusion, call into question these early results. His general conclusion, however, is that there is a greater danger of insufficient investment in research and development (R&D) in developing countries rather than overinvestment.

In a more recent World Bank discussion paper, Primo Braga and coauthors Fink and Paz Sepulveda (2000) provide an updated survey of the economic impact of IPRs in the post-TRIPS environment. These writers once again note the welfare ambiguity of IPRs, paying particular attention to the questions of knowledge production and diffusion. They make the argument that while the short-term static impact of a strong IPR regime may well involve a welfare loss, owing to the exercise of monopoly power on the part of sellers of knowledge-based commodities and production processes, the long-term effects may be beneficial given the presence of additional, largely institutional, conditions. They note in particular the need for an effective competition policy that operates to ensure that the benefits of increased R&D expected to follow from a stronger regime are widely spread. The development of the “human resource base” of the poorer countries is seen as necessary to increasing these benefits, as are greater macroeconomic stability and more open trade and investment regimes (p. 48). Even more fundamental for Braga, Fink, and Paz Sepulveda is the necessity of promoting a pro–IPR consensus among the broad swath of national stakeholders. They write:

A first step for a developing country reforming its IPR regime should be to support initiatives that promote consensus. It is important to bring together all affected parties—local “pirates,” research-based companies, universities, consumer groups, government agencies, industrial property offices, IPRs lawyers, and others—to discuss what IPRs “do” and “don’t do,” while attempting to evaluate the economic impact of IPRs reforms. Such an exercise can provide useful input for the formulation of new laws and help in identifying adversely affected groups and in the design of appropriate compensatory mechanisms, (p. 47)

This particular quotation raises a number of interesting issues. The first is the implicit admission that a fundamental task faced by proponents of a stronger IPR regime such as that embodied by the TRIPS agreement is to create a propitious ideological climate as a precondition for the success of such a regime. Apparently for these World Bank economists, the success of the TRIPS is primarily a problem of winning the confidence of those for whom the agreement can be expected to have potentially profound material consequences, even “local ‘pirates.’” What is especially peculiar about this advice is that it comes on the heels of the admission by the authors that the available theoretical and empirical evidence is unable to demonstrate conclusively the alleged benefits of the enhanced regime. The authors give not a moment’s consideration to the possibility that strengthening the IPR regime might be the wrong thing to do for a poor country.

Second, the authors make reference to “compensatory mechanisms” designed to reduce the burden of a stronger regime on those who are adversely affected. They refer in this case to the use of such options as parallel imports, compulsory licenses, and price controls as tools to be used to alter the distributional impacts of stricter control over intellectual property. These tools will be discussed in later chapters. The important questions to raise here are ones that the authors ignore altogether: What are the political economic conditions required for a country to successfully employ such measures and under what conditions will these measures be adequate to the country’s developmental and distributional goals? Just as the establishment of the TRIPS agreement represented a struggle between contending international as well as intranational interests, the continuing application and interpretation of the agreement can be expected to be no less contentious. The authors’ emphasis on consensus thus appears naive at best and disingenuous at worst.

Another recent work that takes an essentially positive view of the TRIPS agreement is Keith Maskus’s Intellectual Property Rights in the Global Economy (2000). Like the other authors already cited, Maskus notes that IPRs have basically contradictory effects on (at least) short-term welfare. He argues that the theoretical prediction of the outcome of a strengthening of the IPR regime depends on the particular assumptions invoked. In his review of the available empirical evidence, including his own work, however, Maskus finds much to recommend the agreement and argues that its long-term net benefits are likely to outweigh its short-term costs. In particular, Maskus is optimistic about the agreement’s potential to promote for the poorer countries higher levels of international trade and investment, foreign direct investment, and ec...

Table of contents

• Cover
• Half Title
• Title Page
• Copyright Page
• Dedication
• Table of Contents
• Tables
• Acronyms
• Acknowledgments
• 1. Introduction and Background
• 2. The Ideology of Intellectual Property
• 3. Intellectual Property and Positivist Economic Science
• 4. Capital, Class, and the State in the Global Economy
• 5. The Political Economy of TRIPS
• 6. TRIPS and the Global Pharmaceutical Industry
• 7. Intellectual Property Rights and the Agricultural Biotechnology Revolution
• 8. Counterhegemony and the Future of TRIPS
• Notes
• References
• Index
• About the Author