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How Did Intellectual Property Become a Free Trade Issue?

- April 2, 2013

The decision by India’s Supreme Court to deny a patent to Novartis for Glivec has “caused furore”:http://www.nytimes.com/2013/04/02/business/global/top-court-in-india-rejects-novartis-drug-patent.html?ref=business&_r=0 among US pharmaceutical manufacturers, who are calling for harsher and more punitive patent policies to be attached to new trade agreements. However, when you think about it, it’s quite weird that “intellectual property protection” has become an integral part of US free trade policy. After all, patents, copyrights and the like are nothing more or less than licensed monopolies – exactly the kind of thing one might expect free trade agreements to push _against._ And indeed, the story of how the US began to link patents, copyright and free trade is a tortuous one. Susan Sell provides a “detailed account”:http://tmc.org/wp-content/uploads/2011/10/sell.pdf of how this happened. The story she tells is of how the intellectual property lobby and the US Trade Representative gradually entered a symbiotic relationship in which the IP lobby pushed for increases in the USTR’s powers in return for an ever greater emphasis on intellectual property issues as part of the US trade agenda.

bq. inserting intellectual property into the multilateral trade regime made no sense on its face. Intellectual property and trade are different issues, posing very different problems … Traditional protectionist groups from the steel and agricultural sectors
pushed for amendments to trade policy law in 1974. They sought more effective remedies against infringement of domestic intellectual property rights in the United States … This provided intellectual property interests with an opening; other sections of the 1974 Trade Act (which were not intended to apply to intellectual property) provided tools that they could develop over the longer term. Section 301 of the Trade Act of 1974 gave the president the power to take all appropriate action to enforce US rights under trade agreements. … private actors lobbied for amendments to Section 301 of the Trade Agreements Act of 1979 that would further embed their access to trade policymaking. This was an important step in the evolution of a trade-based multilateral intellectual property agreement because the private sector and the USTR began to co-constitute each other’s interests and preferences.

bq. … With the USTR as the main focus of lobbying efforts, its relationship to private sector interests became increasingly symbiotic. The MPAA, led by Jack Valenti, became a sharp critic of copyright ‘piracy’ abroad, and urged the USTR to exert bilateral trade pressure on countries ‘pirating’ American movies. … The 1988 Act introduced Special 301 to explicitly cover intellectual property. The Act stipulates that the USTR must annually identify intellectual property priority (i.e. infringing) countries. This mandate institutionalized intellectual property blacklisting as a mechanism to spread domestic regulatory approaches abroad (Sharman, 2008). Within 30 days of identifying a country as a priority country, the USTR must initiate an investigation. Within six months it must determine whether the foreign activity is actionable, and if so, what action to take. The USTR must implement Section 301 action within 30 days of an affirmative determination. Amendments in 1979 required the federal government to ‘take into account the views of affected industry, effectively establishing a cooperative relationship between public and private sectors’ … The process strengthened the private sector’s role in trade policymaking and created policy feedback that led these actors to press for even deeper institutionalization of their preferred approach to intellectual property protection abroad. This was a classic example of Pierson’s (2000) ‘increasing returns.’

This in turn changed the shape of international trade politics.

bq. When the negotiations began in 1986 Brazil and India insisted that intellectual property protection regulation should remain in the WIPO and had no place in the GATT. These two countries stood firm in their opposition from 1986 until 1989 (Matthews, 2002: 30–1). They had assumed that they faced a choice between WIPO and GATT. Their reversion point then would be the pre-negotiation status quo in which WIPO dealt with intellectual property issues. The US had repeatedly seen its push for stronger intellectual property rules fail in the UN-chartered WIPO. However, over the course of the negotiations, US bilateral pressure on developing countries proceeded apace. The US specifically targeted India, Brazil, and Thailand for Special 301 investigations and sanctions during the Uruguay Round negotiations (Matthews, 2002: 31–2). The US had easily intimidated a number of other developing countries into adopting higher standards of intellectual property protection by using 301. By the late 1980s it became abundantly clear that the choice had become not WIPO versus GATT, but rather GATT versus Special 301. Key developing countries finally assented to a multilateral deal in the hope that a rules-based multilateral bargaining system would end the bilateral bullying.