Introduction
Control over knowledge has emerged as a major area of contention in the current trade dispute between the United States and China. Many American trade experts claim that the Chinese government and corporations are obtaining American intellectual property (IP) rights through unfair means. On the other hand, the Chinese experts are more likely to attribute the upsurge in Chinese scientific and technological advancements to a superior education system and government investment.
Despite these differences, neither side have yet to truly challenge the underlying assumption that intellectual property is something beneficial and should be protected. But for many developing countries, rigid enforcement of existing intellectual property laws is often detrimental to their economic development. It locks these countries into economic dependence on their more advanced trade partners and prevents their own economies from modernizing.
While the leaders of the world’s two largest economies launch rhetorical attacks against each other, we can perhaps wonder whether stringent IP protection produces a net benefit at all. It is worth assessing whether some IP protection comes at the expense of human rights, and if IP is sustainable in the long term.
Mechanism
The Benefits of IP protection
IP laws have often been justified on the grounds that providing legal protection to inventors stimulates innovation. This claim rests on the theory that the research costs of a new invention often exceed the production cost. Inventors require a legal temporary monopoly to recoup the expense required for research and development. If the state does not inventors, then it incentivizes manufacturers to simply produce copies of an invention without compensating the inventor. This leaves the inventor unable to recover the time and resources invested in developing the invention. Such conditions would not incentivize inventions and their dissemination, leaving technology and the economy stagnant.
Another argument that supports a rigorous IP regime is the claim that IP protection facilitates technology dissemination. According to this argument, even if innovation does occur for other reasons, the invention’s dissemination would be slow. With IP protection, inventors can confidently disclose the technical details of their inventions without fearing their competitors making profits by selling unauthorized copies without paying the inventor for licensing. But without the protection, the inventor has the option of either keeping the invention a secret or not engage in innovation at all. Both of these options would be detrimental to developing new and beneficial technologies.
International Technology Imbalance
On the other side of the argument, IP critics claim the IP protection laws create barriers that prevent developing countries from obtaining the knowledge and technology needed to develop their economies that will benefit their own citizens. The barrier prevents developing counting from obtaining basic necessities for their citizens to employing the crucial technologies that would allow these countries to produce more value-added exports.
IP vs. Human Rights
IP critics point out that sometimes, IP protection creates situations where it conflicts with human rights. One demonstration of such a situation is the 2001 battle between South Africa and Western pharmaceutical companies over the right of developing countries to produce HIV drugs. South Africa argued that access to generic HIV drugs was crucial in obtaining the volume of drugs needed to save the lives of its HIV-afflicted citizens. This access was, however, blocked by the IP patents owned by pharmaceutical companies that developed the HIV drugs.
As the case showed, enforcing IP may have serious consequences for hundreds of thousands of people. For these people access to the IP-protected invention is the only way to save their lives. But due to how IP is structured, access to these life-saving inventions often comes at a prohibitive cost to those that need it the most.
Patent and Industrialization
Some economists and historians also argue that unlicensed copying was almost always essential to industrialization for all countries other than the UK. France, Germany, United States, Japan, and all the later comers to industrialization were initially not compliant with the patent system that Great Britain had tried to impose on the world. In most cases, the businessmen and artisans in these countries copied British inventions, studied British scientific output, and then produced imitations without paying for the cost of research. This disregard for British copyrights allowed these countries to quickly catch up to the UK’s lead.
Given the critical role imitation played in the industrialization process of these now developed countries, it would be hypocritical for these same countries to now deny this path to the developing countries. It can be argued that without state intervention that shielded their own industries from the British, these countries would have remained agrarian and dependent on British imports for much longer than they did historically. Their citizens would have been like the citizens of the developing countries today. This often entails exporting mainly raw materials that have low value and high market volatility, in exchange for more valuable manufactured goods.
The World Today
Today, the process of technological dissemination continues as large developing countries such as the B.R.I.C.S. now demand access to technological and scientific knowledge accumulated by the industrialized states. The nature of the dispute has also changed from when South Africa demanded access to generic drugs. Instead, these new industrializing economies now look to establish their own industrial bases to grow their economies beyond the traditional labor-intensive or raw material export industries.
The rise of the developing countries outside of the traditional “Global North” is a much more fundamental challenge to the current world economic order. The current dispute is bigger than merely haggling over how to compensate investors. Instead, it is about having more countries joining the club of industrialized countries, which would change the balance of power between the developed and the developing countries.
Technological Diffusion and Competition
Competition and Affordability
It is undeniable now that knowledge and technology diffusion is occurring across the world. Such a development is detrimental to some. But for humanity as a whole, technological diffusion can be beneficial. As economists always like to point out, innovation is more likely to occur during times of more intense competition. Innovation in technology and production methods often leads to lower prices for existing goods as well as the creation of new ones. As a result, people are materially better off than before as “luxury” goods become more affordable.
This dynamic is now being played out on a global scale. More countries are attempting to develop their economies away from raw material exports and low technology industries. As more countries industrialize, competition increases. As competition increases, countries are forced to develop new ways to apply existing technologies and evolve new organizational structures to remain economically competitive. The end result is that the global price of goods has steadily fallen over the past four decades.
The losers of globalization
Of course, this development has not been kind to the citizens of the developed countries. The increased global competition has seen the wages and living conditions in these countries decline relative to the global average. Like employees in a monopoly company, when the means of producing a highly desired product was limited to a few companies, their employees benefit from higher income and their indispensability. As the market becomes more competitive, these employees find their salaries and perks fall as competitors arise.
The selfish (or rational) thing to do, as people and empires throughout history have tried, is to keep the perceived key to their success secret for as long as possible. To all but the most cynical people today, however, this attitude is now less ethically acceptable. To successfully enact such a policy would mean deliberately keeping the vast majority of the world’s population in a state of poverty so a relatively few can live materially comfortable lives. Even then, as history has shown, such secrets will inevitably diffuse anyway.
There is also a social argument for a more equal global economic order. Many political scientists, economists, and sociologists argue that a world where prosperity is more equally distributed is a safer world. Conflict and violence correlate with poverty. Marginalized people who have lost out from the current dominant system are more prone to become radicalized and turn to extremist ideologies. A more equal distribution of the global productive resources, and better integration of the developing world into the global economy, can diminish the incentive for people to choose conflict over cooperation. Therefore, the one component of the solution to a more peaceful world is to encourage the undeveloped countries of the world to develop and integrate into the global system.
A More Equal Global System?
The transition from a North Atlantic and North Pacific-centered world order to include more of the Global South will not be comfortable for the citizens in the developed economies. While technology diffusion is likely inevitable, these economies are likely to try to entrench more stringent rules that favor existing players to delay dissemination for as long as they can. For example, although in 2001 South Africa won the argument for access to generic drugs, subsequent international agreements such as the Trade-Related Agreement on Intellectual Property Rights (TRIPS) imposed a Western-based intellectual property protection system onto the WTO.
But historically, all technologies that have proven to be useful have diffused to new groups. Therefore, countries that invest more resources into imposing monopolies will find it is a useless endeavor in the long run. Perhaps, instead of trying to safeguard technical secrets, organizations should investigate ways to become more innovative and efficient instead. It is much more difficult for competitors to replicate the culture and the system of successful organizations than copying technical hardware. Rather than launching trade wars and attribute any success to merely more technology, the leaders of the global economy may be better served by re-evaluating the rules governing what will likely become a more multi-polar world. Instead of trying to bury technical and scientific knowledge to prevent dissemination, leaders should investigate how to encourage healthy competition and innovation among countries that are more or less at the same technological level as each other.
Bibliography
Alexander Hammer, Katherine Linton, & Jeremy Wise. (2011). China: Effects of Intellectual Property Infringement and Indigenous Innovation Policies on the U.S. Economy (No. 4226). United States International Trade Commission. https://www.usitc.gov/publications/332/pub4226.pdf
Imitation v inspiration. (2002, September 12). The Economist. https://www.economist.com/node/1325360/print
Patently problematic. (2002, September 12). The Economist. https://www.economist.com/node/1325219/print
Stiglitz, J. E. (2017, October 17). Intellectual Property for the 21st-Century Economy. Ideas & Insights. https://www8.gsb.columbia.edu/articles/chazen-global-insights/intellectual-property-21st-century-economy