Trade

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Balancing Innovation: Managing Current Needs with Future Success in Developing Countries

No one disputes the benefits of innovative technology. It has resulted in IT, medical, and energy advancements that have revolutionized the way we live our lives. What often goes unappreciated, however, is the time and resources invested that ultimately yields this progress. As I discussed on Friday as part of a panel at the Global Intellectual Property Center’s IP Summit, failing to acknowledge and respect intellectual property puts future innovation in jeopardy, and it is critically important that we educate developing countries on the benefits of protecting IP before it has lasting effects on not just the global innovation economy, but their own individual innovation economies

At a time when developing countries are not only trying to recover from the Great Recession, but also working toward building more prosperous economies, access to innovation is increasingly important. Unfortunately, all too often developing countries believe that to achieve their economic and social goals, they must focus on getting access to technologies (including pharmaceutical products, sometimes through issuing compulsory licenses) in the near-term, instead of setting up an environment of strong IP protection where innovation can flourish over the long-term. These actions are … Read the rest

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Trade Liberalization Enhances Economic Growth: New Evidence

A new paper from the FUCAPE Business School in Brazil, authored by Brazilian economist Bruno Funchal and Jadir Soares Junior, find that reductions of barriers to trade in the computer technology sector affected the Brazilian labor market. Specifically, they use the end of the “Informatics Law” in 1992 as the non-tariff barrier to trade of analysis. For eight years the “Informatics Law” imposed a limit on access by foreign companies to the manufacture of small computers and provided various support mechanisms for strictly nationally controlled companies.

Using data from the Annual Social Information Report and the Brazilian Occupational Classification, the authors compare the change in the demand for either “routine” or “non-routine” tasks before and after the repeal of the “Informatics Law” to the percentage of workers using computers in 2002 using a panel regression with fixed effects. The idea is that the liberalization of the technology market in Brazil led to a rise in the demand for workers doing non-routine tasks (considered complementary to computers) and a fall in the demand for workers doing routine tasks (considered a substitute to computers).

The authors find that industries and occupations intensive … Read the rest

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Is it Useful? A Drug Patent Enigma

Obtaining a drug patent isn’t easy:  it requires, on average, 14.6 years and $1.2 billion in pre-approval research and development and clinical testing. In addition, it also requires the developer to meet a set of three internationally accepted conditions. According to the World Trade Organization’s (WTO) Trade Related Aspects of Intellectual Property Rights (TRIPS) Agreement, in order to obtain a patent, a drug must:

  1. Be new,
  2. Involve an inventive step, and
  3. Be capable of industrial application.

TRIPS also clarifies that “involving an inventive step” and “being capable of industrial application” are synonymous with “non-obvious” and “useful”, respectively. For being a WTO legal document, it’s actually surprisingly clear: be new, be non-obvious and be useful.

Typically, the patent is issued prior to a drug’s clinical testing, primarily because if a commercially viable drug is developed from the clinical testing, it is vulnerable to theft and copying. In other words, patents are filed upon discovery of a chemical formula, as part of the United States Patent and Trademark Office’s “first to file” rule. Without the patent, innovative pharmaceutical companies would not have an incentive to research and develop this formula into … Read the rest

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Shutting Down Trade with the Government Shutdown

With the government shutdown now in its second week, its effect is now being felt across much of the broader U.S. economy, especially in trade. The Department of Commerce (DOC) says nearly 10 million American jobs are supported by exports. Last year, U.S. exports rose 4.4 percent to $2.196 trillion and imports grew 2.7 percent to $2.736 trillion.

Unfortunately, the shutdown is destroying much of this daily commerce. Several government agencies—including DOC, the Environmental Protection Agency (EPA) and the Department of Agriculture (DOA)—are involved in trade shipments. While Customs and Border Protection (CBP) is still staffed throughout the shutdown, most of these agencies have the authority to “release and hold” imports and exports before CBP even enters the process, meaning  that many imports and exports are stranded and unable to enter/exit the United States.

For example, the EPA halted all pesticide imports to the United States, because, with more than 90 percent of its staff furloughed, it cannot approve them.  Steel imports are stranded at customs-clearance warehouses awaiting paperwork.  And many U.S. technology companies are slowing down or stopping overseas orders because they cannot obtain DOC authorization to export. The … Read the rest

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In Defense of Free Trade (A Response to “The Free Trade Blues” in Economix)

Blaming free trade for U.S. economic woes does not account for the difficulty of operating in a global marketplace increasingly dominated by mercantilism.

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Levin Details Important Challenges Ahead for International Trade

Today, House Ways and Means Committee Ranking Member Sandy Levin (D-MI) gave an impressive speech highlighting the past, present and future challenges in the international trade arena at the Peterson Institute. Focusing specifically on issues relating to the American automotive industry in the Transpacific Partnership (TPP), he also touched on the Transatlantic Trade and Investment Partnership (T-TIP) as well as the Trade Promotion Authority (TPA). However, his best points were those that emphasized the need for “free and fair trade,” not just “fair trade.”

In sharp contrast to much of the neoclassical literature on free trade, Representative Levin noted that markets are not, in fact, always self-correcting and that distortions from foreign mercantilist trade policies need to be addressed in free trade agreements going forward. As innovation economists, ITIF also holds this belief; global free trade is beneficial, but only when countries eschew mercantilist policies (e.g., tariffs, unfair taxes, currency manipulation, discriminatory standards, IP theft, etc.) that manipulate the system. Not only do mercantilist policies restrain productivity and innovation, but they also potentially lead to lower levels of global growth as private companies make investments in countries and in types … Read the rest

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Using Data To Fight Counterfeit Goods

Whether advertised on seedy websites or peddled on Manhattan’s Canal Street, counterfeit goods remain a serious problem for U.S. businesses and consumers. Despite the efforts of companies and government agencies alike, the International Chamber of Commerce estimates that the total value of counterfeit and pirated products produced worldwide could reach $1.5 trillion, or around 2 percent of the global economy, by 2015. Counterfeit goods, such as fake pharmaceuticals, tainted baby formula and substandard tires, present numerous safety and reliability concerns for consumers and organizations around the world and drives prices up for consumers purchasing legitimate goods.

Until now, illicit counterfeiting operations have had the advantage, as they have been able to exploit the Internet and other technologies to market and distribute their goods more efficiently, especially goods produced in developing countries. In addition, the manual monitoring practices that companies have relied on to identify counterfeits is cost-prohibitive on the Internet. However, new opportunities to leverage data and data analytics may shift the balance of power back to legal businesses and law enforcement officials by allowing them to detect, track, prioritize, investigate and report potential counterfeit goods more efficiently than … Read the rest

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Review: Aid for Trade, 4 Years Later

Last week marked the fourth annual global review of the World Trade Organization’s (WTO’s) Aid for Trade (AfT) Initiative. Created in 2005 by the Sixth Ministerial Conference of the Doha Development Round, Aft targets “behind the border” constraints to trade in least developed countries (LDCs) as well as strengthens their capacity to negotiate beneficial trade agreements. Essentially, Aft focuses on trade facilitation.

The AfT Initiative shines a light on the idea that the best possible “aid” we can give LDCs is free trade. Evidenced by its theme, “Connecting to Value Chains,” the fourth annual review called for “connecting the least connected countries.” More broadly, the value chain world we live in offers many entry points for firms to connect to the global trade web. And countries don’t need to produce final goods to be a part of that global trade web—increasingly we are a world focused on trade in services and tasks. Sixty percent of global trade is now in parts and components.

Production networks stretch worldwide—Senegal assembles Indian cars, Ford has facilities in Vietnam, and Samoa produces automotive harnesses. As WTO Director-General Pascal Lamy puts it, “you do not … Read the rest

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India to Reevaluate Preferential Market Access (PMA) Rules

On Monday, July 8, the Indian Prime Minister’s office, after consultations with India’s Department of Telecommunications and Department of Electronics, announced it would conduct a four-week review and reevaluation of the country’s controversial Preferential Market Access (PMA) mandate. The mandate imposed local content requirements on procurement of electronic products with “security implications for the country” by government and private sector entities. If the PMA had been implemented as originally envisioned, a specified share of each electronic product’s market—anywhere from 30 percent, rising possibly up to 100 percent by 2020—would have to be filled by India-based manufacturers, a requirement that could have eventually affected as much as half of the $50 billion spent annually on information and communications technology (ICT) products and services in India. In announcing the policy review, the Indian Prime Minister’s office acknowledged that, “Concerns have been raised in many quarters on different aspects of the PMA Policy, particularly relating to procurement by the private sector for electronic products with security implications.”

India conceived its PMA rules in an attempt to bolster domestic manufacturing of electronic products in India, a goal India has sought both to boost employment … Read the rest

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Affordable Care Act Endangers Innovative U.S. Life Sciences Industries

The Patient Protection and Affordable Care Act (ACA) is in the news again, with the announcement that the White House has delayed until 2015 the employer mandate, which requires that all employers with more than 50 employees provide health coverage to their workers. While most of the attention toward the ACA has centered around debate regarding the individual and employer mandates, what’s often missed is that certain provisions in the Affordable Act Care threaten to damage two of America’s most important innovative life sciences industries: medical devices and biopharmaceuticals.

Regarding medical devices, as of January 2013 the Affordable Care Act began to impose a 2.3 percent excise tax on the sales of medical devices, in order to offset a portion of the $1 trillion cost of the Act. (Specifically, the Joint Committee on Taxation estimates the tax will collect $29 billion over the 2013-2022 period.) Beyond the fact that raising costs is not the way to control them, the provision has had a deleterious impact on the competitiveness of U.S. medical device firms and threatened employment in the U.S. medical device industry. Some, including former chief Labor Department economist Diana Read the rest