Protecting IP is a Comparative Advantage

The WTO released its annual World Trade Report. This year it has a special emphasis on how digital technologies are transforming global commerce.

It documents how the sharing economy, peer to peer networks, and international e-commerce have transformed the shape of services and goods that are traded across borders. Enabled by the internet, these technologies lower transaction costs and barriers to entry allowing more people to exchange the fruit of their labor with billions across the world and with significantly less restrictions than ever before.

In addition, the report states digital technologies have “lowered the costs to create, copy, and distribute, creative works on a global scale.”

In response, more Regional Trade Agreements are including specific provisions on digital trade, stronger IP rights, consumer protection, and e-signature authentication requirements.

The report cautions countries against “digital protectionism” that can get in the way of these new forms of trade. Usually taking the form of regulations, such protectionism comes is the form of data localization requirements, privacy requirements, or censorship.

Specifically, on IP the report notes how streaming services and digital forms of copyrighted content (movies, music, and books) have transitioned from physical goods to digital licenses. Their digital forms have significantly reduced proliferation of copyrighted content.

Considering the growing role of intellectual property rights in facilitating the emergence of digital trade, the report asks can protecting IP rights be a comparative advantage? Answer: of course.

At PRA, when we produce the International Property Rights Index we always provide correlations with economic and social indicators. Countries with strong property right protections enjoy more per capita wealth, receive more R&D, are more favorable to entrepreneurship, have more civic activism, and network readiness.

The WTO conducted a study of their own, using the WEF Executive Opinion Survey on IP Protection (a component of the IPRI) as a measure of IP protection they correlated exports of IP-intensive activity. The results are “statistically significant” finding that “IP-intensive industries export significantly more from countries that have strong IP protection mechanisms.”

The report also cites the Dr. Park Patent Protection Index as another “robust” study of intellectual property protection. PRA was happy to update the Patent Protection Index in 2018 and use it as a component of IP protection in the International Property Rights Index as well.   

Click here to see the International Property Rights Index. The IP component uses the WEF IP perception measure referred to in the WTO report, the Park Patent Protection Index to measure patent protection, and the BSA Global Software Survey to measure copyright protection. It is also the only Index to measure private property rights and the legal institutions tasked with enforcing these fundamental human rights.