Tech Industry Report Ranks Countries On Protectionism – Including IPR

A report released today by an American technology industry group ranks countries on the basis of mercantilist policies, urging the United States and multilateral organisations to issue a “bold response” to these restrictive and anti-competitive practices – including intellectual property theft and compulsory licensing permitted under World Trade Organization rules in developing countries. The top targets? China and India.

The Information Technology and Innovation Foundation (ITIF) report is entitled, “The Global Mercantilist Index: A New Approach to Ranking Nations’ Trade Policies.” The authors are Michelle Wein, Stephen Ezell and Robert Atkinson. A press release is available here.

“Countries’ use of mercantilist policies in recent years has expanded dramatically, particularly in emerging economies such as Brazil, China, and India,” ITIF said. “These practices, such as forced technology transfer or local production as a condition of market access, intellectual property (IP) theft, compulsory licensing of IP, restrictions on cross-border data flows, and currency manipulation, all distort trade and investment and damage the global economy.”

“Collectively,” it said, “these policies represent a major threat to the integrity of the global trading system and they demand a coherent and bold response from both free-trading nations such as the United States, as well as multilateral trade and development organizations, such as the World Bank, the WTO, and the United Nations.”

The Global Mercantilist Index “uses a comprehensive model to rank 55 nations in 16 categories to better assess which nations utilize the most egregious protectionist policies and which do the most damage to the US economy and US workers,” according to ITIF.

China and India finished first and second in the index, with a ranking of “high (most egregious)”. Next, with a “moderate-high” ranking, were Argentina, Brazil, and Russia.

On IP rights, the report contains an index specific to IP rights, finding Argentina the worst and the US Digital Millennium Copyright Act (DMCA) the best balance between protection and access.

On tech transfer and compulsory licensing, the report states:

As noted, a host of nations, including Brazil, China, and India (among many others), require forced technology transfer in exchange for market access. So when a country such as India issues a compulsory license of biopharmaceutical intellectual property that permits the local generic manufacture of a biopharmaceutical drug, this both compromises the original innovator’s ability to earn a return on its investment in the Indian marketplace, and also risks handing the intellectual property to a competitor who can then manufacture the drug to compete on global markets — further threatening the innovator’s ability to earn profits that can be reinvested back into the next generation of innovation. Preventing such actions through globally strong IP protections is essential if innovation is to flourish in the global economy.

“The growth of trade mercantilism represents a major threat to the integrity of the global trading system and demands a coherent and bold response,” Michelle Wein, Trade Policy Analyst with ITIF and co-author of the report, told Intellectual Property Watch. “Through this report we hope to better illustrate the extent of the problem and offer a new policy framework that can promote a robust global innovation ecosystem moving forward.”

Policy Recommendations

The report proposes “new policy tools that will better establish a global trade regime based on rules- and market-based trade, while at the same time promoting an innovation-based global economy.”

ITIF’s summary of policy recommendations is as follows:

• Congress should task USTR with creating an annual “Global Mercantilist Index” and provide additional funding accordingly;
• The White House should publish a national trade enforcement strategy that reviews the adequacy of U.S. trade enforcement mechanisms with the goal of developing additional enforcement tools and focusing on the worst-behaving countries (Brazil, Russia, India, China and Argentina);
• Congress needs to craft an Omnibus Trade and Competitiveness Act, similar to that of 1988, that both institutionalizes a Chief Trade Enforcement Officer and Working Group at USTR and restructures the interagency trade process;
• Congress should increase USTR, the International Trade Enforcement Center (ITEC) and the International Trade Administration (ITA) appropriations with those increases targeted to trade and customs enforcement;
• Congress also needs to be sure to appoint individuals to the International Trade Commission (ITC) who take trade enforcement seriously and do not simply have a “maximize consumer welfare” mindset;
• Congress should require that provision of trade preferences, such as GSP and other development assistance, be tied to the GMI and Special 301 Report findings;
• The U.S. Agency for International Development (USAID), the Millennium Challenge Corporation, the State Department, and other U.S. development organizations should advocate for a new approach to development economics not grounded in export led high-tech growth;
• The United States should work with our free-trade allies to restructure the WTO to recognize a change in membership toward countries that do not play by the rules so that it becomes a more effective enforcement organization and not just a market opening one;
• Trade policymakers should work with the WTO to develop a similar global mercantilist ranking report that applies an international lens;
• International development organizations such as the International Monetary Fund, EuropeAid and the World Bank should use the global mercantilist ranking report to inform their funding decisions.