Fostering Innovation, Creativity, and Craftsmanship via Trade

The year 2020 marked the 25th anniversary of the groundbreaking WTO Agreement on Trade-Related Aspects of Intellectual Property Rights. TRIPS and subsequent U.S.-negotiated trade agreements advanced global best practices for intellectual property (IP) rights and helped foster a clearer understanding of the role of IP rights in making available breakthrough products, services, and technologies to meet the needs and challenges of a growing global population.

Because many countries were granted long phase-in periods, or even ongoing waivers, for implementation of IP-related commitments in trade agreements, these standards remain uneven across the globe and especially between developing and developed countries. These differences between the IP rules in force from one country to another provide a lens through which to see the importance of trade-related progress in IP rights. The U.S. Chamber International IP Index (the Index) is a comparative law analysis that measures implementation of IP best practices on a country-by-country basis across specific indicators ranging from patents and copyrights to trademarks and trade secrets, as well as enforcement.

Data from the first eight editions of the Index demonstrate a strong, positive correlation between the strength of a country’s IP system (defined by transparent, predictable, and enforceable proprietary rights) and that country’s innovative and creative output, access to innovation and creativity, job creation in knowledge intensive industries, and a host of other widely-shared socio-economic goals. With its 50 discrete indicators, the Index also provides a blueprint for countries desiring to implement an IP system that supports its own ambitions to participate fully in a global economy increasingly dominated by knowledge-based assets.

The TRIPS Agreement plays an invaluable role in setting a minimum global standard for IP rights, one that with full implementation would give every signatory country a solid IP foundation. TRIPS is very much a floor, however, not a ceiling: When measured against the 5th (2017) edition of the Index, implementation of TRIPS by itself accounted for less than 50 percent of the overall possible score, showing that the Agreement does not go nearly far enough to advance national competitiveness in the innovative and creative sectors. U.S. trade agreements, while generally much better, similarly do not fully live up to the standard represented by U.S. law.

The Index demonstrates that countries that have entered into trade agreements with the United States have significantly more advanced IP ecosystems than others, and these IP commitments have enhanced innovative output and increased private-sector investment in R&D. Such comprehensive, high-standard U.S. trade agreements have not only elevated IP standards in global markets, but encouraged global, IP-enabled trade flows.

Of note, the Korea-U.S. Free-Trade Agreement, signed in 2007, is widely regarded as having one of the most effective IP chapters of all the trade agreements signed in the last two decades. Nonetheless, Korea still ranks behind 12 other global economies in the 2020 Index. Intellectual property protections were key in fueling American innovation, technology, and economy since the early 2000s. The Chamber believes that future U.S. trade agreements must build upon the areas where past agreements have fallen short in order to maximize the benefits that robust IP systems create.

The proof of the model has been in the global pandemic. The United States and other nations with high-standard IP rights in place have met the extreme needs imposed by the pandemic with a robust pipeline of products and technologies ready to be tested against those health, safety, connectivity, content, and knowledge-related challenges. This pipeline, owing to decades of high-risk, capital-intensive investment, was made possible by the unique advantages of the U.S. market, in particular, namely strong respect for private property rights, a constitutional foundation for IP, rule of law, and high-functioning financial markets.

The market function of IP rights is an overlooked aspect of the economics of innovation. Throughout 2020, we saw well-defined rights enable collaboration by partners in government, industry, academia, and civil society by clarifying the respective resource commitments of diverse parties, and enabling the licensing of those assets in order to rapidly scale up research, development, testing, and distribution of breakthrough solutions, including COVID-19 vaccines and therapies. It is no coincidence that the United States has been the world leader in the innovative response to the pandemic and remains the world leader in transparent, predictable, and reliable IP rights.

U.S. trading partners will never succeed to the same degree in allocating scarce resources to innovation, creativity, and craftsmanship absent a system of IP rights that likewise supports private sector investment in those goals. The world needs the innovative and creative capacity of all its citizens to meet the demands of poverty, hunger, disease, and climate change, as well as the aspirations of an emerging global middle class. The United States, with its experience and know-how, has a moral imperative to lead.

ACTION: The Chamber advocates for the U.S. government—and governments worldwide—to support private sector investment in innovative and creative products, services, and technologies with a firm foundation of intellectual property rights, including through trade agreements.