Intellectual Property Rights play a New Role in International Trade

A landmark trade agreement between the US and Brazil has put intellectual property rights (IPRs) centre stage in a role IPRs have never played before – as a major bargaining chip of emerging economies. In 2008 Brazil won a trade dispute resolution at the World Trade Organization (WTO), in which the arbitration committee found that US subsidies for domestic cotton production violate global trade laws. This sparked a round of settlement negotiations between the two trading partners that seems only now finally settled. The New York Times reported that an agreement came one day before Brazil was to impose WTO-authorized trade retaliations, amounting to nearly $830 million. Along with tariffs on a number of American goods, these retaliations threatened to suspend IPRs.

This settlement is particularly remarkable because IPRs have often been scrutinized as a mechanism that protects the interests of agribusiness and pharmaceutical companies. However, this episode of bilateral trade negotiation, which marks the first time a country (Brazil) has threatened the suspension of IPRs with authorization from the WTO, seems to have induced a fairer trade deal with an economic giant (the US). The Brazilian action to suspend IPRs, which for example would have broken pharmaceutical patents prematurely, could have cost American businesses up to $239m.

As the NY Times reported, retaliation in trade has traditionally been the preserve of the largest developed countries. But Brazil has displayed that threatening to suspend IPRs is a trade retaliation mechanism that gives leverage to small and emerging economies as well.

Trade Related Aspects of Intellectual Property Rights (TRIPS) have been a contentious issue in international trade for quite some time. Those in favor of strict intellectual property regulation propose that strong IP regimes promote innovation by securing copyright and patent laws. Critics of current IP regimes, however, highlight problems where unequal access to these regimes have allowed corporate interests to privatize traditional knowledge, including folklore and other aspects of the scientific commons like genetic materials. Known as biopiracy, pharmaceuticals have been criticized for patenting “medical discoveries” that in effect were derived from traditional knowledge of local plants of indigenous communities. The companies with the access and ability to follow through the patenting procedures have been the beneficiaries of these discoveries, while the sources of these alchemic practices are never fully compensated. Furthermore, in the global food system and agriculture, IPRs have had far-reaching effects. Biotechnology companies use IPRs to monopolize seed banks, charging small producers technology fees and threatening farmers with legal action when patented seeds are used without a license, even if crops are infiltrated through ecological processes.

Nevertheless, while the ability to threaten the suspension of IPRs in trade negotiations does not curb the way companies manage to wield IPRs in their own interest. It does signify new dynamics among nations in trade negotiations. Because securing IPRs in the poorest countries is paramount in generating profit in the richest countries, some leverage is now provided to small and emerging economies where it never existed before. Brazil, in this case, managed to demand concessions in the cattle industry vis-á-vis the US, and negotiated to receive a technical assistance fund – a token that represents the value of retaliation the WTO had authorized. This development will certainly be acknowledged by trading partners everywhere, especially African cotton producers who as well have grievances regarding American cotton subsidies. IPRs can now be recognized as a major chip at the negotiating table for emerging economies.

By: J.D. Fridman