Free Trade II: Free Trade and Intellectual Property

On the more particular topic of free trade agreements, Matthew Yglesias posts today on how US free trade agreements aren’t so much about free trade any more.

The trade deal was supposed to be a political vehicle for overcoming special interest politics, but it’s really just become another venue for interest group politics. … The pharmaceutical industry has a lot of clout in the U.S., because we’re a major pharma producer. Most foreign countries aren’t like that, so they’re only willing to pay relatively low amounts for drugs. Since the marginal cost of producing pills is low, drug companies generally agree to sell at these low prices. But now pharma can leverage its political clout into the United States into turning the USTR’s office into an extension of its lobbying operations.

One can actually go further than this. There is a very strong case to be made that US trade policy made the intellectual property lobby (of which pharma is a constituent player) just as much as the intellectual property lobby is making trade policy. See this piece by Susan Sell for the Review of International Political Economy (full disclosure – I co-edited the special issue that this article appears in). Sell documents how over time the office of the USTR was pulled into the intellectual property business, despite the lack of any obvious link between trade and IP.

The new Section 337 transferred from the president to the International Trade Commission (ITC) the authority to exclude the importation of foreign goods that violated the Trade Act. This initial intellectual property-trade linkage was limited to cover only goods that were imported into the United States. This provided intellectual property interests with an opening; other sections of the 1974 Trade Act (which were not intended to apply to intellectual property) provided tools that they could develop over the longer term. Section 301 of the Trade Act of 1974 gave the president the power to take all appropriate action to enforce US rights under trade agreements … Together these changes to trade policy had unexpected consequences.
Most importantly, they both led to the mobilization of a new coalition around intellectual property enforcement, and channeled its activities in
some quite specific directions. …

The USTR, which had recently obtained a legislative charter and an associated cabinet position, provided a potential institutional lever, but only if intellectual property could be implicitly incorporated under its remit. … Over the longer term, however, what was more important was the creation of a new coalition of industry actors, which eventually brought a much more disparate set of interests, in pursuit of a far more ambitious
set of objectives. … As time passed, these actors grew more ambitious and began to press for institutional changes that would better allow them to prosecute their interests. Replicating the mechanisms of policy feedback that Pierson (2000) identifies, private actors lobbied for amendments to Section 301 of the Trade Agreements Act of 1979 that would further embed their access to trade policymaking. … The 1979 amendments allowed private parties directly to seek government redress for others’ violations of international trade agreements. Amendments in 1979 required the federal government to ‘take into account the views of affected industry, effectively establishing a cooperative relationship between public and private sectors’ . In a clear instance of an institution shaping interest group formation, the USTR Section 301 process inspired the MPAA’s Jack Valenti and Nicholas
Veliotes, Vice-President of the Association of American Publishers, to create an umbrella organization specifically focused on 301. Created in 1984,
the International Intellectual Property Alliance (IIPA) worked to promote copyright interests at the USTR, generate information for the USTR about
the scale and costs of copyright ‘piracy’ and to educate legislators about the importance of the issues. It represented over
1500 firms and quickly became a powerful and effective lobbying arm.

… The USTR now had become both the target for private sector lobbyists and the agent, bringing together coalitions that heretofore
had not collaborated. In this way the interaction between the USTR and private sector intellectual property lobbyists shaped state preferences for a comprehensive approach that would cover all types of intellectual property – trademarks, patents, and copyrights. … While intellectual property advocates united around the trade focus, they were sharply divided over whether or not to pursue a multilateral agreement through GATT. … This time, the USTR had to convince a key segment of business that they should re-organize their efforts around a multilateral approach.

Interest groups sought initially to take advantage of the unintended opportunities offered by changes in US state structure. Their efforts gave rise to further institutional changes, which in turn built up an ever broader coalition of industry groups pressing for the continuation – and strengthening – of institutions strengthening intellectual property. Changes in the state over time were not the result of efforts by a predefined interest group, nor did the relevant interest group merely content itself with molding its activities to an exogenously fixed set of institutional tools. Instead, interest groups pressed for institutional change, and institutional changes in turn redefined and broadened the relevant interest group in just the kind of feedback loop that historical institutionalists such as Theda Skocpol and Paul Pierson have stressed in their explanations of outcomes in comparative politics.

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