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I was delighted to see Ron Cass' op/ed in today's Wall Street Journal (subscription required) on the Democrats' short-sighted attacks on IP protection in trade agreements.
Essentially, Democrats on the Hill have fallen victim to a PR campaign by a cabal of anti-IP activists who persuaded them to start pressuring the office of the U.S. Trade Representative to stop pressing countries, in this case Thailand, to respect and enforce intellectual property laws.
In the 1980s, Congress, with a Democratic majority, instituted the Special 301 process for the U.S. Trade Representative to identify countries whose failure to protect intellectual property harms the U.S., making potential trade sanctions leverage for better protection. In the 1990s, the U.S. and Europe secured world-wide assent to greater IP protection through the TRIPS (Trade-Related Aspects of Intellectual Property) agreement that brought these issues within the world trade framework.
Ever since, however, a reactionary coalition -- composed of unions in declining U.S. industries, companies threatened by changes in the global economy, health activists seeking free or heavily subsidized access to innovative drugs, and Ralph Nader acolytes (financed by George Soros and left-leaning foundations) who reflexively prefer government control to markets and private property rights -- have endeavored to reverse protections for trade and IP rights.
Like buggy-whip makers of the late 1800s, theirs is a desperate fight against the future. Unfortunately, elements in the Democratic Party have become their allies.
Thailand is being singled out these days for rampant IP problems.
After following the process prescribed by law, Ms. Schwab named Thailand among countries least protective of intellectual property rights, elevating them to Priority Watch status. There is history here: Thailand has been on one or another USTR list of nations violating IP rights since the first Special 301 report in 1989, and it still has staggeringly high rates of piracy in trademarked and copyrighted goods.
The International Intellectual Property Alliance reports that 80% or more of the software sold in Thailand is pirated, as are more than 60% of the motion picture works and 50% of the records and music. IDC Global estimates U.S. losses last year from Thai software piracy alone exceeded $420 million, more than doubling in just two years.
This is egregious behavior. But Thailand is the darling of the anti-IP activists, not simply because they don't respect copyright, but especially because Thailand has at long last done what the activists have been trying for years to persuade some country to do: issue compulsory licenses on a range of pharmaceutical products.
The activists want them to do this because the activists simply despise the property-rights system of pharmaceutical innovation. But Thailand is doing it as industrial policy, using the provisions in the TRIPS agreement to allow them to save money on drugs so that they can spend it on other things, like a gigantic increase in military spending. Exactly the sort of thing you'd expect a military government to do.
While putting the country on the Priority Watch Status, Ms. Schwab also noted Thailand's summary announcements of compulsory licenses for drugs used to fight heart disease and HIV/AIDS. Thailand's military-backed government reasoned this would save $24 million -- while raising top officials' pay by $9 million per year and its military budget by one-third ($1.1 billion). These moves by the world's 34th largest economy (by nominal GDP) reflect new spending priorities, not a health crisis or extreme poverty, and appear to violate TRIPS requirements regarding negotiation and compensation.
Cass blows the whistle on all of this, and points out the danger to the U.S. economy posed by the Democrats in Congress falling under the siren song of these anti-IP activists:
Mr. Waxman's demand that Thailand be taken off the list should be of especially grave concern. As a one-off, the intervention is bizarre. Worse, it sends a signal that the U.S. would be making a disastrous turn to policies that discourage innovation, reduce productivity and lower economic growth.
Unfortunately, too many Democrats -- by making increasingly strident objections to trade initiatives and the protection of U.S. intellectual property rights -- are sending just that signal. They now insist that Ms. Schwab broadly support compulsory licensing for any nation wanting lower costs for patented drugs in the short term -- even if that violates TRIPS, reduces incentives for drug companies to invest in new drugs all of us will need, and takes away a bargaining chip useful to future negotiations. This dramatically mistaken approach that would sell out the nation's future in a futile effort to please groups wedded to the past.
Worst of all, allowing a few congressmen to override the process established by law undermines the rule of law. Congress is not institutionally equipped nor constitutionally empowered to exercise executive authority. If Mr. Waxman and his colleagues get to remove countries they like from the Priority Watch list, what is to stop them, or others, from adding countries they dislike? However satisfying this is today, all of us will pay in the long run.
Let's hope Ms. Schwab, who has until July 9 to reply to Mr. Waxman's letter, can explain this. If Mr. Waxman and his colleagues can't get the easy case right, there's little hope they'll do better on harder ones yet to come.
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Author: Tom Giovanetti || Location: Lewisville, Texas, USA