Trading Up — The Trans-Pacific Partnership Agreement (TPP): Promoting Waves of Innovation

Abstract

The Trans-Pacific Partnership (TPP) is a new mega-regional trade accord and the most ambitious international trade deal for 20 years. Although it still has to be ratified, once in place we expect it to lead to substantial improvements in intellectual property protection and market openness, which will both act as catalysts for increased innovation. A larger market can lead to bigger returns and can incentivise R&D expenditure as businesses strive to make new products for the expanded market.

All this could transform the performance of companies in an area representing almost 40% of global GDP and more than 25% of global trade. The 12 TPP partners include a mix of advanced and emerging economies: Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, United States & Vietnam.

Under TPP, reinforced intellectual property rights will improve the availability of legal protection for innovative ideas, helping to protect intangible assets like trade secrets from abuse. TPP will bolster markets for intellectual property, such as patents, and products that incorporate protected innovation, such as electronics. TPP also clarifies what constitutes fair use of intellectual property. These enhancements can benefit firms, whether they use proprietary models (like filmmakers) or open architecture strategies (like open source software developers). In time, TPP provisions addressing these areas could act as a template for other proposed mega-regional agreements.

We think TPP changes the rules of the game for trade and innovation. Developing countries like Chile, Malaysia, Peru or Vietnam gain access to a large pool of innovation via open markets, promoting technology transfer. Developed countries like the US and Japan will be able to market each innovative product to more customers.

This report reviews the trade and innovation nexus in the context of the proposed rule-based trade reforms under TPP. It highlights opportunities this represents at firm level and for national-level economic development.