Free Trade and Protection of Intellectual Property Rights: Can We Have One Without the Other?

42 Pages Posted: 24 Jan 2002

See all articles by Ai-Ting Goh

Ai-Ting Goh

HEC Paris - Economics & Decision Sciences

Jacques Olivier

HEC Paris - Finance Department; Centre for Economic Policy Research (CEPR)

Date Written: January 2002

Abstract

This Paper is concerned with the interaction between trade policies and the protection of Intellectual Property Rights (IPRs). In particular, it investigates, within the framework of a general equilibrium model with endogenous growth, the welfare implications of an international agreement on one or both policy instruments. High tariffs and low patent protection both allow agents of an individual country to consume more respectively, through rent extraction redistributed by lump-sum transfers, and lower mark-up. Both high tariffs and low patent protection reduce the incentives for firms to do R&D, and, hence, growth. The main insight concerning optimal policies are first, that the two policy instruments are substitutes and second, that they are affected by the same Prisoner's Dilemma problem. As a consequence, an agreement in both policy instruments is needed to achieve any positive welfare gains, which supports the long standing claim of policy makers from developed countries that protection of IPRs should be included in multilateral trade agreements.

Keywords: Trade policy, intellectual property rights, multilateral trade aggreements

JEL Classification: F13, O34

Suggested Citation

Goh, Ai-Ting and Olivier, Jacques, Free Trade and Protection of Intellectual Property Rights: Can We Have One Without the Other? (January 2002). CEPR Discussion Paper No. 3127. Available at SSRN: https://ssrn.com/abstract=298240

Ai-Ting Goh (Contact Author)

HEC Paris - Economics & Decision Sciences ( email )

Paris
France
(33 1) 39 67 72 06 (Phone)
(33 1) 39 67 70 85 (Fax)

Jacques Olivier

HEC Paris - Finance Department ( email )

1 rue de la Liberation
Jouy-en-Josas Cedex, 78351
France
+33 1 3967 7297 (Phone)
+33 1 3967 7085 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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