End patent and copyright requirements in NAFTA
from Dean Baker
The trade deals negotiated in the last quarter century are becoming less focused on traditional trade barriers like tariffs and quotas. Instead, they are imposing a regulation structure on the parties, which tend to be very business oriented. In many cases, the rules being required under the trade deals would never be accepted if they went through the normal political process.
The renegotiation of the North American Free Trade Agreement allows the United States, Canada and Mexico to get rid of rules that have no place in trade deals. At the top of this list is the Investor-State Dispute Settlement (I.S.D.S.) tribunals. These tribunals operate outside the normal judicial process. Their rulings are not bound by precedent, nor are they subject to appeal. Also, they are only open to foreign investors as a mechanism to sue member governments.
These tribunals can be used to penalize governments for measures designed to protect the environment, consumers, workers or to ensure the stability of financial institutions. TransCanada, the company that had been building the XL pipeline, gave us an example of how these tribunals can be used. It initiated a suit after President Barack Obama decided to cancel the pipeline. It is likely that we would see many more suits in the future using the I.S.D.S. tribunals if they are left in NAFTA and other trade deals.
The other non-trade elements that should be removed from Nafta are the provisions requiring strong patent and copyright protection. These are forms of protectionism – the opposite of free trade – that can raise the price of the protected items by a factor of 10 or even 100. The impact of these protections is especially pernicious in the case of prescription drugs.
Drugs that would be readily available in a free market can be prohibitively expensive because of patent protection. For example, the Hepatitis C drug Sovaldi has a list price of $84,000 in the United States. A high-quality generic version is sold in India for less than $200.
While companies need an incentive for innovating, there are far more efficient mechanisms than patent monopolies. It doesn’t make sense for a 21st century economy to be dependent on this relic of the feudal guild system for supporting innovation.
Ending the patent and copyright requirements in NAFTA would be a good first step. We need a fuller debate on modernizing our systems for financing innovation and creative work.
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Real-World Economics Review Blog 
Yes. Treaties that allow secret awards granted by secret corporate tribunals have been an ongoing problem for quite a few years, since Clinton fast tracked NAFTA. (Noam Chomsky says the only true and accurate words in the title are “North” and “American.”)
Here I share a smaller version I encountered while scouting around for musical companions in a small-town California coffee shop;
There are secret undercover musical copyright cops who frequent coffee shops listening for musicians who play songs under copyright and do not give any money to the original artist.
I’m sure a living John Lennon would enjoy playing “Imagine” with me and my tenor recorder, at least once. Even so, I could cause a small coffee shop to be fined if I played “Imagine” and the coffee shop was not properly licensed via a rather large fee.
Note that this is a hypothetical example explained to me verbally by a sincere coffee shop owner yet could be erroneous.
“These are forms of protectionism – the opposite of free trade – that can raise the price of the protected items by a factor of 10 or even 100.”
One wonders why an otherwise intelligent guy like Noam Chomsky venerates the idea of free trade so much. I would agree that patent protection is protectionism, but I missed the argument against it. This does raise consumer prices, but 9 times out of 10 the argument of raised consumer prices is used to justify something otherwise reprehensible. If one country is going to bear the costs to create an industry is it really wrong to prevent a carbon copy of that industry from springing up next door with no investments in education, no reward for investment in new ideas, and no guarantees that workers will bring home a high enough percentage of revenues to keep a consumer class going?
While the U.S. persistently runs a trade deficit this is in goods, not services. The U.S. has had trade surpluses for services for quite a few decades and it is currently around $200 billlion a year. Over half of these services are in the financial products and info tech services; so, my guess would be that the copyright and patent issues are to protect these services in which the U.S. dominates. It is probably also another indication of the power politics connection between these economic interests and their political influence.
This is where national politics, consumers, and standard MBA practices collide. Every MBA student is taught about market segmentation. Forbes explains it this way.
If you are an ambitious entrepreneur with a promising product or service, you probably can’t wait to show it to potential customers. But before you go into “sales mode,” you might want to sit down at your desk, take a look at your value proposition and do some research.
Two columns ago, I explained how to develop a compelling value proposition. This up-front evaluation of your product is the first in a series of exercises to assess your market opportunities. It ensures you are clear about your value to potential customers before you explore the market in detail. (Forbes, Rebecca O. Bagley (Oct. 2 2013). “How To Identify Your Market And Size Up Competitors.”)
In simpler terms, how can I maximize return on my product or service?
Music is now the biggest service sector in the world. And the most profitable. Garret your comments are dead on. Unless you want to be sued don’t play in public a copyrighted song with paying the fee. Those who share music and videos have found creative ways around this. For example, play the song or share the video without a title. I’m sure they’ll soon amend the copyright laws to fix this. Bought any ebooks lately? Used to be publishers accepted losses on some books (e.g., poetry, academic), but no longer. While you can still find paper copies of such books at lower, used prices, the ebook versions are now priced to make up for the losses on paper copy sales. And then there is the “paywall” brawl in academic journal publication. The MBAs have won. There is no sphere of services any longer were maximizing return is not the primary concern. Up to and including babysitting.
But I remain an anachronism. I believe the welfare of society, including those unable to pay for every song or video they hear or view remains more important than maximizing each corporation’s returns. I still believe in moral compensation and moral licensing. Peoples’ good and bad actions must somehow at least balance. In other words, each of us has a responsibility to care for society and others, as much as for ourselves. That equilibrium has been off for decades, especially since the 1960s. We need to get it back. The results of not doing so are catastrophic for us all.
I’m sorry but I don’t think music is the biggest service sector in the world. My guess would be financial serives. Over $1 trillion gets traded on the international money markets each business day alone. And in addition there are other avenues for the financial sector to operate. The U.S. is by far the biggest player in this market. Over 50% of international financial flows come into the U.S. The $ as the reserve currency does around 70% of the transactions internationally. Most of that business is handled electronically. This is where copyrights and patents have impact.
World music industry has annual revenues of about $43 billion. The music black market is worth at least that much annually. That’s revenues of about $100 billion per year. I don’t consider money markets a service industry, unless you equate them with casinos. Besides $1 trillion traded does not equate to $1 trillion in annual revenues. The illegal drug sector is bigger than music. But unlike the music industry it’s all illegal.
World trade gets financed on the international money market and is at least $20 trillion a year in transactions (that’s service provided). Capital market funding is a little bit more — that is a service provided. Both services involve soft ware and electronic record keeping — those are protected by copyrights and patents. Those “casinos” are what move economies around the world and create many of the issues that get discussed on this web site.
I’ve always consider finance nearer a manufacturing business, rather than services business. I also reject the very notion that financial markets are the better option for getting businesses the resources they need for research, innovation, and product creation. Computer software and hardware are also both services and manufacturing businesses. The casinos also create economic disruptions, sometimes quite large, that throw the lives of we ordinary mortals into jeopardy or at times even murder us. I prefer more stable economic organizations.