Increasing Role of IP in International Trade Governance
In an era characterized by rapid technological advancements and a surge in global innovation, the role of intellectual property has become increasingly pivotal. The nexus between innovation and IP is not only driving economic growth but also reshaping the landscape of international relations. The rights associated with IP can either strengthen or strain diplomatic ties between nations. From influencing bilateral negotiations to serving as a cornerstone in trade agreements, IP has the potential to make or break international relations. Beyond its economic impact, this article delves into the transformative influence of IP in fostering global innovation and its broader influence on international relations.
Global trends of growth of innovation and its relevance to international trade
Recent data shows that there has been exponential growth in global innovation. One of the prominent measures of innovation is the patent applications. The WIPO’s Indicators Report evinced that innovators from around the world filed record-breaking 3.46 million patent applications in 2022 with majority of applications originating from developing nations. Further, an OECD report shows that the “world’s top 2000 companies have heavily invested in R&D across 44 countries with subsidiaries in around 100 countries.” This reflects a notable change in the global mindset by moving away from the idea of wealth creation through traditional methods of land and labor, reliance is placed on creation of IP and innovation to gain an edge in the global economic landscape. One of the key factors effectuating this shift is the efficiency of domestic systems in ensuring a fair and efficient IP enforcement mechanism, which aids in incentivizing innovative activity beyond domestic innovation.
IP is emerging as a key player in global trade transactions as well. From promoting the international dissemination of technology, innovation, and know-how to boosting a nation’s levels of R&D, foreign direct investment (FDI), and exports of goods and services, a nation’s ability to ensure strong IP rights are a major catalyst in driving innovation. The role of innovation in building the growth story of Germany poses as an excellent case in this regard. In 2023, Germany ranked eighth in the WIPO’s Global Innovation Index, for the second time. Germany has continued to remain a powerhouse of R&D and is viewed as a significant hub for building IP by global investors and creators. In its report, WIPO recognised the most prominent factor for Germany’s innovative growth as its robust startup environment and its consistent efforts to maintain a strong IP framework. The German Patent and trade mark Office (DPMA) is the largest national IP office in EU and the country harnesses a solid IP system with its consistent and novel reforms like protection of trade secrets in patent litigation, introducing video conferencing for DPMA procedures, extending national phase entry period for PCT applications, etc. Being a steady leader in innovation for several decades, Germany possess a “unique combination of a thriving culture of innovation, focus on exports and a robust SME sector”. In view of which, Germany has continued to be the world’s fourth-largest economy. The German government has recognised the driving force of such immense growth is their culture of innovation and building quality IP over the years.
It is evident that, with time, global players are shifting their focus to capitalising from IPR protection through active participation in knowledge based trade i.e., trade of technology and innovation, in order to strengthen their economy. With the rise in reliance on innovation over traditional methods of wealth creation, knowledge-intensive goods and services are emerging as dominant players in international trade as compared to labor intensive services. A report by Mckinsey reveals that global trade flows are now predominantly comprising knowledge-intensive products and services, accounting for an estimated $4 trillion in exports. While economies like the USA and Switzerland have been the dominant contributors to the knowledge based economy, with time, the emerging nations are gaining prominence in this economy particularly China, which is the second largest contributor to the Knowledge and technology intensive global trade.
While innovation and IP continue to be driving forces in the global economy, rise in innovation also impacts nations on a micro level as well. One of the prominent effects of innovation is increase in inbound Foreign Direct Investment(FDI), which further effectuates creation of bilateral ties for collaborating towards mutual growth.
Effect of growth in innovation on Bilateral relations
The innovation networks play a crucial role for nations, especially developing nations, to collaborate with global partners to allow exploitation of its intellectual assets for shared growth. These innovation networks, thus stem from bilateral ties between any two parties in the capacity of nations, firms, organisations etc.
An apt case study in this regard pertains to the Indian Economy and its current positioning in the global economy as a key player in the global value chains. In 2014, the Indian government launched the ‘Make in India’ initiative to promote the manufacturing and growth of innovation and entrepreneurship within India while providing incentives to attract strategic investments in manufacturing. Further, the Indian government implemented policy reforms to provide Production Linked Incentive Schemes (PLIs) to attract foreign investment. As a result, this initiative not only thrusted domestic manufacturing sector, but also positioned India as an attractive destination for global manufacturing and investments. Current data shows that “FDI inflow in the last 9 financial years (2014-2023: USD 596 billion) has increased by 100% over the previous 9 financial years”. Further, “more than 101 countries have invested across 31 UTs and States and 57 sectors in India over these years.” In view of such positive reforms, apart from growth in FDI, the Indian government is working to collaborate with various international governments by creating strategic partnerships to facilitate technology transfer and innovation. In 2019, Japan and India signed a Memorandum of Cooperation (MoC) on Information and Communication Technology (ICT). This agreement aimed to promote cooperation in areas such as 5G technology, Internet of Things (IoT), artificial intelligence (AI), and cybersecurity. It facilitated collaboration between Japanese and Indian companies in the ICT sector, fostering innovation and technology transfer between the two countries. Further, very recently, India entered into a momentous partnership with the USA, by signing the US led Artemis Accords to facilitate technology transfer of space and defense technology between India and the United States.
The bilateral partnerships were primarily designed to mitigate geopolitical and trading barriers. With time, the scope of such partnerships has evolved to account for the value of IP as part of the international negotiations. Another fascinating case study pertains to China. This nation’s approach to infusing innovation in its economy has been through strategic international bilateral and multilateral collaborations in diverse domains of joint academic research, technology transfer and licensing, foreign direct investment, and mergers and acquisitions. “China is the third-largest investor worldwide, with a stock of outward FDI estimated at USD 2.93 trillion at the end of 2022”. China’s focus on serving its domestic innovation goals has allowed for its successful bilateral trade collaborations with ASEAN, USA, EU etc, which has subsequently led to its robust economic growth.
Though the international partnerships are not limited to trade. In 2001, the Doha Declaration, was a milestone of international cooperation where all the members of WTO joined hands to create an effective system for protecting public health through access to intellectual property primarily via compulsory licensing. The notable aspect of this declaration is the ability of WTO members to reach a collective consensus over a conscious issue of granting key flexibilities to developing country members, with respect to granting non-voluntary or compulsory licenses. After the exceptional success of international cooperation through the TRIPS agreement over these 27 years, multilateral agreements like the Doha Declaration paved the future for building conscious global partnerships.
The increase in international trade collaborations of developing economies is a positive paradigm shift in the global economy, however, extensive exposure of the innovations from the developing nations to the world also poses a threat of imitation and technology leakages. While realizing this pertinent threat, developing nations are coming to ensure strong IP enforcement related provisions as part of their collaborations to limit any cases of infringement and unjust exploitation at any cost.
The present ecosystem today, proves that IP hones a broader influence over international relations beyond economic growth. The rights associated with intellectual property can either strengthen or strain diplomatic ties between nations, if proper mechanisms like trade agreements, diplomatic channels etc are not in place to ensure smooth trade.
CONCLUSION
This discussion encompasses the evolving nature of IP's influence on global interactions and its significance in shaping the geopolitical landscape. The potential significance of intellectual property in developing countries proves to be an incentive for further developments in the research, aiding the potential growth of technological advancement and economic status in this global competitive scenario. IP is part of our global challenges, and it can be a powerful catalyst for sustainable growth.
References:
OECD, World Top R&D Investors: Industrial Property Strategies in the Digital Economy (Brussels and Paris: European Commission and OECD, 2017), http://publications.jrc.ec.europa.eu/repository/bitstream/JRC107015/kjna28656enn.pdf.
McKinsey Global Institute (MGI) report, Global flows in a digital age: How trade, finance, people, and data connect the world economy, https://www.mckinsey.com/capabilities/strategy-and-corporate-finance/our-insights/global-flows-in-a-digital-age
https://pib.gov.in/PressReleasePage.aspx?PRID=1990377#:~:text=FDI%20inflow%20in%20India%20stood,provisional%20figure)%20has%20been%20reported.
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