Intellectual property rights, trade agreements, and international trade

Abstract

The global process of strengthening and harmonization of intellectual property rights (IPRs) systems has been intensified in the last twenty five years by the signing of trade agreements (TAs) that include chapters with intellectual property (IP) provisions and other trade-related issues. This paper provides a first exploration of whether and how the signing of TAs with IP chapters influences bilateral trade flows for a balanced panel of 110 countries and the period 1995–2013. We address methodological issues related to the assessment of the effect of TAs on bilateral trade. We use matching econometrics to evaluate the treatment of TAs with and without IP chapters. In addition, we estimate the effects of TAs on bilateral trade in a more dynamic fashion using a panel data approach based on the gravity model. Also, we perform our analysis for trade in low- and high-IP intensive products. We found that both types of TAs increase bilateral trade but TAs with no IPRs chapters have a stronger positive effect on trade. However, if we include lags to consider that TAs with IP chapters might need a longer implementation time, the net expected increase on trade is similar for both types of TAs. We also found that the effects depend on the development level of countries and on the IP intensity of products. We found a clear positive effect for developed countries, but we do not observe important gains for developing countries in all sectors and to all destinations derived from TAs with IP chapters. This raises the question of whether trade gains can compensate the effort related with IP reforms.