Published
December 09, 2022
The world is charging ahead in pursuit of new market-opening trade agreements, as explained earlier in this series, but in recent years Washington policymakers have been sitting on trade policy’s sidelines. The United States derives huge benefits from trade and trade agreements, but a bolder, forward-leaning approach is needed to ensure U.S. competitiveness in the decades ahead. This week’s installment looks at how trade and innovation go hand in hand.
Trade and innovation are both essential to U.S. prosperity — and it turns out they are closely related.
Effective trade policy can empower America’s comparative advantage in the innovative and creative industries. The U.S. boasts the largest film industry in the world, supporting 2.2 million U.S. jobs and $17.3 billion in exports.
Likewise, the U.S. is the global leader in biopharmaceutical innovation, with American innovators answering the call to develop the vaccines and treatments needed to lead us beyond the global pandemic. In fact, 80% of COVID-19 therapeutics emerged from America’s small and medium-sized biotechnology innovators, illustrating the power of the U.S. small business community.
Trade supports specialization in the areas where the U.S. leads the way and empowers businesses to share the fruits of American innovation and creativity with global consumers. For these industries to continue to thrive, effective intellectual property (IP) rules must be in place in markets abroad.
Historically, U.S. trade policy has set the rules of the road for trade in innovative and creative goods and services with considerable success. Past U.S. free-trade agreements (FTAs) with countries at all levels of development — from Singapore to South Korea to Mexico — have created a framework which empowers trade in IP-intensive industries.
The U.S. Chamber International IP Index — which benchmarks the IP framework in 55 global economies — illustrates how countries with FTAs with the U.S. outperform their regional counterparts on IP-enabled competitiveness.
Take Morocco, for example. Morocco is the highest performing middle-income IP Index economy. Trade agreements with the U.S. and the EU have supported the development of a high-standard IP framework that places Morocco far ahead of its regional counterparts in the Index rankings.
Similarly, we can see the success of IP-enabled trade policy in Latin America. Just the partial implementation of IP provisions the U.S.-Mexico-Canada Agreement gave Mexico the second largest improvement in overall score in the 2021 Index. Likewise, economies included in the Central America-Dominican Republic Free Trade Agreement (CAFTA-DR) score ahead of their Latin American counterparts without such trade agreements in place.
When countries make a conscious policy choice to invest in stronger IP policy, the economic benefits are real. The Index illustrates how economies with the most effective IP frameworks are more likely to enjoy a host of socioeconomic benefits which all countries strive to achieve. For example, countries with strong IP frameworks are 40% more open to foreign investment, 46% more likely to attract venture capital, and 25% more competitive in global markets.
Trade policy can empower innovators and creators to thrive in global markets or it can stop them in their tracks. Nowhere is this more evident than through the World Trade Organization’s proposal to waive IP rights on COVID-19-related therapeutics and diagnostics. The dangerous proposal would eliminate the framework that supported the response to the pandemic and endanger the future of innovation both in the U.S. around the world.
U.S. leadership on IP is more important than ever. Through strong trade policy, the U.S. can support broader global participation in innovation ecosystems through IP capacity building. When America leads on trade, we can ensure that all global consumers can benefit from IP-driven innovation and creativity.
By contrast, when America sits on the sidelines, we risk depriving the world of the innovation that will be critical to supporting future global challenges, from pandemics to energy security to climate change.
The Administration has noted that “in the long term, economic competitiveness will be largely defined by our ability to harness technology, promote innovation, [and] participate in the digital economy.” The Chamber couldn’t agree more. As we seek to build a more resilient economy, IP-enabled trade will be critical.
The U.S. Chamber looks forward to working with the Administration to ensure that both our domestics policies and those in international institutions support the next generation of innovation and creativity.
Read more in our Lead On Trade Series:
- Why Americas Must Lead on Trade
- The Benefits of Trade for America
- The Benefits of Trade Agreements in America
- How America’s Small Businesses Benefit from Trade
- Why Manufacturers Need a Bold Trade Agenda
- How U.S. Farmers and Ranchers Depend on Trade
- Why Services Are the New Frontier in Trade
About the authors
Kelly Anderson
Kelly Anderson is the Chamber's Senior Director of Health and Drug Policy at the Global Innovation Policy Center.
