APEC and intellectual property rights

By Walden Bello, Manila Chronicle, 27 October 1996

During the APEC Senior Officials' Meeting (SOM) in Davao in the third week of August, the United States delegation lobbied hard to get the forum to agree to fully liberalize trade in information technology and products.

The proposal encountered opposition from many of the other countries, with one key official telling the Financial Times that Some lesser developed APEC members thought the proposal as it stands would be of more benefit to the US than its trading partners. He added: A lot of countries felt they were at an embryonic stage of IT development and it might be premature to cut tariffs to zero.

APEC's Place in Washington's IPR Agenda

APEC has become a forum in which the United States has not hesitated to advance measures that would mainly benefit its corporations' position in information technology. Perhaps even more important than the proposal for zero tariffs on information technology has been Washington's effort to make APEC a mechanism for enforcing so-called intellectual property rights (IPRs) of US firms.

Here APEC is seen as a vital addition to unilateral trade diplomacy, which has lately focused on enforcing TRIPs on the key East Asian trading partners, all of whom are high up on on the Special 301 watch list of the US Trade Representative.

APEC is also seen as an extension of the landmark Trade Related Intellectual Rights accord (TRIPs) of the General Agreement on Tariffs and Trade (GATT), which is seen in Asia as a major victory for Bill Gates and the US high-tech industry, which is said to supply and own copyright to 70 percent of the world's software.

The TRIPS agreeement provides for a generalized minimum patent protection of 20 years, increases the duration of the protection to semi-conductors or computer chips; institutes draconian border measures against producers judged to be violating intellectual property rights; and places the burden of the proof on the presumed violator of process patents.

Yet despite such provisions, American business groups think it is not strong enough. Recently, President Clinton's Advisory Committee for Trade Policy and Negotiations (ACTPN) complained that the transitional periods for developing countries to adopt the GATT TRIPs regime are overly long. The ACTPN warned that unless the US pushes countries to hurry and adopt measurers to make their intellectual property regimes GATT-compatible, the end result could be a de facto expansion of transition periods.

Speeding up the legislation and enforcement of IPR commitments is also a key objective of Microsoft Corporation, America's leading software giant, which is carrying out a massive campaign in Asia to compliment Washington's IPR diplomacy. Microsoft has especially targetted China, Thailand, Hong Kong, and the Philippines.

APEC as TRIPs Enforcement Mechanism

APEC is seen by Washington, the ACTPN, Microsoft and the US-dominated Intellectual Property Rights Alliance as lending valuable reinforcement for the enforcement of the GATT TRIPs accord. Not surprisingly, last year, the Eminent Persons' Group, reflecting similar concerns as the ACTPN and Microsoft, strongly recommended that APEC members cut in half the transition period to full TRIPs enforcement that countries agreed to in the Uruguay Round, which would mean a deadline of 1998 instead of 2000 for APEC's developing countries.

The combined US government and corporate offensive has successfully pushed for IPRs to be one of the prime action areas for liberalization commitments under the Individual Action Plans (IAPs) submitted for the Subic Summt. A close look at the recently released IAPs for Thailand and the Philippines shows that American pressure in this area has born fruit. While Thailand's commitments in most areas are very general, they are fairly specific when it comes to IPRs in the period 1997-2000. The Thais promise to amend their patent and trademark legislation to conform to WTO standards and to enact legislation on the protection of plant varieties, trade secrets, geographical indication, and integrated circuits.

The Philippines, for its part, promises to complete aligning its legislation with the TRIPs accord ahead of the 2000 deadline as well as to increase criminal penalties for infringement. The tough Philippine position is due, according to insiders, to the strong influence of Microsoft Philippines' chief Michael Hard, who is said to have helped draft the information technology section of the Philippine government blueprint APEC and the Philippines: Catching the Next Wave.

Profits Versus Rent

Washington's moves on IPR in APEC are not surprising, according to the noted information technology specialist Roberto Verzola: Protection for intellectual property rights has become the number one US demand in all bilateral and multilateral negotiations. For Verzola and many other information experts, Special 301 of the US Trade Act and the GATT TRIPs accord are vital to US interests. But they are not about protecting legitimate profits derived from market competition. They are about the most feudal of exactions—rent.

As Verzola puts in in a recent article: To preserve the potential for big profit, information economies [like the United States} must prevent information sharing. They have therefore developed elaborate legal structures based on the concept of intellectual property rights, which gives them the power, backed by the State, to prevent the copying and sharing of information, to maintain their artificial scarcity, and preserve their monopoly superprofits.

The GATT TRIPs agreement, however, goes against the very nature of knowledge, which tends to be universalized quickly after pioneering inventions are made. The history of technological advance has largely been one of collective advance. When the first societies invented settled agriculture, they had not proprietary obsession that drove them to control their neighbors' ability to better their lot. When Gutenberg invented the printing press, he was not interested in controlling its diffusion in order to make money. Even Henry Ford was not interested in patenting the assembly line.

But in the person of Bill Gates, who is now seen as the paragon of the US hi-tech industry, we encounter a different animal. This acknowledged technological genius is less interested in the social benefits of his technological innovations than in using them to amass money and power for himself and his corporation, Microsoft.

Foreclosing Industrialization by Imitation

The relatively loose diffusion of technology has been a major factor in the waves of industrial development that have swept the globe in recent times. The US industrialized in the 19th century by using but paying very little for British manufacturing innovations, as did the Germans. Japan industrialized by borrowing liberally from US firms, but barely compensating the Americans for them. And the Koreans industrialized by copying quite liberally but with little payments to US and Japanese designs and process technologies.

Since the British industrial revolution, early industrialization in the countries that have since become leading powers was industrialization-by-imitation. The GATT TRIPs accord threatens to make industrialization-by-imitation a thing of the past. As the United Nations Conference on Trade and Development has warned, the TRIPs regime represents a premature strengthening of the intellectual property system ... that favors monopolistically controlled innovation over broad-based diffusion.

A few decades ago, the US government and US firms were less uptight about others' unauthorized use of US technology. There were several reasons for this. IBM, for instance, tolerated the massive cloning of IBM PCs by East Asian producers in order to make the PC the computer industry's global standard, thus outmaneuvering its rival Apple strategically.

Another reason was quite simply, simple superiority complex. As David Halberstam points out in his book The Reckoning, General Motors and Ford were quite loose in sharing technology with the Japanese in the 1950s because they never believed that the Japanese would succeed in making cars that would even remotely rival an American-designed car.

A third reason was the priority Washington placed on the Cold War alliance against communism, which made the Americans cast a bening glance at Japan, Korea, and Taiwan's deviations from protectionism and deviations from free-market policies as well as their unauthorized use and adaptation of the technologies of American firms.

The change in the US attitude stemmped from a variety of factors, including the end of the Cold War and the growing strength of the East Asian economies, which increasingly became perceived as economic rivals as they built up trade surpluses with the United States. But most important was the realization that with the speeding up of the microelectronic revolution, possession of high tech and the capacity to innovate based on sophisticated complex knowledge became the key determinant of both the long-term profitability of American firms and the strategic dominance of the US in the global economy. And to maintain the US strategic edge, it was important not only to lead in innovation but also to control the rate at which others could innovate.

To achieve the latter, it was essential to develop an international legal regime, backed by punitive measures, that would allow US firms monopoly over the most advanced innovations. Thus the GATT TRIPs Accord, which has been a devastating setback for the natural process of the universalization of knowledge and a giant step towards its privatization and monopolization.

The Rise of Rentier Capitalism

One of the likely consequences of this trend is the emergence of rentier capitalism in the high-tech industry. Already, an increasing part of the income of some US firms, like Texas Instruments, derives from royalty from past innovations rather than profits based on current market performance.

Another consequence might be the dampening of high-tech innovation in the industrializing countries. For when any company wishes to innovate, say in chips design, it necessarily has to integrate several patented designs and processes, most of them from US hardware and software specialists like Intel, Microsoft, Texas Instruments and IBM. As Korean firms like Samsung and Hyundai have bitterly learned from their experience of being targetted for intellectual property violations by US government agencies, exorbitant royalty payments to what one analyst has described as the US high-tech mafia keeps one's profit margins down while also reducing incentives for indigenous innovation based on the creative integration of updating patented technologies.

Pirates Versus Feudal Overlords

It is true that the people that US Commerce Secretary Mickey Kantor derisively describes as 'pirates' are out to turn a profit for themselves and can hardly be said to be acting consciously in the service of humanity. But, in spite of their private motivations, pirates are, objectively, acting as the great democratizers of high-tech, making it available to millions of people who would not otherwise have access to it as an exorbitantly priced product.

The real obstance to the democratization of high technology are today's grand seigneurs, the American high-tech transnationals that, in classic Orwellian doublespeak, are advancing their high-stakes game of defending techno-monopoly in the name of defending intellectual property rights. Make no mistake about it: They will make the protection of those rights, alongside trade and investment liberalization, the centerpiece of APEC.