[asia-apec 227] APEC and intellectual property rights

[daga]

APEC and intellectual property rights
Walden Bello
Manila Chronicle
October 27, 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.