Academic journal article Economic Review - Federal Reserve Bank of Kansas City

Intellectual Property Rights and the Uruguay Round

Academic journal article Economic Review - Federal Reserve Bank of Kansas City

Intellectual Property Rights and the Uruguay Round

Article excerpt

Recent international trade negotiations have centered on completing a broad new agreement on trade rules in the Uruguay Round of the General Agreement on Tariffs and Trade (GATT). Conservative estimates show that if the pending agreement is implemented, it will stimulate world economic growth by adding over $200 billion annually to global output (Nguyen, Perroni, and Wigle).

A principal objective of the Uruguay Round is to update global rules covering traditional trade policies, such as tariffs, quotas, and export subsidies. More important, the pending agreement will also bring under multilateral GATT disciplines for the first time broad areas of commercial regulations that influence trade. Such areas as restrictions on services trade, foreign direct investment, and intellectual property rights are playing an increasingly important role in world trade. Moreover, unless suitable agreements on these emerging trade issues are reached in the GATT, they are likely to become the principal cause of future trade disputes.

Of these important new trade issues, intellectual property rights, or IPRs, play a critical role in economic growth and development. Intellectual property rights are patents, trademarks, and copy rights that grant exclusive rights to sell new products and thereby give incentives to undertake innovative research and creative activity. Currently, IPRs offer levels of protection that differ sharply across countries. In general, IPRs are strongest in developed countries and weakest in developing countries. As a group, developed countries are concerned that unequal protection of intellectual property results in a significant loss of revenue through unauthorized imitation and copying in various countries. In contrast, many developing countries feel that stronger IPRs would increase the costs of acquiring new technology and thus significantly raise the price of consumer products. This conflict underlies efforts to develop an international agreement on IPRs as part of the Uruguay Round.

This article examines the growing prominence of intellectual property rights in trade policy and discusses the likely outcome of an IPR agreement in the Uruguay Round. The first section of the article provides an overview of IPRs and presents evidence of their importance in international trade. The second section describes international differences in IPR policies and examines both the costs of these differences and the potential results of increased harmonization. The third section describes the likely form of an agreement on IPRs resulting from a successful completion of the Uruguay Round.


Intellectual property rights are policies that assign and protect the rights to earn income from innovative and creative activity. IPRs provide legal authority to control the dissemination and commercialization of new information and ideas and to enforce sanctions against their unauthorized use. IPRs play a critical role in economic growth and development because they affect the profitability of industrial research and the rewards to creative activity. At the same time, IPRs are controversial because stronger protection of property rights may come at the expense of higher prices and reduced availability of products. With the growth of world trade and increased foreign direct investment in the 1980s, IPRs have become a central issue in trade policy.


There are two general types of intellectual property. Industrial property refers to inventions of value to industry and commerce. Artistic property relates to artistic and literary works, such as books, pieces of art, filmed works, and recorded music. While most goods and services are easily classified into one of these two categories, certain new technological innovations fall between these traditional categories and do not yet have a standardized classification.


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