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TPP and IP: The Economic Benefits of a Pacific Trade Agreement

January 9, 2014
Ndp Analytics recently published a study on the economic benefits of intellectual property rights (IP) in the Trans-Pacific Partnership. They find that 2/3’s of the “economic benefits for the U.S. economy and the 11 partner countries would come from IP-intensive manufacturing industries.” They conclude that “the stronger the protection of IP rights under the TPP, the greater the value of trade leading to greater economic growth, additional jobs created, higher incomes, and development across countries.” Here is more from the report:
"This report quantifies the extent to which IP-intensive manufacturing industries have contributed to the additional economic growth that is a result of the ten free trade agreements (FTAs) already in effect between the United States and 16 other countries in five continents. Then, using the historical data, quantifies the impact that IP-intensive manufacturing industries would have on the economic growth created by a prospective TPP. Among our main findings:

  • Innovation - the creation of something new or improved, or a new market practice - has made a significant contribution to the ten FTAs between the United States and other countries studied in this report. By eliminating tariffs and including IP provisions based on U.S. law and standards these FTAs boosted manufacturing exports in IP-intensive industries by 10.9 percent and pharmaceuticals and medicines by 15 percent, compared to an average of 7.3 percent in all industries and just 3 percent in non-IP-intensive industries.

  • Based on our findings about innovation and the existing FTAs, we estimate that the formation of the Trans-Pacific Partnership would increase U.S. manufacturing exports by $26 billion and U.S. gross domestic product (GDP) by $11 billion, and lead to the creation of as many as 48,000 additional jobs. Two-thirds of these economic benefits would come from IP-intensive industries.

  • As market access increases and trade barriers fall around the world, foreign affiliates of U.S. firms play an ever-more important role, something that is especially true in IP-intensive industries. American manufacturing companies currently sell some $424 billion worth of goods to their foreign affiliates, a figure that will increase by an additional $8 billion if the TPP is concluded. Since more than two-thirds of affiliates sales are in IP-intensive industries - which rely on patents, trademarks, and trade secrets - IP protections based on current U.S. law need to be adopted to secure long-term economic growth.

  • U.S. sales to foreign affiliates have a direct and positive spillover effect on local economies by adding jobs and physical assets. Assuming a finalized TPP maintains the same protections for intellectual property as currently exist under U.S. law, the creation of a trans-Pacific trade pact would produce combined benefits in the 11 other countries of $27 billion in additional sales, $6.4 billion in additional GDP, and 68,240 new jobs.