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Going after the 'IP Axis of Evil'
Scripps Howard News Service


April 15, 2005

More and more, America's economic future is tied, not to what we manufacture, but to what we invent, create, discover and think up.

In general, this is a very good thing. The value that's added through intellectual property - a formula for a new medicine, for example, or the script of a movie or a program for software - is far greater than what's added through making products that other countries can make as well, often at lower cost.

But there's a danger, too. Intellectual property, or IP, is easy to steal - especially compared, say, to an automobile factory. Some nations specialize in reverse-engineering: discovering the chemical composition of a drug. Others wink at domestic factories that make rip-off software and movies. The main protection for IP lies in patents and copyrights, recognized internationally and enforced vigorously.

Lately, some powerful developing countries are putting the global regime that protects IP in serious jeopardy. They're not playing by the rules. The three main culprits are China, India and Brazil - a group that James Pinkerton, New America Foundation fellow and former White House policy adviser, calls the "IP Axis of Evil."

It's fashionable to gripe that lower-paid tech workers in India, especially, profit from the outsourcing of U.S. jobs. In fact, the number of such jobs is tiny, and the United States wins more from insourcing (foreign companies hiring Americans) than it loses through outsourcing.

Plus, such an exchange of jobs is perfectly fair in competitive global trade - and it's good for both sides.

But the theft of IP is something else entirely. It puts America's crown jewels - our brilliance at innovation - in peril. What's especially worrisome is that the Bush administration and Congress are slow off the mark in fighting the threat.

On April 4, the U.S. trade representative delayed a decision on whether to punish Brazil for violating a special agreement with developing countries, the Generalized System of Preferences. Brazil is the 11th-largest economy in the world and a major trade partner and competitor of the United States (Brazil even makes planes that compete with Boeing). Under GSP, we let $3 billion in Brazilian goods enter our country duty-free.

Four years ago, the U.S. trade representative put Brazil on its watch list for chronic flouting of our copyright laws. According to the International Intellectual Property Alliance, "estimated losses due to the piracy of copyrighted materials (by Brazil) totaled $785 million in 2003" - and that doesn't even include losses from patent piracy.

Brazil's leftist president, Luiz Lula da Silva, recently demanded that pharmaceutical companies agree to "compulsory licensing" of patented drugs for AIDS. In other words, Lula wants to steal the formulas and make his own - in violation of World Trade Organization (WTO) agreements.

As for the WTO itself: Brazil, along with India, was a key player in scuttling the 2003 meeting in Cancun, Mexico, by making demands it knew the United States and Europe could not meet. Talk about hypocrisy! Brazil's average agricultural tariff is 37 percent; India's, 112 percent; America's, 12 percent.

Last month, China, assisting its fellow axis member, threw its support behind Brazilian candidate Luiz Felipe Seixas Correa to become the next head of the WTO itself. That's like picking an armed robber as a Supreme Court justice.

Meanwhile, radical anti-globalization activists are trying to change the focus of the World Intellectual Property Organization, the U.N. agency that encourages IP and oversees global agreements. Naderite Jamie Love and his cohorts are trying to enforce a "development agenda" at WIPO's meeting this week in Geneva. Such a shift would allow WIPO to support efforts by countries like Brazil to ignore patents, thus making yet another U.N. agency into a tool for left-wing groups that oppose free markets.

Roughly 15 percent of U.S. economic output and 10 percent of employment are rooted in IP industries like software, biomedicine and entertainment - responsible for a big chunk of our exports. Unlike outsourcing, IP theft really does steal American jobs and threaten our economic and military security.

After the U.S. trade representative decided to give Brazil another extension of its preferred position under the Generalized System of Preferences, Rep. Mark Foley, R-Fla., blasted the administration for a decision that "flies in the face of all logic."

He's right. It's time to get tough with China, India, Brazil and any other countries that breezily violate patent and copyright laws.


James K. Glassman is a fellow at the American Enterprise Institute
and host of the Web site

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