Energy and Climate Change Programme • Intellectual Property Programme

Encouraging International Technology Transfer

by Keith E. Maskus

Intellectual Property and Sustainable Development Series • Issue Paper 7

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Encouraging International Technology Transfer PDF • 0.46 MB

The international flow of technological information and its successful integration into domestic production and management processes are central to the ability of developing countries to compete in the global economy and to narrow the technological gaps they face compared to developed countries. Technological change is a principal source of sustained growth in living standards and is essential for transformation and modernization of economic structures. In most instances developing countries find it heaper and faster to acquire foreign technologies than to develop them with domestic resources. One reason is that such technologies may “spill over” into wider improvements in productivity, generating a multiple benefit.

International technology transfer (ITT) is a comprehensive term covering mechanisms for shifting information across borders and its effective diffusion into recipient economies. Thus, it refers to numerous complex processes, ranging from innovation and international marketing of technology to its absorption and imitation. Included in these processes are technology, trade, and investment policies that can affect the terms of access to knowledge. Policy making in this area is especially complex and needs careful consideration, both by individual countries and at the multilateral level.

International markets for exchanging technologies are inherently subject to failure for reasons discussed in this report. Accordingly, there is strong justification for public intervention. However, interests in shaping such intervention are not uniform. Technology developers, which to date reside overwhelmingly in developed countries, are interested in reducing the costs and uncertainty of making transfers, along with protecting their rights to profit from such transfers. They argue, with some justification, that effective protection and policy supports for markets are necessary to increase the willingness of innovative firms to provide knowledge of their production processes to firms in developing countries. Technology importers, still overwhelmingly in developing and least-developed countries, are interested in acquiring knowledge at minimal cost. Some observers argue that this objective is best met by refusing to protect the rights of foreign firms to profit from such transfers, or at least to restrict sharply their exclusive rights to exploit technology.

There is scope for mutually advantageous changes in policy regimes within these extremes. Thus, the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) within the WTO reflects, in part, an important multilateral effort to address these fundamental tradeoffs. However, the Agreement is widely criticized as being overly protective of the needs of technology developers and insensitive to the needs of developing countries (Commission on Intellectual Property Rights, 2002; World Bank, 2001). As discussed later, TRIPS does not address itself in practical ways to issues of ITT, confining its language to general statements.

The TRIPS Agreement is not the only component of the WTO that affects conditions for ITT. Also relevant are the General Agreement on Trade in Services (GATS), the Agreement on Trade-Related Investment Measures (TRIMS), the Agreement on Sanitary and Phyto-sanitary Standards (SPS), the Agreement on Technical Barriers to Trade (TBT), and the Government Procurement Agreement. More generally, trade policy influences incentives for engaging in technology trade.

Neither is the WTO the only international format in which ITT is addressed. Bilateral investment treaties (BITS) and various preferential trade areas (PTAS) affect incentives and conditions for technology use and marketing.

The investment environment within individual recipient countries may be the most important factor of all. Put simply, because much ITT is mediated through private markets, those countries with inadequate investment climates and poor absorptive abilities are unlikely to receive much inward technology flows under any circumstances.

This report aims to shed light on some of the complexities involved in ITT in order to support positive ecommendations for encouraging such flows to developing countries and least-developed countries. Its ultimate goal is to suggest an agenda within which individual and international policies may be structured for this purpose. In the next section I overview relevant theory and evidence on the nature and flows of ITT in order to understand the need for, and appropriate limitations on, public policy in this arena. Attention is paid market problems, determinants of ITT, channels of transfer, and the scope for spillovers.

Given the central role that intellectual property rights (IPRs) play, in section three I analyse their relationships with ITT. This provides a platform for discussing useful means of limiting the scope of exclusive rights, where such limitations might enhance ITT. However, the analysis also points up the difficulties of attaining benefits from this kind of precise industrial policy.

In the fourth section I turn to the WTO approach to ITT. After discussing the existing WTO provisions in this area I consider the policy options countries have in attracting technology, including regulation of IPRs. This analysis suggests a number of avenues that negotiators might pursue in improving TRIPS as regards incentives for technology trade.

In the final section I provide additional suggestions for multilateral policies that could encourage additional ITT. An important point is that the WTO approach is not the only avenue for achieving this objective.