Intellectual Property Protection as Strategic Trade Policy

James A. Brander^a
aUniversity of British Columbia

Abstract

Despite the WTO agreement on Trade Related Intellectual Property Rights implemented in 1995, international coordination of intellectual property (IP) policy remains contentious. This paper reviews recent research addressing whether IP policy should be standardized across countries, and whether IP protection has become overly cumbersome. It concludes that much IP protection is excessive (possibly reflecting regulatory “capture”) and that international standardization has regressive redistributive effects and unclear efficiency effects. Coordinated decentralization would be preferred. It also suggests that much intellectual property protection can be viewed as “strategic trade policy” whose primary effect is “profit-shifting” rather than the enhancement of economic efficiency.

JEL Classification: O34, F12, F5

Strategic Trade Policy Aspects of the Kyoto Protocol: Extracting Oil Rents

Zhihao Yu^a*
aCarleton University and SHUFE

Abstract

The paper has identified a unique aspect of the Kyoto Protocol from the perspective of strategic trade and environmental policy. While investigating the horizontal “profit-shifting”, vertical “rentextracting”, and “collusion-facilitating” effects, it focuses on the strategic behavior of the OPEC and the potential role of the Protocol in extracting oil rent back from the OPEC. It is also shown that even in the absence of environmental considerations, those member countries that export oil could benefit from the Kyoto Protocol. These results shall strengthen the argument for the sustainability of the Kyoto Protocol in the long run.

JEL Classification: F18, F12, H4

Keywords: Kyoto Protocol, trade and the environment, strategic trade and environmental policy

Strategic Trade and Transport Policies with Congestible Facilities

Andrew Yuen^a and Anming Zhang^a
aUniversity of British Columbia

Abstract

This paper investigates strategic trade and transport policies in situations where transportation of traded goods involves congestible facilities (here, roads) of both the importing and exporting countries. It is found that the presence of road congestion can have an important effect on strategic trade policies of both countries. In particular, with perfectly competitive exporting firms and hence an absence of the rent-extraction incentive, the importing country may still impose a positive tariff. Furthermore, when regional free trade blocs remove trade barriers, whether the countries can impose discriminatory road tolls between the local users and the traded-good traffic can affect: With uniform tolls, road tolls, while being regarded as a domestic (internal) policy, may serve partially as strategic trade policies. In this case, local highway users tend to be worse off than in the absence of trade liberalization. This analysis also provides a potential explanation for the “border effect.”

JEL Classification: F13, L13, L91

Antidumping Regulation and the Byrd Amendment:
Does Revenue Redistribution Dissuade Dumping?

Rod Falvey^a* and Sarut Wittayarungruangsri^b
aUniversity of Nottingham
^bFiscal Policy Research Institute, Bangkok

Abstract

The Byrd Amendment, which redistributed antidumping duty revenue to import competing firms, has been declared an unauthorized “action against dumping”. But does revenue redistribution dissuade dumping? Or is it a strategic trade policy? This paper uses a simple two-period duopoly model to evaluate these issues. An antidumping law provides an incentive for both firms to adjust sales so as to shift the dumping margin in their favor, and revenue redistribution strengthens this incentive for the filing firm. It is found that dumping is generally more prevalent and the dumping margin is larger with revenue redistribution, as a consequence. The profits of the filing (dumping) firm are generally, but not always, higher (lower). Consumers gain in one country and lose in the other, with the gainers and losers depending on the market size difference.

JEL Classification: F13, D43

Keywords: Antidumping, Byrd Amendment, strategic behavior

Subsidies and Countervailing Duties with Firm Heterogeneity

Jota Ishikawa^a* and Yoshimasa Komoriya^a
aHitotsubashi University

Abstract

The WTO allows importing countries to impose countervailing duties (CVDs) when subsidies provided in exporting countries cause serious injuries. This paper examines the effects of CVDs as well as those of subsidies. Using an international oligopoly model, direct export subsidies and capital subsidies are explored in the presence of heterogeneity among recipients. All recipient firms gain from export subsidies, but this may not be the case for capital subsidies. The maximum CVD allowed under the WTO rules may be more than enough to offset the injury caused by a capital subsidy.

JEL Classification: F12, F21, F23

The Time-Consistent Optimal Export Policy,
Market Structure, and Time-Non-Separable Preferences

Orlando Balbo^a,a Robert Driskill^*,^b and Andrew Horowitz^c
aUSACH University, Chile
^bVanderbilt University
^cUniversity of Arkansas

Abstract

The interplay of time-non-separable (TNS) utility and non-competitive market structure gives rise to a time-consistency issue that changes the optimal export policy prescription vis-à-vis what would obtain in either a time-separable utility setting or in a TNS setting in which firms could credibly commit to a path of output. In particular, in the time-consistent equilibrium both the traditional terms-of-trade exploitation motive for an export tax and the profit-shifting strategic-trade
analysis motive for an export subsidy coexist, and the optimal policy prescription depends critically on demand and cost parameters.

JEL Classification: F12

International Outsourcing and Imperfect Contract Enforcement

Larry D. Qiu^a* and Huayang Yu^b
aHong Kong University of Science and Technology and University of Hong Kong
^bXiamen University

Abstract

This paper examines the make-or-buy decision with regard to location (North and South) and productivity (firm heterogeneity) in a complete contracting model. In contrast to the usual incomplete contracting approach to outsourcing, this paper considers the situation in which outsourcing can be governed by contracts, although contract enforcement is imperfect. It shows that a firm’s productivity and regional differences in wage rates, fixed costs for vertical integration, fixed costs for outsourcing and degrees of contract enforcement jointly determine whether the firm will choose vertical integration or outsourcing, and whether they will locate in the North or the South.

JEL Classification: F12, F14, F23