Intellectual Property, Tariffs, and International Trade Dynamics

The emergence of global value chains not only leads to a magnification of trade in intermediate inputs but also to an extensive technology diffusion among the different production units involved in arms-length relationships. In this context, the lack of enforcement of intellectual property rights has recently become a highly controversial subject of debate in the context of the China-U.S. trade negotiations. This paper analyzes the strategic interaction of tariff policies and the enforcement of intellectual property rights within a quantitative general equilibrium framework. Results indicate that, in principle, tariffs could be an effective deterrent for weak protections for intellectual property. Moreover, weakening enforcement may be a strong deterrent for raising tariffs. These results combined indicate that there is scope for international cooperation on these fronts. JEL classification: F41, F42, F51, F21, F13 Key words: tariffs, intellectual property rights, technology capital transfers, international trade
1 Introduction In the wake of the 2008 financial crisis and the Great Recession, the world has seen a resurgence of protectionist policies. The Trump administration has pursued policies that [...]