TRADE-RELATED
FIGURES OF INTELLECTUAL PROPERTY AT THE WTO:
THE CASE
OF IP ROYALTIES AT THE GLOBAL LEVEL
COMMUNICATION
BY COLOMBIA – FOR DISCUSSION
_______________
1 INTRODUCTION
1. Since the adoption of the TRIPS
Agreement in 1995, WTO members have adhered to a unified set of standards for
IP protection, explicitly framed as "trade-related". However, during
its implementation[1], it is striking how
little attention is paid to trade-related metrics of intellectual property.
Indeed, in the nearly thirty years since, there has been scant systematic
discussion or data collection on IP trade flows at the WTO. While WTO
statistics, monitoring reports, and Trade Policy Reviews provide detailed,
granular analysis of trade in goods and services, coverage of IP trade is
limited to a few or not consistent efforts. For instance, the WTO and its
members conduct in-depth studies of trade balances and flows in goods and
services, even at highly disaggregated levels, but offer little comparable
analysis for IP: Which Members are net recipients of IP payments? Which
countries run persistent deficits? Are deficits and surpluses in IP flows
relevant for trade analysis? Are these financial flows significant enough to
warrant systematic tracking in WTO statistics?
2. Although the WTO has conducted
occasional analyses of IP trade figures, these have been ad hoc and lack the regularity and
comprehensiveness of other trade monitoring activities. As a result, there is a
significant information gap regarding "trade-related" IP figures at
the WTO.
3. Fortunately, some relevant data
can be extracted from official sources. The IMF and the World Bank,
drawing on official central banks data, maintain robust but underutilized
databases on international financial payments for the use of intellectual
property. These payments—typically known as royalties—are recorded as distinct
items in countries 'Balance of Payments' statistics. Indeed, when two private
parties agree to the authorized use of an IP right (patents, trademarks,
copyrights, industrial designs, trade secrets, or franchises), the transaction
usually involves a royalty fee, often paid in foreign currency[2].
These cross-border payments are systematically reported in national accounts
and aggregated by the IMF and World Bank.
4. Hence, every country's official
Balance of Payments includes an item: "Charges
for the use of intellectual property," split into "payments"
and "receipts" based on the
transaction's direction.
5. The World Bank compilation, easy
and convenient to use, is available at: https://data.worldbank.org/indicator/BX.GSR.ROYL.CD,for receipts,
and, https://data.worldbank.org/indicator/BM.GSR.ROYL.CD?name_desc=false, for payments
6. Despite the richness of this
data, it is largely overlooked in global trade discussions. The following
section presents key preliminary observations, which highlight the scale and
importance of these figures and advocating for their systematic consideration
in WTO deliberations on the global IP framework.[3]
[1] Colombia has maintained an interest on the impacts of the global
implementation of the TRIPS Agreement, as previously reflected in its
submission IP/C/W/712 of 15th of April 2024.
[2] Charges for the use of intellectual property are defined by the IMF as: "payments
and receipts between residents and non-residents for the authorized use of
proprietary rights (such as patents, trademarks, copyrights, industrial
processes and designs including trade secrets, and franchises) and for the use,
through licensing agreements, of produced originals or prototypes (such as copyrights
on books and manuscripts, computer software, cinematographic works, and sound
recordings) and related rights (such as for live performances and television,
cable, or satellite broadcast). Data are in current US dollars".
[3] Before going on, an important caveat: royalties are just a modest
proxy for the actual direct monetary costs of IP use across borders. Indeed,
they capture only "a part" of what happens in the real world: a
significant part of transfers related to IP can be shifted to other statistical
lines, like for example, payments of services or goods that have "embedded"
the pricing of the IP, or transfers of profits between companies (that have
previously received such payments in local currency and do not appear in the
BoP) to their international Headquarters. In addition, M&As and general
investments can comprise a sizeable portion of IP costs in their operations,
that are later recorded as part of other types of transactions and not as a "royalty
for the use of IP". Hence, the statistical line of "royalties for the
use of IP" in the Balance of Payments of individual countries is
definitely a partial one. But as figures go, it is a good one as it is
universal (every country has a BoP), steady (since many years ago), and
comparable (because it is a monetized figure, contrary to the indirect costs).