In my previous posts the concept of Intellectual Property Regimes in agriculture was introduced. In this post the general research findings about these regimes and how they affect market conditions will be presented.
The empirical studies focusing on this topic use different variables to account for the effect IPR membership influences trade and market conditions. National Populations, GDP, IPR treaty membership, proximity to importing and exporting agricultural markets, and Tariffs are among a selected few. The “Gravity Model” is most commonly used when examining bilateral trade relations.
In order to understand the results of such studies, we need to define the market effects associated with implementing IPR regimes. The impact of IPR’s on trade can be explained through two trade effects.
The Market Expansion effect increases the demand for seed imports in countries with strong patent regimes. This is because strong property laws reduce the chance of imitation in the importing country (Awokuse and Yin 2009). The chance of imitation being the ability of the importing country to reproduce the imported seed by replanting the seeds produced from harvested plants. Therefore exporting countries are more open to increasing trade because their technology is protected against piracy (Awokuse and Yin 2009).
The Market Power effect occurs when an exporter of an agricultural technology withholds exports to extract monopoly rents from the importing market (Yang and Woo 2005). Given that the market is protected by property right regimes, and local firms do not have the technological capacity to replicate the patented technology, an exporting firm restricts exports to command higher prices (Yang and Woo 2005). The impact of IPR’s on trade will depend on the relative strength of each of these effects.
In the following post we will examine one particular study conducted to examine the impact of IPR membership on bilateral trade in agricultural products, and the results are interesting.