Innovativeness and the design of intellectual property rights in preferential trade agreements: A refinement of the North–South explanation

Abstract

What explains variation in preferential trade agreements’ (PTAs) intellectual property rights (IPRs)? Conventional wisdom holds that PTAs include IPRs because in fear of losses from imitation of their innovations, the developed North demands IPRs, and the less developed South gives in to secure market access. However, recently also Southern innovators emerged, which urges for a refinement of this simple distinction. I argue that a PTA member state’s capacity to innovate shapes demand for IPRs. Innovative economies that rely on intellectual property (IP) generation favor IPRs because IP-reliant industries press for IPRs’ inclusion when governments negotiate PTAs with less innovative economies. By contrast, PTAs between non-innovators remain sparse in IPRs because no industries on either side demand IPRs. PTAs among innovators include IPRs as both expect gains. Analyzing novel data on IPR provisions in 495 PTAs signed between 1988 and 2018 and their signatory states shows that heterogeneity in PTA members’ innovativeness indeed increases IPR comprehensiveness. My findings help to understand preferences towards IPRs in PTA negotiations, shed light on reasons for varying IPRs, while offering a refinement of the conventional wisdom that adds to our understanding of PTA design.