The economics of trips: International trade in information-intensive products

The Agreement on the Trade Related Aspects of Intellectual Property Rights' (TRIPs) has become highly controversial. Although trade in the most directly affected products is still a small portion of overall international trade, it is becoming more and more important. U.S. pharmaceutical firms sell

Solid numbers in this area are extremely difficult to obtain, in part because data collection systems are more oriented toward trade in goods. It is also partly due to definitional problems. For example, the "real royalty" for a sale of a pharmaceutical in a foreign nation may appear as a royalty from the foreign firm that sold it, or it may appear as a higher price on the exported product itself. Economically, these two cases are similar but there is a significant difference in balance of payments accounting. Nonetheless, the flow of royalties and payments is significant-and strongly favors the United States, which received over $36 billion in royalties in 1998 and paid out less than a third of that. 6 Moreover, international trade in these areas affects fundamental values including cultural sensitivities and human health.