Licensing is an important source of global technology transfer

15Mar 2017
Muharram Macatta
The Guardian
Licensing is an important source of global technology transfer

The economy industrializes. Birth rates fall as citizens gain better access to birth control and health care and move away from agricultural jobs in which having huge numbers of children is beneficial. Death rates fall as health care becomes better

Technology transfer provides opportunities for enterprises.

. The average life expectancy becomes longer, and the population ages slightly. The economy is in good shape and does not depend solely on one industry. The education system is improved and in better shape to increase the quality of jobs being put on the market.

The average income goes up and aim, there's a developed country. Contrary to popular belief, the countries with high birth rates/a lot of kids being born are not the developed countries, they are the poor countries. In poorer countries, birth control is not as common, and women are generally expected to pump out as many children as possible. Some of these children die so the more the better, in their eyes.

Think about it: the average family in North America or Western Europe probably has 1-3 kids. Couples often make the decision together when to have kids and when to stop. In underdeveloped countries, none of that planning happens. Birth control is rarely used, and usually frowned upon. In a developed country, the woman usually is held in equal regard and often has a job, but underdeveloped countries are generally still very sexist.

By sexist in a developing country, means that there are clear distinctions between what a man does and what a woman does in the home and in society, similar to how there are clear physical distinctions between a man and woman. A developed country often has a higher competition between man and woman as the women are regarding themselves as being equal to men, regardless of the obvious physiological differences.

This critique analyzes national and international policy options to encourage the international transfer of technology, distinguishing between four major channels of such transfer: trade in products, trade in knowledge, direct foreign investment and intra-national and international movement of people. A typology of country types and appropriate policy rules of thumb is developed as a guide to both national policymakers and rule making in the World Trade Organization (WTO). We argue that policies should differentiate between countries.

The policy recommendations made illustrate the more general need for such differentiation in the application of special and differential treatment of developing countries in the WTO. The importance of international technology transfer for economic development can hardly be overstated. Both the acquisition of technology and its diffusion foster productivity growth.

As invention and creation processes remain overwhelmingly the province of the OECD countries, most developing countries must rely largely on imported technologies as sources of new productive knowledge. However, considerable amounts of follow-on innovation and adaptation occur in such countries. Indeed, these processes effectively drive technological change in developing nations.

Developing countries have long sought to use both national policies and international agreements to stimulate international technology transfer. National policies range from economy-wide programs (e.g., education) to funding for the creation and acquisition of technology, tax incentives for purchase of capital equipment and intellectual property rights (IPRs).

A prominent episode of international efforts to encourage international technology transfer came in the late 1970s, when many developing countries sought a code of conduct to regulate technology transfer under United Nations auspices.

It is difficult to regulate international technology transfer effectively given the incentives for owners not to transfer technology without an adequate return and the problem of monitoring compliance with any rules that might be imposed.

This helps explain why international technology transfer is predominately mediated by national policies rather than by international disciplines. While some policies are subject to multilateral disciplines (e.g., subsidies, trade and IPR policies), the rules in place are primarily constraining in nature. They define limits on what is allowed.

Multilateral efforts to identify actions that governments should pursue to encourage international technology transfer are largely of a best-endeavour nature. Starting in the mid 1990s, multilateral disciplines on international technology transfer-related policies began to deepen.

The WTO Agreement on Trade-Related Aspects of Intellectual Property Rights calls on countries to enforce comprehensive minimum standards of IPR protection on a non-discriminatory basis. It also has provisions relating to international technology transfer.

“Article 7 notes that IPRs should contribute to the promotion of technological innovation and the transfer and dissemination of technology. Article 8.2 recognizes that countries may wish to adopt policies to prevent the abuse of IPRs by rights holders or the use of practices that adversely affect the international transfer of technology.

Finally, Article 66.2 calls on developed country WTO members to provide incentives to their enterprises and institutions to promote technology transfer to least-developed countries (LDCs). Licensing and FDI are often substitutes. Which form is preferable to technology owners depends on many factors, including the strength of IPR protection.

Patents, trade secrets, copyrights, and trademarks can all serve as direct facilitators of knowledge transfers. Licensing is an important source of international technology transfer for developing countries. They typically involve the purchase of production or distribution rights and the underlying technical information and know-how.

The general determinants of decisions on where to license are similar to those involving FDI. Thus, market size, anticipated growth, proximity, the stock of human capital, the ability to repatriate licensing rents, and the investment climate all affect licensing flows. Another factor is the confidence of licensor firms that proprietary technologies will not leak into the host economy.

To the extent that transferred technologies are easily copied, industrial espionage is common, or technical personnel can defect to competitor firms, foreign firms may prefer FDI. Where this is not possible, firms may choose not to engage in licensing at all or transfer lagging technologies. Successful transfer typically requires capacity to learn and investments to apply technologies into production processes.

This explains why countries with substantial engineering skills and R&D programs for adaptation and learning are greater recipients of licensing flows than others. International technology transfer flows depend on many factors, including proximity to markets, size, growth, competition conditions, human capital basis, governance, and infrastructure.

Many of these variables are affected by policy. Determining the optimal policy to maximize international technology transfer is difficult; despite an abundance of research on the channels of international technology transfer.

There is still much uncertainty regarding the extent of market failures and potential spillovers associated with alternative channels of international technology transfer, greatly complicating the identification of good policies. While licensing is an important source of technical transformation, successful transfer generally requires capacity to learn and adaptive investments by local firms to apply technologies.

Poor countries are most likely to achieve these gains by taking advantage of mature technologies in the public domain or available cheaply. Thus, policy could aim at improving information flows for domestic enterprises about such technologies.

A secondary priority in low-income nations could be programs to build skills and R&D capacity; Middle-income countries in which firms have engineering skills and active R&D programs are more likely to be the recipients of (and benefit from) significant licensing flows.

However, moving up the technology ladder requires expanding inward flows of voluntary licensing and encouraging local R&D and adaptation. To do this policy efforts could focus on reducing the costs of absorbing technology and enhancing the direct flow of international technology transfer.

The upper-middle income economies presumably require no active intervention in licensing, where technology markets may be expected to operate effectively. Note that our analysis in no case supports extensive government involvement in selecting technologies or placing restrictions on the use of technical information.

Thus, low-income countries would find it advantageous to enforce basic protection of trademarks, trade secrets, utility models, and industrial designs in order to encourage both local small-scale innovation and inward FDI in labour-intensive technologies.

However, it is inadvisable to move beyond minimum TRIPS standards, while requirements for patents, plant variety rights, and copyrights should be as precompetitive as possible. The LDCs may be expected to do relatively little in terms of enforcing foreign patent rights in any case unless there are dedicated funding mechanisms found for this purpose.

There is a strong case for forbearance by OECD governments in pursuing enforcement-related dispute settlement at the WTO. For their part, lower middle-income countries should take advantage of TRIPS flexibilities while offering somewhat wider scope of protection of IPRs.

Many of the suggestions made in this analysis WTO, and many can be made more credible by incorporating them into the WTO as specific commitments. One way this could be done is as part of a new approach to SDT can be implemented unilaterally.

However, some require action in the WTO, as suggested earlier on. Alternatively the various ITT-related policy initiatives could be embedded in a mix of existing WTO agreements and new ones. Whatever path is chosen, effectiveness requires clear criteria be used to differentiate between beneficiary countries.

We have not been very explicit about what such criteria might be beyond the broad income-based categories used above. This is an issue that will have to be decided by WTO members. Our preference is for broad, transparent categories to minimize transactions costs and uncertainty.

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