Using a North–South trade model with innovation and imitation, we investigate the interaction of intellectual property rights (IPR) protection and trade protection. We show that unlike a Southern tariff, a Northern tariff supplements IPR protection and is not necessarily a beggar-thy-neighbor policy. The globally optimal Northern tariff increases as IPR protection in the North or the South decreases. Global welfare may rise as Northern tariff increases, but necessarily declines as Southern tariff increases. This suggests that pushing for freer trade in the South is more urgent than in the North in innovation-intensive sectors where IPR protections are weak in both regions.
Bibliographical noteThe authors benefit from presentation at the Midwest International Economics Conference held at Purdue University (1999) and seminars at Hitoshubashi University, Osaka University and the University of Hong Kong. An earlier version of this paper was circulated with the title "trade and intellectual property rights protection: by whom and for what?". The work in this paper has been supported by the Research Grants Council of Hong Kong, PR China (Project no. CityU 1145/99H).
QIU, L. D., & LAI, E. L-C. (2004). Protection of trade for innovation : the roles of Northern and Southern tariff. Japan and the World Economy, 16(4), 449-470. https://doi.org/10.1016/S0922-1425(03)00025-2