Intellectual property, tariffs, and international trade dynamics

• Published in: Journal of monetary economics Vol. 109; pp. 86 - 103
• Main Authors: Mandelman, Federico S., Waddle, Andrea
• Format: Journal Article
• Language: English
• Published: Elsevier B.V 01.01.2020
• Subjects: Intellectual property rights; International trade; Tariffs; Technology capital transfers; International trade; F41; F51; F21; F42; Tariffs; Technology capital transfers; F13; Intellectual property rights
• ISSN: 0304-3932; 1873-1295
• DOI: 10.1016/j.jmoneco.2019.10.013

•The model incorporates international diffusion of technology capital into a dynamic trade model.•Policy levers are tariffs and imperfect protection of intellectual property.•The data suggest that IP is diffused across countries through arms-length transactions.•Tariffs are effective in deterring appropriation of technology capital.•Decreased protection of IP is effective in retaliating against increased tariffs. The emergence of global value chains leads not only to a magnification of trade in intermediate inputs, but also to extensive technology diffusion. Moreover, the lack of enforcement of intellectual property rights has recently become a subject of debate in the context of China-US trade negotiations. In this paper, the interaction between tariffs and the enforcement of intellectual property rights is studied within a quantitative general equilibrium framework. Results indicate that tariffs could be an effective deterrent for weak protections for intellectual property and weakening enforcement of intellectual property rights may be a strong deterrent for raising tariffs.