Intellectual property rights and dispute settlement in the World Trade Organization

With the advent of the TRIPS Agreement, international disputes about governmental regulation of intellectual property rights (IPRs) are now subject to adjudication within the WTO dispute resolution mechanism. The standard model used by economists to explain dispute settlement procedures is misleading, for the process is not about preventing countries from exercising market power. Rather, the system is designed to resolve political market failures arising within countries that would be harmful to market access for foreign firms. These issues arise particularly in the context of IPRs, which may be used as cross-market bargaining chips. This possibility is illustrated by the petition of Ecuador to suspend concessions in this area for European firms in the context of the EU - Banana case. The scope of such an approach remains unclear and there are many fundamental questions deserving close analysis. In this paper I make several basic points relating to the economics of IPRs and the World Trade Organization's (WTO) dispute settlement process. These comments underscore the fact that the injection of IPRs into the global trading system raises a new dimension for settling disputes.