Over 200 Economics & Law Professors Urge Congress To Reject Corporate Sovereignty Provisions In Trade Deals

from the more-of-this-please dept

We've written quite a lot for years about the massive problems with "corporate sovereignty" provisions in trade agreements -- so-called "investor state dispute settlement" (ISDS) provisions -- that allow companies to "sue" countries for regulations they feel are unfair. These aren't heard by courts, but rather by "tribunals" chosen by the companies and the countries. Some supporters of these provisions claim that there's really nothing wrong with them because they help encourage both investment in different countries and more stable and fair regulations.

If that's the case, though, why are over 200 economics and law professors signing a letter to Congress telling them to reject any trade agreements with these provisions?

Through ISDS, the federal government gives foreign investors – and foreign investors alone – the ability to bypass that robust, nuanced, and democratically responsive legal framework. Foreign investors are able to frame questions of domestic constitutional and administrative law as treaty claims, and take those claims to a panel of private international arbitrators, circumventing local, state or federal domestic administrative bodies and courts. Freed from fundamental rules of domestic procedural and substantive law that would have otherwise governed their lawsuits against the government, foreign corporations can succeed in lawsuits before ISDS tribunals even when domestic law would have clearly led to the rejection of those companies’ claims. Corporations are even able to re-litigate cases they have already lost in domestic courts. It is ISDS arbitrators, not domestic courts, who are ultimately able to determine the bounds of proper administrative, legislative, and judicial conduct.

This system undermines the important roles of our domestic and democratic institutions, threatens domestic sovereignty, and weakens the rule of law.

In addition to these fundamental flaws that arise from a parallel and privileged set of legal rights and recourse for foreign economic actors, there are various flaws in the way ISDS proceedings are meant to be conducted in the TPP. In short, ISDS lacks many of the basic protections and procedures of the justice system normally available in a court of law. There are no mechanisms for domestic citizens or entities affected by ISDS cases to intervene in or meaningfully participate in the disputes; there is no appeals process and therefore no way of addressing errors of law or fact made in arbitral decisions; and there is no oversight or accountability of the private lawyers who serve as arbitrators, many of whom rotate between being arbitrators and bringing cases for corporations against governments. Codes of judicial conduct that bind the domestic judiciary do not apply to arbitrators in ISDS cases.

The letter appears to have been organized by famed law professor Laurence Tribe and famed economist Joseph Stiglitz -- as an update to a very similar letter they sent last year -- with many fewer signatories.

Many of the people who signed are really well-respected (including some I consider friends), but both Tribe and Stiglitz are fairly well-known for where they come from on the political spectrum -- and it would have been nice to have found equal weight from other parts of the political spectrum to balance this letter out a bit. It's still a good letter, and one whose message I agree with, but I fear that many in Congress will just dismiss it as "another Tribe/Stiglitz letter." That's too bad, because it really is a good letter.

Filed Under: corporate sovereignty, economists, isds, joseph stiglitz, laurence tribe, law professors, tpp, trade agreements

Nobel Prize Winning Economist: Intellectual Property Reinforces Inequality, Hurts The Economy

from the say-that-again dept

Nobel prize winning economist Joseph Stiglitz, who has spoken out before about how intellectual property hurts innovation and makes globalization problematic, has written a fantastic op-ed for the NY Times about how intellectual property increases inequality and how that can lead to much greater harm for the economy.

Much of his article is about the Myriad Genetics case, in which the Supreme Court recently struck down gene patents. Stiglitz points out how this is a good thing, and uses the Myriad case to show how patents in particular can do tremendous damage. He talks about why the Supreme Court ruling was important, but notes there's much more to be done. Of course, since he doesn't mention it, I'm guessing that the piece was either written before Myriad thumbed its nose at the ruling by filing a bunch of new patent lawsuits about the new competitors that have sprung up in its wake, or Stiglitz wasn't yet aware of that fact. Either way, the fact that this is how Myriad has responded really only makes his argument that much stronger.

Most of the article focuses on the history of Myriad, how it's basically putting lives in danger and disproportionately harming the poor, who can't afford $4,000 for a simple test. But, the really interesting part is in the last third of the piece, where he digs a little deeper into how this kind of "inequality" actually has a tremendous cost on the economy that is rarely taken into account. In part, this is based on the fact that patents allow for companies to just try to seek a larger part of the existing pie, taking away the incentives to create larger pies -- which is where real innovation and economic growth occur.

Some of the most iniquitous aspects of inequality creation within our economic system are a result of “rent-seeking”: profits, and inequality, generated by manipulating social or political conditions to get a larger share of the economic pie, rather than increasing the size of that pie. And the most iniquitous aspect of this wealth appropriation arises when the wealth that goes to the top comes at the expense of the bottom. Myriad’s efforts satisfied both these conditions: the profits the company gained from charging for its test added nothing to the size and dynamism of the economy, and simultaneously decreased the welfare of those who could not afford it.

While all of the insured contributed to Myriad’s profits — premiums had to go up to offset its fees, and millions of uninsured middle-income Americans who had to pay Myriad’s monopoly prices were on the hook for even more if they chose to get the test — it was the uninsured at the bottom who paid the highest price. With the test unaffordable, they faced a higher risk of early death.

And, while you can argue that the poor always have it tougher, and if they can't afford the test, that's an unfortunate part of life, Stiglitz has a detailed response to that as well. The question is not just whether or not the Myriad tests for BRCA1 and BRCA2 are helpful in their own right, but what would have happened in the absence of the current situation. And Stiglitz argues, compellingly, that Myriad has actually made things much worse. Without such patents, it's likely that the same genes would have been discovered anyway and we'd have more, better and cheaper genetic testing for a much wider selection of the population.

Advocates of tough intellectual property rights say that this is simply the price we have to pay to get the innovation that, in the long run, will save lives. It’s a trade-off: the lives of a relatively few poor women today, versus the lives of many more women sometime in the future. But this claim is wrong in many ways. In this particular case, it is especially wrong, because the two genes would likely have been isolated (“discovered,” in Myriad’s terminology) soon anyway, as part of the global Human Genome Project. But it is wrong on other counts, as well. Genetic researchers have argued that the patent actually prevented the development of better tests, and so interfered with the advancement of science. All knowledge is based on prior knowledge, and by making prior knowledge less available, innovation is impeded. Myriad’s own discovery — like any in science — used technologies and ideas that were developed by others. Had that prior knowledge not been publicly available, Myriad could not have done what it did.

Further, on top of that, keeping more people alive to do more and contribute more to society, while not having to take on the costs of breast cancer, also has tremendous positive impacts on the economy, which are almost entirely ignored by most who view the situation through the single prism of "patents = incentive for innovation."

Indeed, one of the important insights of Robert W. Fogel, a Nobel Prize-winning economic historian who died last month, was that a synergy between improved health and technology accounts for a good part of the explosive economic growth since the 19th century. So it stands to reason that intellectual property regimes that create monopoly rents that impede access to health both create inequality and hamper growth more generally.

He further notes that supporters of strong patent laws have "overemphasized their role in promoting innovation," and that many of the greatest and most important innovations of the modern era were not driven because of the opportunity to patent them, or even to directly profit from them. As he notes, there are many, many other ways to pay for modern innovation without creating the burdensome negative impacts of today's intellectual property system, harming overall innovation while increasing inequality and increasing prices.

It's great to see such concepts make their way to the NY Times. Hopefully it leads more people to begin to recognize just how broken today's intellectual property systems are.

Filed Under: economics, gene patents, health, inequality, intellectual property, joseph stiglitz, patents
Companies: myriad genetics

Nobel Prize Winners Continue To Explain How IP Hurts Innovation

from the time-for-a-change dept

We've discussed multiple times in the past about how economics Nobel laureate Joseph Stiglitz believes that patents hurt innovation. Michael Geist points us to Stiglitz's latest speech, where he teamed up with John Sulston, a 2002 Nobel Laureate in Physiology/Medicine, to point out how the patent system is stifling innovation. It's great to see Stiglitz continue to point out the problems caused by the patent system (and great to see other Nobel winners noticing as well). While Stiglitz has normally focused on pharmaceutical patents, in this speech he also touched on software patents. While Stiglitz hasn't yet come around to believing that patents should be abandoned, he is quite convinced that they're doing plenty of harm in many cases, often locking up innovation and costing society a lot more than they benefit it.

Filed Under: economics, john sulston, joseph stiglitz, nobel laureates

Nobel Prize Winning Economist Explains How IP Rights Are Part Of The Globalization Problem

from the not-the-solution dept

Kevin Donovan writes in to point us to the transcript of a fascinating speech by Nobel Prize-winning economist Joseph Stiglitz on Making Globalization Work. We've written about Stiglitz in the past, for his explanation of how patents often do more harm than good economically. In this speech, which is covering a much broader topic (globalization), he makes a few really good points about why what politicians put in place as "globalization" isn't matching what economists say should happen in a globalized economy -- and intellectual property comes into play. The main point is just that most "free trade" agreements have absolutely nothing to do with free trade. While they're labeled as such, they're usually filled with restrictions on trade that benefit the bigger countries. A true free trade agreement would, as he notes, be short and sweet and easy to write: basically, there are no restrictions on trade. Instead, what we get are supposedly "free trade" agreements that are really pushed by industry representatives for certain industries to benefit themselves.

In particular, he points out how this is done with intellectual property. This is something we noted last year when we couldn't understand why a "free trade agreement" would guarantee monopolies on intellectual property. That seemed like the opposite of free trade. As Stiglitz notes:

"The Uruguay Round TRIPs Agreement, which is Trade-Related Intellectual Property, has nothing to do with trade. They just put "trade-related" because they had to put that in there to have it in a trade agreement. That was the real ingenuity.

There was already an intellectual property organization, called WIPO, the World Intellectual Property Organization. But they wanted the trade ministers to do it because the trade ministers didn't know anything about intellectual property, and that meant they were much more vulnerable to the influences of the special interests."

They put in provisions that were explicitly designed to reduce access to generic medicines. Just to highlight why that's important, a generic AIDS medicine, for instance, costs under $300 for a year's treatment. The brand name is $10,000. If your income is $500 a year or $300 a year, or even $5,000 a year, you can't afford $10,000 a year for the brand name. So when they were signing that agreement in Marrakesh, they were signing the death warrants for thousands of people in sub-Saharan Africa. That was the consequence.

The entire piece is a good read, but as Kevin pointed out, it's interesting to see how Stiglitz fits some of these pieces together to show why globalization hasn't lived up to its promise.

Filed Under: economics, globalization, intellectual property, joseph stiglitz