New NAFTA must protect American innovation and creativity — not punish it

New NAFTA must protect American innovation and creativity — not punish it
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This week in Washington, D.C., diplomats from the United States, Canada and Mexico are re-negotiating the North American Free Trade Agreement (NAFTA), and the talks are "moving at warp speed," according to U.S. Trade Representative Robert LighthizerRobert (Bob) Emmet LighthizerMORE.

Many Americans feel NAFTA has disadvantaged U.S. workers, especially those who produce raw materials or industrial products like auto parts. Others have complained about U.S. companies relocating factories to Mexico to take advantage of lax labor regulations. The Commerce Department has called out Canadian softwood lumber subsidies.

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These are legitimate concerns and negotiators certainly need to address them. But they also need to address what's missing in NAFTA: strong protections that foster innovation and ensure competitive conditions for creative and innovation based industries. These protections — and a commitment by each nation to strong enforcement of these protections — are crucial to the livelihoods of millions of workers and to our economy. 

 

The economic value of creative and innovative-based industries is captured in a person or company's ideas and inventions. These assets are often protected through intellectual property (IP) rights such as patents, trademarks and copyrights, which prevent others from stealing or replicating original ideas without permission. 

These robust sectors wouldn't exist without laws and policies that respect the substantial value they add to their products and services and enable them to reap the benefits of their work. 

That’s because these businesses and inventors all face massive upfront costs. 

Film studios must spend hundreds of millions of dollars to create a major motion picture. Biopharmaceutical companies frequently spend billions to research and develop a single medicine with no guarantee that medicine will ever make it to market. Record companies spend more than a quarter of their revenue on discovering and promoting new artists. In addition to the massive financial investment, it’s also a massive time and resource investment with these companies often spending several years researching and developing a single product.  

If rivals could swoop in and produce cheap, knock-off copies of lifesaving medicines or pirate and distribute Oscar-worthy movies and Platinum-recognized albums, after all the hard creative work has been done, there'd simply be no way for the creators and innovators to earn back their investments.

Needless to say, that would cripple significant segments of the American economy. The biopharmaceutical industry alone contributes about $1.2 trillion to the U.S. economy. Copyright-intensive sectors contribute another $1.2 trillion to the economy. And, the software industry contributes over $1 trillion to the economy. All told, IP-intensive sectors added more than $6 trillion to U.S. GDP in 2014. 

Small businesses and start-ups rely on these same protections as they seek to enter existing markets or to establish new ones. And, with fewer resources to defend themselves against the sort of unfair competition made possible by the theft of their creations, small business innovators are relying on our trade negotiators to ensure a level playing field in the global marketplace.

Together, these IP-based start-ups, small businesses and larger companies support more than 45 million jobs in the United States with workers earning nearly 40 percent more than their counterparts in non-IP intensive sectors.

On top of the many benefits to the United States, the products developed by creative and innovative-based industries are shared around the world. The United States exports roughly $130 billion of IP-intensive products each year, and the use of IP rights accounted for the largest U.S. digital trade surplus of all services categories ($88.2 billion) in 2014.

Unfortunately, illegal actions that deprive inventors of the economic rights to their IP, such as counterfeiting, piracy and other intellectual property theft, threaten the ability of creators and inventors to continue investing and creating jobs. Likewise, it is critical for the United States to assure that safe harbors can’t be used to deprive creators and innovators of the real value of their works. For instance, U.S. companies lose a cumulative $250 billion annually to digital theft. 

Actions that suppress innovation and restrict inventors from reaping the benefit of their efforts are not restricted to the illegal actions of individuals, but often also involve measures implemented by foreign governments. For instance, many U.S. trading partners, including Canada and South Korea, impose draconian price cuts on innovative U.S. medicines — severely undervaluing U.S. innovation.

The policies of these governments contradict trade rules and jeopardize investment in the next generation of treatments and cures. And every IP-intensive industry faces these threats from foreign governments. Our trading partners must appropriately value innovation to level the playing field for U.S. companies. 

Innovation and creativity drive the American economy. This is our comparative advantage. To safeguard this, U.S. negotiators ought to insist on trade policies that respect innovation and creativity, and ensure strong protections for IP and creative content in the new NAFTA. If they succeed, the new agreement could become the gold standard for all future trade deals. 

Just as our raw materials and heavy machinery are valuable products and exports, so too are Americans' ideas. They spur investment, lower trade deficits and create jobs, all of which are critical to the continued success of the American economy.

Bob Barchiesi is the president of the International AntiCounterfeiting Coalition (IACC., James C. Greenwood is the president and CEO of the Biotechnology Innovation Organization (BIO). Charles H. Rivkin is the CEO of the Motion Picture Association of America (MPAA). Cary Sherman is the chairman and CEO of the Recording Industry Association of America (RIAA). Stephen J. Ubl is the president and CEO of the Pharmaceutical Research and Manufacturers of America (PhRMA).