The Role of Intellectual Property in NAFTA Modernization

North America is having a political moment. Parties are not just polarized, but at times seem worlds apart. How leaders in North America react to the current paradigm will shape the future of the region for years. The decisions we make on the North America Free Trade Agreement (NAFTA) today will have ramifications for decades to come.

The path forward for North America is to double down on our strengths, including long-established U.S. leadership—even dominance—in the knowledge economy. Reinforcing competitive advantages in the innovative and creative sectors is the surest way to keep North America at the forefront of the global economy and preserve its ability to help shape the global order.

To achieve this in the current environment requires an eyes-wide-open view by all parties involved of the possibilities of a joint investment in a proven economic model for the conception, development, and commercialization of breakthrough products, services and technologies.

Innovative and creative activities take place on a socially transformative scale when countries foster an ecosystem that balances risk with incentive. This can be achieved by providing a property right that is sufficiently durable, offering a reliable basis for investment in high-risk, high-cost, and often long-term research and development undertakings.

Such an ecosystem necessarily entails:

• Intellectual property (IP) is recognized and vested in law with the form of a property right;
• IP rights are available to all industry sectors without discrimination;
• They are readily enforceable;
• They are fully transferable as a normal article of commerce without undue government interference;
• Provisions of law surround the property right with a high degree of legal certainty to prevent its erosion or foreshortening;
• Limitations or exceptions to an intellectual property right are carefully defined, transparent, and predictable; they make an exception to a rule, not become the exception that makes the rule;
• Governments refrain from inappropriate use of policy or economic leverage to impinge on the property right and impede the return of fair value for innovation.

On a regional basis, to maximize the benefit of economic cooperation:

• The intellectual property rights of a party from one country are respected by the others and assured as favorable treatment as that accorded a domestic party;
• Intellectual property laws are enforced on a cross-border basis to give them universal application; and;
• To the greatest degree possible, IP rights are standardized on a regional basis to provide a seamless facilitation zone for creative and innovative activity.

A region-wide commitment to these principles in support of the innovative and creative sectors of North America could be the linchpin that makes a broader agreement possible to the benefit of all three economies.

The United States is a global leader in innovative and creative output and has an obvious stake in seeing strengthened IP standards put in place worldwide. Meanwhile, Mexico and Canada have even more to gain from an enhanced ecosystem for innovators.

The results of the Global Intellectual Property Center’s latest International IP Index illustrate the socio-economic gains that could be made by Canada and Mexico through an enhanced North American IP standard. A statistical analysis reveals strong positive correlations between IP strength and achievement of a host of desirable socio-economic outcomes.

For instance, Canada has made significant public sector investments in research and development related to artificial intelligence, yet has struggled to commercialize resulting innovations within its own borders.

A modernized NAFTA that gives investors renewed confidence in Canada’s commitment to IP rights, and that includes a commitment to facilitate licensing of related rights, could go a long way toward localizing innovative product development activity in Canada.

Leadership in biotechnological innovation requires robust IP protection

Similarly, Mexico enjoys various advantages, including its proximity to the United States, which makes it an attractive market for life sciences investment. But gaps in Mexico’s IP framework restrain its opportunity to participate fully in the innovative lifecycle for bio-pharmaceutical products.

In both cases, Mexico and Canada have an opportunity to leapfrog numerous global competitors, leveraging an enhanced NAFTA to put themselves among the elite group of countries that invest in IP-led innovation and creativity at the very highest levels to produce the vast majority of the world’s breakthrough technologies.

So let’s have a meeting of the minds. It will require a political leap of faith by Canada and Mexico to see beyond the immediate moment with a clear understanding that the United States will continue to be a trustworthy and reliable partner, one whose institutional strength remains rooted in the U.S. Constitution and an abiding commitment to the rule of law. Likewise, it will require the United States to be willing to take “yes” for an answer, recognizing that America’s—and North America’s—future competitiveness, growth, and prosperity reside squarely in the knowledge economy.

About the authors

Patrick Kilbride

Kilbride is senior vice president of the Global Innovation Policy Center (GIPC).