Want to bring down the US trade deficit? One easy way is to reduce software piracy.
At last count, the packaged-software industry was contributing a surplus of nearly $37 billion to the US balance of trade — and that was with one hand tied behind its back, because another $30 billion worth of sales are lost annually to software piracy.
If we bring software piracy rates down, all the job-creating, economy-growing benefits of open markets and free trade will follow. That is why it is so important for new trade agreements to include robust intellectual property protections.
Last fall, 37 countries, together accounting for more than half of world trade, worked out the Anti-Counterfeiting Trade Agreement (known as ACTA), which commits its signatories to criminalize end-user software piracy. It is just one recent example of how trade policy can help advance broad agreement on issues like IP protection. This year brings another such opportunity in the Trans-Pacific Partnership (TPP), a prospective multilateral pact between the United States, Chile, Peru, New Zealand, Australia, Malaysia, Brunei, Vietnam and Singapore. The Obama administration has rightly made it a priority for 2011.
Excluding the US, the other eight parties to the TPP represented a combined packaged-software market of $8.4 billion last year — a figure that could have been nearly $2 billion higher if not for the effect of software piracy. The direct impact of that piracy on US software sales and exports came to more than $1.1 billion. Unfortunately, two of our TPP negotiating partners, New Zealand and Chile, appear to have embarked on a misguided effort to use the TPP as an occasion to roll back or dilute IP protections.
New Zealand’s actions are especially upsetting because it is also working on a domestic patent law that would deny protection for software-related inventions — in direct violation of commitments it made to the World Trade Organization under the agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). In a similar fashion, Chile has failed to implement numerous IPR obligations in its FTA with the United States.
As I wrote recently in a letter to US Trade Representative Ron Kirk, if these trading partners are unable or unwilling to live up to their existing obligations, then they should have no place at the table in crafting new obligations in the TPP. There is too much at stake.