Patent Laws and Global Inequality: How Corporations Shaped Global Trade RUles
In the Globalization Paradox, Dani Rodrik names many aspects of hyperglobalization that hinder the development of developing countries. He mentions: “Unlike the GATT, which left poor nations essentially free to use any and all industrial policies, the WTO imposes several restrictions (page 198).” Among these restrictions on industrial policy, Rodrik mentions export-processing zones (that helped with the development of Mauritius, China, and many countries in Southeast Asia), policies that require firms to use more local input (domestic content requirements), and patent and copyright laws.
TRIPS: The WTO’s Global Patent Agreement
The one agreement regarding patent and copyright laws Rodrik tells us to pay special attention to is the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). And since he says so, I will do so in this blog post.
Put simply, TRIPS is a global agreement that, since 1994 sets common rules for how long and under what conditions intellectual property is protected, making sure all WTO members can enforce these rules (Landau, 2005).
Some research suggests that this agreement will serve as another set of institutions lowering transaction costs and therefore increasing trade worldwide (Campi & Dueñas, 2019; Sherwood, 2000).
The theoretical grounds supporting the existence of this contract claim that this agreement could help with:
Training skilled workers (human resources)
How universities share technology
Growth of start-up funding (venture capital)
Agricultural development
Public administration and courts
How TRIPS Helps the Rich and Hurts the Poor
In theory, TRIPS should be called ‘raise all boats’. The important caveat, however, is that this should happen under “the right institutional arrangements (Sherwood, 2000).” Nevertheless, developing countries tend to have generally weak institutions (judicial and enforcement systems) compared to the developed world (Trebilcock & Prado, 2011).
In contrast, it is the stronger institutional environment of the developed countries makes these laws easily enforceable and so makes these agreements work in the favor of countries that have such strong institutions (Bekkers et al., 2002; Campi & Dueñas, 2019).
The fact that developing countries have weaker institutions makes TRIPS a multilateral agreement that clearly puts the developed world at an advantage in the international playing field over developing countries.
Secondly, developed countries have been found to experience heavy gains in the long-term aftermath of intellectual property (IP)-heavy agreements, we cannot say the same about developing countries (Campi & Dueñas, 2019). This is because wealthier economies (namely the US, EU, and Japan) already have strong pharmaceutical, tech, and creative industries that rely on patents and copyrights.
When TRIPS tightens these rules, products manufactured in developed countries are better protected and they can export them.
On the other hand, for developing countries, IP rules often mean high costs of reform (to strengthen their institutions) and a loss of policy flexibility; for example, fewer options to produce cheap generic medicines or to protect farmers’ seed practices due to so-called TRIPS-plus provisions that require countries to obey even tougher rules than previously set by the original TRIPS (Asobo, 2025; Hirimuthugodage, 2011). Since most of their exports are in low-IP goods like raw materials or textiles, they don’t gain much extra trade from these agreements (Campi & Dueñas, 2019).
A clear example of TRIPS-plus rules aftermath is the US–Jordan Free Trade Agreement, which forced Jordan to adopt stricter patent and data exclusivity rules than TRIPS. This delayed the arrival of generics and drove up medicine prices, with little evidence of wider trade benefits. Countries are by no means officially obliged to respect these provisions under international law but pressured to do so by stronger players on the international trade playing field in deal negotiations (Mercurio, 2006).
Next to the immediate consequences on access to medical and other goods, the opportunity cost of TRIPS for many emerging economies might be immense, as we could see in the past that the absence of such global standards was crucial for the industrial strategies that led to the development of countries such as South Korea or Taiwan in the 1960s and 1970s (Rodrik, 2011, p. 199).
It is evident that rich countries see real trade benefits of this agreement, while for poorer countries the pay-off is limited and often doesn’t justify the effort and cost of adopting stricter IP rules and restricts their industrial strategies in ways that reduce long-term growth potential.
TRIPS: An Example of Global Governance by Non-State Actors
The case for the negative impact of TRIPS on developing countries seems to be quite clear. Why, then, was such an agreement adopted in the first place? The answer lies in power imbalances, both among states and between states and corporations.
First, it can be argued this agreement is the symptom of the unequal distribution of power in the WTO described by Paul Collier already in 2007. The largest economic players on the global field have higher bargaining power over smaller players. This often results in signing agreements and deals that are not beneficial to developing countries and acts as a feedback loop where developing countries find themselves in increasingly more stagnant and in more difficult trading environments shaped by the developed world (Collier, 2007).
Secondly, as Duncan Matthews (2002) shows, TRIPS was not born out of a neutral desire for fairer trade rules but was largely driven by lobbying from powerful multinational corporations in pharmaceuticals, technology, and entertainment.
These firms, backed by governments in the US, EU, and Japan, shaped the agreement to protect their own interests. Once in place, business groups became the main guardians of TRIPS, ensuring strict enforcement and pushing for even stronger TRIPS-plus standards in later trade agreements (Matthews, 2003; Rohit, 2007).
So far, there has been limited progress on removing these standards or at least minimizing their negative effects.
The so-called TRIPS flexibilities should in theory reduce prices and improve access to medicines, mostly for HIV/AIDS treatments and have done so in the past (’t Hoen et al., 2018).
However, the systematic review of 91 papers on the impact of intellectual property rules on access to medicines from 2022 has found that in practice the use of these flexibilities is limited. Political pressure, lack of legal capacity, and fear of trade retaliation often stop countries from using these flexibilities and therefore the negative impact of TRIPS-plus in reality remains large, making medicines more expensive, delaying the entry of generics, and raising costs for patients and governments (Tenni et al., 2022).
TRIPS and the Future of Fair Trade
TRIPS was meant to support global trade to the benefit of all members of the WTO. Nevertheless, in reality it fuels inequality globally by protecting the interests of the developed world and its corporations. Furthermore, TRIPS has been found to raise the prices of medicine and crops essential for securing decent living standards for citizens of the developing world. It limits policy space and blocks the industrial strategies that once fueled rapid growth in East Asia.
For developing countries, the promised gains rarely outweigh the costs. If global trade rules are to serve development rather than hinder it, TRIPS must be redesigned in the interest of the Sustainable Development Goals instead of multinational corporations.
