Special 301, special interests, and developing countries

Another year, another Special 301 report on the making. The Special 301 is an annual report from the Office of the U.S. Trade Representative (USTR) prepared under section 301 of the Trade Act, in which countries are given disadvantageous marks based on how they enforce intellectual property rights, or whether those countries impose access restrictions to their markets to IP related industries.The report assigns countries either Priority Watch List or Watch List status, whereby investigations are started which may potentially lead to retaliatory trade sanctions against a country. Needless to say, with the U.S. market being such an important destination for many developing countries, the Special 301 is often criticised as a very clear manner in which the U.S. can impose its own IP agenda to other countries, particularly developing economies.

One of the most controversial aspects of the Special 301 report is the role given to industry groups (see this article on Techdirt). The Business Software Alliance, the International Intellectual Property Alliance, and various other groups submit their own recommendations about which countries should be placed in the watch lists, making this one of the most industry-driven aspects of U.S. trade policy. This makes sense from a purely commercial perspective, intellectual property is an important part of U.S. trade, and it would be naive to believe that a topic of such economic relevance would not be subject to close scrutiny in U.S. trade circles. Perhaps what annoys some people, including Yours Truly, is that the Special 301 is often presented more as a carrot to allure countries to change their IP policy for their own good, when what it really is is a big stick in service of the large American IP industries.

Last year there was a very interesting submission from the IIPA which included countries that had governmental positions friendly towards open source. I am delighted to report that this year’s submission from the IIPA has removed most mention of open source software, with the exception that it recognises that when calculating software piracy, the figures do not include FOSS. Despite this clear improvement, the IIPA submission still makes for some depressing reading in parts, specially with regards to developing countries. The IIPA suggests that Priority Watch List in 2011 should include Argentina, Canada, Chile, China, Costa Rica, India, Indonesia, the Philippines, Russia, Spain, Thailand, Ukraine, and Vietnam. They suggest for Watch List status: Belarus, Brazil, Brunei, Greece, Israel, Italy, Kazakhstan, Kuwait, Lebanon, Malaysia, Mexico, Poland, Romania, Saudi Arabia, Singapore, Tajikistan, Turkey, Turkmenistan, Uzbekistan.

Perhaps the International Intellectual Property Alliance has a deceiving name, it is international in the same way that the World Series adequately represents the entire globe. Its stated goal is to “reduce copyright piracy and market access barriers to secure American creative jobs, increase exports, and grow the economy”, which begs the question about why it is not called the American Intellectual Property Alliance, but I digress. To fulfil its role, it is logical that it should look for places with high piracy rates to include them in their IIPA suggestions. What is perhaps rather puzzling is the inclusion of so many developing countries in their suggestions. The common thread in those countries appears to be precisely the presence of high levels of copyright infringement in those countries mentioned in their submission. The report for Mexico is a clear example that is repeated in many of their documents:

“While cooperation with the federal authorities was good, state and municipal government anti-piracy efforts continue to be weak, with few of these local entities working at all on combating illegal trade and piracy. Thus, a key
missing element is a high-level national anti-piracy plan that both enhances and coordinates federal, state and municipal enforcement activities.”

The submission for Brazil is another example of this common thread:

“Notwithstanding some recent progress, high levels of copyright piracy pose serious challenges for all sectors of the copyright industry in Brazil. The challenge is especially acute in the online environment, where legitimate services find it difficult to establish a foothold because so much pirate product is readily available through peer-to-peer piracy, links to offshore cyberlockers, and other channels.”

My native Costa Rica fares even worse, as it has been upgraded to Priority Watch List. What has this country done to deserve such treatment? The IIPA states that:

“The single largest obstacle that the copyright industries face in developing an effective anti-piracy campaign in Costa Rica is the lack of enforcement action, particularly on the part of prosecutors. Many criminal procedures and sanctions were amended in 2008 to facilitate prosecutions, and rights holders are hopeful that the newly appointed Attorney General will follow-through with a more proactive IP enforcement stance. Creation of a specialized IP Prosecutor’s Office is long overdue. No progress was made on implementing government-wide software legalization, as required by CAFTA-DR.”

So, lack of enforcement, and most importantly, lack of political will to make IP enforcement a top priority, is seen as enough of a faux pas to warrant inclusion in the copyright naughty list. Fair enough, as mentioned, copyright revenues are an important part of U.S. trade balance sheets; and let’s face it, those could use with some boosting nowadays. What one has to think is whether U.S. trade policy is aligned with the internal policy of the countries mentioned by the IIPA. The important question in international IP enforcement in the last decade has been precisely that, should developing countries make fighting piracy their priority? IP enforcement costs money, so should poor countries allocate scarce resources in the interest of U.S. industries?

Don’t get me wrong, IP enforcement is useful for local economies as well. Small and medium copyright industries are cropping up all over emerging markets, Brazil, Mexico and Costa Rica are just some examples of such thing. Local film, music and software industries rely on adequate enforcement to grow. But is it in the best interest of these countries to enforce policies that do not benefit people in Guadalajara, Rio and San José, but benefit people in Hollywood, Redmond and Marin County?

Moreover, the copyright industries are often the architects of the lack of enforcement present in many developing countries. For example, the legitimate digital download market is disabled in a large number of developing countries, I do not have access to Amazon´s MP3 Music Store, and the iTunes store in Latin America is woefully depleted. If I want to help film-makers and purchase a DVD, it will cost me double what it would cost in the U.S. Games are the same, FIFA 2011 costs $100 USD in your average Costa Rican mall. And even when one manages to purchase a legitimate DVD or Blu-ray, it will not play due to region code restrictions. Software is so unbelievably expensive that many SMEs have no other option but to obtain pirated copies.

So the fight against piracy has to consider that people in developing countries often cannot pay the exorbitant prices asked, but it should also make it easier for those who want to be honest to stay honest. Why not start by making it easy for us to purchase stuff online? Until that happens, digital piracy will remain high.