MPA on USMCA: Facilitates Growth

The statement below from Charles Rivkin, the head of the Motion Picture Association, is important, and especially for what it says about the size of the exports by US film, television, and streaming businesses. $17.2 billion annually is a lot of money that translates into a lot of jobs. I can't vouch for the number, but assuming as I do that it is fairly accurate, the case for taking actions to reduce piracy is self-evident! 

FOR IMMEDIATE RELEASEJanuary 16, 2020

Statement from Charles Rivkin on USMCA Passage in the Senate     

WASHINGTON  -- The United States Senate today passed the United States-Mexico-Canada Agreement (USMCA). The trade bill now heads to the President’s desk for signature.

The following is a statement from Motion Picture Association Chairman and CEO Charles Rivkin:

“The Motion Picture Association applauds the Senate for passing the USMCA today. Currently, the U.S. film, television, and streaming content industry accounts for $17.2 billion annually in exports and registers a positive trade balance with nearly every country in the world. The USMCA will help the future of our industry look brighter, particularly in Mexico. This deal includes provisions that facilitate the growth of the legal, digital market for creative content while improving tools to address the threat of online piracy, which costs the industry up to $71 billion of revenue lost annually. Future trade deals should account for the constantly changing digital landscape, and we look forward to working with the Administration to build on USMCA and further improve protections for our creative economy. I would like to thank the President, Ambassador Lighthizer, Leader McConnell and Speaker Pelosi for their leadership for passing this important trade agreement.”

TPP Is Beneficial for Consumers and Entrepreneurs around the Globe

The Cato Institute held an event today releasing an abstract of a forthcoming paper entitled “Should Free Traders Support the Trans-Pacific Partnership (TPP)?” Yes, free traders should support TPP and so should Congress!

TPP would expand global trade by eliminating roughly 18,000 tariffs that member countries have imposed on imports from the United States, lifting millions of people out of poverty around the world. By removing these trade barriers and others imposed by the United States, TPP would allow consumers and entrepreneurs in all member countries to enjoy more economic activity and lower prices than what the status quo offers.

From an intellectual property perspective, TPP would establish strong protections of IP rights in member countries, allowing artists and entrepreneurs around the globe to earn a return on their creative works and the labor that makes them possible. U.S leadership regarding strong IP rights protections will incentivize more investment, innovation, and economic growth at home and abroad.

See my July 2015 blog on how multilateral trade agreements create global IP protections.

Multilateral Trade Agreements Facilitate Global IP Protections

On July 9, 2015, the United Nations Foundation and the U.S. Chamber of Commerce hosted a briefing on Capitol Hill entitled “Global Impacts of American Intellectual Property.” The most significant takeaway came from Patrick Kilbride, Executive Director of International IP at the U.S. Chamber of Commerce’s Global IP Center (GIPC). He discussed the important role the United States should play in influencing developing countries to adopt stronger protections of IP rights. He pointed to GIPC’s February 2015 International Index, which scores and ranks countries based on different IP protections (patents, copyright, trademarks, trade secrets, international treaties) and enforcement mechanisms. (See my February blog for more on the index.)

Mr. Kilbride said that the best way for the U.S. to promote strong IP policies around the globe is through multilateral trade agreements. He mentioned that the most recent IP-related multilateral agreement, the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), is over twenty years old. TRIPS established only minimum standards for IP and many of the leading countries within GIPC’s International Index have now surpassed these standards. Because of this, Mr. Kilbride said that it is time for a new multilateral trade agreement with stronger IP standards. He added that the current one under negotiation, the Trans-Pacific Partnership (TPP), is an important place to start.

TPP would export American IP protections to developing countries in the Pacific realm, thus incentivizing more investment and innovation within those economies. However, additional economic activity would not be the only benefit of a stronger IP framework; mutual gains from trade are much higher with transactions that contain strong protections of IP rights rather than weak protections of IP rights.

Developing countries also would vastly benefit from TPP because an expansion of trading partners increases the number of buyers and sellers in a marketplace leading to more transparency, accountability, consumer welfare, and, ultimately, economic growth. This is why Mr. Kilbride declared that the global economy would be much better off if a trade agreement with a strong IP framework could be reached with heavily populated countries such as China, India, and Indonesia.

It is important to remember that gains from trade are mutually beneficial but not necessarily equal. If the TPP agreement is reached, the United States would benefit from the positive externality of robust IP protections in other countries and from lower trade barriers with countries in the Pacific realm. However, the positive impacts for developing countries would be much greater if they adopt American IP protections, incentivizing more economic activity and expanding trade throughout the global economy. Developing countries grow significantly faster than developed countries when there is an expansion in global trade.

That being said, TPP and all multilateral trade agreements with strong IP frameworks are very beneficial for all parties involved, including, most especially, consumers who benefit from increased competition and lower prices. 

Study Finds Low-Income Persons Gain Most from 'Sharing Economy' Markets

I have written several follow-up blogs to a Perspectives from FSF Scholars entitled “The Sharing Economy: A Positive Shared Vision for the Future,” which was published last year. These pieces have referred to the welfare gains consumers have experienced in the new “sharing economy.” Many new companies employing Internet-based applications, such as Airbnb and Uber, have emerged to provide competition to traditional business models and subsequently pushed down prices in their respective markets.

In the Perspectives from FSF Scholars entitled “The Sharing Economy: A Positive Shared Vision for the Future,” Randolph May and I stated the following:

These new online applications facilitate the exchange of goods and services in a way which easily enables a range of peer-to-peer connections and which reduces transaction costs. Individuals have always been able to sell or borrow goods and services through yard sales and community markets, but the Internet has changed the process with a faster, easy-to-use information exchange. For over a decade now, companies like E-bay and Craigslist have used the Internet to lower the transaction costs of modern commerce. But more recently, an influx of new companies and Internet-based applications has emerged enabling individuals to more easily “share” their underutilized things, including, for example, their homes, apartments, and cars.

In a newly-published March 2015 scholarly paper entitled “Peer-to-Peer Rental Markets in the Sharing Economy,” New York University professors Samuel Fraiberger and Arun Sundararajan empirically tested how rental markets within the “sharing economy” are impacting consumers. Professors Fraiberger and Sundararajan found, with statistical significance, that the benefits of “sharing economy” markets have a greater impact on low-income persons than high-income persons.

The new study states:

We highlight this finding because it speaks to what may eventually be the true promise of the sharing economy, as a force that democratizes access to a higher standard of living. Ownership is a more significant barrier to consumption when your income or wealth is lower, and peer-to-peer rental marketplaces can facilitate inclusive and higher quality consumption, empowering ownership enabled by revenues generated from marketplace supply, and facilitating a more even distribution of consumer value.

The explanation of the results is quite simple. Due to the accountability and transparency that many sharing applications provide about their users, the emergence of trust between individuals to share their goods and services has shifted consumer preferences from owning to renting. People who could not afford to own a house, car, or even a power saw can now more easily rent them from others and ultimately enjoy a higher standard of living than they would have otherwise. Additionally, people who would have owned a car or power saw in the past might now rent them instead, saving a significant portion of their income.

Of course, high-income people gain from the sharing economy as well. But the savings accumulated from a shift in owning to renting is more valuable to people with low incomes than to people with high incomes. In economic terms, this is the law of diminishing marginal returns. All else equal, each dollar earned is valued less than the previous one.

Similarly, low-income people, who already own goods that can be rented out, stand to gain more from these transactions than high-income people. The extra income from sharing a car with someone is much more valuable to a poor college student than it is to a wealthy professional. As I have written before, Airbnb, for example, makes traveling less expensive, not only because it provides competition – and often lower prices – to traditional hotels, but also because travelers can share their living space while away. (See here.) In other words, as a result of the sharing economy, the same traveler on the same trip may realize economic benefits in his or her capacity as both a lessor and lessee.

The emergence of the “sharing economy” has provided large welfare gains to the economy as a whole. Consumers have additional, and often less expensive, options in everyday markets, and entrepreneurial activity has been created by ordinary people because Internet-enabled applications have vastly lowered the barriers to market entry.  

Professors Fraiberger and Sundararajan’s paper is significant in its use of empirical data to conclude that access to peer-to-peer rental markets has the effect of increasing savings for renters and increasing incomes for suppliers. While this economic effect of the “sharing economy” is beneficial to all market participants, it proves most valuable to low-income persons. The paper makes for an interesting read as well as a scholarly contribution to the limited academic literature regarding the new “sharing economy.”