Intellectual Property, Tariffs, and International Trade Dynamics

Federico Mandelman and Andrea Waddle
Working Paper 2019-10
April 2019

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The emergence of global value chains not only leads to a magnification of trade in intermediate inputs but also to an extensive technology diffusion among the different production units involved in arms-length relationships. In this context, the lack of enforcement of intellectual property rights has recently become a highly controversial subject of debate in the context of the China-U.S. trade negotiations. This paper analyzes the strategic interaction of tariff policies and the enforcement of intellectual property rights within a quantitative general equilibrium framework. Results indicate that, in principle, tariffs could be an effective deterrent for weak protections for intellectual property. Moreover, weakening enforcement may be a strong deterrent for raising tariffs. These results combined indicate that there is scope for international cooperation on these fronts.

JEL classification: F41, F42, F51, F21, F13

Key words: tariffs, intellectual property rights, technology capital transfers, international trade link

This paper was written in preparation for the Carnegie-Rochester-NYU Conference on Public Policy. The authors thank seminar participants at the Bureau of Economic Analysis, the University of Virginia, and the Federal Reserve Bank of Atlanta for useful comments. The views expressed here are those of the authors and not necessarily those of the Federal Reserve Bank of Atlanta or the Federal Reserve System. Any remaining errors are the authors’ responsibility.

Please address questions regarding content to Federico Mandelman, Federal Reserve Bank of Atlanta-Research Department, 1000 Peachtree Street NE, Atlanta, Georgia, 30309-4470,, or Andrea Waddle, University of Richmond, Robins School of Business, 28 Westhampton Way, Richmond, VA 23173,

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