Is Joe Hockey going to bust some monopolies? His IP referral gives us hope
|
Version 0 of 1. Corporate rent seeking is the great Australian pastime. It’s certainly one of our most dynamic growth industries. As we saw with the carbon and mining taxes – the necessary Senate votes were supplied by a party named after a man who stood to gain millions of dollars from the repeal – companies are getting very good at twisting public policy for their own pelf. The Abbott government exists largely because of this rent-seeking machine. But by referring Australia’s intellectual property arrangements today to an inquiry by the Productivity Commission, Joe Hockey has given us a little hope that he might go to town on some monopolies that have long been cosseted by governments. This particular referral is pretty brave. The PC has already made it clear that it has a dim view of the way intellectual property is treated in Australia’s trade agreements – and it’s unlikely to say anything nice about intellectual property in the Trans-Pacific Partnership agreement, a trade deal which is important to the government but one that the PC has been prevented from assessing in any other respect. Related: Coalition pressed on China free trade agreement – politics live Intellectual property owners are numerous and obviously not all of them are nefarious. Governments enforce intellectual property monopolies through patent and copyright laws to induce people into coming up with new ideas or creating things. If I invent a new type of disco ball, the Australian government guarantees me that no one else in the country will be able to produce it without paying me money – at least for a time. But basic economics tells us that monopolies overcharge and undersupply. They also have the ability to charge different prices in different countries depending on how much they think people in each jurisdiction are willing to pay, which is partly why Australians pay over the odds to watch films and read books. One of the biggest rackets on the PC’s hit list, though, should be pharmaceutical patents. Currently, drug companies can receive a special five-year extension on the length of an Australian patent (allowing them to sell a patented drug at much higher prices). This exceptional provision is supposed to compensate these companies for the time that is spent getting government approval for the actual product. But, as a review undertaken for IP Australia found, there is no evidence that this special carveout has increased pharmaceutical innovation one jot. Whacking these monopolies by reducing the length of the extension could save Hockey more than $200m a year on the Pharmaceutical Benefits Scheme. Some other monopolies will be harder to break, thanks to the restrictive promises we’ve made in otherwise useless bilateral trade agreements. Intellectual property is, like wine or cars, something that can be traded across international borders. Not surprisingly, when agreements are negotiated, countries that export intellectual property like to export restrictive laws on using intellectual property too, since that raises the price of copyrighted and patented material. Ever sung “Happy Birthday” to a friend on the stroke of midnight at a pub? Technically, you need to pay royalties to some colourless Warner/Chapell lawyer. In the Australia–US “free” trade agreement signed under the Howard government, we agreed to extend the term of copyright in Australia from 50 years to 70 years after death. This meant that Happy Birthday went back into copyright, where it will stay under government protection until the end of next year. (The song was thought to have been written in the nineteenth century.) Related: Australia walks away from Trans-Pacific Partnership trade deal talks Australia’s change brought us in line with United States, which did the same thing in the Copyright Extension Act of 1998, named after the less distinguished half of Sonny and Cher. Sonny Bono’s wife, Mary Bono, fiercely lobbied for the act in Congress after Sonny’s death. And guess who was coincidentally receiving giant royalty checks from Warner/Chapell? In general, Australia pays far more for other countries’ intellectual property (about $4.5bn last year) than foreigners pay Australia for ours (just under $1bn in 2014). So when Australia gets bullied into raising the price of intellectual property, we have to send more money overseas to American movie studios and pharmaceutical companies. This had nothing to do with free trade. It was just a $100m-or-so annual transfer from Australia to the US. With luck, the PC’s review should give future trade ministers ammunition with which to shoot down attempts by other countries to fleece Australia in this manner. And it should give Joe Hockey, or whoever has succeeded him as treasurer by the time the PC reports in a year’s time, a genuinely useful list of enemies in the pharmaceutical and the media industry to smite. |