The Organization for Economic Cooperation and Development (OECD) just released a useful new study entitled Policy Complements to the Strengthening of IPRs in Developing Countries. It significantly undermines the claims of "public interest" advocates who wail that they just know intuitively that improved legal protection for intellectual property rights (IPRs) are merely one more means through which developed countries oppress developing countries. While such claims often sound lofty and compassionate, very ugly prejudices often lurk beneath them. Fortunately, by actually studying real data, the OECD found that such claims are wrong as applied to actual developing countries: "[T]the results point to a tendency for IPR reform to deliver positive economic results."

Recently, I used the word "Wow" in the title of a post because a hearing held by the Senate Committee on the Judiciary produced bipartisan calls for broad voluntary cooperation to ensure that Internet commerce--like real-world American Commerce--abides by the rule of law, including those rules of law that prohibit copyright infringement and trademark counterfeiting.

What inspired me about those calls to restore the rule of law was not that they were substantively controversial. For example, the World Bank estimates that intangible capital accounts for 80% of the wealth in the developed world, and that 57% of that intangible capital arises from the rule of law--including all those government-granted monopoly rights that most call "private-property rights" See The World Bank, Where Is the Wealth of Nations? 20, 87 (2006). (Education was the next-largest contributor; it accounted for 36% of intangible capital.) In effect, the World Bank thus concluded that the rule of law accounts for almost 50% of American wealth. Obviously, an Internet that fails to preserve rule of law will thus become a job-killing economic catastrophe for the United States.

And where are the clowns?
Quick, send in the clowns…
Don't bother—they're here.
—Judy Collins/Stephen Sondheim, Send in the Clowns

Recently, Nate Anderson of Ars Technica published File-sharing has weakened copyright—and helped society. This story's title summarizes the thesis of a "new" paper by those Grokster-loving, Free-Culture-Movement Professors, Felix Oberholzer-Gee and Coleman Strumpf (collectively, "OGS"). Their "new" paper is entitled File-Sharing and Copyright. Fortunately, their non-sequitur thesis does not follow from their clown-car collection of factual, legal, economic, and historical errors that poses as "scholarship."

Indeed, I just published a blog post and a longer paper to show that those who listen to the likes of Oberholzer-Gee merely end up accusing the Government Accountability Office of decades of wrongdoing by celebrating the "positive economic effects" of criminal racketeering. The blog post is entitled, Why Copyright Industry Costs-of-Piracy Studies Correctly Ignore the "Positive Economic Effects of Criminal Racketeering; the paper is entitled, Punk'd: GAO Celebrates the "Positive Economic Effects of Counterfeiting and Other Criminal Racketeering.

The Office of the United States Trade Representative (USTR) just released a draft of the Anti-Counterfeiting Trade Agreement (ACTA). After spending several years at the U.S. Patent & Trademark Office, advising USTR on the copyright-related provisions of many proposed and enacted trade agreements, my review of the draft ACTA text confirms, (as well as any draft can), that ACTA is precisely what USTR has said consistently during both the Bush and Obama Administrations: ACTA is an efficiency-enhancing effort that can be executed as an Executive Agreement because it will require no change--repeat, no change--in existing U.S. law.

Indeed, this is why I rarely write about, blog about, or closely follow the ACTA negotiations. ACTA is an important efficiency-enhancing effort intended to facilitate international trade. But--by definition--it will not address any of the most important unresolved questions about how to reconcile the benefits of enforceable copyrights and the benefits of the Internet.

To the contrary, in the ACTA negotiations, developed nations that have already joined and implemented all of the major multilateral IPR-related international treaties--like the Agreement on Trade Related Aspects of Intellectual Property Rights ("TRIPS"), the Berne Convention, and the WIPO Copyright Treaty--are trying to see whether they can agree on what an good implementation of these already-ratified, already-implemented treaties should require.

While such an agreement could further trade among developed nations, it would be even more beneficial to developing and least-developed nations. Most developed nations, including the U.S., already require their preferred trading partners to fully implement the leading international IPR treaties, but each such developed nation now has differing ideas what an "good" implementation of these treaties requires. As a result, any country that wants to increase trade with developed nations in the Americas, Europe, and Asian must now separately negotiate with many nations about the efficacy of its implementation of existing IPR treaties, and it may have to revise its IPR laws repeatedly.

ACTA seeks to reduce or eliminate the resulting delay and duplication of effort. In effect, ACTA seeks to answer the following question: Given that many developed nations already require their preferred trading partners to complete a "good" implementation of the existing IPR treaties, shouldn't they try to reach as least broad agreement on what a "good" implementation of existing IPR treaties requires? If so, then any nation interested in updating its IPR laws in order to better protect its own creators and improve its trade relations could know what to do in order to facilitate trade with many of the world's most attractive trading partners. Consequently, developed nations that already incorporate support for IPR protections into their international-trade strategies could promote trade, reduce waste, avoid petty disputes, and better promote improved IPR protections if they could agree on what a really good implementation of the existing international IPR treaties should require. This is, perhaps, the critical benefit that ACTA seeks to achieve.

This is why the structure and the text of ACTA so closely resemble the structure and text of the IPR Chapter of many existing bilateral and multilateral U.S. Free Trade Agreements ("FTA")--none of which required the U.S. to amend its existing IPR laws. Those similarities are no coincidence. In effect, ACTA attempts to reach at least a general consensus on what the IPR chapters that many developed nations already incorporate into their trade agreements ought to contain.

Nevertheless, while developed-world IPR laws are so generally similar as to permit such consensus, they are not identical. Consequently, the ACTA negotiators must craft language specific enough to provide precise guidance, (as the IPR chapter of a developed-world trade agreement would today), while accommodating some of the differences in the national laws of developed, IPR-exporting nations--each of which is quite convinced that its laws already reflect a "really good" implementation of the existing multinational IPR treaties.

This is why the Internet teapot-tempest over ACTA merely confirms that USTR should be strongly commended for its longstanding decision to pursue ACTA as an Executive Agreement. For precisely the reasons just mentioned, the language of ACTA will almost certainly closely, but not precisely, track the language of the IPR Chapters in those many existing U.S. FTAs. This could have raised legitimate--as opposed to contrived--concerns that ACTA might change to U.S. law. But by negotiating ACTA as an Executive Agreement, USTR eliminated all such legitimate concerns. By definition, an Executive Agreement cannot require any change in existing U.S. law.

Moreover, by negotiating ACTA as an Executive Agreement, USTR not only eliminated any legitimate domestic concerns about ACTA changing U.S. law, it also put all other nations participating in the ACTA negotiations on notice: if the U.S. agrees to particular language, then that is because it has concluded that its existing domestic laws already implement that language. Therefore, should the ACTA negotiations conclude successfully, no co-party to ACTA can argue, credibly, that it could possibly have thought that existing U.S. law failed to implement the Agreement.

These observations are subject to a caveat: the released draft of ACTA is an early-stage draft consisting mostly of bracketed counter-proposals. Multiparty negotiations among many global leaders in international trade never proceed quickly. Nevertheless, the released draft suffices to confirm that ACTA is precisely what USTR has said it is throughout the past two Administrations, and that USTR should be commended for providing both domestic and international clarity by pursuing it as an Executive Agreement.

Finally, a word about ACTA and "secrecy." Negotiating drafts of ACTA have been no more and no less "secret" than negotiating drafts of any other proposed U.S. trade agreement negotiated in the last few decades. And such "secrecy" is perfectly sensible: negotiating nations do not published their negotiating drafts and strategies for the many of the same reasons that poker players do not "publish" the contents of their hands during a game--"transparency" is good; crippling your own negotiators is not. Nor is the resulting "secrecy" that secret: Any Internet reporter who wanted to review an earlier draft of ACTA would have had to do little more than sign a simpler version of the sort of nondisclosure agreement (NDA) that gadget reporters routinely sign in order to get an early look at the latest iWidget.

I may have more to say later about the shrill, dishonest, juvenile histrionics that have passed for most Internet "commentary" on ACTA. For now, I need only congratulate the shriekers for the success of their latest campaign to convince even more federal officials that most Internet commentary on almost matters relating to intellectual property rights, (other than those that protect technology companies or open-source software), will tend to consist of shrill, dishonest, juvenile histrionics.

Indeed, the histronics over ACTA recall the histrionic wailing that filled the Internet during the lead-up to the Supreme Court decision in Grokster. Back then, many of the same groups and individuals now shrieking about ACTA were shrieking that holding the most blatant commercial copyright pirates on the Internet liable for the intended consequences of their own actions would crush innovation and outlaw, (to cite but a few examples), iPods, transistors, Legos, broadcast radio, The New York Times, and--worsf of all--Silly Putty. Today's ACTA histrionics seem equally rational, balanced, informed, and thoughtful.

Tomorrow, the Senate Judiciary Committee will consider President Obama's nomination of Ms. Victoria Espinel for the office of "Intellectual Property Enforcement Coordinator" (the "Coordinator"). This is a new position, created by the recently enacted Pro-IP Act, which I discussed here.

Personally, I conclude that President Obama selected an excellent nominee. Indeed, I can't think of anyone better endowed with the experience, expertise, and judgment needed to be a successful Coordinator.

My colleague, Berin Szoka, worries about 195 independent countries each regulating the Internet:

[I]t's likely to cause, at the very least, many companies to limit access to their sites or services by persons from countries with burdensome regulatory approaches. Even if those foreign laws are well-intentioned and laudable... the result could be to balkanize Internet services.

Szoka argues that Americans are better off because Congress or the federal courts can override burdensome regulation by the States. Others are worried too, and not just about the Internet. Financial regulators have long sought to harmonize regulations across borders, with the European Union leading the way. Szoka would prefer less regulation to harmonization, but if local regulators will not stay their hands voluntarily, a single set of regulations seems preferable to many overlapping, and often contradictory, regulatory regimes.

Yet the question remains of what these regulations should be. The Nobel Laureate Friedrich von Hayek argued that the perfect laws cannot be designed but must evolve over time through a process of trial and error. Americans are better off, not because the federal government can override regulation but because the States are, as Justice Louis Brandeis put it, "laboratories of democracy." Americans have the benefit of trying 50 different regulatory approaches and allowing the market to decide which approach works best.

One could easily look at the Internet today and see that the many different standards and protocols in use are wasteful and burdensome. Yet the many competing standards, and the continuous innovation that drives them, are the engine of growth in the Net economy. Picking a single standard and enforcing that standard would cause innovation to stagnate. Likewise, the burden imposed by competing regulatory regimes is outweighed by the benefits of innovation in the market for law.

Rather than creating a need for standardization in the law, globalization makes regulatory competition more effective. Some companies will choose not to offer content or services in countries with burdensome regulations but this will send a strong signal to those countries to change their regulations. Countries with effective regulations will be able to attract businesses more easily thanks to the web and other countries will have more incentive to replicate the most successful rules.

Competition is likely to lead to less burdensome regulation, so much so that many advocates for harmonization are concerned about a "race to the bottom." Competition can override the preferences of governments - websites around the world are hosted on American servers because the U.S. has stronger Free Speech protections - but not of consumers. Evidence from financial markets (subscription) has found that consumers are attracted to jurisdictions that offer strong protection of property rights: both from fraud and deceptive business practices, and from special interests who can corrupt the law to their own ends.

The Internet has, and will continue to, create new challenges for lawmakers which even the brightest economists and legal scholars will not be able to answer. As tempting as it is to assume we have all the answers, be it less regulation or better regulation, only trial and error can tell us for sure which approach is best.

About 10 days ago I gave a presentation to a D.C. business group on "Innovation: The End? Or a New Beginning?" We got into a discussion of high-end immigration and were in general agreement that we should grant easy green cards to all STEM PhDs educated in the U.S., among other enticements to smart immigrants. One commenter then suggested this was a kind of a zero-sum race between the U.S., China, and India for the world's human capital.

I replied, however, that the technological, economic, and political advance of China and India is a good thing. Innovation anywhere in the world benefits us, too, if we are open to the global economy. For hundreds of years, North America attracted much or most of the world's financial and human capital because (1) though imperfect, we were an attractive realm of freedom and (2) much of the rest of the world was so inhospitable to innovation, entrepreneurship, education, and was generally politically intolerant. This massive tilt in our direction is now over. Other parts of the world present more opportunities for entrepreneurship and education, and we're not going to get all the smart people, no matter how open our immigration laws. Doesn't mean we shouldn't try to get the smartest people. Just that there's going to be lots of innovation and new enterprise in new non-U.S. places, and that overall that's a good thing.

So I was intrigued when an Economist article on this very topic hit my radar yesterday. Turns out Amar Bhidé of Columbia Business School has written a whole book on the subject: The Venturesome Economy.

So does the relative decline of America as a technology powerhouse really amount to a threat to its prosperity? Nonsense, insists Amar Bhidé of Columbia Business School. In "The Venturesome Economy", a provocative new book, he explains why he thinks this gloomy thesis misunderstands innovation in several fundamental ways.

First, he argues that the obsession with the number of doctorates and technical graduates is misplaced because the "high-level" inventions and ideas such boffins come up with travel easily across national borders. Even if China spends a fortune to train more scientists, it cannot prevent America from capitalising on their inventions with better business models.

That points to his next insight, that the commercialisation, diffusion and use of inventions is of more value to companies and societies than the initial bright spark. America's sophisticated marketing, distribution, sales and customer-service systems have long given it a decisive advantage over rivals, such as Japan in the 1980s, that began to catch up with its technological prowess. For America to retain this sort of edge, then, what the country needs is better MBAs, not more PhDs.

A lot to agree with. The addition of China and India to the world economy, with new minds and new centers of research and innovation, make it more likely that new general purpose technologies like the integrated circuit or laser will be invented -- maybe the next one will be in the field of biotech or energy, who knows. It will be good for humanity, at least for those open to these inventions and, yes, the commercializers. But how does clustering -- like Silicon Valley, where a whole ecosystem of talent, firms, and infrastructure spiral virtuously upward -- come into play? Does clustering mean as much as it used to in the age of instant global broadband communication? If technology and the corresponding innovations rapidly diffuse everywhere -- and they do -- it's largely a matter of who earns the profits. Who sets the standards. And which governmental jurisdictions get to tax the innovations and entrepreneurs. In nationalist terms, where military and political power derive from economic power, it is largely a competition for tax revenues.

But Bhidé, at least in this article (I've yet to read the book), I think still underplays the importance of PhDs or their equivalents who not only make the once-in-a-generation breakthroughs but also do help manufacture and commercialize these inventions. And Bhidé probably overplays the the importance of MBAs, who he says are key to our "consumer" culture. Consumers don't drive the economy. Entrepreneurs do. Yes, MBAs are good at cleaving consumers from their wallets. But consumption is a function of growth and growth expectations, which depend on entrepreneurial confidence. Supply creates its own demand.

If we had a perfectly globalized, flat, frictionless world -- it's true, the "where" of innovation wouldn't matter much. And we should basically be shooting for that type of world. But until we get there, the "where" of innovation probably matters more than Bhidé would like.

In this game, it's the farsighted innovators and consumers, who want free trade and tax competition, against the all-too-often shortsighted politicians, who seek the short-term advantage of protectionism, tax gouges, and "energy independence" campaigns. It takes real wisdom to understand that China's or India's gain is also our own.

there is one consequence of the upheavals in the credit markets, and now in the "real economy" that is less visible, and will be with us even after the recovery takes hold. The era of ever-free trade has ended. Any lingering hopes that free-trade advocates might have had to stem the rising tide of protectionism are gone: A worldwide financial crisis is not an environment that fosters acceptance of the view that all is for the best in a world in which capital, labor, and goods move freely across borders.