This extension looks at the incentives leading to a difference between the federal standard of IPR protection and the reality of protection at the local level. Local governments respond to the needs of the domestic actors, including consumers of the domestic and foreign goods and the
domestic firms trying to imitate the foreign firms, and the profits of the foreign firms. Depending on the preferences of the local governments, they will have incentive to either protect in excess of the federal standard or less than the federal standard, with this deviation being constrained by the level of autonomy enjoyed by the local government and chosen based on the cost of deviation. The federal government then chooses its federal standard based on a weighted average of the desired deviations of the local governments, constrained by the level of autonomy, and their international obligations or benefits from the foreign firm. Allowing firms to sell within the country and outside their localities further impacts the local government’s chosen level of deviation, possibly increasing the spread of chosen levels of deviation. International trade puts further upward pressure on protection until doing so crowds out domestic consumers.
This model is best applied to countries without existing norms preventing local governments from responding to economic incentives. As a result, while it can help explain differences in protection in developing economies, it does a poor job of doing the same in developed economies.
CHAPTER 4: COUNTRY STUDY - JORDAN
Much literature regarding the role of IPR protection concludes that countries, in order to court foreign investment, should increase their IPR protection. This tendency towards the
increase in IPR protection has been quite noticeable since the early 1990s, with the signing of the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). Since then, any country wishing to become part of the World Trade Organization (WTO) must bring its IPR standards up to those of TRIPS. Developing countries especially have been changing their laws to bring themselves into accordance with TRIPS since that moment, often to encourage
international confidence and attract foreign investment.
Jordan has followed this trend, with a notable uptick in its IPR protection since the early 2000s. Prior to this change, Jordan had one of the lowest levels of protection among Middle Eastern and North African countries and among Lower-Middle Income countries. Since 2000, however, Jordan has maintained one of the higher levels of protection among Middle Eastern and North African and Lower-Middle Income countries. Additionally, concurrently with its increase in protection, Jordan has formed itself into a major strategic partner for Western countries and launching pad for Western countries investing elsewhere in the Middle East.
A government’s choice of its appropriate level of IPR protection is influenced by the country’s level of development. Also contributing to this decision, though, is the historical strength of institutions and the interests of strong parties. IPR protection is not implemented without significant trade-offs. Much of the current research agrees that while IPR protection might encourage foreign direct investment, it does so at the expense of current consumption and potentially domestic innovation, especially in those countries with relatively poor human capital when compared to the investing country. IPR protection, while providing an attractive safety net for foreign companies, often stems the flow of technical knowledge transfer to domestic companies.
Despite the potential negative impacts of increased IPR protection for developing countries, the Western treaties that Jordan has joined and aspires to join, as demonstrated by the actions of
its government, consistently extol the virtues of IPR protection. Jordan has taken substantial steps towards adopting these policies, not only by signing TRIPS, but also by enacting laws designed to bring its legal standards and enforcement standards more in line with TRIPS and the requirements of its free trade agreements and other international agreements. In doing so, Jordan has moved from having one of the lowest levels of protection in the region to having one of the highest.
This paper will utilize a model of government choice of intellectual property rights to shed light on the incentives facing the Jordanian government in its decision. The paper will focus on three primary questions: 1) Why was Jordan’s level of protection so low prior to 2000? 2) Why did Jordan’s level of IPR protection jump so significantly in 2000? and 3) Why has Jordan’s level of protection been so (relatively) high since 2000? Recognizing that culture, colonial history, legal systems, and religion play an important role in influencing the choice of IPR protection, this analysis will be conducted in comparison to seven countries in the region: Egypt, Iraq, Lebanon, Morocco, Syria, Tunisia, and Yemen. These countries have similar colonial and legal histories and religious makeup, controlling for the importance of these influences in determining the level of protection. They are all lower-middle and upper-middle income countries and have similar levels of development. They differ in their distributions of income and preferences for foreign firms, however, and these differences will help shed light on the incentives compelling Jordan to keep its protection relatively low prior to 2000 and relatively high following 2000.
This chapter will look at the distribution of incomes, dominant industries, strengths of local or tribal governments, and participation in international agreements in these eight countries to help elucidate Jordanian behavior. It will proceed in the following order: Section 1 will give an overview of IPR protection in Jordan, Section 2 will give brief overviews of the state of IPR protection in the rest of the comparison countries, Section 3 will apply the model, and Section 4 concludes.
Much research into IPR protection in developing countries is biased in favor of stricter protection of intellectual property. This paper will attempt to analyze forces for and against the implementation of IPR regimes without this normative assumption. However, it should be noted that much of the recent regulation in both countries has been heavily influenced by Western governments, and so this bias is increasingly present in discussions surrounding this topic.
Figure 4.1: Formal IPR Protection in MENA