Re: Bhagwati's defense of Mankiw
Source Doug Henwood
Date 04/02/19/17:45

Julio Huato quoted Jagdish Bhagwati:

>Even now, despite all the talk about
>poverty alleviation, the World Bank's staff, research, and aid are being
>used, I suspect, in a way that, instead of calling into serious doubt the
>economic logic of IPP, can be interpreted as contributing to the know-how
>that will eventually enable rich countries to get poor countries to set up
>administrative machinery to enforce intellectual property rights for the
>benefit of the rich countries.

Here's an excerpt from the interview Liza Featherstone & I did with
Bhagwati in early 2001. It's a rough transcript - apologies for the
(lack of) punctuation & capitalization.



DH: when the united states was a developing country, it violated
patents, stole all kinds of things, defaulted on debt frequently,
[JB: exactly!] erected all kinds of protectionist barriers. A country
today is forbidden to do any of those things.

JB: lets take protection. We did it just for pharmaceuticals. In my
judgement. The fundamental principle for putting an issue into the
WTOŠhas to be mutuality of gain, because that's what we teach in the
classroom. If you enter into a trade agreement with me which is
non-coercive, and let's assume the governments are reasonably
reflective of their people's interests, maybe there are
imperfections, we could say that about every -- you could then argue
that this is mutually beneficial, that's what we teach in the
classroom. I also teach exceptions to that and there are two kinds of
exceptions. One is that a third country can still get hurt. If I you
and I have a mutually beneficial trade agreement, it reduces the
demand for her exports. Then she gets hurt. She's the bystander, and
yet she gets hurt. In that case if you're a poor country we must have
a trigger mechanism to help you out. Because we cant just go by
general assertion that it's mutually beneficialŠ Is this relevant in
practice? Yes because in the uruguay round what happened was the
nature of the bargain was such that practically all the detailed
studies that I saw suggested that africa would get hurt. African
countries are the poorest in the world today. We should have had a
major trigger mechanism where the bank and the fund would have been
brought into play, bilaterally, to compensate these countries. So
this is the way international coordination should work, that we
should focus on the poor, the way I was forced to do when I was
looking at the bottom 30 % of indian poor and what was the best way
to bring them up to snuff. Two you take the banana case, perfectly
sensible WTO finding, that discriminatory trade agreements no longer
have a place. But who gets hurt by this? Decision between EU and us,
we were doing it for dole, not the dole senator but dole company,
butŠ.the people who get hurt are in the small caribbean countries and
the extent of the loss from this would be something like a third of
their national income. Huge loss for them, very little sumŠwe should
immediately have a triggerŠwhat do we do in things like kyoto and
things, we actually go and help the poor countries, we buy their
agreement. But when the WTO gets involved in the act, nobody, people
are left to their own devices. That's what's wrong. So I have been
arguing that we really need to look at even the trade side, to make
sure thatŠthe very poor are in fact not hurt. And in fact are
compensated very energetically, proactively whenever dispute
settlements are worked out that hurt the poor countries, whenever we
have big trade agreements which may adversely affect the poor
countries. But generally the organizing principle is mutality of
gainŠ.we are violating the principle of mutuality of gain, which is
the only principleŠ turning the WTO into something like a loan shark
operation, using it to collect royalties. I think its crazy. I was
the only one who wrote about this in 1991 and no one would listen. We
cleverly turned the argument away from cost benefit analysis, which
is what economists love, this is the utilitarian logic. And we turned
it into the right's logic, namely piracy and theft. And as soon as
you call it piracy and theft, it's fine with ayn rand and maybe with
nozick up to a point but in the public domain it means those guys, we
should whip them. we couldn't prove it on utilitarian grounds it was
really beneficial to those countries so we immediately turned it into
piracy and theft, and to our people, because they didn't even know
they were being hoodwinked by a shift in economic philosophical
argument, from cost-benefit to an I invented it therefore its mine
kind of arguement. So we cheated. Badly. Now the unions etc, are
saying look you did it for corporations, or for capital, now you can
do it for us. Environmental groups are saying what about doing it for
nature? Real divide is beginning, the people who put it in,
unfortunately democrats, it happened under our watch, that is
creating. Capital or the corporations are our corporations, not those
of the poor countries. And now, I tell my labor friends, these are
good principles, but if we now say, you did it for capital now do it
for us, poor countries are going to say look, you did it for your
corporations. Now you're saying because your unions are really woried
about international competition you should again do it for your
unions. If you're going to do it for these shrimp turtle etc where
the defendants tend to be poor countries, which don't have the
autonomy to choose their own path and their own values. All of these
then become like daggers aimed at poor countries. So its not that
people are against environmental agendas or against removing child
labor as expeditiously as possible. But the see the WTO being turned
by us into instruments of assault, which are defined by lobbies, and
not their lobbies. This is where the north/south divide reallyŠ. What
we did with IPP was to open up the system to a whole lot of lobbies,
which can only be at our end because very few lobbies at the other
end have the clout to be able to do anything. IPP, I think we really
did something quite wrong. The other day on an indian meeting vandana
shiva was talking about intellectual property from quite a different
perspective, bio-piracy. And she said many of the developing
countries had developed their own knowhow on using all kinds of
genetic material from the rain forest and if you were improving on it
you should pay some sort of royalty because this is age-old
knowledge, etc. which you are building. You cant rule it out
altogether it's an interesting argument actually, [laughs] I sided
with her pointing out some of the things on IPP, there were all these
people like [winston lord??] and the whole establishment of this cfr
and the business establishment, they thought I was a green man from
mars for a change. [laughs] They are unable to face this! we forced
WTO into thisŠthe poor countries are at the receiving end. When you
go back to the bank, what are we doing on technical assistance to
africaŠworld bank aid is going to these countries setting up these
mechanism so that our IP rights are going to be enforced! That's
technical assistance? I feel that a lot of us just don't know what's
going on and if we didn't have NGOs, I'm indulgent toward them
because if we didn't have them we just wouldn't begin to find out
some of these things. Of course this I heard from someone inside the
bank, who also doesn't agree with IPR. Why the bank should be used
for this purpose. If people really found out this what they were
doingŠwolfensohn all this rhetoric that im changing the bank in the
right direction, would begin to look a little less persuasive,
[laughs] he should really be raising these questions about IPR.

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