Relationship between Trade and Technology Transfer

Trade and Technology

This article explains the relation of intellectual property rights with trade. Now, a question is how trade and intellectual property rights are linked? If there is a link then, the less developed countries (LDC) are in which position as far as both are concerned? Well, this article would bring out the issues regarding the same. The World Trade Organization (WTO) has special provisions for the developing countries in which it also has longer periods to enforce agreements and commitments. It has the measure to increase trade opportunities and support so that developing countries can build infrastructure for the World Trade Organization work, handle the dispute, and can enforce technical standards.[1]

There can be another question as if both least and developing countries are taken then least may be disadvantaged in terms of getting benefit from the above statement. Well, in the case of least-developed countries receiving special treatment in which there is also exemption from many provisions, two-thirds of members of the World Trade Organization are developing countries.[2]

The least developed countries are given an extended time limit in a change of one state to another so that they protect their intellectual property and under the World Trade Organization’s agreement on trade-related aspects of Intellectual Property Rights (TRIPS). It is about recognizing the special needs of their economic, financial, and administrative constraints. There is a need for flexibility so that the least developed countries can create a technological base.[3]

Technology Transfer and  TRIPS

Broadly stated, the transfer of technology is a series of processes for sharing ideas, knowledge, technology, and skills with another individual or institution (e.g., a company, a university, or a governmental body) and of acquisition by the other of such ideas, knowledge, technologies, and skills. In the context of transferring technologies from the public sector and universities to the private sector, the term “transfer of technology” is sometimes used in a narrower sense: as a synonym of “technology commercialization” whereby basic scientific research outcomes from universities and public research institutions are applied to practical, commercial products for the market by private companies.[4]

Article 7 of the TRIPS Agreement provides protection and implements technological transfer and innovation to the advantage equally to producers as well as the users having technological knowledge. It would be provided to balance rights and obligations and for social and economic welfare.[5]

The developed countries have dominated trade in the case of products which are related to health. Despite this, India and China have come up as leading global exporters of pharmaceutical and chemical inputs. Some of the other developing countries have shown progress in recent exports. The structure of tariffs in some developing countries is high as well as low in pharmaceutical trade to promote local production. In the case of least developed countries, lower tariffs apply.[6]

Developing countries are in the position where they produce new medicine or chemical entities by the process of reverse engineering, therefore, researchers in developing countries can develop new processes different from the process invented to have their own new medicine or chemical entity. The TRIPS agreement extends the scope of protection of a patent in both products and processes. Thus, the developing countries would find it difficult to compete with developed countries and sustain global trade.

In the TRIPS agreement patent is granted regardless of product is imported or locally produced. Thus, Multinational Companies can supply at global markets having the patent of their end product instead of transferring technology or making a foreign direct investment. Thus, this causes disadvantages on part of developing countries.

The composition from generic producers would result in a low level of prices of medicines. In countries where generic medicines are available the prices of the branded product are lowered so that they could not face competition from cheaper alternatives.

Status of Developing Countries

For all developing countries, technology transfer is crucial. Developing countries do not have much-protected technology for new technologies and research to build upon. They also lack an adequate pool of personnel to carry out new technology research and development. As a result, they need technology from developed countries to support their growth.[7]

The theory of “Two Gap” describes restrictions limiting the ability of a developing country to acquire technology. Firstly, developing countries cannot save sufficient capital to build and sustain their technological foundations to support growth. Secondly, import costs considerably surpass export revenues.[8]

If technology is imported and too heavily protected from developed countries, the developing country cannot set its technological foundations. Patents are regarded by LDC as technology transfer obstacles. It creates expensive charges for the use of advantageous technology and obstacles domestically to the development of high-tech industries. Also, patents are regarded as instruments to exert control of the economic growth of developing countries as most of them are owned by corporations in developed countries.[9]

Less developed nations also contend that enhanced protection of patents will make it difficult – due to greater prices – for the majority to give access to medicines and other health items.  The effect of this idea can easily be seen in policies of less developed countries regarding IP ensuring access is provided to beneficial tech for the welfare of its people.[10] In many developing countries, the terrible economic and social situation naturally raises notions that no one should own knowledge and that useful technologies should be easily available to all.[11]

Finally, there is the aspect of high expense in creating strong IP protection. The expense is two-fold i) overhauling the legal system to support copyright, patent, etc; and ii) expense joined with the new training of judges, executives, and others so that they can understand what are the new rights they are about to deal with. Also, pirating operations supply a considerable number of people and businesses in developing countries with jobs and earnings.[12] Local governments are typically unwilling to dismiss so many individuals.

Transnational companies (TNCs) foreign direct investment (FDI) is the most common means for developing countries to gain technologies from developed countries. TNC, will in principle make such investments if it sees an advantage that is not found in the TNC’s domestic market. As TNCs transfer more of their production activities to developing countries due to the cheap labour and infrastructure, they need developing countries they provide strong patent protections so that their tech and knowledge are not leaked to competitors.

High tech industries like pharmaceuticals require high development costs and low imitation costs. TNCs mostly fear piracy and this fear causes companies to limit their licensing activities in developing countries. The result is that TNCs do not bring new technologies to less developed countries because of their weak patent protection.

To combat this situation many believe that FDI will rise if the LDC reinforces its protection of IP. If it is true, it still does not help the less developed countries’ long-term interests. Less developed countries must absorb and develop technologies in ways that are the same as their challenges. This view is called indirect technology transfer[13], imported technology and domestic R&D are complementary.

Developing countries believe with a good reason that the major international treaties like TRIPS are not geared to suit their long interest. Changes can only be done when developed countries perceive the developing nations’ long-term growth as something that is in the best interests of all countries.

Status of Developed Countries

The importance of intellectual property rights is viewed fundamentally differently by developed countries. They see IPR as a method to stimulate innovation. How IPR is seen reflects the views of the Western world on the property as a whole. This includes exclusive ownership, the right to limit usage, and the right of ownership of property.[14] All these concepts are reflected in TRIPs.

Developed countries claim that patents are vital for worldwide economic development as they offer a mechanism of ensuring the return on investment in time and capital in R&D. It is therefore stated that TNC is more likely to carry out expensive research because there is a profit motive.

In addition, developed countries feel that stronger IPR protection encourages research and development in developing countries. They argue that without robust patent rights scientists from developing countries are leaving because their work is not being protected.[15]

Stronger IP rights are a prerequisite for the FDI from the TNCs’ standpoint. The TNCs are especially afraid today due to tremendous piracy activities in developing countries. At the same time, TNC knows that they have enough power because of the urgent need for modern technology in developing countries. The TNC and its developed nations claim, therefore, that greater IPR and in particular patent rights will attract more FDIs in developing countries.

Beneficial or not: Labour Welfare Acts

In a survey of the developing countries, Edwin Mansfield examined whether there was a correlation between IPR strength and FDI level.[16] Mansfield concluded that increased IP protection would attract more foreign direct investment. The growth in FDI was, however, mostly limited to industrial chemicals, pharmaceutical and electrical equipment – computers included. Not unexpectedly, such sectors use large numbers of patents and develop them. Furthermore, the survey showed that the FDI growth took place in R&D rather than in sales and distribution.

Although the surveys provide valuable insights into the long-term issue faced by developing countries, TNC has shown no interest in helping these countries to succeed in developing their technology on a long-term basis. TNC is the only game that supports its ambitions in the city and current international policies such as TRIPs.


Given our assessment of technology transfer and trade to developing countries under present international intellectual property regulations, it is tempting to feel pessimistic about developing countries’ economic future. However, as a collective voice that guides international policies, developing countries are gaining strength. As indicated, they account for nearly three-quarters of WTO membership. The high and low levels of tariffs, in order to maintain the local market, can be seen as expensive in the case of pharmaceutical drugs. The huge investments in R&D by MNC seem to be debatable. Some patent drugs are not invented by MNCs but by public-funded universities and institutions, so it reaps profits in the pharmaceutical industry. There have been obstacles by way of TRIPS provisions on compulsory licensing and parallel imports. This further initiates the crisis for patents and drugs in developing countries.

As their ranks grow, the developing countries can discover the power to overcome the political and economic constraints placed on them by developed countries. Developing countries are likely to build alliances comparable to unionized labour. They may finally influence policy development by gaining new strength and contributing to getting the technology they need to tackle societal problems and build a local high-tech R&D business.

Of course, the process is gradual, as developed countries continue to struggle hard to be the sole distributors of advanced technology. But Western concepts of ownership of property need not shift to affect international rules. Both parties can profit without entirely surrendering their beliefs, as evidenced by the proposal of a reformed patent system. Perhaps advances in that field will dissolve certain tensions between developed and developing countries if pressure for a reformed patent system keeps on rising. The role of the transfer of technology should be considered to be shaping international policy; policy should not shape the role of the transfer of technology.


[1] World Trade Organization,  Help Countries Develop, available at:,disputes%2C%20and%20implement%20technical%20standards  (Last visited, 14 June 2021).

[2] World Trade Organization, Understanding the WTO: Developing Countries, available at: (Last visited, 14 June 2021)

[3] World Trade Organization, Responding to least developed countries’ special needs in intellectual property, available at: (Last visited, 14 June 2021).

[4] Standing Committee on the Law of Patents, Transfer of technology, available at  (Last visited, 14 June 2021).

[5] World Trade Organization, Part I- General Provisions and Basic Principles,   (Last visited, 14 June 2021)

[6] World Trade Organization, Executive summary,  (Last visited, 14 June, 2021).

[7] Michael W. Smith, “Bringing Developing Countries’ Intellectual Property Laws to TRIPs Standards: Hurdles and Pitfalls Facing Vietnam’s Efforts to Normalize an Intellectual Property Regime,”, Vol. 31, Case Western Reserve Journal of International Law (1999).

[8] Evelyn Su, “The Winners and the Losers: TRIPS and its effects on developing countries,”, Vol. 23, Houston Journal of International Law (2000).

[9] Howard A. Kwon, “Patent Protection and Technology Transfer in the Developing World: The Thailand Experience,” Vol. 28, George Washington Journal of International Law and Economics (1995).

[10] Howard A. Kwon, “Patent Protection and Technology Transfer in the Developing World: The Thailand Experience,” Vol. 28, George Washington Journal of International Law and Economics (1995).

[11]  Ruth L. Gana, “Has Creativity Died in the Third World? Some of the Implications of the Internationalization of Intellectual Property,”, Vol. 24, Fall Denver Journal of International Law and Policy (1995).

[12]  Michael W. Smith, “Bringing Developing Countries’ Intellectual Property Laws to TRIPs Standards: Hurdles and Pitfalls Facing Vietnam’s Efforts to Normalize an Intellectual Property Regime,”, Vol. 31, Case Western Reserve Journal of International Law (1999).

[13]  William Lesser, “Equitable Patent Protection in the Developing World,” Eubios Ethics Institute (1991).

[14] Ruth L. Gana, “Has Creativity Died in the Third World? Some of the Implications of the Internationalization of Intellectual Property,”, Vol. 24, Denver Journal of International Law and Policy (1995).

[15] Evelyn Su, “The Winners and the Losers: TRIPS and its effects on developing countries,”, Vol. 23, Houston Journal of International Law (2000).

[16]  Ibid.


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