The Importance of Intellectual Property and International Investment Agreements for Overcoming the “Peripheral Economy Trap”: A Response to Ian Taylor’s “Sixty Years Later: Africa’s Stalled Decolonization

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October 27, 2020

Introduction

This paper engages in a critical legal analysis of Professor Ian Taylor’s article, Sixty Years Later: Africa’s Stalled Decolonization. It is not meant to be an exhaustive analysis but will provide a limited legal perspective of the article’s foundational arguments on the underlying causes of Africa’s economic underdevelopment, through a legal lens rooted in intellectual property (IP) law and international investment law (IIL). This paper suggests that Taylor has 1.) mis-identified the underlying problem of post-colonial economic development as “stalled decolonisation” and has 2.) disregarded the highly constitutive role of the law of international trade, investment, IP treaties and global financial regulation (i.e. the rule of international economic law) in sustainable development outcomes.1 The role of international economic treaty obligations in national and international economic relations, and the development policies flowing from them, are key to understanding what I will label as the “peripheral economy trap”, a legal variation of the World Bank’s “middle income trap”.2 The United Nations, in §7 of the Declaration of the High-level Meeting of the General Assembly on the Rule of Law at the National and International Levels saw Member States reaffirmed their conviction that,

“…the rule of law and development are strongly interrelated and mutually reinforcing, that the advancement of the rule of law at the national and international levels is essential for sustained and inclusive economic growth, sustainable development the eradication of poverty and hunger and the full realization of all human rights and fundamental freedoms, including the right to development, all of which in turn reinforce the rule of law, and for this reason we are convinced that this interrelationship should be considered in the post-2015 international development agenda.”3

The UNGA reiterated these views in Resolution 66/115 §12 noting that “…effective use of modern private law standards in international trade are essential for advancing good governance, sustained economic development and the eradication of poverty…”.4 How well placed are African and Caribbean post-colonial economies to harness the benefits of the laws and treaties of the international economic order? I suggest that what Taylor sees as economic underdevelopment, fuelled by the persistence of lingering neo-colonial economic relations, in reality is a phenomenon sustained in part, by a more generalised diffusion of specific normative economic philosophies, into the drafting practice of international economic treaties. These normative philosophies on the regulation of the global economy, now constitute the accepted rules of the international economic system, to which all countries are subject. I argue that post-colonial African and Caribbean nations, along with other developing economies find themselves structurally located within this legally constituted, “peripheral economy trap”. Taylor is simply asking the wrong questions. He surveys the evidence of low job creation performance for foreign direct investments in Sub-Saharan Africa and asks, “How did stalled decolonization cause this?”. This is a question that has no practical legislative and policy responses, upon which countries can build coherent development strategies.

Lastly, I suggest that a policy programme targeted at transforming the regulatory environment around creation, ownership and control of knowledge assets through IP rights, and the rules underpinning capital inflows and foreign investment partnerships could provide a possible route out of the, “peripheral economy trap”. The first part of this paper sets out the concept of the “peripheral economy trap” as a structural category which is legally constituted and specifically related to the coherence of countries’ IP, international trade and investment legal systems, institutions, and policies. The second part of this paper discusses the importance of law, legal systems, and international treaty obligations, to persistent economic underdevelopment, a variable which Taylor touches on tangentially but quickly discards. The third part of this paper then discusses legal systems, policies and institutions related to innovation, intellectual property, FDI, and capital inflows as a viable route out of the “peripheral economy trap”.

The Peripheral Economy Trap, Middle-Income Trap, and International Economic Law Norms

The peripheral economy trap is characterised by the disadvantageous legal and regulatory position of LDC and developing countries in international economic treaty making and implementation, diminishing the impact of their development policies, while stagnating growth. Employing a syncretic analytical approach from the economic literature on poverty traps and middle income traps, theperipheral economy trapis identified as an enduring fringe status in the international economic law making infrastructure, held static by continuing poorly conceived, self-reinforcing legal and policy choices, determined by the disadvantageous location of countries on the periphery of the IEL regime. This proposition steers clear of the foreign aid prescriptions found in the “poverty traps” literature, toward the more regulatory approach of “middle income trap”analysis. The “peripheral economy trap” is characterised by self-defeating legislative, treaty and policy programmes which are further solidified by the resulting narrowing of policy space, and lack of coherence in institutional development, stymying achievement of defined development goals and creating an endless self-reinforcing cycle.   Having identified the “peripheral economy trap” as a phenomenon of law, what documented evidence (of legal and economic relations) can we find to support this position? Here, a brief analysis of two legal case studies proffers examples of the “peripheral economic trap” in action, while evidence from already well-established data sets and indices, that address the correlation between law and economic outcomes, will be used to illustrate this. Associated with the literature and economic surveys on “middle income traps”, is the Economic Freedom Report (EFW) and associated indices, which provide a wealth of data and evidence of the role of law, law making processes and implementing institutions, including regulatory structures, as significant determinants of which economies become trapped on the periphery. It is stressed that the data underlying the construction the EFW index ratings, are primarily taken from the data sets of the International Monetary Fund (IMF), World Bank, and World Economic Forum (WEF). The index put forward in the EFW studies, describes its function as measuring the extent to which “policies and institutions of countries are supportive of economic freedom.” Some of the variables defined as denoting the level of economic freedom can be used as proxies for understanding the relationship between law (whether municipal or international) and static economic development.

The report looks at five broad areas including 1.) Size of Government, 2.) Legal System and Property Rights, 3.) Sound Money, 4.) Freedom to Trade Internationally, and 5.) Regulation. It is clear that the indicators incorporated under, Legal System and Property Rights; Freedom to Trade Internationally and Regulation are all useful for establishing evidence that the “peripheral economy trap” is a legal phenomenon which results in static development outcomes. By using the EFW component data points that are specifically targeted at extracting evidence on the economic development impact of law as a proxy, we can get a glimpse of the nature of the law constituting the economic periphery. The EFW identifies the weakness in the rule of law and property rights(p.8) as being pronounced in Sub-Saharan Africa. It also highlights that “Latin America and Southeast Asia also score poorly for rule of law and property rights”. The figure below shows the disaggregated data points which can be used as a proxy for fleshing out “the peripheral economy trap. In figure 1 below Legal Systems and Property Rights is composed of several data point including “integrity of the legal system”, “protection of property rights”, “legal enforcement”, etc. setting out municipal legal criteria for a stable commercial environment.

[caption id="" align="aligncenter" width="480"]Figure 1: Source EFW Report:  https://www.fraserinstitute.org/sites/defa ult/files/economic-freedom-of-the-world-  2020.pdf Figure 1: Source EFW Report: https://www.fraserinstitute.org/sites/defa ult/files/economic-freedom-of-the-world-[/caption]

In figure 2 on issue 4, “Freedom to Trade Internationally”, encompasses the role of international trade law and global financial regulation in point “b” on regulatory trade barriers and “d” controls of the movement of capital and people. Figure 2 : Source EFW Report 2020 :  https://www.fraserinstitute.org/sit es/default/files/economic-freedom-  of-the-world-2020.pdf

 

Figure 2 : Source EFW Report 2020 : https://www.fraserinstitute.org/sites/default/files/economic-freedom-of-the-world-2020.pdf

In figure 3 below which directly addresses regulation the rules applicable to credit market, the labour market and business are accounted for.