Intellectual Property Protection Abroad

Today's Washington Post reports:

Once again, President Bush had a difficult time wresting concessions from Chinese President Hu Jintao....At each of those meetings, the list of U.S. trade demands has been the same: China must stop unfairly depressing the value of its currency to gain trade advantages; it must halt rampant copyright piracy that is costing American companies billions of dollars in lost sales; and it must open its markets wider to U.S. exports.

Of the three issues listed here, the most troubling one is copyright piracy. As I have noted previously, the currency issue is not as big a problem for the U.S. economy as is often suggested, and ultimately it is in China's interest to open their markets. (David Ricardo really had it right.) But it will be hard to get China to get serious about piracy.

Piracy is a big deal for the U.S. economy. We have a comparative advantage in producing intellectual property (software, movies, economics textbooks), and it is a significant problem if other nations simply steal the fruits of those efforts. However, if a country is an importer of intellectual property, as China probably is, its self-interest is served by not cracking down on piracy. Why pay for something you can get for free?

Update: Economist Hal Varian writes to tell me that "in 1891, the U.S. was the world's biggest copyright pirate, for the same reason that is true of China today."