The right copyright policy for Europe is not IP maximalism


Economic data do not support that a strengthening of IP is beneficial to Europe.

Excerpted from Joe Karaganis, author of Media Piracy in Emerging Economies:

“Where do the EU’s economic interests lie? Let’s look at the numbers:

* According to the World Bank, Europe’s audiovisual imports exceed its exports by a ratio of around 4-1. In 2008, Europe (EU 27) imported roughly $14.7 billion in audiovisual and related services (basically, licenses for movies, TV, radio, and sound recording). In contrast, it exported about $3.9 billion, for a net trade deficit of $10.8 billion (International Trade Statistics 2010: 156).

* About 56% of those imports ($8.35 billion) come from the US. The EU, in turn, exports about $1.7 billion to the US, resulting in a net negative trade balance of around $6.65 billion. This does not include software licenses, where US companies monopolize larger parts of the European consumer and business markets.

* The US, in contrast, is a large net exporter of audiovisual goods, with roughly $13.6 billion in exports and $1.9 billion in imports.


For countries or regions that are net importers of copyrighted goods, higher IP standards and stronger enforcement will result in increased payments to foreign rights holders. Because the US thoroughly dominates European audiovisual markets, stronger enforcement in these areas is, in practice, enforcement on behalf of Hollywood.

So pirating of US audiovisual products actually reduces the outflow of money from the European economy. Ah, yes, the industry pundits will retort, but what about the loss of revenue due to pirating of copyright works that circulate purely within the EU?

Domestic piracy may well impose losses on specific industrial sectors, but these are not losses to the larger national economy. Within a given country [or in this case, region], the piracy of domestic goods is a transfer of income, not a loss. Money saved by consumers or businesses on CDs, DVDs, or software will not disappear but rather be spent on other things—housing, food, other entertainment, other business expenses, and so on. These expenditures, in turn, will generate tax revenue, new jobs, infrastructural investments, and the range of other goods that are typically cited in the loss column of industry analyses. To make a case for national economic harms rather than narrower sectoral ones, the potential uses of lost revenue need to be compared: the foregone investment in the affected industries needs to represent a better potential economic outcome than the consumer surplus generated by piracy (Sanchez 2008). The net impact on the economy, properly understood, is the difference between the value of the two investments. Such comparisons lead into very complicated territory as marginal investments in different industries generate different contributions to growth and productivity. There has been no serious analysis of this issue, however, because the industry studies have ignored the consumer surplus, maintaining the fiction that domestic piracy represents an undiluted national economic loss.

For our part, we take seriously the possibility that the consumer surplus from piracy might be more productive, socially valuable, and/or job creating than additional investment in the software and media sectors. We think this likelihood increases in markets for entertainment goods, which contribute to growth but add little to productivity, and still further in countries that import most of their audiovisual goods and software—in short, virtually everywhere outside the United States.”

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