Aid, lending, and TRIPS

Abstract The rise of superstar firms has accompanied the expansion of an international intellectual property (IP) regime that extends beyond the standards established in the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). Despite sustained resistance from developing countries, the United States has successfully promoted TRIPS-plus provisions through preferential trade agreements, with other advanced economies following. This study attributes US success in diffusing TRIPS-plus standards to the strategic deployment of development finance, conditioned on the domestic political feasibility of aid and the regime type of the recipient country. Using National Trade Estimate (NTE) reports from 1995 to 2022 published by the US Trade Representative, I construct a semantic proxy for US assessments of IP protection in partner countries harnessing a state-of-the-art stance detection large language model. Countries facing greater IP-related criticism incorporate more TRIPS-plus commitments into their preferential trade agreements with the United States in exchange for development finance. Compensation varies by regime type. Democracies receive increased foreign aid, while autocracies benefit more from International Finance Corporation lending to the private sector. Placebo tests reveal that among TRIPS-plus commitments, test data exclusivity, US pharmaceutical elites’ top priority that blocks generic drugs past patent expiration, uniquely mobilizes both instruments.