The Effect Of IPR Protection On China’s Export Margins

"Innovation" and "High Quality Improvement" are two prominent topics during China’s economic transformation and export upgrading.It’s our urgent mission to improve our export competitiveness,to realize sustainable growth of both export and economy,and finally to grow into a leading exporter and realize quality-led growth.Innovation is essential to economic growth.The effective protection of IPR can encourage the innovation of local firms,increase the spill-over of technology through import,FDI and technology transfer,and enhance the reputation of “Made in China”.On the basis of current research,this paper explores how IPR protection influences a country’s export margins,figures out indexes of IPR protection and export margins,empirically analyzes the impact of China’s IPR protection on the export margins of our manufactures,and examines the possible mediators.Major ideas are summarized as follows:First,theoretically,strengthening of patent protection encourages innovation.Strengthening of patent protection by countries with technology advantage may impede its price and extensive margins of export,but strengthening of patent protection by those with disadvatages may boost price and extensive margins of export from those with advantages.However,if goods with mature technology are to be produced in countries with disadvantages,price and extensive margins of export from advantageous countries may decrease.Both high-tech import and manufacturing FDI can promote export margins,but the effect of strong patent protection on the import and FDI is undetermined and influenced by many other factors.Therefore,strengthening of patent protection’s effect on export margins is not determined.Second,taking search cost and investment in advertising into account,this paper analyzes how trade mark protection may encourage firms to improve their reputation by increasing investment in advertising and innovation,so as to increase export on extensive and/or quality margins.Third,patent index and trade mark index are constructed with data realated to China’s IPR legislation and effectiveness.Export margins are calculated with HS-6-digit trade data from UN COMTRADE.Since the year of 2008,the strength of IPR protection is increasing,and quantity margin still contributes most to China’s export.The scatter diagrams show that IPR protection is roughly positively related to the export margins.Fourth,empirical study is conducted based on the theoretical analysis and stylized facts.Results show that the strength of IPR protection is positively related to the extensive and quality margins of manufacture export.Strengthening IPR protection can instantly and continuously increase our export to high income and upper middle income countries on extensive margin,increase our export to all countries on price margin,especially to lower-middle-income countries.Patent protection has no continuous effect on price margin,but trade mark protection has.Patent protection influences quantity margin along a J curve,first impedes quantity margin and improves it later.Trade mark protection has positve lag effect on quantity margin to all countries,but only has negative instant effect on quantity margin to high income countries.On the industry level,patent protection promotes exports of patent-sensitive industries through extensive and quantity margins,but trademark protection promotes exports of trademark-sensitive industries through price and quantitiy margins.IPR protection can increase extensive and quantity margins of capital-intensive industries and price margin of labor-intensive industries,but decrease extensive margin of labor-intensive industries.Moreover,patent protection decreases price margin of capital-intensive industries,and trademark protection decreases quantity margin of labor-intensive industries.Therefore,patent protection boosts export through extensive and quantity margins,while trademark protection boosts export through price and quantity margins.At present,we still have no competitiveness in upper-end manufactures and brands.Fifth,the relative strength of IPR protection between trade partners and China is also integrated into the analysis.If China is at a disadvantage in IPR protection,the strengthening of IPR protection of our trade partner may lead to an increase in our price margin.If lower middle countries bridge their gap of IPR protection with China,our extensive margin of export to those countries will decrease.International production transfer and increase in competing products are possbile reasons for this.Finally,improvement in patent protection may encourage innovation and FDI inflow that subsequently lead to an increase on quantity margin,but prevent the increase on extensive and price margin,probably because the present patent protection is still below the “threshhold”.Improvement in trade mark protection can also encourage innovation,but innovation is not yet the channel through with IPR protection facilitates export margins.Meanwhile,improvement in trade mark protection impedes FDI and import.