Are We Doing Enough to Support Technology Transfer to Developing Countries?

This is a joint post with Walter Park. 

The spread of knowledge and ideas should help close the gap between rich countries and poor. That’s why technology transfer is one of the seven components of CGD’s Commitment to Development Index (CDI). You may remember that Denmark came out on top of the 2013 CDI overall, but it was edged out by South Korea on the technology component. France and Portugal were third and fourth of the 27 nations ranked; Slovakia and Poland took the last two spots.

Technology transfer holds great potential to improve the health and livelihoods of people living in poorer countries. Those of you who read Charles Kenny’s book Getting Better will know about the huge gains in health across the world because of the spread of germ theory (ideas), hand-washing (norms), and antibiotics (technology) in the 20th century. But that same century was characterized by historically high economic inequality between nations (perhaps now being reversed at last). Does this means that that the equalizing effect of the diffusion of ideas has been suppressed? Might arrangements in developed countries to reward innovation have had the unintended consequence of depriving the rest of the world of its benefits, so widening the gap between rich and poor?

Those concerns led developed countries in 1994 to commit that they would help spread technologies in developing countries, in return for global enforcement of intellectual property rules. Our draft paper with Walter Park suggests that developed countries are not living up to that promise. 

What Developed Countries Agreed to 

The 1994 Trade Related Intellectual Property Rights (TRIPS) Agreement obliges developed countries to support technological advancement by helping to spread technologies to developing countries. Article 66.2 states: 

Developed country Members shall provide incentives to enterprises and institutions in their territories for the purpose of promoting and encouraging technology transfer to least-developed country Members in order to enable them to create a sound and viable technological base.

Under the TRIPS agreement countries are required to report on their compliance with Article 66.2, but the monitoring of these commitments has been inadequate and very probably the implementation has been, too, say the experts who attended a March 27 meeting co-hosted by the Center for Global Development in Europe and International Center for Trade and Sustainable Development (ICTSD).

Why Countries Are Not Meeting Their Commitments

The experts who attended our event with the ICTSD identified several indicators of inadequate fulfillment of rich-country commitments and some factors that make such fulfillment difficult.

There is no one widely accepted definition of technology transfer. It should be no surprise that technology transfer is hard to measure.

No indicators have been agreed, there is no shared agreement about what is meant by a “sound and viable technological base”, and there is no consensus on what constitutes an adequate set of incentives. In the circumstances it is not surprising that it is hard to assess whether developed countries have lived up to their commitment.

There are significant gaps in reporting.

Some European countries have never submitted a report, and others do so only sporadically. Whereas some reports provide detailed information about the implemented interventions, some countries only list them very briefly. Officials tasked with writing the reports complain that nobody pays any attention anyway.

There is very little feedback on the reports and no pressure to look at them.

Developing countries’ institutions often do not have the capacity to even read the reports, let alone assess whether the intervention has contributed to their technological development.

Overall the message is alarming:

We simply don’t know if countries are living up to their commitment to improve technology transfer.

We are not clear on what the commitment means, nor what we are doing to fulfil it, so we can’t assess whether it is working and what we can do to improve it. 

How to Improve

Of course, it is never easy to measure a multidimensional, contested idea like technology transfer. But that’s true of lots of things which we nonetheless try to assess quantitatively, such as learning. In the same way, we could design indicators of technology transfer, based on the relatively widespread consensus about what is needed. We want modern, up-to-date technologies to spread to the developing world at affordable prices. We want indigenous firms to receive licensing contracts on reasonable terms to manufacture high-value goods. We want subsidiaries of foreign firms to hire and train employees to perform high-value production in least developed world, and their governments to provide the incentive and support those firms’ needs, such as financing and insurance. And for all these “wants”, we can set goals and targets. Our criticism with the process so far is that policymakers and institutions have come up with mandates and lofty words but no action, and no measurable targets (such as increased investments of 5 percent by year 2015, etc.)

Perhaps the most alarming part of the conversation was the reflection among policymakers that many developing countries — especially the emerging economies — are increasingly seen as competitors not partners. This perception, which is reinforced by economically illiterate talk of a “global race”, dampens the interest of policymakers in finding ways to share technologies to enable poorer countries to catch up. This entire view is nonsense, of course: global economic growth is win-win, not zero sum; and consumption of knowledge is non-rival. It would be a pity if these fears further reduced efforts to ensure that everyone, everywhere, can take advantage of technological progress.

Next steps: we’ll be updating our analysis to take account of the excellent suggestions we received from the expert participants in our seminar, and developing specific policy recommendations for publication later this year. In the meantime, we would be very glad to have suggestions and comments on our earlier draft.