Cross-border payments for the use of Intellectual Property

May 31, 2023

By Davide Bonaglia and Sacha Wunsch-Vincent (WIPO)

Most recent figures for 2021 show that cross-border payments for the use of intellectual property (IP) reached nearly a trillion US dollars (USD), reflecting a growth by roughly 65% from 2010 and a multiplication by a factor of more than 50 over the last four decades (see Figure 1).

Figure 1: Cross-border payments for intellectual property, in USD, 1980-2021

According to fresh data to be used in Global Innovation Index (GII) 2023, IP payments – when actors in one country pay for IP owned by another actor in a different country - reached 528 billion USD in 2021 (+14% compared to 2020), while IP receipts – when actors in one country receive money for their IP used by another actor in a different country - reached 453 billion USD in 2021 (+13% compared to 2020) (see Figure 2).

Combined, these two figures almost reached 9% of the Total Trade in Commercial Services, up from roughly 7 % in 2012 (see Figure 2).

Figure 2: IP exports – in absolute terms (in USD, left axis) and as a share of trade in commercial services (in percent, right axis), 2012-2021

This growing global “trade in IP” reflects how global production has been re-organized over the past decades.^[1] Thanks to advances in technology and reduction in trade costs, production processes have become more fragmented and dispersed across the globe. As production has become more globally widespread, intangible assets, such as technological knowledge, software, and know-how, have led to an intensification in cross-border trade of ideas. Instead of developing technologies in-house, firms tend to purchase them from third-party suppliers, with the idea of acquiring new knowledge and skills that are not available in-house^[2].

In 2021 United States made most money by selling IP abroad, having received more than 124 billion USD, an 7.8% increase compared to 2020 (see Table 1). In 2021, Germany – the number two “IP exporter” – also significantly increased its IP exports, going from almost 36,000 billion USD in 2020 to almost 57,000 billion USD in 2021. Within the top 10, China is the only middle-income economy, occupying the 7^th position. Within the top 20, Brazil occupied the 16^th position with 705 billion USD, Türkiye the 18^th with 228 billion USD, and Argentina the 19^th with 227 billion USD.

Table 1: Ranking of the world’s leading IP exporters, in USD billion, 2021

Source: Authors based on World Trade Organization (WTO) and United Nations Conference on Trade and Development, Trade in Commercial Services database

Considering the proportion of IP exports in the overall total trade instead, Europe stands out as the leader, with 12 of its economies ranked in the top 20 (see Table 2). Switzerland has the highest share of revenue generated from IP exports, accounting for 5.24% of its total trade. Estonia is also making notable strides, having entered the top 20 for the first time.

Table 2: GII 2023 preliminary ranking of the World’s Leading IP Exporters as percentage of Total Trade, 2021

Source: Authors based on World Trade Organization (WTO) and United Nations Conference on Trade and Development, Trade in Commercial Services database

Figure 3a below showcases the leading economies by total IP exports across Europe, Northern America, Southeast Asia, East Asia, and Oceania. Germany and the Netherlands lead the ranking in Europe, while in East Asia, Japan, China, and Singapore are the top performers in terms of IP exports^[3].

• In Central and Southern Asia, the leaders are India and Pakistan.
• In Northern Africa and Western Asia, the leading economies for IP exports are the United Arab Emirates and Israel.
• In Latin America and the Caribbean, Brazil, Argentina, and Colombia occupy the top three spots.
• Finally, in Sub-Saharan Africa, the leading countries for IP exports are South Africa, Ghana, and Kenya.

Figure 3a: Global leaders in IP exports by region in 2021, in billion USD

Figure 3b: Global leaders in IP exports by region in 2021, in billion USD

Figure 4a below shows the leading economies in IP exports as share of their total trade across Europe, Northern America, Southeast Asia, East Asia, and Oceania.

• Among the European countries, Switzerland has the highest share of revenue generated from IP exports, followed by the Netherlands and Malta.
• In East Asia, Japan is the leader in terms of IP exports, contributing 5.17% to its total trade revenue. New Zealand and Singapore follow with 1.96% and 1.74%, respectively.
• In Northern Africa and Western Asia, Cyprus and Israel lead.

Figure 4a: Top economies by share of IP exports in total trade, in percent, 2021

• In Northern Africa and Western Asia, Israel (1.28%) and the United Arab Emirates (0.88%) follows.
• In Latin America and the Caribbean, Argentina (0.29%), Brazil (0.23%) and Colombia (0.22%) occupy the top three spots.
• Finally, in Sub-Saharan Africa, the leading countries for IP exports as share of total trade are Kenya, Ghana and Uganda.

Figure 4b: Top economies by share of IP exports in Total Trade, in percent, 2021

For the final rankings, see the GII 2023 to be published on September 27, 2023.

For a detailed analysis on the caveats of using cross-border IP payment data, notably how multinational enterprises distort the measurement of cross-border IP flows for lower taxation purposes, see the literature mentioned in footnote 1.

Background

The Global Innovation Index includes a pillar on Knowledge and Technology Outputs, with threes subpillars on knowledge creation (6.1), knowledge impact (6.2) and knowledge diffusion (6.2). The subpillar 6.2 includes one indicator Intellectual Property Receipts, % Total Trade (6.3.1) that measures the charges for the use of intellectual property (i.e. receipts) as percentage of the total trade, and computed as an average of the three most recent years.

Receipts are between residents and non-residents for the use of proprietary rights (such as patents, trademarks, copyrights, industrial designs, including trade secrets and franchise) and for licenses to reproduce or distribute (or both) intellectual property embodied in produced originals or prototypes (such as copyrights on books and manuscripts, computer software, cinematographic works and sound recordings) and related rights (such as for live performances and television, cable or satellite broadcast). Total trade is defined as the sum of total imports of code G goods and code SOX commercial services (excluding government goods and services not included elsewhere) plus total exports of code G goods and code SOX commercial services (excluding government goods and services not included elsewhere), divided by 2.

Data for the GII draws on the World Trade Organization and United Nations Conference on Trade and Development, Trade in Commercial Services database (https://stats.wto.org/) and covers the period 2015-2021.