Policy Options Paper

Trade and Innovation: Policy Options for a New Innovation Landscape

January 2016

The interconnection between trade and innovation is one of mutual reinforcement and this two-way relationship has become the subject of growing attention among experts and practitioners. With the innovation process increasingly organised in global networks and value chains across borders, innovation, trade, investment and industrial policies are now more closely intertwined and their interface is in need of a fresh look. Many countries are actively pursuing ambitious innovation policies to boost their competitiveness. Research and development activities, both public and private, are becoming more transnational in nature. At the same time, societies across continents are in growing need of deploying and adapting new technologies and building innovative capacities to effectively address sustainable development challenges, including the environment, food security and public health. Yet innovation affects countries at separate rungs on the development ladder differently. Distinct policy tools (and their application) intended to encourage innovation and facilitate its dissemination and absorption will be appropriate in diverse situations. Against this background, the present paper assesses whether current trade regulatory frameworks, in particular WTO agreements, adequately support innovation as a policy objective in the context of the knowledge economy and the digital environment. It then converges around recommendations in six broad categories of possible policy change: global rules on digital trade; new rules to expand the movement of people to pursue innovation opportunities; revised rules on internationally agreed and targeted research subsidies in areas of recognised global public concern; a concerted move to establish international standard-setting on the basis of open and global collaboration; an internationally coordinated approach to trade secrets; and steps to improve innovation-related data collection. It concludes by submitting different approaches to innovation and trade system reform and by identifying a set of research gaps that deserve further analysis at the intersection between innovation, trade and sustainable development.

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