Innovation, Imitation, and Political Cleavages in International Trade and Patent Protection

The distributional consequences of intra-industry trade are well documented in the literature, yet exporting firms shape trade policy in their favor. How? I argue that exporters expect higher returns from lobbying when they face more intense import competition. I introduce a model of international patent protection, where patent holders influence the policy making process. In the equilibrium, companies whose exports are prone to reverse engineering by import-competing firms due to their long product lifetime seek strong patent protection by home government. To test the theory, I measure product cycles, using millions of patent citations, and collect lobbying reports filed on US trade agreements on patent protection, signed after the Doha Round. I find that US patent holders who manufacture products with long lifecycles lobbied the congress more to ratify the US trade agreements. This tendency becomes more pronounced as the agreements adopt higher standards of patent protection. The results illustrate how the winners maintain the status quo in international trade